Anne Penketh: 'Paranoid' power able to test Obama's mettle

The power of paranoia in international relations cannot be underestimated.

Fear of regime change colours the way Iranian leaders look at the world and influences North Korea's view from behind the "bamboo curtain". Paranoia feeds the hostility between Pakistan and India, and hinders Russian democratisation. It even fuels British insecurities about the "special relationship" with the United States, as we now know from the WikiLeaks diplomatic cables.

Throw nuclear weapons into the mix and catastrophe is only one miscalculation away.

Over the past two years, the focus of US President Barack Obama's diplomatic outreach has been to try to demonstrate that just because some leaders are paranoid, it doesn't mean that the US is out to get them. The first thing he did was to ditch the George W. Bush mantra of "you're either with us or with the terrorists" in favour of dialogue, engagement and rebuilding trust.

His two biggest headaches have come from Iran's nuclear programme and nuclear-armed North Korea, which hold both opportunities and risks for the Administration. There is also Pakistan, a fragile democracy with nuclear weapons and a big stake in Afghanistan. But there is a powerful country at the nexus of the geopolitical faultline running from Pyongyang to Pakistan, and that is China.

Unfortunately for Obama, China doesn't do diplomatic give and take. It too, is paranoid, according to Kevin Rudd, the former Australian Prime Minister, when it comes to Tibet and Taiwan. It plays hardball over its currency and human rights. Its bottomless energy needs have led to a new age of Chinese imperialism. It is pursuing strategic goals which may not coincide with those of the US on North Korea, which is probably one of the reasons why Obama allowed Governor Bill Richardson to return to Pyongyang, bypassing China.

China will remain Obama's most serious foreign policy challenge over the next two years as he contemplates another term. Beijing holds the key to improved trade and could help the President dig the country out of economic crisis. But it is only now, as the North Korean crisis has deepened, that the Administration has started to take China to task publicly over its "enabling" of its reclusive client state.

In Washington, Obama faces urgent questions from his critics about his China policy, branded a "dismal failure" by Republican Dana Rohrabacher during a recent Congressional hearing which heard an upbeat account from US officials of the dramatic effect of international sanctions on the Iranian economy. Senator Lindsey Graham is predicting a "confrontational path" with China in the near term, and calls for the Iranian leadership to be "neutered" by military strikes. Meanwhile, Obama faces criticism from his own party for the blood and treasure spent in Afghanistan where the withdrawal of US troops has been pushed back to 2014.

So the Administration is walking a foreign policy tightrope. How can Obama define success on Iran and North Korea, when the ultimate choices will be between war and appeasement? On his right, the Republicans are beating the drums of war. But the alternative options of allowing Iran to enrich uranium on its own soil, and letting North Korea keep its nuclear weapons capability - the guarantee of the regime's survival - will be a hard sell to Democrats and undermine the President's own creed of nuclear non-proliferation.

After the "shellacking" of the mid-terms, the President is desperately in need of a foreign policy victory.

It has eluded him on the Middle East: Obama faces a self-imposed deadline for a peace agreement between Israel and the Palestinians next September amid widespread scepticism that it can be achieved.

It is difficult to see how he will be able to invest the personal involvement necessary to successfully conclude the negotiations on core issues, while faced with economic crisis, an ongoing war in Afghanistan, and the nuclear challenges from Iran and North Korea.

The ratification of New Start - if and when it happens - will be a big win for Obama, but it should never have been so difficult to deliver such a modest arms control treaty.

Obama will have a chance to burnish his foreign policy credentials next month, when President Hu Jintao visits Washington. The visit will be a defining moment for Obama's policy goals. But on trade and human rights too, the Chinese will test his mettle.