China & Russia vs. the US (I)

Michael Pollak mpollak at panix.com
Mon May 10 01:57:27 PDT 1999


[Stratfor's background to the current embassy crisis from a month ago]

29 March 1999

Kosovo and Asia

Summary

Kosovo points toward a rupture between Russia and the West. It also

points to an alliance between China and Russia. During the past

generation, economics were more important than politics. That is now

old-fashioned thinking. National Security in all of its guises is back

and critical. Kosovo is a turning point for Asia as well as Europe.

Analysis

On the surface, the Kosovo crisis has little to do with Asia. This is

not at all the case. Asia lives in the shadow of the United States.

Politically, militarily and certainly economically, anything that

affects the United States affects Asia and this, more than anything

the United States has done in Iraq, will affect Asia.

Let us begin by making a point that many readers have raised. It

appears that we spend more time on military affairs than on the

economic affairs that our readers are interested in. This is certainly

true. Remember, our task is to forecast events. Our reading of events

is that the next decade will resemble the pre-1990s period. That is to

say, it is our view that political and military events will define

economic relations. This is the reverse of the situation during most

of the 1990s. Particularly in Asia, political and military affairs

appeared trivial and even archaic compared to economic and business

news. That is simply no longer the case.

Consider the Kosovo crisis. In and of itself, this is a matter of

little importance to Asia. What is important is that it is redefining

U.S. relations with Russia. For the Russians, the Kosovo crisis is a

last chance to force the West to bail out its collapsed economy.

Russia is using its leverage over the Serbians as a tool for

extracting economic concessions from the West. To be more precise, the

U.S. pleaded with Russia to intervene on its behalf with the Serbs to

head off the current crisis. Not only didn't the Russians do this, but

they also actually made the situation worse, by making it clear to the

Serbs that they were no longer isolated. The Russians have been

shipping supplies and weapons to the Serbs for quite a while. This has

emboldened the Serbs. During the run-up to the crisis, the Russians

did everything they could to appear to be working to influence the

Serbs while actually encouraging Serbian resistance.

Russia wanted this crisis for two reasons. First, it is using the

crisis to show the U.S. and Europe what the world will look like if

reform in Russia collapses. The motive here is to get the U.S. and

Europe to convince the IMF to provide Russia with financial support.

Of course, Russia knows quite well that the quantity of support

available from the IMF is trivial compared to the Russian need. It

wants the money but is aware that the money is, at best, a stopgap

that will not stabilize the economy but will buy the Yeltsin-Primakov

regime some breathing room.

Russia's interest in the crisis goes deeper--it is aware that the

reform game is up. It is, therefore, looking to position itself for

the next era, the one that comes after the post Cold War era. The

crisis does two things for Russia. For the first time since the

collapse of reform, the Kosovo crisis has built a general Russian

political consensus around the pan-Slavic theme. This in itself is

useful. Second, using the pan-Slavic theme as a political foundation,

Russia is now in a position to try to create a geopolitical bloc,

particularly in European regions built around the Slavic claim of

Western betrayal. This bloc is already emerging.

But the most important evolution is Russia's desire to reverse the

U.S.-Chinese entente of 1972. If you will recall, the origin of

U.S.-Chinese relations rested in the American defeat in Vietnam. The

Nixon administration understood that because of the forced withdrawal

of U.S. forces from Vietnam and the collapse of political solidarity

in the United States, America, by itself, could no longer resist

Soviet pressure. The Chinese, for their part, understood that they

were heavily exposed to Soviet pressure. Indeed, ever since 1962 when

the Soviets floated the idea of a surgical nuclear strike on the

Chinese nuclear facility at Lop Nor, an idea that the Kennedy

administration vetoed, China was dependent on the United States as a

counterweight to the Soviets. Thus the formal anti-Soviet entente

created in 1972 was designed to contain the Soviet Union. It worked.

That relationship did more than merely redefine global geopolitics. It

also served as the general foundation of the U.S.-Chinese commercial

relationship that was a fundamental element in China's opening to the

world and reform in China. The geopolitical relationship approved by

Mao evolved into the economic structure from which Deng evolved modern

China.

Now, U.S.-China relations have collapsed in recent months. The issue

is not human rights or spying, although these have contributed. The

fundamental issue is that the basic element of the U.S.-China

relationship--American investment and loans underwriting China's

development--has simply dissolved into air. To be more precise,

China's economic development has run into a massive cyclical downturn

and is no longer a very attractive environment for Western investment.

Therefore, China has little motive to continue the geopolitical

cooperation begun in 1972. More exactly, since the economic benefits

are no longer there, the geopolitical price that China has been

prepared to pay is no longer rational.

China, like Russia, has played a subordinate geopolitical role in

relation to the United States throughout the 1990s. The payoff for

both was economic. The price was that both countries, and Russia in

particular, had to be extremely cautious not to challenge fundamental

American geopolitical interests. For example, neither country really

challenged U.S. operations against Iraq, viewing them as a trivial

price to pay for economic relations.

But with economic relations dissolving, neither country need suffer

U.S. geopolitical arrogance any longer. Russia has nearly ruptured its

relationship with the West and whether or not the IMF provides loans,

those relations will never recover. China is itself fed up with the

United States and is eager to assert its geopolitical presence in

Asia. Neither Russia nor China can resist the United States alone. But

just as the trilateral relationship between Russia, China and the U.S.

created an anti-Soviet alliance between China and the U.S. in 1972, so

the deck gets reshuffled in 1999.

Today, an anti-U.S. alliance between Russia and China is emerging,

designed to bring overwhelming U.S. power under control. And Kosovo is

the trigger. Both Russia and China are appalled by the U.S. use of

NATO as an instrument of U.S. policy in Yugoslavia. Each understands

that if the U.S. succeeds in Kosovo, it is as likely to use that power

in Ukraine or Indonesia. Therefore each has an interest in U.S.

failure in Kosovo, or at least preventing the spread of Kosovoism to

areas of fundamental interest to them.

Therefore, the question facing Asia today, as we prepare for a

U.S.-Asia summit, is likely to be as definitive in some ways as

Nixon's visit was in 1972: What will the world look like if the United

States finds itself in a Cold War with a Sino-Russian alliance? What

will happen on the Korean peninsula? What will happen in Hong Kong?

What will happen in Indonesia? How will Japan behave?

In a continent where real estate holdings in Singapore or money rates

in Thailand have appeared far more substantial and important than

fighter aircraft or naval vessels, such a redefinition will be

wrenching. Just as Cold War thinking dominated Asia well into the

1980s, so too, post-Cold War thinking will dominate into the first

decade of the next millenium. But the smart money understood early on

that real estate investment was more important the weaponry. Today's

smart money had better recognize that weapons are once again more

important than real estate in Asia.

This is a theme we will be emphasizing in the coming weeks and months.

It is time to think politically and take economic actions with one eye

on national security.

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