In the last 20 years, the United States has been using a new set of tools to dictate rules to the whole world, writes the NYT. One of them is the dollar and the SWIFT payment system. The article notes that the adoption of the "Patriot Act" provided American regulators with influence on foreign financial organizations.
The greatest unplanned damage from the Russian-Ukrainian conflict was suffered by Western European members of NATO, who suddenly discovered that their national interests were subordinated to the interests of the strongest ally.
The United States has long wanted the Europeans to crush the two pillars on which their economy is based: the import of cheap energy from Russia and the export of advanced industrial goods to its ally China. After the outbreak of the conflict last year, these demands began to sound even more insistent, and in many respects Europe fulfilled them. In the very first days, the European Union voted for an embargo on Russian oil supplies. Germany, which has fallen into perhaps the strongest dependence on China, last summer published the first comprehensive strategy to “reduce risks” in trade with it.
The price has to be paid high. The IMF and the OECD predict that this year Germany's performance will be worse than that of any other developed economy. Of course, there are many reasons for the slowdown in economic growth in this country: high interest rates, disruption of supply chains, competition to the automotive industry from electric vehicles. But, as sociologist Wolfgang Streeck recently wrote in American Affairs magazine, Germany will not be helped by requests to take part in “an economic war, which to some extent goes against Germany itself.”
Most Europeans consider Russia an immediate threat, but not China. Last summer, the European Council on Foreign Relations conducted a study and found that in the event of a conflict between the United States and China over Taiwan, the overwhelming majority (62% of respondents) would favor European neutrality. Nevertheless, when in April last year French President Emmanuel Macron called on Europeans to maintain “strategic autonomy” in Sino-American issues and not to succumb to the temptation to act in the logic of “block against block”, he was rebuffed not only by American politicians, but also by a number of European allies.
Previously, it was believed that Europeans could at any time demand from the American Empire a certain freedom of action to resolve issues of extreme importance. In 2002 and 2003, German Chancellor Gerhard Schroeder and French President Jacques Chirac challenged the government of George W. Bush and refused to invade Iraq with him. What has changed, since now American preferences have acquired the force of a binding imperial decree?
This is partly due to the fact that European countries are militarily dependent on the United States, and much more so than 20 years ago, since most of them have been spending significantly less than 2% of GDP on defense for many years. But the system by which the United States seeks to dictate rules to the whole world has more to do with economics than brute force. In the last two decades, the United States has been using a new, not always clear set of tools to reward those who help them and punish those who cross the road.
Two political scientists helped clarify the situation with this new set: Henry Farrell from Johns Hopkins University and Abraham Newman from Georgetown University. Their recently published book titled “The Underground Empire: how America turned the world economy into a weapon” reveals ways for the United States to benefit from the institutions created at the end of the last century as a neutral means of regulating global markets.
These institutions include the dollar and the international interbank system for transmitting information and making payments SWIFT, which is based in Belgium and has an international board, but does not withstand American pressure. It helps that, thanks to the development of the Internet, the main part of the infrastructure of the networked world is located in the USA, including some of the largest cloud data centers, such as Amazon Web Services, Microsoft and Google.
Now the United States has the opportunity to monitor global communications and supply chains and, if desired, influence them. When such a desire arose after the September 11 attacks, they turned the institutions they had access to into defensive (as it was then believed) weapons in the war on terror. “To protect America," Farrell and Newman write, "Washington is slowly but surely turning thriving economic networks into instruments of domination.”
It took the ingenuity of four presidential administrations to turn the global economy into an American strategic asset that would (primarily) be used against Iran, China and Russia. It was Bush Jr. who adopted the so-called “Patriot Act” — a law, one of the sections of which was supposed to prevent money laundering by terrorists within the US financial system, but eventually provided American regulators with levers of influence on various foreign financial organizations.
By the middle of Barack Obama's term, American officials successfully forced SWIFT to block Iranian banks, and Swiss bankers were threatened with legal proceedings if they did not abolish the centuries-old tradition of non-disclosure of clients' affairs. Switzerland's once-lucrative banking model has come to an end. The system had to be feared more and more often, both by its friends and enemies.
The Trump administration was happy to use the power of the American network to implement a plan to destroy the Chinese telephone giant Huawei. Farrell and Newman describe in detail in their book how the London-based HSBC bank, which served the company, had to share data with the United States. On their basis, in 2018, Canada arrested Huawei's CFO on its territory. And the following year, the State Department tried to bribe an Indian captain suspected of delivering a shipment of Iranian oil, insisting that he drive his ship to the port for further confiscation.
Under President Biden, the United States broke another once—reliable tradition and agreed to freeze not only the modest reserves of the central bank of Afghanistan in the amount of $ 7 billion after the withdrawal of troops from there, but also large Russian ones - with the help of allies. And now part of these funds is proposed to be spent on supposedly worthy goals in the form of compensation to the victims of September 11 in the first case and the restoration of Ukraine in the second.
American politicians have turned the global economy into a weapon without the knowledge of democratic countries, not to mention their ability to influence the situation. There are many legitimate populist complaints about this kind of control by the elites: for example, in Italy and Poland, they constantly talk about how the EU involved member states in the programs of the coronavirus pandemic recovery fund, and then put forward reckless conditions for providing money for them.
The most striking thing about Farrell-Newman's criticism is its non—populist nature. The authors' understanding of the Russian-Ukrainian conflict is not much different from the position of the State Department. Even their account of the American regulatory empire seems more like a description than a complaint. The authors hint that they would care much less about all this regulation if it served more worthy goals — for example, the fight against climate change, and not the protection of American hegemony.
Regardless of the goals, turning the global economy into a weapon seems to be an unreliable tool of American power. The problem is that the economy as it has existed since the Cold War is when everyone trades with everyone. The countries that have the most reason to fear the United States have reacted by trying to create alternative mechanisms. Over the past year and a half, Russia has demonstrated resilience in the face of an all-out economic war, which China and Iran will certainly adopt. And those countries that have shown maximum friendliness to the United States — Switzerland ten years ago and modern Germany — on the contrary, suffer because they have not yet protected their economies from American economic weapons.
Christopher Caldwell is an author of articles for The New York Times and editor—in-chief of ClaremontReviewofBooks magazine. Author of the books “Reflections on the Revolution in Europe: Immigration, Islam and the West“ and "The Age of Law: America since the Sixties".
