Histrio-Strategic View of Israel-Gaza, Russia-Ukraine & BRICS Bank

 

Those who want to “live in interesting times” got their wish this week. A week so “interesting” that no one was interested in major developments in Afghanistan & Iraq – the two hot spots of US policy.  

We do feel for Secretary Kerry. He did really achieve a major success by getting the two contenders for the Presidency of Afghanistan to agree to an internationally monitored vote count. The US case for not intervening against ISIL in Iraq also seems to be paying dividends. Reportedly, the old Saddamist secular-type guys have risen against the ISIL “caliphate” and driven ISIL fighters out of Mosul. The traditional Sunni Iraqi tribes seem to be uniting to drive out ISIL and run Sunni-Iraq themselves. This, if successful, is a major positive for USA, Israel, Iran, Syria & Russia and paves the way for a consensus ousting of Maliki.

Let us be clear. Secretary Kerry was both tactically smart and lucky this week in Afghanistan & Iraq. Nothing about US policy in these two lands is driven by histrio-political understanding of the centuries-old conflicts. It is just that these two conflicts are not zero-sum games, certainly not at this time. Unfortunately, for Secretary Kerry & the Obama Administration, both Russia-Ukraine & Israel-Palestinians are at zero-sum games at this time.

As Stratfor wrote this week:

  •  “What ties Ukraine, Russia, Israel and Gaza together is that they are all fighting for their lives, or interests that are so fundamentally important to them that they cannot live without them.” 
  • [such conflicts] will be settled by steel and not by kindly advice or understanding. The problem between these people is not that they don’t understand each other. The problem is that they do.”

1. Israel-Gaza

There was a time when the Israeli-Palestinian conflict would be settled the historical way, even the very recently historical way. Prime Minister Netanyahu alluded to this when he said Israel cannot do in Gaza what Russia did in Chechnya. And when you cannot do what is ideal for your people, you act opportunistically. That is what Netanyahu did this Thursday by launching a ground incursion into Gaza.

Think back to the December 2008 – President Bush, the most fervent supporter of Israel, was stepping down and President Obama was about to take power. The window was about to close for Israel’s freedom of action. So Israel launched its operation in Gaza on 27th December 2008 and completed it on 18th January 2009, two days before the inauguration of President Obama.  

Israel is far more isolated today than it was at any time during the Bush Presidency. Western Europe and the UN are almost anti-Israel & certainly anti-Netanyahu at this time. The American-European left routinely uses terms like “Israeli Apartheid”. A ground incursion into Gaza would have been stridently criticized by Western Europe, the UN, and opposed by the Obama Administration. Israel was in a difficult situation. 

Then came the shooting down of the Malaysian airlines plane over Ukraine. The deaths of 300 civilians/crew over the most sensitive of European territories, the region that decided the fate of World War II, was instantly the event with pan-European & global impact. All of a sudden, Western Europe had no band-width to deal with Israel-Gaza. 

Israel recognized this opportunity and acted immediately. On Thursday afternoon, Israel launched its ground incursion into Gaza &, on Friday, Netanyahu broadened the scope of the Israeli objectives. By the time, the Western world refocuses on Israel-Gaza, the Israeli incursion would be fait accompli. Globally speaking, the Israel-Palestinian conflict is a minor problem, more of an irritant than a crisis. It is not even important to the major Middle Eastern Arab regimes who are caught up in a region-wide Sunni-Shia conflict. 

2. Russia-Ukraine

Frankly, the Russia-Ukraine conflict should be even less important to the world than the Israel-Palestinian conflict. Ukraine means “nation on the edge” according to Stratfor, and, for Russians, Ukraine is  “the borderland that can’t be given up“, either strategically or emotionally. As Henry Kissinger said on March 6, 2014, “No Russian I have ever met finds it easy or even possible to consider Ukraine a totally separate country”. And the real problem is between the western half of Ukraine & the eastern half of Ukraine. As Stratfor wrote this week:

  • “For western Ukrainians, these Russophiles are thugs trying to destroy the country. For the Russophiles, it is hypocrisy that Ukraine demands that its right to self-determination be honored, but it has no honor for the right to self-determination of the Russophiles.”

Frankly, the rest of the world shouldn’t care about this old conflict. A semi-partition between West Ukraine & East Ukraine along the Dnieper river would be ideal for both Germany & Russia. Such a semi-partition would provide a realistic anti-Russia buffer to Poland, the most important country for Germany and provide a realistic anti-west buffer to Russia. Such a partition could be soft with rotating presidencies between West & East Ukraine in a federally loose structure. Frankly, old Europe would create such a structure via an old-style conference run by people like Bismark & Talleyrand. The major power of that era, Britain, would support and bless such a structure.

Think back to 1970s. What was the modus operandi of the competition between America & the Soviet Union? Post the Cuban missile crisis, neither super-power really acted directly against core interests of the other; their competition was marked by tit-for-tat actions against proxy states of the two superpowers. Western Europe was strictly and completely off limits. Neither President Nixon nor President Reagan would have even considered acting in East Germany, let alone in East Ukraine. 

This smart caution was the result of a healthy respect in America for the Soviet Union, a clear understanding of the damage the USSR could inflict on the USA. That respect evaporated with the fall of the Soviet Union and the sorry state of Yeltsin-led Russia. No one in America is willing to accept that Yeltsin-led Russia was a temporary phase and that Putin-led Russia needs to be handled with both respect & caution. America’s main problem is that the contempt of Russia is truly bi-partisan – it is where the twain of America’s Imperial Class meet; where Cheney & Obama find common ground, where John Bolton & John Kerry unite, where Strobe Talbott & Charles Krauthammer find a common voice. 

What makes this joint contempt dangerous is that America & only America possesses the 21st century’s strategic neo-nuclear weapon. 

3. America’s Neo-Nuclear Weapon

Absolute power tends to corrupt absolutely. And corruption in the strategic sphere is evidenced as recklessness. The America of 1970s & 1980s did not have absolute power and so its policy was based on circumspection and caution. Today’s America does have absolute power in the world – the absolute power of the US-Dollar based global financial system.

The USSR & old China were impervious to this weapon and its impact. Today’s reality is very different. Getting cut off from the Dollar-based financial system would cause havoc in the economies of Russia and China. This is America’s financial nuclear weapon that no other country can match. Such weapons are to be used with extreme care. Unfortunately, the Obama Administration is being utterly reckless in its use of America’s absolute financial power. 

Reckless is when you use a strategic weapon for tactical purposes; reckless is when you use a weapon against both friend & foe; reckless is when you use a weapon without the slightest heed for a blowback against you. Read what Ian Bremmer wrote this week about a blowback from Germany:

  • “The global reach of the U.S. dollar as the world’s reserve currency gives the United States an extraterritorial privilege. America’s sanctions regime, which extends far beyond its borders, further empowers the United States. Sanctions can apply when there are no American citizens involved. They can target non-American branches of foreign institutions that simply have a U.S. presence, such as French bank BNP Paribas, which recently pleaded guilty to criminal charges and paid an $8.9 billion fine. With more than $15 billion in fines now levied against more than 20 international banksmostly EuropeanGermany is alarmed by the United States’ tendency to use its economic clout as an extension of its foreign policy, one that the Germans see as increasingly fickle, opaque and misaligned from their own.”

And this is Germany, the linch-pin of American strategy in Europe, the one country Russia would like to move into a neutral posture. If Germany feels this way, guess how alarmed Russia & China are? This alarm is what drove Russia & China to agree to a huge energy deal in May 2014. As Stratfor wrote in May,

  • “Beijing’s willingness to enhance its strategic relationship with Moscow reflects its belief that the United States poses a far greater threat to Chinese interests than does Russia.”

This pivot to Asia gives Putin access to Chinese loans &, more importantly, an ally that is just as concerned about America’s reckless use of the Dollar-based financial system. This leads us to this week’s event that could potentially be of great significance to America.  

This week, the BRICS, Brazil, Russia, India, China, & South Africa, established a BRICS development bank, a bank that might in the future enable some freedom for these countries from today’s dominant financial system. We recognize that this BRICS bank will be a small player with limited capability. We understand that all its members have a greater stake in their relationship with America than with each other.

But there is no doubt that their long term objective is to make these countries more resistant to America’s reckless use of financial sanctions. China is the most concerned and most capable of making its own currency a secondary global reserve currency. This week, China set up a $100 billion development bank just to facilitate its trade with Brazil and signed a $11 billion currency swap deal with Argentina’s central bank to help Argentina in case Argentina’s reserves are threatened (Argentina is currently embroiled in a financial dispute with American hedge funds). 

If successful, the BRICS bank may get additional members from Asia, Africa, Latin America, & the Middle East to become a more global or supra-EM bank. That could transform the BRICS bank into a major vehicle of trade with the EM bloc of nations. And then we could even see Eastern European or affected Western European nations like France, Italy, Spain, become members of the BRICS bank. 

The most optimistic view of the BRICS bank as an anti-Dollar construct was articulated by the financially smart & verbally flamboyant Jim Rogers:

  • “as long as India is involved, it probably won’t happen anytime soon but Brazil, China, & Russia could certainly, easily, put together something to compete with the US Dollar … the Dollar is a terribly flawed currency … I would throw out India if I were involved in this thing”.

Remember Rogers is flamboyant to the point of being nuts his speech. But he does make a very important point regarding India. India may be the smallest BRIC today but India is the country best suited to represent an anti-China posture within the BRICS bank. It was India’s opposition to China that resulted in India being chosen as the first President of the BRICS bank. The core interest of India lies in ensuring China doesn’t become “the decider” within the BRICS bank. India has no current interest in moving away from the US-Dollar based financial system. Frankly, the other nations also need someone to stand up to China and India fits that bill. So Rogers is correct in saying that the BRICS bank will not become anti-Dollar as long as India is actively involved in BRICS.

But that is today. Because an America that can attack the premier bank of an ally like France, an America that is now eyeing German banks for similar sanctions, can easily turn on India tomorrow. And America has a history of imposing sanctions on India. So India has a serious interest, like most nations in the world, in creating a joint Asian-African-Latin American defense system against US financial sanctions.

4. Primary Threat to American Prosperity & American Power

History teaches us that empires lose their imperial power by acting so recklessly that they invite even warring nations to unite in joint defense against the empire. This is the greatest danger we see to American prosperity, a slow & steady loss of the global reserve status of the US Dollar. And what is America if it is not the most prosperous country in the world?

America is strong enough to win every financial battle it chooses to fight- whether against Iran, France, Russia, or even China. But by winning every battle it fights, it could end up losing the long war. Isn’t that what happened in Vietnam?

 

Editor’s PS:

  • We have begun using Histrio-political, Histrio-strategic to describe the central importance of history in analysis. We think history encompasses the importance of geography and so histrio-political & histrio-strategic are far better terms than geo-political & geo-stratregic.  This is partly why we described as Robert Kaplan’ book “Revenge of Geography” as impressive but unfulfilled promise in our review. 

 

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