Whatever the outcome in Ukraine, one thing is for sure the economic reverberations will be felt by everyone for years to come as the world divides between the West and a rapidly reshaping Eurasia.
With a geo-strategically important part of the Eurasian land mass once again in the grip of conflict, the United States government under Joe Biden appear oblivious to the concept of multipolarity that would surely go a long way to creating a peaceful resolution in Ukraine.
But as Iraq, Syria, Venezuela and Iran all illustrate, one of America’s main weapons of choice against adversaries involves the use of sanctions. Often underestimated among policy-makers and central planners is the fact that sanctions serve as protective tariffs on affected countries which are then forced to become more self-reliant.
Michael Hudson points out, for instance, that when America made sanctions on European trade with Russia, Lithuania dutifully stopped exporting cheese to the country. This resulted in Russia setting up its own cheese sector and becoming self-sufficient in the product.
Hudson says that across the board, from agriculture to technology, Russia is increasingly self-reliant while at the same time the country has become dependent on China for the things that it is not self-reliant in. Consequently, Russia and China are becoming more, not less, integrated. The attempt by the US to isolate Russia could therefore actually prove to be counterproductive.
These kinds of tectonic shifts have recently intensified following the decision by the United States to grab Russia’s foreign exchange reserves. If any country in the global south attempts to trade with Russia, the United States will attempt to acquire their foreign exchange reserves held in the New York Federal Reserve Bank or the Bank of England.
Foreign countries who hold dollars instead of gold and have therefore effectively financed the US budget deficit and balance of payment deficit for the past fifty years, are being threatened by the US if they support Russia.
America’s imposition of sanctions, and especially it’s grabbing of foreign reserves, has started a war that is dividing the world between the West and Eurasia.
The attempt by the US to isolate Russia by these means is precisely the kind of strategy Henry Kissinger and Halford Mackinder before him, warned against the US adopting.
Washington’s concern that these actions could paradoxically bring Russia and China closer together is the catalyst behind recent appeals by the US administration urging Beijing to desist in their support for the Kremlin. On March 14, Jake Sullivan warned China that Washington was prepared to sanction any country that broke US sanctions against Russia.
The response from Beijing was to commit to breaking off all trade between what is a largely self-sufficient Eurasia and a largely de-industrialized and heavily oil, gas and raw material dependent West.
Russia/Ukraine produce a quarter of the worlds wheat, annually. Since many countries in Europe are net importers of food, the knock-on effect of sanctions with regards to food security could be particularly devastating for the countries concerned.
Hudson argues that sanctions are driving a wedge between European countries and that their implementation is part and parcel of a deliberate neocon strategy centred on a set of invented illusions that underpin The Project for the New American Century.
The aim of the neocons is to decrease levels of food production in Europe. The United States is set to gain from this is through rising oil prices due to the fact that their foreign policy is based largely on oil and gas.
”The oil industry controls most of the world’s oil trade, and that explains a lot of the US diplomacy. This is a fight to lock the world energy trade into control by U.S. companies, excluding not only Iran and Venezuela, but also excluding Russia”, says Hudson.
But this strategy could also prove to be counterproductive for the US. While the United States is rushing headlong into a foreign policy premised on an oil trade that accelerates carbon emissions and thereby exacerbates climate change, Europe continues to push increasingly towards renewable energy.
The more self-sufficient Europe becomes and the less it depends on fossil fuels, the greater the likelihood is that the United States loses its primary oil trading lever.
On the other hand, if Europe fails to become completely self-sufficient in renewable’s it would mean the US has the ability to turn off the electricity and gas supplies of any country that fails to follow its diplomatic direction.
In this context, European nations who are net importers of food and/or rely on the US for both heating and to keep the lights on, are clearly more vulnerable than Eurasia is to any future US arm-twisting.
Hudson suggests that the EU is caught between a rock and hard place and that EU foreign policy has effectively become subsumed by NATO. Indeed, as Russian Foreign Secretary, Sergei Lavrov explained during a recent speech, the EU is being dominated by the US-NATO alliance.
The sentiment expressed, which seems to be echoing across Russia, is that Europe’s betrayals since the former Soviet Union broke up has meant that Russia has no choice other than to learn to live without Europe, reorient its economy towards China, Asia and Eurasia and become its own self-sufficient, independent core. Europe has always tended to align with the United States and has never been serious about integrating with Russia.
Hudson explains that the new world division and global fracture is about the West wanting to maintain its hold on the financial, insurance and real estate sector and credit creation:
”After World War One, the American fight against Soviet communism, was basically a fight of industrial capitalism against the threat of socialism. But after 1991, and especially in the last two decades, America de-industrialized. The fight now is neoliberalism against industrial capitalism or socialism abroad. It’s against industrial capitalism evolving into socialism. It’s a belief that now that America’s been de-industrialized, it will control the world economy through a financial means.”
Hudson continues:
”The basic American strategy of neoliberalism is to hold the population in serfdom and to fight against countries that reject the privatization and specifically financialization of their economies under the control of US banks, US private capital, allied satellite banks and capital from Europe. The fight is about the control of the world economy by banking and finance against countries building up their own economies through labour and tangible capital formation.”
Put simply, the battle is between neoliberal rent seekers on the one hand and value creators on the other.
Hudson says the key to why the world is fracturing globally is explained by the fact that the strategy of the United States is to become the landlord monopoly class of the entire world.
But now that China and Russia are pushing to be a self-sufficient core in Eurasia, this strategy is under threat. The battle between Russian and the United States in Ukraine is emblematic of these ideological, geopolitical and geostrategic fractures. All the while, Europe and Ukraine are apparently willing to be the sacrificial lambs in the fight.
”This is a fight”, says Hudson, ”that Russia initially didn’t want because it was hoping that Europe and Russia would have a mutual gain in trade and investment relationships. There may be a proxy war between the United States over the European economy, not necessarily bombing Europe, but trade and energy sanctions, the kind of disruption that Europe, if it loses Russian oil, gas and minerals, is going to be seeing in the next year.”
Hudson envisages a situation in which the hawks of war prevail over the cooler heads:
”I don’t see any cooler heads in the United States. The Democratic Party are willing to go to war to the death. They’re still living in a kind of mythology world, not in the real world. And the thought that the world can come to an end either doesn’t have a reality to them or, as Herman Cain said, ‘well, somebody is going to survive’.”
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