About the author:
Digby James Wren, Special Senior Advisor and Director of the Mekong Research Centre, International Relations Institute of Cambodia
The 2022 U.S. National Security Strategy explicitly targets both Russia and China.1 However, the Biden administration’s strategy for the maintenance of US global hegemony through the prosecution of asymmetric warfare at both ends of the Eurasian super-continent is not new. The Trump administration’s strategic shift away from globalism towards patriotism was also designed to align US domestic energy and industrial self-sufficiency with foreign policy, diplomacy and military power in an attempt to fulfill a realist vision of control over global power and wealth. In order to circumvent the institutionalization of a multipolar world order, which places limits on the exercise of US global military and economic power, the Trump administration moved to shift the center of gravity of world oil and natural gas production from the Middle East to North America. As of 2018, the U.S. became the world’s largest producer and second largest consumer of energy and, stated Trump, “stands ready to export our abundant, affordable supply of oil, clean coal, and natural gas.”2
Thus, the U.S. set out to create an arc of non-transit states (Ukraine, Poland, Scandinavia, Baltic States) around Russia to limit energy exports to the EU and actively sought to transfer European dependence on Russian energy to dependence on US oil and gas. This explains, in large part, the resumption of NATO activity in Ukraine, which profited from transferring fees on Russian gas, and unprecedented US political pressure on Germany to halt construction of the Nord Stream 2 pipeline and the promotion of an EU-constructed Baltic pipeline. The Trump administration’s efforts to gain global oil primacy, however, received a grievous shock during the onset of the global COVID-19 pandemic in the first half of 2020. A record plunge in global oil prices, ostensibly due to Russian and Saudi disagreement over production cuts that subsequently led to global demand destruction and supply surplus, exposed the high cost of US shale oil and gas. US shale oil and gas production, which employs millions of US citizens in its long supply chains, immediately collapsed exposing how US foreign policy artificially maintained high oil prices via excessive Saudi output and crippling oil sanctions and political subversion activities against Iran, Libya, Russia and Venezuela.3 4 5 6
The withdrawal of the U.S. and its NATO allies from Afghanistan at the end of the War on Terror and the outbreak of the Covid-19 pandemic signaled that Sino-Russian entente and China’s Belt and Road Initiative (BRI) infrastructure extensions into Central Asia had wrested effective territorial, political and diplomatic control away from the United States. It also ensured the uninterrupted supply of energy through the Central Asian states of Russia, China, Iran, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan and the primacy of the Shanghai Cooperation Organisation (SCO). Thus, the new eastern frontier for US and NATO activities became the line from the Baltic Sea to the Black Sea on Russia’s western periphery.
The move for Ukrainian membership of NATO, which dates from the 1990s and US president Bill Clinton’s strategy of “Democratic Enlargement,” which securitized democracy promotion,7 was accelerated by the U.S. supported coup d’état of 2014 and the consequent Russian annexation of Crimea. Moscow’s suspicions that the U.S. was determined to cripple Russian power are rooted in the post-Soviet collapse and the decades-long campaign by successive US administrations to limit Russia’s maritime access to the Baltic Sea, the Black Sea and the Mediterranean Sea. Moreover, the U.S.-led campaign of economic and technological sanctions following Russia’s annexation of Crimea and increased asymmetric operations to destabilize Russia’s southern and western peripheries only confirmed Russian fears of US intentions and NATO expansionism. Russia’s successful interventions, to frustrate US and NATO efforts in Syria and Libya, and more recently, to stabilize U.S. backed political turmoil in Kazakhstan, Tajikistan and Uzbekistan were seen in Washington as further evidence that Russian military power must be confronted directly.8 Thus, the decision to create a buffer zone in the Russian major populated eastern provinces of Ukraine was not only catalyzed by the adoption of legislation by the Ukrainian Parliament for membership in NATO in 2017, 2019 and 2020, but by concerted U.S.-led attacks on Russia’s territorial peripheries, Sea Lines of Communication (SLOCs), and its economic and technological advancement.
Since Russia’s February 2022 special military operation in Ukraine, the U.S.-led NATO alliance has conducted a proxy war of increasingly vast scale designed to militarily and economically exhaust Russia. Most worryingly, the U.S. has begun to sabotage the physical infrastructure connectivity between Russia and Europe including both the Nord Stream 1 and 2 pipelines and the Norwegian undersea communications cable. Thus, the United States has effectively achieved its long-standing ambition of partitioning Russia from Europe territorially, militarily, politically, economically and infrastructurally. However, the US campaign to partition China from Russia, the G7 and the Indo-Pacific remains incomplete.
In the Western Pacific and western Xinjiang province, the United States has followed a similar strategy of territorial, military, political, economic and infrastructure partition of China from both Europe and the so-called Indo-Pacific. The reinvigorated Quadrilateral Security Dialogue (“Quad” - U.S., Japan, India and Australia) and the AUKUS alliance, between Australia, the UK and U.S., are designed to constrain China within the so-called first island chain, from the tip of the Japanese archipelago through South Korea, Taiwan and the Philippines to the South China Sea (SCS), Australia’s far north, the Strait of Malacca and into the Indian Ocean. The Biden administration’s continuance and escalation of the Trump-era tech and trade war, increased provocations over Taiwan, political socialization programs in ASEAN nations, the launch of the Indo-Pacific Economic Framework for Prosperity (IPEF), and more recently, restrictions on semiconductors, semiconductor design and semiconductor production equipment, have placed significant downward pressure on China’s economic growth. Concurrently, the U.S. has generated global media and diplomatic narratives of slowing growth in China due to “Communist” mismanagement, heightened risks of military confrontation over Taiwan and the SCS, coercive debt-traps from BRI projects, and pernicious accusations about human rights abuses in Xinjiang and Hong Kong.
By 2003, when the term “Malacca Dilemma” was coined to describe China’s critical reliance on the Strait of Malacca sea route,9 China’s perception of a worsening strategic environment along its highly developed and economically dynamic southeast coastal region had sharpened considerably. Since then, China has expanded its global influence and built strategic ties across Africa, the Pacific, Asia and other regions. However, China’s rising energy dependence highlights the contemporary security problems of safeguarding commodity supply lanes and defending its historical sovereignty in adjacent seas. Thus, the increase of sea traffic from the Indian Ocean, through the Strait of Malacca and the South China Sea (SCS) headed for ports in China, Japan and Korea, depends to a considerable degree on whether China elects to view energy security geostrategically or geoeconomically.10 11 In Beijing, securing energy supplies along the BRI is a coherent strategy for enhancing energy security and comprehensive national power and an effective response to energy vulnerability. China’s leaders also promote the physical connectivity of suppliers to China through infrastructure assets such as pipelines, refineries, ports, processing facilities and the benefits that accrue to partner countries from “circulation” into the world’s largest industrial energy user and consumer market. The US sabotage of energy infrastructure in Europe can only further exacerbate Beijing’s fears for its vast BRI global infrastructure network.
Energy supply and energy demand form a realistic basis for China’s efforts to expand energy cooperation with countries along the BRI. With their abundant proven reserves and huge energy outputs, the countries along the BRI and China’s evolving energy requirements are highly complementary. The combined proven energy resources of partner countries along the BRI account for 52.27% of the world’s reserves.12 The top ten nations in terms of their proven reserves of energy resources, when ranked in descending order, were: Russia, Iran, India, Saudi Arabia, Kazakhstan, Ukraine, Indonesia, Qatar, Iraq, and the United Arab Emirates, countries which are mainly located in West Asia and the Middle East. China’s energy security in relation to the countries along the BRI demonstrates a complex evolutionary trend and remains the main source of overseas energy for China and thus crucial in guaranteeing China’s energy security. The benefits from the construction of a petroleum pipeline and good geo-relations between China and Russia led to sharp growth in Russia’s energy guarantee toward China’s energy security. Saudi Arabia’s energy guarantee, however, has fluctuated as its geopolitical situation has changed in the same period.13 14
Tellingly, the U.S. 2022 National Security Strategy does not once mention Saudi Arabia. Foreign reports had been anticipating China’s President Xi Jinping visiting Riyadh, and right following the anticipation, there were reports that Saudi Arabia would no longer restrict oil sales to US dollars.15 US President Joseph Biden hastily arranged a visit to the “pariah” state, as he vowed in his 2020 presidential campaign, to meet with Saudi Crown Prince Mohammed bin Salman (MBS).16 However, the reversal of Biden’s cold shoulder approach to MBS was far from successful. The Crown Prince has made no concessions to the U.S. since their July 2022 meeting and on September 5, OPEC and its ten allies, led by Russia, ended monthly increases that had reached 690,000 barrels a day in August and announced a collective production cut of 100,000 barrels a day. They also authorized Saudi Arabia to explore further changes to arrest the fall in oil prices, despite US efforts to keep oil prices between $6017 and $7518 to undercut Russia’s ability to finance its military special operations in Ukraine.19
In another snub to the US strategy, in mid-October 2022, OPEC+ cut production by two million barrels per day. The cuts coincided with further inflation spikes in both the U.S. and Europe and, more critically, the Democratic Party’s challenge to keep control of both houses of Congress in the November US mid-term elections. Biden’s response, that the Saudis would suffer “consequences” came after the Chairman of the Senate Foreign Relations Committee, powerful Democratic Senator Bob Menendez, said the U.S. must immediately freeze all cooperation with Saudi Arabia, including arms sales.20 Some powerful Democrats argued that the U.S. should halt all military-technological transfers to Saudi Arabia, while others released statements exhorting Biden to compel the Saudis to reconsider the oil cuts and not risk US leverage over the JCPOA (Joint Comprehensive Plan of Action) and in Yemen. However, much more is at stake for the U.S. than the Iran nuclear deal, a significant loss in arms sales - Saudi Arabia is the leading purchaser of US arms exports - and the potential termination of the Saudi-U.S. partnership.21
While the prospect of complete US withdrawal and a Saudi military deal with Russia and/or China would be strategically damaging, the dismantling of the petro-dollar arrangement, established by Richard Nixon in 1973, would be catastrophic for US global ambitions. The greatest strength, and greatest weakness, of the United States economy, and therefore its power and wealth, is the continued role of the dollar as the global reserve currency. To stabilize the hyper-inflation that followed the end of the Bretton Woods system, Nixon visited Saudi Arabia in 1973 and convinced the Saudi royal family that the U.S. would guarantee Saudi security in exchange for the Kingdom, the world’s largest oil exporter, to price all oil exports in US dollars. Thus, after the oil shock of the 1970s and the “Carter Doctrine,”22 the U.S. sought to gain control over global energy pricing and markets by subordinating the members of the Organization of the Petroleum Exporting Countries (OPEC).23 However, the effectiveness of active US sanctions against Russia (not an OPEC member), Iran and Venezuela, respectively the world’s second, fifth and eleventh largest oil-producing nations, while undoubtedly restricting the economic health of all three, has been offset by the continued purchase by the world’s largest and third largest oil-consuming nations, India and China.24
In order to economically sustain the War on Terror, invasions of Afghanistan and Iraq, operations in Syria and Libya, unprecedented tariff and sanctions regimes to restrict global supply chains, reindustrialization efforts, and finance massive quantitative easing both before and after the Covid-19 pandemic, the U.S. has stripped its economy of vigor. Thus, the U.S. has accumulated vast debts, reduced its infrastructure to disrepair, generated domestic insurrection and political polarization and needed to maintain high domestic demand and employment through restrictive immigration. The Biden administration’s current Trans-Atlantic and Indo-Pacific “three oceans campaign,” - which echoes the Mahan strategy of global hegemony through maritime supremacy25 - and unlimited financial and material support for its proxy war against Russia has only added to the Bush Jr., Obama and Trump-era economic profligacy and increased energy and food supply problems to produce the highest levels of domestic and global inflation since Richard Nixon ended the Bretton Woods system and unpegged the dollar from the gold standard in 1971.26 27 Thus, the potential geopolitical risks for the United States are now reaching crisis levels.
The United States has forgotten the lessons from its own Declaration of Independence when it fought a “revolutionary” war against the British Empire in 1776. Taxation without representation was the fundamental justification, however, heavy taxation was imposed so Britain could sustain its global contest with France for control of resource-rich territories and populations. In its persistent pursuit of global hegemony since 1945, and its unrealized subjugation of Russia and China, the United States has crippled its economy to such an extent that it is now exporting inflation. The U.S.-produced inflation is equivalent to global taxation, because other economies must accelerate domestic production to pay for dollar price increases in energy, food and debts. In an act of self-inflicted harm, the U.S. has also exported political destabilization and significant inflationary costs into the economies of its allies, while simultaneously reducing its industrial dependence upon their exports. The EU, the UK, Japan and South Korea have seen significant declines in their currencies against the dollar, energy and food import costs have risen substantially, export dependency on the Global South has increased and competition from China, India and other emerging economies has intensified.
For Saudi Arabia, the unrestricted supply of energy, guaranteed by US military support has become an onerous liability. Oil revenue, which was reinvested into the US economy and massive arms sales was recycled into US treasuries and invested into the markets and sustained corporate profits. However, the intense volatility in the U.S. and its EU and Japanese partners has given rise to a greater appreciation of the benefits of diversification. China is now the Saudi’s largest customer and has a less volatile economy, superior or peer technology and the world’s most advanced industrial and manufacturing base with large growth potential including infrastructural connections to the 140 partners of the BRI in Africa, Asia, Europe and Latin America. Moreover, China has managed to maintain both fiscal and monetary stability and contribute to global economic growth despite US efforts to undermine its economic, technological and military potential.
For emerging economies such as Sri Lanka, Thailand, Laos and Turkey, the specter of a repeat of the 1997 Asian Financial Crisis (AFC) and/or another 2008 Global Financial Crisis (GFC) is a stark reminder of their reliance on the US dollar as a reserve currency and the US fickle support in times of need. The recent collapse of the UK bond market during the transition from Boris Johnson to Liz Truss spurred former US Treasury Secretary Larry Summers to say it was performing like an “emerging economy.”28 In fact, Japan, UK, Germany and South Korea have been actively reducing their exposure to US treasuries to support their currencies.29 In turn, the US Fed may need to reverse course and start to buy treasuries to support the bond market30 or experience a UK-like collapse.31 Overall, the U.S. is now widely seen, not as the champion of free and open trade and an economic “safe haven,” during global crises, but as the major cause of global financial instability, the primary catalyst for the decline of globalization and multilateralism, and the greatest obstacle to achieving multi-polarity, global economic growth and a consensus for planetary challenges, and a shared future for mankind.
1. Whitehouse (Whitehouse) (2022) ‘National Security Strategy,’ Whitehouse, Whitehouse, Washington accessed.
2. Trump D (House W) (2018) ‘Remarks to the 73rd Session of the United Nations General Assembly | New York, NY | The White House,’ House W, @whitehouse, Washington DC accessed 06/10/2018.
3. Klare MT (2015) 'From Scarcity to Abundance: The Changing Dynamics of Energy Conflict,' Penn State Journal of Law and International Affairs, 3(2):10-41.
4. Dollar D and Gross S (2018) China’s currency displacing the dollar in global oil trade? Don’t count on it, Brookings Institute, accessed 06/10/2018 2018.
5. Bimbetova B, Tyurina Y, Troyanskaya M, Ermakova E, Orynbassarova A, Skakova A, Koptayeva G and Agabekova G (2019) 'The Impact of International Sanctions on National Economic Regime of Target States: The Case of Energy Sector (Oil, Gas and Renewable Energy),' Academy of Strategic Management Journal.
6. Boedoff J (2020) 'Why This Oil Crash Is Different,' Foreign Policy.
7. Søndergaard RS (2015) 'Bill Clinton’s ‘Democratic Enlargement’and the Securitisation of Democracy Promotion,' Diplomacy & Statecraft, 26(3):534-551.
8. Krivosheev K (2022) Crises in Central Asia Belie the Region’s Ability to Democratize 13/07/2022, Carnegie Endowment for Peace, Washington.
9. Situated between Malaysia and Indonesia, where 80% of their energy needs (oil imports) pass en-route from the Middle East and Africa (Angola) shipping lanes through the Malacca Straits into the South China Sea (SCS).
10. NEA (Agency NE) (2017) ‘Vision and Actions on Energy Cooperation in Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road,’ Agency NE, Belt and Road Portal, Beijing accessed 16/05/2017.
11. Boute A (2019) 'China’s External Energy Security: Energy Trade and Investment Along the ‘Belt and Road’: An Introduction,' The Journal of World Investment & Trade, 20(2-3):195-220.
12. In terms of the total amount of energy, these countries accounted for 401.45 billion tons of coal, 133.15 billion tons of oil, and 143.3 trillion cubic meters of gas, which accounting for 45.03%, 55.62%, and 76.68% of the world's reserves. (Zhao et al. 2019)
13. Zhao Y, Liu X, Wang S and Ge Y (2019) 'Energy relations between China and the countries along the Belt and Road: An analysis of the distribution of energy resources and interdependence relationships,' Renewable and Sustainable Energy Reviews, 107:133-144.
14. Kozhanov N (2020) 'Saudi Arabia in Struggle for the Chinese Oil Market: the Price War as Necessity.'
15. Whitehouse (Whitehouse) (2022) ‘National Security Strategy,’ Whitehouse, Whitehouse, Washington accessed.
16. Fields J (2021) Biden once wanted to make Saudi Arabia a ‘pariah’ – so why is he playing nice with the kingdom’s repressive rulers now? The Conversation, Canberra.
17. US$60 is the price below which US producers are no longer profitable.
18. US$75 is the top price that the Biden administration deems acceptable for its allies and partners.
19. Ottaway D (2022) Biden’s Saudi Trip Widens Rift with Crown Prince Mohammed Bin Salman 27/09/2022, Wilson Center, Washington.
20. Holland S (2022) Biden vows consequences for Saudi Arabia after OPEC+ decision Reuters, London.
21. Ibid.
22. Krane J and Medlock KB (2018) 'Geopolitical dimensions of US oil security,' Energy Policy, 114:558-565.
23. Klare MT (2015) 'From Scarcity to Abundance: The Changing Dynamics of Energy Conflict,' Penn State. Journal of Law and International Affairs, 3(2):10-41.
24. Escobar P (2018) 'Why India is ignoring US sanctions and sticking with Iran,' Asia Times.
25. Mahan AT (1897) The Interest of America in Sea Power, Present and Future, Sampson Low, Marston & Company, Limited, London.
26. Eichengreen B and Flandreau M (2009) 'The Rise and Fall of the Dollar (or When Did the Dollar Replace Sterling as the Leading Reserve Currency?),' European Review of Economic History, 13(3):377-411.
27. Zhou X (2009) Reform the international monetary system, Bank of International settlements, Switzerland.
28. CNBC (2022) Larry Summers blasts UK tax cuts as ‘utterly irresponsible’ and warns of possible contagion, New York City.
29. Iyer A (2022) The world is selling US treasuries and that is bad for the RBI Money Control, New Delhi.
30. Brettell K and Barbuscia D (2022), U.S. Treasury asks major banks if it should buy back bonds, Reuters, London.
31. Jones H (2022) UK bond market crash takes shine off Big Bang plans for London Reuters, London.
Please note: The above contents only represent the views of the author, and do not necessarily represent the views or positions of Taihe Institute.
This article is from the October issue of TI Observer (TIO), which is a monthly publication devoted to bringing China and the rest of the world closer together by facilitating mutual understanding and promoting exchanges of views. If you are interested in knowing more about the October issue, please click here:
http://www.taiheinstitute.org/Content/2022/10-31/1615423550.html
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