Where in the world; are we?

The second in a three-part series explaining the issues behind the news; Part two: global affairs. Introduction by John Lichfield

The world used to be so simple. Even when it was not simple at all - like Afghanistan or Nicaragua - it was possible to apply fairly simple rules. There were lots of bad people in the world but if they were the West's approved baddies they were not so bad; and there were some quite good people, but if they were Moscow's goodies they were, on the whole, a bad thing. If your politics were left of a certain point, you just reversed the rules.

Then, some time around 1989-1991, the world changed before our eyes. The Soviet Union collapsed and, according to certain people, history ended. But foreign news did not end; it just became one damned thing after another. Some of the things looked hopeful - South Africa, Palestine, Italy; some looked desperate beyond belief - Yugoslavia, Chechnya, Iraq. But what did it all mean?

There was one all-encompassing theory. Everything was caused by the end of the Cold War. This was true, up to a point. The Palestinian-Israeli rapprochement; the unravelling of Italian politics; the collapse of apartheid; the civil war in Yugoslavia - all can be explained, in part, by the melting of the great ice sheet of East-West intrigue and hostility.

But this is only another way of saying that the peoples of the world, like the inhabitants of Sleeping Beauty's castle, were finally waking to their own interrupted business. On the one hand, disputes which had seemed hopelessly tangled - Palestine, South Africa - began miraculously to solve themselves. Elsewhere, national and tribal enmities and ambitions that had been paralysed for decades - Yugoslavia, Chechnya - sprang viciously back to life.

None of this helps much to understand the plot lines of the individual stories. The world has abruptly become a more confusing, and in some ways a less comforting place. We are no longer separated by barbed wire from our fellow Europeans; but some fellow Europeans are, once again, exterminating one another by the thousand. We no longer face the prospect of nuclear armageddon; but we do face the prospect of Saddam Husseins armed with nuclear-tipped Scud missiles.

Who will run China after Deng Xiaoping?

The plot: Deng Xiaoping, the Long March veteran and architect of China's economic reform policies, is 91 years old and in frail health. He no longer has any official positions, has not been seen in public for two years and may or may not still be sentient. His political influence has waned as sharply as his health, but many China-watchers are concerned about what will happen when this elder statesman dies, fearing a destabilising power struggle among those jostling for position.

The characters: in China's opaque political system, no outsider can know for sure who is pulling which strings. But, officially, the "core" of China's new "collective" leadership is Jiang Zemin, who is president, head of the Chinese Communist Party, and chief of the armed forces. Power has been transferred to Jiang and this younger generation of leaders, but when Deng is gone, political infighting is likely to break out among colleagues greedy for power.

Prospects: China has always had anemperor figure as the de facto head of its political structure. This time, there is no one of Deng's stature waiting in the wings. In that sense, questions about who will replace Deng are missing the point. The uncertainty this time is whether an immature, undemocratic political system will continue to be stable without a strongman at its head. Deng's lengthy decline has enabled Jiang to bolster his position, but few analysts believe it is he who really makes the difficult decisions these days. And the next stage of China's economic reforms may well prove to be the most challenging yet because of the need to address unemployment, social inequalities and untamed corruption. While ideological differences among China's top leaders are now narrowed, political ambition within an extremely corrupt society poses the greatest potential threat to China when Deng finally departs.

What does Russia want from Chechnya?

The plot: the Russians have long had problems with this insubordinate region. The Chechens continued to resist Tsarist occupation at a time when most other nations in the Caucasus had knuckled under, and throughout the War of the Caucasus (1817-1864) it never came fully under Russian control. The Bolsheviks, too, had a hard time subduing Chechnya, and promises of independence for the country were hastily forgotten after the revolution of 1917.

The Chechens declared independence in 1991, when the Soviet Union had not yet officially collapsed. Though Boris Yeltsin seemed sympathetic to calls for independence while Mikhail Gorbachev was in the Kremlin, he pursued a different policy once he took the reins of power, and in November 1991 sent hundreds of troops in against the Chechen pro-independence leadership. For the next three years there was a stand-off between the two sides, but in December 1994 Russian troops moved in to crush Chechen independence once and for all. It took until February 1995 to subdue Chechnya entirely, in a bloody and ill-judged operation. Even then, while the capital, Grozny, was theoretically in Russian hands, a low-level guerrilla war raged on, and Moscow was hated as never before. A peace deal was supposedly made in July, but neither side took it very seriously; indeed, the Chechen rebellion became fiercer, culminating in last week's hostage crisis.

Prospects: the Chechnya war is far from over; indeed, Moscow never even came close to winning. Elsewhere, the picture is so confused that serious predictions are almost impossible. There are half a dozen potential flashpoints in the Caucasus, and others further afield.

Above all, however, the continued use of Russian firepower against civilian targets, and the nationalist tone of the politicians inside and outside the Kremlin, serves as a reminder that Moscow still believes in the old- fashioned dictum that large states may do what they like, while smaller nations must be subservient.

Is the UN in terminal crisis or can it rebuild its influence?

The plot: the UN General Assembly lost a large part of its roof to a windstorm last week and much symbolism has been read into the accident. "The UN blew its top yesterday," quipped a spokeswoman, referring to the organisation's financial crisis. Another interpretation might have been, "UN falls apart".

Because of the failure of the US in particular to pay its dues, the UN is currently owed $2.3bn and is effectively bankrupt. Travel by its officials has been frozen and all recruiting put on hold.

Antagonism towards the UN inside Congress is at a historic high. In the US especially, the UN is regarded as having been primarily culpable in the debacle in Bosnia. Its peace-keepers were supplanted by Nato troops before Christmas and the organisation's role in the current peace-keeping effort had been deliberately kept to a minimum.

Prospects: all of this is combining to force the UN to undertake in-house reform on many fronts. A radical reduction in peace-keeping activities has already began with the withdrawal from Bosnia. New management policies are being introduced to elicit more efficiency from its bloated bureaucracy. Negotiations have also begun on a new template for member states' contributions, which in particular should cut the amount the US will have to pay.

Can France recover from civil unrest?

The plot: France entered 1996 still shaken by the public-sector strikes of November and December, which forced the prime minister, Alain Juppe, to amend drastically his plan to reform the social security system. The plan arose from the need to cut public spending and increase government revenues to get France's finances into shape to meet the criteria for European Economic and Monetary Union.

But the major domestic problem remains unemployment, at around 11.5 per cent, and although schemes have been put forward to tackle it, such as tax-free zones in deprived areas, it remains stubbornly high, exacerbated by high payroll taxes.

The characters: President Jacques Chirac has begun to regain some of his popularity, thanks in part to his national address on the night of the death of Francois Mitterrand. Juppe's popularity has also started to rise again, though dissident voices are heard in the ruling coalition, and the utterances of Philippe Seguin, speaker of the National Assembly and a potential premier, are closely scrutinised.

Prospects: Chirac's election owed much to his promises to cut unemployment and heal social divisions. Keeping those promises would require a radically different economic policy. Any major reform runs the risk of sabotage by an alliance of disparate forces with vested interests in the status quo. A postponement into the remote future of European monetary union would not be wholly unwelcome in some quarters if it led to an easing of economic policy.

Is Japan over the hill?

The plot: Japan was the wonder of the post-war world as it struggled up from the ashes of its firebombed cities. By the 1980s it was tipped to become America's successor as world-bestriding economic giant. Foreign experts flocked to discover the secrets of Japanese success, and apply them back home.

In 1991, inflated property and share prices collapsed; so did the splurge in lending and investment that these had prompted. The economy plunged into recession.

Four years later, the economy is still at a standstill. This is not a cruel, destructive recession like Britain's; unemployment has risen only slowly, and the Gross Domestic Product has not collapsed. Rather Japan seems to have entered a long winter, in which the massive bad debt burden of banks who had lent rashly during the boom years has lain on the economy like a heavy frost. Each year the government predicts imminent recovery; each year it has to bite its tongue.

The characters: Japan's handsome new prime minister, Ryutaro Hashimoto, brings the long-dominant Liberal Democratic Party back into the coalition's driving seat after 18 months' leadership by the ineffectual "grand-pop" of the Social Democratic Party, Tomiichi Murayama. Again "full-blooded recovery" is predicted, to be brought about by "thoroughgoing deregulation". But the prime minister slyly appointed a member of Murayama's party as finance minister, presumably to take the blame when the wheels come off.

Prospects: this is the year of the rat, according to the oriental zodiac - usually a brilliant year for the Japanese economy. Perhaps the ice will finally begin to crack. If it does, it will probably be due to economic remedies familiar in Britain: "downsizing" of workforces, curtailing of "lifetime employment", deregulation of industry. Ten years ago we were all learning from Japan; now the boot is on the other foot. It is still far from certain that Japan's sun is about to rise again.

Dancing on the edge: does Whitewater matter?

The plot: Whitewater, the controversy (is there a scandal there at all?), has been running for almost four years and shows no sign of abating, least of all when a presidential election is at hand. The affair has its roots back in 1979, when the Clintons formed a real estate venture - called Whitewater - with James McDougal, owner of the Arkansas bank Madison Guaranty. Ten years later the bank collapsed, at a cost of $60m to the taxpayer, and in 1992 the Justice Department was asked to investigate alleged abuses. More significantly, questions were raised as to whether money from the bank was diverted into Mr Clinton's election campaign.

Characters: the focus has now shifted to Hillary Clinton and her legal work in the mid-1980s for Madison Guaranty. Documents were published in December that appeared to contradict the evidence she gave to federal regulators, showing that she did far more work for the bank than she has admitted. Separate probes are being conducted, in Little Rock by the independent prosecutor Kenneth Starr, and in Washington by committees of the Republican- dominated House and Senate. Documents and witnesses are constantly being subpoenaed by both Mr Starr and the Congress, and many White House memories have been found strangely wanting, even though no criminal wrongdoing by either Clinton has been unearthed.

Prospects: the affair will continue to make news. For Republicans, it keeps the spotlight on the "character issue" which has dogged the Clintons since 1992. For the media, there are tantalising links with Vince Foster, the White House aide and Clinton confidant who committed suicide in 1993 - or was he murdered? For conspiracy theorists, Whitewater is still the best show in town.

The plot: for 12 months and more, a posse of Republicans has been campaigning for President Clinton's job. Next month sees the first votes in state primary elections and caucuses, to produce a nominee to challenge Mr Clinton in the presidential election of 5 November.

The characters: Bob Dole, the Senate Majority Leader, is the favourite, but watch the multi-millionaire publisher Malcolm "Steve" Forbes, now a clear second behind Senator Dole. Media coverage will be intense until a winner has emerged; possibly as early as mid-March, later if the frontrunner falters.

Prospects: right after the Atlanta Olympics in July come the conventions, essentially crowning ceremonies for the chosen Republican and Clinton, unopposed for his party's nomination. The campaign proper starts in September; by then an independent candidate may have joined the race.

Who can Saddam turn to now?

The plot: in September 1975, Saddam Hussein arrived in Paris to be welcomed as "a personal friend" by Jacques Chirac. Those were the days when the leader of the Iraqi Ba'ath party - later to be the Iraqi president, or the "Beast of Baghdad" - was a good friend of the West. When Iran fell to the mullahs he became an ally, supported by arms dealers and officials in London, Washington, Bonn, Paris and most Arab capitals. His invasion of Iran in 1980 was received with satisfaction in Western capitals and the Arabian Gulf, whose emirs/kings spent billions to support his war aims.

When Iran called off the war in 1988, Saddam was hailed as leader of the Arab world - until his oil revenues were slashed by price cuts in the Arabian peninsula and he gobbled up Kuwait in 1990. Then our friend became our most hated enemy. American and British forces, assisted by the Saudis, drove Saddam out of Kuwait in 1991.

Characters: only one; all rivals have been executed. Saddam Hussein was born in 1937 in Tikrit province (home of Saladin), a peasant boy whose concept of the Arab "nation" - led by Iraq, of course - would make him ruler of Baghdad for almost 20 years (so far). Saddam's mere survival has given him near-superhuman status among Arabs who can ignore his 24- hour hangmen, Kurdish and Shia massacres, etc.

Prospects: Saddam's refusal to accept post-Kuwait UN resolution 986 (allowing a partial sale of Iraqi oil in return for humanitarian aid) may soften in coming weeks. Last week, French intellectuals condemned the West for the "cold genocide" of an estimated 560,000 Iraqi children (a UN statistic). Even Saudi Prince Khaled called for an end to UN sanctions, which are supported by Israel. Saddam has turned aggression into victimhood, with American help. He may survive if the West needs him in a further war against Iran.

What's the IGC for?

The plot: the Intergovernmental Conference starts on 21 March. Discussions will last until December 1997. The main issue is how the EU should expand to take in former communist states. The populations of candidate states is about 130m. Their inclusion would make a community of half a billion, twice the size of the US. The EU would then contain about 30 states; decision-making would become more cumbersome. The European Parliament would swell to perhaps 800 deputies.

Thus the IGC will also examine how to reform EU decision-making. At the moment most decisions require consensus; in future there will be more split votes.

The prospects: the British government wants enlargement because it will be more difficult to turn a larger community into a federation. Germany wants enlargement initially limited to Poland, the Czech Republic and Hungary, because their economies may be developed enough to cope within a more federal Europe. The subtext is: it is becoming less likely that a single currency will be created by 1999 because gathering recession in continental Europe will make it impossible.

Continental governments believe hard bargaining will not start until after a British general election, when it will be clear whether they are dealing with John Major or Tony Blair, who they assume will be more co- operative.

Has Germany lost its magic touch?

The plot: Germans drive the fastest cars in Europe, have the shortest working day, the most holidays and, despite the cholesterol-rich diet, live longer than just about anybody else. Life in this land of superlatives, where the strength of the mark is deemed to be the pinnacle of national achievement, has never been so good.

It is so good, in fact, that it cannot last. The German economy, creaking under the burden of unification, can no longer sustain this miraculous standard of living. Germany has an unemployment rate that is rising faster than anywhere else in the West, declining consumption and investment, and a government budget that is spinning out of control. The country that invented the Maastricht criteria for reigning in profligate European governments has itself busted the targets, and will probably bust them again this year as it staggers through an unexpected mini-recession.

Rather like a shark that must keep moving to survive, the German economy cannot afford to stand still. Commitment to the east, the poorer member states of the EU, and the generous provisions of the welfare state require that those factories on the Rhine keep pumping away. Other sources of revenue have been exhausted. The taxpayer who has been throwing money unblinkingly at good causes, such as eastern Germany and the olive groves of Greece, is beginning to feel the pain.

The characters: while Germans earn nearly twice as much as British workers, they pay considerably more to the state. Average income tax is 45 per cent, 7.5 per cent of which goes to eastern Germany.

The workers, naturally, demand and usually manage to extract compensation from their employers. Thus the circle is closed. The factories that should be fuelling the locomotive of Europe's economy are themselves running out of steam; their power siphoned off by a greedy state.

Prospects: the government must contemplate cuts that were until now unthinkable. Early retirement, pensions, even the health service are being targeted.

Companies, meanwhile, are looking for ways out. German industry is proving as good at exporting jobs as it used to be at exporting goods. Those great world-beating concerns with their wonderfully reliable products will soon be coming to a factory near you.

523 days to go: what will happen to Hong Kong?

The plot: Hong Kong reverts to Chinese sovereignty at midnight on 30 June 1997. Peking has promised a "one country, two systems" policy which will guarantee Hong Kong's autonomy and freedoms after it becomes part of China, but there is considerable scepticism in the colony over whether the mainland will abide by these pledges.

The characters: Chris Patten, the former Conservative Party chairman, took up his position as the last governor of Hong Kong in 1992, and within months had incurred Peking's wrath because of his plans to reform the way members are elected to the colony's parliament, the Legislative Council. The lead character yet to be named in this drama is the future Chief Executive of Hong Kong, who will assume the top job at the time of the transfer of sovereignty. The post must go to a Hong Kong person, but it is Peking that will have the final say on the appointment. The choice of this person is viewed as this year's key decision.

Prospects: at the stroke of midnight on 30 June 1997, China will disband the Legislative Council, which was elected last year when the Democratic Party won the greatest number of seats. An interim body will immediately be installed, ahead of new elections under rules to be sanctioned by Peking. After that, Hong Kongers fear a slow but steady erosion of Hong Kong's strengths. Already, corruption is rising and the palpable sapping of confidence can be seen in the increased number of emigration applications.

China says it wants to maintain Hong Kong as a world financial centre and free trade port, particularly as it plays an important role in the economic development of the mainland. The mainland is also now a big investor in Hong Kong, and has a vested interest in maintaining business confidence. However, Peking has yet to prove that it understands how such things as an independent judiciary and a free media are key to Hong Kong's future role in the world.

Will the peace hold in Bosnia?

The plot: a peace was finally agreed in November 1995 (the Dayton Accord), bringing to an end a war that lasted three and a half years and left a society in ruin. The ethnically mixed Bosnia - "like a Jackson Pollock painting", as Bosnian president Alija Izetbegovic once described it - has now given way to a patchwork of ghettoes each "belonging" to one of the warring ethnic or religious factions.

Croatian president Franjo Tudjman has largely achieved the enlarged, ethnically pure state he wanted; Serb president Slobodan Milosevic has been thwarted in his aim for a Greater Serbia, but has ensured his political survival; Izetbegovic has seen his state preserved within its present borders, but divided up into the Bosnian-Croat Federation and the Bosnian Serb Republic.

The leaders of the Bosnian Serbs, Ratko Mladic and Radovan Karadzic, have been accused of war crimes. But it is unclear whether they will ever face trial. Milosevic, believed by many to bear indirect responsibility for the early atrocities, is now a key ally for the Western powers. There are reports that mass graves identified in Serb-held Bosnia may now be dug up. But the occupying Nato force has made it clear that it is unwilling to set aside manpower in order to protect the sites. For the West, the whole issue remains an embarrassment, and a reminder of how little it was ready to do a few years ago, when more decisive action might have prevented the massacres from taking place.

Prospects: Bosnia now enjoys a kind of peace, but this may prove to be poisoned. The bloodshed and violence of the past three years, followed by the Dayton divisions, mean this will remain the most unstable region in Europe. It seems inevitable that the injustices of today will re-explode in just a few years' time.

Both for the Serbs and the Croats, the motto of "might is right" has proved deadly accurate in the past four years. It seems unrealistic to hope that this lesson will go unheeded in the future. When the terrorism begins, people will shake their heads and wonder why.

Has the dream turned sour in South Africa?

The plot: South Africa is lurching, steadily if not faultingly, towards normality and integration. But it has discovered along the way that the road to reconciliation can be a highway of hazards.

The economy is growing rapidly, but violent crime is tearing at society, both black and white. In the first seven months of 1995, more than 1 million serious crimes were reported, including 10,000 murders, about one every 29 minutes. The crime wave is beginning to undermine investor confidence in South Africa's "miracle transformation". Many English-speaking white professionals are emigrating to safer climes, taking their badly needed skills with them.

The characters: crime is but a nasty symptom of a country and society in transition. Individuals and groups are struggling to come to terms with the changes brought by the advent of black rule - Afrikaners with having lost their position of privilege, black South Africans with the realisation that governing a country is a difficult business. Many blacks have been forced to face up to the harsh reality that the end of apartheid did not mean sudden material improvements in their lives. The concept of a "rainbow nation" exists only in sports and in the world of advertising. Whites and blacks still have a great mistrust of each other.

Prospects: these divisions may deepen in a few short weeks, when a Truth Commission begins exhuming apartheid-era crimes. Although the commission can grant amnesty to all who come clean about their old misdeeds, conservative whites believe the past is better forgotten and forgiven without the theatricals. The black majority, however, feels strongly that there can be no reconciliation without discussion of past crimes.

Another potential focus for trouble is General Magnus Malan, a former defence minister who is due to go on trial in March along with 10 fellow senior officers for 13 apartheid-era murders. He has become a rallying point for those opposed to dredging up the past.

But the legacies of the past are still alive and killing in the KwaZulu- Natal province, where black-on-black political violence claims scores of victims every month.

Is North Korea really dangerous?

The plot: since the end of the Cold War, North Korea's isolation has been unique. Cut off by its former patrons, China and Russia, it sticks stubbornly to the Stalinist path. The ruling Workers' Party has no rivals, and about one in 10 of the population belongs to it. There is no freedom of speech or information or anything else. Dissidents are sent to labour camps, and the population is required to contribute voluntary labour for civic projects. Meanwhile, the army gets rich selling Scud missiles to Syria and Iran and spends the profits on rare cognac and Mercedes- Benzes. Out in the countryside, two million people are at risk of starvation, due to the failure of the harvest. There is said to be a black market in human excrement, for use as manure.

The characters: the founder of the nation was Kim Il Sung, who died in 1994 and was succeeded by his son Kim Il Jong, a paunchy, bouffant-haired film buff. Both are treated with the reverence of gods, but although Kim took the salute during last October's anniversary celebrations he has yet to take the titles of head of state and head of the party. The posts remain vacant, for reasons that are unclear.

Prospects: it seems extraordinary that the regime has not yet imploded. Some commentators put this down to the lingering devotion of the people to Kim Il Sung's ideology of juche, self-reliance, but ignorance of alternative political systems may also be important. The United States, terrified of the regime acquiring nuclear weapons, brokered a deal that provides replacement nuclear power stations (unable to produce weapons-grade plutonium) and 500,000 tons of oil per year free. Japan and South Korea have also been pouring in food aid. All these countries are propping the regime up: South Korea could ill absorb a huge inrush of refugees, and the prospect of a German-style unification is more alarming still.