Tag: Sanctions

One of the greatest powers of the United States, one which was hardly used before Clinton, is the ability to freeze people out of the payments system. When Argentina had its previous debt crisis, it cut a deal with investors: They took a haircut, and the government agreed to pay them the haircut. Some investors refused.

Later, that deal was effectively destroyed, because Argentina lost in a US court. As a result, they could not pay the investors who had taken the haircut–a US judge was able to cut a sovereign state off from paying its debtors. Argentina could only have access if it paid both those who took the haircut and those who didn’t.

Over the last 20 years, in particular, the US has enforced financial sanctions against a bewildering number of people and states. Right now, it is disallowing Venezuela from buying many foreign goods. (When “socialism” doesn’t collapse fast enough, the US is always on hand to give it a shove.)

During the Iran sanctions period, before the Iran nuclear deal, the US and the EU cut Iran off from the payments system, virtually wholesale. SWIFT, the electronic payments system headquartered in Brussels refused to cooperate, saying that it should not be used as a tool of politics.

But the EU threatened the board and senior SWIFT executives with criminal charges, and SWIFT folded.

Lots of Iranians died and suffered under those sanctions, just like Iraqis did under the sanctions in the 90s.

When the Iran deal was cut, the sanctions were eased.

But Trump, when he tore up the Iran deal, re-imposed sanctions. The EU disagreed, but many EU companies are obeying the American order because America has said that it will sanction both companies and individuals who disobey.

And even if SWIFT doesn’t cooperate as a body, the problem is that most payments at some point touch American banks. The moment they do, America jurisdiction cuts in. (This is how FIFA got hit for corruption by US law enforcement. None of the bribes had anything to do with the US, but payments went thru US banks.)

So Europe is considering creating a payments system which does not ever touch US jurisdiction:

Germany’s foreign minister has called for the creation of a new payments system independent of the US as a means of rescuing the nuclear deal between Iran and the west that Donald Trump withdrew from in May…

…“For that reason it’s essential that we strengthen European autonomy by establishing payment channels that are independent of the US, creating a European Monetary Fund and building up an independent Swift system,” he wrote.

This adds Europe to a group which includes Russia and China, along with virtually every nation who has been subject to US sanctions.

The thing is that such sanctions used to be fairly rare. But Clinton weaponized them against Iraq and every President since them has used them as a bludgeon. They are a way, like drones to punish countries and individuals and to ignore sovereign rights.

The MMT types go on and on about being sovereign in one’s currency, but the fact is that you aren’t sovereign if another country can cut you out of the payments system. And right now the only countries in the world that are sovereign in that sense are America, the EU and China. And the EU and China are only somewhat sovereign.

These punishments are extra-territorial, they are an imposition of US law on non US countries and citizens. They are possible only because the US is the world hegemonic power, and sits at the center of the world payments system. Venezuela can sanction, but no one cares unless they have assets actually in Venezuela.

This power has been abused, repeatedly, to interfere in business that is none of America’s business. One can say that it might have been used acceptably when the entire UN security council agreed (I disagree), but when it doesn’t, the US has acted anyway.

And so, now, every great power in the world, with the possible exception of Japan, wants to take that power away from the US.

About time, but it will take time. It isn’t just about virtual links, it is about physical links: it must be done over continental cables and thru satellites which are not American. The way current software acts doesn’t take that in account, and physical infrastructure as well as software needs to be built.

But I hope that Europe is serious, because combined with China and Russia this is something which can be done, and done fairly fast (within a decade, I’d guess.) The only problem is that the EU, too, likes having this power. Are they really willing to give it up? Because the best way to do this would be to create a system which cannot be sanctioned without the agreement of all the powers who create: a system which cannot be sanctioned unilaterally. Everyone involved should have a veto.

Time will tell if Europe and, indeed, other nations, truly want a system that none of them can use to punish others.

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How to Stop Russian Election Interference

By Ian Welsh

On July 16, 2018

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Let us take as a given that Russia interfered in the last US election (though many of the accusations are unconvincing, some appear to be be true).

I’m pushing this back to the top, for what I assume are obvious reasons. Originally published Feb 1, 2018.

Why did they interfere?

They most likely did so because having a President in charge who was somewhat favorable to Russia is in Russia’s self interest. Remember that Russia is under US-led economic sanctions.

There is a case to be made that what Russia did was simply what Russia should have done: Act in its own self-interests. Russia should do what is in its self-interest.

Moreover, it is the same as the US does to other countries, all the time, including to Russia. When the US thinks that a country should have different leadership, it tries to make sure that happens. Such operations include political support, propaganda, and often support for violence. Money is funneled to opposition factions. The color-revolutions were US supported and so were the Maidan protests which overthrew the elected Ukrainian government and caused the most recent big crisis with Russia. There are many, many examples, including extensive support for anti-government forces in Iran.

The US does this because they think it is in their interest. If they think a democratic party is good for the US, they support it, but they have supported dictators and anti-democratic coups as well.

So what Russia is doing has a lot of precedent. The US is not some trembling innocent suffering some unspeakable crime. The better analogy is a serial bully who got his eye blacked by a past victim.

From the outside, Americans screaming about this look like a bully screaming, “How dare you do to me what I do to everyone else. I’m going to bury you!”

This does not induce sympathy.

Still, we can make a strong case that countries shouldn’t interfere in other countries’ internal political affairs, including–especially including–elections.

I think that the Russians might be willing to agree to that.

So the sane method of dealing with this issue, to which which virtually everyone will agree, would be to begin negotiations towards that end.

Americans and Russians get together and have frank talks, which amount to a peace treaty: We won’t do it to you, if you don’t do it to us.

They might even extend the notion to not doing it to other countries.

This is the actual road out, though it’s laughable because it really seems impossible to imagine. Both the US and Russia have been interfering in many countries for a long time, though the US has been the champion for the last 30 years or so–and by a wide margin.

But if you don’t want someone to hit you, perhaps you shouldn’t hit them?

The problem here is that this can’t stand alone. If the US retains the ability to sanction other countries economically, in ways that are so damaging that they kill vast numbers of those countries’ citizens and impoverish even more, which the US does, who is going to agree to just sit there and take it?

And the US does have this ability, for now, due to its control over the world payments system. The US Treasury can unilaterally sanction countries and firms, and no one can stop them, because banks outside the US feel compelled to obey as any transfer that touches on the US triggers US law, and the payment system is US built and controlled.

Most foreign debts are also subject to either US or British law, as the Argentinians learned to their great detriment.

But then, doesn’t the concept of sanctions fall under the general idea of interfering with other countries? Perhaps the US might also wish to stop sanctioning countries. Almost every case has done more harm than good, and the sanctions almost always hit ordinary people harder than leaders, even when they are targeted at the richest.

The way to have peace, is to leave other people alone.

I know that this runs exactly against the American character which is, “Hurt them until they do what I want.” It runs directly against how the US disciplines its own people, which is, “If you don’t cooperate, you’ll be poor and miserable.” (See how felons are treated after their incarceration for the most direct example.)

But perhaps, just perhaps, the best results in this world rarely come from hurting people until they submit, however long that takes. (See Cuba and Iran for how long it can not work.)

Oh, sure, sometimes it does “work.” The US has overthrown many countries’ governments, and they have gotten many other political parties elected. No one can deny this. But somehow, doing so often leads to even worse situations down the line. It seems that if you hurt people enough, they resist and start hating you, act against you, and try to get a government they like that doesn’t like you, and so on.

Sanity is saying “Okay, okay. Let’s stop this cycle of reciprocally hurting people.”

But that has to start and be credibly initiated by the worst abuser. And though most Americans won’t admit it, that worst abuser is the US.

This has been another episode of “Kindergarten-level Ethics for Adults.”

If you don’t like it when someone does it to you, don’t do it to other people.

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Relations with Russia Sour Further

By Ian Welsh

On July 31, 2017

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So, we have an anti-Russia sanctions bill moving through Congress, which will increase sanctions on Russia and include fines on non-American companies who do business with Russia in specific ways. It will remove Trump’s ability to remove sanctions. While Trump could veto it, the two versions (House and Senate) both passed with super-super-majorities (the Senate version is 98-2).

The White House has indicated that Trump will likely pass it, and if he doesn’t, will seek a “harsher” bill.

Meanwhile Russia has expelled 755 diplomats and seized two US diplomatic buildings in Russia, a move which brings American diplomatic numbers in Russia to the exact same number as Russian diplomats in America. This is in retaliation for Obama’s seizure of two buildings and removal of Russia diplomats just before he left office.

Russia had put off retaliation in hopes that Trump would reverse Obama’s action.

One of the few good things one hoped for with respect to the Trump administration was an improvement in US-Russia relations.

But Russia hysteria is in full swing in the US; red-scare reborn, based on accusations that Russia put Trump in the White House. A lot of people believe this, there were certainly plenty of contacts between various Russians and the Trump campaign, and heck, Russia probably did prefer Trump, hoping he’d undo sanctions and be less hostile.

(Meanwhile, the US appears to be working to overthrow the Venezuelan government.)

Proof of significant action by Russia is lacking. It may be that some minor help was given, but I have yet to see any proof that hacking was ordered by the Russian government, only repeatedly asserted by a variety of intelligence agencies, all of whom have a long record of lying when convenient.

If interference did occur, it appears to have amounted to “release of true information that was harmful to Clinton.”

If this is worthy of sanctions, then the rest of the world should lock up America and throw away the key given America’s actions; repeatedly not just interfering in elections, but overthrowing governments–including democratically elected ones.

It is worth remembering, again, that Russia has enough nukes to destroy the world, and so does America. Good relations are in the interest of world survival.

It is perhaps also worth looking, with a cold eye, at whether America or Russia, over the last 20 years or so, has done more harm to other countries and their citizens? If you are honest in the exercise, you might begin to wonder who is the greater threat.

Meanwhile, we also have more sanctions against Iran and North Korea coming down the pipe.

North Korea is, by the way, still at war: The Korean war was never ended with a peace treaty, only with a truce. North Korea is under perhaps the most extensive sanctions in world history, but somehow those sanctions haven’t stopped it from getting nukes, and it’s possible they may even wind up with missiles able to strike the US.

There is a rumor that the current leader of North Korea was left a note by his father, which said, “Don’t give up your nukes. Saddam gave up his program, and that’s when the US went for him.” It has also been noted that Qaddafi gave up his nuclear program, played nice with the West, and as a reward, got sodomized with a knife and killed. (Clinton was very happy about this: “We came, we saw, he died.”)

I don’t know if the rumor is true, but I do know that North Korea would be insane to give up their nukes as anything but part of a comprehensive peace deal which removed sanctions, and maybe not even then. This is simply as a matter of survival. You don’t have to like the North Korean regime (I don’t) to not realize that people aren’t going to cut their own throats for your convenience.

As for Iran sanctions… bah, fill it in yourself. This is vile stupidity, and I hate any form of theocratic government.

I blame Democrats and the media for a ton of this. The hysterics have been never-ending. Better relations with Russia are a good thing under most circumstances. Instead, the US is ratcheting up tensions and giving Russia every reason to see the United States as its enemy. (Lets’ be frank, the US is Russia’s enemy, and, save for a brief period when they were allied against Germany, has never been anything else.)

So, the world gets stupider, more propaganda ridden, and more dangerous. The sanctions won’t “work” (and appear to be about forcing Europeans to buy American oil instead of Russian), not in the sense of making Russia do what the US wants or not do anything they can to undo damage done to their country.

If you don’t want someone to treat you as a threat, perhaps don’t act as a threat. (Insert long essay here about how, actually, the US is far more of a threat to Russia than Russia is to the US.)

This is all pathetic, and everyone involved in it should be ashamed, but is, instead, proud.

Pathetic.

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What the Melian Dialogue tells us about the End of Empire (Venezuelan security threat edition)

By Ian Welsh

On March 10, 2015

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The Course of Empire by Thomas Cole

I’ll just point out that in no way can Venezuela be considered a security threat to the United States. And the “human rights violations”, while some are real are far less than routinely committed by many US allies, including Saudi Arabia, while Venezuela is more democratic, again, than many countries the US has not imposed sanctions on.

This sort of bullying is exactly the sort of thing which will lead to the end of American hegemony. Though less severe, one is reminded of the Melian dialogue. The Athenians argue that the powerful do as they will and the weak as they must, and that the Melians should surrender. If they do not, the Athenians will slaughter the men and sell the women and children into slavery.

The Melian reply in part, is thus:

But do you not recognise another danger? For, once more, since you drive us from the plea of justice and press upon us your doctrine of expediency, we must show you what is for our interest, and, if it be for yours also, may hope to convince you: Will you not be making enemies of all who are now neutrals? When they see how you are treating us they will expect you some day to turn against them; and if so, are you not strengthening the enemies whom you already have, and bringing upon you others who, if they could help, would never dream of being your enemies at all?

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The irony of the Melian dialogue is that both sides are right: the Melians are destroyed, and would have been better off if they submitted. But the destruction of Melos is indeed one of the contributing factors to the eventual fall of Athens, because while Sparta may be nastier internally, they are also less dangerous to other city-states than Athens is.

The analogy is not perfect, because even with all of Venezuela’s problems, much of the population is better off resisting the US than it would be conceding (the poor and the darker colored citizens have benefited immensely under the Bolivaran revolution).

But America, and the West’s continued insistence that nations will kneel or suffer is very similar and is already damaging American power.

Russian Sanctions against the West

By Ian Welsh

On August 8, 2014

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Per Russia, from a speech by Medeved:

Russia has completely banned the importation of beef, pork, fruits and vegetables, poultry, fish, cheese, milk and dairy products from the European Union, the United States, Australia, Canada and the Kingdom of Norway.

He also noted that Russia is considering revoking or changing airspace rights over Russia’s Asia Pacific region or Siberia. This is not a small matter, and would make many flights from airlines in the affected countries far more expensive (while allowing their competitors, in countries which haven’t imposed sanctions on Russia to out-compete them.)

As zero-hedge points out, the agricultural ban will have a significant negative effect on the European economy, which is already sputtering, and will likely lead to more special monetary policy (giving money to the already rich).

Such policy is very good at pumping up stock markets, but as the US experience indicates, it does nothing for ordinary people, whose wages in the US have fallen (only the top 10% has seen increases). I warned in 2009 that the policies of the Fed and Obama would lead to at least a generation of worse economy. Special monetary policy is worse than doing nothing, and very quickly.

The continued pivot away from the West and towards BRICS and other nations is not a good thing for the West. An integrated Russia is in the West’s best interest: a Russia in the arms of China, is not. I still cannot imagine anything in the Ukraine that is worth this.

The line in most Western media is that this will hurt Russia more than it does the West and perhaps even cause protests in Russia due to rising food prices. We’ll see, to be sure, in the short to medium term it will hurt Russia, but Russia does still have plenty of inefficiently utilized agricultural land, and the rest of the world will be happy to sell to Russia. Note, however, that the US, Canada, and the EU are very cost-efficient agricultural producers and the alternative suppliers are in the southern hemisphere, as a rule. This will cause a permanent rise in the cost of food in Russia, whether it will be offset by a rise in domestic production leading to higher incomes for farmers remains to be seen. Such would take time, in any case.

I note, finally, that if you are going to go to war with someone, you should cut off your food dependency before you do. Certainly NATO may not intervene if Russia decides to help the rebel states in the Ukraine, but certainly sanctions would ratchet. If Russia intends to invade the Eastern Ukraine, it might as well do this now and prepare its economy.

Interesting times. Let us hope this isn’t another step towards the interesting experience of a nuclear exchange over a country most Americans couldn’t find on a map.

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The horizon is not so far as we can see, but as far as we can imagine

Tag: Sanctions

When Will the US Lose Control of the World Payments System?

How to Stop Russian Election Interference

Relations with Russia Sour Further

What the Melian Dialogue tells us about the End of Empire (Venezuelan security threat edition)

Russian Sanctions against the West