Thursday, April 6, 2023

Contrasting styles of global leadership

A shorter version of this commentary was first posted in Asia Times. Early this January, I opined in Asia Times that “2023 bodes poorly for US international relations” under US President Joe Biden. I based my conclusion on China’s impressive success in making new friends vs. the Biden administration’s inability to make any. In less than three months since then, developments around the world have been seismic and spectacular and have made a prophet out of me, if I do say so myself. In January, I reported that China President Xi Jinping received the red-carpet treatment from Saudi Arabia, concluded a $25 billion deal for oil and met with the six Middle East nations that make up the Gulf Cooperation Council. Hosted by Saudi, they talked about China buying energy and helping them build their infrastructure. Two years earlier, China entered a 25-year strategic cooperation agreement with Iran. Thus, China has become friends of both major sects of Islam that have been historically bitter rivals. (To be honest, I did not expect anything earthshaking out of all this.) Then earlier this March, China announced that after four days of meeting and discussion in Beijing, Saudi Arabia and Iran have agree to resume diplomatic relations. A peace deal for the ages This was a big deal and caught the world by surprise. Heretofore, Saudi representing the Sunnis while Iran the Shiites have been bitter sectarian foes for centuries. Yet, China was able to play the role of an honest broker and brought the two sides together. China has the right set of credentials to be a mediator for peace. China is the second strongest global power, but does not try to bully any lesser countries and seeks to get along with everyone. China emphasizes three principles in their international relations: respect the national sovereignty of the other, does not interfere with the internal affairs of the other, and seek joint development based on common interests and mutual benefits. A few days later, Xi called on his “good friend,” Russia President Vladimir Putin in Moscow and brought with him a 12-point peace plan to resolve the conflict between Ukraine and Russia. The west promptly labeled the peace plan as vague, ambiguous and did not include terms that would revert Russian occupied territories back to Ukraine. But the west missed the point that was clear to everybody else in the world. Namely, a true mediation for peace does not begin by stipulating what the outcome should look like. That is up to the outcome of negotiations by the two principals. Zelensky would like China to step in But as pointed out in Asia Times, Ukraine President Volodymyr Zelensky may find China’s peace proposal an acceptable starting point. He is facing western allies getting weary of supporting the war. Without such support, Zelensky knows his goose is cooked. While Japan’s prime minister, Fumio Kishida was visiting Kiev acting as Washington’s envoy to encourage keeping the war going, Zelensky publicly welcomed China’s participation to broker a peace deal. He obviously found comfort in China’s ability to bring peace between Saudi Arabia and Iran. While Xi Jinping is enhancing his stature as a world leader that is proactive for peace, what has happened to Joe Biden during the same period? History will show that blowback from two of Biden’s worst decisions ever made has come to haunt him in the first quarter of 2023. In 2022, Biden imposed economic sanctions and confiscated all the Russian dollar holdings held in the US in an attempt to bring Russia to its knees. But it didn’t work. Russia’s economy turned out to be far more resilient than Washington expected. Weaponizing the dollar is a big blunder Barred from trade with the EU and others in the west, Russia turned to trade with China, India, East Asia and global south. Trade with China will surpass $200 billion this year and Russia has agreed to accept China’s renminbi to settle their transactions. As Russia earn a bounty of yuan from energy sales to China, other countries see the advantage of accepting the yuan from Russia for their trade, thus avoiding the extra cost of having to convert their own currency into dollars. Since China is likely to be their most important trading partner, yuan from Russia can simply be used when they do business with China. Brazil is the latest major trading nation to announce acceptance of the yuan to settle their accounts with China. These developments are not sufficient to dislodge the dollar as the global reserve currency but do indicate that other nations are eager to by-pass the dollar. By weaponizing the dollar, Biden has succeeded in planting the idea in other central banks that the dollar is no longer a reliable reserve currency. Recently, ASEAN countries held a meeting to discuss ways to avoid using the dollar, euro or yen to settle their trade accounts. If not those, what then? Probably China’s yuan and their own currencies. Indeed, China and even Japan have been reducing their dollar holdings. In recent months, China and Russia have been the major buyers of gold, no doubt with the dollars they held. The recent collapse of the Silicon Valley Bank is an indicator that the US economy is caught between the rock and a hard place. To tamp down inflation, the Fed has to raise the interest rate. Rising interest rate means a decreasing value of the long-term treasury bonds that the bank bought that pay lower interest rates. Thus, the decline in the value of the collateral asset owned by SVB made the bank vulnerable to a bank run. Most American banks operated in much the same way as SVB but were more fortunate because the Treasury department quickly stepped in and injected liquidity to reassure depositors that their banks won’t go the way of SVB. American economy needs China’s help To use a Chinese expression, Treasure Secretary Janet Yellen and Commerce Secretary Gina Raimondo have been acting like ants running around a hot griddle, wanting and waiting for an invitation to visit Beijing. Why? Because Yellen wants to urge China to continue buying American IOUs and Raimondo would like to raise the level of bilateral trade, which would help keep the US economy going. Somehow, these Biden cabinet officers do not know how to ask nicely nor diplomatically. They seem to assume that a public announcement of their wish is good enough for Beijing to express mail an invitation to their offices. It has not occurred to them that Beijing needs to know what’s in it for China to meet with them. The Biden administration has the arrogance to presume that they can pick and choose the economic sectors that they can decouple from China and which to select for collaboration with China. Apparently, Biden does not understand that China does not see itself as a vassal state but has its own priorities. Decouple is a two-way street. Both Testa and Ford have asked Contemporary Amperex Technology Ltd. to build a battery plant in the US. CATL is the world leader in lithium battery technology and dominant supplier to makers of electric vehicles. China may well deny CATL an export license to locate a plant in the US for fear that the US would commandeer its world leading, proprietary technology, just as Biden has done in shipping advanced fab belonging to Taiwan Semiconductor Manufacturing from Taiwan to Arizona. Obviously there exists a huge deficit of trust between the US and China. Nothing Biden has done is in the direction of healing the rift. Blowing up Nord Stream is the other blunder The revelation by Pulitzer Prize–winning journalist Seymour Hersh that Biden ordered the destruction of the Nord Stream pipelines has further emphasized that Biden is an unethical and ruthless national leader that cannot be trusted. Biden has shown that he has no qualms in committing a war crime by severing the key economic linkage between Russia and the EU. Cutting off cheap energy from Russia has wreaked economic turmoil on his European allies. That Biden would do this to his own allies will shake EU allies’ trust and confidence in the US for years to come. As matters stand now, Xi Jinping represents a proactive world leader that will use his influence and prestige to work for world peace. Despite all the slander heaped on him and the blackening of China by Washington and the western media, a long queue of world leaders are jostling to meet with him in Beijing to discuss economic cooperation and collaboration on world peace. At the other end of the world is Joe Biden, a world leader that is dishonest and unethical and has earned the wary distrust of virtually every national leader in the world. He gives lip service to peace while creating conflict and intimidating smaller countries to join the US military alliance and prepare to “volunteer” in Washington’s proxy wars. Even his closest ally has to watch its back lest it’s abruptly discarded when it no longer figures in the US national interest. If, nay when the world majority chooses peace over war, then there would be no need for any country to depend on American military protection for security—a protection often promised but seldom delivered.

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