The Ruble crisis and future of the world

By Nasurullah Brohi

The economy is going to set up the rules of interstate relations in the world and the current economic crises would drive the world into the emergence of a new competition of alliance structure and would divide the world into two parts i.e. pro-West and anti-West blocs where massively destructive wars seem to be inevitable. Today once again, the rise of antagonism over control of the economic resources such oil and natural gas resources is going to erupt an imperialist war around the Eurasian region that gradually advances towards the risk of a world war.

The economy being central in state affairs, therefore, states keenly pursue economic surplus which enables them to produce more than it needs that ultimately results in sustainability of the established standards of living. The economic objectives and economic interests have bigger meaning for prosperous and developed states than the developing or under developed ones. For that reason, by the year 1941, an open trading regime had become a major foreign policy goal of the President Roosevelt’s administration.  This was especially emphasized in the Article IV of the Atlantic Charter’s transcript highlighting the right of every state to have equal access to indiscriminate terms to the trade and to the raw materials of the world which are needed for the economic prosperity of the nations.

The origin of setting up the US foreign policy goals, focusing on economic hegemony through Capitalism was initiated in 1944 during the Second World War, when the United States, Britain, and 42 other countries met at Bretton Woods for drawing-up a framework for economic recovery of the Europe and the expansion of the trade conduct in the world. This framework continues to be influential even today. At that time the Bretton Woods meeting resulted in the creation  of  three  recognized  institutions like  the  World Bank, the  International Monetary Fund  (IMF)  and  the General  Agreement  on  Tariffs  and  Trade  (GATT) which later on became the World Trade Organization.  The IMF got a significant role to play by valuing all the currencies of the world in terms of US dollar whereas; the gold was used to place the value of the US dollar. Today, the Western dominated economic regulators has significant influence over internal and external affairs of most of the countries in the world. The fragile economies are so easily manipulated and therefore compelled to submit before the wishes of global powers otherwise they would face severe economic sanctions, which will capitulate as state bankruptcy.

Likewise, today the Russian Federation is being pushed to the bankruptcy through imposition of severe economic sanctions by the US, as it was already under sanctions by the European Union over its support to the armed separatist movement in Eastern Ukraine. The EU’s fears can be anticipated by the comments of EU Summit Chairman Donald Tusk that, for them the Russia is strategic problem and the biggest challenge is Russia’s approach not only to the Ukraine but also to Europe.

The Russian President Putin has also termed the U.S led NATO its biggest enemy and showed their utmost commitment to safeguard Russian interests by all means and in case of any security threat Russia would opt for the nuclear option as well. However, the economic survivability is on top most priority for the Russia and in that case, since there are two major multilateral options is available to overcome its economic depression i.e. the Shanghai Cooperation Organization and the BRICS. Through BRICS, Russia is striving for its stronger integration predominantly through crafting a common financial system and a single currency to shun the chances of stagnation and ensure its access to crucial technical developments to achieve their goal of becoming world’s advanced financial and technological hub. In May, 2014, China and Russia signed an energy agreement worth $400 billion under the BRICS umbrella. Under the agreement Russian energy giant Gazprom will supply a daily 3.75 billion cubic feet of liquefied natural gas to China for next 30 years. The most important point here was their commitment to deal either in China’s Yuan or Russia’s ruble, which scrapes the U.S because mostly such business has been done in U.S dollar which brings a requirement for countries to stock the U.S dollar reserves. For Western economists, such deals are viewed symbolic who think that Russia’s total hydrocarbon trading per year alone amounts more than 1 trillion dollars. This demonstrates the world that Russia and China are committed to the agenda of undermining the U.S dollar.

In persuasion of these objectives, the Shanghai Cooperation Organization (SCO) also holds a significant importance in terms of its counterweight against Western blocs i.e. EU and NATO. Despite the fact that Russia and China both have a distinct stake in trying to reduce the influence of America’s military power in Central Asia. Russia has hoped to use SCO as an antidote to strengthen its monopoly in oil and gas transit, in Asia. While on the other hand, China would like to use SCO to facilitate in presenting Beijing as a dominant player of regional trade and investment. Although SCO is much larger in terms of population, land and natural resources in comparison to North Atlantic Treaty Organization (NATO) and the European Union, yet it cannot offset the economic power of the United States. To further boost up the economic cooperation, the China proposal for building an interstate pipeline network is essential for the SCO’s organizational effectiveness. Presentation of this proposal clearly highlights the extent of Beijing’s interests in gaining access of the energy resources in the region. Such an investment made by China could result in significant improvement of the commercial potential and infrastructure in the region. Generous economic assistance provided by Beijing brings forth a question as to China is trying to build a traditional vassal relationship between China and the Central Asian states through investment, trade and military cooperation. There is growing need of further economic and military cooperation between the SCO powers, Russia and China to equally stand against the NATO, EU and other Western dominated institutions to counter balance it beyond the region. Fortunately, SCO members are having the edge of the economic factor over NATO states that enable them to exercise a huge amount of power in the international arena, the rise of China, as a global economic power along with the other oil rich SCO member states would yield in a tremendous impact and a takeover of global financial institutions.

Though, China seems to throw a financial lifeline to Russia and risk a showdown with the Western side. With its huge foreign currency reserves China can easily settle up Russia’s debts. But after calculating the current ruble crisis and analysing the political and economic dynamics, the concern lies in the question that whether the tension on both sides is gradually progressing towards another Cold or World War because the current conflict is believed to look alike to that the Great Depression and the rise of fascism which were in part a consequence of countries pursuing discriminatory trade policies during the interwar years.

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Nasurullah Brohi

Nasurullah Brohi works as a Research Fellow at the Strategic Vision Institute in Islamabad and can be reached at [email protected]

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