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Hubbard and Erdbrink report on U.S. president Trump's visit to Saudi Arabia to begin a new chapter in relations with the Gulf nations and the Saudis. Under president Obama the U.S. distanced itself from the Saudis and the Gulf nations, preferring to pursue a policy of closer relations with Iran and signing the Iran nuclear deal. This included a policy of staying out of Syria to the point of turning down a decision to deploy U.S. airpower to maintain no-fly zones to protect refugees. Syrian government forces fighting rebels were supported by Iran. The new policy is dictated by the new conditions in the Middle East. The U.S. has sought since the presidency of Reagan to balance the power relations in the region. With the nuclear deal signed and Iran respecting the deal according to independent reports, the U.S. allied with Iran in the battle against Islamic State in Iraq,  a shift was needed to balance the support provided to Iran by Russia which worsened the refugee crisis in Syria. The Republican party and Mr. Trump were critical of the Obama Iran policy during the nuclear deal negotiations. The safety of Israel is also a factor as non-state actors were supported by Iran threatening Israeli security. For these reasons the shift is an effort to rebalance the relations in the region. The arms deal in its size and president Trump's statement that Iran had "fueled the fires of sectarian conflict and terror," can be seen as this rebalancing. A business aspect of the large arms deal is that it will promote job growth in the defense industry in the U.S.. Other countries including Germany have seen growth in their defense industry. This is not the best way forward for the Middle East, yet it is a way the U.S. and nations in the region are adjusting to realities- the collapse of the Arab Spring from within and without the help from outside, the sectarian conflict arising from the Shiite pushback from Iran following the Baathist and Sunni control of Iraq which collapsed with the U.S.invasion, where the majority of people are Shiite yet with a strong Sunni presence. Elections brought Shiites in power, leading to a Sunni response in the form of Islami State caliphate move into Mosul, Iraq's second largest city after Baghdad. A decade of conflict and the efforts by the Bush administration ended in failure and sectarian conflict, resulting in the U.S. policy of rebalancing in favor of Iran to negotiate the nuclear deal. In this sense the arms deal does not solve anything. A similar rebalancing under Reagan by arming one side, followed by arming the other, led to involvement with ground forces under president Bush. It only leaves the region poor after years of sanctions against Iran to the point where a NYT reporter was not sure whether it was safe to fly from Tehran to Mashad with Iran Air because of the lack of spare parts for the airline. War torn, with millions of refugees in Syria and Iraq, the region remains broken in many ways, waiting for a sensible non sectarian view to prevail in the interest of the people in the region. The election of Rouhani in Iran by 57% of the vote is only a sign that young people in the region given a chance would opt for a different course in future. The rest of Asia has moved forward and shows a path that can be followed. ...

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Defense spending under the new Obama 2012-2013 budget for the fiscal year starting Oct. 1, 2012, is $525 billion, and an additional $88 billion for Afghanistan. This is $6 billon below the $531 billion budget for the 2011-2012 budget of $531 billion approved by Congress, $22 billion less than the Obama administration's proposed budget. An additional $115.1 billion was for Afghanistan. In a move to bring financial discipline to additional appropriations for foreign conflicts, the Obama administration is proposing in the 2012-2013 budget proposal a limit to "overseas contingency operations" appropriations. The total proposed is $450 billion for fiscal 2013 to 2021.

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Colonel Stevenson's efforts to limit features on a new bomber for the U.S. Air Force to replace aging B-52's and B-1's. Contractors added a kitchenette in one design which was turned down by Stevenson and senior officers at the Air Force. Senior officers were mindful of how it might be seen by the public and aware of the need to keep costs down during a period of austerity budgets. Barnes describes the efforts of Colonel Stevenson as he led efforts to limit the new plane to essential features, turning down contractor proposals for a plane that could be converted into a drone, reconaissance and cyberdefense features, and other embellishments that would drive up the price tag per plane. In 2011 budget negotiations defense officials agreed to limit the cost to $550 million per bomber, a third of the cost of the B-2 which cost $1.8 billion per plane. Because new planes take a decade or more to design and build with cost overruns, it is also important not to venture too far into technological unknowns. This adds more time to build and proves costly. The Long-Range Bomber project started in 2011 with Secretary Gates signing off on the requirements for it to give the president the option to move quickly in a matter of hours to penetrate distant airspace. The cost is $600 million spent till Oct 2013 for research, and $8.7 billion budgeted to 2018. The Air Force is sticking to existing engine design, and Stevenson says if the technology has not been tested the Air Force is not interested in experimenting with it. In the process Stevenson finds himself trying to change the culture at the Air Force, where putting cost as the top priority is a new concept....

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The lack of U.S. leadership and slow response by the Obama administration to the rapidly developing situation in the region risks spillover effects from Syria to affect the entire Middle East. Russia's stakes are minimal in the region because it is simply trying to retain some of its old influence in the region, yet it is having an outsized influence in the region through its early military assistance to the Assad regime. The stakes are much higher for the U.S. because of the decade spent and resources invested in Iraq, higher for Iraq with its need for civil harmony between Shiite and Sunni communities, for Turkey with its large Kurdish minority and flow of refugees from the border with Syria, for Saudi Arabia as a defender of Sunni interests. Without active U.S. leadership the situation is allowed to drift and young people of the Free Syrian Army are basically taking on the bulk of the role of resolving the situation. France's Sarkozy and Britain's Cameron offered this kind of leadership in Libya as Libya's young people struggled to resolve the situation there. ...

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China's current account surplus has declined to 2.8% of GDP for 2011 from about 10% in 2007, and will be around 2.3% of GDP in 2012, according to IMF estimates. The U.S. current account deficit is down to 3.1% of GDP from 5.1%. By controlling the exchange rate China was able to keep the competitiveness of its exports, resulting in a five fold increase in exports from 2000 to 2010, according to the IMF. The decline could be temporary say experts, as the the recession in Europe and the U.S. resulted in slowing exports, with its infrastructure buildup sucking in imports of machinery and other goods from the western countries at an accelerated pace with its 2009 stimulus measures. Another reason is that in the last decade China has developed its own high tech and other companies which will now increase exports. IMF forecasts show a pickup in China's trade surplus to 4.25% by 2017. This could be lower if the renminbi is allowed to appreciate. Estimates of appreciation of the renminbi are 8 percent in nominal terms since June 2010 against the dollar. Including inflation, which is higher in China, the renminbi has appreciated by 13% since June 2010. ...

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Mark Landler describes the situation on the Syria-Turkey border and Turkey's position. On the same day U.S. Senate leaders McCain and Graham pointed to the contradictions in U.S. president Obama's policies in Syria and Iraq leading to the serious problems in the Middle East. Turkey says the U.S. needs to resolve the contradictions before it can actively commit its forces especially asking the U.S. to establish a no-fly zone in Syria.

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Denning says that because of the enormous repercusions on Iran's economy of a war in the Persian Gulf, a more likely scenario is not the cutoff of supplies of Iranian oil altogether but a smaller list of buyers for Iranian oil, making Iran sell the oil at a discount. Saudi Arabia's and Libya's added production would bring more oil to the market. The impact will be larger on Europe because of the decline in the value of the euro, with Brent crude on a 12 month average basis costing 14% more now than in the peak price in 2008. By comparison in dollar terms the comparable figure is 4% higher for the U.S. At a price of Brent crude of $120 in 2012, according to Citigroup, energy costs would take up 9% of world GDP, putting pressure on a economic recovery in Europe and the U.S.

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Sectarian conflict in Iraq between Shiites and Sunnis following the U.S. withdrawal. Efforts by former Baathist party members and officers in the Saddam regime to aggravate sectarian tensions.

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The President of the American Chamber of Commerce, Harley Seyedin, says that the days when migrant workers did not know their rights, labor laws were not enforced, and factory owners could keep wages low, are gone. With 787 million mobile phone users and 384 million Internet users- which includes migrant workers who can now get the news about the latest developments, send messages, video, and access the internet. For its part the government made serious effort to create awareness about new labor laws of 2008 through the state run media outlets. And workers have greater awareness and understanding of their rights for safe working conditions and double overtime pay, as well as other rights guaranteed in China's new labor laws. And something else is happening that connects the universities with workers. The expansion of the number of students at Chinese universities has brought more people from rural areas into the universities. This has created sympathy and support for migrant workers at the universities. Nine sociologists at Peking and Tsinghua universities signed an open letter calling national and local governments to implement actions that let migrant workers integrate into the city environment and share in the country's progress that they are creating. The government's security system has prevented the creation of a worker's movement in the past. But this time the government may be thinking of the need to develop China's domestic market, as the reliability of markets in the USA and European countries is uncertain as economic conditions change. For this to happen China's workers need higher wages to buy the goods China produces. ...

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International Energy Agency estimates show the U.S. surpassing Saudi Arabia as the world's largest oil producer by 2020 because of the boom in shale oil production. The estimates are for 11.1 million barrels a day from the U.S. in 2020.

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Questions being raised about the Obama administration's approach to the war in Syria.

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This Journal editorial points to the 3 page letter from Gen. Dempsey that make a U.S. response in Syria seem difficult and laborious, cost $1 billion a month, and endless. Gen. Keane points to the Syrian air force operating from just 6 main air strips and with about 50 aircraft out of 100 operational, using this to terrorize the opposition and the countryside indiscriminately including civilian population. Taking these out with cruise missile and other strikes is all that is needed, not even a no-fly zone says Keane. Short of a proper response the U.S. and the Obama administration could only end up leaving the Assad regime in place for longer, says the Journal. Aid to rebel groups that can then do the work of completing the transition is the right strategy, says the Journal.

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The return of street bombings in Iraq by Al Quaeda affiliates leads to increased sectarian violence in 2013. Sunnis feel they are targeted as Iraqi government forces conduct searches following bombings, and issue residence cards for Sunni areas to prevent infiltration by Al Quaeda terrorists. Sunnis fear the formation of Shiite private militia groups.