BRIC and SCO Summits ~Reinventing the Wheel

A new world is being born, one without the US dollar greasing the wheels of commerce, notes Eric Walberg
Yekaterinburg, famous tragically as the spot Lenin chose to have the Tsar and his family executed in 1918, and ironically as the fiefdom of Boris Yeltsin, who finished off the Russian revolution itself in 1991, witnessed something no less remarkable last week when leaders of the so-called BRIC nations (Brazil, Russia, India and China) held their first summit, following the yearly meeting of the Shanghai Cooperation Organisation (SCO). The BRIC countries comprise 15 per cent of the world economy, 40 per cent of global currency reserves and half the world’s population. Brazil , India and China have also weathered the financial crisis better than the world as a whole.
Holding the two meetings together meant that Indian Prime Minister Manmohan Singh attended the SCO for the first time. The SCO, Russian and China ’s Eurasian security organization, has become a key counterweight to US hegemony in the world, and Russia and China are eager to have India upgrade its position of observer to member. This summit appeared to have coaxed India a step closer, as the SCO security agenda has shifted its emphasis to the growing security threat from Afghanistan, which satisfies the more pro-US India .
But the headline-stealer was the BRIC summit. While the US plays its tiresome geopolitical games on Russia ’s eastern borders, Russian President Dmitri Medvedev was busy charting a new economic and political reality in the heart of Eurasia . “The artificially maintained unipolar system”, he lectured, is based on “one big centre of consumption, financed by a growing deficit and ... one formerly strong reserve currency.” At the root of the global financial crisis, he concluded, is that the US makes too little and spends too much. Especially upsetting for Russia is its continued military largesse to Georgia , the missile shield in Eastern Europe and its invasions of Iraq and Afghanistan . “The summit must create the conditions for a fairer world order,” he read out, as Presidents Hu Jintao of China , Luiz Inacio Lula da Silva of Brazil and the Indian prime minister looked on approvingly.
China backs Russia ’s two big gripes with the US : “The security of some states cannot be ensured at the expense of others, including the expansion of military-political alliances or the creation of global or regional missile defense systems,” the joint Chinese-Russian statement says. Chinese leader Hu Jintao also joined Medvedev in denouncing US plans to militarise outer space: “Russia and China advocate peaceful uses of outer space and oppose the prospect of it being turned into a new area for deploying weapons ... The sides will actively facilitate practical work on a draft treaty on the prevention of the deployment of weapons in outer space, and of the use of force or threats to use force against space facilities.”
Iranian President Ahmedinejad, fresh from trouncing his pro-Western rival in presidential elections, dotted the “i”s at the SCO meeting, taking a leaf from Venezuela ’s Hugo Chavez: “The international capitalist order is retreating. It is absolutely obvious that the age of empires has ended and its revival will not take place.”
But there was more than colourful rhetoric in all this, despite the pooh-poohing of Western pundits, who deride the SCO and BRIC as a collection of misfits and wannabes. The BRICs have put the US dollar on notice, and are already finding alternatives as a means of clearing accounts. Medvedev called for the IMF to include the Russian ruble and the Chinese yuan in the basket of currencies used to value its financial products. But that is just for starters. Chinese Central Bank governor Zhou Xiaochuan says the goal is now to create a reserve currency “that is disconnected from individual nations.”
Even more ominous for the threadbare dollar, though perfectly sensible in the computer age, is the revival of stone-age barter on a big scale, which bypasses the need for any reserve currency at all. Brazil ’s biggest trading partner, once the US , is now (surprise) China , and they are using barter deals to settler their accounts, bypassing the dollar altogether. Two weeks ago China reached an agreement with Malaysia to denominate trade between the two countries in yuan.
As dollars are the world’s default reserve currency today, the US government can churn them out at will to paper over its massive foreign debt and budget deficit, effectively letting it steal other countries assets legally and forcing countries everywhere to finance its military spending. China , Russia , Brazil and now India are well aware of this, have had enough, and have the international heft to do something about it. For them, the US is the ultimate rogue nation. How else to characterise a country that insists other countries follow one set of laws – on war, debt repayment and treatment of prisoners – but ignores them itself? The US is now the world’s largest debtor yet has curiously avoided the pain of “structural adjustments” that the IMF imposes on other debtor economies, refusing to cut its bloated military budget or increase taxes meaningfully. “The world economy should not remain entangled, so directly and unnecessarily, in the vicissitudes of a single great world power,” said Roberto Mangabeira Unger, Brazil’s minister for strategic affairs.
The US can never “repay” the $4 trillion debt it owes foreign governments, their central banks and the wealth funds set up precisely to dispose of the global dollar glut. “ America has become a deadbeat – and indeed, a militarily aggressive one,” notes Michael Hudson. The problem is how to contain it. Rumblings are coming not only from fringe peaceniks. Yu Yongding, a former Chinese central bank advisor now with China ’s Academy of Sciences, advises US Treasury Secretary Tim Geithner that the US should save by cutting back on its military spending. “ US tax revenue is not likely to increase in the short term because of low economic growth, inflexible expenditures and the cost of ‘fighting two wars’”.
The BRICs are trying to organise their affairs so that they are no longer the unwilling recipients of dollars. No matter what they think of the US , they hasten to insist they don’t want to see the US dollar collapse, since they hold most of their own reserves in dollars. But they are beginning to withdraw the life-support system the US has been relying on since Nixon completed the transition from a gold-based reserve currency to a purely paper one in 1971.
Just to emphasise how serious the situation is, according to the Financial Times, the top 5 financial institutions by market capitalisation in 1999 were, in order, Citigroup (US), Bank of America (US), HSBC (UK), Lloyds TSB (UK), Fannie Mae (US). The top 5 as of 2009 are Industrial & Commercial Bank of China, China Construction Bank, Bank of China, HSBC (UK), and JPMorgan Chase (US). From 0:3 to 3:1 for China, now officially the world’s second largest economy after the US – a rout.
Just as countries are beginning to rediscover age-old barter, fixed, pegged and dual exchange rates are also being considered, mechanisms once derided as passe. In the face of continued US overspending, de-dollarisation will force countries to return to nationally determined fixed exchange rates and dual exchange rates – one exchange rate for commodity trade, another for capital movements and investments.
The world is discarding its sixty-year old framework, though the historic meetings in Yekaterinburg elicited only a collective yawn from most media. “Between the BRIC countries, there is really little in common,” said Yevgeni Yasin, head of research at the Higher School of Economics in Moscow. “Each of them has its own destiny, its own special character, and it will be much more difficult for them to agree among themselves than separately with Western countries.” China depends on manufactured exports to the US and Europe. Russia sells oil, natural gas and other natural resources. Brazil relies on agricultural exports, while India ’s growth has been largely based on its domestic market.
However, Jeng Fengin at the Chinese Institute of Modern-Day International Relations is less blase: “The financial crisis has given a much-needed boost to the fledgling partnership between Brazil, Russia, India and China and helped our voice to be heard everywhere.” President of the Brazil-Russia Chamber of Commerce, Industry and Tourism Gilberto Ramos warned sceptics that the BRIC countries are all powers of a truly continental scope and have very much in common, both geographically and macroeconomically.
In case Obama hasn’t noticed, Eurasia is coalescing, not around littler Georgia and big brother Poland, with their pretensions as forward bases for the mighty US empire, but around China, Russia and India. He would do well to remember Yekaterinburg is not only famous for its Russian past, but for Gary Powers, the US spy shot down in 1960, a fitting metaphor for how Russia and China are taking aim at the US-dominated international financial order.
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Eric Walberg writes for Al-Ahram Weekly. You can reach him at

http://ericwalberg.com/

The Shanghai Cooperation Organisation’s Special Conference on Afghanistan

The Shanghai Cooperation Organisation’s Special Conference on Afghanistan, held in Moscow on 27 March, marks a new stage in the international community’s relations with this beleaguered country. It reflected the growing clout of Russia and China, the founders of the SCO, which includes Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan and four observers — India, Iran, Pakistan and Mongolia.
In attendance for the first time were top US and NATO officials, including US Deputy Assistant Secretary for South and Central Asian Affairs Patrick Moon and NATO Deputy Secretary General Martin Howard, as well as UN Secretary General Ban Ki-moon and Secretary General of the Organisation for Security and Cooperation in Europe Mark Perrin de Brichambaut. Among the 36 countries participating were representatives from the G8, the European Union and the Organisation of the Islamic Conference. The unanimously adopted Joint Action Plan underlined the SCO’s importance “for practical interaction between Afghanistan and its neighbouring states in combating terrorism, drug trafficking and organised crime.”
The Moscow Declaration upstaged the UN Conference on Afghanistan held four days later, coming down hard on Pakistan with a call for more effective means to combat terrorism, including denying sanctuaries to the resistance. Coming just over a month after Kyrgyzstan announced the closing of the US airbase on its territory, the conference reiterated the SCO’s position that it is opposed to the expansion of US military interests in Central Asia, but is willing to expand cooperation with the US and NATO in Afghanistan, short of sending troops. Interestingly, Obama announced a shift in US policy emphasis on the same day as the SCO summit, promising greater consultation with Afghanistan ’s neighbours.
It also declared support for the efforts of the Karzai government, which is openly criticised as weak and corrupt by US officials. Russia’s Deputy Foreign Minister Alexei Borodavkin warned against creating a power vacuum in Afghanistan in the run-up to the presidential elections later this year. Russia also came out against negotiating with the Taliban.
The Russians believe that Afghan drug trafficking is the most serious threat to the security of Russia and Central Asia. Russia’s anti-drug chief Viktor Ivanov last week called the coalition’s anti-drug policy a fiasco, nothing that opium production in Afghanistan had soared since the deployment of US and NATO troops in the country. Afghan narcotics, he said, kill 30,000 people in Russia every year, twice as many as the Soviet Union lost during its decade-long military intervention in Afghanistan. The Action Plan calls for joint SCO-Afghan operations in combating drug trafficking and organised crime, including training of drug agencies, combating laundering of drug money and improving border controls.
The Plan reads like a roadmap for bringing Afghanistan into the SCO fold, a move which India’s envoy approved of. The idea of Afghanistan joining the SCO would clearly be anathema to the US, however, and Obama’s proposal to create a NATO-dominated Contact Group with Afghanistan is clearly a way to contain the growing influence of the SCO. But with NATO allies reluctant to back Obama’s surge strategy, major concessions will have to be made, affecting virtually all US foreign policy.
Russia has approved rail transit of non-military supplies to Afghanistan, and suggested this could include military cargo as well, though such approval is surely conditional on US actions affecting Russia, primarily its plans for missile bases in Eastern Europe and its campaign against Iran. Russian analyst Alexander Lukin says cooperation with the SCO offers the US and NATO an acceptable format to bring Iran into the dialogue. Iran’s Deputy Foreign Minister Mehdi Akhundzadeh sat across the table from the US envoy at the Moscow Conference.
Iran is a dilemma for the SCO. Just as Georgia is being put on hold in NATO, Iran’s application to join the SCO was put off again. “The admission of new members to the SCO should strengthen the organisation, but not cause new problems,” SCO Secretary General Bolat Nurgaliyev said last month. Full membership would provide Tehran with a mutual assistance guarantee similar to that provided NATO members. Just as NATO’s expansion plans brought the world perilously close to war last summer over Georgia, so would a US-Israeli attack on Iran if it were a full member. This will be addressed at the next SCO summit which will be held in Yekaterinburg, Russia, in June.
In 2003, Iran indicated to the Bush administration that it was no friend of the Taliban and was willing to cooperate in stabilising the situation in Afghanistan, but its overtures were spurned and the invasion of Iraq put paid to any such plans. The hysterical campaign against Iran since has only made the US/NATO occupation of Afghanistan harder — there are reports that Iran may even be burying the hatchet with the Taliban. But its enthusiasm for the SCO and continued support from China and Russia in its stand-off with the West make this possibility unlikely.
Iran is also suffering from the exploding drug trafficking from Afghanistan that the US invasion facilitated, plus a surge of Afghan refugees. Russia in no doubt delighted with the Iranian police chief Esmaeel Ahmadi-Moghadam’s announcement last week that Iran was ready to train Afghan police. The Germans have botched this and the Iranians could hardly do worse. If the US were serious about containing the huge heroin problem it created, it would take their offer seriously.
But Obama will be unlikely to capture this moment, given his timidity so far in dealing with the mess he was bequeathed. He needs to build a new coalition and endgame strategy that would avoid the humiliation the US suffered in Vietnam, and fast. There are many adjustments to be made — nixing the Bush-Brzezinski strategy of surrounding Russia with NATO members for starters. And winding down the campaign against Iran, which will include reining in Israel. US policymakers who want to reverse the reckless sabre-rattling of the Bush years can actually take solace in the rise of the SCO, which was founded in 2001 and whose growing prominence is a direct result of the Bush years. With the collapse of the Soviet Union and NATO’s self-proclaimed status as world policeman in the past two decades, Russia and China were more or less forced to form their own “NATO”. After all, nature abhors a vacuum.
Ironically, as the attempt to surround Russia sputters, it is Afghanistan that is now surrounded by SCO members and observers, notably Iran, anxious to contain drug trafficking. In this context, US-Israel threats to attack Iran are more and more like the boy who cried “Wolf!” The Bush Afghanistan/Iran policies in shambles and there is little indication so far that much is being done to improve the situation.
Can NATO and the SCO become allies in Afghanistan, or are they fated to be enemies? Council for Foreign Relations analyst Evan Feigenbaum, until recently the State Department’s deputy assistant secretary for South and Central Asia, says the SCO conference “offers an opportunity for the US to try to turn what are ostensibly common interests into complementary polices,” but he’s not optimistic. He pointed to the SCO call in 2005 for a timeline for a US withdrawal from military bases in Central Asia, which “attracted a lot of notoriety,” and asks just what the SCO could actually do in Afghanistan. Good question. How can Chinese and Russian support save the totally discredited Karzai regime? How would their “help” be greeted by Afghans? Clearly some accommodation with, if not total surrender to the Taliban is the deadend the US has reached, and SCO involvement can change this.
Feigenbaum makes another telling observation: “We really don’t understand what the SCO is ... Is it a security group? Is it a trade bloc? Is it a group of non-democratic countries that have created a kind of safe zone where the US and Europeans don’t talk to them about human rights and democracy?” Indeed, there is little uniting the suspicious and uneasy SCO members other than fear and perhaps loathing of the US and Taliban, and a desire to staunch the drug smuggling which the US is failing so spectacularly to deal with. If NATO were to disband or at least retract its claws, the SCO might well collapse. Expanding it to include, say, Iran, let alone Pakistan and India, would paralyse it.
The most likely cooperation would be in containing the drug flow, if the US is indeed serious about this and not part of the problem, as some analysts — in the first place Russian — contend. The prospects of establishing a stable, popular political regime opposed to the Taliban is a fantasy apparently shared by both NATO and the SCO. But Russia and China are hardly going to have more success in destroying the Taliban than the US. Any attempt by either Russia or China to contribute to the slaughter now taking place will only backfire among their own restive Muslim minorities, which all SCO members have.
It appears that Russia genuinely wants the US to succeed in bringing Afghanistan to heel. Russia’s Ambassador to NATO Dmitri Rogozin said recently, “We want to prevent the virus of extremism from crossing the borders of Afghanistan and take over other states in the region such as Pakistan. If NATO failed, it would be Russia and her partners that would have to fight against the extremists in Afghanistan.” Rogozin proposes using the NATO-Russia Council to establish a security order stretching “from Vancouver to Vladivostok. Perhaps NATO could develop into PATO, a Pacific-Atlantic alliance.”
Whether this is merely Rogozin being flippant is not clear. Surely such an organisation belongs as part of the UN, which is perhaps what he meant. In any case, Rogozin is back on the warpath, or rather the peacepath, calling NATO’s month-long war games in Georgia scheduled for 7 May a “provocation” and calling for them to be cancelled. If they go ahead, Russia will “take appropriate measures”, one of which already has been taken with the cancellation of a meeting of Russian and NATO general staff commanders this week. There are lots more aces up the Russian sleeve, including SCO and Afghan ones. If Obama persists in Bush-era belligerence, it will only make resolving the many problems he faces all the more difficult.
Even if he can keep the SCO onside, it is no lifejacket for NATO in Afghanistan. The best the two “security” organisations can do is to let it go its own way, “containing” it until it recovers from the trauma of all the “help” it has been force-fed over the past three decades.
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Eric Walberg writes for Al-Ahram Weekly. You can reach him at www.geocities.com/walberg2002/

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