Trade War: Are US Sanctions the Last Straw for Russia? - Like This Article

August 3, 2017 - Fort Russ - 

By Eduard Popov - translated by Jafe Arnold - 

Continued from Part 1

Unlike the anti-Russian sanctions imposed over the “occupation of Crimea”, the sanctions 2.0 package has not been met with support from the US’ ally, the European Union. Moreover, as discussed in part one, the sanctions have provoked a split into two camps - “old Europe” on the one hand and several countries making up the “new”, “post-communist” Europe led by Poland on the other. In the words of the famous German expert on Russia, Alexander Rahr, “Now is the moment of truth for Europe. It is no longer possible to pretend that nothing has happened and hunker down and wait. Europe must either swallow this bitter bill and agree to the status of being an eternal vassal of America, or defend its right to independent policy - distancing itself from the US with all the ensuing consequences.”

Russia, meanwhile, has found itself in an even more difficult position. On August 2nd, Russian Prime Minister Dmitry Medvedev claimed that the US has in effect declared a full-fledged trade war on Russia. This is quite a dramatic statement from the mouth of a politician who is often considered to be more pro-Western and liberal than President Vladimir Putin. Nevertheless, it is a very accurate statement at that. 

The Countering America’s Adversaries Through Sanctions Act (HR 3334), which was finally approved by US President Donald Trump on August 2nd, is not limited to trade sanctions. It essentially puts Russia’s very sovereignty at stake. As we brought up in the first part of our article, Russia has been given an ultimatum to cease all of its activities of a military, economic, and informational nature beyond its borders. This is akin to demanding that Russia isolate itself and sit back and await a most likely unfavorable "fate." These plans and intentions go far beyond the notion of trade war, and accepting such an ultimatum would mean the Russian state essentially liquidating itself. In our opinion, this ultimatum was presented not in the hope that it would be accepted (the US Congress is hardly likely to actually believe that the Russians are so weak), but with the aim of provoking a final rupture of bilateral relations. This would be a throwback to the worst periods of the Cold War.

Russia’s response to the US’ challenge: How and what? 

The first reaction from Russia’s side came on July 28th, when it was announced that Russia would expel numerous American diplomats and deny the American diplomatic mission’s access to certain properties and facilities. This step was a belated response to the earlier expulsion of 35 Russian diplomats from the US and confiscation of the Russian Embassy’s property in the US (which was purchased by the Soviet Union back in the 1970’s). The American diplomatic mission to Russia’s staff is to be reduced by 755 people, as a result of which the US diplomatic mission will have the same number of personnel that Russia’s diplomatic mission has in America, or 455 people. 

American diplomats have also been denied access to their vacation residence in Serebryany Bor (near Moscow) and their warehouse. This step, let us emphasize, is but a belated reaction to the very same actions of US authorities against the Russian diplomatic mission in the US, and in the truest since of the word is therefore not a response to the sanctions 2.0. Nonetheless, this move demonstrates Russia’s leadership’s willingness to take radical steps against the US. 

A whole number of Russian politicians and pro-government political analysts have suggested that Russian monetary assets be withdrawn from the US. Russia’s Deputy Minister of Foreign Affairs, Sergey Ryabkov, for instance, has stated that the US’ anti-Russian sanctions are only pushing Russia towards further developing a system to replace the dollar. The Russian Senator Igor Morozov has also said that Russia should respond by getting rid of the $110 billion that Russia holds in US Federal Reserve bonds and opt instead for Chinese and European bonds. 

Also on August 2nd, the famous economist and advisor to President Putin, Sergey Glazyev, spoke even more extensively on this topic. Commenting on the US authorities’ actions and possible retaliatory steps on Russia's part, Glazyev proposed that Russia “should recognize the US as an aggressor country, especially since the Americans are waging a hybrid war against us - not only by imposing sanctions, but also training militants who make their way to Russia [probably a reference to Islamist militants in the North Caucasus - Popov], by virtue of their hostile actions in Syria and other places where we are ensuring peacekeeping roles. And in general through subversive activities against Russia.” Glazyev has also spoken out in favor of withdrawing Russian investments in US bonds insofar as such ultimately helps finance the American military budget. 

Sergey Glazyev with Vladimir Putin (Sergey Lavrov in background)

However, Glazyev fears that such could end up being impossible for Russia to do: “I personally know many examples of when attempts by our citizens to withdraw money from foreign accounts in US dollars and transfer them to Russia turned out to be not simply difficult, but impossible…The same thing could happen to state money. The Americans have already frozen Iran’s assets, for example, and those of our state organizations against which sanctions have been imposed.” 

Other economists and experts surveyed by the author have expressed similar notions in a similarly distressed tone. As a side note, shortly before the “Crimean Spring”, Russia had already withdrawn its assets from the US, only to re-invest them amidst a general increase in investments in American bonds in recent times. 

Russia vs. the US beyond the economic sphere

It is unlikely that Russia will get back the money it has invested in American bonds. At another time, this would cause an enormous crisis of trust in the US financial system. However, the fact that American ruling circles are behaving so abrasively towards not only their “enemies” (Russia, China, the DPRK, etc.), but even their “friends” (the European Union) is evidence that Washington is not very concerned with the political, psychological, and informational consequences of pursuing such “bull in a China shop” policies. The age of post-modernity in which the contemporary world finds itself allows public consciousness to be manipulated so deftly that not even the propaganda genius Dr. Goebbels could have dreamed of such. It might even be correct to speak not even of manipulation of consciousness, but outright mind control.

At any rate, Russia is entering an unprecedentedly acute and dramatic struggle with the US amidst a very complex foreign and domestic policy situation. The international situation is complicated by an absence of genuine allies in the former Soviet space. Even Belorussia under Alexander Lukashenko at times  behaves demonstratively hostile, and some experts in Moscow are even speaking of an end of the Union State. Hopes for new allies among the countries of “old Europe” are rather phantasmal insofar as the Old World remains under Washington’s tight control. 

But the most dangerous aspect of all, in our opinion, is the domestic political situation, in particular the split within the Russian elite and issues pertaining to the latter's professional qualities and ideological and psychological motivations. Even the loss of Russia’s financial investments in the American bonds market would be justified on the condition that such is compensated for with intelligent spending in domestic resources. This is hindered, however, by the pro-American lobby in Russian ruling circles and the influence of the opposition oligarchs. 

President Putin is faced with the daunting task of eliminating or reducing the influence of the American lobby and relevant oligarchs, especially in the financial-economic wing of the government. This is one of the leftovers of the “wild capitalism” of the 1990’s. The presence of this influential layer makes victory for Russia in its confrontation with what is still the strongest power in the world, to say the least, difficult. 

The Ukrainian front of a hot war 

Optimistic views on the outcome of the “New Cold War” (which could at any time  turn into a hot one) can be found in Russian patriotic circles. This is the result of a misunderstanding of the goals and capacities of the conflicting sides. At the present moment, Russia is trying to avoid confrontation with the United States. Nevertheless, the policy of compromise has its limits. A fierce struggle between patriots and those in favor of capitulating to the US is ongoing within the Russian elite (much like among European elites). The sanctions 2.0 have not yet shifted the balance in favor of either side, but have only given impetus to both parties’ arguments. A victory for the patriots would reinforce Russia’s distancing itself from the West and bring Russia and China closer together - a prediction which Donald Trump himself made upon signing the sanctions legislation into law on August 2nd. 

The probability of a local military clash between either Russian and American armed forces or, more likely, between Russia and foreign armed forces controlled by the US, is high. The leading Ukrainian expert Mikhail Pogrebinsky has drawn particular attention to the danger of this scenario. In Pogrebinsky’s opinion, under current circumstances the Russian leadership is capable of giving a harsh response to Kiev’s hostile actions (such as Ukrainian-prepared terrorist attacks on Russian territory). Without a doubt, the intensification of America’s anti-Russian policies play a role in the situation in Ukraine. 

The Wall Street Journal has reported that US defense secretary James Mattis has approved a plan for supplying defensive weapons to Ukraine, including Javelin anti-tank missile systems and anti-aircraft guns. Let us recall, however, that the Javelin system is not a defensive weapon, but is intended for offensive operations. According to the testimonies of my friends in the Donetsk People’s Republic militia, Javelin’s were used back in 2015, but on Russia’s insistence the Donbass republics turned a blind eye to these and other facts of American and Western military presence in Donbass. 

Over the past few days, the Ukrainian press has been overwhelmed with euphoria over the new anti-Russian sanctions and the decision to supply “defensive” weapons to Kiev. Kiev hopes to solve both its Donbass and Crimean “problems" with the US’ help. As I’ve expressed earlier in commentary on the Ukrainians’ expectations, the intensification of the US’ Ukraine policy and the growth of tension between the US and Russia, however, will first and foremost and most painfully of all hit Ukraine - which from any perspective today looks like it is one of the most probable theaters for a potential hot war. And this would be a war not for Ukraine, but in Ukraine - a daunting prospect that awaits Ukrainians. 

Russia: Quo vadis? 

In its showdown with the declining US empire, Russia faces enormous tasks both at home and abroad. If Russia is to count on winning, then it must accomplish a real cadre and ideological revolution, and essentially replace its elite and management class. The closest analogy to this in the history of Russia would be the “Stalinist purges” of the 1930’s which thoroughly shook up and weakened the “new bourgeoisie” (whose appearance Trotsky astutely noted) and potential supporters of capitulation and rapprochement with Nazi Germany.

No less grand-scale and ambitious are the outstanding tasks in the ideological sphere. Russia essentially belongs to the “second tier” of the capitalist world and has not yet proposed a conceptual alternative to the existing world order. Putin’s famous Munich speech can be considered a first step in this direction. Paradigmatically enough, the decline and inevitable collapse of the American empire is historically coinciding with the crisis of capitalism and its ideological expression, liberalism, a phenomenon which Immanuel Wallerstein has termed the “end of the century of liberalism.” 

I am convinced that Russia can and must lead the process of practically implementing a global alternative to liberalism. The current geopolitical  rift with the United States opens up new prospects for this. Crisis gives birth to new opportunities. 

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Trade War: Are US Sanctions the Last Straw for Russia? - Like This Article

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