Prospect of an intense hybrid war, with Russia as its target. The type of financial warfare is nothing new.
A leading Russian thinker, adviser to the Russian President on economic issues, and promoter of the Eurasian Economic Union, asked rhetorically in a recent article
whether there is any reason [for the Russians] to expect the lifting of sanctions. His answer was a flat ‘no’: US sanctions were never about Crimea or even Syria, he says. Rather, they were more about the financial crisis at the heart of the western financial system, and its need to compensate for the depletion at its core by raiding resources from the periphery (where Russia is situate). He foresees the prospect of an intense hybrid war, with Russia as its target.
Well, Sergey Glaziev is something of a hawk on the subject of Russian re-sovereigntisation, so some may have doubts whether his worrying prognostication that America is on an ineluctable course leading to some sort of confrontation with Russia, is shared by its leaders. Does Russia really believe this to be a real risk? The answer clearly is ‘yes’: It does. Glaziev’s point is that the hybrid aspect has to be defended against, as much as the military aspect – and to this end, he has submitted a series of proposals
to Russia’s National Security Council to lessen Russia’s vulnerability to geo-financial war.
Patrick Armstrong, a former Canadian diplomat who served in Moscow, explains
that there can be no other rational explanation for how Russia is reconfiguring its army – other than it takes the American threat very seriously. It is preparing for a big war, as opposed to the ‘small’ agile forces that it has had until now, and which were configured for fighting in such fronts as Chechnya and Georgia. Armstrong writes: “one can tell a lot about what kind of war a country expects, by understanding how it has put its [component forces] together: If you stop at independent brigades (or brigade groups) that will have, in proportions, depending on what you want to do, infantry, tank and artillery battalions as well as ‘support’ elements, you are telling the world that you expect, and are planning for, relatively small wars. If you go to divisions you are expecting something larger and if you construct a corps (or army in Russian terminology) you are telling the world that you are preparing for a big war”. He continues:
“What's All This Mean? How big a war do you anticipate? A smallish one, a bigger one or a really big one? Your answer will determine the formations that you construct. An important decision point, which reveals your answer, is whether you add-in the other combat arms, and specialised support elements, at brigade (ie 5000 or so troops) level, or at division (10,000 or so) level?
“If at brigade level, you have made a decision that you expect your future wars to be rather small and that all-arms formations of 5000-or-so soldiers is as big as you need. If on the other hand, you decide to create divisions – formations about three times as large – you are showing that you are expecting a larger war. If you then start combining these divisions into corps, armies or even army groups, you are expecting a really big, all-out war against a first-class enemy. Something the size of World War II in fact…
“The [former] Soviet Army was organised for a huge war: it had divisions, organised into armies (corps in Western terminology), which were then organised into fronts (armies in Western terminology) and further grouped into TVDs or Theatres of Military Activity (army groups in Western terminology) - all backed up by a conscription and reserve system, immense stocks of weapons and gigantic pre-positioned ammunition dumps. This time, the Soviets did not intend to fight the decisive battle an hour's drive from Moscow. When the USSR collapsed, so did that structure …
“For some years the management of the Russian army did not appear to have understood that everything had changed – that the huge Soviet forces were gone and would not magically fill up with hundreds of thousands of conscripts to fill up the "empty formations". But, they didn't know how to make them smaller, either: we were always told in talks with the Russian General Staff that the state could not afford to pay the officers the pensions and housing allowances they were entitled to. And so this once mighty army decayed.
“Perhaps it was failure in the First Chechen War that finally convinced headquarters that the Russian army was not a temporarily shrunken ‘big war army’. We started being told that they were re-designing their army around independent brigades. It was clear from reading the periodic military and strategic doctrine documents that the wars that Moscow foresaw were smaller wars, on the scale of border infractions or a Chechen-sized war, in which the enemy would be small, agile lightly-armed groups. For such conflicts, anything larger than independent all-arms brigade-sized formations would be too large and complicated.
“And, gradually, between the two Chechen wars, ‘divisions’ (which our inspections had shown to be empty of soldiers but full of poorly-maintained equipment and under-paid dispirited officers) disappeared and were replaced by ‘storage bases’. We assumed these to be a way of avoiding the huge retirement bill while giving officers something useful to do. At the same time independent brigade groups began to appear, with the first ones in the south where trouble was expected. This is one of the reasons why the second Chechen war was a victory for Moscow …
“In short, by the turn of the century, in their published doctrine, in everything they told us in meetings, in deployments and in their formation structures, the Russians were showing us they had no offensive designs against NATO and they expected no attacks from NATO. The south was where they saw danger.
“The Treaty on Conventional Armed Forces in Europe (CFE) showed us all this: the Russians were obliged to give us a list of elements showing their precise location and relationship to other structures with the number of soldiers and major weapons; we could go there and check this out at any moment. Thanks to the Treaty we always knew what they had, where they had it and how it was organised. Our inspectors found no discrepancies. But the NATO member countries never ratified the Treaty, continually adding conditions to it and, after years, Russia, which had ratified it, gave up, and denounced it. And so we all lost (because it was reciprocal) a transparent confidence building mechanism based on full disclosure with the right to verify.
“All this time the Russians told us that that NATO’s relentless expansion, ever closer, was a danger (опасность) although they stopped short of calling it, as they did terrorism, a threat (угроза); “dangers” you watch; “threats” you must respond to. NATO of course didn’t listen, arrogantly assuming NATO expansion was doing Russia a favour and was an entitlement of the “exceptional nation” and its allies.
“It is important to keep in mind with the everlasting charges that Russia is "weaponising" this and that, threatening everyone and everything, behaving in an "19th century fashion", invading, brutalising, and on and on, that its army structure and deployments do not support the accusations. A few independent brigades, mostly in the south, are not the way to threaten neighbours in the west. Where are the rings of bases, the foreign fleet deployments, the exercises at the borders? And, especially, where are the strike forces? Since the end of the USSR they have not existed: As they have told us, so have they acted.
“They planned for small wars, but NATO kept expanding; they argued, but NATO kept expanding; they protested, but NATO kept expanding. They took no action for years. Well, they have now: the 1st Guards Tank Army is being re-created. This army, or corps in Western terminology, will likely have two or three tank divisions, plus a motorised rifle division or two, plus enormous artillery and engineering support, plus helicopters and all else.
“The 1st Guards Tank Army will be stationed in the Western Military District to defend Russia against NATO. It is very likely that it will be the first to receive the new Armata family of AFVs and be staffed with professional soldiers and all the very latest and best of Russia's formidable defence industry. It will not be a paper headquarters; it will be the real thing: commanded, manned, staffed, integrated, exercised and ready to go … The decision to create a tank army (armoured corps in Western terminology) is an indication that Russia really does fear attack from the west, and is preparing to defend itself against it. In short, Russia has finally come to the conclusion that NATO's aggression means it has to prepare for a big war.”
Of course, Glaziev’s point was not so much about preparing for a big, classic, military war (he is an economist), but more about the dangers from hybrid war, precipitated by depletion at the core of Pax Americana, which is much less visible to the public, less understood, yet deeply insidious. Glaziev would no doubt point to the (US-Saudi orchestrated) dramatic drop in the price of oil in 1985/6, and its impact on the Soviet leadership, as an early example of effective hybrid warfare, practiced against Russia: an army, particularly a big army, can be of little assistance at times of financial implosion - rather the reverse. The point here is that the re-configuration of Russia’s armed forces underlines that Glaziev’s point that Russia is threatened by American escalation primarily in the hybrid mode is reflected amongst the Russian leadership. They would not be spending this money on re-shaping the armed forces if they did not think the threat to be serious.
The type of financial warfare (geo-financial) to which Glaziev refers, is nothing new. Professor Carroll Quigley was formerly at Harvard, Princeton, and the school of Foreign Service at Georgetown University. He was also something of an ‘insider’, being a friend of Rockefeller, and an important influence on his one-time student, Bill Clinton (who was to become came an important patron of the financial establishment, and its wider ambitions). Quigley wrote in detail in his epic 1964book
, Tragedy and Hope
: A history of the world in our time (page 324), how the men –“the Anglo-American establishment”
- who constructed our early monetary system:
“had a far-reaching aim, nothing less than to create a world system of financial control … able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled … by the central banks of the world, acting in secret agreements … Each central bank, in the hands of men like Montagu Norman of the Bank of England (and) Benjamin Strong of the New York Federal Reserve … sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world. In each country the power of the central bank rested largely on its control of credit and money supply.”
Quigley relates that it was, for this purpose that the Federal Reserve System was established. However, the project started rockily: the then US President William Taft declined to support the banking élite’s scheme to create a central bank in the United States. Taft was duly toppled - the 1907 ‘financial crisis’ being ‘crafted’ to usher in a more favourable climate towards the establishment of an American central bank, and a more compliant President Wilson, shortly after taking office, signed the Federal Reserve Act.
But as Quigley noted: "It must not be felt that the heads of the world's chief central banks were themselves substantive powers in world finance. They were not. Rather they were the technicians and agents of the dominant investment bankers of their own countries, who had raised them up, and who were perfectly capable of throwing them down. The substantive financial powers of the world were in the hands of these investment bankers who remained largely behind the scenes in their own unincorporated private banks. These formed a system of international cooperation and national dominance which was more private, more powerful, and more secret than that of their agents in the central banks.”
What is so intriguing about Quigley’s writings was his awareness, proximity and understanding of the workings of the unofficial levers of western power, and more specifically a group which evolved from what he referred to as the 'Anglo American Establishment' in an earlier manuscript, and which we have come now to call the American ‘deep state’ (in its wider manifestation). Quigley wrote, "I know of the operations of this network because I have studied it for twenty years, and was permitted for two years, in the early 1960s, to examine its papers and secret records. I have no aversion to it or most of its aims and have, for much of my life, been close to it and to many of its instruments."
Plus ça change, plus c'est la meme chose!
The names may have changed - Goldman Sachs vice Rockefeller - but otherwise, the ‘system’ is still intact (just). What did change however, was the exceptionalism demanded by the US in the wake of the 9/11 World Trade Centre attacks. This effectively turbocharged the tools of geo-financial warfare. In pursuit of the eradication of ‘terrorism’, money laundering, and of the global implementation of US enacted sanctions on ‘bad actors’, America has increased its claim to legal jurisdiction to extend to virtually the entire global financial system. The imposition of secondary sanctions affecting third countries, the levying of quite arbitrary and massive fines on banks, the threat of expulsion from the global financial system, derivative based ‘runs’ on currencies (i.e. the (orchestrated) run on the rouble on 15 & 16 December 2014); plays with dollar appreciation and devaluation impacting on dollar-denominated debt held outside of the United States -- in aggregate, all these measures combined had truly become more potent than conventional weaponry; more powerful, in some cases, than an army.
If proof were needed, we have only to look at the domination of EU domestic and foreign policy that has been obtained by Washington through the US Treasury’s ability to strike sheer terror in the hearts of European banks, to cow governments (Germany), and, in co-ordination with the ECB, oust European leaders (Berlusconi) and to break populist governments (Greece).
As the eminent economist, Professor Michael Hudson has noted
in respect to this financial subjugation of European states:
“[T]here is no legal framework for writing down debts owed to the IMF, the European Central Bank (ECB), or to European and American creditor governments. Since the 1960s, entire nations have been subjected to austerity and economic shrinkage that makes it less and less possible to extricate themselves from debt. Governments are unforgiving, and the IMF and ECB act on behalf of banks and bondholders – and are ideologically captured by anti-labor, anti-government, financial warriors.”
“The result is not the “free market economy” it pretends to be, nor is it the rule of economically rational law. A genuine market economy would recognize financial reality and write down debts in keeping with their ability to be paid. But inter-government debt overrides markets and refuses to acknowledge the need for a Clean Slate. Today’s guiding theory – backed by monetarist junk economics – is that debts of any size can be paid, simply by reducing labor’s wages and living standards, plus by selling off a nation’s public domain – its land, oil and gas reserves, minerals and water distribution, roads and transport systems, power plants and sewage systems, and public infrastructure of all forms.”
“…The immediate political aim of this financial warfare in Greece is to replace its elected government (supported by a remarkable July 5 referendum vote of 61 to 39) with foreign creditor control by “technocrats,” that is, bank lobbyists, factotums and former Goldman Sachs managers. The long-term aim is to impose a war against labor – in the form of austerity – and against the power of governments to determine their own tax policy, financial policy and public regulatory policy” [emphasis added].
No wonder, at a moment when the very hallmark of impending hybrid warfare is manifest in a new round of demonization of President Putin arising from the ‘Panama Papers’ (although he is not named in them), the question is raised: “whether there is any reason to expect a lifting of European sanctions on Russia”. Ostensibly, the answer should be ‘no’. Just look at how the US Treasury effectively is voiding the lifting of sanctions on Iran by strong-arming the European banks to stay aloof from the financing of Iranian trade or infrastructure – in spite of Iran’s acknowledged compliance with the JCPOA. President Obama merely responded to Iranian complaints on this score -- that the benefits (of the lifting of sanctions) would only accrue when Iran has more fully integrated into the US managed global economy, changed its complexion, and become more ‘business friendly’ (i.e. only when Iran has fully acquiesced to US financial hegemony).
But … But, on the other hand, President Obama does want ‘industrial quiet’ in Syria (and in the rest of the Middle East) for the duration of the Presidential campaign season, and Angela Merkel’s political domination of this issue (sanctions on Russia) within the EU is slipping as a result of the widespread hostility to her stance on the refugee issue. European politics are quite conflicted, but it is clear that the rebellion against prolonging Russia sanctions has growing traction.
In one sense, these latter objections are symbolic of the under-the-table debate that is extant in Europe, focussed on how America’s judicial overreach on Europe’s banking sector is adversely impinging on Europe’s own foreign interests (recall that the Euro was originally conceived as the means to escape from under the ‘hammer’ of Greenspan). And – as importantly - how Europe’s new ‘Economic Government’ of the ECB plus Bundesbank, controlled by a handful of ‘northern’ European players (many of them Goldman Sachs alumni), are crushing southern Europe, to the point of provoking popular revolt. The 'deep state’ (we should no longer perhaps call it Anglo-American, as it has become more cosmopolitan than that) in short, simply is intent on crushing any flickers of nationalism or sovereignty in southern Europe in order to force the introduction of European and global financial governance – as the EU official formerly heading the EU unit responsible for the European Monetary System and European monetary policy has explained
And the other big ‘But …’ is that it is now the case that it is not just banks which are ‘too big to fail’ - it is the market itself which has become too influential, and too big, to fail. ‘It’ must be propped up (by whatever means necessary), in order to maintain the illusion of ‘growth’ and rising wealth to an ever more sceptical audience (both lay and expert). In short, the imperative to maintain market stability in New York is trumping the use of the system as a financial weapon by which simply to extend its foreign reach, and to prevent any competitor, such as China, from emerging. The bubble excesses are shifting the historic calculus.
But (as the financial blogger Charles Hugh Smith has noted
) boosting ‘the market psychology’ requires ever greater extremes: extremes of debt, use of more esoteric trading instruments, greater leverage, and higher valuations. These extremes, per se, destabilise markets, “first beneath the surface and then all too visibly”. And the advent of new technologies (particularly those of High Frequency Trading and the widespread use of robots to conduct trading) posses an inherent potential to destabilise markets globally. In short, the American and European economic and political structure is now almost wholly dependent on continued, and ever ‘accommodating’, central bank stimulus for ‘the market’ and in avoiding any de-stabilising market lurch. And China, just recently, has demonstrated that it too, can, if it so chooses, oscillate the exchange rate of the Yuan and precisely ‘lurch’ ‘the market’ (see here
), causing the Federal Reserve to rush to back-down on a stronger dollar (which threatened China with an outflow of capital).
The paradox here is that the faltering financial and credit bubble and its present vulnerability to shocks of whatever nature at the tail end of a long credit cycle, is making the US Treasury and Fed risk adverse (as evidenced by the US Treasury Secretary Jacob Lew’s call
for more sensitivity in using the Treasury’s ‘neutron bombs’). What Lew left unsaid was that the new ‘sensitivity’ was not some new-found American ‘statesmanship’, but rather, the raw fact that the Fed and the Treasury cannot risk the bubble deflating for fear of it collapsing into a major asset deflation. This is the strength into which China so successfully played.
This is the ‘eye of the needle’, too, through which Russia must pass if it is to obtain a lifting of EU sanctions. ‘The market’ is vulnerable to any kind of disturbance, and the US President is vulnerable to external distractions during the Presidential election process. Can Russian co-operation in Syria – especially at the sensitive moment when the cessation of hostilities isdisintegrating
– provide the circumstances for a ‘grand bargain’ and a lifting of sanctions? The needle’s ‘eye’ is, indeed, narrow, given the strength of the historic dynamics stemming from what Quigley called the Anglo-American Establishment and from NATO.
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.