Stephen Harper’s embarrassing behaviour regarding the crisis in Ukraine — demonizing Vladimir Putin and upping the rhetoric — must be welcomed in the U.S. which created the crisis in the first place and apparently believes it still has something to gain by isolating Russia. But it is not clear that Harper even realizes — or cares — what the larger game is.
And that game may include a Russia-driven shift in global currency allegiance that could devastate the economies of the U.S. and Canada.
The generals surrounding Harper in the ridiculous war-room setting where he announced Canada was sending six fighter jets to bolster NATO’s military buildup in eastern Europe looked very uncomfortable. Who likes being used as a prop for a faltering politician? The setting was a bad case of over-acting — as if we were joining the Allies in another world war rather than engaging in what one expert called “incremental posturing.”
Is Harper just a useful idiot to the U.S. — ranting and raving about Russian expansionism and imperialism so that the U.S. position looks more reasonable by comparison? He declared:
“When a major power acts in a way that is so clearly aggressive, militaristic and imperialistic, this represents a significant threat to the peace and stability of the world, and it’s time we all recognized the depth and the seriousness of that threat.”
It is difficult to know what is going on in the fevered imagination of the prime minister, but this time one has to really wonder if he has become genuinely unhinged — always a possibility with someone both paranoid and narcissistic. While it is clear that genuine foreign policy execution always plays a distant second role to micro-managing the electorate, it is still possible that Harper’s domestic framing of foreign policy vis-a-vis Ukraine could inadvertently play a role that he didn’t intend.
Why Putin doesn’t want Ukraine
It is interesting that Harper virtually never talks about what is actually happening in Ukraine. The notion that Russia wants to occupy Ukraine or even invade it to protect ethnic Russians is far from the mark. The last thing Russia wants is responsibility for one of the worst basket cases in all of Europe. Ukraine is a nearly-failed state, all of its politicians are corrupt to a greater or lesser degree, it is bankrupt, has no effective police force and is held down by crumbling infrastructure, a decrepit industrial base, massive unemployment and a dysfunctional legal system. Putin is likely delighted to see the whole mess dumped into the lap of the U.S. and EU to try to sort out — a process that will take a decade and tens of billions of dollars just to tread water.
In its current state Ukraine will never be invited to join the EU because then the EU would be directly responsible for bailing it out. And trying now to bring Ukraine into NATO would be seen everywhere as madness — a provocation to which Russia would reply by cutting off gas to western Europe. So Putin will watch with the comfort of an oligarch as the IMF puts the fiscal boots to a country already on its knees. And, of course, he can play mischief with gas prices any time he wants. The IMF prescription of drastic cuts to government programs could well cause widespread social unrest — and play into the hands of the fascist parties given new prominence by the U.S.-inspired coup. It could also turn many ethnic Ukrainians against the West, making its task of establishing stability that much more difficult.
It is extremely unlikely that Putin will intervene to protect ethnic Russians in eastern Ukraine, either, unless there is virtual bloodbath. He will calculate that even a few hundred deaths of Russian separatists will simply reinforce his public relations victory over the West — confirming his framing of the issue as the ineptness and brutality of an illegal Kyiv government that hates Russia and Russians. It makes far more sense for him to let the U.S. and EU deal with such a crisis and damage what’s left of NATO’s shaky credibility than it is to be the bad guy and intervene militarily.
In the meantime, the demonization of Putin and Russia is having a major influence on an issue that has barely been mentioned in the media: Putin’s plan to create the petroruble and decouple Russia’s energy exports from the dollar.
Restacking the BRICS
It is arguable that push for the petroruble is a global issue many times more important to the U.S. than anything that happens in the Ukraine, but American efforts to isolate Russia is actually accelerating the process. The desire is also driving Russia to look to the east instead of Europe for its future prosperity — aligning with China as both a market for its gas and a partner in undermining the petrodollar. China is already headed there. Its yuan is the second most used currency, ahead of the euro, in international trade settlements. China recently “opened two centers to process yuan-denominated trade flows, one in London and one in Frankfurt.”
The emerging economies of Brazil, Russia, India, China and South Africa are grouped under the acronym BRICS. According to journalist Peter Koenig: “Other countries, especially the BRICS and BRICS-associates (BRICSA), may soon follow suit and join forces with Russia, abandoning the ‘petrodollar’ as trading unit for oil and gas. This could amount to tens of trillions in loss for demand of petrodollars per year.” In which case, “leaving an important dent in the U.S. economy would be an understatement,” says Koenig. “Along with the new BRICS(A) currency will come a new international payment settlement system, replacing the SWIFT and IBAN exchanges, thereby breaking the hegemony of… the Bank for International Settlements (BIS) in Basle.”
The prospect of the U.S. dollar losing its status as the world’s trading currency is far and away the greatest threat to U.S. hegemony in the world as it would turn the country’s $17-trillion (not counting unfunded liabilities) virtual debt problem into a real one. Until now, the huge external demand for U.S. dollars has allowed it to accumulate enormous debts without defaulting. With Russia, China and the rest of the BRICS countries moving in this direction, the U.S is panic-stricken. It used to be said that the U.S. dollar was backed by the Pentagon. Indeed, plans to decouple from the dollar was a common feature of three countries that experienced the wrath of U.S. foreign policy and military intervention. Libya’s Moammar Gadhafi was planning a gold-standard currency for all of Africa; Iraq was planning to quit using the dollar for its oil exports, as was Iran. Sanctions against the latter had as much to do with this plan as any other issue.
But Russia, China, Brazil and India are countries of a whole different order and out of reach of the Pentagon’s threats. There is virtually nothing the U.S. can do to stop this movement, provoked in part by the massive printing of money in repeated “quantitative easings” and accelerated by NATO’s adventurism.
Germany’s ‘giant magnet’
If that were not a big enough headache for the U.S., Russia is well placed to detach Germany from the EU and U.S. efforts to isolate Russia. While Russia will suffer economically in the short term from sanctions, the longer term looks brighter. At the same time that BRICSA is planning its new international payment system, China and Germany are negotiating another initiative that guarantees Russia a prominent role in one of the world’s most ambitious economic development schemes: the New Silk Road linking China and Europe. This initiative is intended to provide enormous impetus for development of western China and everything from there to Germany.
Says Koenig: “Germany, the economic driver of Europe — the world’s fourth largest economy (US$ 3.6 trillion GDP) — on the western end of the new trading axis, will be like a giant magnet, attracting other European trading partners of Germany’s to the New Silk Road. What looks like a future gain for Russia and China, also bringing about security and stability, would be a lethal loss for Washington.”
So the Russian president, at record highs in public approval and now fully justified in facing east after being provoked by the West, doesn’t have to act. Everything is in motion for advantage Russia. And our war mongering prime minister will continue to aid Mr. Putin by demonizing him and justifying his eastern “pivot.”