Saudi Arabia and UAE view United States an unreliable partner under Joe Biden

A professor at Georgetown University in Qatar says that leaderships in Saudi Arabia and the United Arab Emirates look at the Biden administration as an unreliable partner who is not worthy to jeopardize the ties with Russia.

“They feel that under Joe Biden the United States has not been a reliable partner, especially since the close, personal relationship that existed with the Donald Trump and since the United States is indirectly talking to Iran in Vienna,” Mehran Kamrava told The Tehran Times.

Though US-Persian Gulf ties are deep-rooted when it comes to military contracts, the Russia-Ukraine conflict shows that Arab states in the region may leave United States alone in some cases. 

The UAE and Saudi Arabia appear to be sending a message to the US, said Kristian Coates Ulrichsen, a Middle East fellow at Rice University’s Baker Institute for Public Policy. Talking to Al Jazeera last month, Ulrichsen said they are going to act upon their interests and not what the US think their interests are.

Giorgio Cafiero, CEO of Gulf State Analytics, a Washington, DC-based geopolitical risk consultancy, also said, “Syrian President Al-Assad coming to the UAE, shortly after the (Persian) Gulf Arab country opted to abstain from a UN Security Council resolution condemning the Russian invasion of Ukraine last month, tells us that the Emiratis are very serious about asserting their autonomy from the United States.” 

“For Arab states, Russia is an important actor with whom they can hedge their bets with the United States.”Arab states, especially Saudi Arabia and the Emirates, felt they lost a close friend in the White House after Donald Trump was defeated in the 2020 elections. 

“Clearly, the Saudi and Emirati leaderships do not have the same kind of relationship with Biden that they had with Trump, and they feel slighted,” Kamrava notes. 

“Also, given the very close relationship between both Saudi Arabia and the UAE with Russia, neither wants to risk alienating President Putin,” adds professor from Georgetown University. 

Following is the text of the interview:

Do you think the Ukraine war would expand to other countries? 

Since the war is currently ongoing, it is difficult to guess whether or not it will expand and if it will usher in a new order in the region. 

Are we going to witness a new order in the region?

Clearly, we see the emergence of diverging trends, however, and the gap between the EU and the US on the one side and Russia and a number of other countries, like China and Iran, on the other. 

Saudi and UAE leaders declined calls with Biden amid the Ukraine conflict. What are the implications of such a reaction?

Clearly, Saudi and Emirati leaderships do not have the same kind of relationship with Biden that they had with Trump, and they feel slighted as a result. They feel that under Biden the United States has not been a reliable partner, especially since the close, personal relationship that existed with the Trump White House is gone and since the US is indirectly talking to Iran in Vienna. Also, given the very close relationship between both Saudi Arabia and the UAE with Russia, neither wants to risk alienating President Putin. 

Why do the Arab states prefer not to be engaged in the US-Russia conflict while they are allied with Washington?

The Arab states do not want to jeopardize their increasing closeness with Russia. For them, Russia is an important actor with whom they can hedge their bets with the United States, and as a result, they are reluctant to take positions that are overtly antagonistic toward Russia.

China and the many Arab states avoided condemning Russia for launching war on Ukraine. Do you think the Ukraine crisis will turn into a new form of confrontation between the West and the East?

That might indeed be the case, but, again, it is too early to tell. Clearly, we are seeing tectonic shifts occurring in regional alignments. But how these shifts will turn out is hard to tell. There are new and emerging powers in the East, the most notable being China and South Korea, and, at least in relation to South Korea, it would be difficult to say that it is not part of the Western or American orbit. Nevertheless, there is no doubt that Russia is seen in the US and in the EU as a “disruptive actor” and China is perceived as a major technological competitor. 

Do you see a kind of hesitation in Persian Gulf Arab state's betting on America in the defense system? Do they think that America left them alone, especially in the Yemen war?
    
I think the US will remain to be an outside security provider for the southern states of the Persian Gulf in the near future. The personal relationship between Persian Gulf rulers and US President may change, but there are deeper structural factors that for the time being tie the two sides together. Some of the more important of these include deep military and security ties, with the Persian Gulf states continuing to prefer American weaponry and equipment; massive and growing economic and commercial ties between the two sides, with the US having emerged as a favorite destination of money and investments going from the Persian Gulf; and continued political and economic ties. In addition to all this, there is also heavy psychological reliance on the US as a security provider. Therefore, there is no indication that the US military presence in the Persian Gulf region will be lessened at all in the near future. 

Courtesy: The Tehran Times

Bangladesh Forex Crisis threatens macroeconomic stability of the country

According to The Bangladesh Chronicle, like other countries of the world, Bangladesh too is facing volatility in the foreign exchange market. This was initially caused by the demand recovery and supply chain disruptions as battered economies began recovering from the coronavirus pandemic.

The volatility has exacerbated in the last one month because of Russian invasion of Ukraine. This is not only likely to derail the rebound from the health crisis but also bringing about a bigger macroeconomic challenge for Bangladesh.

Maintaining a stable exchange rate of the taka against the US dollar is a populist idea that prevailed in the mindset of both the government and commoners. The same thinking might still be dominating, although the country seems to be facing a far bigger crisis than the pandemic.

Bangladesh Bank seems to be indecisive whether it would go for gradual depreciation of the local currency or opt for a quick devaluation. The situation has been created by the dwindling flow of foreign exchange.

Bangladesh Bank injected a record US$3.78 billion between July 1, 2021 and March 23, 2022 to stop the freefall of the taka, but the initiative has hardly resolved the crisis faced by the dollar-strapped banks.

Although, export earnings are on the rise, this has not been enough to offset the instability in the foreign exchange market led by a steep increase in import payments and a sharp decline in remittance.

Between July 2021 and January 2022, imports grew to US$46.67 billion, up 46%YoY. As against this exports increased 29% to US$27.97 billion. Remittance declined 19.4% to US$16.68 billion.

The imbalance between the inflow and outflow of US dollars has compelled many banks to purchase the greenback from Bangladesh Bank to settle letters of credit for imports.

The central bank is providing dollars to the banks with utmost generosity as the taka would face a major fall if the support is not extended.

The exchange rate now stands at Tk 86.20 per US dollar compared to Tk 84.80 a year ago. This means the central bank has allowed the taka to depreciate in a certain range.

But Ahsan H Mansur, an economist who earlier worked at the International Monetary Fund, describes the central bank’s move as insufficient to ensure macroeconomic stability from the current global turmoil.

“Bangladesh Bank will have to devalue the local currency by Tk 3 against the dollar immediately,” he said.

Higher imports against moderate exports brought down Bangladesh’s foreign exchange reserves to US$44.29 billion on March 23. This is way down from the US$48 billion recorded in August last year.

Economists think the worse is yet to come. This is because the impact of the global supply chain disruption stemming from Russia’s invasion of Ukraine has not fully hit Bangladesh yet.

Businesses usually open letters of credit two to three months before the arrival of imported products. So, the effect of the war will be visible a couple of months later.

 “The crisis in the foreign exchange regime will deepen if the increasing imports cannot be contained,” Mansur said.

He suggested bringing down the country’s import growth below 30% from 46% now or else the reserves will be hit hard by the ongoing instability.

The depreciation risks stoking inflationary pressure to some extent. The official figure of the Consumer Price Index surged to a 16-month high in Bangladesh in February driven by soaring costs of essential food ranging from staples such as rice, edible oil and vegetables to protein items.

“Inflation will increase, but you will have to embrace it for the time being,” said Mansur when asked how the government would tackle the situation.

“We don’t want to become Sri Lanka, which has long been facing a foreign exchange crisis,” he added.

Sri Lanka has been hit with the financial crisis because of a shortfall of foreign currencies. As a result, traders cannot finance imports.

On Tuesday, the country was forced to order troops to petrol stations as sporadic protests erupted among the thousands of motorists that queue up daily for scarce fuel.

“Any delays in taking initiatives to address the existing crisis will deal a fatal blow to the macroeconomic stability,” said Mansur.

Remittance flow through the official channel may reduce further as the exchange rate in the kerb market, an illegal trading spot, is higher than in the banking sector.

A foreign currency trader says that people now have to count Tk 91.80 per dollar, way higher than the Tk 86.20 interbank rate.

The foreign exchange regime volatility has even forced a bank to stop publishing US dollar rates in the last few days since the rates are fluctuating abnormally, said an executive of the lender requesting anonymity.

“If the kerb market continues to offer a higher rate, remitters will opt for the informal channel,” Mansur said.

“This will bring the reserves to a critically low level. So, the central bank should narrow the gap as the subsidy of 2.5% given by the government to beneficiaries of remittances is not adequate,” he added.

Md Habibur Rahman, Chief Economist of Bangladesh Bank, says the central bank has decided to gradually depreciate the local currency.

He thinks the exchange rate gap between formal and informal markets should be Tk 2.50 per dollar to ride out the ongoing situation.

If his view translates into reality, the exchange rate will have to be depreciated to at least Tk 89 per dollar, which is also supported by Mansur.

“The central bank will bring about quick depreciation of the taka to a certain degree since injecting dollars to keep the exchange rate stable is not an ideal stance for long,” Rahman said yesterday.

However, he has not given any hint as to how much depreciation will be allowed.

Another central bank official said the government would try to keep inflation in check in order to protect people from higher prices since the next general election is not far away.

Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, says the reserves could cover import payments for more than nine months a few months ago, but now it can finance imports for about 5 and a half months.

He calls the gradual depreciation of the taka a time-befitting move.

“The depreciation will bring imported inflation. The government can lessen the woes of the common people by giving fiscal supports such as waiving or reducing taxes and value-added taxes, and providing subsidies to expand open market sales,” he said.

“But such fiscal measures will have an implication on drawing up the next budget,” Rahman added.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, says the imports of non-essential and luxury items have to be discouraged as some banks now face foreign currency shortages.

Imran Khan requests President of Pakistan to dissolve assemblies

The voting on Non-Confidence move was scheduled for Sunday. Opposition also moved a non-confidence move against Speaker of National Assembly. Deputy Speaker chairing the session termed the move void and within a few minutes Imran Khan while adding the nation, informed that he had sent a request to President of Pakistan to dissolve the assembles.

The decisions are likely to create constitutional crisis and heighten political uncertainty. Selection of an interim set up, legal battle in courts and holding of fresh election may mar economic development in the country. It will be premature to talk about near term future, till the dust settles.

If China breaches border, Russia won’t come to your defence, United States warns India

According to The Bangladesh Chronicle, the United States has warned India against warming up relationship with Russia, ahead of a visit by Moscow’s top diplomat to press New Delhi to resist Western pressure to condemn its invasion of Ukraine.

It may be recalled that India abstained from UN resolutions censuring Moscow and continues to buy Russian oil from its longstanding and time-tested friend and the biggest supplier of arms.

Delhi shares Western alarm over Beijing’s assertiveness in the Asia-Pacific region, with 20 Indian and four Chinese troops killed in a brawl on their disputed Himalayan border in 2020.

Daleep Singh, Washington’s chief sanctions strategist was quoted by local media in a visit to Delhi as saying that India could not rely on Russia if there was another clash.

“Russia is going to be the junior partner in this relationship with China. And the more leverage that China gains over Russia, the less favourable that is for India,” Singh was quoted as saying on Thursday.

“I don’t think anyone would believe that if China once again breached the Line of (Actual) Control, that Russia would come running to India’s defence,” he said, referring to the India-China border.

Moscow, facing massive Western sanctions in response to its invasion of Ukraine in February, has declared a “no-limits partnership” with China, which also did not condemn Russian actions.

Russian Foreign Minister Sergei Lavrov arrived in Delhi late Thursday from China, where he had hailed Beijing as part of a new “multipolar, just, democratic world order”.

India and Russia are working on a rupee-ruble mechanism to facilitate trade and get around Western sanctions on Russian banks, according to media reports.

Russia has written to India’s defence ministry requesting clearance of payments worth US$1.3 billion that have been halted since last month, according to the local Economic Times newspaper.

Singh said the US was ready to help India — the world’s third biggest oil importer and consumer — diversify its energy and defence supplies.

But he added that there would be consequences for countries seeking to circumvent the sanctions.

“I come here in a spirit of friendship to explain the mechanisms of our sanctions, the importance of joining us, to express a shared resolve and to advance shared interests. And yes, there are consequences to countries that actively attempt to circumvent or backfill the sanctions,” he said.

“We are very keen for all countries, especially our allies and partners, not to create mechanisms that prop up the ruble and that attempt to undermine the dollar-based financial system,” he said.

India is part of the Quad alliance with the United States, Japan and Australia — seen as a bulwark against China.

After the 2020 clash on the China border, India rushed large amounts of military hardware to the frontier, most of it Russian-origin. 

چین نے سرحد کی خلاف ورزی کی تو روس آپ کے دفاع میں نہیں آئے گا: امریکہ نے بھارت کو خبردار کر دیا

بنگلہ دیش کرانیکل کے مطابق امریکہ نے روس کے ساتھ تعلقات میں گرمجوشی کے پیشِ نظرہندوستان کو خبردار کیا ہے۔ یہ بیان ماسکو کے اعلیٰ سفارت کار کے ہندوستان کے دورہ سے قبل جاری کیا گیا ہےتاکہ ہندوستان پردباؤ ڈالا جائے کہ وہ یوکرین پر روس کی حملے کی مذمت کرے۔

یاد رہے کہ بھارت نے ماسکو کی مذمت کرنے والی اقوام متحدہ کی قراردادوں پر اپنی رائے دینے سے پرہیز کیا اور اپنے دیرینہ دوست اور ہتھیاروں کے سب سے بڑے سپلائرسے تیل خریدنا جاری رکھا۔

دہلی نے ایشیا پیسیفک کے علاقے میں بیجنگ کی جارحیت پر مغربی خدشات سے اتفاق کیا، 2020 میں ہندوستان کی متنازعہ ہمالیائی سرحد پر  چین کے ساتھ جھڑپوں میں 20 ہندوستانی اور چار چینی فوجی مارے گئےتھے۔

دلیپ سنگھ، واشنگٹن کے چیف پابندیوں کے حکمت عملی کے ماہر نے مقامی میڈیا سے گفتگو کرتے ہوئےدہلی کے دورے کے حوالے سے کہا کہ اگر کوئی اور تصادم ہوا تو بھارت روس پر بھروسہ نہیں کر سکتا۔

چین کے ساتھ اس تعلقات میں روس جونیئر پارٹنر بننے جا رہا ہے اور چین روس سے جتنا زیادہ فائدہ اٹھاتا ہے، ہندوستان کے لیے اتنا ہی کم سازگار ہوگا،‘‘ سنگھ نے جمعرات کو کہا۔

"مجھے نہیں لگتا کہ کوئی بھی اس بات پر یقین کرے گا کہ اگر چین نے ایک بار پھر لائن آف (حقیقی) کنٹرول کی خلاف ورزی کی تو روس ہندوستان کے دفاع کے لئے بھاگ کر آئے گا،" انہوں نے ہندوستان-چین کے سرحدی تنازعہ کا حوالہ دیتے ہوئے کہا۔

فروری میں یوکرین پر حملے کے جواب میں بڑے پیمانے پر مغربی پابندیوں کا سامنا کرنے والے ماسکو نے چین کے ساتھ "غیر محدود شراکت" کا اعلان کیا ہے، جس نے روسی اقدامات کی بھی مذمت نہیں کی۔

روس کے وزیر خارجہ سرگئی لاوروف چین سے جمعرات کو دیر گئے دہلی پہنچے، جہاں انہوں نے بیجنگ کو ایک نئے ملتی پولرسسٹم کا ذکر کیا اور اسے ایک منصفانہ، جمہوری عالمی نظام کا حصہ قرار دیا۔

میڈیا رپورٹس کے مطابق، بھارت اور روس تجارت کو آسان بنانے اور روسی بینکوں پر مغربی پابندیوں کو ختم کرنے کے لیے روپیہ-روبل کے طریقہ کار پر کام کر رہے ہیں۔

مقامی اخبار اکنامک ٹائمز کے مطابق، روس نے ہندوستان کی وزارت دفاع کو 1.3 بلین امریکی ڈالر کی ادائیگیوں کی منظوری کی درخواست کی ہے جو گزشتہ ماہ روک دی گئی تھیں۔

سنگھ نے کہا کہ امریکہ بھارت کی مدد کرنے اور اس کی توانائی اور دفاعی سپلائی کو متنوع بنانے کے لیے تیار ہے  – ہندوستان دنیا کا تیسرا سب سے بڑا تیل درآمد کرنے والا اور صارف ہے۔

لیکن انہوں نے مزید کہا کہ پابندیوں کو روکنے کی کوشش کرنے والے ممالک کے لیے اس کے نتائج ہوں گے۔

"میں یہاں دوستی کے جذبے کے ساتھ آیا ہوں تاکہ ہماری پابندیوں کے طریقہ کار، ہمارے ساتھ شامل ہونے کی اہمیت، مشترکہ عزم کا اظہار کرنے اور مشترکہ مفادات کو آگے بڑھانے کے لیے آیا ہوں۔ اور ایسے ممالک کو خطرناک نتائج سے آگاہ کرنا ہے جو پابندیوں کو روکنے یا پیچھے ہٹانے کی سرگرمی سے کوشش کرہے ہیں،" انہوں نے کہا۔

انہوں نے کہا کہ "ہم تمام ممالک، خاص طور پر اپنے اتحادیوں اور شراکت داروں کے لیے بہت خواہش مند ہیں کہ وہ ایسا طریقہ کار نہ بنائیں جو روبل کو فروغ دے اور جو ڈالر پر مبنی مالیاتی نظام کو کمزور کرنے کی کوشش کرے۔"

ہندوستان امریکہ، جاپان اور آسٹریلیا کے ساتھ کواڈ الائنس کا حصہ ہے جسے چین کے خلاف ایک مضبوط اتحاد کے طور پر دیکھا جاتا ہے۔

چین کی سرحد پر 2020 کی جھڑپ کے بعد، ہندوستان نے بڑی مقدار میں فوجی جنگی سازوسامان سرحد پر پہنچا دیا، جس میں زیادہ تر روسی ساخت کا ہے۔

 

Need to understand unique identities of diverse neighborhoods of Jerusalem

According to a report in The Jerusalem Post, in the summer of 2020, JIPR researcher Tehila Bigman set out to examine the nature of interactions in Jerusalem's mixed neighborhoods. Residents from nine (mixed and separated) Jerusalem neighborhoods participated in the study.

Through questionnaires, interviews and observations, the researcher developed a picture of the residents’ perspective, as well as their perception of the challenges and opportunities inherent in living in mixed neighborhoods.

The study found that in order to create living spaces that provide a sense of security for all residents, it is important to establish anchors of identity for each of the resident population groups, but it is not necessary to create separate residential neighborhoods.

More than 90% of the residents stated that they would feel comfortable in their residential area as long as they could receive services adapted to their religious identification and feel they belong to a large enough group.

A smaller percentage indicated that it is important to them that the neighborhood’s character overlap with their own religious identification or that most of the population is like them.

As to the anchors, when participants were asked, “Which institutions or services are most important for you to have in the neighborhood?” the most prevalent answers among Haredi respondents were a synagogue (96%) and a mikveh (75%).

The most prevalent answers among religiously observant respondents were a synagogue (71%) and parks or playgrounds (59%).

The most prevalent answers among secular respondents were a shopping center (62%) and a library (57%).

Each of the sectors ranked “a suitable education system” third.

Finally, the findings point to a significant gap between what residents perceive as personally beneficial and what they perceive as beneficial to Jerusalem.

About 30% of the participants disagreed with the statement, “Residing near people like me improves the quality of life for me / my children.”

As to benefits for the city, about half of the participants (49%) agreed that the quality of life in Jerusalem would improve if people resided near others who differ from them.

In only a few decades, the sectorial division within Israel will resemble the current division within Jerusalem, according to demographic forecasts.

Accordingly, Jerusalem can play a key role in providing models for the cooperative management of private and public spaces alike.

If Jerusalem and Jerusalemites succeed in managing shared spaces constructively, they will be offering hope for cooperative management across Israel.

 

 

Russia-Ukraine conflict: A US manufactured crisis

Few people today ask the most important question about the conflict between Russia and Ukraine. Many people want America to stay out of the fight, but even they don’t ask the vital questions.

Why does the world face a crisis today? Why has a border dispute between Russia and Ukraine escalated to the point where people fear nuclear war?

The answer is simple. The United States, under the leadership of President Joe Biden and the forces controlling him, has done this and, by doing so, brought the world to the brink of disaster. As always, the great Dr. Ron Paul gets it right: “Three weeks into this terrible war, the US is not pursuing talks with Russia, instead of supporting negotiations between Ukraine and Russia that could lead to a ceasefire and an end to the bloodshed, the US government is actually escalating the situation which can only increase the bloodshed.

“The constant flow of US and allied weapons into Ukraine and talk of supporting an extended insurgency does not seem designed to give Ukraine a victory on the battlefield but rather to hand Russia what Secretary of State Blinken called ‘a strategic defeat.’

“It sounds an awful lot like the Biden Administration intends to fight Russia down to the last Ukrainian,” wrote Paul. ”The only solution for the United States is to get out. Let the Russians and Ukrainians reach an agreement. That means no NATO for Ukraine and no US missiles on Russian borders? So what! End the war then end NATO.”

Let’s look at an analogy that will help us understand Paul’s point. For years, the Ukrainian government has attacked an area in the Donbass region that has seceded from Ukraine and formed an independent, pro-Russian, republic. Just before Putin moved against Ukraine, Ukrainians increased the scale and scope of their attack.

Rick Rozoff describes what they did, “Two-thirds of Ukrainian army servicemen have been amassed along the Donbass contact line, Eduard Basurin, spokesman for the self-proclaimed Donetsk People’s Republic (DPR) militia, said on Thursday.

“Another three brigades are on their way to Donbass, which is 20,000 to 25,000 troops more. The total number will reach 150,000, not to mention the nationalists. This is about two-thirds of Ukrainian Armed Forces’ personnel,” Basurin said on the Rossiya 1 television channel (VGTRK) on Thursday.

Ukrainian troops are stationed along the 320-kilometer front line, he said.”

Unlike what has just happened, the Ukrainian attack did not result in US sanctions on Ukraine. There were no meetings of the UN to condemn Ukrainian aggression. There was no talk of world war. On the contrary, the Ukraine government used American weapons in its attack and asked America for more weapons to continue their attack.

Let’s listen to Rozoff again, “The Armed Forces of Ukraine used the American anti-tank missile system Javelin in the hostilities in Donbass. This was announced by the head of the Main Intelligence Directorate of the Ministry of Defense of Ukraine Kirill Budanov in an interview.

“Budanov said that ideally, the US would help deter any Russian incursion, through additional military aid and increased diplomatic and economic pressure, including more sanctions against Russia and the seizure and blocking of Russian banking accounts.

“Also, in addition to US aid already promised and delivered, including Mark VI patrol boats, Javelin anti-armor systems and AN/TPQ-53 light counter-fire radar systems, Ukraine seeks additional air, missile and drone defense systems and electronic jamming devices, Budonov said. Patriot missile batteries and counter rocket, artillery and mortar systems are on Ukraine’s wish list.

“The AN/TPQ-53 systems were used to great effect, Ukraine military officials have previously reported. Budanov said the Javelin systems have also been used against Russian forces. Those, along with Turkish-manufactured drones, used against Russian-aligned separatist artillery troops, have a significant psychological deterrent value, said Budanov.”

The US should have not have shipped arms to Ukraine. Doing this made the situation worse. But for what we’re saying now, it doesn’t matter what you think of the policy. The key point is that because there was no international outcry and no sanctions, the matter remained a local fight. If Biden and his team had reacted to the so-called Russian invasion in the same way, the matter would have remained a local quarrel. Russia and Ukraine would have made a deal and that would be that.

The neocon warmongers and other defenders of democracy, who unfortunately include some deluded libertarians object. Don’t we have a duty to resist aggression? The answer is clear, No, we don’t. We do not have a duty to evaluate every foreign quarrel and assess who is at fault. We do not have a duty to require leaders of regimes we, or rather our masters in Washington, don’t like to accept existing boundaries of countries as unchangeable. We should reject the false doctrine of “collective security,” which makes every border dispute a world war.

The great American historian Charles Beard recognized what was wrong with “collective security” in the 1930s. In his article, “Giddy Minds and Foreign Quarrels,” he asked: “On what … should the foreign policy of the United States be based? Here is one answer and it is not excogitated in any professor’s study or supplied by political agitators. It is the doctrine formulated by George Washington, supplemented by James Monroe, and followed by the Government of the United States until near the end of the nineteenth century, when the frenzy for foreign adventurism burst upon the country.

This doctrine is simple. Europe has a set of ‘primary interests’ which have little or no relation to us, and is constantly vexed by ‘ambition, rivalship, interest, humor, or caprice.’

The United States is a continental power separated from Europe by a wide ocean which, despite all changes in warfare, is still a powerful asset of defense. In the ordinary or regular vicissitudes of European politics the United States should not become implicated by any permanent ties. We should promote commerce, but force ‘nothing.’ We should steer dear of hates and loves. We should maintain correct and formal relations with all established governments without respect to their forms or their religions, whether Christian, Mohammedan, Shinto, or what have you.”

Beard then responded to those who wanted to scrap our traditional policy of non-intervention with “collective security”. In the rest of the world, outside this hemisphere, our interests are remote and our power to enforce our will is relatively slight. Nothing we can do for Europeans will substantially increase our trade or add to our, or their, well-being. Nothing we can do for Asiatics will materially increase our trade or add to our, or their, well-being. With all countries in Europe and Asia, our relations should be formal and correct. As individuals we may indulge in hate and love, but the Government of the United States embarks on stormy seas when it begins to love one power and hate another officially.”

We should heed Beard’s wisdom today. Otherwise, the world may go up in flames.

 

Sanctions against Russia a threat to US dollar dominance

The recent financial sanctions imposed on Russia for its invasion of Ukraine are likely to weaken the dominance of US petrodollar as the world currency, Gita Gopinath, First Deputy Managing Director, International Monetary Fund (IMF) told The Financial Times.

The sanctions may result in a more fragmented international monetary system, warned Gopinath.

She had previously said that the sanctions against Russia would not foreshadow the demise of US dollar as the world’s reserve currency and that the Ukraine crisis would slow growth, but would not cause a global recession.

The United States, European Union (EU) and Group of Seven nations have hit Russia with a bundle of heavy sanctions and blocked the country from using SWIFT, the global communications service that clears international financial transactions, virtually cutting it off from the global financial markets and international trade.

The United States also froze US$630 billion in assets held in international reserves by the Russian Central Bank.

The Russian government is retaliating by demanding payment in rubles or gold for purchases of energy and other important commodities.

“If they want to buy, let them pay either in hard currency and this is gold for us, or pay as it is convenient for us, this is the national currency,” said the head of Russia’s energy committee, Pavel Zavalny.

The United States and the Britain have imposed embargoes on Russian energy exports, but EU, which is more reliant on energy imports, is more reluctant to ban it. The new policy has hit EU the hardest, sending gas prices on the continent up by 30% on March 30.

Meanwhile, ruble has since risen to a three-week high past 95 against dollar after the Moscow Stock Exchange reopened after the initial round of sanctions.

Zavalny has suggested that buyers from countries friendly to Russia, such as China, could pay in their own fiat currencies or in Bitcoin.

Russia had been planning for years to reduce its dependence on petrodollar since the United States imposed sanctions in retaliation for its annexation of Crimea in 2014. The current crisis in Ukraine has only accelerated those plans.

Before the recent conflict, Russia still had roughly a fifth of its foreign reserves in dollar-denominated assets, mainly held overseas in Germany, France, Britain and Japan, which have since sided with the United States to isolate Moscow from the global financial system.

Gopinath said that Russia’s response to the sweeping sanctions could encourage the emergence of small currency blocs based on trade between separate groups of countries and would lead to further diversification of the reserve assets held by national central banks.

“Countries tend to accumulate reserves in the currencies with which they trade with the rest of the world, and in which they borrow from the rest of the world, so you might see some slow-moving trends towards other currencies playing a bigger role in reserve assets,” she said.

However, Gopinath doubts that the dominance of US dollar would likely be challenged in the medium term, as it is backed by strong and highly credible institutions and the fact that it is freely convertible.

“Dollar would remain the major global currency even in that landscape but fragmentation at a smaller level is certainly quite possible,” said Gopinath.

“We are already seeing that with some countries renegotiating the currency in which they get paid for trade.”

Gopinath did note that dollar’s share of international reserves had fallen from 70% to 60% over the past 20 years, with the emergence of other trading currencies.

About a quarter of the decline in dollar’s share is attributed to greater use of Chinese yuan, but less than 3% of global central bank reserves are denominated in that currency, according to the IMF.

The IMF deputy director said that the conflict is spurring the adoption of an international digital finance system, utilizing cryptocurrencies and central bank digital currencies.

“All of these will get even greater attention following the recent episodes, which draws us to the question of international regulation,” said Gopinath. “There is a gap to be filled there.”

The CCP had been preparing for the use of yuan as a global currency before the current crisis and was already ahead in adopting a central bank digital currency.

However, Gopinath said that yuan was unlikely to replace the dollar as the dominant reserve currency.

“That would require having full convertibility of the currency, having open capital markets and the institutions that can back them. That is the slow-moving process that takes time, and dollar’s dominance will stay for a while,” she said.