Moon of Alabama Ukraine

Some Likely Long-term Effects of the War in Ukraine

Game-changers of the Ukraine war could be the freezing of Russia's central bank assets, China and India's rapprochement, the cementation of the EU's vassalage, and more.
Above Photo: International Week of Anti-Imperialist Struggle.

By Moon of Alabama

I agree with these but would add that it is also likely to lead to 4) the long term demise of NATO and 5) a shrinking role for the U.S. in the Middle East will also shrink as a consequence of the war.

1. The freezing of Russia’s (and Iran’s, Venezuela’s, Afghanistan’s) assets will have severe consequences for the U.S. dollar. The U.S. essentially defaulted by holding back Russian assets that it had the fiduciary duty to give back. China and everyone else will move its reserves to countries or into commodities that are not under U.S. control. See the Michael Hudson’s interviews here and here:

[T]hat means that other countries all of a sudden see what they thought was their flight to security, what they thought was their most secure savings, their holdings in U.S. banks, US treasury bill, all of a sudden, is holding them hostage and is a high risk. Even the Financial Times of London has been writing about this, saying, how can the United States that was getting a free ride off the dollar standard for the last 50 years, ever since 1971, when foreign countries held dollars instead of gold and basically holding dollars means you buy U.S. Treasury bonds to finance the US budget deficit and the balance of payments deficit. How can the United States kill the goose that’s giving it the free ride? Well, the answer is that other countries can only move into gold and there’s an alternative to the dollar because that’s something that all the countries of the world have agreed upon is an asset, not a liability. If you hold any foreign currency, that currency is a liability of a foreign country, and if you hold gold, it’s a pure asset.

2. China’s and India’s rapprochement has been coming for some time. The border squabble over a few thousand square meters of mountain rocks in recent years never made much sense. The Ukraine crisis has shown that India and China have common interests. Some solution for the border will be worked out and full cooperation will return. This means the end for the Quad, the U.S. made anti-China coalition of Australia, India, Japan and the U.S. itself.

3. The cementation of the EU’s vassalage to the U.S. will only be temporarily. European companies have their own interests and they will press their politicians into more realist positions:

It is a long haul for Europe to dispense with Russian gas. Serbian President Aleksandar Vucic said yesterday: “There are gas shortages, and that is why we need to talk to Russians. Europe will move towards reducing its dependence on the Russian gas, but can this happen in the coming years? This is very difficult.”

“Europe consumes 500 billion cubic meters of gas, while America and Qatar can offer 15 billion, up to the last molecule… That is why German and Austrian politicians told me: “We cannot just destroy ourselves. If we impose sanctions on Russia in the oil and gas domain, we will destroy ourselves. It’s like shooting yourself in the foot before rushing into a fight.” This is how certain rational people in the West see it today.”

4. As for NATO: As soon as Russia has finished its operation in the Ukraine it will become clear that it has absolutely no interest in attacking any NATO country. The coming period of high inflation will lead to shrinking defense budgets. A NATO that makes promises, like it did to Ukraine, but has neither will nor means to fulfill them has lost its way and serves no serious purpose. It will wither away.

5. In the Middle East the U.S. has proven to be an unreliably ally. The Saudis and others need someone else to protect their security:

The Russian intervention in the Ukraine took Gulf governments by surprise and caused a great deal of anxiety. Here were governments that have tried in recent years to balance their primary loyalty to the U.S. with a new attempt to improve relations with China and Russia.

While Putin intervened in Syria against the wishes of Gulf regimes, which were trying to unseat the Syrian ruler, Bashar al-Asad, the Gulf acknowledged the resolve and determination of the Russian government. Brutality in Russian or American intervention in Syria is of no concern to Gulf despots. They value first and foremost the willingness of the Putin administration to stand by his ally in Damascus in comparison to what they see as a lack of resolve on the part of the U.S. towards its clients in the Gulf.

The Gulf regimes feel Putin is more loyal than the U.S., and the mischievous behavior of UAE and Saudi Arabia in the last few weeks is an expression of their frustration with U.S. role in the region. (Riyadh, for instance, is in talks with China to trade some of its oil in yuan, which would deal a blow to the U.S. dollar that is used in 80 percent of world oil sales. Until now, the Saudis have exclusively used the dollar. And Emirati and Saudi leaders have refused to take Biden’s phone calls.)

China and Russia will likely cooperate to build some new security architecture in the Middle East.

As all the above plays out it may well turn out that the U.S. policy of overextending and unbalancing Russia did not work but has created a backlash that has severely damaged its own strategic position.

2 comments

  1. The goal has always been to diminish America’s role in the world and destroy the dollar as the world’s reserve currency. They’re doing a great job.

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