Those of a materialist mindset might speculate that Russia's blitzkrieg into Georgia last week was motivated less by a sense of solidarity with its poor benighted brethren in South Ossetia and more by a determination to manipulate global energy markets.

Certainly, the timing was good. The mini-war in the Caucasus could bring an end to the recent slide in crude oil prices that was threatening to reverse the remarkable redistribution of global wealth from oil consumers to oil producers of the past few years. The possibility of a Russian stranglehold on the Baku-Tbilisi-Ceyhan pipeline, which has a transport capacity of 1.2 million barrels per day, promises to keep another important source of Western energy supply firmly under the influence of Moscow's iron whim.

However, it seems more likely that Vladimir Putin's decision was just another old-fashioned opportunistic power grab designed to exploit Western political irresolution and take Russia one step closer to reviving the territorial reach of the Soviet Union. And if it drops a few more billion dollars into the Russian treasury, well, who's complaining?

What's certain is that this latest eruption of geopolitical tension is another helpful reminder of the fragility of the global economy a year after the onset of the credit crisis.

At the end of last week, before the bold Putin gambit, there was a mood of rising optimism in the US. The Federal Reserve's carefully calibrated statement accompanying its decision a week ago to leave interest rates unchanged managed to square the circle of the raging Recession v Inflation debate within the central bank.

The sharp fall in crude oil prices pre-Georgia seemed to confirm the suspicions of many in Washington that a substantial part of oil's rise in the past year was the result of speculative excess that was at last deflating. And despite the continuing story of unrelenting gloom, there was yet more news confirming that, as anaemic as it may be, the US economy still managed to eke out some growth in the first half of the year.

All this propelled US equities higher and pushed bond prices lower. But the really big financial development was the sudden rise of the dollar against most global currencies. Sudden concern about the prospects for the European economy, combined with increasing fears for Britain's outlook and gloom in Japan, has helped to push the dollar to its highest level in many months against the euro, the pound and the yen.

This adds a new and faintly amusing twist to the “decoupling” story that has been much in vogue in financial commentary in the past year. This is the idea that the rest of the world is now largely immune to what goes on in the US and can thrive even during an American recession.

Now it is starting to look as though the rest of the world might actually experience a deeper, nastier recession than the US appears to be having. If that does happen, I hope all those who said the Fed should take a leaf out of the ECB's book and concentrate on fighting inflation will feel suitably ashamed.

But the US is hardly out of the woods yet, despite the recent dollar exuberance. For one thing, as irony would have it, both the causes of the dollar's rise and its consequences might actually spell trouble for the American economy. As US financial conditions deteriorated in the past year and consumers retrenched, one of the few props to growth was the external account.

Relatively solid growth in the rest of the world and a weak dollar produced a marked improvement in the US trade balance, and net exports of goods and services have accounted for all of the modest growth in the US economy in the past year. If the rest of the world is now weakening, and if the dollar's strength proves more than transient, that support for US growth will be kicked away.

Still, except for a few exporters, nobody's really complaining. Softer oil prices (assuming that the Georgia effect passes) and a stronger dollar will work wonders for the still cloudy US inflation picture and enable the Fed to stay on the sidelines for some time yet. And a strengthening dollar steadily removes one of the great sources of fear for US financial markets: that a sudden loss of confidence in the currency will produce a collapse in US asset prices.

However, although the dollar may have hit bottom, that should not be interpreted as a sign that a broad and healthy US recovery is under way. Despite the two quarters of very weak, export-led growth in 2008 so far, the sharp rise in unemployment suggests that output is growing - if it is growing at all - well below capacity.

The strong probability remains that the American economy is still bumping along the bottom of a mild recession that began at the end of last year. That is not a disaster, but if the rest of the world is headed there, too, it may yet get worse.

gerard.baker@thetimes.co.uk

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