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Russia strikes back against the Empire (part 1 of 2)

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by akrainer
Sunday, Jan 30, 2022 - 10:43

Originally published at "The Naked Hedgie" this article is first of two parts about Russia’s radical new gambit in its relationship with Western powers. We’ll examine the recent history of the conflict, its broader historical context as well as its economic underpinnings before venturing to analyze, in part 2 where this conflict could lead in the coming months and years. The video version, covering both parts is published on the “Markets, Trends and Profits” channel is below:

For some reason, in the aftermath of this month’s failed talks between the Russian, American and NATO representatives in Geneva, everybody is talking like they believe Russia’s invasion of Ukraine is imminent. From the officials of US State Department, Pentagon and NATO to the intelligence agencies and the media, nearly everyone is talking as though they haven’t the slightest doubt that Russia intends to invade. But I believe that they are mistaken and that Russia has an entirely different strategy. In this report I will offer a broader context to these events as well as my own guess about Russia’s next moves. So far, I have not seen this possibility considered by any officials or experts and if I’m right, and I believe I am, Russia’s coming actions will likely take the collective West entirely off guard and the consequences could prove hugely detrimental, particularly for our friends in the global banking cartel. They in particular might want to pay attention to this report.

The 1990 promise: not one inch eastward!

Let’s briefly summarize the recent history of relations between Russia and the west. In February 1990 the Soviet Union was still intact and Germany still divided: Western Germany was a NATO member and East Germany was a communist, Soviet bloc country. The US Government asked Secretary General Mikhail Gorbachev for Soviet Union’s cooperation on their plan for German reunification. In consideration for Soviet withdrawal from East Germany, US State Secretary James Baker promised that NATO would not expand “one inch eastward.” This commitment was reiterated by other US officials. The Soviets withdrew and Germany was reunited, but the US broke their promise and over the next 27 years the alliance expanded many inches eastward, adding 14 new member states, all of them in the direction of Russia’s borders. A glance at the “before” and “after” maps is enough to see why Russia feels concerned about this:

Today, the alliance is in the process of absorbing Ukraine and Georgia with the view to their eventual full membership. This represents a “red line” for Russia, but NATO insists the alliance membership is open to any “European state in a position to further the principles of [the North Atlantic Treaty] and to contribute to the security of the North Atlantic area.” In spite of the fact that the Communist bloc no longer exists, the NATO alliance regards Russia as an enemy and consistently maintains a hostile posture toward her. Over the years, NATO has nearly quadrupled its military forces near Russia’s borders.

As professor Stephen Cohen noted already in 2016, “The last time there was this kind of Western hostile military force on Russia’s borders was when Nazis invaded Russia in 1941. There has never been anything like this. During the 40-year Cold War there was this vast buffer zone that ran from the Soviet borders all the way to Berlin. There were no NATO or American troops there. This is a very radical departure on the part of the [Obama] administration.” Indeed, NATO has continued to stockpile heavy weaponry, building up permanent logistics infrastructure, and deploying more and more troops along Russian borders. The U.S. has built missile “defense” bases in Romania and Poland, deployed nuclear bomb-capable aircraft close to Russia and allocated more than $8 billion of U.S. taxpayers’ money to upgrade their arsenal of B-61 nuclear bombs kept in the United States and five other NATO-member nations.

At a Brussels NATO summit in June 2021, Secretary General Jens Stoltenberg boasted about the alliance’s plans to continue the buildup: “…we have now implemented the biggest reinforcements of our collective defense since the end of the Cold War, and will continue to strengthen our collective defense with high readiness, more troops, and increased investment in our defense,” and added: “Perhaps the most important thing we have done is that for the first time in NATO’s history, we have combat-ready troops in the eastern part of the Alliance. New battle groups are deployed to the Baltic countries and Poland, we have tripled the size of the NATO readiness force.”

Absorbing Ukraine into NATO

In 2017 Ukraine’s Parliament passed legislation making its membership in NATO a strategic policy objective. In 2019, this objective was enshrined in Ukraine’s constitution. And while her full membership in NATO is ostensibly not on the table, the alliance is clearly advancing to fully integrate Ukraine as a partner, which will bring NATO right onto Russia’s doorstep.

The cooperation between Ukraine and NATO began already in 1994. In July 2013 (that’s right, five months before the Maidan coup kicked off), NATO began to implement the “Defence Education Enhancement Programme” (DEEP) in Ukraine, nothing short of a comprehensive overhaul of Ukraine’s military training and educational institutions. From 2013 through 2018 DEEP deployed more than 350 training teams focused not only on educating military officers but also “a new generation of Ukrainian diplomats and high level officials” as well as press officers. This is important to keep in mind because when Ukraine’s “high level officials” speak to Western audiences in polished prose and fluent English, usually these are not democratically elected representatives of the people of Ukraine but rather NATO’s own trained monkeys delivering well-rehearsed talking points.

Olha Stefanishynait’s ‘absolutely important’ for Ukraine to be a member of NATO!

Arming and training of Ukraine’s military has accelerated since the Maidan coup. In 2015 Ukraine formally became a member of NATO Support and Procurement Agency (NSPA) enabling it to directly procure weapons and military technology. Many of the new training centers have been intended to become full military bases in the future. Furthermore, at least two of Ukraine’s military units have been certified as eligible for deployment as part of NATO Response Force. A press release of one of these regiments stated that “The service members… have come a hard way to join the NATO family and met all of the alliance’s requirements to fulfill combat missions along with foreign partners.”

“NATO family?” That press release must have come straight from the DEEP wordsmith academy. But not all programs can be shown in the family album. Recently YahooNews broke a story about a covert program to train Ukrainian paramilitary units on US territory. The program has been run by the CIA’s “Ground Department” since 2015 as part of its expanded anti-Russia effort.

The United States and Britain have also been active building up Ukraine’s naval capabilities. In June 2021, Great Britain and Ukraine signed a deal for the construction of warships for Ukraine’s navy and building of two new naval bases, one in the Black Sea and one in the Sea of Azov. The deal was signed aboard of a British navy destroyer in the presence of the British Ambassador to Ukraine, Melinda Simmons and Admiral Tony Radakin.

The Russians have had enough!

Thus, for 30 years now the Western powers relentlessly built up military assets in eastern Europe and supported one color revolution after another all along Russia’s borders, turning all her neighboring states into adversaries with loyalties in the West. Throughout this time, Russia’s responses have only been reactive, not pro-active. But now Russia gave Western powers a clear signal that it will no longer tolerate further violations of its security concerns.

On Friday, 17 December 2021, the Kremlin released two draft treaties formulating a radical new security arrangement which were presented to the US Government and the NATO alliance. The treaties address the aspects of the US/NATO activities in Europe which jeopardize Russia’s security and set out a series of strikingly tough demands including a stop to NATO’s expansion and a rollback of NATO from Eastern Europe. The text of the treaties apparently stunned their recipients, yet nobody seems to think that the Russians are bluffing. As Kremlin’s unofficial spokesman Dmitry Kiselyov put it, “Russia has made an offer to the United States which it cannot turn down. The moment of truth has arrived.”

Russian government made it clear that it expected a prompt resolution of the matter and the talks between the parties were organized in Geneva on the 10th through 13th January 2022. After the first day’s talks with the US Deputy Secretary of State Wendy Sherman, Russian Deputy Foreign Minister Sergey Ryabkov bluntly stated that “For us, it’s absolutely mandatory to make sure that Ukraine never, never, ever becomes a member of NATO.” He further explained that, “We presented to the Americans in the most detailed way possible the logic and substance of our proposals, explained why obtaining legal guarantees from NATO not to expand is an absolute imperative, explained why we absolutely must receive legal guarantees on the non-deployment of the strike systems on Russia’s borders, and why we are raising the question about NATO abandoning, by and large, the matériel development of the territory of states which joined the alliance after 1997.”

These demands may seem extreme, but for more than two centuries now, Russia has suffered multiple invasions and color revolutions directed from the Western centers of power. In 1941 Germany invaded Russia resulting in massive devastation and more than 16 million Russian lives lost. Today Russia is facing a hostile alliance of 30 nations, three of which (US, UK and France) are nuclear powers, two of which (US and UK) are open to use nuclear first strike policy, and one of which actually dropped nuclear bombs on the civilian population of its wartime adversary. It should not be difficult to understand why Russia has serious security concerns. Accordingly, Sergey Ryabkov made it clear that if the US and NATO proceed with new weapons deployments close to Russia’s borders, that Russia would respond with “military technical measure” that “will inevitably and unavoidably damage the security of the US and its European allies.”

This was indeed stunningly tough talk from the Russian representative. Longtime Russia analyst Gilbert Doctorow thought that, “If accepted in their present form, these treaties would represent a total capitulation by the United States over everything four successive administrations have tried to achieve to contain Russia.” Unsurprisingly, the talks in Geneva produced no breakthrough. The following day, Russia’s Foreign Minister Sergei Lavrov held a long press conference in which he said that the Russian side is expecting “a concrete answer” to its security proposal but that Moscow’s “patience has come to an end.” During that conference Lavrov made a reference to the proverb that the Russians take a very long time to harness their horses, but once the horses are harnessed they ride swiftly. He said: “…we have been harnessing for a very long time, and now it’s time for us to go.”

I believe I know where the Russians will ride next but before I venture that guess, it should be useful to set this episode into its proper historical perspective which bears repeating.

Context: West’s obsession with Eurasia

The first thing that’s important to understand is that to this day, the American geopolitics are driven by the vestigial interests of the late British Empire. In the early 20th century, as the British Empire began to collapse, its stakeholders – the international banking cartel based in the City of London – moved to infiltrate and coopt the governing institutions of the United States and hijack its wealth and military power in continued pursuit of their own imperial ambitions. For over a century now, their overarching imperative has been to maintain their hegemony over the Eurasian landmass. Sir Halford Mackinder explicitly formulated this objective in 1904 in his Heartland Theory.

In “Democratic Ideals and Reality,” he wrote: “Who rules East Europe commands the Heartland; who rules the Heartland commands the World-island; who rules the World-island controls the world.” By World-island, Mackinder meant Eurasia.

As the empire builders infiltrated the US they took their policy objectives with them, including the imperative of ruling Eastern Europe to control Eurasia. In his 1997 book “The Grand Chessboard,” the Empire’s court intellectual, Zbigniew Brzezinski articulated this objective as America’s own priority and explained the rationale behind it:

For America, the chief geopolitical prize is Eurasia… Eurasia is the globe’s largest continent and is geopolitically axial. A power that dominates Eurasia would control two of the world’s three most advanced and economically productive regions. … About 75% of the world’s people live in Eurasia and most of the world’s physical wealth is there as well, both in its enterprises and underneath its soil. Eurasia accounts for 60% of the world’s GDP and about 3/4ths of the world’s known energy resources.”

The most immediate task is to make certain that no state or combination of states gains the capacity to expel the United States from Eurasia or even to diminish significantly its decisive arbitration role.” (“The Grand Chessboard,” 1997)

These were not just idle musings of an ivory tower professor: Brzezinski was a powerful policy adviser to many presidential administrations including those of John F. KennedyLyndon JohnsonRonald Reagan and Jimmy Carter. His thinking was key in shaping the US foreign policy for the last five decades.

The imperial obsession with dominating Eurasia has remained entrenched until today as reaffirmed once more in August of 2018, by the U.S. Assistant Secretary of State for European and Eurasian Affairs, Wes Mitchell in a briefing to the U.S. Senate Foreign Relations Committee. On the occasion, Mitchell made it explicit that the “central aim of the Administration’s foreign policy is to defend US domination of Eurasian landmass as the foremost US national security interest and to prepare the nation for this challenge.” Mitchell also said that the Administration was “working with our close ally the UK to form an international coalition for coordinating efforts in this field.”

But unfortunately for the empire builders, over the last 20 years RUSSIA has emerged as the dominant power in Eastern Europe and a major obstacle to their global ambitions. It’s a near certainty that the empire will do everything in its considerable power to try and eliminate this obstacle. This is the context that explains NATO expansion, military deployments and support for multiple color revolutions along Russia’s borders: it is the dying empire’s struggle to retain its supremacy and destroy any rival that can obstruct its “full spectrum dominance.” There can be little doubt that Russia’s leadership understands NATO expansion precisely in this context.

Our next question is: where does this obsession with dominating Eurasia come from? What’s the reason behind the need for conquest and hegemony?

It is all about collateral

As historian Ramsay MacMullen suggested, in order for us to arrive at a correct understanding of history, we need to understand the motivations of groups and individuals who created that history. After more than two decades of permanent wars, we can part with the illusions that our armies are fighting to spread democracy and freedom or that our leaders lose any sleep over human rights of exotic peoples in faraway lands.

The struggle is, and always has been over resources (including the local labor force) because those resources represent money-good collateral. Western financial system has been absolutely starved for high quality collateral and Eurasia is awash with it. The problem with the western monetary system is that it tends to pile debt on top of more debt, leveraging the system until it collapses, almost permanently careening from crisis to crisis. It can only be stable while it is growing. It grows through credit expansion, and credit expansion requires quality collateral.

How much collateral do we need? A few years back, we got a glimpse of the magnitude of the problem: the appendix to Treasury Borrowing Advisory Committee’s (TBAC) quarterly refunding presentation showed that in 2013 the total demand for “High Quality Collateral” (HQC) needed to stabilize the system was estimated at $11.3 trillion. That figure surely grew considerably in the ensuing years. Incidentally, the TBAC is one of the most powerful agencies in government. Even though most people are not even aware of this committee, it is the hip where the banking power joins political power. It is staffed by bankers and not by people’s representatives. Some believe it’s the committee that really rules the nation. When TBAC tells the government that they need more collateral, the government listens.

If all this seems a bit ambiguous, perhaps a concrete example can help us understand the way military conquest translates into high quality collateral. In 2016, the Chilcot Inquiry into the British role in the Iraq war revealed that six months after the 2003 invasion, a consortium of Western banks led by JPMorgan extended a $2.5 billion loan to “help” Iraq’s economic recovery. The loan was extremely favorable and risk-free to the bankers as it mortgaged Iraqi oil exports. Perhaps it was only a coincidence that JPMorgan was also one of the biggest backers of the Bush/Cheney election campaign. Once in power, the Bush administration delivered the Iraq invasion. JP Morgan also richly rewarded Sir Tony Blair’s inestimable contribution to making that war possible. At the end of his term as Britain’s Prime Minister, the bank hired him as an advisor on a $5 million/year contract.

The JPMorgan loan to Iraq was just one instance where a large loan conjured out of thin air and secured by the subjugated nation’s natural wealth would have to be paid back with interest. You can multiply such deals perhaps a hundred-fold or more if you can deploy armies to resource-rich regions of the world and your corporations get the first-row access to the business of exploiting those resources. All this high quality collateral can then be leveraged up to so that the credit expansion process can continue for a long time before the need arises to liberate new collateral.

Contrast JP Morgan’s good fortune in Iraq two decades ago with some of the present developments in the region. For example, Iran is presently building a huge Natural Gas hub project that will bring Natural Gas from the Caspian region to Europe. Just one of the recently developed gas fields, the Chalous is estimated to hold enough reserves to supply more than 50% of European gas demand for at least 20 years. But with the rise of Russia and China as the new dominant powers in Eurasia, such projects are now off limits to Western banks and corporations. Today the key players developing this energy infrastructure are Russia’s Gazprom and Transneft, China’s CNPC and CNOOC and Iran’s KEPCO. From the bankers’ point of view, that’s a lot of high quality collateral that’s now in the wrong hands.

 

In part 2 we’ll analyze Russia’s response to the US and NATO’s failure to respond to her security demands. While events on the ground might appear uneventful, I believe the real pain will be felt in western financial and commodities markets.

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