Political Multipolarity vs. Economic Unipolarity: 2018 Results and 2019 Intrigues

Summing up the results of 2018, one is tempted to lay emphasis on a number of major events and trends. However, that carries the risk of neglecting systemic issues that generate the diversity of individual phenomena. The understanding of these issues provides us with an analytical ability that helps us attribute numerous events to a more or less understandable model.

I think in 2018, the community of Russian experts on international affairs resumed the discussion of a fundamental question of the modern world structure. For many years Russian and international experts have been talking about the end of the unipolar world and the inevitable triumph of the multipolar order. Having become divorced from reality in the academic community, this dispute became partially scholastic. In the meantime, for practical experts the inevitable multipolarity is an obvious truth. This state of affairs is not typical only of Russia. In the meantime, both groups omit some important details that were clearly pronounced in 2018, when the picture became more complex.

The 2018 Trends and Developments: Valdai Club’s Top Five
The stormy and alarming year 2018 is coming to an end. The Valdai Club offers its rating of events that had the greatest impact on the world situation.
Club events

It is difficult to argue against the idea of multipolarity if we look at it from the realistic (neo-realistic) point of view. In Russia the school of realism and its derivatives has remained the most influential up to now and is a landmark for many experts on international affairs abroad. In effect, the very notion of polarity was engendered by the realistic tradition. The realists view the world in the context of the distribution of power and military-political potentials between them. They actually brush aside all other components of this equation, retaining only the political variable. Politics should be explained by political factors. There is certain logic in this approach, which makes this model fairly simple and effective for the purpose of analysis.

In terms of the distribution of the military might, the modern world really is multipolar and the trend towards multipolarity is gaining strength every year. Naturally, the US remains the strongest power and its military budget exceeds that of all other countries put together. However, there are at least several countries in the world that can either destroy the US or inflict unacceptable damage on it. In other words, there are other poles in the world on which it is difficult to impose direct military dictate. This distribution of power, even with the imbalance in favor of the US shows that the world is multipolar in military-political terms. The more power the other players gain, the more multipolar the world becomes. 

However, the picture is different if we look at it in economic terms, or to be more precise, in terms of using the economy as an instrument of coercion and political power in international relations. The realists do not see this projection – they are largely circumventing it. Meanwhile, the economy, trade and finance have turned into an independent instrument of power. In this projection, the world has not yet departed far from its unipolar structure. Interestingly, history shows that the economic levers of power have been used by the most economically powerful states. In other words, military and economic powers are closely interconnected. However, the military and economic projections of power are different from each other, generating a much more complicated structure of power relations in the modern world. The year 2018 graphically demonstrated the existence of these two projections. Several events became landmarks.

The first one was the unilateral withdrawal by the US from the Joint Comprehensive Plan of Action (JCPOA, or the Iranian nuclear deal). Washington resumed large-scale sanctions against Iran, including a ban on the purchase of Iranian oil. Indicatively, these sanctions are ex-territorial. The US is ready to punish foreign companies that are violating US legislation outside US territory. Iran remained committed to the JCPOA. All other permanent members of the UN Security Council and the EU criticized Washington’s decision. In fact this plan was a product of collective diplomacy and multilateral global management. It was produced by active work in the UN and sealed in UN Security Council Resolution 2231. The United States’ unilateral withdrawal from the JCPОA and resumption of ex-territorial sanctions in fact amounted to the destruction of a collective decision and imposition of the US agenda on the remaining participants. Iran itself was forced to face a complicated dilemma: either return to its nuclear program, which would consolidate the US position, isolate Iran from the world and threaten it with military strikes, or fulfil the JCPOA and sustain losses from US sanctions. The Americans got the best results: Iran did not resume its nuclear program but again had to bear the brunt of sanctions.

Despite allied relations with the US in NATO, the EU is the most consistent critic of the US withdrawal from Iran’s nuclear deal. In particular, it resumed the 1996 Blocking Statute, which protects EU businesses against ex-territorial US sanctions. However, the majority of major EU companies are leaving Iran for fear of US sanctions.   In other words, Western governments may criticize US sanctions as much as they like, but private business will remain committed to American laws for fear of losing the US market, being fined or deprived of an opportunity of dollar transactions. The domination of the dollar in the global financial system and the size of the US market leave a powerful lever of economic interests in US hands. The actions of the business community made it abundantly clear who dictates the rules of the game.

A Pyrrhic Victory: the History of the Sanctions War Against Iran
Ivan Timofeev
The history of sanctions against Iran deserves close analysis in light of the growing sanctions pressure on Russia. Iran’s experience is meaningful if only because both countries have to contend with US sanction law.
Valdai Papers

Another dramatic event were the sanctions against Russia and its companies, including Rusal, En+ and others that were blacklisted on April 6, 2018. Restrictions were imposed on one of the world’s largest suppliers of aluminum. The Russian authorities did not make political concessions, not to mention changes in their political course. This is unlikely to happen even under stronger pressure. However, our reciprocal measures did not do any damage to the Americans. Moreover, Russia found itself in a fairly narrow corridor of opportunities. It could either try to nationalize Rusal without any guarantees of unimpeded business with its contractors (the blocking of dollar transactions would seriously undermine its international business). Or it could let the company negotiate deals with the Americans on its own. However, in both cases the government faces a serious risk of a crisis in the aluminum industry with all the ensuing social and domestic political consequences. In the final analysis, Rusal has reached an agreement with the Americans and sanctions against it will be lifted in the near future. But de facto the control of the Russian industrial giant will be transferred to the British and Americans. Russian plants continue operating and their workers continue receiving salaries, but the Americans will have control over the company. In other words, this asset-grabbing was carried out with the help of sanctions. There are no guarantees at all that other Russian global companies will not be subjected to the same treatment.
US Sanctions Against Russia: The Forecast for 2018
Ivan Timofeev
There will be at least seven reports submitted next year, each of which will most likely provide a pretext for the further alienation of Russia and the United States from each other. Russia needs a well-considered policy of clever actions that will make it possible to control confrontation, minimize damage, and retain foreign policy initiative.  
Expert Opinions

The intrigue of 2019 will be the introduction of US sanctions against Chinese companies. The case of Huawei will play a key role in this respect. By imposing sanctions on China’s ZTE, the Americans made the company almost fully subordinate to the US authorities: there are high fines, dismissal of employees guilty of violations and presence of US observers. The bad situation may change for the worse if the Americans transfer it from the administrative to the political plane. 

The situation with US sanctions is rather contradictory. On the one hand, their political effectiveness in relations with targeted countries remains rather low. The cases of the DPRK, Iran, Russia and China, to name a few, have shown that the pressure of sanctions does not lead to political concessions. On the other hand, international business tends to obey US demands and leave the markets of the countries subjected to sanctions, thereby reducing their foreign trade opportunities. In terms of economic power we are dealing with an efficient unipolar world as regards business that is giving highly dubious dividends to the US as the financial hegemony. 

The main political question is how long the key players will accept the situation where economic globalization is used in the political interests of the leading power and the main currency of international settlements is “weaponized.” It seems 2019 may become the year of major decisions.

Sanctions for the Violation of Sanctions: Businesses on US Treasury Radar
Ivan Timofeev
Many evaluations of the US sanctions policy focus on major political steps – the adoption of new laws, the US President’s executive orders, the drafting of new bills, etc. At the same time, the practice of US regulators punishing specific companies for violating sanctions is of great interest. Such practices say a lot about the specifics of the sanctions policy and their effectiveness.
Expert Opinions
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.