Modern Warfare Weapons Grade Economics

The financial marketplace is the real global battlefield, and money our most effective weapon against our enemies, says our guest author.
Is President Barrack Obama bringing Russia to its knees?

If Russia’s economic downtown continues to accelerate, U.S. President Barack Obama’s remaining time in office could end with an unexpected and historic victory over his great global rival, Russian President Vladimir Putin.

If so, he would be the first American president to practice the modern art of war, forcing a regime to do an about-face or even topple its leader without firing a shot.

Even if the U.S. is considering the delivery of conventional weapons to Ukraine, Mr. Obama has initially – and effectively – relied on modern weapons with wider dispersion and a more subtle penetrating power. No country can escape them. They come from the global interlinking of capital and commodities markets in the digital “real time” world of the 21st century.

These weapons aren’t made of steel, but fashioned from bits and bytes. They don’t carry warheads, but information. Today, currency rates, stocks and raw materials are the weapons that decide the scope of the action and the combatants’ ability to fight.

No one knows how many short trades on the ruble are on the books of Anglo-Saxon hedge funds.

Wars are no longer waged on territorial battlefields, but on the markets. And some nations can influence the sensitive geo-economic network of markets to their own advantage. Thus, it is no longer the battle for Donetsk, but the ruble exchange rate or oil prices that will decide the conflict in Ukraine.

This shift doesn’t immediately turn investment bankers into soldiers or replace the Pentagon with Wall Street, but control over global capital streams and their standards are today’s hegemonic instruments. To be an aggressor in this world, it’s paramount to have a clear awareness of your own vulnerabilities.

No one knows how many short trades on the ruble are on the books of Anglo-Saxon hedge funds. Yet the combination of the ruble’s dramatic fall, capital transfer restrictions placed on Russian banks and the deterioration of oil prices have lit the Russian candle at both ends.

Ongoing efforts by the Russian central bank to prop up the ruble are causing the country’s foreign exchange reserves to melt like ice in the sun. It’s only a matter of time until this economic cushion is spent. Meanwhile, the unavoidable and dramatic hike in the prime rate is choking the already sputtering engine of the Russian economy. Sanctions have cut off Russian banks from international capital markets, making it more expensive to supply the banking system with capital.

Overthrowing Mr. Putin would not be a victory; a solution that involves him is the best course of action.

And since the Russian budget is based on an oil price of $60 (€52.42) per barrel, the remarkable deterioration of prices is another painful factor in its economic woes. U.S. allies in the Persian Gulf, where exploration costs range up to $20, can continue to pump out oil for a very long time. The fact the American fracking industry is also affected by low crude prices is taken in stride as part of the country’s geopolitical interests.

Assuming Mr. Obama prevails with a strategy employing commodities and capital markets, what will follow? Experience in the Middle East has taught us that replacing the person in power rarely improves the situation and, as a rule, makes it more incalculable.

This happened when the U.S. supported the Taliban against the Russian occupiers in Afghanistan, only to fight them when the Taliban turned against the West. American support for Saddam Hussein in Iraq’s war against the Iranian theocracy culminated in yet another Gulf war, a huge loss of life and the erosion of trust in the region.

Overthrowing Mr. Putin would not be a victory; a solution that involves him is the best course of action. Global capital markets could, in turn, make bridges to disarmament available, yet the axiom “it takes two to tango” applies. Bridges must be built from both sides.

 

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