On US European Grand Larceny (R)

Just How Far does $265 billion Go?

The recent US aid package for Ukraine contains a provision that gives Congressional approval to the possibility that the US might seize the frozen assets of Russia that are currently held in the US. These are worth around $5 billion, so that in themselves they would not be sufficient to make much difference to the relative balance of force in Ukraine. However, it is widely believed, despite the expressed fears of many Central Banks around the world, that the US will further pressure the EU to take comparable action to seize frozen Russian assets in Europe, which are thought to value around $260 billion. If this amount was indeed seized it would surely be sufficient to sustain the effort in Ukraine well beyond the six months that the recent aid package is expected to achieve (so as to get US support for Ukraine past the presidential election without Ukraine going belly-up and making Biden look even more ridiculous than he looked when Taliban “cave men” finally defeated the global hegemon, and Biden withdrew US troops out of Afghanistan in 2001.

I am doubtful that another $265 billion available to NATO will change the ultimate trajectory of the war in Ukraine namely, a victory for Russia and for the new multipolar order based on the BRICS.

(1) First off, and it is a relatively small point, I believe a percentage of this (10%?) will be siphoned off through corruption in Washington, Brussels and, above all, in Ukraine, which is the world’s dumpster for corrupt schemes.

(2) Secondly, the addition of more money in a context in which weapons production by the collective West is contained by limited productive capability, will merely push up prices without supplying anything like an equivalent increase in weapons.

(3) Thirdly, whatever new weapons do actually get to be made with the new money will not arrive to the battlefield in much less than a year, maybe several years.

(4) Fourthly, the availability of weapons does not of itself produce more Ukrainian men whose numbers are badly depleted through casualties of war (probably now around 600,000 - the Russian MoD today calculates 508,000 dead and badly wounded), and by demographic constraint - the total Ukrainian population left in Ukraine may now be down to around 20 million, and Ukraine is going to have a very hard time persuading or even compelling many of the 800,000 men now refugees in other parts of Europe to come back home, while many of those still in Ukraine are desperately trying to flee across the borders with Romania and Poland. In addition to new men, Ukraine needs resources and time for mobilization, housing, training and equipping them, and this will be a large claim on the $265 billion, requiring at least a year before any such new force would be of much benefit to the Ukrainian army.

(5) Fifthly, it is all but certain that the total productive weapons manufacturing capability of Russia is at least as great as and probably considerably greater than that of the collective West put together.

By the time the $265 billion become available, and by the time its expenditure actually leads to some kind of qualitative improvement to the forces of the collective West and Ukraine - let us assume around two years - that advantage to Russia will be even greater than it is now. By that time, frankly, the war will have been well and truly won by Russia.

Russia’s advantage lies in three principal factors: (a) it never downgraded its military strength to the same degree as did the West, following the unipolar moment (a period of relatively uncontested US hegemony) that endured from 1989 to 2001; (b) Russia maintained its productive capability by putting far more of it in storage, so to speak, than did the collective West; (c) Statist Russian economics has allowed economic growth even while still severely keeping the power of the oligarchs under control and never giving free reign to the forces of extreme market capitalism.

This in turn means that Russia has retained a greater array of levers on the economy; and that the economy has retained sufficient redundancy without being diced and sliced to the exigencies of “just in time” production so beloved of monetarist, western economists. Or to put it in another way, the Russian economy still preserves a strong element of subservience to the needs of the State and, indeed, to the needs of the people. All this means that Russia can produce weapons in much greater quantities, much more cheaply and much faster than is the case in the collective West.

(6) Sixthly, Russia has very strong and dependable allies. The USA, desperately clinging to the illusion of eternal grandeur and self-righteousness, has been unable to resist its existential resort to bullying, not just bullying Russia but also bullying the largest manufacturing power in the world, China, which accounts for 35% of all the world’s manufacturing, constitutes one sixth of the global market, and in purchasing power equivalence is the equal of the USA. China in 2020 accounted for 18% of the world's total wealth whereas the US share had declined to 29%.

China must by now be convinced without any shadow of doubt that the USA is a totally untrustworthy interlocuter, one that is also deeply lacking in competence, wisdom and intelligence at the levels of top leadership. In short, only a fool does business with the USA without a packed getaway suitcase next to his bed and a jet plane parked outside. China understands this, and cannot be fooled. The large numbers of pro-Western business people and intellectuals that have featured in, but never dominated Chinese and Russian societies for the past two decades or so, are losing faith in their avatar as quickly as its credibility and goodwill collapses.

So the USA has very unwisely created a situation in which it is pitted against China and Russia and, also, India (all of them nuclear powers) and, through the BRICS, with the most important sources of global oil and gas, notably Russia, Iran, Saudi Arabia and the UAE. And it is pitted against the Global Majority, provenly offering far more to those countries of the Global South who value true economic development, one that brings greater prosperity to the majority of their people, and real political independence (so unlike the politically shackled, impotent vassals that provide a yapping retinue to Washington most of whose people have experienced a fifty year process of decline in living standards in real terms.

(7) The key economic lever that the West has deployed in this global confrontation (now being played out in conflicts between NATO and Russia over Ukraine, NATO and China over Taiwan, and NATO, in alliance with Israel and some Arab monarchies, over many countries of the Middle East over Iran) short of military compulsion, has been sanctions.

Even though these have not worked in the case of Russia whose economy has been enormously stimulated by (a) the cessation of the flow of Russian wealth out of Russia to pockets of the owners of Western corporations in Russia; (b) the maintainance within Russia of the profits that Russian oligarchs formerly diverted to overeseas bank accounts and investments; (c) growing self-sufficiency in the production of goods which Russia once imported from the collective West and elsewhere; (d) the boom in revenue flows to the Russian state from taxes on profits from Russian oil and gas exports whose value has increased following Europe’s voluntary withdrawal as clients for Russian oil and gas, and the enormous surge of Russian energy exports to China, India, and Pakistan, among others.

(8) Russia has available many tools with which it can partially counter a Western attempt to seize its frozen assets. Western companies continue to operate in Russia and earn billions of dollars in profits. Overseas companies in Russia earned $20bn in profit and $217bn in gross revenue in 2022, since when the figures are believed to have grown considerably. Less directly, we have seen how the presence of western countries in markets of the Global South has been diminished in favor of both Russia and China, as in the case of France in the Sahel region of Africa, and this is a trend that will likely further develop.

The USA and the collective West have for a very long time applied their energies to enhancing their global presence by the funding of so-called “NGOs” whose purpose is to agitate for political and ultimately regime change in favor of Western interests. This tactic has been less successful of late, not least because of the damage that it inflicted on the political structure of Ukraine and the development of a war with Russia that has the potential for nuclear annihilation. It is a strategy that depends on three main activities: the payment of salaries to NGO employees that compare very favoraby with local opportunities; misinformation strategies that include the establishment of new media or the buying-out of existing local media; and direct political agitation that frequently steps beyond normal democratic norms and results in violent confrontations. We have seen this play out many times in countries like Thailand, for example, but the events in Kazakhstan in 2022 suggest that more and more people are seeing through the Western ways of manipulating foreign elections, and seeking to protect their sovereignty against the machinations of so-called “pro-democracy” movements which, in reality, are puppets of Western capitalism. This has been evident in Georgia, for example, whose political class is attempting once again to put an end to the influence of NGOs through legislation against “foreign agents,” even though its pro-Western President is opposed.

Sanctions on China

The stunning failure of the collective West to achieve its objectives through the application of sanctions on Russia has not deterred Washington or Europe from persisting with what they fondly imagine to be the equivalent of lightsabers in the movie trilogy, Star Wars. Trump’s initiation of a trade or tariff war against China has failed to equal the playing field in the West’s favor as Janet Yellen’s recent appeal to Beijing has proven - China, she wails, is just producing too much, flooding the world with Chinese goods, while simply not enough is going to Janet and her mates in Washington. Her visit has just been followed up by the ever feckless Tony rabbit-in-the-headlights Blinken, who has reiterated the Janet’s woes and told China to stop any trade with Russia that might help it in Ukraine (not a whole lot, if truth be told), a message that compounds similar manifestations of US weakness in its recent applications of fresh rounds of sanctions on Iran, Venezuela and Russia and just about anybody anywhere who shows a glimmer of intelligence and strategic resilience that might reduce the power of the Great Satan.

Sanction, sanction, sanction!

Blinken’s visit to China is widely believed to have articulated the pretext for the next round of sanctions and tariffs against China by the US (with lukewarm support, if any, from Europe, whose overall economy has already been mauled through cowered subservience to abuse from its US spouse). To these sanctions and, perhaps more important than the sanctions in Washington minds, should be added possibilities that come about if Washington succeeds in pushing Europe to the precipice of illegal seizure of frozen Russian assets, if that then opens the pandora’s box for the US to begin to seize Chinese assets in the collective West whenever China shows itself insufficiently deferent to Western sanctions hegemony.

As of 2021, Chinese firms’ asset base in the US has been calculated at $282 billion. China only accounts for 1.5% of the total asset base of multinational companies in the US, fairly meager. China, in other words, has anticipated potential US financial aggressions, and avoided their worst outcomes. Furthermore, China can exercise incredible leverage over the US. China has steadily accumulated U.S. Treasury securities now worth $797.7 billion in Treasuries (roughly 10% of the U.S. national debt). This is paper wealth, not gold, so the paper is in the hands of China and is the basis for Chinese decisions to sell and to buy US Treasuries such that these decisions have very great influence over the value of the US dollar. This is hardly an unambiguous advantage to China, however, given that 70% of China’s $2.3 trillion in official reserves is held in U.S. dollar assets. But in recent years, China has been the second largest recipient of foreign direct investments (FDI) worldwide, attracting approximately $189 billion in 2022 alone. There are very significant US assets in China, therefore, on which China can exert its influence to manipulate their market value, and even their status as foreign property, in the event that the USA would resort to threatening Chinese assets in the USA or even the value of US Treasuries held by China.

Back to Ukraine

Reports from the battlefields are somewhat subdued, possibly on account of the celebration of the Orthodox Easter and to the lead-in to the May 9th Victory Day celebration of Russian victory over Nazi Germany in World War Two. There has been a Russian breakthrough of Ukrainian defense lines in Northern Kupyansk area south of Yahidne, in Kyslivka, north of Tabaivka, which is being followed up, some reports say, by Russian penetration of the settlement of Kotlyrivka to the south west, pushing Ukrainian forces back to the M26 road and further west towards Pischanne. According to the Russian Ministry of Defense, Ukrainian forces suffered 270 losses of lives in this area in the past 24 hours. In the South Kupyansk area, Russian forces have broken through the defenses of the 3rd Azov Brigade to enter the village of Makivka, opening the possibility of a Russian advance towards Hrekivksa to the West and Nevske to the South.

In the Siversk aresa, Russia has been bombing the supply road near Serebrianka and Hryhorivka, west of Bilohorivka (which Russia has yet to capture). Further south, Russia continues to pummel the settlement of Spirne in advance of a likely ground operation.

Elsewhere not a great deal has changed. Ukraine is sending in the Main Intelligence Directorate (GURovtsy) to Chasiv Yar area, as Russia continues to pummel the eastern sections of the settlement. In the Ocheretyne area, Russia is moving northwest to Novooleksandrivka and Arkhanhelske, and increasing the pressure westards to Novokalynove and Keramik which Russia now controls. But some reports say there is still an encircled group of elite special forces (White Wolves) in Keramik. A group of some 3,000 Ukrainian troops are also reported to be trapped between Novokalynove and Keramik to the east and Ocheretyne to the west, with Russia being able to shell all points in this area. Russia has full control of Berdychi, a little south of Ocheretyne, and Ukrainian forces are fleeing northwards. Nearby, Russia has control over Novobakhmutivka and, it is thought, Soloviova. It has previously captured Semenivka to the south of Berdychi. Further south, Russia has secured the eastern end of Natailove. The settlement of Karlivka is under Russian fire.

Russia appears to be encircling the high-rise industrial area in the north of Krasnohorivka. It is likely that Krasnohorivka will very soon fall. A methodology for the evacuation of Ukrainian forces from Krasnohorivka is not at all clear.

It is confirmed that 10,000 fresh Russian troops are being deployed to Avdiivka-Ocheretyne area. Kremlin spokesman Peskov has indicated that Russia is not going to slow down along the combat lines in this area now that Russia has Ukraine on the run. Ukrainian commanding general Syrsky is saying publicly that the situation on the front lines is becoming increasingly difficult for Ukraine.

In Kherson, Ukraine has been attacking Russian positions along the east bank of the Dnieper from Novo Zburivka to Nova Kakinovka. This may be intended to worry Russia that Ukraine may be intending to stage a major offensive here and to force Russia to divert troops to this area away from the south and central Donetsk regions.

Ukraine has used ATACMS missiles to attack air defenses in Crimea near Cape Tarkankut, and oil refineries and the air base at Kushchyovsksya on the mainland east of Crimea. Russia claims to have shot down 5 ATACMS missiles.

Alexander Mercouris, on his broadcast today, considers the question of why Russia has not attacked the bridges across the Dnieper and speculates there may have been a trade-off between Russia and the USA to the effect that Russia would leave the Dnieper bridges, which they surely could destroy with kinzhal missiles, if the US pressured Ukraine not to destroy the Kerch bridge (although at least two attempts have indeed been made, even though the Kersh bridge is no longer essential to Russia as a means of conveying supplies to its troops in the south of Ukraine along the land bridge).

In Moscow, Russia is exhibiting captured Western weapons in a move that appears to be causing offense and concern to Western arms manufacturing companies and to be worrying Western military defenders lest Russia is able to reverse engineer some of these weapons to better protect itself against them and also to build its own, more refined versions, which it will surely do.