Above Photo: Vladimir Putin with then-Iranian President Hassan Rouhani in 2019. Atlanticcouncil.org.
The Days Of Unchallenged U.S./NATO Dominance Are Over.
For some reason, in the aftermath of this month’s failed talks among the Russian, American and NATO representatives in Geneva, everybody is talking as though they believe Russia’s invasion of Ukraine is imminent. From the officials of the U.S. State Department, Pentagon and NATO to the intelligence agencies and the media, nearly everyone is talking as though they have not the slightest doubt that Russia intends to invade.
However, in a Friday meeting with president Biden, Ukrainian President Volodymyr Zelensky urged Biden not to provoke panic, saying that he did not see a greater threat now then during a similar massing of troops last spring. Russian president Vladimir Putin is indeed both a cautious and calculating leader who has increased Russia’s strength and global position incrementally over the last twenty years. His current strategy appears to center on solidifying Russia’s newfound alliance with China, building up Russia’s military strength, cementing a Eurasian union, and increasingly moving into the Middle East and expanding alliances with pro-Russian regimes there, notably in Syria and Iran. These maneuvers threaten U.S. and western hegemony and may prove detrimental to the global banking cartel which is at the forefront of the push to try and provoke war and weaken and destroy Russia today.
The 1990 Promise: Not One Inch Eastward!
Let’s briefly summarize the recent history of relations between Russia and the West. In February 1990 the Soviet Union was still intact and Germany still divided: West Germany was a NATO member and East Germany was a communist, Soviet bloc country.
The U.S. Government asked Secretary General Mikhail Gorbachev for the Soviet Union’s cooperation on its plan for German reunification. In consideration for Soviet withdrawal from East Germany, U.S. Secretary of State James Baker promised that NATO would not expand “one inch eastward.” This commitment was reiterated by other U.S. officials. The Soviets withdrew and Germany was reunited, but the U.S. broke its promise and, over the next 27 years, the NATO alliance expanded many inches eastward, adding 14 new member states, all of them in the direction of Russia’s borders. A glance at the “before” and “after” maps is enough to see why Russia feels concerned about this:
Today, the alliance is in the process of absorbing Ukraine and Georgia with the view to their eventual full membership. This represents a “red line” for Russia, but NATO insists the alliance membership is open to any “European state in a position to further the principles of [the North Atlantic Treaty] and to contribute to the security of the North Atlantic area.”
Despite the fact that the Communist bloc no longer exists, the NATO alliance regards Russia as an enemy and consistently maintains a hostile posture toward it. Over the years, NATO has nearly quadrupled its military forces near Russia’s borders.
As professor Stephen Cohen noted in 2016, “The last time there was this kind of Western hostile military force on Russia’s borders was when Nazis invaded Russia in 1941. There has never been anything like this. During the 40-year Cold War there was this vast buffer zone that ran from the Soviet borders all the way to Berlin. There were no NATO or American troops there. This is a very radical departure on the part of the [Obama] administration.”
Indeed, NATO has continued to stockpile heavy weaponry, building up permanent logistics infrastructure, and deploying more and more troops along Russian borders. The U.S. has built missile “defense” bases in Romania and Poland, deployed nuclear bomb-capable aircraft close to Russia and allocated more than $8 billion of U.S. taxpayers’ money to upgrade its arsenal of B-61 nuclear bombs kept in the United States and five other NATO-member nations.
At a Brussels NATO summit in June 2021, Secretary General Jens Stoltenberg boasted about the alliance’s plans to continue the buildup: “…we have now implemented the biggest reinforcements of our collective defense since the end of the Cold War, and will continue to strengthen our collective defense with high readiness, more troops, and increased investment in our defense.” He added: “Perhaps the most important thing we have done is that for the first time in NATO’s history, we have combat-ready troops in the eastern part of the Alliance. New battle groups are deployed to the Baltic countries and Poland, we have tripled the size of the NATO readiness force.”
Absorbing Ukraine Into NATO
In 2017 Ukraine’s Parliament passed legislation making its membership in NATO a strategic policy objective. In 2019, this objective was enshrined in Ukraine’s constitution. And while its full membership in NATO is ostensibly not on the table, the alliance is clearly advancing to fully integrate Ukraine as a partner, which will bring NATO right onto Russia’s doorstep.
The cooperation between Ukraine and NATO began in 1994. In July 2013 (that’s right, five months before the Maidan coup kicked off), NATO began to implement the “Defense Education Enhancement Program” (DEEP) in Ukraine, nothing short of a comprehensive overhaul of Ukraine’s military training and educational institutions. From 2013 through 2018, it deployed more than 350 training teams focused not only on educating military officers but also “a new generation of Ukrainian diplomats and high-level officials” as well as press officers.
This is important to keep in mind because, when Ukraine’s “high level officials” speak to Western audiences in polished prose and fluent English, usually these are not democratically elected representatives of the people of Ukraine but rather NATO’s own trained flaks delivering well-rehearsed talking points.
The arming and training of Ukraine’s military has accelerated since the Maidan coup. In 2015 Ukraine formally became a member of the NATO Support and Procurement Agency (NSPA), enabling it to directly procure weapons and military technology. Many of the new training centers have been intended to become full military bases in the future.
Furthermore, at least two of Ukraine’s military units have been certified as eligible for deployment as part of the NATO Response Force. A press release of one of these regiments stated that “The service members… have come a hard way to join the NATO family and met all of the alliance’s requirements to fulfill combat missions along with foreign partners.”
“NATO family?” That press release must have come straight from the DEEP wordsmith academy. But not all programs can be shown in the family album. Recently, Yahoo! News broke a story about a covert program to train Ukrainian paramilitary units on U.S. territory. The program has been run by the CIA’s “Ground Department” since 2015 as part of its expanded anti-Russia effort.
The United States and Britain have also been active building up Ukraine’s naval capabilities. In June 2021, Great Britain and Ukraine signed a deal for the construction of warships for Ukraine’s navy and building of two new naval bases, one in the Black Sea and one in the Sea of Azov. The deal was signed aboard a British navy destroyer in the presence of the British Ambassador to Ukraine, Melinda Simmons, and Admiral Tony Radakin.
The Russians Have Had Enough
Thus, for 30 years now, the Western powers relentlessly built up military assets in Eastern Europe and supported one color revolution after another along Russia’s borders, turning all her neighboring states into adversaries with loyalties in the West. Throughout this time, Russia’s responses have only been reactive, not pro-active. But now Russia gave Western powers a clear signal that it will no longer tolerate further violations of its security concerns.
On Friday, December 17, 2021, the Kremlin released two draft treaties formulating a radical new security arrangement which were presented to the U.S. Government and the NATO alliance. The treaties address the aspects of the U.S./NATO activities in Europe which jeopardize Russia’s security and set out a series of strikingly tough demands including a stop to NATO’s expansion and a rollback of NATO from Eastern Europe.
The text of the treaties apparently stunned their recipients, yet nobody seems to think that the Russians are bluffing. As Kremlin’s unofficial spokesman Dmitry Kiselyov put it, “Russia has made an offer to the United States which it cannot turn down. The moment of truth has arrived.”
The Russian government made it clear that it expected a prompt resolution of the matter and the talks between the parties were organized in Geneva on January 10-13, 2022. After the first day’s talks with U.S. Deputy Secretary of State Wendy Sherman, Russian Deputy Foreign Minister Sergey Ryabkov bluntly stated that “For us, it’s absolutely mandatory to make sure that Ukraine never, never, ever becomes a member of NATO.” He further explained that, “We presented to the Americans in the most detailed way possible the logic and substance of our proposals, explained why obtaining legal guarantees from NATO not to expand is an absolute imperative, explained why we absolutely must receive legal guarantees on the non-deployment of the strike systems on Russia’s borders, and why we are raising the question about NATO abandoning, by and large, the matériel development of the territory of states which joined the alliance after 1997.”
These demands may seem extreme, but for more than two centuries now, Russia has suffered multiple invasions and color revolutions directed from Western centers of power.
In 1941 Germany invaded Russia, resulting in massive devastation and more than 20 million Russian lives lost. Today Russia is facing a hostile alliance of 30 nations, three of which (U.S., UK and France) are nuclear powers, two of which (U.S. and UK) are open to use nuclear first-strike policy, and one of which actually dropped nuclear bombs on the civilian population of its wartime adversary. It should not be difficult to understand why Russia has serious security concerns.
Accordingly, Sergey Ryabkov made it clear that, if the U.S. and NATO proceed with new weapons deployments close to Russia’s borders, Russia would respond with “military technical measure” that “will inevitably and unavoidably damage the security of the U.S. and its European allies.”
This was indeed stunningly tough talk from the Russian representative. Longtime Russia analyst Gilbert Doctorow thought that, “If accepted in their present form, these treaties would represent a total capitulation by the United States over everything four successive administrations have tried to achieve to contain Russia.”
Unsurprisingly, the talks in Geneva produced no breakthrough. The following day, Russia’s Foreign Minister, Sergey Lavrov, held a long press conference in which he said that the Russian side is expecting “a concrete answer” to its security proposal but that Moscow’s “patience has come to an end.” During that conference Lavrov made a reference to the proverb that the Russians take a very long time to harness their horses, but once the horses are harnessed they ride swiftly. He said: “…we have been harnessing for a very long time, and now it’s time for us to go.”
I believe I know where the Russians will ride next but before I venture that guess, it should be useful to set this episode into its proper historical perspective which bears repeating.
Context Is Everything
The first thing that is important to understand is that, to this day, the American geopolitics are driven by the vestigial interests of the late British Empire. In the early 20th century, as the British Empire began to collapse, its stakeholders—the international banking cartel based in the City of London—moved to infiltrate and coopt the governing institutions of the United States and hijack its wealth and military power in continued pursuit of their own imperial ambitions. For more than a century now, their overarching imperative has been to maintain hegemony over the Eurasian landmass. Sir Halford Mackinder explicitly formulated this objective in 1904 in his Heartland Theory.
In Democratic Ideals and Reality, he wrote: “Who rules East Europe commands the Heartland; who rules the Heartland commands the World-island; who rules the World-island controls the world.” By World-island, Mackinder meant Eurasia.
As the empire builders infiltrated the U.S., they took their policy objectives with them, including the imperative of ruling Eastern Europe to control Eurasia. In his 1997 book The Grand Chessboard, the Empire’s court intellectual, Zbigniew Brzezinski articulated this objective as America’s own priority and explained the rationale behind it:
“For America, the chief geopolitical prize is Eurasia… Eurasia is the globe’s largest continent and is geopolitically axial. A power that dominates Eurasia would control two of the world’s three most advanced and economically productive regions. … About 75% of the world’s people live in Eurasia and most of the world’s physical wealth is there as well, both in its enterprises and underneath its soil. Eurasia accounts for 60% of the world’s GDP and about 3/4ths of the world’s known energy resources.” (“The Grand Chessboard,” 1997)
The very same imperial obsession was reaffirmed once more in August 2018, in a briefing by U.S. Assistant Secretary of State for European and Eurasian Affairs A. Wess Mitchell to the U.S. Senate Foreign Relations Committee. On the occasion, Mitchell made it explicit that the “central aim of the [Trump] administration’s foreign policy is to defend U.S. domination of Eurasian landmass as the foremost U.S. national security interest and to prepare the nation for this challenge.”
Mitchell also said that the administration was “working with our close ally the UK to form an international coalition for coordinating efforts in this field.”
But unfortunately for the empire builders, over the last 20 years, Russia has emerged as a rival power in Eastern Europe and a major obstacle to their global ambitions.
It is a near certainty that the empire will do everything in its considerable power to eliminate this obstacle. This is the context that explains NATO expansion, military deployments, and support for multiple color revolutions along Russia’s borders: It is the dying empire’s struggle to retain its supremacy and destroy any rival that can obstruct its “full spectrum dominance.”
There can be little doubt that Russia’s leadership understands NATO expansion precisely in this context. Our next question is: Where does this obsession with dominating Eurasia come from? What’s the reason behind the need for conquest and hegemony?
It Is All About Collateral
As historian Ramsay MacMullen has suggested that, in order for us to arrive at a correct understanding of history, we need to understand the motivations of groups and individuals who created that history.
After more than two decades of permanent wars, we can part with the illusions that our armies are fighting to spread democracy and freedom or that our leaders lose any sleep over human rights of people in faraway lands. The struggle is clearly over resources (including the local labor force) because those resources represent money-good collateral.
The Western financial system has been absolutely starved for high quality collateral and Eurasia is awash with it. The problem with the Western monetary system is that it tends to pile debt on top of more debt, leveraging the system until it collapses, almost permanently careening from crisis to crisis. It can only be stable while it is growing. It grows through credit expansion, and credit expansion requires quality collateral.
How much collateral do we need? A few years back, we got a glimpse of the magnitude of the problem: The appendix to the Treasury Borrowing Advisory Committee’s (TBAC) quarterly refunding presentation showed that in 2013, the total demand for “High-Quality Collateral” (HQC) needed to stabilize the system was estimated at $11.3 trillion.
That figure surely grew considerably in the ensuing years. Incidentally, the TBAC is one of the most powerful agencies in government. Even though most people are not even aware of the existence of this committee, it is the hinge where banking power joins political power. It is staffed by bankers and not by people’s representatives. Some believe it is the committee that really rules the nation. When TBAC tells the government that they need more collateral, the government listens.
If all this seems a bit ambiguous, perhaps a concrete example can help to understand the way military conquest translates into high quality collateral.
In 2016, the Chilcot Report, an inquiry into the British role in the Iraq War, revealed that, six months after the 2003 invasion, a consortium of Western banks led by JPMorgan extended a $2.5 billion loan to “help” Iraq’s economic recovery.
The loan was extremely favorable and risk-free to the bankers as it mortgaged Iraqi oil exports.
Perhaps it was only a coincidence that JPMorgan was also one of the biggest backers of the Bush/Cheney election campaign.
Once in power, the Bush administration delivered the Iraq invasion. JP Morgan also richly rewarded Sir Tony Blair’s inestimable contribution to making that war possible. At the end of his term as Britain’s Prime Minister, the bank hired him as an adviser on a $5 million per year contract.
The JPMorgan loan to Iraq was just one instance where a large loan conjured out of thin air and secured by the subjugated nation’s natural wealth would have to be paid back with interest. You can multiply such deals perhaps a hundred-fold or more if you can deploy armies to resource-rich regions of the world and your corporations receive front-row access to the business of exploiting those resources.
All this high-quality collateral can then be leveraged so that the credit expansion process can continue for a long time before the need arises to liberate new collateral.
Contrast JP Morgan’s good fortune in Iraq two decades ago with some of the present developments in the region. For example, Iran is presently building a huge natural gas hub project that will bring natural gas from the Caspian region to Europe. Just one of the recently developed gas fields, the Chalous is estimated to hold enough reserves to supply more than 50% of European gas demand for at least 20 years.
But with the rise of Russia and China as the new dominant powers in Eurasia, such projects are now off limits to Western banks and corporations.
Today the key players developing this energy infrastructure are Russia’s Gazprom and Transneft, China’s CNPC and CNOOC and Iran’s KEPCO. From the bankers’ point of view, that is a lot of high quality collateral that is now in the “wrong” hands.
What Happens Next?
Clearly, the conflict between east and west is not over ideology or a bit of territory. It is about hegemony over resource-rich regions of the world and this makes the two sides’ positions intractable. The Russians clearly understand this, which may explain why they presented the Western powers with a set of demands so tough that they certainly knew they would be rejected.
It seems that Russia really does intend to respond with military technical measures that will jeopardize Western powers’ security. So far, however, even among the Russian analysts, nobody seems to know what is coming next. Most of the experts and officials in the West seem convinced that Russia will invade Ukraine, but I do not believe this will happen.
The media also made much of Russia’s deputy foreign minister’s remarks that they do not exclude deploying military assets in Cuba or Venezuela. That is probably a head fake. A few analysts, including Scott Ritter, have suggested that Russia might deploy medium-short range missiles targeting European capitals with nuclear-capable warheads.
The Kremlin will probably increase pressure on the U.S. and NATO countries in multiple ways, but my own hunch is that their first focus will be on the Persian Gulf region, which is strategically of huge importance to the West but where U.S./NATO positions are increasingly fragile. Russia could jeopardize the Western powers’ security in that region by implementing “military technical measures” in support of friendly regimes in the Middle East, primarily Iran.
It is becoming clear that Iran is becoming an important component of China’s One Belt One Road agenda and that it is being set up as the cornerstone of its security architecture in the Middle East and the Persian Gulf. These developments also have the full support of Russia.
On March 27 of last year, Iran signed a comprehensive 25-year cooperation plan with China which includes cultural, diplomatic, economic, and military cooperation. On September 17, Iran became a member of the Shanghai Cooperation Organization (SCO). Iran has also signed various security agreements with Russia and is in the process of negotiating a 20-year cooperation agreement modeled on the Iran-China agreement.
On December 11, 2021, Iranian foreign ministry spokesman Saeed Khatibzadeh stated that, “Like the 25-year cooperation roadmap we developed with China, we can do the same with major neighboring countries.”
Clearly, the Iranians, who have pledged to throw the United States out of the region, have been increasingly confident in asserting their regional influence. Of course, the greatest challenge to Iran’s regional policy and security is the presence of American troops and military bases surrounding Iran as per the map below (crudely updated by the author):
But during recent years Iran’s stature and influence have been growing while that of the U.S. and NATO has been diminishing. Incidentally, the above map illustrates another reason why the hold on Afghanistan was so important to the Empire.
Iran’s partnership with Russia and China will ultimately tip the military balance of power, so it was perhaps no coincidence that Iran’s President Ebrahim Raisi’s visit to Moscow was scheduled for January 19, 2022—only days after the failed talks between Russia and the U.S. in Geneva. In announcing the meeting, Russian Foreign Minister Sergey Lavrov said it was a “very important” meeting, adding, “Undoubtedly, among international issues, the ones such as the Joint Comprehensive Plan of Action and the security of the Persian Gulf will be discussed in the meeting of the Presidents of Iran and Russia.”
At the opening of his meeting with President Putin, Mr. Raisi said that the relationship between the two nations “should be permanent and strategic.” In his address to the Russian Duma, he said: “The strategy of domination has now failed, the United States is in its weakest position, and the power of independent nations is experiencing historic growth.” President Raisi’s visit to Moscow was followed two days later by military exercises of the Russian, Iranian and Chinese navies in the Sea of Oman, not far from the strategically pivotal Straits of Hormuz. The three powers’ show of force was an unmistakable hint that there is a new sheriff in town and that the days of unchallenged U.S./NATO dominance in the region are over.
Thus, the “military technical” measures Russia announced—if the U.S. and NATO did not agree to its draft treaties—will likely be made in support of forces that are already fighting to drive the Western powers out of the region. Iran is obviously the prime candidate for such support and, during his visit in Moscow, President Raisi did not fail to underscore Iran’s credibility and commitment to this objective in stating, “We have been resisting the Americans for 40 years.”
Together with its proxy forces in Iraq, Iran will make it increasingly difficult and costly for the U.S. to secure its control of the region. Russia will not need to confront the U.S. militarily at all—the U.S. forces will simply be worn down and eventually pushed out in a similar way as they were pushed out from Afghanistan. For the Western nations, which are already facing a worsening energy crisis, this could indeed jeopardize their security.
But it could also have severe adverse effects on their economies and capital markets. Paradoxically however, for that same reason the Western powers will not advertise that their control is slipping away; they will likely take their blows in silence and keep a brave face for as long as possible to keep the markets convinced that their revenue streams from the Middle East will remain secure forever.
I first published what I have laid out here in my daily TrendCompass newsletter on January 14th, titled “Only a hunch: will it be the Persian Gulf?” I can confess, this really is only a hunch, based on my own reading of the situation.
However, as events have played out over the last two weeks, I am increasingly confident that my hunch is correct.
At the same time however, I could not begin to guess how exactly the events might play out. For one thing, the uncertainty is probably part of the equation: Russia’s current gambit is a very radical departure from the status quo and it should be to its advantage to keep its adversaries guessing and distracted in the wrong places. Indeed, it is possible that nothing obvious will happen over the coming weeks. All the same, we should not underestimate changes that are already taking place. As they compound, they will precipitate a collapse of the global order that has become entrenched for more than two centuries now.
How The Coming Changes Will Manifest In The West
Russia will probably not invade Ukraine and Russian bombs will not start raining down on European cities. But the pain will be real, and the changes will be felt most strongly in our capital and commodities markets.
Over time, we will see a very substantial rise in interest rates, which will ultimately push stock prices into a real bear market. Unlike the limited and short-lived corrections we have experienced over the last four decades, a real bear market could be drastic and last a very long time. It is what happened in the U.S. after the 1920s’ bubble and in Japan after the 1980s’ bubble.
In both cases we saw stock prices decline by more than 80%. The U.S. stock market took over 25 years to fully recover while the Nikkei has yet to return, after fully 32 years, to its 1989 peak.
We are also likely to see a continued acceleration of inflation in most if not all of the G7 nations, as well as a gradual worsening of the energy crisis which could drag on for years. This could push energy prices far beyond today’s levels. Even without factoring the conflict with Russia and based on the accelerating depletion of conventional oil reserves, the UK Ministry of Defense predicted in 2012 that the price of crude oil would rise to $500 a barrel by 2040. (It is currently about $85 a barrel.)
Similar trends will likely materialize in other commodities, including metals and agricultural produce, fueling a sustained commodity super-cycle that many analysts have been predicting in recent years.