Tag Archive | "BRICS"

BRICS and the Fiction of “De-Dollarization”


NOVANEWS

Next week in early September 2017, the member states of BRICS, will be meeting in Xiamen, Fujian Province, China.

This article was first published by Global Research in April 2015.

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The financial media as well as segments of the alternative media are pointing to a possible weakening of the US dollar as a global trading currency resulting from the BRICS (Brazil, Russia, India, China, South Africa) initiative. 

One of the central arguments in this debate on competing World currencies hinges on the BRICS initiative to create a development bank which, according to analysts, challenges the hegemony of Wall Street and the Washington based Bretton Woods institutions.

The BRICS New Development Bank (NDB) was set up to challenge two major Western-led giants – the World Bank and the International Monetary Fund. NDB’s key role will be to serve as a pool of currency for infrastructure projects within a group of five countries with major emerging national economies – Russia, Brazil, India, China and South Africa. (RT, October 9, 2015, emphasis added)

More recently, emphasis has been placed on the role of China’s new Asia Infrastructure Investment  Bank (AIIB), which, according to media reports, threatens to “transfer global financial control from Wall Street and City of London to the new development banks and funds of Beijing and Shanghai”.

There has been a lot of media hype regarding BRICS.

While the creation of BRICS has significant geopolitical implications, both the AIIB as well as the proposed BRICS Development Bank (NDB) and its Contingency Reserve Arrangement (CRA) are dollar denominated entities. Unless they are coupled with a multi-currency system of trade and credit, they do not threaten dollar hegemony. Quite the opposite, they tend to sustain and extend dollar denominated lending. Moreover, they replicate several features the Bretton Woods framework.

Towards a Multi-Currency Arrangement? 

What is significant, however, from a geopolitical standpoint is  that China and Russia are developing a ruble-yuan swap, negotiated between the Russian Central Bank, and the People’s Bank of China,

The situation of the other three BRICS member states (Brazil, India, South Africa) with regard to the implementation of (real, rand rupiah) currency swaps is markedly different. These three highly indebted countries are in the straightjacket of IMF-World Bank conditionalities. They do not decide on fundamental issues of monetary policy and macro-economic reform without the green light from the Washington based international financial institutions.

Currency swaps between the BRICS central banks was put forth by Russia to:

“facilitate trade financing while completely bypassing the dollar. “At the same time, the new system will also act as a de facto replacement of the IMF, because it will allow the members of the alliance to direct resources to finance the weaker countries.” (Voice of Russia)

While Russia has formally raised the issue of a multi-currency arrangement, the Development Bank’s structure does not currently “officially” acknowledge such a framework:

We are discussing with China and our BRICS parters the establishment of a system of multilateral swaps that will allow to transfer resources to one or another country, if needed. A part of the currency reserves can be directed to [the new system]” (Governor of the Russian Central Bank, June 2014, Prime news agency)

India, South Africa and Brazil have decided not to go along with a multiple currency arrangement, which would have allowed for the development of bilateral trade and investment activities between BRICs countries, operating outside the realm of dollar denominated credit. In fact they did not have the choice of making this decision in view of the strict loan conditionalities imposed by the IMF.

Heavily indebted under the brunt of their external creditors,  all three countries are faithful pupils of the IMF-World Bank. The central bank of these countries is controlled by Wall Street and the IMF. For them to enter into a “non-dollar” or an “anti-dollar” development banking arrangement with multiple currencies, would have required prior approval of the IMF.

The Contingency Reserve Arrangement

The CRA is defined as a “framework for provision of support through liquidity and precautionary instruments in response to actual or potential short-term balance of payments pressures.” (Russia India Report April 7, 2015). In this context, the CRA fund does not constitute a “safety net” for BRICS countries, it accepts the hegemony of the US dollar which is sustained by large scale speculative operations in the currency and commodity markets.

In essence the CRA operates in a similar fashion to an IMF precautionary loan arrangement (e.g. Brazil November 1998) with a view to enabling highly indebted countries to maintain the parity of their exchange rate to the US dollar, by replenishing central bank reserves through borrowed money.

The CRA excludes the policy option of foreign exchange controls by BRICS member states. In the case of India, Brazil and South Africa, this option is largely foreclosed as a result of their agreements with the IMF.

The dollar denominated $100 billion CRA fund is a “silver platter” for Western “institutional speculators” including JP Morgan Chase, Deutsche Bank, HSBC, Goldman Sachs et al, which are involved in short selling operations on the Forex market. Ultimately the CRA fund will finance the speculative onslaught in the currency market.

Neoliberalism firmly entrenched

An arrangement using national currencies instead of the US dollar requires sovereignty in central bank monetary policy. In many regards, India, Brazil and South Africa are (from the monetary standpoint) US proxy states, firmly aligned with IMF-World Bank-WTO economic diktats.

It is worth recalling that since 1991, India’s macroeconomic policy was under under the control of the Bretton Woods institutions, with a former World Bank official, Dr. Manmohan Singh, serving first as Finance Minister and subsequently as Prime Minister.

Moreover, while India is an ally of China and Russia under BRICS, it has entered into a  new defense cooperation deal with the Pentagon which is (unofficially) directed against Russia and China. It is also cooperating with the US in aerospace technology. India constitutes the largest market (after Saudi Arabia) for the sale of US weapons systems. And all these transactions are in US dollars.

Similarly, Brazil signed a far-reaching Defense agreement with the US in 2010 under the government of Luis Ignacio da Silva, who in the words of the IMF’s former managing director Heinrich Koeller, “Is  Our Best President”, “… I am enthusiastic [with Lula’s administration]; but it is better to say I am deeply impressed by President Lula, indeed, and in particular because I do think he has the credibility”  (IMF Managing Director Heinrich Koeller, Press conference, 10 April 2003 ).

In Brazil, the Bretton Woods institutions and Wall Street have dominated macro-economic reform since the outset of the government of Luis Ignacio da Silva in 2003. Under Lula, a Wall Street executive was appointed to head the Central Bank, the Banco do Brazil was in the hands of a former CitiGroup executive. While there are divisions within the ruling PT party, neoliberalism prevails. Economic and social in Brazil is in large part dictated by the country’s external creditors including JPMorgan Chase, Bank America and Citigroup.

Central Bank Reserves and The External Debt

India and Brazil (together with Mexico) are among the World’s most indebted developing countries. The foreign exchange reserves are fragile. India’s external debt in 2013 was of the order of more than $427 Billion, that of Brazil was a staggering $482 billion, South Africa’s external debt was of the order of $140 Billion. (World Bank, External Debt Stock, 2013).

External Debt Stock (2013)

Brazil  $482 billion

India   $427 billion

South Africa  $140 billion

All three countries have central banks reserves (including gold and forex holdings) which are lower than their external debt (see table below).

Central Bank Reserves (2013)

Brazil  $359 billion

India:  $298 billion

South Africa $50 billion

The situation of South Africa is particularly precarious with an external debt which is almost three times its central bank reserves.

What this means is that these three BRICS member states are under the brunt of their Western creditors. Their central bank reserves are sustained by borrowed money. Their central bank operations (e.g. with a view to supporting domestic investments and development programs) will require borrowing in US dollars. Their central banks are essentially “currency board” arrangements, their national currencies are dollarized.

The BRICs Development Bank (NDB)

On 15 July 2014, the group of five countries signed an agreement to create the US$100 billion BRICS Development Bank together with a US dollar denominated  ” reserve currency pool” of US$100 billion. These commitments were subsequently revised.

Each of the five-member countries  “is expected to allocate an equal share of the $50 billion startup capital that will be expanded to $100 billion. Russia has agreed to provide $2 billion from the federal budget for the bank over the next seven years.” (RT, March 9, 2015).

In turn, the commitments to the Contingency Reserve Arrangement are as follows;

Brazil, $18 billion

Russia $18 billion

India  $18 billion

China $41 billion

South Africa $5 billion

Total $100 billion

As mentioned earlier, India, Brazil and South Africa, are heavily indebted countries with central bank reserves substantially below the level of their external debt.  Their contribution to the two BRICs financial entities can only be financed:

  • by running down their dollar denominated central bank reserves and/or
  • by financing their contributions to the Development Bank and CRA, by borrowing the money, namely by “running up” their dollar denominated external debt.

In both cases, dollar hegemony prevails. In other words, the Western creditors of these three countries will be required to “contribute” directly or indirectly to  the financing of the dollar denominated contributions of Brazil, India and South Africa to the BRICS development bank (NDB) and the CRA.

In the case of South Africa with Central Bank reserves of the order of 50 billion dollars, the contribution  to the BRICS NDB will inevitably be financed by an increase in the country’s (US dollar denominated) external debt.

Moreover, with regard to India, Brazil and South Africa, their membership in the BRICS Development Bank was no doubt the object of behind closed doors negotiations with the IMF as well as guarantees that they would not depart from the “Washington Consensus” on macro-economic reform.

Under a scheme whereby these countries were to be in be in full control of their Central Bank monetary policy, the contributions to the Development Bank (NDB) would be allocated in national currency rather than US dollars under a multi-currency arrangement. Needless to say under a multi-currency system the contingency CRA fund would not be required.

The geopolitics behind the BRICS initiative are crucial. While the BRICS initiative from the very outset has accepted the dollar system, this does not exclude the introduction, at a later stage of a multiple currency arrangement, which challenges dollar hegemony.

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Will Washington’s New Pro-Moscow, Anti-Beijing Gang Drive a Wedge Through the BRICS in 2017?


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The weeks following an underwhelming Brazil-Russia-India-China-South Africa (BRICS) mid-September summit in Goa and the United States presidential election in November have unveiled ever-widening contradictions.

Thanks to blatant corruption, presidential delegitimation has reached unprecedented levels in both Brazil and South Africa; while ruling-party religious degeneracy in India also included an extraordinary bout of local currency mismanagement; and sudden new foreign-policy divergences may wreak havoc in China and Russia.

The BRICS bloc’s relations could well destabilize to the breaking point.

Washington Wedge

Even before the next major world recession arrives, probably within two years, the inexorable rise of intra-bloc conflict will be apparent at the September 2017 BRICS summit in Xiamen, China. Most obviously, the Brasilia, Moscow and New Delhi regimes are shifting toward Washington while those in Pretoria and Beijing are spouting well-worn anti-imperialist rhetoric, just as Donald Trump and his unhappy mix of populists, paleo-conservatives, neo-conservatives and neoliberals take power on January 20.

We should have been more concerned about these power relations much earlier. For more than a decade, Washington militarists and their academic allies (like Keir Lieber and Daryl Press) have believed that “the United States now stands on the cusp of nuclear primacy… [having] the ability to disarm the nuclear arsenals of Russia or China with a nuclear first strike.” Such men are further empowered by Trump’s Christmas-time threat to any opponent that he would engage in “an arms race. We will outmatch them at every pass and outlast them all.”

Obama Legacy

In spite of regular promises to disarm the nukes, outgoing president Barack Obama’s recent recommitment to a new generation of precision-guided mini-warheads will not only cost more than $1-trillion over the next three decades, but also makes their use “more thinkable,” according to one of his top strategists.

And in several other ways Obama’s legacy set the stage for the worst of Trump’s coming policies: economically empowering the top 1% at the expense of the vast majority, continuation of a belligerent foreign policy, promotion of corporate interests across the world, denial of civil liberties especially to refugees and prisoners, and construction of a vast surveillance capacity by Washington’s deep state.

Still, while each of these dangerous elephants trample the grass underfoot, there are a few surviving blades – the subject of a coming essay. Only grassroots initiatives offer encouragement for a bottom-up anti-imperial afterlife following the top-down imperial, inter-imperial and sub-imperial follies of 2017. The main point of the pages ahead, though, is that whether in Washington or BRICS capitals, the wedge may well work but the broader right-wing agenda will fail.

Tensions in Taiwan

To illustrate the insanity ahead, one ‘country’ seems poised to centrally play at least a symbolic role: Taiwan. In late December, Solly Msimanga – the centre-right mayor of South Africa’s capital city, Pretoria, elected just four months earlier – visited Taipei to seek out trade and investment opportunities, following an invitation from his counterpart in Taiwan’s capital.

The prior municipal political establishment became as wild-eyed-angry about this trip as were Chinese elites about the December 2 congratulatory phone call Trump happily took from Taiwan’s president Tsai Ing-Wen. Reflecting an unusual global sensibility, the African National Congress (ANC) branch that had ruled the city for the prior two decades furiously complained that Msimanga’s trip “exposed the conspiracy against BRICS countries… We are without doubt characterizing this trip as treason” (sic).

The national Department of International Relations and Cooperation spokesperson, Clayson Monyela, reiterated that Msimanga “was advised against undertaking this trip. The SA government respects the One China policy.” Actually, Monyela’s unit has its own Taipei Liaison Office which promotes cooperation in biomedicine and auto electronics. Likewise the Taiwanese have Liaison Offices in Pretoria and Cape Town.

Indeed dating to 1996 when Taiwan held its first-ever democratic presidential election, Nelson Mandela had committed to recognize a government which “supported us during the later phase of the struggle… It is not easy for me to be assisted by a country, and once I come to power, say ‘I have no relations with you’. I haven’t got that type of immorality, and I will not do it.” The ‘support’ was merely a bribe: in 1993-94, Taipei officials donated $20-million to the ANC for its election campaign, a U-turn after a long history of the pro-U.S. military regime’s collaboration with apartheid. (Mandela similarly celebrated Indonesian dictator Suharto in 1997, after receiving his taxpayers’ similarly generous donations.)

Always exhibiting his deal-making instincts, Trump had replied to critics, “I don’t know why we have to be bound by a One China policy, unless we make a deal with China having to do with other things, including trade.” (Washington had recognized One China since 1979, as had the UN General Assembly since 1971.)

One reasonable response from Taiwan was a request not to be used as a bargaining chip. Complained a “very annoyed” researcher, June Lin from the Taipei-based Formosan Association for Public Affairs, “Trump tried to be free and easy, but he is very specific about the exchange deal: ‘Who cares? Unless you give me A and B and C, or I won’t give a damn.’”

A Chinese state mouthpiece, the Global Timesthreatened that if Trump “openly abandons the One China policy, there will be a real storm. At that point, what need does mainland China have for prioritising peaceful unification with Taiwan over retaking the island by military force?”

War is one scenario but an economic blockade is more likely, given Taiwan’s reliance on China, especially sending world-leading semi-conductors to the desperately dependent West via eastern mainland China’s high-tech assembly facilities. One Beijing official told Reuters, “We can just cut them off economically. No more direct flights, no more trade. Nothing. Taiwan would not last long. There would be no need for war.”

Moreover, if Trump continued to be – as the Global Times put it – “as ignorant of diplomacy as a child,” then China would aid (unspecified) anti-U.S. forces. “This inexperienced president-elect probably has no knowledge of what he’s talking about. He has overestimated the U.S. capability of dominating the world and fails to understand the limitation of U.S. powers in the current era.”

If Trump is merely an ignorant conman, as seems the case, he nevertheless has a potent instinct for divide-and-rule rhetorical flair, confirmed by his support in the U.S. white working class. Trump’s economic localization slogan “Buy American and Hire American” may, in turn, combine with his geopolitical deal-making to become a major wedge between the BRICS. For behind the resurgent inter-imperial sentiments lie vast economic contradictions that now appear beyond the capacity of multilateral capitalist regulation to resolve.

Rightwing or Leftwing Localization?

Beijing will certainly face worsening problems with Trump, given the latter’s propensity to blame trade competition – specifically, subsidised Chinese exports and currency devaluation, as well as alleged Chinese commercial computer hacking – for U.S. deindustrialization. Advised by the notorious Sinophobe economist Peter Navarro, Trump’s answer is a series of localization-oriented policies that will allegedly benefit U.S. manufacturing industry by increasing protection from foreign imports with what may be a 45% tariff on China and 10% on goods from other overseas sources.

Centre-left economist Joseph Stiglitz warns against Trumponomics, in part because of the lack of redistribution that might make such high import tariffs feasible: “Higher interest rates will undercut construction jobs and increase the value of the dollar, leading to larger trade deficits and fewer manufacturing jobs – just the opposite of what Trump promised. Meanwhile, his tax policies will be of limited benefit to middle-class and working families – and will be more than offset by cutbacks in healthcare, education, and social programs.”

A trade war is just as likely an outcome, reminiscent of the protectionist Smoot-Hawley Act of 1930 which is credited with contributing to the Great Depression. Like that period, the major question is in which direction populist sentiments channel working-class politics, rightwards or leftwards. (A coming essay considers the left option.)

Momentum in most sites is enjoyed by right-wing leaders: the U.S. (Trump), Britain (UK Independence Party and Brexit supporters), France (National Front led by Marine le Pen), Germany (Alternative for Germany) and the Netherlands (Party of Freedom led by Geert Wilders), with the latter three holding elections in 2017, along with Italy whose Five Star Movement (led by comedian Beppe Grillo) also has right-populist support.

If this tendency continues to prevail, we can expect the widespread emergence of what is often termed a ‘fascist’ regime: when the populist sentiments of working-class people are revealed as nativist, racist, misogynist, homophobic, xenophobic, Islamophobic, anti-Semitic, ablist and anti-ecological, when imperialist and militaristic sentiments are acted upon, and when the socio-cultural agenda of the right is conjoined with corporate power to take control of the state.

In the period 2017-20, the dominant alignment appears to be a combination of far-right socio-cultural politics with mega-corporate interests, at least in the USA. (In Britain, the City of London’s financial-corporate agenda conflicts more explicitly with the far-right’s Brexit strategy.) It became clear immediately after the election that Wall Street’s giddy investors expect military, financial and fossil fuel industry stocks to prosper far more than any others, as the Dow Jones index hit a new record.

Trump promises to lower corporate taxes from 35 to 15% and rapidly inject what might be called ‘dirty Keynesian’ spending on airports and private transport infrastructure, heralding a new boom in U.S. state debt. Along with the Federal Reserve’s rise in interest rates, this in turn will at least initially draw more of the world’s liquid capital back into the U.S. economy, similar to the 2008-09 and post-2013 shifts of funds that debilitated all the BRICS currencies aside from the Chinese yuan.

New Alliances Loom as Several BRICS Continue to Crumble

With Trump’s election and the resulting rearrangement of geopolitical alliances and economic uncertainty, the BRICS will be under increasing pressure on several fronts. One winner may well be the Russian economy, as a result of loosening sanctions and the higher oil prices that will likely result from the December 2016 Organization of Petroleum Exporting Countries agreement. At rock bottom in February 2016, the price per barrel had fallen to $27, but by year’s end it was $55, giving some prospect of relief to the Russian economy.

Nevertheless, as the world becomes more geopolitically dynamic and economically dangerous – what with ongoing Chinese overcapacity, unprecedented global corporate debt while profit rates continue falling, worsening stagnation and rising financial meltdown risks emanating from weak European banks such as Germany’s Deutsche as well as several Italian banks – the political coherence of the BRICS bloc is in question.

Trump’s election heralded a period ahead in which the BRICS’ dubious claim to building a counter-hegemonic world politics will falter even faster. Two leaders – Brazil’s Michel Temer and India’s Narendra Modi – have strong ideological affinities as conservative nationalists.

Temer’s government, installed in May, has come under intense pressure because of ongoing popular delegitimation of his constitutional-coup regime, in part from unions which had supported the predecessor Workers Party. Temer’s closest allies (e.g., Renan Calheiros and Eduardo Cunha, who arranged former president Dilma Rousseff’s downfall in the Congress, and six of his cabinet ministers) were repeatedly exposed as far more corrupt than the prior president, thanks in part to plea bargain confessions by 77 officials of the Odebrecht construction companies involved in political bribery.

In December, Temer’s government imposed a new 20-year austerity regime that is certain to generate a coming period of unrest. Temer’s two 2016 trips to Asia – to appear with the G20 and especially with other BRICS leaders at the Goa summit – represent one means of distraction from such troubles.

In India, six weeks before hosting the 2016 summit, Modi suffered a strike of an estimated 180 million workers demanding both higher wages and an end to his neoliberal (austerity-oriented, pro-corporate) economic policies. Although his Hindu nationalism assures a strong base, Modi soon became even more unpopular with the non-sectarian working class and poor (amongst others) due to his chaotic banning of large currency notes (500 and 1000 rupees) that make up 86% of the money in circulation. This left many rural areas virtually without cash and hence without economic activity, and banks were compelled to restrict funds withdrawals to small daily amounts.

Modi also attempted, albeit unsuccessfully, to use the Goa summit for intense (albeit unsuccessful) ‘anti-terrorist’ lobbying. The economic and political links that China and Russia have built with the Pakistani government – as it has progressively delinked from Washington in the wake of the 2011 Osama bin Laden execution – remain more attractive than remaining in India’s favour within the South Asian rivalry.

A third leader, South Africa’s Jacob Zuma, seems to require BRICS anti-imperialist myth-making to shore up his internal legitimation, as part of the ANC’s so-called “talk left, walk right“ tendency. For example, in November 2016 Zuma explained BRICS to party activists in the provincial city of Pietermaritzburg: “It is a small group but very powerful. [The West] did not like BRICS. China is going to be number one economy leader… [Western countries] want to dismantle this BRICS. We have had seven votes of no confidence in South Africa. In Brazil, the president was removed.”

The following week in Parliament, Zuma was asked by an opposition Member of Parliament which countries he meant, and he replied, “I’ve forgotten the names of these countries. How can he think I’m going to remember here? Heh heh heh heh!,” he chuckled.

It is evident that Zuma will continue to use the BRICS as a foil for such defensive sentiments, even though his government’s initial endorsement of the NATO bombing of Libya in 2011 was the most egregious case of the BRICS’ geopolitical role in Africa, against the African Union’s wishes (and to be fair, Pretoria did reverse course and opposed further intervention). Behind the scenes, U.S. journalist Nick Turse has identified the Pentagon’s “war fighting combatant command” in dozens of African states, mainly directing local proxies.

It soon transpired that there was a blunt division of labour at work between Washington and its deputy sheriff in Pretoria. At the conclusion of his 2014 meeting with Obama as part of a U.S.-Africa heads-of-state summit, Zuma identified a chilling conclusion: “There had been a good relationship already between Africa and the U.S. but this summit has reshaped it and has taken it to another level… We secured a buy-in from the U.S. for Africa’s peace and security initiatives… As President Obama said, the boots must be African.”

The theatrical aspects of BRICS will continue, apparently designed in part for the local consumption of constituencies who want to see their leaders standing tall internationally in part because of rising local problems. But the most dynamic and contradictory terrain of BRICS to consider is their role in global geopolitics.

BRICS Play the Global Game

Armed conflicts and extreme tensions certainly affect the BRICS directly and in their immediate regions: Syria, Ukraine, Poland, Pakistan, the Korean Peninsula and the South China Sea. In addition, global power balances are adjusting because of dramatic 2016 shifts of leadership loyalties from West to East in Turkey and the Philippines encouraged by Russia and China, respectively.

Meanwhile, the last two years have witnessed major armed (including civil) conflicts continuing in Syria, Afghanistan, Turkey, Pakistan, Mexico and northern and central Africa. Aside from extremist groups such as the Islamic State, Boko Haram and Al-Shabaab, the main belligerent bloc of states catalysing violence in the world today is centred on Washington.

World military spending, 2015. [Source: Bank of America.]

The most dangerous such state network continues to feature Israel, Saudi Arabia and Qatar in the Middle East (the latter two of which split favours in funding both Islamic extremists and the Clinton Foundation). Misery, displacement, refugees and brutal repression are evident, as a result, from Palestine to Syria to Yemen, while the Pentagon and State Department are themselves directly responsible for infinitely destructive chaos in Libya, Afghanistan and Iraq. Vladimir Putin’s decision to defend Syria’s corrupt, dictatorial Bashar al-Assad regime in turn led to extensive war crimes against civilians such as bombing East Aleppo.

Beyond the Middle East, it is always tempting for Western powers to provoke incursions in the BRICS’ regional sites of accumulation and geopolitical influence. The North Atlantic Treaty Organization’s (NATO) conflicts with Russia in Georgia, the Ukraine, Poland, Syria and Turkey, and the U.S. Navy with China in the South China Sea, have been most important in recent years. The U.S. dominates world military spending, with $610-billion in direct outlays in 2014 (and myriad other related expenses maintaining Washington’s control such as U.S. AID). But four of the five BRICS also spent vast amounts on arms: $385-billion in 2015 (of which 55% was China).

There are various other sites of contestation, e.g. over Washington’s (and its ‘five eyes’ allies’) capacity to tap communications and computers through the internet. After revealing the U.S. National Security Agency’s (NSA) snooping capacity in 2013, whistle-blower Edward Snowden has an apparently safe Moscow exile, after fears of extradition to the U.S. or worse. A few months later, Rousseff cancelled the first visit by a Brazilian head of state to Washington in 40 years, as a way to protest Snowden’s revelation that the NSA was tapping her phone.

In this context of split loyalties, two quite unpredictable processes are in play at the time of writing, centering on Russian and Chinese relations with Washington. First, in Russia, Putin was accused by Obama and by the defeated candidate Hillary Clinton of assisting Trump to win the November 2016 election through email hacking, a matter that may be clarified in January if U.S. intelligence agencies manage to prove the case. But these agencies failed repeatedly on prior occasions, and on December 29 even Obama failed to offer conclusive evidenceof wrongdoing when he expelled three dozen Russian diplomats accused of spying.

At the time of writing, WikiLeaks founder Julian Assange still denied he had access to leaked emails from any direct Russian source. A former British ambassador, Craig Murray, claims mid-2016 Democratic National Committee leaks were given to him by an internal Democratic Party whistle-blower, to pass to Assange. Another election email scandal involved the hacking of Clinton’s campaign chairperson, John Podesta, whose security advisor admitted that he accidentally made Podesta vulnerable in a phishing scam designed to acquire his password.

Putin responded to Obama’s late-2016 attacks merely with scorn, saying he would await the presidential transition, and was immediately congratulated by Trump. Putin not only recently bragged, “Of course the U.S. has more missiles, submarines and aircraft carriers, but what we say is that we are stronger than any aggressor, and this is the case.”

Yet Putin’s critics remind that the Russian government is being successfully prosecuted for widespread doping of Olympic athletes, a charge once denied but now confessed. Given Putin’s hatred of the U.S. State Department – for valid reasons, such as its role in the Ukrainian regime change in 2014 and destruction of Iraq, Afghanistan, Libya and Yemen in recent years – there is no question that he both favoured the election of Trump and had the spy-craft capacity to make an intervention.

Putin also enjoys alliances with several far-rightwing allies in Europe and he anticipates a dramatic adjustment in the Western balance of forces thanks in part to Trump’s prolific personal business interlocks with Russia. Benefits to Putin will begin with the relaxation of sanctions associated with Russia’s 2014 invasion of the Ukrainian (former Soviet) province of Crimea, recognition of Moscow’s sphere of influence in the ex-Soviet Union, and potentially also a rising oil price.

One dilemma for the Trump administration is that his own party and the Democratic Party have been conditioned to despise Putin for more than a decade. But Trump surprised the establishment with the appointment to the position of Secretary of State of the pro-Russian ExxonMobil chief executive Rex Tillerson. There could be a resurrected $500 dollar Siberian oil deal for ExxonMobil – whose implementation was interrupted in 2015 – if Washington soon ends U.S. sanctions against Russia, as is widely anticipated.

As Guardian columnist Julian Borger reports, powerful critics believe Trump’s “opaque ties with Russia and his glaring conflicts of interest represent existential threats to U.S. democracy. Trump is giving the nod to Tillerson, the recipient of Moscow’s Order of Friendship, as a slaughter is underway in Aleppo, likely to be one of the worst war crimes of the century so far, in which Russia is complicit.”

Moscow’s Sputnik news expects mediation by Henry Kissinger to mutual advantage. But this is dangerous, warns former Reagan Administration official Paul Craig Roberts: “Kissinger, who was my colleague at the Center for Strategic and International studies for a dozen years, is aware of the pro-American elites inside Russia, and he is at work creating for them a ‘China threat’ that they can use in their effort to lead Russia into the arms of the West. If this effort is successful, Russia’s sovereignty will be eroded exactly as has the sovereignty of every other country allied with the USA.”

Already before Trump enters the White House, Beijing’s Xi Jinping is in greater conflict with Washington than at any time since China-U.S. frictions of the early-2000s. On the other hand, U.S. capital is extremely exposed in China through direct investment, supplier relations, R&D contracts and consumer markets. And Beijing still owns more than $1.3-trillion in Treasury Bills, although that holding has not increased since 2012.

Geopolitical tensions in the South China Sea began rising in 2011 with Obama’s “pivot to Asia.” This meant, according to journalist John Pilger, “that almost two-thirds of U.S. naval forces would be transferred to Asia and the Pacific by 2020. Today, more than 400 American military bases encircle China with missiles, bombers, warships and, above all, nuclear weapons. From Australia north through the Pacific to Japan, Korea and across Eurasia to Afghanistan and India, the bases form, says one U.S. strategist, ‘the perfect noose’.”

In addition, Eurasia is a testing ground because of increasing investments in Chinese infrastructure (perhaps amounting to $160-billion) in the former Silk Road – now ‘One Belt, One Road’ – to be funded by the new Asian Infrastructure Investment Bank (AIIB), centering on Russian-Chinese energy cooperation.

One Belt, One Road

Still, this picture of the BRICS and U.S. imperialism remains fuzzy given Trump’s mercurial character, ruthless pragmatism, exceptionally thin skin, crude bullying behaviour and ability to polarise his own society and the world. Obama’s last moves as president include a few attempts to at least briefly Trump-proof his legacy: demonising Russia, banning oil drilling and opening new environmental reserves in vulnerable sites, condemning Israel’s West Bank colonization, and protecting Planned Parenthood abortion facilities.

There is no question, though, that Trump’s most extreme threats to global geopolitics, economics, society and environment will be carried out by a Cabinet and lieutenants who represent the most regressive characteristics of U.S. capitalism. Trump’s top layer of government can be termed ‘4G’, as it contains:

  • gazillionaires – his Cabinet is worth $15-billion, by far the most tycoon-infested in U.S. history, including a top labour official opposed to a living wage;
  • generals – three veterans of the failed campaigns of Iraq and Afghanistan hold key security roles that had once been reserved for civilians;
  • gas-guzzlers – four lead officials in climate-related portfolios including the Secretary of State are loyal representatives of the oil, gas, coal and pipeline industries; and
  • GoldmanSachs – Trump’s Treasury Secretary, main economic advisor and lead political counsel were once executives of the Wall Street investment bank, responsible for so much global economic damage over the past decade due to predatory financing practices.

Must there be either an inter-imperialist conflict of elites that could lead to nuclear confrontation, debilitating trade wars or further juvenile insults as passions continue to rise on the one hand; or on the other, a new alliance of U.S. and Russian elites that will codify a lucrative intra-imperial division of the world’s spoils including fossil-fuel exploitation and resulting climate change that will quickly spiral beyond repair?

The False Hope of BRICS Top-Down Resistance

One other option is a rational approach from the BRICS countries’ leaders. Reflecting how difficult this will be, however, former South African president Thabo Mbeki expressed Africa’s desire for a reformed United Nations when speaking directly to Putin in Finland last October: “The matter of the reform of the Security Council becomes important in that respect… It needs changing. It’s difficult. Russia is a permanent member that might be one of the obstacles to changing it, I don’t know.”

Neither Moscow nor Beijing will nominate Brazil, India and South Africa for permanent seats (along with Japan and Germany), for fear of diluting their own Security Council power and especially their veto. The lack of space for Africa in the UN may mean, according to threatsmade by Zimbabwean president Robert Mugabe in September, a formal boycott of the body by the continent starting in September 2017. And another vehicle for Third World advocacy, the Non-Aligned Movement, was considered increasingly irrelevant when in September 2016 Modi did not even show up at a Caracas summit, notwithstanding India’s formative role in its 1955 founding at Bandung.

Likewise, the BRICS leaders’ self-interest prevents genuine transformation of other multilateral institutions: in the last round of ‘reforms’ of the World Trade Organization (WTO), International Monetary Fund (IMF) and UN Framework Convention on Climate Change – all consummated in December 2015 – there can be no question that Africa was the loser, as the BRICS’ neoliberal negotiators ran roughshod over the poorest countries.

Moreover, last August, the BRICS’ representatives at the Bretton Woods Institutions endorsed five-year contract extensions for World Bank and IMF leaders Jim Yong Kim (from the U.S.) and Christine Lagarde (from France). They even confirmed Lagarde’s reign in mid-December the same day a Paris court found her guilty of criminal negligence when, serving as the French finance minister, she made a huge taxpayer payout to a tycoon who in 2007 had given financial support to her Conservative Party.

And hope for the BRICS Contingent Reserve Arrangement to serve as an emergency funding alternative to the IMF remains foiled by the provision that after borrowing 30% of the quota, a desperate debtor country must then get an IMF structural adjustment policy. And the BRICS New Development Bank’s potential role as an alternative to the World Bank appeared self-sabotaged last September when a cozypartnership was agreed that entails project co-financing and staff secondments.

In 2014, Obama agreed with The Economist editor interviewing him about “the key issue, whether China ends up inside that [multilateral financial] system or challenging it. That’s the really big issue of our times, I think.” He replied, “It is. And I think it’s important for the United States and Europe to continue to welcome China as a full partner in these international norms.”

The philosophy of subordinated incorporation – sub-imperialism for short – became too difficult for Obama himself to sustain, when in 2015 he dogmatically (and unsuccessfully) discouraged AIIB membership by fellow Western powers and the Bretton Woods Institutions. It was his most humiliating international defeat. But when it came to intensified trade liberalization in the WTO, recapitalization of the IMF under neoliberal rule, and destruction of the binding emissions reductions targets on Western powers that characterized the Kyoto Protocol, Obama’s strategy of bringing China and the other BRICS inside was much more successful.

In sum, looked at from above, the BRICS leaders regularly suffer status quo assimilation when it comes to global governance partnership, but they fracture when it comes to their own internecine competition or when failing to offer unified challenges to multilateral institutional leadership. And this inconsistency is what leaves the bloc wide open to a potential Trump wedge in 2017.

With this in mind, Immanuel Wallerstein argues that Trump “is using the Nixon technique in reverse. Nixon made a deal with China in order to weaken Russia. Trump is making a deal with Russia in order to weaken China.” Wallerstein doubts its efficacy simply because Beijing and Moscow are pursuing their own separate interests effectively already: “This policy seemed to work for Nixon. Will it work for Trump? I don’t think so, because the world of 2017 is quite different from the world of 1973.”

The main difference may be the more advanced stage of economic stagnation and desperation, a topic I will take up another time. But on the left, the kinds of dashed hopes so many activists harbored at that time are also worth recalling, for they included (sometimes in partial or very contradictory ways) sustained improvements in European social democracy and the U.S. Great Society, rising Third World revolutions sometimes accompanied by Northern solidarity, the onward march of the Soviet Union and East Bloc, the Chinese “New Man,” the feminist and black power struggles, radical environmentalism, liberation of humanity from capitalist alienation and exploitation, the casting off of outmoded sexual mores and gender norms, and the end of statist domination.

Today, with the world’s progressive, democratic forces hunkering down on so many fronts, nevertheless a ripeness within so many societies’ resistance politics reflects a much broader, deeper capacity to link up than ever before: within the BRICS, the U.S. and internationally. As Pilger concludes his recent film about Washington’s latest war-mongering, “We don’t have to accept the word of those who conjure up threats and false enemies to justify the business and profit of war. We have to recognize there is another superpower, and that is us, ordinary people everywhere.” •

Posted in USA, ChinaComments Off on Will Washington’s New Pro-Moscow, Anti-Beijing Gang Drive a Wedge Through the BRICS in 2017?


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