It was the best of times; it was the worst of times. My 2012 started here in my beautiful little Dutch village chatting with my nice Dutch neighbours amid the clatter of many thousands of burning Euros being shot into the sky or exploding in brief, bright and brilliant suns.

On New Year’s Eve Alphen seemed a million miles from reality in that fleeting moment when the New Year illuminates the old and casts it to mature into the giant whisky vat of history. And yet even during the brief truce in reality between Christmas and New Year change was regrouping. And, as the smoke clears the strategic landscape has subtly but most profoundly changed. Ten years late the old century has finally passed and the new one is finally upon us.

On 24 December the second round of voting began in Egypt’s parliamentary elections. These elections are crucial not only because of the importance of Egypt in the Arab world, but also because they illuminate the political direction of travel of the Middle East. Specifically, if the Islamist parties do well, as seems likely, Egypt could become the pioneer of a new twenty-first century phenomenon – the legitimate Arab Islamist state. Critical will be the extent to which Islamism embraces democracy and whether indeed it can. One man (or woman), one vote once would simply mark yet another false Arab dawn. Egypt will be central to the stability of the Middle East and its political identity.

On 25 December German President Christian Wulff said that Germany would offer “solidarity to Europe” in “a spirit of unity” to point the way out of the Eurozone crisis. A close ally of Chancellor Merkel President Wulff said that Europe is “our common home,” the values of which must be defended jointly. 2012 will indeed be the true test of German leadership in Europe as Berlin grapples with the Eurozone crisis…and the British. For Europe much will depend on how much Germany is willing to pay for this ‘spirit of unity’ and the leadership of Europe it confers.

Beijing announced on 27 December that the China National Petroleum Corporation (CNPC) would begin looking for oil in Afghanistan’s Amu Darya Basin which is estimated to hold around 87 million barrels of oil. As the West prepares to leave Afghanistan having spent huge amount of treasure and at the cost of many lives China and the neighbours are preparing to exploit Afghanistan’s estimated $1 trillion of mineral and fossil fuel reserves. Much of the first half of the century will be about China’s rapacious search for energy. Indeed, only sustained economic growth will offset the marked absence of political liberty in China. China’s move into Afghanistan also marks another step on the road to a new bipolar world that will be dominated by Beijing and Washington.

On 29 December economists at the Centre for Economics and Business Research (CEBR) announced that Brazil had overtaken Britain as the world’s 6th largest economy. They also predicted that India and Russia would enjoy surges in growth as the old West stagflates in what the CEBR called Europe’s ‘lost decade’. The only consolation for the British was that the CEBR confidently predicts that by 2020 Britain would have a significantly larger economy than that of France. Here we go again. In fact Brazil will find it very hard to turn such paper wealth into power but Britain and France really do now need to decide the extent of their strategic ambitions and how on Earth they can act together.

On 1 January Iran announced that it had successfully test-fired a medium-range surface-to-air missile equipped with the “latest technology” and “intelligent systems”, during military exercises in the Gulf. This followed reports that the West was intending further sanctions against Tehran aimed at Iran’s oil and financial sectors because of Iran’s seeming determination to build nuclear weapons. Ten days of Iranian naval exercises in the Straits of Hormuz signalled Tehran’s response; the closure of the world’s most important oil shipping lane in the event of a future confrontation with the United States and its European allies. Behind all of this posturing lies Persian Iran’s strategic ambitions to dominate its Arab region.

Put simply the power state is back. Unfortunately, the European West in particular seems incapable of thinking big enough to cope with this new/old reality. First, the Eurozone crisis is of such severity that rather like heroin addicts many European leaders would sell their peoples’ futures for a short-term political fix rather than deal with the real problem. As Luxembourg Prime Minister Jean-Claude Juncker put it over Christmas, “We know how to solve the problem, we just do not know how to get re-elected afterwards”. Oh, for just one truly great leader! Second, Europe only recognises as much strategy as it can afford…which is not a lot. Third, the foreign and security departments of European states are today brim full of counter-terrorism experts and aid and development specialists who skew the focus of national strategies towards failed states and civil strife. Such parochial ambitions are funded at the expense of balanced defence efforts. This is old strategy for an old world.

The twenty-first century will be a big power, big state century. Power will be organised either around big states via informal regional groupings or though institutions such as the new European Union with one such state at its core.

Welcome to the twenty-first century. It starts right now!

Julian Lindley-French is Eisenhower Professor of Defence Strategy at the Netherlands Defence Academy, Fellow of Respublica in London, Associate Fellow of the Austrian Institute for European and Security Studies and a member of the Strategic Advisory Group of the Atlantic Council. He is also a member of the Academic Advisory Board of the NATO Defence College in Rome. This essay first appeared on his personal blog, Lindley-French’s Blog Blast.