Category Archives: Europe

The Big Chill: Tensions in the Arctic

The Big Chill: Tensions In The Arctic

Dispatches From The Edge

Oct. 31, 2014

 

One hundred sixty eight years ago this past July, two British warships—HMS Erebus and HMS Terror—sailed north into Baffin Bay, bound on a mission to navigate the fabled Northwest Passage between the Atlantic and the Pacific oceans. It would be the last that the 19th century world would see of Sir John Franklin and his 128 crewmembers.

 

But the Arctic that swallowed the 1845 Franklin expedition is disappearing, its vast ice sheets thinning, its frozen straits thawing. And once again, ships are headed north, not on voyages of discovery—the northern passages across Canada and Russia are well known today—but to stake a claim in the globe’s last great race for resources and trade routes. How that contest plays out has much to do with the flawed legacies of World War II, which may go a long way toward determining whether the arctic will become a theater of cooperation or yet another dangerous friction point. In the words of former NATO commander, U.S. Admiral James G. Stavridis, an “icy slope toward a zone of competition, or worse, a zone of conflict.”

 

There is a great deal at stake.

 

The U.S. Geological Survey estimates that the Arctic holds 13 percent of the world’s oil reserves and 30 percent of its natural gas. There are also significant coal and iron ore deposits. As the ice retreats, new fishing zones are opening up, and, most importantly, shipping routes that trim thousands of miles off of voyages, saving enormous amounts of time and money. Expanding trade will stimulate shipbuilding, the opening of new ports, and economic growth, especially in East Asia.

 

Traffic in the Northern Sea Route across Russia—formerly known as the Northeast Passage and the easiest to traverse— is still modest but on the uptick. The route has seen an increase in shipping, from four vessels in 2010 to 71 in 2013, and, for the first time in history, a Liquid Natural Gas Tanker, the, made the trip. On a run from Hammerfest Ob River, Norway, to Tobata, Japan, the ship took only nine days to traverse the passage, cutting almost half the distance off the normal route through the Suez Canal.

 

Which is not to say that the Northern Sea Passage is a stroll in the garden. The Arctic may be retreating, but it is still a dangerous and stormy place, not far removed from the conditions that killed Franklin and his men. A lack of detailed maps is an ongoing problem, and most ships require the help of expensive icebreakers. But for the first time, specially reinforced tankers are making the run on their own.

 

Tensions in the region arise from two sources: squabbles among the border states—Norway, Russia, the U.S., Canada, Denmark (representing Greenland), Finland, Iceland, and Sweden—over who owns what, and efforts by non-polar countries—China, India, the European Union and Japan—that want access. The conflicts range from serious to somewhat silly. In the latter category was the 2007 planting of a small Russian flag on the sea-bed beneath the North Pole by private explorer Artur Chillingarov, a stunt that even the Moscow government dismissed as theatrics.

 

But the Russians do lay claim to a vast section of the North Pole, based on their interpretation of the 1982 Convention on the Law of the Seas that allows countries to claim ownership if an area is part of a country’s continental shelf. Moscow argues that the huge Lemonosov Ridge, which divides the Arctic Ocean into two basins and runs under the Pole, originates in Russia. Canada and Denmark also claim the ridge as well.

 

Canada’s organized an expedition this past summer to find out what really happened to Franklin and his two ships. The search was a success—one of the ships was found in Victoria Straits—but the goal was political not archaeological: Ottawa is using the find to lay claim to the Northwest Passage.

 

Copenhagen and Ottawa are at loggerheads over Hans Island, located between Ellesmere Island and Greenland. The occupation of the tiny rock by the Canadian military has generated a “Free Hans Island” campaign in Denmark.

 

The U.S. has been trying to stake out terrain as well, though it is constrained by the fact that Washington has not signed the Law of the Seas Convention. However, the U.S. has locked horns with Ottawa over the Beaufort Sea, and the Pentagon released its first “Arctic Strategy” study. The U.S. maintains 27,000 military personnel in the region, not including regular patrols by nuclear submarines.

 

The Russians and Canadians have ramped up their military presence in the region, and Norway carried out yearly military exercises—“Arctic Cold Response”—involving up to 16,000 troops, many of them NATO units.

 

But you don’t have to be next to the ice to want to be a player. China may be a thousand miles from the nearest ice floe, but as the second largest economy in the world, it has no intention of being left out in the cold. This past summer the Chinese icebreaker Snow Dragon made the Northern Sea Passage run, and Beijing has elbowed its way into being a Permanent Observer on the Arctic Council. The latter, formed in 1996, consists of the border states, plus the indigenous people that populate the vast frozen area. Japan and South Korea are also observers.

 

And herein lies the problem.

 

Tensions are currently high in East and South Asia because of issues deliberately left unresolved by the 1952 Treaty of San Francisco that ended WW II. As Canadian researcher Kimie Hara recently discovered, the U.S. designed the Treaty to have a certain amount of “manageable instability” built into it by leaving certain territorial issues unresolved. The tensions that those issues generate make it easier for the U.S. to maintain a robust military presence in the region. Thus, China and Japan are involved in a dangerous dispute over the uninhibited islands in the East China Sea—called the Diaoyu by China and the Senkaku by Japan—because the 1952 Treaty did not designate which country had sovereignty. If it came to a military confrontation, the U.S. is bound by treaty to support Japan.

 

Similar tensions exist between South Korea and Japan over the Dokdo/Takeshima islands, between Japan and Russia over the Northern Territories/Southern Kuriles islands, and between China, Vietnam, and Taiwan over the Spratly and Paracel islands. Brunei and Malaysa also have claims that overlap with China. Any ships traversing the East and South China seas on the way north will find themselves in the middle of several nasty territorial disputes.

 

In theory, the potential of the Arctic routes should pressure the various parties to reach an amicable resolution of their differences, but things are complicated these days.

 

Russia has indicated it would like to resolve the Northern Territories/Kuriles issue, and initial talks appeared to be making progress. But then in July, Tokyo joined Western sanctions against Russia over its annexation of the Crimea and the Ukraine crisis, and negotiations have gone into the freezer.

 

Moscow just signed off on a $400 billion oil and gas deal with Beijing and is looking to increase trade with China as a way to ease the impact of Western sanctions over the Ukraine crisis. At least for the present, China and Russia are allies and trade partners, and both would like to see a diminished role for the U.S. in Asia. That wish, of course, runs counter to Washington’s growing military footprint in the region, the so-called “Asia pivot.”

 

The tensions have even generated some good old-fashioned paranoia. When a Chinese tycoon tried to buy land in northern Norway, one local newspaper claimed it was a plot, calling the entrepreneur “a straw man for the Chinese Communist Party.”

 

The Arctic may be cold, but the politics surrounding it are pretty hot.

 

At the same time, the international tools to resolve such disputes currently exist. A starting place is the Law of the Seas Convention and a commitment to put international law over national interests. The Chinese have a good case for sovereignty over the Senkaku/Diaoyus, and Japan has solid grounds for reclaiming most of the Southern Kuriles. Korea would likely prevail in the Dokdo/Takeshima dispute, and China would have to back off some of its extravagant claims in the South China Sea.

 

For all the potential for conflict, there is a solid basis for cooperation in the Arctic. Russian and Norway have divided up the Barents Sea, and Russia, Norway, the U.S. and Britain are cooperating on nuclear waste problems in the Kola Peninsula and Arkhangelsk. There are common environmental issues. The Arctic is a delicate place, easy to damage, slow to heal.

 

As Aqqaluk Lynge, chair of the indigenous Inuit Circumpolar Council says, “We do not want a return to the Cold War.”

 

 

—30—

 

 

 

 

 

 

1 Comment

Filed under Asia, China, Europe, Military, Pacific

Let A Thousand Poles Bloom

Shanghai Cooperation Organization

“Let A Thousand Poles Bloom”

Dispatches From The Edge

Sept. 29, 2014

 

At the very moment that the Americans and their allies are trying to squeeze Russia and Iran with a combination of economic sanctions and political isolation, alternative poles of power are emerging that soon may present a serious challenge to the U.S. dominated world that emerged from the end of the Cold War.

 

This past summer, the BRICS countries—Brazil, Russia, India, China and South Africa—created an alternative to the largely U.S. controlled World Bank and International Monetary Fund (IMF), and the Shanghai Cooperation Organization (SCO) added 1.6 billion people to its rolls.

 

The BRICS construction of a Contingent Reserve Arrangement will give its member’s emergency access to foreign currency, which might eventually dethrone the dollar as the world’s reserve currency. The creation of a development bank will make it possible to by-pass the IMF for loans, thus avoiding the organization’s onerous austerity requirements.

 

Less than a month after the BRICS’ declaration of independence from the current strictures of world finance, the SCO—China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan—approved India, Pakistan, Iran and Mongolia for membership in the organization. It was the single largest expansion of the economic cooperation and security-minded group in its history, and it could end up diluting the impact of sanctions currently plaguing Moscow over the Ukraine crisis and Teheran over its nuclear program.

 

The Shanghai Cooperation Organization began as the Shanghai Five in 1996, and five years later became the SCO. Even before the recent additions, SCO represented three-fifths of Eurasia and 25 percent of the world’s population.

 

A major focus of the SCO is security, although the countries involved have different agendas about what that exactly means.

 

Russia and China are determined to reduce U.S. and North Atlantic Treaty Organization (NATO) presence in Central Asia to what it was before the 2001 invasion of Afghanistan. The SCO has consistently rebuffed U.S. requests for observer status, and has pressured countries in the region to end U.S. basing rights. The U.S. was forced out of Karshi-Khanabad in Uzbekistan in 2006, and from Manas in Kyrgyzstan in 2014.

 

“At present, the SCO has started to counterbalance NATO’s role in Asia,” says Alexei Maslov, chair of the Department of Oriental Studies of the Higher School of Economics in Moscow, and the new members, he says, want in to safeguard their interests.

 

Given the current confrontation between NATO and Russia over the Ukraine, and tensions in the East China Sea between the U.S., Japan, and China, Moscow and Beijing may not agree on a number of issues—in 1969 they came to blows over a border dispute—but they are on the same page when it comes to limiting Washington’s influence in their respective backyards.

 

Chinese Defense Minister Gen. Chang Wanquan said last year “China is ready to work with Russia to…expand the scope of bilateral defense cooperation.” Last month Russia’s Chief of Staff Gen. Valery Gerasimov declared that, “Russia is ready to make joint efforts with China to lift the relationship to a new high.” China has been supportive of Russia in the Ukraine crisis.

 

For Iran, SCO membership may serve as a way to bypass sanctions currently pounding the Iranian economy. Russia and Iran signed a memorandum in August to exchange Russian energy technology and food for Iranian oil, a move that would violate U.S. sanctions. But Moscow—already weathering sanctions that have weakened its economy—may be figuring that there is little more the U.S. can do and still keep its European allies on board. Russian counter sanctions on the European Union (EU) have shoved a number of European countries back into recession, and the EU is worried that Russia will turn east and Europe will lose much of its Russian market share.

 

To a certain extent, that is already happening. When the 2,500-mile “Power of Siberia” pipeline is completed in 2018, it will supply China with about 15 percent of its natural gas, Russia’s Rosneft and China’s National Petroleum Corporation are jointly exploring oil and gas reserves in the arctic, and the Russians have also offered China a stake in the huge Vankor oil field in East Siberia. Since January 2014, some 30 percent of Russian oil exports have gone to Asia.

 

Teheran is reaching out to Beijing as well. Iran and China have negotiated a deal to trade Iran’s oil for China’s manufactured goods. Beijing is currently Iran’s number one customer for oil. In late September, two Chinese warships paid a first ever visit to Iran, and the two countries navies carried out joint anti-piracy and rescue maneuvers.

 

For India and Pakistan, energy is a major concern, and membership in the oil and gas rich SCO is a major plus. Whether that will lead to a reduction of tensions between New Delhi and Islamabad over Kashmir is less certain, but at least the two traditional enemies will be sitting down to talk about economic cooperation and regional security on a regular basis.

 

There are similar tensions between SCO members Uzbekistan and Kyrgyzstan over borders, and both countries, plus Tajikistan, have squabbled over water rights.

 

Most SCO members are concerned about security, particularly given the imminent departure of the U.S. and NATO from Afghanistan. That country might well descend into civil war, one that could have a destabilizing effect on its neighbors. Added to that is the U.S.-NATO-Gulf monarchy jihad against the Assad regime in Syria, a conflict that is raising yet another generation of mujahedeen that will some day reappear in their home countries—some of them SCO members—trained and primed for war.

 

From Aug. 24 -29, SCO members China, Russia, Kazakhstan, Kyrgyzstan, and Tajikistan took part in “Peace Mission 2014,” an anti-terrorist exercise to “subdue” a hypothetical Central Asia city that had become a center for terrorist activity. The drill involved aircraft, 7.000 troops, armored vehicles, and drones, and according to China’s Chief of Staff, Fang Fenghui, was aimed at the “three evil forces of terrorism, separatism, and extremism.”

 

The problem with General Fang’s definition of “terrorism” is that it can easily be applied to minorities or local groups with legitimate complaints about their treatment by SCO member governments.

 

China has come down hard on Turkic speaking Uyghurs in Xinjiang Province, who have been resisting marginalization by China’s dominant ethnic group, the Han. Uyghur scholar IIham Tohti was recently sentenced to life imprisonment for “separatist activity.”

 

Beijing has also suppressed demands for independence or more autonomy by Tibetans—who it also labels “separatists” –even though China has no more a claim over Tibet than Britain did to India or Ireland. All of them were swept up by empires at the point of a sword.

 

The BRICS and the SCO are the two largest independent international organizations to develop over the past decade, but there are others as well. In Latin America, Mercusur—Argentina, Brazil, Paraguay, Uruguay, and Venezuela—is the third largest trade grouping in the world. Associate members include Chile, Colombia, Bolivia, Ecuador, and Peru. Mexico and New Zealand have observer status. The newly minted Union of South American Nations (USAN) includes every country in South America, including Cuba, and has largely replaced the Cold War relic, the Organization of American States (OAS) that excluded Havana. While the U.S. and Canada are part of the OAS, they were not invited to join USAN.

 

What role these new organizations will play internationally is not clear. Certainly sanction regimens will be harder to maintain because the SCO and the BRICS create alternatives. South Africa, for instance, announced that it would begin buying Iran oil in the next few months, an important breach in the sanctions against Iran. But being in the same organization does not automatically translate into having the same politics on international questions.

 

The BRICS and the recent Israeli invasion of Gaza are a case in point. China called for negotiations. Russia was generally neutral (but friendly toward the Netanyahu government, in part because there are lots of Russians in Israel). India was silent—Israel is New Delhi’s number one source of arms. South Africa was critical of Israel, and Brazil withdrew its ambassador

 

In comparison, NATO was generally supportive of the Israeli actions, Turkey being the odd man out. There is more political uniformity among NATO countries than there is among SCO and BRICS nations, although there is growing opposition in the ranks of the European Union (EU) over Washington’s hard line approach on the Ukraine. The U.S. does $26 billion in trade with Russia, the EU $370 billion. Russia also supplies Europe with 30 percent of its natural gas, although that reaches 100 percent for countries like Finland. Most EU countries—the Baltic nations and Poland being the exceptions—see little percentage in a long, drawn out confrontation with Russia.

 

These independent poles are only starting to develop and it is hardly clear what their ultimate impact on international politics will be. But the days when the IMF, World Bank, and U.S. Treasury could essentially dictate international finances and intimidate or crush opponents with an avalanche of sanctions are drawing to a close.

 

The BRICS and the Shanghai Cooperation Organization are two nails in that coffin.

 

 

—30—

 

 

 

 

1 Comment

Filed under Asia, Central Asia, China, Europe, India, Iran, Latin America, Pakistan

Foreign Policy, Lord Palmerston & Appendectomies

Foreign Policy, Lord Palmerston & Appendectomies
Dispatches From The Edge
Sept. 15, 2014

Thinking about U.S. foreign policy these days brings to mind a line from songwriter/comedian Tom Lehrer: if you are feeling like a Christian Scientist with appendicitis you have good reason.

1) The North Atlantic Treaty Organization (NATO) is creating a Rapid Reaction Force to challenge Russian “aggression” in Ukraine, and the U.S., the European Union, and Russia are lobbing sanctions at each other that have thrown Europe back into a recession. Russian planes are buzzing U.S. and Canadian warships in the Black Sea.
2) The U.S. is bombing Iraq and Syria in an effort to halt the Islamic State of Iraq and the Levant (ISIL), while at the same time supporting insurgents trying to overthrow the Assad regime in Damascus, the pool from which ISIL was created.
3) After 13 years of war, Afghanistan is the verge of a civil war over the last presidential election, while the Taliban have stepped up their attacks on the Afghan military and civil authorities.
4) Libya has essentially dissolved as a country, but not without supplying insurgents in central Africa and Nigeria with greatly enhanced firepower.
5) The U.S. encouraged the Japanese government to bypass Article 9 of Japan’s peace constitution that restricted deploying its military outside of Japan. Washington also committed the U.S. to support Tokyo in the event of a clash with China over the ownership of a handful of islands in the East China Sea. American, Japanese and Chinese warships and military aircraft have been playing chicken with one another in the East and South China seas.

What is going on? Did some Greek open a box she shouldn’t have? Is the Obama administration—take your choice—incompetent? Trying to wind down two of America’s longest wars? Giving liberal cover to a neo-conservative strategy to re-institute a new cold war? Following an agenda?

How about all of them?

There certainly has been incompetence. The 2009 surge into Afghanistan did nothing but kill a lot of people, and the Libya intervention substituted Chaos Theory for diplomacy.

It is also true that old wars are winding down. In 2008 there were 110,000 U.S. troops in Afghanistan and 182,000 in Iraq. By the end of 2014 there will be no U.S. troops in Afghanistan, and—at this time—only a handful in Iraq.

Cover for the neo-cons? The Obama administration did help engineer the coup in Ukraine, and Assistant Secretary of State Victoria Nuland—who oversaw the action and handpicked the interim coup president—was Dick Cheney’s principle foreign policy advisor.

And the U.S. certainly has an agenda, which may best be summed up by 19th century British Prime Minister and Foreign Secretary Henry Lord Palmerston—England’s hammer of empire, who oversaw the Opium Wars with China and the Crimean War with Russia: “We have no eternal allies and we have no eternal enemies. Our interests are eternal and perpetual, and these interests it is our duty to follow.”

What are our “interests” in Ukraine?

Certainly not spreading democracy. We supported a coup against a corrupt, but legally elected oligarch, and replaced him with another oligarch in an election that excluded half the country.

There are, in fact, multiple currents at play. During the Cold War disagreements about foreign policy among the ruling elites were suppressed by the overarching need to defeat what was perceived as a real threat to capitalism, the socialist world. “Politics stops at the water’s edge” was the watchword back then. But once that threat evaporated with the collapse of the Soviet Union in 1991, those disagreements were free to come pouring out. Democrats and Republicans now openly sabotage one another’s policies in Asia, Latin America, and the Middle East, and different wings of both parties battle over using the American military.

Which doesn’t mean there isn’t common ground.

One shared interest is pushing NATO east, something the U.S. been doing since the U.S. double-crossed Soviet Prime Minister Mikhail Gorbachev in 1990. Gorbachev agreed to pull 380,000 Soviet troops out of East Germany provided NATO did not fill the vacuum. “Not one inch east,” U.S. Secretary of State James Baker promised. Now, virtually every Warsaw Pact country is a member of NATO.

There is also general agreement—underlined at the recent Alliance meetings in Wales—to expand NATO into a worldwide military alliance, although that creates a certain dilemma for Washington. Currently the U.S. foots 75 percent of NATO’s bill, but is finding that increasingly hard to do, given the enormous costs of the Afghan and Iraq wars, the pivot to Asia, and the expanding war in Iraq and Syria.

The Ukraine crisis has served as the perfect excuse to dragoon other members of NATO into increasing their contributions, though that won’t be a slam-dunk. Most of Europe is in recession, and while the NATO ministers are all for becoming global policemen, their constituents are less enthusiastic. European publics turned sharply against the Afghan War, and most polls show strong opposition to any more “out of area” deployments or increased military spending at the expense of social services.

One strong current at work these days are the neo-conservatives, whose goals are not to just break Ukraine away from Russia, but go for regime change in Moscow. They also lobby for overthrowing the Assad regime in Syria, and for war with Iran. They are overwhelmingly Republicans, but include Democrats.

Allied to the neo-cons in policy—if not politics—are the liberal interventionists, most of whom are Democrats. The interventionists led the charge on Libya and also lobbied for bombing Assad. Former U.S. Secretary of State Hillary Clinton and UN Ambassador Samantha Powers may not have the same politics on all issues as the neo-conservatives, but in places like the Ukraine they share common ground.

A leading “interest” in Ukraine is challenging Russia’s designation as the world’s top energy exporter and throttling its oil and gas industry. With Siberian fields almost tapped out, Russia is developing offshore and arctic sources, and the sanctions are aimed at blocking Moscow from getting the technology it needs to do that. The sanctions are also aimed at the South Stream pipeline, which, when completed, will run from the Caspian basin, across the Black Sea, to Europe. South Stream will eventually supply Europe with 15 percent of its gas and generate $20 billion in yearly revenue for Moscow. The U.S. and Turkey have been trying to derail South Stream for over a decade.

There are minor currents and back eddies as well.

Eastern Ukraine has large shale deposits that Chevron has been sniffing around, and—if you like conspiracies—one of U.S. Vice-president Joe Biden’s kids, Hunter, is on the board of Burisma Holdings, the Ukraine group exploring the country’s energy potentials. Joe Biden has been particularly hawkish on the Ukraine, comparing it to the Munich appeasement with Nazi Germany in 1938.

But the overriding “interest” of American foreign policy—regardless of the different currents—is to marginalize competition. Russia’s economy is no competition for Washington’s, but Moscow is a major supplier of energy to China. The two countries recently inked a $400 billion pipeline deal.

China’s economy is on the verge of passing the U.S. as the world’s largest, and it has already replaced the U.S. as the leading trade partner for most of the world. It is also the globe’s number one consumer of oil and gas.

This latter fact is a sensitive one, particularly given growing tensions between the U.S. and China. Some 80 percent of Beijing’s energy arrives by seas currently controlled by the U.S. Sixth and Seventh fleets.

Russian supplies, however, travel mostly by train and pipelines, and are, thus, out of the U.S. Navy’s reach. China is also negotiating with Iran over energy, and once again, those energy supplies would mostly move through pipelines.

To understand U.S. interests in the Ukraine involves tracking all of these currents, some of which may run at cross purposes. Obama’s push to damage the Russian energy industry is not popular with the American oil company ExxonMobil. He wants to push NATO east, but there is no indication he is seeking regime change in Moscow, and he has even tried to reduce some of the sturm und drang around the crisis. The neo-conservatives, on the other hand, want to arm Ukraine and put Putin’s head on a stake.

Of course the “interests” the Obama administration is pursuing in Ukraine are not the “interests” of the majority of Americans—or Ukrainians, for that matter. They are the “interests” of the neo-cons, energy companies, arms manufacturers, and international financial organizations like the International Monetary Fund and the European Bank. In short, the interests of the 1 percent over the 99 percent.

Up until ISIL started cutting American journalists heads off, U.S. polls reflected overwhelming exhaustion with foreign wars. The Center for Public Integrity found 65 percent of Americans would choose to cut military spending. But Americans are also easily stampeded by bombast: The “Russians are coming” (while it was the West that marched east). “Chinese cyber warriors are going to crash our national power grid” (except we don’t have a national power grid and the only countries that have engaged in cyber war are the U.S. and Israel). “And the turbans are going to get you in your bed” (even if U.S. intelligence agencies say the ISIL has not threatened the U.S.).

Since the September 11, 2001 attacks on the World Trade Center and Pentagon, the U.S. has spent almost $70 million an hour on security and around $62 million on domestic needs. Since 9/11 some 23 Americans have died as result of “Muslim terror plots” in the U.S., while the number of those killed by right-wing extremists is 34.

The reality is the U.S. cannot do much about climate change, growing economic inequality, infrastructure deterioration, and the slow motion collapse of our education system without confronting the $1 trillion it spends annually on military and defense related items, or the $4 to $6 trillion that the wars in Afghanistan and Iraq will eventually cost us.
With the U.S. about to begin an open-ended air war in Iraq and Syria (to join those in progress in Pakistan, Yemen and Somalia) the cost of fighting an almost non-existent “terrorist” threat to the U.S. is about to sharply escalate. In whose interest is that?

Increasingly, what is in the interest of the few is incompatible with the interest of the many.

Conn Hallinan can be read at disptchesfromtheedgeblog.wordpress.com or middleempireseries.wordpress.com

—30—

3 Comments

Filed under Afghanistan, Africa, Asia, China, Europe, FPIF Blogs, Iraq, Oil

Sanctions and the U.S. Dollar

Sanctions & the Dollar: A Fall From Grace?
Dispatches From The Edge
Aug. 26, 2014

The recent round of sanctions aimed at Moscow over the crisis in the Ukraine could backfire on Washington by accelerating a move away from the dollar as the world’s reserve currency. While in the short run American actions against Russia’s oil and gas industry will inflict economic pain on Moscow, in the long run the U.S. may lose some of its control over international finance.

Proposals to move away from using the dollar as the international currency reserve are by no means new. Back in 2009, the Shanghai Cooperation Organization (SCO) proposed doing exactly that. SCO members are Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. Afghanistan Iran, India, Pakistan and Mongolia have SCO observer status, and the organization has close ties with Turkey and the Association of Southeast Asian Nations.

Ever since the 1944 Britton Wood Agreement, the world’s finances have been dominated by the U.S. dollar, the International Monetary Fund (IMF), and the World Bank. But, according to economist Jeffrey Sachs, that world is vanishing and the dollar cannot continue to hold the high ground, because “the role of the United States in the global economy is diminishing.”

While it may be diminishing, the U.S. and its European allies still control the levers of international finance. For example, the U.S.’ slice of the global GDP is 19.2 percent, and its share of IMF voting rights is 16.8 percent. In contrast, China, with 16.1 percent of the global GDP, has only 3.8 percent voting rights in the IMF. The presidency of the organization is reserved for a European.

In 2010, the World Bank “reformed” its voting rights to increase low and middle-income countries from 34.67 percent to 38.38 percent, although even this modest adjustment has been sidelined because the U.S. Senate refuses to accept it. The wealthier countries still control more than 60 percent of the vote. The presidency of the Bank normally goes to an American.

In early August of this year, the BRICS countries—Brazil, China, India, Russia and South Africa—launched a series of initiatives aimed at altering the current structure of international finance. Besides pushing to dethrone the dollar as the world’s reserve currency, the organization created a development bank and a Contingent Reserve Arrangement (CRA). The former would allow countries to by-pass the IMF and the World Bank, with their tightfisted austerity fixation, and the latter would give countries emergency access to foreign currency.

The development bank will start off with $50 billion in the kitty, but that will soon double. The BRICS will also be able to draw on $100 billion from the CRA. While by international standards those are modest sums—the IMF has close to $800 billion in its coffers—the BRICS bank and CRA has just five members, while the IMF serves hundreds of countries. Eventually the BRICS observer members may be able to tap into those funds.

Last month’s sanctions went straight for Russia’s jugular vein: the development of its massive oil and gas reserves and Moscow’s construction of the South Stream pipeline. When completed, South Stream will supply Europe with 15 percent of its natural gas and generate over $20 billion in annual profits. Indeed, there is suspicion among some Europeans that the real goal of the sanctions is to derail South Stream and replace it with U.S. shale-based American oil and gas.

Sanctions can do enormous damage.

The United Nations estimates that the sanctions against Iraq were responsible for the deaths of some 500,000 Iraqi children from 1991 to 1998.

The sanctions aimed at Iran’s oil and gas industry have cut deeply into government revenues—80 percent of the country’s foreign reserves are generated by hydrocarbons—resulting in widespread inflation, unemployment and a serious national health crisis. While humanitarian goods are not embargoed, their cost has put medical care beyond the reach of many Iranians.

Associated Press reporter Nasser Karimi wrote last year that some medicine and medical equipment costs have risen 200 percent: “radiology film up 240 percent; helium for MRIs up 667 percent; filters for kidney dialysis up 325 percent.” The cost of chemotherapy has almost tripled.

Iran’s exclusion from the Society for World Wide Banking (SWIFT) makes it impossible to transfer funds electronically. That, in turn, makes buying the raw materials to manufacture generic medicines expensive and difficult.

The recent crash of an Iranian passenger plane that killed 39 people was, in part, the result of sanctions. Because Iran cannot purchase spare parts for its Boeing and Airbus planes, it is forced to use alternatives, like the trouble-prone Ukrainian-made A-140 aircraft that went down Aug. 10. Another A-140 crashed in 2002, killing 46 passengers.

In short, opposing the U.S. and its allies can be dangerous to one’s health.

There is growing opposition to the widespread use of sanctions, as well as to the ability to isolate countries from international finance by excluding them from things like SWIFT. Coupled with this is a suspicion that the U.S. uses its currency to support its economy at the expense of others.

After the 2007-08 economic meltdown, the U.S. lowered its interest rates and increased its money supply, thus making its exports cheaper and other countries imports more expensive. Developing countries have blamed these policies for artificially driving up the value of their currencies and, thus, damaging other countries economies. Brazilian Finance Minister Guido Mantega calls it waging “currency war.”

With the U.S. now pushing higher interest rates and throttling back on buying foreign bonds, many developing countries fear that international capital will flow back to the U.S., leaving countries like Brazil high and dry.

But as long as the world’s reserve currency isin dollars, the U.S. will be able to manipulate global finance and block countries like Iran from any transactions using dollars. But that may be coming to an end. With China set to replace the U.S. as the world’s largest economy, it is only a matter of time before the renminbi—or some agreed upon international method of exchange—replaces the dollar.

China is already moving toward bypassing New York as the world’s financial center, instead routing finances through Hong Kong and London. “There can be little doubt from these actions that China is preparing for the demise of the dollar, at least as the world’s reserve currency,” says Alastair Macleod of GoldMoney, a leading dealer in precious metals.

A number of countries are already dealing in other currencies. Australian mining companies have recently shifted to using China’s reniminbi. How dumping the dollar will affect the U.S. is not clear, and predictions range from minor to catastrophic. What will almost certainly happen is that the U.S. will lose some of its clout in international finance, making it easier for developing countries to move away from the American economic model: wide-open markets, fiscal austerity, and hostility to any government role in the economy.

Diminishing the role of the dollar may make it harder to apply sanctions as well, particularly in those areas where Washington’s policies are increasingly alienated from much of the world, as in Iran, Cuba, and Russia. The European Union (EU) has sanctioned Russia over Ukraine, but not to the extent that the U.S. has. The EU’s trade with Russia is a major part of the Europe’s economy, while Russian trade with the U.S. is minor. And the BRICS—who represent almost a quarter of the world’s GNP and 40 percent of its population—did not join those sanctions.

Addressing the BRICS delegates in Fortaleza, Brazil, Russian President Vladimir Putin said that “together we should think about a system of measures that would help prevent the harassment of countries that do not agree with some foreign policy decision made the by the U.S. and their allies.”

In the long run, the EU may come to regret that it went along with Washington. German industry has taken a big hit—trade with Russia fell 20 percent from January through May—and Russia’s ban on EU agricultural products has badly hurt Poland, Lithuania, Germany, Denmark, Latvia, Finland and the Netherlands. Indeed, European Bank President, Mario Draghi, warned that the current EU recovery is extremely fragile and that sanctions could push it back into recession.

The Germans are especially worried that Russia will turn to Asia, permanently cutting Berlin out of Moscow’s economic sphere.

There are enormous changes ahead as a result of climate change and population growth. While there has been a reduction in the number of people living in extreme poverty—making less than $1.25 a day—almost all that reduction was in China. Things have actually gotten worse in parts of Asia and Africa. By 2050 the world’s population will grow to nine billion, and 85 percent of that growth will be in developing nations, the very countries that most need help to confront the consequences of that future.

Unless the institutions of international finance are wrested from the control of a few wealthy nations, and unless there are checks on the ability of the U.S. and its allies to devastate a country’s economy over a disagreement on foreign policy, those figures bode for some serious trouble ahead.

Conn Hallinan can be read at dispatchesfromtheedgeblog.wordpress.com and middleempireseries.wordpress.com

—30—

4 Comments

Filed under Europe, Iran

Europe: The Sky’s Not Falling

Europe: The Sky’s Not Falling

Foreign Policy In Focus

June 6, 2014

 

 

Now that the dust has settled from the recent elections for the European Parliament it is time to take a deep breath and see what really happened. No, Britain is not about to toss its immigrant population into the sea. No, France’s Marine Le Pen is not about to march on the Elysee Palace. And, as repulsive as the thugs of Hungary’s Jobbik Party and Greece’s New Dawn are, it was the continent’s left to whom the laurels went in last month’s poll.

 

Parties that targeted unemployment, austerity and the growing wealth gap in Europe did well, and the dramatic breakthrough of right wing racist and xenophobic parties in France, Britain, and Denmark had less to do with a neo-Nazi surge than with the inability or unwillingness of the opposition in those countries to offer a viable alternative to a half decade of economic misery. Indeed, if there was a message in the May 25 EU elections, it was that those who trumpeted austerity as the panacea for economic crisis were punished.

 

Hence Britain’s Conservative/Liberal Democrat coalition took a drubbing, France’s ruling Socialists were blitzed, and German Chancellor Andrea Merkel’s lost eight seats, while her Social Democratic opponents picked up four.

 

Among the 28 European Union (EU) member countries, 751 seats in the parliament were up for election.

 

In contrast, where there was a clear choice between economic democracy, on one hand, and “let’s blame it on the immigrants and Roma,” on the other—as in Greece, Spain, Portugal, Ireland, and most of Central and Eastern Europe—voters went left. As Srecko Horvat, Croatian philosopher and author of “What Does Europe Want?,” commented in the wake of the election, “The European left is back in the game.”

 

“Earthquake” was the metaphor most used in describing the triumphs of Marine Le Pen’s National Front (NF) in France, the United Kingdom Independence Party (UKIP) in Britain, and Denmark’s Danish People’s Party. But, if there was a result that shifted the foundations of Europe, it was the victory of Greece’s Syriza Party and the “out of nowhere” appearance of Podemos—“we can”—in Spain.

 

Syriza emerged from the wreckage inflicted on the Greek economy by the so-called “Troika”—the International Monetary Fund, the European Central Bank, and the European Commission. For the price of a bailout—most of it siphoned off by big European banks—the Greek government instituted massive layoffs, huge cuts in pensions, health care, and education, and privatized government-owned property. The jobless rate rocketed to 28 percent—over 50% for young people—and millions of Greeks were impoverished. While Greece’s creditors did well, the austerity did nothing to turn the depressed economy around.

 

Syriza took 26.5 percent of the vote May 25 to become the biggest party in Greece. That figure translated into a general election would net the party 130 seats in the 300 seat Greek parliament. In contrast, the two governing parties that oversaw the austerity program lost over 10 percentage points between them.

 

Much of the media focused on the neo-Nazi New Dawn Party, which won 9.4 percent of the vote—a 2.4 percent jump over their 2012 showing. New Dawn will send three representatives to the European Parliament, where the Greek left will swamp their representatives.

 

Another rightwing Greek party, the Popular Orthodox Rally lost voters.

 

While Syriza focused on the Greek domestic crisis, it also consciously attached itself to other left anti-austerity movements throughout the continent. “What happened in Greece is not a success story but a social tragedy that shouldn’t be repeated anywhere in Europe,” Syriza’s leader Alexis Tsipras said during a debate among candidates for the post of European Commission president.

 

That “anywhere in Europe” resonated in other countries entrapped in the Troika austerity formula or struggling to emerge from stagnant economies and long-tern unemployment. Beside Greece, the most conspicuous example was Podemos in Spain.

 

Podemos came out of the massive anti-austerity rallies that paralyzed Madrid and other Spanish cities in 2011, and which impelled similar demonstrations in Europe and the U.S., including the Occupy Wall Street movement. Podemos, says its leader Pablo Iglesias, is “citizens doing politics. If the citizens don’t get involved in politics others will. And that opens the door to their robbing you of democracy, your rights, and your wallet.”

 

The Spanish party consciously modeled itself on Syriza, not only in program, but also in its grassroots, bottoms-up organizing tactics. While Podemos has only been in existence four months, it took 8 percent of the vote nationwide and 11 percent in Madrid. Added to the success of left parties in Catalonia, Valencia, and the Basque Region, plus the votes for the Spanish Green Party and the Socialist Party, Spain’s ruling rightwing Popular Party is suddenly a decidedly minority organization.

 

That pattern was repeated in several other countries.

 

In Ireland the two parties that oversaw the austerity program—Fine Gael and Labour—dropped 16.5% and 12.5% respectively from the 2011 general election, while left and independent parties, like Sinn Fein, the Socialist Party and People Before Profits cornered 45% percent of the vote. The anti-austerity Portuguese Socialist Party defeated the center-right coalition that has overseen the Troika’s recipe for Lisbon, and the Portuguese Communist Party took 12.7 percent of the vote.

 

Italy saw the leftist Democratic Party emerge as the number one political force in the country with 40 percent of the vote, while Beppo Grillo’s angry and iconoclastic, but program-light, Five Star Movement took a beating, coming in at 21.2 percent. Former Prime Minister Silvio Berlusconi’s rightwing Forza Italia took third at 16.8 percent. A Syriza look alike, “L’Aitra Europa” (the “Other Europe”), garnered a respectable 4 percent and three seats in the European Parliament after only a few months campaigning. In contrast, the much older and established racist Northern League lost four seats and took an anemic 6.2 percent of the vote.

 

In Slovenia the United Left won 5.9 percent of the vote, which in a general election would have given the party six seats in parliament.

 

The extreme right Party for Freedom in the Netherlands lost two seats, and the rightwing Finns Party dropped from the 19 percent it scored in 2011 to 13 percent.

 

Not that it was all sweetness and light.

 

Hungary’s neo-Nazi Jobbik took 14.7 percent of the vote, but that was an almost 6 percent drop from what the Party received in last month’s general elections. Poland’s reactionary Congress of the New Right jumped from 1 percent in the 2011 general elections to 7 percent, and Lithuania’s conservative Order and Justice Party scored 14.3%. The anti-immigrant New Flemish Alliance won in Belgium, and Austria’s Freedom Party came in third, with 19.7 percent of the vote. However, right wing parties like Ataka in Bulgaria, the Greater Romanian Party, and the Slovak National Party all lost voters.

 

The right won parliamentary seats in 10 out of the 28 EU countries, and increased their representation in six of those countries, but also lost seats in seven other countries.

 

The triumphs of the NF in France and the UKID are certainly worrisome. Both ran virulent, anti-immigrant campaigns, and the NF has long been associated with anti-Semitism and anti-Roma ideology. It would be a mistake, however, to assume everyone who voted for both parties share their penchant for ethnic hatred. Some of that support was indeed racist, but the parties also tapped into voter anger over the economic policies of the EU that have kept both countries locked into near recession conditions.

 

The “traditional” left—the Socialist Party in France and the Labour Party in the UK—have gone along with some of the troika’s austerity measures, and have also been sotto voce about immigrant bashing. The absence of a serious left critique of EU policies in both countries let many people surrender to their dark side and buy the fable that immigrants have swamped the job market and plundered social services. Especially since many of the rightist parties opportunistically adopted anti-austerity planks.

 

In Denmark, for instance, the center-right Venstre Party campaigned on denying welfare benefits to immigrants, hardly a platform to contrast itself with the far-right Danish People’s Party.

 

Politically the continent has rejected the troika’s strategy, much as Latin America did in 2000. “We are opposed to everlasting austerity as a means for fiscal rebalancing on both pragmatic and ideological grounds,” says Syriza’s Tsipras. “The subjugation of democratic process to the markets was the reason why we have the crisis today…we predicted from the onset…that austerity-based policies would backfire.”

 

The trick now will be to pull the various left forces together to hammer out an alternative. Podemos’ Iglesias has declared that the Spanish party intended to work “with other parties from Southern Europe to say that we don’t want to be a colony of Germany and the troika.”

 

Syriza has already proposed a European summit modeled on the 1953 London Debt Agreement that canceled 50 percent of Germany’s World War II debt and spread out payments on the rest over 30 years.

 

As for the so-called “earthquake” on the right: the neo-Nazis and immigrant bashers will make a lot of noise, but they offer nothing but hate as an economic solution. The left has a better one, and they are back.

 

—30—

 

 

 

 

1 Comment

Filed under Europe

Marching On Moscow

 

Dispatches From The Edge

Conn Hallinan

May 27, 2014

 

British Field Marshall Bernard Montgomery had three laws of war:

One, never march on Moscow;

Two, never get in a land war in Asia;

Three, never march on Moscow.

So why are the U.S., the European Union (EU), and NATO on the road to the Russian capital? And exactly what are they hoping to accomplish?

 

Like all battlefields on the Eastern front, this one is complicated.

 

For beginners, there are multiple armies marching eastward, and they are not exactly on the same page. In military parlance that is called divided command, and it generally ends in debacle. In addition, a lot of their weapons are of doubtful quality and might even end up backfiring. And lastly, like all great crisis, there is a sticker price on this one that is liable to give even fire breathers pause.

 

There are actual armies involved. NATO has deployed troops, aircraft and naval forces in the region, and the Russians have parked 40,000 troops on Ukraine’s eastern border. But with the exception of the horrendous deaths of over 40 demonstrators in Odessa, the crisis has been a remarkably calm affair. The Russians took over the Crimea virtually without a shot, and while there is a worrisome increase of violent incidents in the south and east, they are hardly up to the French and German invasions in 1812 and 1941, respectively.

 

Which doesn’t mean things couldn’t turn dangerous, a reason why it is important to know the agendas of the players involved.

 

For the Russians this is about national interest and security, and the broken promises and missed opportunities when Germany was reunified in 1990. At the time, the Western powers promised they would not drive NATO eastward. Instead, they vacuumed up members of the old Soviet Warsaw Pact and recruited former Soviet republics into a military alliance that was specifically created to confront Russia.

 

All talk of Putin recreating the old Soviet Empire is just silliness, which there is a lot of out there these days. A perfect example was the New York Times’ embarrassingly thin story about Putin’s personal wealth that rested on the fact he wore expensive watches.

 

There is some silliness on the Russian side as well. Yes, the overthrow of Ukraine President Viktor Yanukovych was a coup—what else do you call an armed uprising that causes an elected president to flee? —but it wasn’t just ex-Nazis and fascists. There was genuine mass anger at the corruption of the Yanukovych government.

 

At the same time, two of the groups that spearheaded the coup—and who currently control seven ministries in the Western Ukraine government—celebrate those who fought with Waffen SS divisions during World War II. The Germans killed some 25 million Russians during that war, so if they are a bit cranky about people who hold celebrations honoring the vilest divisions of an evil army, one can hardly fault them.

 

The Americans and the Europeans have long had their eye on Ukraine, though their interests are not identical because their economic relations are different.

 

Russia supplies the EU with 30 percent of its energy needs; for countries like Finland and Slovakia, that reaches 100 percent. U.S. trade with Russia was a modest $26 billion in 2012, while for the EU that figure reached $370 billion. More than that, several large European energy giants, including BP, Austria’s OMV, ENI, Royal Dutch Shell, and Norway’s Statoil, are heavily invested in Russian gas and oil. If oil and gas are combined, Russia is the largest energy exporter in the world.

 

For Europe, Russia is also a growing consumer market of 144 million people, where retail spending has grown 20 percent a year between 2000 and 2012. . Any attempt to ratchet up sanctions will have to confront the fact that isolating Russia is not in the interests of some very powerful business interests in Europe—and even a few in the U.S., like Chevron, ConocoPhillips and ExxonMobil.

 

Russia is the world’s eighth largest economy, and one that is well integrated into the world’s economy, particularly in Asia through the Shanghai Cooperation Council. The Council includes not only Russia and China, but also most of Central Asia’s countries, with observer status from Iran, Pakistan and India

 

The emerging BRICS countries—Brazil, India, China and South Africa (Russia makes up the “R”)—did not support the recent UN resolution condemning Moscow’s annexation of the Crimea and would certainly not join any sanctions regime. The Russians and Chinese inked a 30-year, $400 billion gas deal, and bilateral trade between the two countries is set to reach $100 billion by 2015 and $200 billion by 2020. Russia and Iran are reportedly negotiating a $10 billion energy deal as well.

 

So far, sanctions have targeted individuals, although Washington and the EU have threatened to up the ante and ban Russia from using the Swift system of international banking. That would make transferring money very difficult. It has certainly crippled Iran’s finances. But Swift, as Gideon Rachman of the Financial Times points out, is a double-edged sword. “Cutting Russia out of Swift would cause chaos in Moscow in the short term,” but in the long term “it might hasten the day when Russia, and more significantly, China, establish alternative systems for moving money between international banks.” According to Rachman, China and Russia have already discussed such a system.

 

The EU’s army is all for rhetorical condemnation of Russia, but when it comes to increasing sanctions, its command is divided. Those countries with significant investments in Russia—Italy, Germany, Spain, Austria and Greece— oppose cranking up the sanctions. German Chancellor Andrea Merkel must juggle her desire to support the U.S. with polls showing that the average German really doesn’t want to march east: been there, done that. The Swedes and the Poles are fire-breathers, but their stance is as much about trying to offset German power in the EU as for any concern over Ukrainians.

 

In short the EU looks like one of those combined armies of Austrian-Hungarians, Russians, and Prussians that Napoleon made his reputation beating up on.

 

For the Americans this is about expanding NATO and opening up a market of 46 million people in the heart of Eastern Europe. The key to that is getting the 28 members of the alliance to finally pull their own. The U.S. currently foots 75 percent of NATO’s bills, and is caught between a shrinking military budget at home and a strategy of expanding the U.S.’s military presence in Asia, the so-called “pivot.”

 

NATO members are supposed to spend 2 percent of their GDP on the military, but very few countries—Britain, Estonia and Greece—actually clear that bar. Nor is there any groundswell to do so in European economies still plagued with low growth and high unemployment. Yes, yes, get the Russkies, but not at our expense.

 

“Sanctions will not help anybody, they would not just hurt Russia, but also Germany and Europe as a whole,” says Rainer Seele, chair of Wintershell, and energy company owned by the German chemical giant BASF.

 

However, NATO is pushing hard. U.S. General and NATO commander Gen. Phillip Breedlove recently called for beefing up NATO forces on the Russian border. But for all the talk about a new Russian threat, NATO is not going to war over Ukraine, anymore than it did over Georgia in 2008. A few neo-conservatives and hawks, like U.S. Senator John McCain, might make noises about intervention, but it will be a very lonely venture if they try.

 

In the end the solution is diplomatic. It has to take into account Russia’s legitimate security interests and recognize that Ukraine is neither Russian nor Western European, but a country divided, dependent on both. The simplest way to deal with that is through a system of federal states. It is the height of hypocrisy for the U.S. to oppose such a power arrangement when its own system is based on the same formula (as are many other countries in Europe, including Germany).

 

Polls show that Ukrainians in the East and South do not trust the Kiev government, but they also show that a solid majority wants a united country. That could shift if the Kiev government decides to use force. Once bodies start piling up, negotiations and compromise tend to vanish, and the possibility of civil war becomes real.

 

Moscow made a proposal last summer that the EU, Russia, and the U.S. should jointly develop a plan to save the Ukrainian economy. The EU and the U.S. dismissed that proposal, and the current crisis is a direct result of that rejection. The parties need to return to that plan,

 

In spite of the tensions, events in Ukraine are trending toward a political resolution and the May 25 presidential elections may produce a candidate willing to compromise. The Russians are re-deploying those 40,000 troops, and Russian Foreign Minister Sergei Lavrov made it clear that “We want Ukraine to be whole within its current borders, but whole with full respect for the regions.” Translation: no NATO.

 

The dangers are many here: that the Kiev government tries to settle the conflict by force of arms; that NATO does something seriously provocative; that the Russians lose their cool. As Carl von Clausewitz once noted: “Against stupidity, no amount of planning will prevail.”

 

But the ducks are lining up. The sanctions will not force Russia to compromise its security and may end up harming the EU and the U.S. The commanders of the armies facing Moscow are divided on measures and means. Neither side in the Ukraine is capable of defeating the other. It is time to stop the bombast and cut a deal, particularly since Washington will need Moscow’s help in Iran, Syria, and Afghanistan.

 

Oh, and marching on Moscow? Really? Monty wasn’t the quickest calf in the pasture but he had that one figured out as a bad idea.

 

 

 

—30—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4 Comments

Filed under China, Europe

Continental Drift: Europe’s Breakaways

Continental Drift: Europe’s Breakaways

Dispatches From The Edge

Conn Hallinan

April 2, 2014

 

 

“Happy families are all alike: every unhappy family is unhappy in its own way.”

“Anna Karenina” by Leo Tolstoy

 

The opening to Tolstoy’s great novel of love and tragedy could be a metaphor for Europe today, where “unhappy families” of Catalans, Scots, Belgiums, Ukrainians, and Italians contemplate divorcing the countries they are currently a part of. And in a case where reality mirrors fiction, they are each unhappy in their own way.

 

While the U.S. and its allies may rail against the recent referendum in the Crimea that broke the peninsula free of Ukraine, Scots will consider a very similar one on Sept. 18, and Catalans would very much like to do the same. So would residents of South Tyrol, and Flemish speakers in northern Belgium.

 

On the surface, many of these succession movements look like rich regions trying to free themselves from poor ones, but, while there is some truth in that, it is overly simplistic. Wealthier Flemish speakers in northern Belgium would indeed like to separate from the distressed, French speaking south, just as Tyroleans would like to free themselves of poverty-racked southern Italians. But in Scotland much of the fight is over preserving the social contract that conservative Labor and right-wing Tory governments have systematically dismantled. As for Catalonia—well, it’s complicated.

 

Borders in Europe may appear immutable, but of course they are not. Sometimes they are changed by war, economic necessity, or because the powerful draw capricious lines that ignore history and ethnicity. The Crimea, conquered by Catherine the Great in 1783, was arbitrarily given to the Ukraine in 1954. Belgium was the outcome of a congress of European powers in 1830. Impoverished Scotland tied itself to wealthy England in 1707. Catalonia fell to Spanish and French armies in 1714. And the South Tyrol was a spoil of World War I.

 

In all of them, historical grievance, uneven development, and ethnic tensions have been exacerbated by a long-running economic crisis. There is nothing like unemployment and austerity to fuel the fires of secession.

 

The two most pressing—and the ones most likely to have a profound impact on the rest of Europe—are Scotland and Catalonia.

 

Both are unhappy in different ways.

 

Scotland always had a vocal, albeit marginal, nationalist party, but was traditionally dominated by the British Labour Party. The Conservatives hardly exist north of the Tweed. But Tony Blair’s “New Labour” Party’s record of spending cuts and privatization alienated many Scots, who spend more on their education and health services than the rest of Britain. University tuition, for instance, is still free in Scotland, as are prescription drugs and home healthcare.

 

When Conservatives won the British election in 2010, their austerity budget savaged education, health care, housing subsidies, and transportation. Scots, angered at the cuts, voted for the Scottish National Party (SNP) in the 2011 elections for the Scottish parliament. The SNP immediately proposed a referendum that will ask Scots if they wanted to dissolve the 1707 Act of Union and once again become be an independent country. If passed, the Scottish government proposes re-nationalizing the postal service and throwing nuclear-armed Trident submarines out of Scotland.

 

If one takes into account its North Sea oil resources, there is little doubt but that an independent Scotland would be viable. Scotland has a larger GDP per capita than France and, in addition to oil, exports manufactured goods and whisky. Scotland would become one of the world’s top 35 exporting countries.

 

The Conservative government says that, if the Scots vote for independence, they will have to give up the pound as a currency. The Scots respond that, if the British follow through on their currency threat, Scotland will wash its hands of its portion of the British national debt. At this point, there is a standoff.

 

According to the British—and some leading officials in the European Union (EU)—an independent Scotland will lose its EU membership, but that may be bluster. For one, it would violate past practice. When East and West Germany were united in 1990, some 20 million residents of the former German Democratic Republic were automatically given EU citizenship. If 5.3 million Scots are excluded, it will be the result of pique, not policy. In any case, with the Conservatives planning a referendum in 2017 that might pull Britain out of the EU, London is not exactly holding the high ground on this issue.

 

If the vote were taken today, the Scots would probably vote to remain in Britain, but sentiment is shifting. The most recent poll indicates that 40 percent will vote for independence, a three percent increase. The “no” votes have declined by 2 percent to 45 percent, with 15 percent undecided. All Scottish residents over the age of 16 can vote. Given the formidable campaigning skills of Alex Salmond, Scotland’s first minister, and leader of the SNP, those are chilling odds for the London government.

 

Catalonia, wedged up against France in Spain’s northeast, has long been a powerful engine for the Spanish economy, and a region steeped in historical grievance. Conquered by the combined armies of France and the Spain in the War of the Spanish Succession (1701-1714), it was also on the losing side of the 1936-‘39 Spanish Civil War. In 1940, triumphant fascists suppressed Catalan language and culture and executed its president, Lluis Companys, an act no Madrid government has ever made amends for.

 

Following Franco’s death in 1975, Spain began its transformation to democracy, a road constructed by burying the deep animosities engendered by the Civil War. But the dead stay buried only so long, and a movement for Catalan independence began to grow.

 

In 2006 Catalonia won considerable autonomy, which was then overturned by the Supreme Tribunal in 2010 at the behest of the current ruling conservative Popular Party (PP). That 2010 decision fueled the growth of the Catalan independence movement, and in 2012 separatist parties in the province were swept into power.

 

Prime Minister Mariano Rajoy’s PP is pretty much an afterthought—19 out of 135 seats—in Catalonia where several independence parties dominate the Catalan legislature. The largest of these is Province President Artur Mas’s Convergencia i Unio (CiU), but the Esquerra Republicana de Cataluyna (ERC) doubled its representation in the legislature.

 

That doesn’t mean they agree with one another. Mas’s party tends to be centrist to conservative, while the ERC is leftist and opposed to the austerity program of the PP, some of which Mas has gone along with. The CiU’s centrism is one of the reasons that Mas’s party went from 62 seats to 50 in the 2012 election, while the ERC jumped from 10 to 21.

 

Unemployment is officially at 25 percent—but far higher among youth and in Spain’s southern provinces—and the Left has thrown down the gauntlet. Over 100,000 people marched on Madrid last month demanding an end to austerity.

 

Rajoy—citing the 1976 constitution—refuses to allow an independence referendum, a stubbornness that has only fueled separatist strength. This past January the Catalan parliament voted 87 to 43 to hold a referendum, and polls show a majority in the province will support it. Six months ago, a million and a half Catalans marched in Barcelona for independence.

 

The PP has been altogether ham-fisted about Catalonia and seems to delight in finding things to provoke Catalans: Catalonia bans bull fighting, so Madrid passes a law making it a national cultural heritage. The Basques get to collect their own taxes, Catalans cannot.

 

How would the EU react to an independent Catalan? And would the central government in Madrid do anything about it? It is hard to imagine the Spanish army getting involved, although a former minister in the Franco government started Rajoy’s party, and the dislike between Madrid and Barcelona is palpable.

 

There are other fault lines on the continent.

 

Will Belgium split up? The fissure between the Flemish-speaking north and the French-speaking south is so deep it took 18 months to form a government after the last election. And if Belgium shatters, does it become two countries or get swallowed by France and the Netherlands?

 

The South Tyrol Freedom Party (STFP) is gearing up for an independence referendum and pressing for a merger with Austria, although the tiny province—called Alto Adige in Italy—has little to complain about. It keeps 90 percent of its taxes, and its economy has dodged the worst of the 2008 meltdown. But some of its German-Austrian residents are resentful of any money going to Rome, and there is a deep prejudice against Italians—who make up 25 percent of South Tyrol—particularly among those in the south. In this way the STFP is not very different than the racist, elitist Northern League centered in Italy’s Po Valley.

 

It is instructive to watch the YouYube video on how borders in Europe have changed from 1519 to 2006, a period of less than 500 years. What we think of as eternal is ephemeral. The European continent is once again adrift, pulling apart along fault lines both ancient and modern. How nations like Spain and Britain, and organizations like the EU, react to this process will determine if it will be civilized or painful. But trying to stop it will most certainly cause pain.

 

 

—-30—-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3 Comments

Filed under Europe