Since The Russian Sanctions, This Country Is Progressively Isolated
Not since the 1929 Rose Bowl Football Game have we seen the plans and preparations of one side go so wrong. In that game, Roy Riegels picked up a fumble, ran 69 yards in the wrong direction to score a touchdown for the opposition, the Georgia Tech Yellow Jackets, and presented them with the National Championship. From then on, Roy Riegels was forever known as “Wrong Way,” a moniker that could be applied to this Administration and its foreign policy.
Since President Joe Biden announced that Europe and the United States would impose trade sanctions on Russia, the other side has scored the Touchdowns.
The latest “score” came from the middle east. There Saudi Arabia and Iran have agreed to re-establish diplomatic ties. After years of dispute, most recently over the war in Yemen, these two most significant global oil-producing countries have joined a growing group of countries leaving the American Sphere.
As we discussed last week, Saudi Arabia has already taken steps to move away from the Petro-Dollar. It is one more step away from the American Centered Global Financial Order.
If there was any doubt that this was a move away from the American Sphere, you only need to realize that this was all brokered by China. China is the “team” that always scores when the ball’s in the “red zone.” (ouch! I couldn’t help it!)
Remember that trip that Xi Jinping took to the Middle East last month? Well, this is the result. And what a diplomatic coup this is. It sets China up as the principal trading partner with two of the largest oil-producing countries in the world. At the same time, it edges out the United States. The potential is unlimited.
For nearly half a century, the US held the spot as Saudi Arabia’s principal trading partner (although not with Iran). But that preeminent position is fading fast if it’s not already gone. It put the US back in the position it held in the early 1970s. Then it was OPEC that opposed US policies. America was subject to OPEC’s whims and wishes if we wanted to receive their oil. Secretary of State Henry Kissinger brokered that diplomatic agreement establishing the US Dollar as the exchange currency for all Saudi crude. And the Petro-Dollar was born.
Under this Administration, all that is being unwound.
Last year, as you may recall, the very first thing that Russia did in response to the Biden Sanctions was to call up China and ask to be put on their International Settlements System, called CIPS, the Cross-Border-Inter bank-Payment-System. Essentially a financial system that had been on the shelf for years with limited volume. Until last year, CIPS could only garner about 2% of the global transaction volume. But all that is changing now. With Russia solidly in-house and now Saudi Arabia and Iran as potential users, the CIPS System looks poised to make significant headway against the US Dollar denominated SWIFT Settlement System. What’s more, there are increasing indications that many of the BRICS countries would, with the proper inducement, join the Chinese CIPS System.
The growth of CIPS would be a final step in China’s bid to challenge the United States for global financial dominance. The Chinese seek to become the number one economy in the world. Economic dominance by word and deed has been their goal for over a generation. It’s a goal that would be significantly aided by becoming the world’s reserve currency.
I can’t help thinking that this impulsive, volatile President has often headed in the wrong direction because his policies were not well-considered. For instance, he was blind-sided when he cut off Russian oil and ignited inflation here in the States. He was equally impulsive in the withdrawal from Afghanistan. A move that put many lives at risk and resulted in the loss of billions of dollars worth of military equipment, to say nothing of the loss of military technology.
Today, it is rumored that this Administration is considering sanctions against China. One wonders if the President realizes that China is our number one trading partner, our principal supplier for many of the goods and components our economy depends upon.
But, according to Biden, China is also our number one threat and is to be treated as an enemy. Given how dependent we are on China’s supplies and materials, this is not prudent. Trade Sanctions would send our economy into an immediate tailspin.
But given this Administration’s track record, sanctions cannot be dismissed. Indeed, this President’s policy prescription should be questioned, as they’re often heading in the wrong direction, scoring touchdowns for the other guy. For instance, those Russian oil sanctions have hurt Europe so much that they may need to move their military plants elsewhere to find a constant supply of energy. In contrast, the sanctions have done little to halt Russia’s war effort.
These countries uniting outside the US Sphere of influence is a major geopolitical victory for China. The score is beginning to mount, and China is racking up the points. Russia’s move to the Chinese CIPS System was a touchdown for Chairman Xi. The recent consolidation of the BRICS countries as a countervailing force to America is likewise a score for the other team. And now the brokered diplomatic agreement between Iran and Saudi Arabia adds more points to the scoreboard.
Look for Xi to try to maneuver our President into yet another ill-conceived policy that leaves our country poorer and China wealthier. US-instituted Trade Sanctions, for instance, would do far more harm to the US than China.
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