And so it begins. Russia is not restraining the separatists, the Kiev government is finally really sending in the troops, Barack Obama and EU leaders claim they will impose real sanctions and Russia and China are set to ink a deal to export Russian Gas to China, the world’s industrial heartland.
If the sanctions are imposed, for whatever reason (Russian invasion or not), they will force the creation of a second economic, non-dollar bloc. Russia is not Iran, and China is not going to cut off Russia to please the West, rather the contrary. The creation of a real non dollar bloc which can make almost anything people want, and which has access to essentially all key resources from oil to rare minerals, metals and food is an existential threat to the hegemony of the West and its allies like Japan and Korea.
Be clear, real sanctions will impose real costs on Russia, but they can bear them. They do not need to borrow money from the West, they cannot be Troika-ized. They have key resources that someone will buy, even if they can’t buy in dollars, because Yuan or rubles can, actually, buy most of what most countries need to buy.
Absent China, Russia cannot be isolated. Cannot. China is unlikely to cooperate. Sure, they could view eastern Russia near their borders as ripe, but Russia as a subordinate state in the Chinese sphere means they get everything they really need from the Russians anyway, plus backing in a military confrontation with the current developed world.
The Chinese are not stupid, they know that if a real war breaks out, it will be between them and America. They are the rising power, the naturally most powerful and militarily powerful state in the world, recovering from a hiatus of a few centuries where they lost their status. Russia has a lot to offer them, and the Chinese cannot be coerced by sanctions. Sanctioning China would backfire so hard that the US was go into a real economic collapse: China makes the goods. Sanction them, and they WILL break the patents and just make them anyway. Reestablishing the manufacturing and distributing base back to the US and its allies under such circumstances would be unbelievably difficult, especially as Russia, China and its allies control certain key resources like rare earths (other people could mine them in quantity, but don’t, because Chinese rare earths are cheaper and we are stupid and greedy.)
Russia is already planning how to survive economic sanctions: how to sell its goods in rubles. People will buy, Russia is too big a producer to ignore. If Europe doesn’t want the growth which comes from using Russian gas and oil, well, China and others will be happy to take it.
And once a second bloc is created, it will no longer be possible to pull stunts like breaking Iran with sanctions: the Chinese/Russian bloc will have a veto.
Over Ukraine? I guarantee that if this is done in 50 years historians will look back on this like we do on WWI—what were they thinking? The Balkans wasn’t worth WWI. Ukraine isn’t worth destroying American: Western, hegemony. Well, not for America. Others might think this is more of a good thing than bad.
But it is also the potential glide path to war, real war. WWIII.
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Greg T
Some observations:
1. In their zeal to arbitrage labor for maximum profit, multinational corporations, with a big assist from the USG, have effectively outsourced US national security.
2. For a generation, the neolibs were telling us the world is flat. States were outmoded institutions. The magic market would solve economic want. What bullshit. Russia and China are about to show everyone that states are the real source of power. Maybe Americans will take notice?
3. It appears that BRICS are about to do what the American people can’t or won’t do for themselves. Impose constraints on a US government run amok.
4. The US is run by a coterie of greedy, arrogant, short-sighted dimwits. Apparently, this is what is taught at Yale, Harvard, Stanford and other paragons of elite education.
5. It’s close to game over for the US empire. The question is; will the US go down quietly, like the USSR? It’s time for Americans to wake up.
Bill H
Are we stupid enough to do this? Absolutely.
Celsius 233
Ian, WWIII? Really?
I’ve been trying to imagine just what would have to happen for that. You have laid out a pretty good case for Russia to come out of sanctions stronger, not weaker. The U.S. would be worse off in the long run, by your own scenario.
I see this as the bully getting his just desserts.
That said; I also know the power of stupid in our government, but WWIII?
madisolation
I have a question. Someone said there is no alternative to the USD, except in specialized usages, because there must be a large liquid market in reserve, and no other country fits that criteria. Yet I’m reading about how BRICS and other countries should desert the dollar system and create their own system. Is there a viable alternative to the USD in the short term?
Thank you to anyone responding.
Celsius 233
madisolation
April 26, 2014
Is there a viable alternative to the USD in the short term?
~~~~~~~~~~~~~~~~~~~~
America’s greatest unspoken fear, IMO.
Is there an alternative? I don’t know.
But it would seem a unified world could make it so.
madisolation
@Celsius 233
“But it would seem a unified world could make it so.”
It seems that way to me, too.
Pelham
There is some thought that WWI was more about preserving what was then a British financial system — similar to what we have today — that was focused primarily on extracting wealth from colonies. The challenge was the German financial system at the time, which was focused on building up Germany as an industrial power, one that would soon surpass (or had surpassed) decaying British industry. The Balkans were just a convenient tripwire.
If that’s the case, what you describe sounds even more foolish than you make it out to be. The Anglo-American West appears to be ignoring the possibility of a superior system and, in fact, encouraging its formation rather than using some pretext to launch the kind of cataclysm (sanctions obviously don’t qualify) that would preclude or dismantle it.
markfromireland
Those plans in one version or another have been in existence for quite a while. The process of preparing them began in earnest under Andropov at a series of seminars that took place under the auspices of the Andropov Institute at its Yasenevo premises. It was scaled back under Gorbachev, dropped completely under Yeltsin but continued on a “freelance” basis by a few academics associated with the security apparat – the process was re-initiated and given a high priority by Vladimir Putin when he succeeded Yeltsin.
Even if the planning process discontinued under Medvedev — which I very much doubt reviving them would be a process of dusting off and updating relatively recent policy documents.
I think it’s important when thinking about Russia to remember that going right back to the failure of the Decembrists that a central organ of the Russian state has been the “vysshaya politsiya” or the so-called “higher police”. This organ – or apparat, has always included a large academic component charged with studying anything that can threaten the security of the Russian state. That’s a very broad remit and includes for obvious reasons economic aggression waged by external powers.
mfi
markfromireland
Is the last part of this sentence a typo? Something missing?
mfi
markfromireland
And finally for those of your readers interested in discovering what the American political establishment is being told about Russia you could do far worse than read the Congressional Research Service briefing a version of which the FAS have made available on the site:
Russian Political, Economic, and Security Issues and U.S. Interests – RL33407.pdf
mfi
Ian Welsh
MFI – corrected.
Money – the Yuan is plenty liquid, but not internationalized. A while back I saw some figures showing China producing 16 times the new money that the US was.
S Brennan
Not really disagreeing, but….
I think Russia/China would have preferred to wait a little longer while the DC/Wall-Street Idiotocracy dug the US’s grave a little deeper…making our escape impossible.
However, with a lightweight like Obama at the helm, Russia/China have an advantage, in that, a governmental leadership change would be required to preserve the US empire…and the Clinton/Bush/Obama administration has had 14 years to entrench it apparatchiks throughout government and business.
When the auto-industry declined in the 70’s, the media held management blameless, NO…not the people in charge, it was the line workers fault that cheap failure prone parts and primitive manufacturing techniques were employed. I see the Clinton/Bush/Obama administration [and their minions] taking this route.
Petro
And then there’s this: China, UK sign deal on RMB clearing bank
Empirin’, it sure was fun while it lasted.
Formerly T-Bear
“”The Prelude to the End of the American Era””
??? I think you’re hearing the FINALE being sung. Don’t forget just WHO is in charge of the asylum and WHEN they last self-corrected.
Another metaphor handy enough, the only place that ship of state is going is DOWN; the sooner the better, it’s become a hazard to navigation in the narrow channels of international relations and established law; its crew, willfully ignorant, wantonly obtuse and woefully experienced have become dependent upon the authority of an autocratic cabal, unable to hear, see, feel or know any other means of maintaining life, zombies indeed, the living dead.
unthinkable
We can not have another world war because the costs are too high at this point with the advent of nuclear weaponary. Jimmy Carter stated that if countries have it (nukes), they will use it. so peace has to be the only option. there can be no glide path
markfromireland
@ unthinkable April 27, 2014
Fixed it for you. There are plenty of American policy level officials elected and professional alike who believe that nuclear war(s) are both ‘containable’ and ‘survivable’ and that’s just your civilian officials. I have also met senior to very senior American military officers whose duties have encompassed tours of duty at the strategic planning level who believe the same thing.
Then there’s senior to very senior American officers whose religious beliefs include that we are living in the ‘end times’ and that anything that helps bring about the second coming of Christ is is a good thing. The American Air Force in particular is so infested with these creatures that I simply assume any American Air Force office is one of them until proven otherwise.
All of which would be bad enough before you even begin to factor in the fact that of all the branches of the American military the single most hawkish is the USAF. Their doctrines and tactics are now and always have been predicated on the belief that enough USAF weapons and personnel will survive a first and second strike to win a nuclear war.
The current SACEUR and CO USEUCOM is American Air Force General Philip Mark Breedlove.
If you do even a miniscule amount of searching you will see that he is very hawkish on the current goings-on in Ukraine and what America and its NATO allies should do about it. Reports such as this one from Reuters:
Russia could achieve Ukraine incursion in 3-5 days – NATO general
or this one from the normally very well-informed Eli Lake:
Read in full: Exclusive: Key General Splits With Obama Over Ukraine
mfi
unthinkable
@markfromireland
Okay, i didn’t mean that we could not survive with one or two strikes. everyone knows that we could since japan is still around and doing just fine after two strikes. That scenario does not even exists anymore with the continuous monitoring and autonomous responses to detection of icbm’s by certain systems in place. It’s going to be more like 20 strikes on the major cities, on each side, with unimaginable fall out affecting all parts of every continent including water sources. If these senior planning officials in the administration and in the military believe that a strike would be contained and manageable, they are deluded.
markfromireland
@ unthinkable April 27, 2014 Actually you could probably survive a lot more than ‘just’ one or two strikes. For all sorts of reasons as you plainly realise the Japanese example is a bad one (although happily it is thus far the only one that exists) I’ll mention just three as amplification of your points:
One: The nuclear munitions that would be used have a far higher yield than the bombs dropped on the Japanese.
Two: The obvious one of geography there’s a major difference between a continental landmass and a small country consisting of Islands. Much harder to contain fallout and water source contamination as you rightly point out.
Three: The USA isn’t going to have a super-power come in and rebuild the place.
I’ll also add that the continuous monitoring and autonomous response systems that you mention aren’t foolproof.
You would think would you not that all of this would make it crystal clear to everyone that any war involving nuclear munitions is neither containable not manageable. But you’d be wrong about that – there are plenty of senior planning officials both in the civilian administration and in the military who have built their careers by pushing the dangerous nonsense that nuclear wars are manageable, containable, and winnable.
mfi
Ian Welsh
One of my friends cut his teeth on nuclear war strategy. It turned him into someone who hated nukes with a passion.
Badtux
Once again, the Russian ruble isn’t going to supplant anything as a major currency. All Russia exports is natural resources and weapons. Natural resource extraction currencies don’t become major currencies, else we’d all be using Saudi rials. What makes a currency a major currency is when there is a major market basket of goods that can be purchased with it. Right now, the number of goods that can be purchased with Russian rubles isn’t enough to do squat.
The yuan, on the other… if Russia started selling to China in yuan, that would make a lot of sense because then they can buy the Chinese consumer goods they yearn for without the friction of multiple currency marketplace transactions. The problem is that China is basically providing a discount price on their goods if you pay in dollars rather than yuan, due to their yuan-dollar peg. They will buy Russian oil and gas with yuan if Russia loses access to dollars, but they really prefer the dollars, because the dollars buy things like high tech semiconductor fab equipment, modern high-tech machine tools, and Saudi oil that are denominated in dollars, not yuan.
There may be a breaking point at which the dollar loses its status as the marketplace currency for the world. And the yuan, if Russia starts selling things in yuan, definitely looks like a candidate for the dollar’s replacement. But it’s not there yet, mostly because the Chinese don’t want it there yet. The Chinese are content to accept dollars then come over and buy America’s industrial infrastructure and ship it to China (though they’re running out of things to buy that way, but never fear, we’re all going to be renters in Chinese-owned houses and commercial buildings soon enough). They want to continue this project until the United States is no longer a major power but, rather, is in the position of the Ottoman Empire in the late 1800’s, a prostrate and powerless puppet of the major powers of the world. Right now the US military is too powerful to consider this project finished. But maintaining a high-tech military requires a lot of resources, and as said resources become increasingly unavailable… well. See Ottoman Empire in the late 1800’s. Just sayin’.
Ron Hutchison
The United States has no strategic interest in Ukraine. Russia does. To push this confrontation into war means that there are interests in the U.S. that really, really want war. What are Rumsfield and Rice doing these days?
Judy Byington
US, Canadian politicians join global leaders in Satanic child sacrifice cult?
Prominent US and Canadian politicians and corporate officials were expected to be named by eyewitnesses to murder as being members of the Ninth Circle Satanic child sacrifice cult. Witnesses claimed that brutal Satanic crimes against children continued today, some done in secretive sub-basement vaults beneath Roman Catholic cathedrals.
http://childabuserecovery.com/us-canadian-politicians-join-global-leaders-in-satanic-child-sacrifice-cult/#.U0vyykBxSs8