US Sanctions reach a Turning point

Since the publication of this analyses, the USA now also contemplates to sanction China's military top, and India, for buying Russian weapon systems. Already sanctioning Russia, Iran, and Europe together with Turkey (not to mention Venezuela, Cuba and N.Korea), by adding China and India, the USA will be well on way to try to put sanctions on countries making up astonishingly close to 3/4 of the world economy.



20 September 2018

US Sanctions reach a Turning Point

By: Karsten Riise



A defining moment for the US sanctions regimeEach year, the USA finds a new country or group of countries to target with sanctions. Each year the USA adds about 1,000 individuals to its ever longer sanctions list. Now, US sanctions are coming to a turning point.

Up till now, the EU – representing around the same percentage of the world economy as the USA - was sitting put, as the USA grew its sanctions regime to ever more bizarre proportions. Together, the USA and the EU constituted nearly half of the world economy, and US sanctions previously “only” used to target the other half of the world’s economies. Hitherto, the EU had no compelling reasons to strain is relations with the USA because of US sanctions not affecting themselves.

But now, “secondary sanctions” regarding Iran also hit hard at strategic EU companies and financial institutions and negatively affect EU global strategic interests in energy from the Persian Gulf. US sanctions in effect attack the liberty, security and sovereignty of its biggest group of friends, the EU.

Thus, we have now come to a defining moment for the global sanctions regime, run by the USA.

The US economy is already less than a quarter of the world’s GDP in USD dollars, and in 2023 it will fall to only just about one fifth of the world (source: IMF). The non-US part, the 4 fifths of the world economy (now including the EU and China), constitute an increasingly advanced group, and they are about to collude against the US sanctions regime. Collusion is the result of parallel interests, and the EU may not actually (or at least not publicly) coordinate all its counter-sanctions with other major power centers.

We talk about the world’s most powerful and complex political-economic structures starting to fundamentally change, here.

So we need to analyze the bigger picture, how complete systems of counter-strategies against present and possible future US sanctions are being planned and implemented by strong powers around the world - all directed (but maybe only sometimes coordinated) against the USA. These systems of counter-strategies will include, but not be limited to, the following:

Finance

Payment transfer streams will develop to avoid US banks – hurting the global position of the USA’s major “growth-industry”. It will be a chance (as well as a good excuse) for the EU, China, Japan, India and everybody else, to nationalistically promote THEIR banks in the international system, at the expense of US banks.

Looking at the long-term trend, the US financial industry has become really the ONLY big growth industry which drives upwards the USA economy. No other sector in the US economy has the combination of size and growth, which finance has (weapons are a bit the same, but finance is unique in size) - so this will be very hard for the USA.

US banks hitherto have a central role in facilitating all global money transfers, and a lot of international money transfers between third-countries somehow technically go via the USA. This system architecture will now be stopped – not just by China, but also by the EU, and probably by India.

Everybody outside the USA will be reluctant to let their money be touched by US financial institutions, or let their money touch US shores even for a milli-second. And of course, the EU and China know how to engineer legal and technical solutions for this.

The growth of US credit card systems will be impeded. Instead, cards from China, the EU (and India?) will take bigger shares of this profitable and fast growing world market. Russia was the first country on this trend, kicking out all US credit card companies, and inviting in the Chinese credit card system. The EU may well strengthen the role of EU credit cards, and create actions which “incidentally” (oops!?) will hurt US credit cards in EU markets. The finance center of London, UK will after Brexit be caught in this cross-fire between the EU and the USA – if the UK sides with the USA against EU counter-sanction initiatives, the EU may develop strong tools to draw UK credit-card business into EU-jurisdiction.

New global IT money transfer system regimes, which counteract US influence on SWIFT, will erode US political influence. The SWIFT system is based in Brussels, but under heavy US political influence. Russia has already built itself an alternative to that. The EU can no longer accept that the US might be able to hurt EU companies on their SWIFT transfers. The EU will therefore have to take actions either to liberate SWIFT from US control, or to create a parallel EU-system.

Avoid Wall Street

Why should countries take up loans in the US, if they can have the same loans without risk of future sanctions from China or even the EU?

The IPO of the Saudi ARAMCO oil company has been stalled – unconfirmed information states that fear of US courts reaching out against Saudi assets after 11 September, is part of the reason. Already, the trend is that the biggest IPOs in the world move to Asia.

De-dollarization

The EU now will shift trade of energy from dollars to Euro – this trend will also diminish dollars in other international trade. Trillions of international dollars flowing around in trade may come back “home” to the USA – risking inflation and economic crisis.  Gold is according to unconfirmed reports being speedily bought up by governments, not only by Russia and China, but even Turkey, recently also hit by US sanctions.

Strategic supply

Airbus cannot deliver airplanes to Iran, because, among other things, vital parts are sourced in the USA. This will change. Strategic supply chains will morph to avoid US sub-suppliers, carriers (ships, airplanes, IT), technology, service partners etc. – fundamentally hurting the US global position. We are not speaking used-cars, here, we speak strategic business sectors. The EU and China may not state this anti-US sourcing publicly as an official policy, they will just pull the strings to do it VERY effectively in strategic sectors.

Also, US deliveries in other strategic sectors like food (grain and soy from US farmers) and US energy will be affected by counter-sanctions. China sheds US soybeans and pushes their price down - the EU (less dependent hereof) may then offer to pick-up cheap surplus soybeans from the USA as a bargaining card. The idea of larger US delivery of LNG to the EU probably will be mostly words, but the amounts of LNG from the USA to the EU may possibly increase marginally. The EU may even come to a cold calculation, that the EU in the gas sector might have a more maneuverable partner with Russia than with the USA. The EU has in several aspects a substantially advantageous size-relation towards Russia, and not towards the USA, and while Russia enjoys a good relationship with China, Russia will like to balance its relations too.

Tourism and education
Tourism is one of the fastest growing industries in the world, and the USA sells its cultural influence to all tourists coming. University education is not only a strategic business to finance national research – Universities are also a cornerstone for the USA to influence future management generations around the world. Why not send tourists and students to other places than the USA? Chinese tourists and students are of significant importance to the USA, and China has plenty of other destinations to send tourists and students, other than to the USA.

Using the state to shield business

As a counter-sanction, the EU now moves central banks and state-owned companies into the fray in financing, and as business partners and intermediate partners, when dealing with Iran. US sanctions on EU state-owned entities can then amount to a US declaration of (economic) war, not only against EU private entities, but directly against EU states.

Buying other than US weapons

The EU recently is implementing a grand and ambitious strategy to increase its own weapons-industry – independent of the USA. To increase the volume strength of EU weapons-makers, the EU will need to minimize imports of US weapons. The EU will have to make their own, only importing as few items as possible from the USA. Saudi Arabia is by far one of the world’s biggest arms purchasers – and nearly all is bought form the USA. However, should the bromance between the leaderships of Saudi Arabia and the USA cool down, Saudi Arabia would be well advised to diversify their weapons sources too. And Saudi Arabia even already has Eurofighters from the EU and embryonic arms-relations with Russia and to build on.


The collusion against the USA
US trade war unites the EU, China, India, and the rest of the world (even the UK) against US interests. With aggressive, unilateral trade-war, started by the US, all the rest of the world will now have even more motives to coordinate their counter-strategies to the US sanctions regime.

The EU may seem slow to react – and this may lure US politicians in their hubris to believe that the EU cannot or will not. But believe me, the EU will – because this has become a strategic must. The EU has seen the hand-writing of US sanctions on their wall – they will think this through, plan and make deep preparations to free EU sovereignty from US control. Just read between the lines of EU’s Commission President Jean-Claude Juncker’s recent State of the Union speech. When the EU rolls out their US counter-sanction measures, it will be big, comprehensive and VERY effective.

Negative changes for the USA will last
Once alternative systems to US banks, finance, the US dollars etc. have developed and matured, they will NOT go away.

The USA is in its hubris about to destroy its global claim for economic hegemony – and that is a good thing.

Karsten Riise
Partner & Editor

CHANGE NEWS &
CHANGE MANAGEMENT

President Trump gets on with what he wants

23 March 2018
Trump’s line-up
By: Karsten Riise
One year into his term, the world must prepare itself for the fact that President Trump seems to get on with what he wants to do. Prepare for a profound change in the structure of the world.
With his replacement of Secretary of State Rex Tillerson and National Security Advisor McMaster, President Trump seems to be lining up for some big moves on his national and international agenda:

1. A showdown with Iran, N.Korea – and in the end, China !

2. A final Palestinian “solution” together with Israel, Egypt and Saudi Arabia, which will be 110% according to the deepest wishes of the current Prime Minister of Israel.

President Trump’s steel tariffs may end up by being insignificant tariffs for two US allies, Canada (actually the biggest foreign steel supplier to the USA) and the EU. Hence, only China may be really affected by the tariffs. This pattern may also apply, if Trump chooses to ‘blow-up’ the whole World Trade Organization (WTO): President Trump can replace the WTO with bilateral and regional US agreements with Canada, the EU and other traditional US partners in such a way, that ‘incidentally’ only China will be kept out.  President Trump’s trade policy towards China may be thoroughly calculated: More production of products in China for the USA will be relocated back into the USA. President Trump probably also calculates, that US high-tech exports to China may not be greatly affected by the foreseeable Chinese trade-retaliation, as these high-tech supplies will still be strategically important for China. Curbing China’s growth by means of a trade-war can also affect China’s economic capability to build up the military – a military rightly or wrongly designated by many in the USA as a serious competitor for world domination. A trade-showdown with China may therefore look very promising to President Trump – and to his new National Security Advisor John Bolton.

Ex Secretary of State Rex Tillerson and ex-National Security Advisor McMaster were both standing in the way of President Trump’s visions, including his plan to divide the Middle East with Israel and Saudi Arabia. A policy, for which President Trump has designated Jared Kushner as informal but plenipotentiary envoy, and Jared Kushner has successfully obtained the closest possible confidence with the leaderships of Israel and Saudi Arabia. Rex Tillerson’s diplomacy was actively undermining this, by trying to soften Saudi Arabia’s blockade of Qatar. And McMaster was also undermining President Trump’s Middle East policies, by denying Trump’s special envoy Jared Kushner the necessary top-secret security clearance to do this job. Now Tillerson and McMaster a both out of the way, and a strong signal has been sent to everyone not to repeat Tillerson and McMaster’s political mistakes of not following President Trump’s intentions closely.

Surprisingly, with a possible top-level meeting with N.Korea, President Trump may even on this issue have at least a slight chance to achieve something his way. Clearly, the dynamics of US-China relations are key to this. Though talking ‘fire-and-fury’, President Trump has even still managed so-far not to start any new US war, a ‘feat’ which stands in stark contrast to some of President Trump’s more big-media applauded predecessors, or even in contrast to his once opposing presidential candidate.

You may (even strongly) like or dislike the policies, President Trump pursues. With the appointment of a former torturer-in chief to lead the CIA, you may probably strongly disapprove of some of the means he is willing to apply. Many American presidents have pursued policies not approved by large segments of the American people. You may also have your own ‘mainstream-private’ and politically ‘correct’ gender views about President Trump’s private life, though these opinions are mostly colored by political sympathies and by outright ‘liberal’ and conservative bigotry - and females seeking fame and money through litigation against wealthy and disputed male individuals is an ordinary phenomenon, and not automatically sympathy-inspiring.

All this does not touch on the fact, that one year into his term, the world must prepare itself for the fact that President Trump seems to get on with his idea of ‘putting America first’. This will profoundly change the structure of the world. ‘Putting America first’ may sound akin to ‘global leadership’, but it is in fact antithetical to the outlasted idea of ‘US global leadership’.  In fact, ‘putting America first’ this way may result in something, I have seen for long, namely a thorough unwinding of the US global empire and a world more fragmented into regions and criss-cross relations.


Karsten Riise
Partner & Editor

CHANGE NEWS &
CHANGE MANAGEMENT

Trump and empire

17 January 2018

Trump and the dissolution of empire

By: Karsten Riise

History doesn’t repeat itself,
but it often rhymes.


The USA is on way to a dissolution of its global empire. This has parallels to the Soviet Union's dissolution before and after 1989. Barack Obama was an "American Gorbatchev". Obama came to power with a non-effective slogan of "change". Just like Gorbatchev’s similar slogan of "perestroika" (restructuring), Obama wanted to revive an ossified world-system by adjusting it. And just like Gorbatchev, Obama was eventually caught-up himself by the ossified system. The system was so rigid, that instead of the change itself, similarly to Gorbatchev, Obama inadvertently enabled a precursor for fundamental change - namely dissolution.

Like president Trump may seem a more “coarse” personality compared to his more polished predecessor Obama, Yeltsin was also a more “coarse” and direct personality compared to Gorbatchev. As Trump, Yeltsin was harsh in his words and ways, and really prepared to confront and break-down serious stuff.

Yeltsin decided to actively dissolve the whole political system, put “Russia first” and withdraw Russia as center of a costly Soviet empire. Apart from three tiny Baltic members-states of the Soviet Union, dissolving the Soviet Union, was actually not something which all the rest of the ailing Soviet Union was actually very enthusiastic about at the time. The Soviet dissolution came so decidedly about, because Yeltsin and the many Russians who supported him had turned their view from seeing the Soviet Union as an extended power-asset for Russia, and instead saw the rest of the Soviet empire as a non-supportable liability with too few benefits for Russia herself. Exactly similar to the “why should we carry the burden for defense of others who can defend themselves” which president Trump signals.

One must not just focus on president Trump as an individual. One must look at the collective movements in the USA which led to his presidency. Trump was among other things voted into office because an overwhelming number of Americans experience that hopeless US-imperial habits (Afghanistan is the longest US war ever and still continues) have never led to a "useful outcome" for ordinary Americans - only to losses of lives, dignity and treasure for the USA herself. Vietnam was a clear example of the cost of US-imperial war, and the consequences of perpetual “Vietnam-lessons” have since then finally come home to the Americans.

Like Central Asian Soviet countries, Belorussia and probably even the Ukraine did not initially wish for the dissolution of the Soviet Empire, also the EU did not initially wish for the dissolution of a US empire, which handed the EU a prominent (second) place in the world. Only gradually does the EU now see this development as a chance to enhance the EU in a new global political world-leadership vis-à-vis the USA. Regarding the conflict-views of president Trump, note that his pressure on North Korea is not primarily for the sake of helping an imperial ally, South Korea. What president Trump pursues in East Asia and with North Korea is a very US-centered agenda, even at the cost of risking “good empire relations” with subordinate allies in East Asia. President Trump’s extremely tense rhetoric against North Korea may even have caused the USA a reduction of goodwill among ordinary people in South Korea and Japan. In Afghanistan, US-policy under president Trump is no longer empire-building. Faced with the steep opinions of his own generals, president Trump is simply pragmatically “kicking-the-can-down-the-road” in Afghanistan at “minimal costs”, to keep the generals on his side.

Many erroneously accuse president Trump of having “no strategy” or even of being “irrational”. Such labels reveal a major misjudgment of president Trump. It is no surprise, and for his non-deplorable electorate certainly no shame, that president Trump upon assuming office had only had experience with a national political environment, and that he faces a steep “learning curve” in international politics. The way president Trump goes about to earn himself necessary international political experience is not by reading long analyses by intellectual “experts” (most of whom he has deemed a complete failure in the past) but by DOING. Instead of intellectualizing, President Trump sometimes may try things out in his own practice, instead of initial delicacies he has deemed ineffective steam-roll as far he can go, but later be prepared for pragmatic ways.

President Trump's rhetoric towards North Korea should thus be interpreted more carefully than most observers do. Threatening war does not automatically imply that president Trump will start one – especially if he feels certain that the other part will not be starting a war. This lax attitude to war-threats has probably rightly or wrongly been adopted by most American presidents before Trump. In some kinds of negotiation, appearing a bit “irrational” may even be a very rational style, and also North Korean leaders have adopted this style persistently. Though Trump shouts “fire and fury”, he could eventually still become the first US President to turn and live with North Korea, when he experiences that this is the best that can be done. A similar pragmatism may even surface with president Trump and Iran – if we are lucky. Compared to the politician Trump defeated, there are so far at least no signs that president Trump has any ideologic desires like “freedom-and-democracy-by-the-sword” to take the USA into a new big imperial conflict in the Middle East, like for example both of the presidents Bush did.

On immigrants, president Trump basically continues the reductionist aims of his predecessor - he does it less delicately, but perhaps also more honestly. President Trump ended up by showing a degree of pragmatism with Mexico, and he did it also with China, just like Nixon and Kissinger ended up doing it with China too. Reagan’s lack of international experience before assuming office, and Reagan’s rhetoric of “Soviet empire of evil” was just as condemned in his time, as the rhetoric of Trump has been today, and still Reagan embraced pragmatism and even a sense of personal trust with Gorbatchev in the case of Russia. Not to excuse, but just to create a perspective, even some not-too-good remarks from president Trump have not seldom been heard just as bad or worse from other US presidents and wannabe’s: Nixon was negative to black people, Jews, Irish and Italians, and asked Kissinger not to be too shy about ‘nuking’ Vietnam. Reagan and Bush jr. publicly called other countries “evil”. Trump’s not-so-liberal opponent Hillary Clinton threatened publicly to bomb Iran into a ‘nuclear dessert’, as the United States top-ranking diplomat she made stupid comparisons against Russia’s leader, and boasted in a nasty way with her bombing destruction of Libya: “we came, we saw, he died”.

The vestige of US global empire with its “unipolar moment” and the USA as an “indispensable” nation is all inexorably on way to dissolution. President Trump wants to give the USA a new place in a new world of today, not in a fictitious US-world of the 1990’ies or 00’s. Contrary to the US electoral candidate of yester-year which Trump defeated, president Trump seems to have just a little more healthy lack of desire to resuscitate US global imperial presumptions. Compared to president Yeltsin in Russia, President Trump has not (yet) tried to dismantle the inner workings of the country he is elected to lead, but stock-crashes happen statistically every 7 years, which is 3 years overdue now, so also an inner imperial dissolution may still happen in Trump’s presidential term.


Karsten Riise
Partner & Editor

CHANGE NEWS &
CHANGE MANAGEMENT