Image Credit: Luis Vazquez/©Gulf News

It is half-time in the match between the US justice system and Fifa. In the first half, the Americans took a shock early lead, with the unexpected arrest of several of Fifa’s leading players. But world football’s governing body struck back with a defiant equaliser — re-electing its discredited president, Sepp Blatter.

The ultimate outcome of this match will be of interest all around the world, and not just to football fans. President Vladimir Putin of Russia has denounced the Fifa arrests as yet another example of the abuse of American power. His reaction illustrates that the Fifa struggle has become a highly visible test-case of one of the central questions in world politics — is the US still powerful enough to call the shots in global organisations? Or is the sole superpower’s grip on global institutions slipping?

Fifa, of course, is a niche organisation. But the same questions of whether ultimate power still lies in the West applies to much more systemically important global institutions such as the International Monetary Fund (IMF), the United Nations and its sub-organisations including the UN Human Rights Council. It is also increasingly a question in the network of non-governmental organisations that provide the wiring for the world economic system; from Swift, the organisation that handles international financial transfers between banks, to Icann which regulates the internet.

Until last week, Fifa looked like the archetype of an international organisation that was slipping out of the control of the West. Bids to stage the 2018 and 2022 World Cups from England, Spain, the Netherlands, the US and Australia had been rejected in favour of Russia and Qatar. The western press was full of accusations of corruption at Fifa. But Blatter and his acolytes brushed them aside.

The dramatic arrests in Zurich changed this picture of western powerlessness. This was something that only the US could or would do. Switzerland has launched its own investigation but is unlikely to have acted alone, without prompting from the FBI in Washington.

But what allowed America to act in this way? Is that US power transferable to other domains? And is it slipping?

One key fact is the centrality of the American financial system to the world economy — something that in turn rests on the importance of US-based banks and the role of the dollar as the pre-eminent global reserve currency. The US has standing in the Fifa cases because allegedly fraudulent transactions were made through American banks and foreign banks with operations in the US.

On other occasions, it is not just the direct use of the US financial system that drags outsiders into America’s net. Some US sanctions regimes force foreigners to obey American law, even outside the US, or to be subjected to sanctions themselves. Swift, for example, is based in Belgium. But had Swift’s directors refused to obey US law imposing sanctions on Iran, they risked being refused entry to America. So they chose to co-operate.

This is the kind of power that no other country can yet wield. China, for instance, is a huge market and is not averse to using its market-power to threaten countries that do things Beijing dislikes, such as meet the Dalai Lama or recognise Taiwan. The renminbi is not a global currency however and access to the Chinese financial system is not yet critical to a global business. Nor does a threat to bar an individual from travelling to China have the chilling effect of a potential travel ban to the US. (As for the Russian travel bans, issued last week on 89 EU citizens, few would regard these as an unbearable imposition.)

Could this change? Possibly. But it would probably require the Chinese currency to become a global reserve currency to rival the dollar. That is why the IMF’s decision later this year about whether to include China in the basket of currencies from which it makes up its special-drawing-rights will be keenly watched. Such a move would be a visible step along the road to turning the renminbi into a global reserve currency. That, in turn, might ultimately threaten the dollar’s unique global position — and the power that it confers on the US.

The US may oppose any IMF move to elevate the status of the renminbi. It will have to tread carefully, however. Opposition that was based on the fact that China’s currency is not yet fully convertible could well be seen as legitimate. Opposition that looked like little more than an unjustified effort to hang on to a privileged position could end up weakening the US.

For the final lesson of the Fifa affair is that America’s power does not just rest on the size of its market or the power of its military. Its justice system also still possesses a moral authority that stems from its roots in an open, democratic and law-governed society.

The justice dispensed by the US system can seem rough, particularly given its use of threats and plea bargains. But if the US Department of Justice says there is a serious case to answer, it still carries global credibility. The same benefit of the doubt would not be extended to a prosecutor in Moscow or Beijing.

China is certainly closing the wealth gap with America, just as Asia is closing the gap with the West. But the reputation of American institutions for integrity remains a vital intangible asset. It is that reputation that allowed the US to tackle Fifa.

— Financial Times