Source – geopoliticaleconomy.com
- “…The fact that the war, which is being lost dramatically in Ukraine, the narrative has been changing by the Americans, not yet by NATO. But on terms of NATO policy, there is a 4,400 page not-so-secret document at the end of the World News Summit, which categorizes their next steps in Russia, but also their next steps in the Indo-Pacific. And that’s the most worrying part of them all”
NATO Failed in Ukraine Against Russia. Now It’s Targeting China
MICHAEL HUDSON AND PEPE ESCOBAR
PART I
RADHIKA DESAI: Hello, everyone, and welcome to the 15th Geopolitical Economy Hour, the fortnightly show on the political and geopolitical economy of our times. I’m Radhika Desai.
MICHAEL HUDSON: And I’m Michael Hudson.
RADHIKA DESAI: And today we propose to discuss NATO in the aftermath of its recently concluded Vilnius Summit, exploring a variety of questions about how its assault on Russia is faring and the prospects of extending its sphere of operations to what NATO leaders like to call the Indo-Pacific.
RADHIKA DESAI: And in order to do this, on today’s show, we are joined by none other than Pepe Escobar. Many of you will, of course, know who he is.
He’s a Brazilian journalist, geopolitical analyst and author. Pepe, welcome to our show.
PEPE ESCOBAR: It’s a huge honor and pleasure to be with you guys and with this fantastic audience, of course. And let’s rock.
RADHIKA DESAI: All right. Let’s let’s rock. So basically, NATO is a huge topic and it’s surrounded by a considerable amount of smoke and a vast number of mirrors.
So we have to try to understand we have to sort of push through all of this to try to understand what it is. It calls itself a defensive alliance, defensive.
The fact of the matter is it was created as part of the Cold War, which the U.S. launched more or less single handedly before the Second World War was even over. It launched it against its own Second World War ally.
And again, the United States did this, you know, launched the nuclear bombs on Hiroshima and Nagasaki as part of this launching of the Cold War. So there is no way in which this war is defensive.
And what’s more, it’s also was an offense against communism, of course, but it has also been an offense against the third world.
Essentially, NATO was also set up as a bit of a rival to the United Nations, which the U.S. liked less and less as it began to include more and more countries from the third world.
Alliance? What sort of an alliance is it in which one about one member seeks to essentially damage and harm other members? That’s what the United States is doing, for instance, to Germany today. That’s what it did to the United Kingdom all those decades ago at the end of the Second World War.
Much is also made of NATO’s unity. In reality, the effort, the mountains of effort required to paper over the cracks that are widening in NATO are, in fact, no longer even enough. And the cracks are showing through.
The North Atlantic? What do you mean North Atlantic? NATO has long abandoned its alleged sphere of operation and it has penetrated more and more outside that sphere, not only within Europe, but is today, of course, as I’ve already said, preparing to penetrate the Indo-Pacific.
One could lengthen this list of the lies that surround NATO. But why don’t we just launch into our conversation? We’ve decided to structure it around a series of questions. So let me just start us off by posing the first one.
The first question we have is simply, where did the Vilnius Summit leave NATO? What are the principal features within the alliance that it exposed?
Maybe we can start with you, Pepe, since you are our guest.
PEPE ESCOBAR: Oh my God. Can I throw a bomb? OK, guys, look, I have had this pleasure of following virtually every NATO summit for the past 15 years or so.
So the evolution or the involution of NATO as a global Robocop has been distinct year after year. In fact, I started calling NATO global Robocop as early as 2010, 2011, 2012, because that was already obvious.
And then when we got under a fog of war, Rasmussen as NATO General Secretary, usually they get a deranged Scandinavian as NATO General Secretary. Now the deranged Scandinavian is, of course, that piece of Norwegian wood, Jens Stoltenberg.
So it’s very, very hot.
I remember when I was in Sweden years ago and I was on a geopolitical roundtable in a university in southern Sweden, when I started talking about Rasmussen, my Swedish audience erupted in anger because they knew, they were postgrad students, they knew very well who Rasmussen was and they said, look, he’s destroying the reputation of Scandinavia as rational actors.
And they knew it very well. Stoltenberg is not as rabid as Rasmussen, but he is sold basically by the people who control NATO, as you know, better, much better than I do, straight from Washington. And obviously those guys at NATO headquarters in Belgium are just following orders coming from Washington.
Stoltenberg is sold as a sort of a relatively polite face of NATO, but the message is the same. And after the start of the special military operations, got even worse.
So anything that comes from the mouth of Stoltenberg, we know that it’s coming from the mouth of the rabid, Straussian neocon psychos in D.C. And they have their Scandinavian guy, you know, just voicing them.
The problem is he’s taken seriously all across Europe. I mean, seriously, Ursula von der Leyen now is the butt of jokes from Spain to Greece and everywhere in between. But Stoltenberg is actually taken seriously. And that’s what makes them even more dangerous.
If you talk to an average citizen, let’s say here in France or in Italy or in Greece or in Germany, they take NATO’s pronouncement seriously. And the NATO 24-7 spin on the war against Russia, which basically says, no, we are not involved. We are not at war with Russia. We are not part of the war.
And then he announces the umpteenth package coming either from the West, from the EU or NATO countries as well against Russia. So the problem is, most people, because of the mainstream media barrage all across Europe, they don’t get into the specifics.
So they really don’t know that NATO is up to their necks and beyond in a war against Russia.
The way Vilnius was covered by European mainstream media was that, no, once again, we are all united, the 27 of us against Russian aggression, the usual.
But no specifics and much, much worse, only very, very sparse mentions of NATO extending the Robocop mandate to the Indo-Pacific and to the South China Sea.
So in fact, what we’re seeing for the past year and a half, let’s put it this way, is that the North Atlantic Organization now has taken over the Indo-Pacific and the South China Sea. So they actually moved to Asia.
So it’s not North Atlantic Organization. It’s Northern Hemisphere, Including the Far East Organization.
But this is not explained, obviously, by, for instance, The Economist, The Financial Times, major newspapers in Italy, Le Monde here in France, etc. So obviously, the average European citizen is absolutely clueless about that.
And the fact that the war, which is being lost dramatically in Ukraine, the narrative has been changing by the Americans, not yet by NATO. But on terms of NATO policy, there is a 4,400 page not-so-secret document at the end of the World News Summit, which categorizes their next steps in Russia, but also their next steps in the Indo-Pacific. And that’s the most worrying part of them all.
And once again, I would say 99% of EU citizens are completely oblivious to all of that.
MICHAEL HUDSON: Well, I think the purpose of NATO from the beginning has always been to promote a unipolar U.S.-centered order. And it began with Europe, because NATO, in effect, has taken over European foreign policy, and even domestic policy. It’s written into the EU constitution.
And certainly, you’ve seen the effect of the war in Ukraine is to make Western Europe a U.S. satellite. It’s cut off the trade with Russian gas and oil and fertilizer and other raw materials, making Europe dependent on U.S. suppliers at much, much higher prices.
So the effect of NATO so far has been to sort of break away Europe from what seemed to be an increasingly close relationship of mutual economic gain between Germany and other European countries, trading and investing with Russia for low-cost raw materials, and with China for low-cost manufacturers.
Well, the U.S. plan in just forcing a military solution in Ukraine has been to break away Russia’s ability to support China, to support Syria, to support Iran and other countries. The whole idea of NATO was to carve away any group that would seek to be independent of the U.S. world order.
And of course, the ultimate aim, as President Biden has said again and again, is China is the number one enemy.
Well, you can’t go against China right now, because it already has so much support from Russia and other countries. So NATO thought, well, how do we isolate China? We first of all have to break away its potential ally in Russia.
And if we have a war in Ukraine, the neocons actually believe that the Russian people would rise up against President Putin and have a regime change, and the regime change would bring another Boris Yeltsin-type Western-oriented character.
Well, the reality has been just the opposite. Hardly surprising, when a country is under attack, like Russian speakers are under attack in eastern Ukraine, well, the tendency of any population is to rally behind the leader.
And that’s why Putin’s approval rating has gone up to 80 percent, much higher than any American or European leader.
So what’s happened is that instead of NATO breaking up China, Russia, and other countries seeking to pursue their own policy, it’s driving them all together out of simply the need to protect their own economies from the U.S. sanctions and from the U.S. plan to break them up.
And when the United States comes right out and says China is our enemy, Russia’s our enemy, and all their allies are enemy, hardly by surprise, the enemies get together.
So the result is that NATO really, instead of isolating the members of the BRICS and the global majority of Eurasia with the global south, they’ve driven them all together.
I don’t think there’s any truth at all in the rumor that the heads of NATO are really working for China’s foreign policy department. I don’t think they’re really in the pay of China’s government to make sure that Western Europe is driving all the other countries together under Chinese and Russian domination.
And I don’t think they’re really working for the Russian State Department, either. But if you think of them as working for Russia and China, you realize suddenly you can explain all of the consequences of what the NATO policy is bringing about.
It’s driving the rest of the world together and being an integrating force for the rest of the world by making an iron curtain, isolating the United States, England, and Western Europe away from the rest of the world, leaving the west of the world, the BRICS and the global majority to make their own new world order.
RADHIKA DESAI: I mean, I think all of these are really interesting points. I mean, if I were to put, just summarize in one word what, where, you know, where Vilnius leaves NATO, I would say that word would be failure.
Because even though NATO has a lot of things going for it, including, you know, governments in places, important capitals like Berlin that are willing to do everything that NATO wants, in fact, NATO is failing to achieve its objectives.
And the key way in which it is failing is, of course, that all the help that has gone to the Ukrainian membership, they have essentially not been, they’re essentially going to fail in the battlefield.
Sanctions, Michael, as you mentioned, have already failed to bring Russia down. Now there’s going to be failure in the battlefield.
And if there is failure in the battlefield, then I think that the divisions within NATO, which are already quite apparent, I mean, the fact of the matter is that the various Eastern European countries wanted to give Ukraine membership or at least some sort of map to membership.
And this was not permitted by Germany for its own reasons, but also by the United States. And President Biden cannot afford to be seen as essentially, you know, increasing the U.S.’s or NATO’s involvement in this war in any way.
So the fact of the matter is that in this it has not succeeded either.
Moreover, the military aid, you know, just think about this, the size of the actual military industrial complex possessed by the NATO countries collectively is enormous.
But the fact of the matter is that still they have been unwilling to a considerable extent, but also unable to supply Ukraine with the quantity and quality of the arms that it needs so that it cannot succeed, could not succeed. And so the so-called counteroffensive is failing.
And that’s the background against which the Vilnius Summit took place. With that background, even though it added Finland and hopes to add Sweden, having overcome President Erdogan’s limitations by offering him vast quantities of money, et cetera.
The fact of the matter is that this alliance, the cracks within it are already showing.
And I also feel that success against Russia is very critical to extending the alliance and its sphere of operations to China, because the fact of the matter is that if they can’t succeed against Russia, there’s definitely, they’re not going to succeed against China.
And what’s more, there was already dissension over Russia. The fact of the matter is that the various NATO members are so deeply involved economically with China that they are not going to, they’re going to be even greater dissensions with essentially targeting China, even though all Washington’s puppets in various European capitals are huffing and puffing to try to achieve this by talking about de-risking and what have you.
People like Ursula von der Leyen are in the forefront of this effort, but I don’t think they’re going to succeed for reasons, I think, Michael, that you also mentioned.
The cost that these countries are going to have to pay for these wars costs not just militarily, but also economically. The consequences of the economic disruptions that it’s going to bring is going to create dissension within these people, is going to create popular discontent. It’s going to destabilize governments.
And what’s more, it’s also going to create dissensions within the elites, because many of them have reasons to continue doing business not only with Russia, but also with China, in particular with China.
So in that sense, I would say that the Vilnius Summit has simply shown the dysfunction of NATO to an even greater extent.
Maybe we can go on to the next question, which is how is the proxy war on Ukraine faring? What does it mean for Biden and his larger strategy of uniting so-called democracies against the so-called autocracies and targeting China?
I’ve kind of already segued into that topic.
PEPE ESCOBAR: Well, I’ve been writing about this stuff for a year and a half, so I hate to repeat myself. But OK, let’s go straight to the point.
NATO’s humiliation, full humiliation, is just around the corner. And compared to it, Afghanistan does not even qualify as a mini Disneyland. Just wait. Because in terms of the counteroffensive, it’s already dead. It lasted three weeks and it’s already dead. And there won’t be a counteroffensive 2.0.
First of all, they have no personnel, qualified personnel. Second, they have no weapons. Third, they are being demilitarized on a daily basis, non-stop.
Because if you follow any good writing in English, of course, if you don’t follow the ones writing Russian or Chinese, it’s understandable in the West.
But if you follow the very good ones writing in English, starting with Andrei Martianov. Andrei Martianov is very funny because technically he’s an Azerbaijani. He was born in Baku, but in the old Soviet Union. But Andrei lives in Western USA.
He writes in English. His blog is excellent. His podcasts are also excellent. And I would say, without a shadow of a doubt, in English, he’s the number one military analyst of what’s really going on in the war.
And we have excellent American analysts like Colonel Douglas McGregor, Scott Ritter, etc. They all, in military terms, they all say the same thing. This thing is dead. This thing is practically over. The thing is how long […] NATO can get away with selling a fiction to a global audience.
People in Germany, France, and Italy, the top three economies here in Europe, are already asking questions. I mean, industrialists, academics, they are not, of course, stigmatized in mainstream media, underground channels, parallel discussions, roundtables of very well-informed people, including intelligence people, French, Italians, etc.
They say, look, there’s got. We need to find a way out of this, but it’s impossible because everything is controlled in Washington by those Straussian neocon psychos.
Even them, not them, even the so-called Biden administration, which the way I’ve been writing for years, it doesn’t exist. What exists is the Biden combo.
Biden is, as we all know, he cannot find his way to the next room. Everybody knows that. So the decisions are taken by the combo.
And among the combo, the visible faces, which makes them even more toxic, are the toxic trio. Sullivan, Blinken and Nuland. But the guys who actually make these decisions, they are in the back. They never show up. So that makes it even more dangerous.
We have an idea of who they are, but they never show up. They don’t need to. The messengers spread the message. And they are trying to change the narrative badly because they know that there’s going to be a massive humiliation just around the corner.
The elections are getting closer and closer. You cannot go to the American public next year and present a NATO humiliation, which is obvious for 88% of the world, as a victory and try to get away with it. It’s absolutely impossible.
People who bother to look at what’s really happening on the ground in the battlefield in Ukraine can see for themselves. So now they’re trying to change the narrative.
And the best example these past few weeks, in fact, these past few days, was Edward Luttwak, which you all know as, let’s say, number one or number two Pentagon advisor for the past 50 years or so.
He gave an interview that is absolutely incandescent, where he’s basically changing the subject to war on China.
So this was, I would say, the official entry of the real war is against China, not in Ukraine, into mainstream media. It’s on YouTube. Everybody can watch it. Soon, if people start watching, soon we’ll have millions of views.
And Edward, as you know, is a very, very clever operator. Even when he doesn’t say it, he’s spelling the whole game, in fact.
Look, William Burns called Naryshkin. William Burns, head of CIA, Naryshkin, head of Russian foreign intelligence. This is true. Burns did call Naryshkin. They have a very important phone conversation, but not exactly what Edward is spinning.
Basically, Naryshkin was trying to explain to Burns, look, if you, CIA, start mounting operations inside the Russian Federation, there are going to be repercussions for you guys. So, you know, go slow.
Edward’s, basically, Edward’s spin was, no, Burns told Naryshkin that Putin and Biden should close a deal.
Putin is not going to close a deal with the Biden administration. Forget it. The Biden administration knows exactly what Russia wants, which is exactly what Russia wanted in December 2021. Indivisibility of security. You guys know this very, very well. In our audience, I’m sure it’s familiar with that.
Those letters that were sent to the Pentagon and the White House and got a non-answer. Also sent to NATO. It’s all about indivisibility of security for Europe and for the post-Soviet space. And at the time, the Americans ignored it.
So now they want to go back to the table and discuss with the Russians. The Russians know very well when they receive a yes, no, or a no, yes, which was the case. So there’s nothing to discuss.
And the Russian foreign ministry, the minister of defense, in putting himself over and over again has said, look, our set of conditions to end the war are there. The Americans know it very well.
We can finish the whole thing with a phone call. They don’t make the phone call that really matters. It’s not Bernstein or Rischke. It’s the White House to Putin. This one is not going to happen anytime soon. But he’s still trying to find a way out.
So if you think that this came straight out of a Kafka novel, yes, it did. And it keeps going.
RADHIKA DESAI: How and when do you think the war might end?
PEPE ESCOBAR: There are two short answers, Radhika. One, with the phone call, the war stops tomorrow. And they all go to a negotiating table somewhere in Finland, in Kazakhstan, in Geneva.
And obviously there will be no agreement because the Americans will refuse to accept indivisibility of security. Everybody knows that. So there is no peaceful solution to this war.
The only solution for this war is a complete humiliation of either side. As we look at the battlefield, we see that the humiliation of NATO is just around the corner, literally.
And it doesn’t matter if you send F-16s in six months or in one year. It doesn’t matter if you have more Storm Shadows from Britain. It doesn’t matter if you send 1,000 Leopards from Germany. It doesn’t matter.
And it’s very, very funny because even Putin himself is saying, look, whatever they send here, it will be incinerated. And he says that casually now. Before that, the Russian Minister of Defense was even trying to be relatively diplomatic.
And now the Russians are even laughing about it because they are annihilating so-called top-of-the-line Western weapons with old Soviet weapons, modified Soviet weapons as well. So is this going on for another three months? It’s very possible.
And there is going to be some sort of Russian, let’s say, crypto-offensive trying to take the whole of the east of Dnieper. They can take over everything.
Another possibility, in the next few months or until early next year, go all the way to Odessa, which is something that every military analyst in Russia was saying since February last year. We have to go all the way to Odessa now, soon, immediately.
So maybe this is going to happen. But the Russian Minister of Defense has different scenarios for what happens after what happened in Bakhmut, which was this World War I thing, absolutely devastating, lasting six or seven months.
But it was a rehearsal to what the Russians might do when they really decide to get into war. So what Putin said a few months ago still applies. We haven’t even started yet. And they haven’t.
Because their best weapons are still in the rear guard. Their top battalions are not part of the fighting yet. They are using their hypersonic missiles sparingly when they have a very specific target like that bunker near Lviv in western Ukraine that they destroyed a few months ago with one Kinzhal penetrating underground.
And then nobody talked about it. The Pentagon didn’t talk about it. The Russian Minister of Defense didn’t talk about it because this was too sensitive. A lot of NATO people were killed in that Kinzhal strike.
So the Russians are fighting with one hand behind their backs. No question. And with velvet gloves. But now, after all these attacks inside the Russian Federation including the second attack against the Kerch Bridge and attacks against civilians in Russia, they are starting to lose their patience.
They have the possibility to increase lethality to any degree you can imagine. They don’t want it for the moment. They always leave a window open in case the Americans decide to start talking.
And that brings us to an extremely complex matter which unfortunately we don’t have time at least today to talk about it, which is divisions at the top in Russia.
There are oligarchs who are pro-ending the war. There are oligarchs who want to extend the war indefinitely because they are making a lot of money out of it. There are pro-EU people very, very close to the Kremlin. And there are the Silovikis and the ultra-nationalists who say no, we should cut off the head of the snake tomorrow in 20 minutes, which they can if they want to.
So there are divisions inside Russia and at the highest levels. There is no division in terms of accomplishing the goals as fuzzy as they are of the special military operation.
Demilitarization of Ukraine is on the way. They did it at least 50% if not more. Demilitarization of NATO is also working because they did it.
Germany, they don’t have shells for one week if they decide to go into a war. Their Leopards are gone, not to mention the other ones.
Which leads us to the most dangerous element in all that, which brings us back to our NATO discussion: the Poles, the rabbit hyenas of Europe. The Poles and the Baltics are cultivated by the Americans as their new strike force considering that the Ukrainian strike force is practically gone
And that would assure the war entering another even more complicated stage and with no end in sight. The possibilities of this thing getting worse of course are endless but this one I would say is the number one.
Subcontracting the next offensive to the Poles with help from other NATO mercenaries. Forget about Ukraine, now it’s going to be Poland independently, not part of NATO because they’re doing this on their own, NATO is not involved.
And then we have a different actor on the Ukrainian battlefield because the Poles, their agenda as all of us know, is to annex Western Ukraine and they think they have a golden opportunity that they never had before in the past few decades to do it.
So I’m sorry if I’m being so nihilistic but.
MICHAEL HUDSON: Well you may sound nihilistic but I think what you said Pepe is exactly what was being discussed at Vilnius and NATO. I think all the NATO people are in agreement with you.
What we’re saying is no longer on the outside as a minority view. What you said is the majority view of NATO.
They got together, they realized it, and it’s as if at the Vilnius meeting they said, okay we’re going to bury Ukraine, this is a funeral for Ukraine, we know that we can’t win, the only thing we want to do is.
If there are any tanks and weapons left, let’s use them all up so that Europe will buy a huge bonanza for the American military industrial complex, Raytheon is very happy.
But I think the message at Vilnius the associated meetings at the EU was, we’re finished with Ukraine, we’ve done everything that we set out to do, we’ve bled Russia, great success as you pointed out elsewhere our real enemy now is China.
Now our center is really in the Pacific. Our center is in the China Sea. Specifically, let’s make Taiwan the new Ukraine. Let’s be willing to die for the last Taiwanese. Let’s do to China what we’ve just so wonderfully done to NATO.
We’ve expended everything there, but while we’ve used our tanks and ammunition and armaments in the West now let’s use up our navy, there’s a huge market in building all the ships that a war with a provocation with China will do.
Let’s send some of our ships that China will say well that’s our own territory we’re one country, let’s shift to a naval war in the Pacific now, and that seems to be what they all decided on.
They don’t want to talk about Ukraine anymore, it makes them unhappy. I mean for us it’s saying, ha ha we told you all about it all along.
For them they say, well we did what we could.
And I think you’re right about Poland. In Poland they’re obsessed with the 15th century and the 16th century. When Poland had Lithuania, had many of the Baltic States, had Prussia. All of that. Had part of Ukraine.
They want to recover their lost glory and the leaders of Poland are exactly as you said, and I think NATO isn’t really going to be a part of it, if Poland tries to attack Belarus or even isolate Königsberg.
Somehow NATO’s not going to get involved if Russia retaliates with a slam. You can just remember what happened in World War II to remember that.
I think what you’ve outlined, I think it’s what NATO agrees with
RADHIKA DESAI: Well I mean let me complicate that a little bit, because the thing is that if there were to be any kind of Polish military action of the sort that you’re discussing, it’s going to actually divide NATO quite radically.
There’ll be some powers who’ll be saying, we have to back Poland. This is a fight. And all the rhetoric about freedom and democracy and so on will come out.
But the fact of the matter is beginning with the Germans and a whole lot of others, they’re not going to support, as Michael you were just saying, they’re not going to go along with that. So I think it’s more complicated.
I think also that in terms of extending this to China I really think that military failure of the sort that we all agree the West is facing that NATO is facing is going to give people pause, first of all.
That is to say, can the United States really do, can it really hold up the military end, so to speak? And it can’t. It spends more money on its military than the next however many states combined but still cannot produce weapons of the quantity and quality that even Ukraine needs, let alone the West as a whole will need if it goes to war with China.
So in a sense it’s got an overpaid, pampered military industrial complex that cannot actually produce the weapons, so in that sense.
And earlier I said Biden didn’t want to include Ukraine in NATO or not even give it a road map for electoral reasons, but I think there’s also another reason.
They do not want a failed state in their ranks, because that’s what Ukraine will become soon. So in that sense I would say that the possibility of extending the war to China is much less secure I think.
Also because, even the countries around China who the United States has been trying to divide from China for a long time, they continue to deepen their economic connections, trade relations, investment relations, etc with China.They’re not going to go to war with China in any easy way.
They’re going to be deeply divided just as the European leadership is divided.
In fact all of this kind of nicely segues into our next question, which is how much longer do you think Europe and other US allies sustain the appearance of unity?
Because we know that Europe is paying a big economic cost. The unity that is much doubted has also been a very selective sort of, convenient sort of, unity where every country has sent whatever is convenient for it rather than what is needed in Ukraine.
So how long do you think that even Europe can stay united, with the British pulling in one direction, the eastern states in another direction, Germany and France and Italy in yet another direction? How long can this unity be sustained?
MICHAEL HUDSON: I don’t think it’s a question of countries fighting each other. It’s a question of the business interests fighting the political interests who basically are employees of the United States.
The question is, are international relations going to be determined by economic factors and mutual gains as we all believe with the materialist approach to history, or is it going to be completely non-economic factors, or, as Janet Yellen and her European counterpart said, all trade is risk.
Any trade with China or Russia or the Near East runs a risk of losing national security. Because if you trade with a country, you’re dependent on them, and therefore you should break off the trade with China. You should break off the trade.
Well obviously, breaking off the trade with China and Russia has already led to the collapse of the German steel industry and the industries that use steel and the fertilizer industry and the glass making industry that uses gas.
So the real question is, are European politics going to be based on economic long-term self-interest as we all assumed was the guiding shape of geopolitical arrangements, or is it going to be rejecting your self-interest in terms of national security, meaning, trade with the United States establishes absolute dependence on the United States.
When Janet Yellen the US Secretary of the Treasury and [Von Leyen] you have to base all your trade on national security, that means all trade must be locking in your dependence on US exporters, US oil and gas exporters, now that we are your only suppliers of gas and oil. US farm exports. US computer information technology exports. US communications technology. Rejecting Huawei.
How is it that the European politics is not dominated by the business interests, but by American fantasy that even American interests are not based on the benefits of American computer chip exporters.
You’ve just had President Biden say we’re going to have to give 30 billion dollars to support US chip modernization, but the chip companies are going to have to lose one third of their total market which is China.
And the chip companies have said, wait a minute you’re saying that we’re going to lose our markets and you’re going to try to make us grow again but without a market for our goods because our market is China.
Even the United States is turning away from its economic self-interest to this obsession with we must dominate other countries. This obsession of the neocon to control other countries.
I don’t think something like this has really come across before and those of us who believe in the economic determination of history can’t believe it’s going to go on very long but here we are.
PEPE ESCOBAR: Just complementing what Michael said, it has to do with the astounding mediocrity of the current political elites in Europe.
This is something that, of course, we have these conversations here in Europe, but of course, totally off the record. And you never see a debate like that on the opinion pages of Le Monde or in any nightly newscast.
But German businesses, they are absolutely furious. And they said, look, there are already some sort of revolt that we need to get rid of this government as soon as possible. French interests, more or less the same thing.
When Macron went to visit China recently, the businessman with Macron said, we don’t care what you discuss in terms of politics. We are here to do business with the Chinese, whatever you say.
And in fact, they clinched a lot of very juicy contracts while they were in Beijing.
The Italians, the same thing. The Italians are saying, are you nuts? You want to cut off the Italian partnership in the Belt and Road Initiative in Brie, which is a decision that they’ll have to take until the end of the year, beginning of next year. This is absurd. They’re going to invest in our ports. They’re creating jobs here.
So, you know, there is a revolt in business circles. These are the three economists that really matter in Europe, Germany, France. Everybody else is an extra, you know.
So we can see maybe, I would say, medium to long term, a change in the horizon. Short term, I would say it’s an absolute massive tactical victory by the Americans to cut off the EU, especially Germany, from Russia.
The problem is the people who actually know how business is done, businessmen and industrialists, now they’re starting to get the full picture, not only for the next winter, but for the years ahead.
So the best we should all expect is a change in governments in these three countries that really matter.
In France, it’s not going to happen because, as we know, Macron was recently reelected, even though his popularity is probably less than zero at the moment. There’s no chance there’s going to be a coup d’etat to get rid of le petit roi, the little king.
But French businessmen, they are as furious as their German counterparts. They say, so what do we got left? Are we going to transfer to the US? No. Are we going to transfer to Asia? Maybe.
And obviously, if that happens, the social situation inside France, which is already mega explosive, then it’s going to be total combustion.
And in Germany, the deindustrialization of Germany now is a fact, and the numbers are absolutely horrifying. They basically deindustrialized this year over 30% compared to last year. This is beyond enormous and unimaginable until a few months ago, right?
And obviously, Eastern Europe doesn’t count. In Eastern Europe, they have other ideas. Apart from the Poles, the Romanians soon are going to start saying, ah, we want to recover our lands that now are part of Ukraine.
And the Hungarians are going to say exactly the same thing.
So basically, there will be a giant partition of Western Ukraine with everybody jumping in. So the ramifications of all that are, in terms of political economy and in geopolitical terms, are absolutely horrifying.
And from the point of view of the average EU citizen, which is already being buried by taxes, the average French or Italian taxpayer basically pays 50% of what they earn in taxes. It’s completely absurd.
They don’t get much in return because the social security system in both countries and the other ones is also collapsing. So ends barely meet for most people.
They are starting to make the direct connection of throwing zillions of euros into Ukraine while the social situation inside the EU, as much as inside the US, as you know very well, is deteriorating very fast.
RADHIKA DESAI: And this is so true. And just to go back to something that Michael was saying, you know, Michael, you were talking about how those of us who think that economic interests should determine political and geopolitical actions and so on, that we are somehow being pushed to reassess the basis of the way we think.
But there’s a way of thinking about it. If you think about this in terms of the longer history of imperialism, and I’ve always said that it’s important to recognize that imperialism has been in decline since about 1914.
It’s been a long one. It’s been a slow one. Some of us can’t wait for it to accelerate, but it has been in decline.
And it’s come to the point where the very actions that are necessary to preserve the imperial system are in fact harming the very system on which it is based.
So when you have that sort of, the snake eating its own tail situation, that’s when you begin to see that the contradictions of the system are mounting. And that’s the position, that’s the situation where we are at.
That what the United States needs to do in order to preserve and extend the imperial system and therefore the capitalist system itself is proving harmful to capitalism.
Now, what that means for the future is anybody’s guess. Supposing, you know, we got the kind of government that, the regime change.
So if you got the kind of regime change that Pepe was mentioning and important European capitals, they will then have to go back to something like the approach that they were taking when Merkel made Germany dependent on Russia for its, you know, energy needs and so on and so forth.
You could have something like that.
But then what that has to do is we will see that the capitalist world is going to have to make terms with a world that is, you know, on the one hand socialist in the sense that China is socialist and other socialist powers.
And on the other hand, if not socialist, like Russia, at least not willing to be subordinated to capitalism and therefore to be, to follow neoliberal principles, because neoliberal principles are nothing but subordination to capitalism.
So in that sense, I think that we are looking at part of the reason why this situation looks as complex as it does is because of this very complicated situation of capitalism and imperialism today.
So maybe we have time to at least go into one further question. And that is really, again, this is about the very economic question.
But why do you think the Grain Deal broke down? What is the significance of the breakdown of the Grain Deal?
Because remember, of course, remembering that originally the Grain Deal, you know, the West made a lot of noise about how Ukraine feeds the world and blah blah and so on.
But in reality, the Grain Deal was arrived at in order that the big agribusinesses that are located in Ukraine will be able to export their grain and make a profit. That was the real reason for the Grain Deal.
Now, of course, President Putin has given his own reasons and he’s actually given two sets of reasons. One is, you know, he’s pointed out that the West did not keep its side of the deal.
But he also pointed out that the grain that was coming out of Ukraine was, in fact, not reaching the third world anyway.
PEPE ESCOBAR: Three percent of the grain was reaching poor countries in Africa. You know what? They were discussing this this morning at a Valdai Club session this morning, previous to the Russia-Africa Summit that starts on Thursday.
They were discussing that and they got into detail and they said the Russians were the only ones who actually exposed to the rest of the world a fiction.
Over 40 percent was going to rich EU nations, not the poor EU nations. That’s number one.
Number two, they were using the fact that Odessa port was the center to stockpile weapons in Odessa. Why the Russians are bombing Odessa since the beginning of this week? Because they are bombing exactly this as a stockpiling of weapons.
And number three, they were organizing ways of using the corridors of the Grain Deal to attack the Black Sea fleet and especially Crimea. There you go. Michael, it’s all yours.
MICHAEL HUDSON: Now that you said the whole point, what you said is exactly right.
The grain that Russia had said, we’re producing the grain. We want to use this grain to give to the African countries to consolidate our linkage between Russia, China and the BRICS and the global south, specifically of Africa.
Obviously for them, just as when they built the Aswan Dam in Egypt, for them trade and support was a means of creating national alliances and Europe prevented that.
And as you pointed out, the big agricultural agribusiness companies wanted to make money for the same reason that Willie Sutton said, why do you rob banks? Because that’s where the money is.
So of course they wanted to get paid by Europe instead of giving their product away for free. There’s no percentage of zero that you can really get out of this.
And as you pointed out, Ukraine was trying to use this ostensibly humanitarian grain trade to stockpile weapons and use that sea transport as a means of, how do you attack Crimea? By the sea. That’s how they used a sea torpedo to blow up the bridge to Crimea.
So you’re having exactly this. Russia has decided to demilitarize the Black Sea. Putin has said that if there’s any foreign ship that is not with Russian permission in the Black Sea, that would be treated as an enemy because who else would possibly go to the Black Sea?
There are not going to be insurance companies that are going to guarantee the safety of shipping in a military war zone. So without getting insurance for your sea transport, how are you going to transport grain? That in itself has stopped it.
And Putin had just listed a whole series of criteria that would be necessary for the grain deal to resume.
And that included stopping the EU sanctions against the Russian banks that have to finance the grain deal, stopping all sorts of attacks on Russia, sort of using the grain transport path as a means of actually putting a warship in there to attack Russia.
Essentially, Russia said, you’ll have to demilitarize the Black Sea if you want peaceful grain commerce across the Black Sea.
The US is completely unwilling to do that. Congress will never go along with that. So essentially, the United States has blocked the grain deal.
And it’s using its propaganda in Africa to say, oh, look, Russia is blocking it. That’s why you’re not being fed with the grain.
Who are you going to believe, the Russian reality or the American cover story? That’s what’s being fought out in Africa right now.
And Africa is becoming actually one of the great battlefields in this split between the unipolar US order and the emerging global majority order. And grain is the basis of this.
The foundation of American trade policy since 1945 has been to prevent other countries from growing their own food.
All of the World Bank loans to third world countries in the 50s, 60s and 70s have been for exporting plantation crops and for the US State Department opposing family-based farming to promote plantation crops, especially on lands owned by American exporting interests.
The issue is the whole structure of African and Southern Hemisphere land tenure and whether they’re going to aim at feeding themselves just as the Europeans have fed themselves.
And the issue that you didn’t mention with the grain deal was Ukraine says, all right, let’s try to export our grain by rail to Europe.
Well, the center of European foreign policy, the most important economic aim of creating the common market in the first place was the common agricultural policy to protect French and German and other agriculture.
And the last thing they want is for their farmers to be undersold with cheap Ukrainian grain that will hurt their economic interests. And so they’re European farmers and they have the agricultural policy that is blocking the shipment of Ukrainian grain through Europe.
But apart from the fact that all of the storage facilities, the silos for grain are already being used for European farm grain, there’s nowhere to put that Ukrainian grain. The problem is insolvable from that point of view.
RADHIKA DESAI: Yeah, that’s so true and important, Michael, that you sort of have broadened the picture to put the issue of the grain deal in the larger picture of imperialism and the way it has always operated.
Because all the first world countries, the imperialist countries themselves actually pursue a very strict food security policy.
Meanwhile, they tell third world countries, oh, you shouldn’t worry about food security. You should, as Michael rightly points out, produce the export crops. What are export crops? They are crops that the first world wants.
Why should third world countries produce export crops? Because they exist as far as the third world, as far as first world countries are concerned, to supply cheap things that the West, which is largely non-tropical, cannot produce.
So the third world is supposed to supply us with all those tropical fruits, vegetables, tobacco, cocoa, coffee, tea, whatever it is.
And what’s really also interesting is, you know, people always think of the third world as being unable to feed itself. In reality, there are actually relatively few third world countries that have fallen for the definitely the very real inducements of the United States to not worry about food security.
And besides, they are not rich enough to import a lot of food. So the extent of food dependence of first world countries is actually much greater.
We import a lot more of our food than the average third world country and certainly big third world countries.
And what that food export also does is it keeps inflation low. We are able to, in first world countries, buy things for next to nothing. And this is a big factor in keeping inflation low.
So, yeah, I think this is very important to put the grain deal in the larger picture of imperialism.
Now, I should say we are near to an hour in this show and we still have several questions to discuss. So what I propose is that next week we will come back and discuss the same issue and complete the number of various questions that we were discussing.
So until next week, then we will have when we’ll have the second part of this program on NATO. Thanks, everyone, for watching. Thanks to Pepe for being our guest.
He will be back next week. And, of course, thanks also to Paul Graham, who’s a videographer and all the others who support our show. Thank you very much. And till next time.
MICHAEL HUDSON: If there is a next week.
PART II
RADHIKA DESAI: Hello everyone and welcome to the [15th] Geopolitical Economy Hour, a program that discusses the political and geopolitical economy of our time. I’m Radhika Desai.
MICHAEL HUDSON: And I’m Michael Hudson.
RADHIKA DESAI: And today we have once again Pepe Escobar, roving reporter extraordinaire. Welcome, Pepe.
PEPE ESCOBAR: Thank you. It’s an enormous pleasure to be with you guys again.
RADHIKA DESAI: And today we are going to continue the discussion we started in the last Geopolitical Economy Hour, entitled “NATO Out of Bounds: War Against Russia, War Against China”.
Last time we discussed where the Vilnius Summit had left NATO, and the divisions within the alliance that the summit had exposed; how the proxy war on Russia was faring; and how the Biden project of uniting so-called democracies against so-called autocracies relies so critically on the outcome of this war, which by present indications does not look good for Ukraine, and it does not look good for NATO.
We then went on to discuss how much longer Europe and other US allies could sustain the appearance of NATO unity, which is cracking as we speak, and ended with a discussion of how the grain deal [the Black Sea Grain Initiative] had broken down.
Now that discussion already permitted us to expand our frame out of Europe and to take in the world as a whole, because, as it became very clear in our discussion, you cannot understand the breakdown of the grain deal unless you put it in the larger context of how imperialism has a long and murderous history of attempting to deny food security to most of the world.
So now today we are going to continue that discussion by focusing on the danger of NATO being transformed from a North Atlantic Treaty Organization to a North and South Atlantic and Pacific Treaty Organization, as Biden leads to an ever-widening and deepening hybrid war on China with trade, technology, diplomatic, and military aspects, but which is coming ever closer to some kind of military war.
So once again, we framed our discussion around several questions, so I will just begin by posing the first one:
What is the United States’ wider intention and strategy vis-a-vis China in the so-called Indo-Pacific region?
What do recent events mean for the region? I’m thinking of events such as the visit of high-ranking Chinese and Russian officials to Pyongyang to commemorate the 70th anniversary of the armistice in the Korean War.
I’m thinking of Western hysteria over the recent agreement between China and the Solomon Islands, one of a very large number of Pacific island nations.
The recent announcement of a new package of military aid to Taiwan from the United States, which essentially is going to be done by a kind of presidential decree, using the same military drawdown program that President Biden has been using to fuel the war in Ukraine.
And generally, I’m thinking of rising tensions in the region, thanks to the announcement of AUKUS a couple of years ago, and the reactivation of the so-called Quad alliance, or incipient alliance, whatever you want to call it, between the United States, South Korea, Japan, and India.
And of course, there has been the recent NATO declaration that it considers China a threat.
U.S. strategy is not easy to understand, because, while on the one hand, there seems to be some effort to promote dialogue with the visits of recent high-ranking U.S. officials, such as Antony Blinken and Janet Yellen, while on the other hand, U.S. actions continue to ratchet up tensions across all the fronts.
So, Michael, why don’t you start us off with your views on this matter?
MICHAEL HUDSON: Well, today is just two years since America was driven out of Afghanistan, and we’re seeing a repeat of the defeat in Ukraine.
So the U.S. and NATO have lost Ukraine, but they want to keep the fighting going because Biden said this is a fight against China that’s going to take two decades, maybe three decades.
So it looks like the Pacific and even the Arctic may become the new U.S. disruption zone.
Now, especially since Russia and China are working with North Korea to develop ports for the new trade from the Pacific via the Arctic to Northern Europe. So the United States is losing militarily, but it looks like it’s going to lose Europe in a few years.
And the American strategic plan since the 1990s was to absorb the Warsaw Pact into NATO. And it’s done that, but now it looks like it’s overplaying its hand. And the cost ultimately may be to lose Western Europe, headed by Germany, France, and Italy.
And we’re already seeing, in the last few days, just since our last broadcast, we’re seeing riots throughout Europe as the economy and employment are declining.
And there’s discussion, where is the German chemical industry, led by the BASF company, going to go? They’ve announced they are not going to make any further capital investments in Germany. They say that they’re being pressured to move their facilities to the United States. And they already have facilities in China.
So where will the German industrial population go when it abandons the country, just like Latvia, Estonia, and Lithuania’s population have fallen by about one-third since 1990?
When you look at how this all works out geopolitically, the Baltics and Central Europe are not important economically. Their population is declining.
And only Poland has a military value, because of its dreams of recovering where it was in the 16th century, when it controlled most of Scandinavia and the Baltics.
So the U.S. is pushing the insistence, either you’re with us or against us. And the break that’s coming may move Western Europe into the Russian and SCO – Shanghai Cooperation Organization – orbit.
When they finally make the decision, if they do decide, “Gee, we shouldn’t have lost the trade with Russia. And now we’re being told to stop trading with China. Maybe we shouldn’t have made that”. If they reverse their decision, this is going to be irreversible.
And you could say the same of the Global South countries that are being pressured – and indeed, most of the Global Majority – they’re being forced to choose, either you’re with the U.S., whose industrial economy is shrinking, or you’re with the expanding BRICS+, plus the Shanghai Cooperation Organization.
So where are these countries going to realign over the next few years?
The U.S. can keep England as a dependency. And England’s fate is, I think, going to be a warning to what happens to countries that adopt U.S.-style finance capitalism instead of socialist industrialization and public services as a human right.
PEPE ESCOBAR: Michael gave us the big picture, right? I would like to focus on something that happened these past few days, which is enormous, and I would say, for most of the planet, quite unforeseen, which is Russia bringing back North Korea, the DPRK, to the rank of a very important Global South power with enormous reach.
So we have [Russian] Ministry of Defense Sergei Shoigu received like Mick Jagger in Pyongyang. He got a true rock star welcome, the whole thing, including a private audience with Kim Jong-un and obviously the whole leadership of the DPRK.
What leaked, of course, was the possibility of many military agreements and increasing their military collaboration.
What did not leak is the best part of them all, because it’s the geoeconomic part.
What do the Russians really want to do with Pyongyang? They want to integrate Pyongyang with South Korea, with Seoul. And of course, this will mean Russia developing a sort of go-between, diplomacy between both. And they have the possibility to do both, because they are also respected in Seoul.
And something that has already been discussed at the Eastern Economic Forum in Vladivostok. These discussions, they started at least three or four years ago in Vladivostok. And what they’re all about basically is to build a trans-Korean railway, which is going to connect with the trans-Siberian and connect both Koreas to the Russian far east, and then all the way across Eurasia.
So imagine that you are a Samsung businessman in Seoul. You look at that and say, “Wow, I don’t need to use cargo tankers anymore; I can have direct access to the enormous developing market in the Russian far east, not to mention the whole of Eurasia via Russia, just by building a railway”. Very, very simple.
Which sooner or later, and I would say, with Chinese input, could become a high-speed rail. Considering that the Chinese are already investing in high-speed rail in Russia, and considering that if there is a duplication of the trans-Siberian into a trans-Siberian high-speed rail is going to be built by the Chinese, this trans-Korean railway could also be built with Chinese input, technical input as well.
And financed via a Chinese Silk Road Fund, the BRICS Development Bank, Russian banks, etc. It could be a reorganization of finance, East Eurasia style.
So they were discussing that, of course, and this is going to be re-discussed, and they’re going to get deeper into it at the next Eastern Economic Forum in Vladivostok in early September. So it’s around the corner, literally.
So the fact that this is happening now, it’s very, very important, because this is a sort of a preamble to what they’re going to get into at the next Eastern Economic Forum. So everybody is happy with this arrangement.
North Korea, because they are brought back to the forefront of trade in the parts of Eurasia. The possibility of having some sort of geoeconomic deal between North Korea and South Korea.
Russia, developing the far east and integrating the far east with the Koreas.
And China, of course, because this also integrates this part of Eurasia, this Northern Eurasia framework.
And it’s part of BRICS. It’s part of the Shanghai Cooperation Organization. And this opens, I would say, this leaves us with the possibility of North Korea sooner or later getting integrated into the Eurasia Economic Union.
And that’s fantastic, because I see that happening in at least two stages.
The first stage, the EAEU strikes a free trade agreement with North Korea, just like the ones they have with Cuba, or with Vietnam in Southeast Asia.
And they are also working with Indonesia to have an EAEU free trade deal with Indonesia. They could also do the same thing with North Korea.
And fantastic, this bypasses US sanctions, because it’s going to be – the EAEU basically, Russia is 80% of the firepower of the EAEU. They can devise a settlement mechanism involving North Korea that bypasses the US dollar completely.
You have expansion of EAEU to Northeast Asia, which is very important. The Chinese are going to love it as well, because they can also, even if they’re not part of the EAEU – don’t forget that Putin and Xi have already said, and the directives are already there – the Belt and Road Initiative, BRI and EAEU, they have to converge.
And this would be a perfect example of convergence between BRI and EAEU.
So that’s why, the way I see this visit by Shoigu as Mick Jagger, it extrapolates it everywhere, geoeconomically and geopolitically. And it’s no wonder that it was not even mentioned, I would say, or barely mentioned in Western mainstream media.
RADHIKA DESAI: That’s absolutely true.
And I mean, the more one thinks about it, the fact of the matter is that it is only a matter of time when the US’s strategy will stop working in the region.
So first of all, I mean, this idea that the United States can extend NATO to the Pacific is not going to wash, because the Pacific region has historically focused on its own economic development.
The Chinese are essentially pitting their own strategy of proposing economic development to the NATO strategy of securitizing everything, and essentially turning everything into a military conflict or a military alliance. We’re going to see the contestation of these two visions in the region.
And I would say, basically, it’s a matter of time before everybody begins to realize that what the United States is doing in Asia, what the United States has been doing around the world, at least since the Second World War, if not before, is essentially, well, the United States says it is providing protection to the world; in reality, the United States has been running a protection racket.
What is a protection racket? A protection racket is to promise to provide security against dangers that you have yourself created, so that your promise to provide security appears credible and attractive.
So, for example, the United States has continued to foment disunity on the Korean Peninsula. The fact of the matter is that the vast majority of Koreans, North and South, deeply yearn for some form of unification. There is absolutely no doubt.
And this is attested to by the fact that, periodically, governments come to power that have advanced progress towards unification, but the United States then comes in and disrupts it.
It’s only when Koreans realize this that they will stop voting for those forces. And I think it’s a matter of time.
Similarly, in the case of Taiwan, already we are seeing in the run-up to the elections that are due, I think, in a few months, you have in the appearance, side by side with the KMT that wishes to promote peaceful reconciliation with China, the emergence of a new party that is going to do the same.
This is going to essentially push the DPP out of the picture. So they’re not going to win.
Similarly, also you read in the papers, although Japan has signed, has pronounced a new military policy in recent years that people say should be unthinkable in a country with a pacifist constitution, but in reality you see that the overwhelming majority of the Japanese are not going to join any kind of US-led war against [China over] Taiwan.
And so finally, what I’m really driving at is that the wonderful specifics that you gave about what can happen just in the case of North Korea, this is part of a wider set of pressures that I like to think of as the exertion of the economic magnetism, the economic gravity of China.
And no country can afford not to respond to that. And so we are going to see a shift, but at the same time, in terms of what we can expect to happen in the next few years, maybe even few decades, is an attempt on the part of the United States to stop this inexorable development from occurring.
And you were saying, Michael, that I agree with you, that, at one level, it looks as the United States is looking at a multi-decade war. But we also read in the papers that the United States feels compelled to do something now, because they think that they have up to 2027 before China will become capable of really resisting US forces.
But yeah, I mean, this is a kind of a segue into the next question, which is basically, what can the US expect from its allies?
MICHAEL HUDSON: Japan has sort of a Stockholm Syndrome, and it identifies with the United States because the US bombed it. And despite its export trade opportunities with China, its right-wing government is still willing to lose this market and sacrifice its economy for the United States once again, just as it did in the Plaza and Louvre Accords.
And South Korea is really the key to all of this, partly because it’s so important in ship making, and it’s being pressured to continue cutting back its export of sophisticated ships to China. The Wall Street Journal just had a long report on that.
But if it sees the promise of the Chinese market – and as Pepe has explained, the whole Eurasian market, thanks to the railroad – it’s going to decide, what it is going to choose: the export markets to resolve the military overhead and the threat of North Korea, or is it just going to continue to back the US?
It’ll probably have to tell the US to remove its occupation troops, because I think the Korean War still is legally on. So we may finally see an end of the Korean War that began in 1950.
PEPE ESCOBAR: Your question is what America will do essentially. Just look around and see what they are incapable of doing in several parts of the Global South or the Global Majority.
For instance, Southeast Asia. Well, I lived in [Southeast Asia]; it’s my home. I moved to Southeast Asia in ’94, a long time ago.
So I followed the relationship between the ASEAN 10, the 10 members of Southeast Asia, with Russia, China, India, and the US on the spot.
And nowadays, everybody knows that the number one trade partner of all ASEAN is China.
We also know that the U.S. has more margin of maneuver in some of the Southeast Asian nations than in others.
For instance, Singapore, we usually joke that Singapore is an American aircraft carrier station in Southeast Asia, side by side with Indonesia and Malaysia.
More and more relations between Indonesia and China are being, finally, there was a lot of mutual suspicion during the times of Suharto, of course, and immediately afterwards.
And the Chinese have been very, very clever to explain to Indonesia, “Look, we don’t have any designs on your islands, the Natuna Islands in the South China Sea”. So the Indonesians are more relaxed.
So now they are talking business, for instance, like, you know, Chinese investments, part of the Belt and Road Initiative across Indonesia.
Philippines, we all know, it remains an on-off American colony.
But the Americans, for instance, have absolutely zero penetration in, for instance, Myanmar, Laos, and Cambodia. This is Chinese territory. And these have Belt and Road Initiative projects all over the space, like the absolutely extraordinary high-speed rail that the Chinese built from Yunnan to Vientiane.
I saw that being built in the middle of the forest across the Mekong River. It’s something that only the Chinese are capable of pulling off. And they did in record time on top of it, because the Laos government said, “OK, come here, do everything”, and it’s the way to go.
In Thailand, there’s going to be an extension, because, of course, of foreign interference, because of Thai lobbies fighting among themselves, the Thais haven’t even started to finish their own stretch, you see.
But this proves that Southeast Asia, in terms of Chinese-U.S. relations, it’s a balancing act. But most of these nations know exactly what’s going to happen from now on.
Their number one trade partner is China. And Chinese influence in all of them will continue to be very, very strong, directly and indirectly, via the Chinese diaspora in all of them, what we call the “bamboo internet”, which is strong in all of these nations.
South America: South America, what they basically, against Argentina and Brazil, of course, the Americans have tactical victories.
In case of Argentina, for instance, they forced Argentina to get a loan to pay another IMF loan.
So basically, the plan is to get Argentina to keep begging for IMF loans ad infinitum. So this is plan A. There’s no plan B.
Brazil is much more complicated. But for the moment, it’s a tactical victory, because the margin of maneuver of the Lula government is very, very slim.
And we have the famous list of what you’re going to do, that Jake Sullivan went personally to Brasilia to hand out to the new Brazilian government.
So obviously, Lula inside BRICS has to be very, very careful. Every time that he opens his mouth and he talks about de-dollarization, we see people shrinking in the beltway. So very complicated.
And across Africa, of course, which I’m sure we’re going to discuss, we are watching basically a second wave of decolonization.
And now, finally, the real thing with a new generation of young African patriots in Burkina Faso, in Mali, in Niger, in Gambia.
And of course, with very, very important allies, not only Russia and China outside, but Algeria in the Maghreb, who plainly supports all these new governments in the Sahel area.
So in terms of not only the U.S., but the collective West as a whole, they’re being expelled little by little, with or without AFRICOM, from Africa.
And of course, in West Asia, they still cling to, for instance, Syria.
Everybody seems to forget nowadays, with the war in Ukraine, that one-third of Syria is still occupied by the Americans. And they are plundering oil virtually on a daily or weekly basis, and wheat. And this disappeared completely from the narrative anywhere.
Even in West Asia, the war in Syria is not over. The war in Syria continues, and there is an illegal occupation of one-third of the Syrian territory.
So we have tactical victories. At the same time, we have Hezbollah growing stronger and stronger by the day.
So the Americas are losing terrain everywhere.
[The US has] tactical victories in Europe, of course. They managed to get Germany and the EU separated from Russia. But this is not eternal. This is a tactical victory for the moment. This could change in a matter of a few years only.
And of course, across Eurasia, we all know what’s happening. Shanghai Cooperation Organization, BRICS+, the Greater Eurasia Partnership conducted by Russia, Belt and Road Initiative. We’re going to have a forum in Beijing in October.
This is it. Eurasia now is Eurasia controlled by Eurasians, and without foreign interference.
Of course, we still have attempts at color revolutions.
I’m going back to Central Asia soon. I’m going to see what’s happening in Kazakhstan now. Kazakhstan, they are so uncomfortable; they’re trying to hedge their bets, considering that they suffered a color revolution a year and a half ago. And there are sequels. This thing is not controlled yet.
So it’s a very mixed picture, guys. I think we all agree that, in terms of tactical victories, the Americans have some serious ones. But in terms of the overall strategy, they are losing virtually in every continent.
RADHIKA DESAI: And the very fact that Kazakhstan would be having second thoughts about this is a very important thing. Because from what I understand, of all the Central Asian republics, it is the most pro-Western. It is the most penetrated by American capital, and so on and so forth.
So that’s really fascinating. And you’re absolutely right that the picture is very complex.
But we can see where the undercurrent of history is going. It’s going away from the United States and toward China and Russia and so on.
But at the same time, the undercurrent is one thing. But on the surface, the United States will continue to try and make attempts to block this from happening. There will be vain attempts, but they will be made. People will pay the price for it, et cetera.
But still, if you try to, you know, as you say, the United States’ ability to conduct all this is in danger.
One indication of this, as we’ve discussed in the past, is that the U.S. cannot, you know – today it’s in the news that the U.S. is going to use the drawdown facility that has been created for Ukraine to send weapons to Taiwan.
But the fact of the matter is, what’s also being reported in the U.S. media itself, let alone elsewhere, is that the U.S. ability to produce the sort of arms that are necessary for theater operations today is actually very weak. It is not able to produce.
The United States provides vast quantities of money to its pampered military-industrial complex to produce weapons that are of no use – or they are not sufficient.
You know, they’re very good at producing high-priced, big-ticket items that cannot be used on the battlefield.
Now, this is really a fascinating comment on capitalism, on American-style monopoly capitalism, that you have a pampered military-industrial complex that cannot produce what you need, and you still keep supporting them. So that’s one contradiction.
And of course, there are also many others, you know, within an election campaign about to go into high gear in the United States. The unpopularity of the [Ukraine] war, even in the U.S., will be clear.
Every other day, there is some item in some or the other newspaper saying, “You know, why are we sending so much money to Ukraine when we can invest in the U.S.?”, etc.
So what are the U.S.’s options?
I mean, Michael, you recently wrote a paper in which you said that the United States has lost any capacity to rationally calculate what it ought to do, what strategy will win. Perhaps you can say something about that.
MICHAEL HUDSON: Well, the U.S. chip makers like Intel are protesting very loudly that China represents one-third of their market.
And so if they’re told by the Biden administration to stop selling sophisticated chips to China, then the government is going to be told, well, you’ll have to make up maybe a $50 billion subsidy to us.
And will the U.S. Treasury really be asked to replace the China market? That’s what’s already being debated in Congress.
So if it does that, how is this kind of giveaway going to affect the U.S. presidential and the congressional elections just next year? This is already an issue.
And business donors are not giving money to the Biden administration and the Democratic Party, because they’re wondering what to do.
And on the other hand, you have Donald Trump trying to get votes by being even more anti-China than the Democrats.
So the great unknown is how China is going to respond to the U.S. shooting itself in the foot. Is it going to be willing to turn the tables and retaliate by imposing its own sanctions?
And it has a much stronger ability to impose sanctions on the U.S. than the U.S. has to impose sanctions on China.
And [China] fired a warning shot a week ago by stopping the exports of gallium – it produces 80 percent of the world’s supply – and germanium, which it does 60 percent.
And on August 1st, China just announced that it has limitations on rare earth exports. And rare earths are a key to making the magnetic characteristics that are required for sophisticated chip technology.
So China can simply impose sanctions on trade that doesn’t have much monetary value, but a key technology value, and can limit the trade in raw materials only to its Shanghai Cooperation Organization allies, and say, “Well, look, I’ll provide you with all the materials, and you can make what the United States and Western Europe are no longer able to make, because they don’t have what only we can supply”.
So the question is, when will China’s political mentality decide to actually fight the U.S. type of negative war with sanctions instead of the competitive cost-cutting, high-technology war that economic trade is supposed to fight? That’s the issue.
RADHIKA DESAI: Absolutely. And, you know, as you were talking, Michael, I was reminded of the fact that, of course, sanctions against Russia were supposed to, you know, “reduce the ruble to rubble” and, you know, push the Russian economy back into the stone age and whatnot.
And, of course, if they didn’t win against Russia, they are not going to win against China. We know that, as you say, rightly, that perhaps China should engage a little bit more in the kind of action that it has just undertaken to deny the West important inputs that it needs, important raw materials that it needs.
But even without such restrictions, China is already making U.S. sanctions useless, because it has rapidly accelerated its innovation in chip technology and so on.
And you know that if the Chinese really roll up their sleeves and say we are going to attack this problem, that problem will be solved in relatively short time.
If the Taiwanese can do it, why can’t the Chinese? It’s not you know, the Chinese have been happy to rely on imports since they were easily available. But if they are not, they will develop their own.
So the sanctions are going to boomerang big time vis-a-vis China as well. In fact, in a much bigger way.
And so the thing that becomes very clear is that it’s very unlikely that there’s going to be anything like an Asian NATO.
In fact, given the failure of the war, as I’ve argued before, in Ukraine, the real question will become whether even a European NATO can survive.
PEPE ESCOBAR: Radhika, can I change the subject a little bit? Touching on what Michael just said, it dawned on me that the ultimate form of sanctions against the empire is de-dollarization.
Because if you don’t change the geoeconomic paradigm, nothing’s going to happen in terms of multipolar integration.
So I’d like a little introduction and then I’m going to ask Michael a direct question. Because he’s probably the number one specialist in the world that can give us, without being part of the negotiations, that can give us, OK, what are they planning to do?
It’s about the so-called BRICS new currency. What I learned from BRICS Sherpas is that there won’t be an announcement of a BRICS new currency in South Africa in three weeks, for a number of very complex reasons.
First of all, they don’t have time. Second, their negotiations started only a few months ago. And this is something that I discussed in Moscow; you need five, six, seven years to design a system like that, if not 10 years, and start to implement it and test it with businesses first, and then with nation states.
What is going to happen in South Africa is they’re going to announce an increase in bilateral trade in their own currencies, which is something that they already do. And they are already working on alternative settlements.
So basically, starting with the five BRICS currencies – which significantly, [their names] all start with an “R”. That’s very, very quirky, isn’t it? Obviously, if we use renminbi instead of yuan, so we have renminbi, real, rand, rupee, and ruble.
So we’re going to have the R5 together, organizing an alternative settlement system of payments. And this will be the first step towards multilateral trade in their own currencies, the five.
Don’t forget that we’re going to have BRICS+. So we’re not going to have five; we’re going to have maybe seven, eight, nine, or even 10, depending on the first wave and the second wave of candidates to become parts of BRICS+.
And then expanding multilateral trade with these national currencies. And, of course, building, okay, let’s start designing a system, and let’s try to sell this to our businesses in our individual nations, and then to other ones as well. And that will mean the Shanghai Cooperation Organization, Eurasia Economic Union, etc.
The Eurasia Economic Union, they have already started discussing an alternative currency three years ago, at least. And they’re still discussing it. Like, you know, two months ago, [Prominent Russian economist] Sergey Glazyev went to Beijing to discuss this with the Chinese.
Essentially, it’s an extremely complex thing. And, of course, taking into consideration that the Chinese are terrified of American secondary sanctions, especially. So this is all extremely complicated.
So my question to Michael would be, what would be the ideal path in terms of elaborating an alternative payment system inside BRICS first, then expanding to BRICS+, and then selling this system of payments, considering that the Chinese have their own payment system; the Russians have their own payment system; Iran have their own payment system.
So getting these all together, so you can settle trade within this new framework, bypassing the U.S. dollar. And then you’re going to have your big enterprises, your big companies, individual nations say, “Well, this is an excellent deal, fantastic”.
So now if we’re a company in Turkey, we can do business with a Russian company and we use an alternative payment system.
What would be the best way to proceed ahead? And when would we reach a stage where we can actually discuss an alternative currency in terms of bypassing the U.S. dollar and the euro?
MICHAEL HUDSON: Well, actually, Radhika and I have devoted two programs of this series to just that question. And we pointed out that what people think of when they say BRICS currency is something like a euro that you can use for buying and selling things, either buying steel or spending at the grocery store.
You’re absolutely right. That’s far away, because you need political integration to have that.
But what we’re really talking about, and what the kind of currency that’s being talked about isn’t really a currency; it’s a bank credit, a bank settlement system, very much like the SDRs [Special Drawing Rights] for the IMF, except it won’t be controlled by the U.S.
But most of all, this is what [John Maynard] Keynes supported in [the Bretton Woods Conference in] 1944 with the bancor. It’s a means of settlement only for spending among central banks.
So it’s not a general currency. It’s a means of settling credits among central banks. And the credits are apparently going to be based on the artificial bank currency, tied to the price of raw materials that the member countries all support.
And it’ll be very much like paper gold. Right now, the alternative to holding each other’s currencies or U.S. dollars is gold, because gold is an asset without a liability. It’s just something that you can invest in. But you have to somehow earn the money to buy the gold.
Many countries have left their gold, since the pre-1991 movement devaluation. Countries used to leave their gold with the U.S. Federal Reserve to settle, buy, and sell in the gold market to stabilize their exchange rates. They never asked for their gold back.
Finally, Germany asked a few years ago, and the Fed said, I’m sorry, all your gold is gone. We’ve kept down the price of gold to prevent people from moving away from the U.S. dollar by pledging it to commodity dealers. And we don’t have any gold to give you.
And how much of the world’s gold has been left with the Federal Reserve? We don’t know.
So to avoid the problem of how to really settle new gold, the BRICS bank will create a credit system where all the countries have credit to buy and sell with each other to be settled in their own currency, so that China, for instance, won’t hold too much Argentinian currency – especially since Argentina has just done the currency swap to pay the IMF for its foreign debt that it should have simply wiped out.
So we’re talking about a central bank special currency, not a general spending currency. There are two different things that are often confused in the public discussion.
RADHIKA DESAI: Yeah, and if I may add to that, because – you know, Michael and I have done work on this together in our programs, in a paper that we jointly wrote; and then also, independently, so Michael has done his work in Super Imperialism and so on; and my own work on geopolitical economy, is really, it’s primarily – in the book called Geopolitical Economy – it’s primarily a critique of the US dollar system, which I argue has never worked stably.
So it has always run into crisis. And in order to appear to function, [the dollar system] has required the inflation, particularly after 1971, of very dangerous bubbles of financial activity.
And the reason for that is very simple. You know, the loose talk – which, by the way, includes a lot of academics who engage in loose talk – loose talk of the naturalness of the sterling system and then the dollar system has given everybody to understand that somehow, yes, of course, the currency of the most powerful country should be the world’s currency.
But this is, in fact, as we’ve shown, an extremely unstable situation. It cannot obtain.
And that’s why Keynes in 1944, speaking on behalf of his country – not willing his country to be subject to the external authority of the dollar, knowing that the sterling can no longer perform the role it once used to perform, knowing intimately well why that was so – proposed the bancor.
And essentially this completely separates out the issue of international settlement of imbalances from the ordinary requirements of money within a society.
So within a society, money has to be run in order to create full employment, a productively dynamic, ecologically sustainable currency that will work domestically.
But often the requirements of that may go directly counter to the need to maintain its international value.
And gold, by the way, often people confuse it: gold is not money. When gold is used as money, it shows that there is no money.
Gold is a commodity. You know, Michael said it’s an asset without liabilities, but maybe it’s even more pertinent to say it’s a commodity.
So it’s a bit like, you know, going back to barter. So you give me steel and I’ll give you gold. That’s the exchange of two commodities. It just happens to be a widely accepted commodity. But people have proposed other things.
But essentially, the resort to gold, the Germans and others saying we want our gold back, etc., it’s one of the signs – one of the many signs, by the way – that the American dollar system is not working.
So essentially, the point that I’d like to make, therefore, is what would need to happen? You know, your original question was, you know, how will these currency plans work, etc.?
So I would say that the first step would be to, of course, create a relatively stable system of exchange rates between these – let’s just assume it’s the five Rs.
So let’s say, you know, what is the mutual exchange rate of the five Rs, and to try to stabilize them and so on?
And then, in the long run, you know, this kind of system can work. They can even create a sort of bancor based on the five Rs – although originally Keynes had said, let’s not even not use any currencies; let’s just tie the value of bancor to a basket of a few dozen, most widely traded commodities, because that’s what ultimately matters in international trade.
So you could do that, and maybe you can get there, but you can begin by stabilizing the values.
But then I think the big step would have to be, you would have to try and create relatively balanced trade among all the trading partners.
Why is that? Because, Michael said that we have to ensure that, you know, China does not end up with too much Argentinian currency or whatever, or any one of the five does not end up with too much of the currency of the other.
Because what it shows is that one country buys a lot from another country, but that country, which is exporting a lot, has no use for its export revenues.
Now, that would require a development plan among the holders of the five Rs so that, for example, let’s assume a trade relationship between China and Russia.
Well, China and Russia have to ensure that each would want to buy things with what it earns from the other country. So if it’s absent, then maybe there should be investment and opportunity to develop the capacity to produce the thing.
Because, you see, the genius of Keynes’s arrangement was that it had mechanisms within it to force people, force countries to move towards balance. Surplus countries were equally responsible, as were deficit countries, to try to address imbalances, both in terms of capital flows and in terms of trade.
So once you create those mechanisms, then you create an incentive for, say, if China has too many rubles, then China says, “OK, Russians, we are going to help you develop this productive capacity, so that you can export more of X, Y, Z to us, etc.”.
So I think that’s what needs to be done. And just one final point, Keynes’s genius is really apparent in our time because, just as Keynes said, a stable system should try to eliminate persistent imbalances.
Now, move your eyes to the dollar system. The one thing it primarily relies on is the generation of persistent imbalances, because to provide the world with money on the basis of your persistent trade deficits and the current account deficits with the rest of the world, means that the whole system is reliant on imbalances, which means it is volatile and unstable.
So, as you rightly say, Pepe, this is a very complex thing, and it’s going to take time to work out.
But it won’t be worked out if people are laboring under misapprehension, such as that, you know, we need to create a currency like the euro rather than a currency like bancor.
MICHAEL HUDSON: Just one thing about the dollar. You just mentioned, and everybody who discusses the dollar system talks about how the US has been providing dollars.
In [my book] Super Imperialism, and my work for Arthur Anderson years ago, the US private sector is exactly in balance. Since 1950, year after year, from the Korean War to the Vietnam War, the private sector, trade and investment, is just in balance; it hasn’t provided any extra dollars at all to the world.
The entire US deficit supplying dollars to the world has been military. It used to be called the dollar glut. It was to stop that, that [French] General de Gaulle kept cashing in [dollars for] gold.
What the new system of the BRICS and the five Rs are going to cure is that the credit is not going to be paid by building 800 military bases around the other countries, to lock them into a dependency system.
You’ll have the international payment settlement system demilitarized. That’s the basic aim of all this.
The US dollar system is a militarized system. The dollars are US military spending abroad.
That’s the number one reason for world peace, that the dollar system should be superseded.
RADHIKA DESAI: I agree that in terms of trade, US trade was balanced for a long time, like longer than you might imagine.
But certainly starting in the 1980s, the US trade deficit also made its own contribution to the current [account deficit]. The US trade deficit is today between 3 and 4 percent of US GDP.
MICHAEL HUDSON: No, that’s absolutely fictitious. It’s based on fictitious statistics.
Much of the trade deficit is in oil. When the oil comes in, it’s counted as a trade deficit. But only about 10 percent of the price of this oil is paid in non-dollars. All the oil that’s imported is from US oil companies.
And the offset is the earnings on this, the interest paid, or the cost of producing this oil are all made in the United States.
So you have investment inflows on the capital account and on the income account to offset the fictitious payments of oil imports that don’t involve foreign currency at all.
RADHIKA DESAI: OK, I’m not quite sure what you mean, because the fact of the matter is that the whole point is that the United States pays for this oil in dollars.
But let me just make another further point, which is that, you know, people tend to focus on the US trade deficit, and then they say, “Look, the Chinese are buying so many US treasuries and so they are essentially financing the trade deficit, and so this is a kind of a mutually supportive system” – “Chimerica” and all that.
But in reality, what people forget is that what’s really keeping the dollar system going is not Chinese financing, not Chinese purchases of US treasury securities; what keeps the dollar system going is the vast expansion of financial activity, which goes in both directions.
And so, for example, if you look at the statistics, the financial statistics about all the international capital flows that were going on, the bulk of them being in dollar-denominated assets in the run up to the 2008 financial crisis, the Chinese played hardly any role in it.
The biggest role that was played, the part of the world that was most fully integrated into the US financial system, which was producing these toxic securities that led to the 2008 financial crisis, was Europe.
And therefore, it is no wonder that Europe was the part of the world that suffered the most from the 2008 crisis. The 2008 crisis set the foundation for the 2010 Eurozone crisis, and so on and so forth.
And that is why I really find it important to correct people when they term what happened in 2008 a global financial crisis; there was nothing global about it. It was a North Atlantic financial crisis.
MICHAEL HUDSON: That’s right.
PEPE ESCOBAR: I want to pose a question to both of you. Because I was reminded of something very clever that the Chinese are doing and maybe they are setting an example for the whole Global South.
You know that they have now oil futures being traded at the Shanghai bourse, especially the GCC. It’s fascinating.
So the GCC goes to the Shanghai bourse. They sell their oil futures. The Chinese buy it. They pay yuan.
But then the GCC says, look, we don’t want all that yuan. You know, what are you going to do with so much yuan?
The Chinese said, no problem. You can trade your yuan with gold using the Shanghai exchange, a clearing house, or in Hong Kong if you want.
This is absolutely brilliant. Do you think that this could be expanded to the other BRICS, starting with the other BRICS, and then if we have, for instance, Iran and Saudi Arabia being part of BRICS+, adopting the same mechanism?
RADHIKA DESAI: I think that can work. I would say that, you know, the role of gold, as I see, is always residual.
If all the money in the world were actually backed by gold, we would suffer massive deflation, because there wouldn’t be enough money in the world, because there isn’t enough gold in the world.
MICHAEL HUDSON: Gold only finances international balances, not general activity, as the gold exchange standard, not the gold standard.
And again, the gold is an alternative, the easiest alternative to the dollar, because everybody accepts it.
It’s taken a couple of thousand years, but they finally decided something that they can accept as an alternative.
It’s a transition to the BRICS artificial currency. It’s a transition to something away from gold – the idea of an international currency that is not the embodiment of not the U.S. trade deficit, but U.S. military spending.
RADHIKA DESAI: So then to further add to that, so I would say that essentially, when people buy gold, what they’re saying is they don’t want money; they want a commodity; they want that commodity, etc., an easily tradable commodity, so some kind of asset.
So in that sense, it’s a good idea. You know, the function of gold, I often like to say that the sterling standard in the late 19th and early 20th centuries, the sterling exchange standard was often called the gold standard, you know, because sterling was backed by gold.
But two things. Number one, the genius of the system actually lay in creating such wide international acceptability for the sterling that it was rarely exchanged for gold. And the reason and the mechanisms by which this was done, we can talk about it.
But the point is, it was rarely exchanged for gold. Keynes writes in his [book] Indian Currency and Finance, which is actually a primer on the functioning of the international gold standard, the sterling standard. And I’ll come in a minute to why a book on Indian currency and finance should serve as the primer on the gold standard. But let me just finish this point.
He makes the point that the Bank of England had less gold than the Caja of Argentina. And he prided himself on that. And he also used to berate the French for holding gold. He says, look, you don’t need to, et cetera. But that’s a whole other set of questions.
Now, let me come to how the British were able to do this. It’s because they drew – I mean, the so-called gold standard actually had very little to do with gold, except for the fact that gold was the benchmark of the value; the price of gold was the benchmark of the value of sterling, and sterling was occasionally exchanged into gold.
And, you know, in those days, some gold coins did circulate. But that was really a very limited role.
The real foundation of the sterling standard was the surpluses that the British drew from their colonies, chiefly British India, which is why a book on Indian currency and finance, which is really a description of how surpluses were transferred from India to the UK. What were the mechanisms employed in order to do this?
So my point being that that is why this book is a primer on the gold standard. And the real foundation of the gold standard was the surpluses Britain extracted from its colonies, and then exported as capital exports.
To where? To Europe, to North America and Oceania, and to some extent to South Africa – that is to say, to all its settler colonies.
So if you think about it in a different way, Britain drew surpluses from her non-settler colonies – British India, Africa, the Caribbean – and exported them as capital exports to her settler colonies.
This is really, it’s quite a racialized thing, but that is the way it was. It is primarily where the money went.
And so Britain provided the world with liquidity by exporting capital, not by running deficits as the US would do later.
The US had no choice. The US didn’t have colonies which it could squeeze to provide surpluses to export to the rest of the world. So the US had to take a different role.
So to come back to your question, I think that the Chinese strategy of allowing things to be exchanged for gold is a good confidence-building measure.
And, you know, at the moment, the transactions are few enough that it can do so. I mean, ultimately, the system should work so well that it does not need gold.
Now, there again, the question is, if China tried to internationalize its currency on the model of the dollar, it would actually reduce China to the sort of economy the US has, of de-industrializing and aging infrastructure. So it will not do so.
That is why Michael and I, and anyone who thinks about it, always says you should not internationalize your currency in that way, not to any significant extent; instead, you need this kind of artificial currency that will help settle international imbalances.
PEPE ESCOBAR: So you’re right, Radhika. And this is the official position in Beijing. They want to go very, very slow with the internationalization of yuan.
RADHIKA DESAI: Yes, yes, exactly.
So, folks, I should say, you know, we’ve had a really wide-ranging discussion, as usual, absolutely fantastic.
We’re about an hour and we’d like not to go too much over an hour. So let me ask you both to say any closing remarks you want to say.
MICHAEL HUDSON: Well, you’ve been brought back to the point that we’ve been making in part one of this discussion, which is the U.S. sanctions were designed to isolate Russia’s raw materials and China’s information technology and shipmaking.
These are not in the economic interest of America’s allies, or of China’s Asian neighbors, or even the United States.
Europe is being told to buy its oil and gas from the U.S. Korea, and Japan, and Taiwan –
Basically we’re back to the issue of whether trade is going to be economic or national security in nature. And it seems now, given the U.S. military presence, it’s going to be both. It’s going to be economic with national security.
And I think it’s hard to see getting the U.S. using any military leverage at all, given the failure of the NATO tanks and the missiles and the anti-aircraft. And the idea is that basically the U.S. is, the dollar is being rejected.
And at first glance, the thought of the BRICS and the Global Majority emerging may seem outrageous, but it’s no more outrageous than the thought that the Nobel —
I want to make a suggestion that, just as the Nobel Peace Prize was given to Henry Kissinger for destroying Laos and Cambodia and covering Vietnam’s forest with Agent Orange, or Obama was given the Peace Prize for destroying Libya and confiscating its gold that Gaddafi had hoped to use for an African gold-based currency and turning it over, and the final Obama act starting today’s crisis with organizing the pro-Nazi coup in Ukraine, I think that America is trying to force Europeans to believe that war is peace in the same sense that Tacitus described a British chieftain of saying that Rome was making a desert and calling it peace.
But in view of what we’re seeing in the last year and a half, I could imagine President Biden getting this year’s Nobel Peace Prize. It would fit in perfectly. It meets the traditional qualifications of destroying a country, Ukraine.
But actually, there’s another reason which he can get it. Biden and Blinken and their neocon team have driven most of the entire Global Majority together to create an alternative to the U.S.-centered world that has become increasingly one-sided.
And under the Biden administration, the United States is forcing the entire rest of the world, except for its NATO satellites, to create a new economic order. And that’s what we’ve been discussing.
And this new international economic order is on the lines that the United Nations was supposed to be created in the first place, before it was taken over by the U.S.
Self-sufficiency in food production for each country. They won’t have to run a trade deficit to import food, because, just like Russia was able to make itself independent in grain and become a grain exporter, other countries can do the same thing, when they’re freed from the World Bank and the International Monetary Fund trying to block it.
The new economic order will be a mixed economy along socialist lines, to uplift the entire economy, at least of the expanded BRICS and the Shanghai Cooperation Organization.
And there will be a focus more on peaceful integration instead of military and financial integration.
So it turns out that the NATO war in Ukraine has turned out to be this grand catalyst for this new world order. And just because this wasn’t Biden’s and Blinken’s original intention doesn’t mean that it’s not the effect in practice.
And remember, [Charles Maurice de] Talleyrand, the French official in the 18th century, said of one policy, “It’s worse than a crime, it’s a blunder”. And you could say that that describes American policy perfectly.
But let’s give it credit for this fortuitous blunder that has driven the whole Global Majority together, to make an alternative to the World Bank, an alternative to the IMF, and an alternative to the failed U.S.-centered unipolar order.
PEPE ESCOBAR: Well, I am in touch with a group of Chinese writers and scholars, and they are always absolutely fascinated. And one of them, in fact, Michael was just talking about blunders.
They said, this is the number one blunder in the history of the empire, and they won’t be able to recover. And the Chinese have a little bit of experience with blunders, right?
Well, I would like to finish basically saying that in three weeks we’re going to have the BRICS Summit. So everything that Michael was telling us a little while ago is going to be discussed at the BRICS Summit.
And this is what the Sherpas have been doing these past few weeks. The Sherpas were actually organizing and designing the proceedings, what’s going to happen, the agenda, and the procedures for BRICS Plus, the expansion.
So in three weeks, we’re going to have a geopolitical, geoeconomic earthquake. There’s no question about that. Just to remind all of you, there is a list of potential members of BRICS+.
This is fascinating because these are part of an organization parallel to BRICS called Friends of BRICS. Whenever there is a BRICS Summit, you have Friends of BRICS Summit as well. They interact and they also have their own mini summit.
And this is exactly what happened in South Africa, what, two weeks ago, maximum. I’ll give you the list. Iran, Saudi Arabia, United Arab Emirates, Cuba, Democratic Republic of Congo, Comoros, Gabon, and Kazakhstan.
So probably the first tier, the first wave of BRICS+ is going to come from these guys to one, two, three, or four of these. And there’s also Belarus, which was not in Friends of BRICS, but it’s very close to Russia. And Belarus also applied for BRICS.
You will notice that in this list, there’s no Argentina, unfortunately. And this, I think we discussed this in our previous, because Argentina, basically, they were, I would say, forced to withdraw their application toward BRICS. And this, they didn’t know how to explain that in Buenos Aires. But this is what it is at the moment.
So can you imagine if we have just in terms of the brand new world ahead? Iran, and Saudi Arabia, and the United Arab Emirates as a member of BRICS.
So we’re going to have BRICS+ directly linked to OPEC+, directly linked to major sources of energy to China, directly linked to that mechanism at the Shanghai bourse of the GCC selling oil. And if you want gold, you can have your gold as well.
So can you imagine this in a matter of two or three days? We’re going to have this thing turning upside down. And then maybe this is the beginning of the new world economic order. Voila.
RADHIKA DESAI: Yeah, absolutely, folks. And so, yeah, let me just wind this down by making just a couple of remarks.
Number one, I think that, you know, you were talking about blunders.
But if you look at the long term historical point of view, the whole project of American hegemony has been a blunder. We are just seeing the latest and ever more desperate blunders of the United States in trying to keep it going.
This has been my argument for a very, very long time. And bringing the matter back to NATO, which was at least formally the subject of our thing, NATO has always, of course, been an instrument of U.S. hegemony.
But if you cast your mind back a couple of decades, you will see that people, very few people really talked about NATO very much. Because U.S. hegemony was much more extensive. NATO was one part of a larger structure of U.S. hegemony.
Now we’ve come to a point where the U.S.’s purchase on world events relies on NATO to such an extent that it has become the mainstay of U.S. power.
And this mainstay of U.S. power was, you know – part of the reason people didn’t talk about it very much is because it was always fractious. There were always tensions between the Europeans and the Americans and so on. So there was not much to see there in terms of U.S. hegemony.
And now that so-called U.S. hegemony has become reliant on reliance on this outfit is really telling, is really telling about how far, how low U.S. power has sunk.
So perhaps with that, I think we should end today’s today’s show. Please look forward to more shows with us. Hopefully, Pepe, we will have you back another time, after these upcoming summits, or something like that, to assess them.
PEPE ESCOBAR: Thank you so much. My pleasure.
RADHIKA DESAI: Thanks very much. And thanks again to our videographer, Paul Graham. And of course, as always, to Ben Norton for hosting our show.
Goodbye, everyone. And see you next time. Bye bye.
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