its successor state, the Russian Federation, following the dissolution of the Soviet Union in 1991. The alliance between the Western Allies and the Soviet Union had begun to deteriorate even before the war was over. Germany had been de facto divided, and two independent states, the Federal Republic of Germany (West Germany) and the German Democratic Republic (East Germany), were created within the borders of Allied and Soviet occupation zones. The rest of Europe was also divided into Western and Soviet spheres of influence. Most eastern and central European countries fell into the Soviet sphere, which led to establishment of Communist-led regimes, with full or partial support of the Soviet occupation authorities. As a result, East Germany, Poland, Hungary, Romania, Czechoslovakia, and Albania became Soviet satellite states. Communist Yugoslavia conducted a fully independent policy, causing tension with the Soviet Union. Post-war division of the world was formalised by two international military alliances, the United States-led NATO and the Soviet-led Warsaw Pact. The long period of political tensions and military competition between them, the Cold War, would be accompanied by an unprecedented arms race and number of proxy wars throughout the world. In Asia, the United States led the occupation of Japan and administered Japan's former islands in the Western Pacific, while the Soviets annexed South Sakhalin and the Kuril Islands. Korea, formerly under Japanese rule, was divided and occupied by the Soviet Union in the North and the United States in the South between 1945 and 1948. Separate republics emerged on both sides of the 38th parallel in 1948, each claiming to be the legitimate government for all of Korea, which led ultimately to the Korean War. In China, nationalist and communist forces resumed the civil war in June 1946. Communist forces were victorious and established the People's Republic of China on the mainland, while nationalist forces retreated to Taiwan in 1949. In the Middle East, the Arab rejection of the United Nations Partition Plan for Palestine and the creation of Israel marked the escalation of the Arab–Israeli conflict. While European powers attempted to retain some or all of their colonial empires, their losses of prestige and resources during the war rendered this unsuccessful, leading to decolonisation. The global economy suffered heavily from the war, although participating nations were affected differently. The United States emerged much richer than any other nation, leading to a baby boom, and by 1950 its