iran

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Brazil Slams the West’s Currency War

Mitt Romney is not the only global figure to unleash allegations of currency manipulation. In fact, most of the allegations are aimed at America and the West.

From Reuters:

Brazilian President Dilma Rousseff slammed rich nations on Thursday for unleashing a “tsunami” of cheap money that threatened to “cannibalize” poorer countries such as her own, forcing them to act to protect struggling local industries.

Rousseff’s words amounted to some of the highest-profile criticism to date of efforts by the European Central Bank, the Bank of Japan and others to spur their economies through low interest rates and cheap loans.


I just want to flag up Henry Kissinger’s words from his recent Foreign Affairs piece:

The current world order was built largely without Chinese participation, and hence China sometimes feels less bound than others by its rules. Where the order does not suit Chinese preferences, Beijing has set up alternative arrangements, such as in the separate currency channels being established with Brazil and Japan and other countries. If the pattern becomes routine and spreads into many spheres of activity, competing world orders could evolve. Absent common goals coupled with agreed rules of restraint, institutionalized rivalry is likely to escalate beyond the calculations and intentions of its advocates. In an era in which unprecedented offensive capabilities and intrusive technologies multiply, the penalties of such a course could be drastic and perhaps irrevocable.

Competing world orders could evolve? No; competing world orders are a reality, and it seems like Latin America — most obviously Argentina and Venezuela, but now also Brazil, and perhaps even Colombia and Mexico — are moving closer toward the emerging ASEAN bloc, and away from the West.

Ironically, the emerging currency war is as much as anything else a side-effect of Bernanke’s admitted preoccupation with fluffing and puffing up U.S. equities.

And it looks like he’s going to be getting a hand.

From Bloomberg:

The Bank of Israel will begin today a pilot program to invest a portion of its foreign currency reserves in U.S. equities.

The investment, which in the initial phase will amount to 2 percent of the $77 billion reserves, or about $1.5 billion, will be made through UBS AG and BlackRock Inc., Bank of Israel spokesman Yossi Saadon said in a telephone interview today. At a later stage, the investment is expected to increase to 10 percent of the reserves.

Zero Hedge prognosticates:

In other words, while the Fed’s charter forbids it from buying US equities outright, it certainly can promise that it will bail out such bosom friends as the Bank of Israel, the Swiss National Bank, and soon everyone else, if and when their investment in Apple should sour.

Luckily, this means that the exponential phase in risk is approaching as everyone will now scramble to frontrun central bank purchases no longer in bonds, but in stocks outright, leading to epic surges in everything risk related, then collapse and force the Fed to print tens of trillions to bail everyone out all over again, rinse repeat. We say luckily, because it means that the long overdue systemic reset is finally approaching.

Developing nations have a legitimate concern: Western central banks will throw liquidity around to no end to save the status quo. And that means that developing nations will themselves feel they have to compete in order to remain competitive. It’s messy.

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Iran Squeezes the Petrodollar

I have, these last few months, been documenting the current state of geopolitics —specifically the growing isolation of the West, the ditching of the dollar as the global reserve currency, the growing unity between the authoritarian Eurasian nations, and the brewing storm in the middle east between Israel and Iran.

Now another piece of the puzzle falls into place.

From Zero Hedge:

Much has been spun in recent weeks to indicate that as a result of collapsing trade, Iran’s economy is in shambles and that the financial embargo hoisted upon the country by the insolvent, pardon, developed world is working. We had a totally different perspective on things “A Very Different Take On The “Iran Barters Gold For Food” Story” in which we essentially said that Iran, with the complicity of major trading partners like China, India and Russia is preparing to phase out the petrodollar: a move which would be impossible if key bilateral trade partners would not agree to it. Gradually it appears this is increasingly the case following a just released Reuters report that “Iran will take payment from its trading partners in gold instead of dollars, the Iranian state news agency IRNA quoted the central bank governor as saying on Tuesday.”

The Eurasian powers — centred around the troika of Russia, China, and Iran — continue to ransack the dollar’s legitimacy as the global reserve currency.

Meanwhile, in a Foreign Affairs piece, the architect of our current world order, Henry Kissinger, seems to see the writing on the wall:

The current world order was built largely without Chinese participation, and hence China sometimes feels less bound than others by its rules. Where the order does not suit Chinese preferences, Beijing has set up alternative arrangements, such as in the separate currency channels being established with Brazil and Japan and other countries. If the pattern becomes routine and spreads into many spheres of activity, competing world orders could evolve. Absent common goals coupled with agreed rules of restraint, institutionalized rivalry is likely to escalate beyond the calculations and intentions of its advocates. In an era in which unprecedented offensive capabilities and intrusive technologies multiply, the penalties of such a course could be drastic and perhaps irrevocable.

Kissinger recognises the Eurasian endgame — also described by me quite throughly over the six months:

Some American strategic thinkers argue that Chinese policy pursues two long-term objectives: displacing the United States as the preeminent power in the western Pacific and consolidating Asia into an exclusionary bloc deferring to Chinese economic and foreign policy interests. In this conception, even though China’s absolute military capacities are not formally equal to those of the United States, Beijing possesses the ability to pose unacceptable risks in a conflict with Washington and is developing increasingly sophisticated means to negate traditional U.S. advantages. Its invulnerable second-strike nuclear capability will eventually be paired with an expanding range of antiship ballistic missiles and asymmetric capabilities in new domains such as cyberspace and space.China could secure a dominant naval position through a series of island chains on its periphery, some fear, and once such a screen exists, China’s neighbors, dependent as they are on Chinese trade and uncertain of the United States’ ability to react, might adjust their policies according to Chinese preferences. Eventually, this could lead to the creation of a Sinocentric Asian bloc dominating the western Pacific. The most recent U.S. defense strategy report reflects, at least implicitly, some of these apprehensions.

He ends the piece flatly:

Both sides should be open to conceiving of each other’s activities as a normal part of international life and not in themselves as a cause for alarm. The inevitable tendency to impinge on each other should not be equated with a conscious drive to contain or dominate, so long as both can maintain the distinction and calibrate their actions accordingly. China and the United States will not necessarily transcend the ordinary operation of great-power rivalry. But they owe it to themselves, and the world, to make an effort to do so.

But — in reality — American and Western policy is nothing like as respectful toward China as Kissinger might hope.

As I wrote earlier this month:

The last hope for American imperial hegemony is to bring the Arab Spring to Moscow, Beijing, Tehran, and Islamabad.

Kissinger — while not explicitly endorsing such an eventuality — recognises the possibility:

The political scientist Aaron Friedberg writes, for example, that “a liberal democratic China will have little cause to fear its democratic counterparts, still less to use force against them.” Therefore, “stripped of diplomatic niceties, the ultimate aim of the American strategy [should be] to hasten a revolution, albeit a peaceful one, that will sweep away China’s one-party authoritarian state and leave a liberal democracy in its place.”

And — for all the hullabaloo about war with Iran —the Arab Spring model is the State Department’s last best hope for maintaining American primacy in the face of (as Tyler Durden puts it) insolvency. War, proxy war, or trade war with the Eurasian powers is too costly, too risky, too open-ended for America today.

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The Uniting States of Eurasia

I have, these last few months, been documenting the current state of geopolitics — specifically the growing isolation of the West, the ditching of the dollar as the global reserve currency, the growing unity between the authoritarian Eurasian nations, and the brewing storm in the middle east between Israel and Iran.

Now another piece of the puzzle falls into place.

From The Sun:

Pakistan yesterday warned Britain to help stop the American “Drone Wars” that are slaughtering hundreds of its innocent civilians.

The nuclear power chillingly declared it “has the means” to retaliate unless the carnage ceases.

Pakistan’s High Commissioner to Britain Wajid Shamsul Hasan told The Sun in an exclusive interview that his country’s relations with America are at their lowest ebb.

He said: “Patience is definitely reaching exhaustion levels.” Mr Hasan said Pakistan backs the War on Terror waged by Britain and the US.

But he urged PM David Cameron to condemn US drone attacks on al-Qaeda and Taliban training camps in the north west of his country — dubbing them as “war crimes” and “little more than state executions”.

Tough-talking Mr Hasan also declared Pakistan would have no choice but to support Iran if “aggressive” Israel attacks it

This isn’t a joke. This isn’t “just rhetoric”. This is Eurasia uniting to keep America out, to trample American and Israeli interests, and to dominate geopolitics. Let me be clear: this is the systemic and complete failure of 40 years of American foreign and domestic policy. 

From Zbigniew Brzezinski’s Grand Chessboard (pp. 31):

[H]ow America manages Eurasia is critical. A power that dominates Eurasia would control two of the world’s three most advanced and economically productive regions. A mere glance at the map also suggests that control over Eurasia would almost automatically entail Africa’s subordination, rendering the Western Hemisphere and Oceania (Australia) geopolitically peripheral to the world’s central continent. About 75 per cent of the world’s people live in Eurasia, and most of the world’s physical wealth is there as well, both in its enterprises and underneath its soil. Eurasia accounts for about three-fourths of the world’s known energy resources.

With Eurasia uniting around Russia and China (exemplified by their joint veto on Syria) it seems like America — stripped by globalisation of her productive base, and thus dependent on Eurasian resources and manufacturing — is about to lose the colossal free lunch she has enjoyed since the 1970s. And American aggression to impose its will on the Eurasian powers is becoming less and less viable. America is not only deeply in debt to her enemies, but would find herself gravely injured by any future trade war.

Of course, there is a path forward for America. But it is not the path desired by the current administration:

A sensible American plan going forward would recognise [these issues], and would be developing the means and the infrastructure to end America’s free lunch — specifically, through redeveloping American manufacturing capacity and supply chains, and scaling back America’s role as global policeman. Unfortunately, I see no such thing from government, and very little from private industry. America is clinging onto the old foreign policy doctrines — that if America is powerful enough, and if it can retain its role as global hegemon and world policeman, then it will always be free to consume a chunk of the rest of the world’s production and resources, because its currency will forever be the global reserve. But that simply isn’t true — Russia and China have already ditched the dollar for bilateral trade.

But this is bigger than just the implications for America. We are moving into a new era; a new world order, a multi-polar (bipolar? tripolar? apolar?) world.

What will this mean for the rest of the world and all her citizens? I have very little clue — but hopefully not world war, or trade war, or proxy war. Hopefully America will gracefully accept the end of American hegemony. Hopefully the new powers will be gracious and fair toward the old ones. Hopefully the new world will be friendlier to liberty, friendlier to freedom.

But given that the new bloc’s powers all exude authoritarian rhetoric, I doubt it.

Most concerningly, regular readers will be aware that Pakistan are the second Eurasian power to pledge military support to Iran in the case of an Israeli attack. These nations know the score:  the last hope for American imperial hegemony is to bring the Arab Spring to Moscow, Beijing, Tehran, and Islamabad.

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When Will it be Time to Bomb Iran?

Jeffrey Goldberg — having stated the case for war with Iran — doubles back on himself:

The nuclear experts I respect most, including Bruce Blair, of Global Zero, and David Albright, of the Institute for Science and International Security, both call a Middle East in which Iran possesses a small number of nuclear weapons a dangerously unstable place. Here is what Albright told me Monday about Iran’s particular challenges in an escalating confrontation — the no second-strike conundrum: “In a crisis, you don’t want to go first, but you don’t want to go second, either. It ends up in an unstable situation. Miscalculations can result in nuclear weapons being used. Iran may feel it doesn’t have second-strike capability and so would, in an escalating crisis, feel it has to use what it has first.” Iran, he explained, will be hampered, for many years after it crosses the nuclear threshold (assuming it is allowed to cross), by a small arsenal of comparatively modest bombs.

The Israelis, on the other hand, have a much larger arsenal than the Iranians could hope for for many years, and much more varied and sophisticated delivery systems.

So, what to do? Not attack. There’s plenty of time for war. Right now, the focus should be on convincing Iran, through sanctions, and a promise, if it gives up its nuclear ambitions, to rejoin the international community. Will this work? Probably not, but it has to be pursued. Here’s Bruce Blair on the efficacy of a preemptive attack: “The liabilities of preemptive attack on Iran’s nuclear program vastly outweigh the benefits.”

That’s a nice turnaround. I am all for containment through diplomacy, although lukewarm on sanctions as they seem to punish the people for the actions of a government. But I think all the posturing about the possibility of a nuclear war in the middle east is fantasy. Let me absolutely clear: it is exceedingly unlikely Iran will initiate a nuclear strike — of any kind, either direct or via a terrorist proxy — while Israel retains a Second Strike capability. Why? Because doing so would necessitate the destruction of their civilisation.

All of that Israeli rhetoric about never permitting a second holocaust isn’t merely rhetoric. It’s backed by the fiercest of passions, the fiercest of intellectual traditions, and the weight of six million dead Jews, slaughtered in Eastern Europe during World War 2.

To quote Moshe Dayan:

Israel must be like a mad dog, too dangerous to bother. Our armed forces, are not the thirtieth strongest in the world, but rather the second or third. We have the capability to take the world down with us. And I can assure you that that will happen before Israel goes under.

That’s why Israel developed a Second Strike capability. Any middle eastern state that hits Israel will be obliterated by Israeli plutonium. It’s as simple as that, and Ahmadinejad knows it. Iran is not developing nuclear weapons as a tool of destruction. We have to look at the context; non-nuclear states like Libya and Iraq have been subject to Western-backed regime change, while far more brutal nuclear-armed dictatorships like North Korea have not. Simply, the Iranian theocracy is not pursuing nuclear arms to attack Israel, and thereby guarantee their destruction. They are pursuing nuclear arms to guarantee their survival.

If Israel were a defenceless nation, neoconservative hawks who wish to see Washingtonian intervention might have a stronger case. If a nuclear-armed second-strike-capable Iran were threatening to obliterate a non-nuclear Israel, Israel could truly claim that there was an existential threat to her. But back in reality, that is just not true.

Even Meir Dagan, the former head of Mossad recognises that Iran is not an existential threat to Israel.

From the Guardian:

Upon leaving his post, Dagan publicly warned against Israel attacking Iran to stop it from acquiring nuclear weapons.

In his latest comments, he said that if Israel attacks Iran, it will find itself at the centre of a regional war that would endanger the state’s existence. Dagan’s intervention is dangerous for Netanyahu because it comes from the right wing of Israeli opinion rather than the left, where the prime minister would expect criticism.

Dagan has been in charge of aggressive Israeli actions abroad in recent years, that have included assassinations in Lebanon, Syria and Dubai and an air attack on a suspected nuclear reactor in Syria. He also criticised Israel’s failure to offer any initiative to resolve the conflict with the Palestinians .

The absence of any workable plan, he said, will leave Israel in a dangerous and weak situation.

This really echoes my thinking: the real threat to Israel, and America is not inaction on Iran, but excessive force. Iran poses little threat, but military intervention to effect regime change in Tehran runs the risk of huge and widespread blowback throughout the Muslim world: terrorism, guerrilla warfare, and deeper intergovernmental hostility, a breakdown of regional trade, and even a wider land war involving Eurasian nations who wish to protect Iran, including China and Russia.

The real threat to world peace — and to Israel — is Western paranoia, leading to pre-emptive warfare. 

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The Edge of Bankruptcy

We are like a man who used to be rich and is in the habit of paying for everybody’s meals and announces at a lavish dinner that he will pay the bill, only to then turn to the fellow sitting nearby and say, “Can I use your credit card? I will pay you back!”

— Ron Paul

I have in the past very briefly made the case for why it is not time to attack Iran:

The truth is that Iran (and more explicitly a strong and united Eurasia) is only a threat to America if America chooses to continue the absurd and destructive path of a world-dominating petrodollar superpower, dependent on foreign oil and resources, and with a foreign policy designed to (essentially) extort these things from the rest of the world.

Today, I want to go a little further: While — unlike some readers — I believe that Islamic terrorism is a real (though minor) threat, I believe that America’s neoconservative foreign policy is the greatest threat to American interests.

Neoconservatism holds that American and Western civilisation has a unique moral role in policing the world. That means military commitment, and very often war. That, in turn, means spending:


Spending has meant huge deb acquisition:

There are many historical antecedents of empires convinced of their own special role in history, and determined to impose it on the rest of the world by force. Look at Rome — driven into the ground by the cost of imperialism, and its “bread and circuses” welfare state.

A greater example still is Britain:

This graph is a tale of imperial overstretch, a tale of debt acquired by a colonial power playing world policeman, and trying to maintain the status quo.

Imperial Britain’s debt load hit its peak at the very point when its empire crumbled into the sand. This is not a co-incidence, and the good news for America is that once Britain ended its global role, growth soon returned, and Britain’s debt-to-GDP ratio fell back to a sustainable level.

Of course, America’s debt position might be more sustainable if she was still the world’s greatest industrial powerhouse. But she has instead exported much of her productivity to her hostile creditor, China:

The deindustrialisation of the West has allowed newly industrialised nations, especially China, to build up huge monetary wealth. This is a map showing the net of each nation’s reserves, minus external debt:


And neoconservatives continue to believe that America — dependent on foreign goods and resources, hugely indebted to hostile nations, and war fatigued — is somehow in a position to expand her empire, and to attack more countries?

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Iran Did 9/11?

From the Washington Post:

NEW YORK — A federal judge has signed a default judgment finding Iran, the Taliban and al-Qaida liable in the Sept. 11 terrorist attacks.

Judge George Daniels in Manhattan signed the judgment Thursday, a week after hearing testimony in the 10-year-old case. The signed ruling, which he promised last week, came in a $100 billion lawsuit brought by family members of victims of the attacks. He directed a magistrate judge to preside over remaining issues, including fixing compensatory and punitive damages.

But I thought Iraq was culpable for it!

Suck on this!

We hit Iraq because we could!

Of course, war hawks (the same war hawks who wanted to hit Iraq — and succeeded in spending trillions of dollars on an expensive and fragilising conflict that did nothing whatever for national security) are always looking for compelling and emotive justifications for their war-mongering.

And in Iranian President Mahmoud Ahmadinejad, hawks like Friedman have found a man who is in many ways their shadow. Flamboyant, provocative, over-the-top and fiercely combative Ahmadinejad gladly engages in anything that will piss the West off — holocaust revisionism, 9/11 trutherism, and now war games around a major international shipping lane.

“Suck on this!”, as Tom Friedman put it.

From Zero Hedge:

Iran is launching a “massive” 10 day war games naval exercise right in the belly of the beast.

Iranian Navy Commander Rear Admiral Habibollah Sayyari on Thursday announced the upcoming launch of ten-day massive naval exercises in the international waters.

“This is the first time that Iran’s Navy carries out naval drills in such a vast area”, he was quoted as saying. “The exercises will manifest Iran’s military prowess and defense capabilities in the international waters, convey a message of peace and friendship to regional countries and test the newest military equipment among other objectives”. He added that “the newest missile systems and torpedoes will be employed in the maneuvers, adding that the most recent tactics used in subsurface battles will also be demonstrated. Iranian destroyers, missile-launching vessels, logistic vessels, drones and coastal missiles will also be tested.“

There can be no question that this “exercise” may well be a cover for seizing and closing the Strait of Hormuz.

The real question is how America will respond.

From the National Post:

The Strait is a 50-kilometre wide passageway through which about a third of the world’s oil tanker traffic sails. Whoever controls this crucial choke-point virtually controls Middle East oil exports.

“The importance of this waterway to both American military and economic interests is difficult to overstate,” said a report by geopolitical analysts at the global intelligence firm Stratfor.

“Considering Washington’s more general — and fundamental — interest in securing freedom of the seas, the U.S. Navy would almost be forced to respond aggressively to any attempt to close the Strait of Hormuz.”

“Iran has built up a large mix of unconventional forces in the Gulf that can challenge its neighbours in a wide variety of asymmetric wars, including low-level wars of attrition,” said Anthony Cordesman of the Center for Strategic & International Studies in Washington.

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America’s Military Weakness?

Regular readers will know that I believe that the global debt picture makes conflict — proxy or direct — between America (the world’s great debtor) and its creditors highly likely in the next century. Already America and Eurasia are engaged in media, cyber, and information warfare. Recent Iranian threats to close the Straits of Hormuz — an arterial shipping channel — could give America and Israel an excuse to directly engage the Iranian state.

Alas, it seems America has a chink in her armour, one demonstrated perfectly by Iran’s retrieval of an intact American spy drone. That drone didn’t crash: its intact appearance suggests one thing — that it was landed.

How could that be possible?

From VeteransToday:


The national insecurity stakes just went up once again.

Being in the armed forces of any country, at any time, has always been a hazardous occupation.

But thanks to the gross incompetence, malfeasance and short sightedness of our current and former elected officials it just became much, much, deadlier to be a US Serviceman.

“Surprise, Surprise, Surprise”,  to quote Gomer Pyle. The secret spy mission to create photographic proof of Iranian nuclear intentions has gone horribly wrong.

China is the country of origin for many, many of the semiconductors used by the US Military. It was most likely that China provided the hardware with the secret backdoor that allowed the Iranians to seize control of the Stealth drone while the drone was on a secret CIA mission over Iran.

Working together, they captured a state of the art US Military stealth aircraft.

What this means to all US Military personnel serving anywhere in the world? It means that control of any electronics system in any type of platform, can be seized and used against the military that launched it.

So what can America do about such security holes?

No electronics system within any platform is safe as long as there is any non-domestic electronics content.

Components from China are OK for a flat-screen TV, but not for critical weapons systems. Chinese components simply cannot be trusted.

Every system down to the component level must be recalled.

Any and all suspect components must be replaced, immediately before we actually place our fighting men and women in harm’s way with compromised systems.

As a country we need certain strategic industries. In this computer age, we need a strong and vibrate semiconductor industry we cannot safely or prudently outsource this to China.

In the interim, the Pentagon should stand down all weapons systems activated since 1998, and re-activate the older, but trustworthy systems.

If this is true, there can be no war against Iran or Syria in the near future.

Pakistan, Iran, Russia and China will be free to stampede over American interests in Eurasia.

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Is the Middle East About to Explode?

It looks like Israel and America’s secret war on Iran has finally provoked a response.

From AP:

Iran’s semiofficial Fars news agency says the country’s armed forces have shot down an unmanned U.S. spy plane that violated Iranian airspace along its eastern border.

The report says the plane was an RQ170 type drone and is now in the possession of Iran’s armed forces. The Fars news agency is close to the powerful Revolutionary Guard.

Iran is locked in a dispute with the U.S. and its allies over Tehran’s disputed nuclear program, which the West believes is aimed at the development of nuclear weapons. Iran denies the accusations, saying its nuclear program is entirely peaceful.

Iran’s response to the downed U.S. drone’s violation of its airspace will not be limited to the country’s borders, a military source told state television.

“The Iranian military’s response to the American spy drone’s violation of our airspace will not be limited to Iran’s borders any more,” Iran’s Arabic language Al Alam television quoted the military source as saying, without giving details.

Iran said in July it had shot down an unmanned U.S. spy plane over the holy city of Qom, near its Fordu nuclear site.

Why is this happening?

As I wrote last month, a new middle eastern war can provide a lot of opportunities to the Western establishment:

  1. Create a new post-9/11-style hard-to-question patriotism — “There’s a war on — we all need to rally together around the flag — the complainers and protestors must hate America”
  2. Put America back to work — in weapons factories, and on the front lines.
  3. Give the economy a large Keynesian injection — through war spending.
  4. Take out Iran, a powerful enemy of America — and send a threatening message to other uppity Eurasian autocracies like Russia and China.
  5. Curtail civil liberties & censor the internet — “There’s a war on — we all need to rally together around the flag — and those who don’t must be working to undermine America”

The real danger here is that this won’t solely be a middle eastern war. Israel and America have grossly miscalculated the odds of drawing Russia and China into a global confrontation. Russia and China want a new world order centred around themselves, not America, and they will grab this opportunity to dethrone the West.

Russia is already supplying Bashar al-Assad’s Syrian regime with cruise missiles.

Western policy has been built around a false cornerstone of interdependence, the idea that there can be no war between China and America because America is dependent on Chinese goods, and China is dependent on the American monetary system. Nothing could be further from the truth — America (and its consumeristic zombie hordes) need China far more than China needs America. China’s dollar reserves are a luxury, not a necessity, and they are a luxury that can be thrown away in the name of Chinese dominance in Eurasia and the Pacific.

Of course, although a new middle eastern or global war will be an economic, political, social and humanitarian disaster, it will be very profitable for weapons contractors, and provide a large boost to aggregate demand.

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“China Will Not Hesitate To Protect Iran Even With A Third World War”

From Zero Hedge:

Fast forward to 2:08: “It is puzzling to some that Major General Zhang Zhaozhong, a professor from the Chinese National Defense University, said China will not hesitate to protect Iran even with a third World War. Professor Xia Ming: “Zhang Zhaozhong said that not hesitating to fight a third world war would be entirely for domestic political needs….”

Now, I don’t think a Third World War will really be of much benefit to China right now: they are strengthened by the status quo; power and wealth is flowing from West to East. They have humungous treasury and FX reserves that would be better discharged into productive assets, physical assets, etc.

But perhaps I underestimated the strategic importance to China of keeping America out of Eurasia, and retaining access to Iranian oil.

Ultimately — unless America unleashes a nuclear holocaust — it is a war that I think China would be certain to win, slowly, painfully and excruciatingly. The key card China holds is that it retains control over many American supply chains, not just for finished goods, but for components and resources. America has grown hugely dependent on importing energy and resources through the global trade web; a global trade shutdown would trigger hyperinflation in America, and force a long, painful transition period. America — even with European support — does not have enough manpower or enough leverage over global resources and energy to win a conventional war against Russia, China, and Iran.

I hope that sanity prevails, and there is no new war against Iran.

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Kinetic Peace Action #2

Following NATO’s war in Libya, hawkish commentators have been salivating over the prospect of more “liberal interventionism” in the middle east.

Now, thanks to the Arab League, they might just get their wish.

From Zero Hedge:

Yesterday we reported that the Arab League (with European and US support) are preparing to institute a no fly zone over Syria. Today, we get an escalation which confirms we may be on the edge. Just out from CBS: “The U.S. Embassy in Damascus urged its citizens in Syria to depart “immediately,” and Turkey’s foreign ministry urged Turkish pilgrims to opt for flights to return home from Saudi Arabia to avoid traveling through Syria.” But probably the most damning evidence that the “western world” is about to do the unthinkable and invade Syria, and in the process force Iran to retaliate, is the weekly naval update from Stratfor, which always has some very interesting if always controversial view on geopolitics, where we find that for the first time in many months, CVN 77 George H.W. Bush has left its traditional theater of operations just off the Straits of Hormuz, a critical choke point, where it traditionally accompanies the Stennis, and has parked right next to Syria.

The point, I think, is that the Arab League and NATO would be very happy to see Iran’s wings clipped through regime change in Syria. I’ll be absolutely clear: I think that this is an attempt to get Iran to directly intervene in Syria, and get their fingers burnt by a humiliating NATO counter-offensive. The preferred outcome would be a resurrection of the Green Revolution, a bringing of the Arab Spring to the streets of Tehran, and regime change.

I don’t think Ahmadinejad is that stupid. He long ago absorbed the lessons of Saddam Hussein (now confirmed by the demise of Qaddafi). As I wrote last month, these are:

  1. Nuclear weapons are an essential prerequisite to holding off NATO-sponsored regime change.
  2. Western nations and organisations — including NATO, the United States, Britain, France and the UN — cannot be trusted.

Ahmadinejad would not respond. Iran is preparing for the coming Israeli-NATO onslaught, and doing everything in its power to urge China and Russia to heavily discourage any such move. China and Russia — strong Iranian trade partners (and to some extent ideological partners) — already have a strong interest (energy and resources) in resisting regime change in Tehran.

But this is all part of a greater game: America and the West are locked in a proxy war with the Eurasian autocracies (Pakistan, Russia, Iran, China — for short, the PRICs) for both Eurasia’s huge resources and manpower, and global military and financial supremacy. American policy is to retain the petrodollar-standard, and continue enjoying the free lunch such a system yields.

Iran’s fall could give America — as heavily indebted and zombified as America is — a significant boost toward retaining primacy in years to come, and scare the other autocracies into compliance. For that reason, Russia and China — who have gained a very strong position through accumulating American currency, and become hubs of global trade — will not be keen to see further American encroachment into their back yard.

Forward-thinking readers are urged to get a copy of Zbigniew Brzezinski’s masterpiece The Grand Chessboard, and study it.