New Era of Financial Warfare
Ambrose Evans-Pritchard, in Thursday’s Daily Telegraph, reports on new ways the U.S. is carrying out financial warfare against Russia by stealth. He writes that the U.S. has created a financial “neutron bomb” that can target any country and is now targeting Russia. He claims that for the past 12 years an “elite cell” at the U.S. Treasury has been designing ways to bring almost any country to its knees without firing a shot.
“It is a new kind of war, like a creeping financial insurgency, intended to constrict our enemies’ financial lifeblood, unprecedented in its reach and effectiveness,” says Juan Zarate, the Treasury and White House official who led the policy after 9/11. “The new geo-economic game may be more efficient and subtle than past geopolitical competitions, but it is no less ruthless and destructive,” he writes in his book Treasury’s War: The Unleashing of a New Era of Financial Warfare.
This includes shutting off market access for Russian banks, companies, and state bodies with $714 billion of debt. He calls it the “scarlet letter,” created under Section 311 of the U.S. Patriot Act, which was devised to be used against terrorist financiers. Once a bank is named, it will be caught in a “boa constrictor’s lethal embrace,” as Zarate puts it. Even if the bank has no operations in the U.S., European banks will not violate it.
Evans-Pritchard continues, “The U.S. Treasury faces a more formidable prey with Russia, the world’s biggest producer of energy with a $2 trillion economy, superb scientists, and a first-strike nuclear arsenal. It is also tightly linked to the German and East European economies,” and therefore the U.S. risks destabilizing its own alliance system. Furthermore, President Vladimir Putin knows this as well and no doubt is prepared to take counter-moves.
Zarate now advises HSBC on how to stop in-house money laundering, which is a laugh in itself.
Evans-Pritchard’s column cites Princeton Professor Harold James, who compares such actions to the pre-First World War attempts by Britain and France to use financial warfare against Germany. Warning of the dangers of such action, James said, in a piece for Project Syndicate, “Lehman was a small institution compared with the Austrian, French, and German banks that have become highly exposed to Russia’s financial system. A Russian asset freeze could be catastrophic for European — indeed, global — financial markets.”
Evans-Pritchard seems to be familiarizing himself with the Classics, as he cites how the sanction imposed by Pericles turned out badly. “So are the salutary lessons. Pericles tried to cow the city state of Megara in 432 B.C. by cutting off trade access to markets of the Athenian Empire. He set off the Peloponnesian Wars, bringing Sparta’s Hoplite infantry crashing down on Athens. Greece’s economic system was left in ruins, at the mercy of Persia. That was a taste of asymmetry.”
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