Swatting midges with crowbars

Is NATO still fit for purpose in the face of increased Sino-Russian use of geoeconomic instruments to achieve their geopolitical goals?

“Saigon.  Shit.  I’m still only in Saigon… Every minute I stay in this room I get weaker, and every minute Charlie squats in the bush he gets stronger.  Each time I look around, the walls move in a little tighter.” 

Captain Willard , Apocalypse Now

President Trump’s huffy exit from NATO’s 70th birthday party, held last December in the UK, is reminiscent of Lesley Gore’s 1963 classic, ‘It’s my party, and I’ll cry if I want to.’  Amid discussions about the alliance’s future, attendees had much to cry about: ‘nastiness’ from France’s Macron and ‘bitchiness’ from Canada’s Trudeau.  But, the best predictor of the future, so the saying goes, is the past. On that basis the futures of NATO and the EU appear somewhat time limited.

Almost exactly two thousand five hundred years ago the Greek city states triumphed having seen off the Persian beast from the east.  Emerging as the preeminent Greek hegemon Athens promptly created the Delian League – the NATO of its day – to keep Persia contained in Asia.  Athenian wealth flowed from dues paid by alliance members – the 2% of GDP, as it were.  But, misuse of the budget to promote her own aims caused resentment.  Stripped of meaningful purpose in a changed world the alliance fractured and fifty-one years after its inception tensions exploded into war.  Twenty-seven years later Athens was left devastated, never to recover. 

Having outlived the Delian League NATO boasts of its success and longevity – all nineteen additional years of it. But, its birthday party exposed cracks in the alliance. Highly unlikely to turn on itself and reduce America to vassal status, NATO is, nevertheless, in trouble.  Macron and Trump may both have a point about the alliance and its future – the patient might in a way be brain dead and largely unwilling to pay for its own treatment.  Conceived in 1949 and structured to meet the threats of a bygone bi-polar world, NATO fulfilled its military and political mission of providing collective security to western liberal democracies in facing down communism, preventing the resurgence of a European hegemon and providing the protective framework for the European political project.  

But today, NATO appears to lack the mental architecture to reimagine itself in a fast-emerging multi-polar world in which the tools of statecraft wielded by China and Russia are more geoeconomic than geopolitical in pursuit of their geostrategic objectives.  As the West builds new aircraft carriers, worries about defence spending, and ponders how to recapitalise its armies, the Chinese construct new ports and railways while the Russians develop their Arctic infrastructure.  In the same week that Justin Trudeau mocked Trump at Buckingham Palace, Russia turned on the Power of Siberia pipeline to feed gas to China, reinforcing her position as a swing supplier of energy, no longer dependent solely on markets in Western Europe.

NATO is not the only patient in the ward. Almost every institution conceived by the post-war Bretton Woods conference that gave birth to the International Rules Based System (IRBS) and sanctified Western global hegemony is feeling the stress of the world’s shift to multi-polarity.  The EU project is a case in point. How often have we heard that the EU is the guarantor of peace in Western Europe? At its inception the rationale that European countries would never again fight each other was high minded and provided a logical raison d’être for the political project. But given that democracies have never fought each other – the Icelandic fishing wars notwithstanding – that argument has less traction.  As with the Delian League and NATO, the EU’s founding purpose is no longer relevant while fissures in it have widened – witness Brexit.

Future historians may well note that Bretton Woods marked both the beginning of the zenith of Western democratic liberalism and of its twilight years, doomed through entropy to follow the fate of the other two failed twentieth-century isms – Communism and Nazism – albeit in slower time and less dramatically.

For five hundred years the Western European system, which found new expression on the North American continent, dominated the world through maritime power. Having exploited new markets through naval muscle the West became the guarantor of its own wealth by securing maritime trade while at the same time containing Russia within the vast Eurasian landmass.  Bottling up Russia was never just a Cold War and post-Cold War policy.

But all that is now in flux.  In 2013 China officially launched her Belt and Road Initiative (BRI) enshrining its ambition in her constitution in 2015, just in case anyone doubts her long-term commitment to the project.  BRI aims to use China’s rapid industrialisation as a springboard to global influence, if not dominance, by creating a twenty-first century Silk Road – an empire built with geoeconomic instruments rather than the traditional geopolitical tools of conquest. 

To appreciate the scale of BRI one needs to imagine China as an octopus whose tentacles represent eight strategic directions: three Eurasian economic land corridors (Belt) and three maritime routes (Road) aim, amongst much else, to link up the Eurasian landmass through a series of regional trading hubs.  Considering herself a polar power China’s seventh tentacle embraces both poles, while the eighth stretches into space.  

Put another way, China’s approach can also be described through the trinity of Ends, Ways and Means in which the aims or goals (Ends) are achieved through various strategic directions and options (Ways), which in turn are driven by available resources and appropriate mechanisms (Means). 

In Belt and Road: A Chinese World Order  Bruno Maçães defines China’s End as the expansion of her power and influence through the logic of geopolitics but using the tools of geoeconomic statecraft to achieve geostrategic aims.

The Means through which she achieves this include: state control of strategic industries; the creation and control of communication corridors; the creation and use of organisational and financial institutions; and cooperation with other countries in such a way that does not involve the loss or subordination of their sovereignty, but stresses respect for and strengthening of regional cultural values – seemingly, the very antithesis of the EU’s political project (Maçães 2018).

The Ways are the three land and three maritime directions known respectively as the Belt and Road.  Somewhat counterintuitively, the maritime strategic directions are known as ‘Road’ because they connect ports of departure with destinations – connecting the dots, as it were.  The three strategic land ‘Belts’ on the other hand are less end-to-end trade routes, and more a series of interconnected free-trade hubs, markets and regions – like the holes in a belt.  

The three Belt directions are: 1. Southwest China through Southeast Asia and Indo China to the Bay of Bengal; 2. Northwest China through West Asia to the Persian Gulf; and 3. Northwest and Northeast China through Central Asia and Russia and on into Europe and the Baltics.  These strategic land directions hinge on a mix of six ‘communication corridors’ or infrastructure projects: railways; highways; sea routes; air transportation hubs; electric power, information communication technology (ICT) and artificial intelligence (AI); and oil and gas energy transportation through pipelines and LNG shipments.

The three maritime Road directions are: 1. The traditional trading route through the South China Sea, Indian Ocean, Red Sea and into the Mediterranean; 2. South-eastward to Oceania and the South Pacific; and 3. Aided by climate change, the opening up of the Northern Sea Route (NSR) across the Russian Arctic and on into West Eurasian markets in the European Economic Area (EEA).

The Chinese Belt & Road Initiative

To drive this project forward China has created economic institutions that directly rival those of Bretton Woods.  In War by Other Means Robert Blackwell and Jennifer Harris define geoeconomics as the use of economic instruments that: promote and defend national interests; produce beneficial geopolitical results; and counter the actions of other nations’ economic actions on one’s own geopolitical goals.  They describe modern geoeconomic instruments as: trade and investment policies; economic assistance and sanctions; cyber; financial and monetary policy; and policies governing energy and commodities.  

The perennial problem of breaking the West’s maritime blockade of Eurasia has been one of time and space; how to shrink geography and collapse time over such vast distances.  In the past the technology simply didn’t exist to do this in a way that rivalled the speed and volume of maritime trade.  But the Chinese solution today is cyber.  The magic juice that collapses time and space is ICT-AI linking up new digitised regional trading hubs across Central and West Asia and on into Western Eurasian markets in the EEA.  

One cannot overestimate the importance of ICT and AI. The engines that powered North Korea’s 2017 ballistic tests are thought to have been smuggled from eastern Europe into the so-called hermit state – not physically but digitally – and built by 3D printers.  Small wonder, then, that China is at the forefront of developing ICT infrastructure and pushing 5G technology and AI, so much so that the US, roused from its geopolitical slumber, is pushing back hard against Huawei’s 5G aspirations in particular and with trade tariffs in general.  No surprise then that Trump insisted on Huawei as an agenda item at NATO’s 70th.  He who controls ICT and AI controls the world in the twenty-first century.

That said, at least three Eurasian countries – China, Russia and Iran – are moving in the opposite direction to the rest of the world with respect to connectivity.  Within the next five to ten years every spot on earth will receive satellite-enabled high speed Internet thanks to a blizzard of communications satellites being sent into Earth’s orbit by Space X’s Starlink (12,000 by 2025 and possibly up to 40,000 in total), Amazon (3,200), OneWeb (650-2,000) and others.  By contrast, at the end of 2019 only 2,218 active satellites were circling the globe.  But, perversely, China, Russia and Iran are increasing their efforts to decouple from the terrestrial Internet by creating their own domestic intranets, thus isolating their populations behind digital Berlin walls.  Ironically, such digital cocooning may well hinder the very trans-Eurasian connectivity that BRI envisages and negatively impact the flow of business and trade.  How these countries plan to further isolate their populations from the celestial Internet remains to be seen. 

Digital connectivity aside, while the West has long ignored geoeconomic instruments, choosing instead to exercise influence through geopolitical tools, both Russia and China have embraced them fully.  Having squandered the opportunity to rise from the economic ashes of communism, and hobbled by a negative fertility rate (Rosstat  predicts a 12% reduction in population over the next two decades), Russia is unlikely to recover her former Soviet glories or influence.  But, by positioning herself as the Eurasian bridge, she plays a pivotal role in connecting the continent, particularly by opening up her Arctic coastline to Chinese infrastructure investment, where the NSR, one of China’s three maritime Roads – the so-called Ice Road – represents a 37% reduction in transit compared with the Indian Ocean route.

Groaning with untapped resources, the Arctic NSR is also key to transporting energy in the form of Liquefied Natural Gas (LNG) east to China and Chinese raw materials west to manufacturing hubs closer to European and US markets such as at Kirkenes in the Norwegian Arctic.  Such is the importance of the Arctic that Putin has anointed the FSB with full responsibility for everything that happens there.  With sixty-one heavy, medium and light icebreakers compared to the US’s five and a key member of the Arctic Council, Russia is the preeminent Arctic power. 

The NSR is but part of a larger whole.  Originally proposed in the mid-1990s, the Eurasian equivalent of the EU finally took form in May 2014 as the Eurasian Economic Union (EAEU). Stretching from the Pacific to the borders of the EU, the EAEU is an integrated single market of over 180 million people.  Clustered around Russia, with member states Belarus, Kazakhstan, Kyrgyzstan, and Armenia, the EAEU is China’s most northerly economic land corridor.  Like a Zulu army on the march she advances westwards in bull formation: the head through Central and Southwest Asia; the enveloping horns down from the Arctic and up through the Red Sea and North Africa. 

China’s long but rapid march to the West’s markets is as relentless as it is economically aggressive. Her penetration of Western Eurasia has already begun. She has challenged the EU by cutting bilateral deals with no less than four EU member states with seemingly no reference to Brussels.  In 2018 the EU’s Politburo in Brussels was so alarmed by Italy’s intention to sign a non-binding memorandum of understanding with China’s BRI that it, along with the European Central bank, directly interfered in Italian politics to engineer ‘regime change’ thereby ensuring that a more EU-compliant government was installed in Rome.  

Elsewhere in Southeast Europe, the influence of BRI is such that Serbia, a Balkan EU accession state (2025), signed an agreement with the EAEU in October 2019 to create a free trade zone.  This may signal Serbia’s intention to join the EAEU, perhaps proving that in future it may be possible to be a member of both blocs.  Or of one unified bloc?  Either way, the EAEU is making inroads into Southeast Europe.  If China can engineer bilateral deals with EU member states bypassing Brussels entirely, why should Britain even need to pursue a Canada type trade deal?  Is the EU really even that relevant anymore? Bruno Maçães thinks not.  He should know. He was the Portuguese European Minister for two years, 2013-2015, and author of The Dawn of Eurasia as well as Belt and Road: A Chinese World Order.

While the EU wrings its hands, China buys into southern European ports, plans to construct railways north to Hungary and south from Kirkenes in Norway through Finland and, via a proposed tunnel under the Baltic, into Estonia. It is not hard to imagine which way Estonia might jump when offered attractive infrastructure opportunities – something not in NATO’s gift.  Ironically, China may yet become the best guarantor of peace not just in the Baltics but across Eurasia – a kind of Orwellian, AI-driven Pax Sinica.

Despite her comparative weakness, Russia excels at buttressing that with skilful use of geoeconomics.  What better way to keep the West mired in Cold War thinking and expending treasure on expensive geopolitical toys than to pose a conventional threat: sabre rattling on the Estonian border, tantalising glimpses of fifth generation Su 57 fighters in Syria, hypersonic nuclear missiles and other exotic products of the Russian new physics.  To be credible a threat must have three elements: capability; intention; and opportunity.  Russia clearly demonstrates capability. But, is the intention to invade Estonia and the other Baltic countries real or feigned? Does the opportunity even exist?  With this sleight of hand Russia flits between hybrid operations, always below the military horizon of NATO’s Article 5, while leveraging geoeconomic instruments to achieve geopolitical ends. 

But not everything goes China’s and Russia’s way.  Although BRI is the twenty-first century equivalent of Mao’s Long March, advancing on many fronts over many decades it expects to encounter opposition and resistance, evidenced by the US’s pushback on Huawei’s G5 aspirations and the use elsewhere of the US’s favourite geoeconomic weapon – sanctions.  

Most recently, on 21 December 2019, the US imposed sanctions on Western European companies, specifically Dutch-Swiss Allseas, building Russia’s Nord Stream 2 gas pipeline under the Baltic into Germany, infuriating both Russia and the EU.  The US claimed it was acting to protect Ukrainian gas transit revenues at the precise time when Russia and the Ukraine were renegotiating that gas transit contract.  In reality, though, the US has her eyes on the lucrative Western European gas market into which she wants to sell her own fracked LNG.  Whether the Europeans want to build regassification plants at vast cost and become reliant on transatlantic shipments of LNG from the US and thereby hostage to arbitrary price hikes is another matter, and probably one which Germany and others would wish to avoid.

In this longer term geoeconomic battle the US would probably lose.  According to Britain’s Arctic expert, Tim Reilly, at Cambridge University’s Scott Polar Research Institute, even if the US succeeded in  strong-arming the EU into ditching Russian piped gas and accepting dependence on US LNG, that position could quickly be undermined by cut-price Russian LNG from Yamal.  Small wonder then that, in complete defiance of US sanctions against Russia, some European energy companies are actively involved in the extraction and transportation of Yamal’s LNG.

Perhaps these recent US sanctions were also a response to another threat – to the monopoly enjoyed by the US Dollar as the world’s only reserve currency.  To a large extent the US’s continued high standard of living has been maintained by China’s purchase of US debt, much of which, ironically, she has used to fund BRI.  But both Russia and China have recently started to dump their holdings of US dollars, signalling a swing away from the Dollar as the world’s only reserve currency, and potentially imperilling an economy where the debt-to-GDP ratio easily exceeds 100%.  The IMF, a Bretton Woods institution, usually considers countries bankrupt when the debt-to-GDP ratio hits around 75%.  

As the world morphs from unipolar domination by one superpower to regional-based multi-polarity with China taking the leading economic role in Eurasia, we might expect to benefit from parallel and rival global financial institutions – such as Beijing’s Asia Infrastructure Investment Bank – and a choice of alternative reserve currencies. This trend was highlighted by Chinese insistence on paying for Saudi oil in Yuan instead of US Dollars – further evidence that the clash of civilisations, between the liberal democratic system and the so-called illiberal democracies and oligarchies of Mid and East Eurasia, is playing out on a chessboard where the pieces are more geoeconomic than geopolitical.

But the US will not relinquish global hegemony easily.  Obama’s 2012 Pivot to Asia refocussing US geostrategy away from Western Europe and on the Western Pacific was a clear response to China’s growing power and influence using the only tool available – muscle.  By acquiring new military bases on the Philippines, expanding those on Okinawa and building new naval facilities on the South Korean island of Jeju, the US perpetuates the centuries-old strategy of containment of Eurasia.  With the geoeconomic deck stacked in China’s favour and the geopolitical in the US’s, the former’s greatest challenge is to avoid war with the latter at all costs.  But war may, unfortunately, be inevitable if both countries stumble into the Thucydides Trap whereby established powers feel threatened by and compelled to fight rising powers, as was the case with Sparta and Athens, causing the collapse of the Delian League. According to Thucydides we go to war for one of three reasons: fear; interest; or honour. An American-Sino-Russian war, probably fought out of a combination of fear and interest, would engulf us all.

As a consequence of the Pivot to Asia, in January 2018 the then US Defense Secretary, Jim Mattis, announced a new National Defense Strategy emphasising disengagement from fighting terrorists in the Middle East and reorientation towards a more traditional state-on-state posture with a Maritime Security Initiative designed to contain China in the Western Pacific and Indian Ocean. Despite this and in the face of a reduction in US defence spending of 17% in real terms over the past decade compared to China’s 83% increase, the US has funnelled nearly fifty times more treasure into the European Defense Initiative than the Maritime Security Initiative in the Pacific. 

To compound matters further, while trying to disengage from the Middle East, where close to US$8tn has been squandered in failed wars on terror, Trump’s unilateral shredding of the Joint Comprehensive Plan of Action nuclear deal with Iran and imposition of sanctions aimed at regime change have backfired, resulting in retaliatory attacks on shipping and further planned attacks against US personnel in Iraq. In consequence, the decapitation on 3 January of General Qasem Soleimani, the head of the Quds Force of the Iranian Revolutionary Guard Corps, will likely not only further frustrate US disengagement from the region but also goad Iran into a variety of hybrid responses below the military horizon.  

One unforeseen consequence of Soleimani’s elimination might be the unravelling of Iraq and the resurrection of Islamic State in the north binding the US into an unwanted ‘forever war’ in the Middle East while she attempts to contain Sino-Russian geostrategy on three Eurasian fronts: Western Europe; the Middle East; and the Indo-Pacific region. Can she now afford to confront them on a fourth?  Something has to give.  But what?

A further factor makes a war of catastrophic consequence more not less likely – Trump’s tearing up of the Intermediate Nuclear Forces (INF) treaty on 2 August last year allowing the US to base intermediate range ballistic missiles in Western Europe and the Western Pacific, aimed at China, North Korea and Russia.  The real danger of this lies in the success of the Russian new physics – unmatched by the West – in achieving nuclear yields using conventional explosives, undermining at a stroke the logic of nuclear retaliation and no-first-strike, further forcing all parties deeper into the Thucydides Trap.

In this respect size matters, and population sizes matter enormously in the geoeconomic-geopolitical calculus.  The US’s population is well over twice that of Russia’s and growing not shrinking.  If, by tearing up the INF treaty, Trump engineers a new arms race, Russia’s brightest minds, which are currently devoted to enabling geoeconomic goals, will have to be diverted back into the hawkish and dangerous geopolitics of an arms race.  Russia doesn’t have a large enough top percentile of the best minds to do both.  The US does but chooses to exercise statecraft largely through geopolitics.  China’s population can match the top percentile brain power of the US and Russia combined many times over, affording her greater resilience and flexibility.  In addition to being China’s 70th birthday, 2019 was also the year of her slowest growth for three decades not helped by a looming banking crisis.  But the resilience afforded by sheer numbers – brain power – will probably see BRI weather the storm in the long term.  It’s not so much where the project will be in five or ten years’ time, but what it will look like in fifty and a hundred years.

Russia won’t hang around to have her economy broken a second time by an arms race.  She’ll retaliate violently before that happens.  So, given the dangers of forcing Russia into an arms race, by far the most effective way for the US to put the brakes on BRI would be to draw Russia away from China by offering to fund the Arctic infrastructure project and assist its development with her considerable offshore drilling and extraction expertise – an area in with China is sorely lacking. Although Trump might recognise this as a great deal, such an approach would be ideologically unpalatable to most politicians in Washington. And so, Russia and China march on in step, joined at the hip.

Somewhat belatedly, France’s Macron has recognised the need for rapprochement with Russia to pull her away from China and back into the Western European orbit. Perhaps he acknowledges the EU’s folly of encouraging the Ukraine to arbitrarily tear up the long lease agreement she had with Russia over the Crimean naval base at Sevastopol.  Maybe this lies behind his belief that the alliance is brain dead.  But, with NATO now on Russia’s borders – a policy the alliance promised in the early 1990s it would never pursue – and the US’s ramping up of military force around China, engineering a Sino-Russian divorce seems highly unlikely, particularly now that the hinterland of Eurasia and the NSR are connecting up, affording both countries new trading and infrastructure investment opportunities both along the way and deep into Western Eurasia without a shot being fired.

If NATO’s birthday party highlighted one thing it is its stagnant Cold War thinking and lack of real capability in matching the effect and influence of geoeconomic instruments wielded by Russia and China.  What use are tanks and aircraft carriers in the face of juicy and seductive investment projects?  Now reduced to swatting midges with expensive crowbars, is NATO destined through irrelevance to go the way of the Delian League?  Or should it now be looking at radical new structures to assure Western Europe’s collective defence, beyond merely insisting that members pay up?  Perhaps it’s time for some brain surgery. Or a divorce?

But this is not so much a failure of the Atlantic alliance as it is a failure of the West – if such a concept even still exists –  to recognise the emergence of a multi-polar world and redress geopolitical-geoeconomic asymmetries by responding to China and Russia with joined-up geoeconomic strategies of its own.  It can certainly be argued that Trump’s ripping up of trade agreements, his tariff war with China and imposition of sanctions against Iran and Russia are examples of geoeconomic muscle flexing. But these have only been in the US’s interest and lack coherence across the Western alliance. In nearly every case the US defaults to the use of geopolitical tools, marching herself and others inexorably deeper into the Thucydides Trap.  It may, therefore, already be too late to create a balanced geostrategy that harmonises geoeconomic instruments with geopolitical tools to meet future twenty-first century challenges, giving attendees much more to cry about at the NATO’s next birthday party, particularly if the US abandons Western Europe for her more pressing interests in Eastern Eurasia.


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1 Comment
  • Diane Duvnjak
    Posted at 15:32h, 06 January Reply

    Very informative and has just about everything in there from geopolitics to geoeconomics as you say, but includes philosophy, connectivity due to the internet, as well as humour! But I wondered where bitcoin and the blockchain fits into all this. It was also intriguing that you had a review of your friends book Gold Rush as I am saving in gold with a company who have combined with its own crypto-currencies as an answer to the world currency/money problems. Money problems which affect again, the ‘little people’ the most.

    Your blog is quite scary though, and I wondered where we ‘little people’ will find a nice safe home!

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