Backfire
West & Russia in broader confrontation, Russia & Algeria align, US & Mearsheimer test, AUSMIN confirms Australia as US client state, US government keeps military contractors afloat
UPDATE: Whatever the origins of the Ukraine war, the G7 and Russia are now engaged in a broader confrontation that is not confined to the military struggle: the war has become a competition in pain-tolerance.
“We made it clear to the whole world that Russia and Algeria aim to pursue an independent foreign policy and defend their national interests despite unprecedented pressure from the West,” said the Russian Defence Minister.
International relations (IR) experts widely perceive the US global political influence to be in a decline, especially in regions farther from the US. However, state actors who are gaining influence in their home regions are experiencing their own geopolitical roadblocks. Dr. Katz highlighted the past work of IR theorist, John Mearsheimer, who created a standard for measuring an actor’s great power strength and influence in regions across the world.
The AUSMIN talks confirmed Australia’s status as a client state of the United States. The degree of military integration suggests that future decisions around conflicts in the region will be made by America and rubber stamped by Australia.
New dataset highlights the extent to which American military contractors rely on government contracts to stay afloat. In 2022, U.S.-based primes got 71 percent of their total revenue from public contracts. Lockheed Martin is by far the most reliant on taxpayer dollars, earning 96 percent of its total revenue from military contracts.
USA Russia strategy has backfired
By Anusar Farooqui
Whatever the origins of the Ukraine war, the West and Russia are now engaged in a broader confrontation that is not confined to the military struggle: the war has become a competition in pain-tolerance.
This is, as Thomas Schelling wrote, “a conscious process of dirty bargaining”, whereby each side tries to inflict pain and suffering on the other side until one or both yield. Put simply, the West and Russia are playing a violent version of the schoolyard game Mercy. The centrepiece of the West’s effort to inflict pain on Russia is what the historian Nicholas Mulder has called “the economic weapon”, which has been deployed at unprecedented scale. The centrepiece of Russia’s effort to inflict pain on the West is the commodities weapon. In this competition in pain-tolerance, it is not immediate whether the West or Russia has the upper hand.
The West unleashed the economic weapon with considerable fanfare. Russia, with a GDP smaller than South Korea, was treated not as a great power adversary but as a rogue stake akin to Iran — a nuisance that could be rather effortlessly strangled through the unrestrained use of Western sanctions. Great hope was placed on the idea that these sanctions would inflict such catastrophic pain on Russia as to undermine the Putin regime.
These hopes and expectations were based on wishful thinking. Non-Western powers — China, India, Brazil, Mexico and South Africa — simply refused to play along with the West. They appeared more worried by the West’s weaponisation of the dollar system than by Russian aggression against Ukraine. Even more importantly, Western leaders were gravely mistaken in their idea that Russia was a second-rate power that could be simply crushed with the economic weapon.
This idea was inconsistent with any clear-eyed evaluation of the facts. The Red Army was the strongest land army in the world from the mid-Thirties to the late-Eighties, and by the early 2000s, Putin had revived the Russian army following a brief period of disinvestment and neglect. The Russian army has seen action in a series of small wars since Putin came to power, demonstrating operational and tactical competence.
Thanks to its nuclear arsenal, Russia has enjoyed strategic parity with the United States since the late Seventies, which has allowed it to deter more direct US intervention in the Ukraine war. President Biden has wisely ruled out sending US combat forces to directly engage Russian forces. And despite a botched invasion plan, the baseline scenario for the Ukraine war remains an outright Russian victory. If that happens, the Ukraine war will look in retrospect very much like the Winter War of 1939-1940, in which, despite many early reversals and heavy losses inflicted by the Finns, the Soviet steamroller ultimately prevailed through sheer material superiority.
Russian GDP may be small, but Russia is, together with the United States, one of the only two states in the international system that can survive relatively unscathed in complete autarchy. Indeed, Russia is not dependent on the world for hard-to-replace stuff — the world is dependent on Russia. It supplies a significant fraction of the world’s energy, metals, fertilisers, and food.
The upshot is that the West’s economic war on Russia is generating tremendous blowback in the form of sky-high commodities prices and the mother of all inflationary shocks to the world economy. Just like imposing an economic blockade on Saudi Arabia is a recipe for self-harm, trying to economically strangulate Russia is a fool’s errand. The breakdown of Russo-Western relations has generated a food crisis, an energy crisis, and a broad-based inflationary shock the likes of which we haven’t seen since the oil price shocks of the Seventies. So, the Russo-Western confrontation is extremely costly for the world at large. Meanwhile, Russia’s coffers are overflowing from commodities exports. So much for the economic weapon.
It is not just that imposing costs on Russia is very costly to the West and the rest of the world. With Western opinion leaders fantasising about Russia after Putin, it pays to be clear-eyed about regime stability on both sides. Russia is what Jeffrey Winters calls a “Sultanistic oligarchy” — a political economy characterised, above all, by the need to temper conflict between oligarchs through the concentration of power in the hands of one man. China is also a Sultanistic oligarchy. The difference between Russia and China is that, while Putin faces a small and stable number of oligarchs, China’s oligarchy is constantly growing in size, wealth, and power. The stability of the Russian oligarchy endows the Putin regime with considerable stamina. No serious Russian analyst believes it to be at risk of collapse, no matter what the West dishes out.
The contrast with the West couldn’t be starker. The Biden administration and the Democrats look set to crash and burn on the shoals of inflation. The president’s approval rating has sunk below 40%. Democrats will almost surely lose control of Congress come November. Of course, other issues condition Democrat fortunes. But it can hardly be denied that the greatest threat to the Democrats is inflation. And inflation is at least partly under Putin’s control — he can turn the knob up and down to maximise the delivery of pain to the West.
In fact, considerably more than the Democrat’s performance in November is at stake. Biden’s wager on Ukraine is running the risk that the Democrats could be locked out of power for the rest of the decade. That would, among other things, put the US energy transition at risk. No doubt Putin will do all he can to replace Biden with Trump. He may very well succeed. Instead of the West engineering a regime change in Russia, it is Russia that is likely to succeed in engineering a regime change in the United States. Is there any way to avoid this nightmare scenario?
Again, we must be clear-eyed: the source of the problem is Western misperception of Russian weakness. American Russia policy is based on the assumption that Russia is weak and the West strong. But, as we’ve seen, this assumption is unwarranted. In terms of what we can dish out to him and what he can dish out to us, it is Putin who has the upper hand.
The United States, and the West more generally, have committed to supporting Ukraine as it fights for its existence against Russia. It is not politically possible for Washington to throw the Ukrainians under the bus, even if doing so made sense from the perspective of cold-hearted realism.
Washington is gearing up for a protracted struggle intended to bleed Russia through proxy war in Ukraine and with the liberal use of the economic weapon. This policy is premised on the idea that time is on the West’s side. This assumption, like the assumption of Russian weakness, is wrong. If Putin has the upper hand in the competition in pain-tolerance, then time is on his side. With his current policy, Biden is running a significant risk that the US, instead of Russia, will be destabilised politically. The correlation of forces calls for a different foreign policy. What might that look like?
The Ukrainian struggle has won the hearts and minds of the West. But Ukrainian interests are not necessarily congruent with American or Western interests. Moreover, as paymasters, armorers and tactical intelligence providers, the Americans enjoy considerable leverage over the Ukrainians. A hard-nosed policy would use this leverage to get the Ukrainians to the bargaining table sooner rather than later, and possibly much sooner than the Ukrainians would prefer.
A Western peace policy would seek to, first of all, get the warring parties to begin negotiating as soon as possible. Second, it would clearly set out what the US seeks from a negotiated diplomatic settlement. At a minimum, it should seek a Ukraine free from Russian coercion and free to seek non-military relations with the West. Third, the West must concede that Ukraine will never be part of the Western military alliance. Indeed, the point of departure for productive diplomacy is Ukrainian neutrality. The details should be left to the two warring parties.
Credibly backed by the West, the Ukrainians will not necessarily have the weaker hand in their negotiations with the Russians. The West has demonstrated that it can impose large costs on the Russians. But the Russians have also demonstrated their capacity to inflict pain on the West. With these demonstrations, the door is now open for a diplomatic resolution of the Ukraine war. The United States will find that there is considerable support at home and abroad for a principled peace policy that does right by the Ukrainians without destroying Western political economy in the process.
Read more here.
Algerian-Russia Defense Discussions
Minister of Defence of Russian Federation hold talks with Algerian People’s National Army Chief of Staff. The head of the Russian military department noted, meeting with guest that Russian-Algerian ties are developing particularly dynamically and positively. This is largely due to the trusting friendly relations that have developed between the leaders of the two countries: ‘During the meeting of the presidents of the Russian Federation and Algeria, the declaration on the in-depth strategic partnership between our countries was signed,’ informs the Russian Ministry of Defence.
‘We made it clear to the whole world that Russia and Algeria aim to pursue an independent foreign policy and defend their national interests despite unprecedented pressure from the West,’ said the Russian Defence Minister.
Sergei Shoigu emphasised that Russia has always supported the right of every country to make sovereign decisions on the whole range of international and domestic issues, especially those related to ensuring national security: ‘We are interested in Algeria’s leading position in strengthening regional security and stability in North Africa.’
‘For its part, the Russian Defence Ministry is ready to contribute to improving the combat capabilities of the Algerian People’s National Army,’ stressed the head of the Russian military department.
Algerian People’s National Army Chief of Staff Army General Said Chengriha noted that the memory of the Algerian people keeps for life the positions held by the Soviet Union in 1954 during the Algerian revolution, as well as the benefits and assistance provided by the Russian Federation represented by the Armed Forces of the Russian Federation to the Algerian People’s National Army to strengthen its defence capabilities, as well as to confront the threats and challenges faced by the country.
…Algeria is adamant about the restoration of constitutional order in Niger and supports Mohamed Bazoum as the legitimate president, the Algerian Foreign Ministry said in a communique made public on Tuesday, TASS informs.
“Constitutional order must be returned through peaceful means so as to prevent brotherly Niger and the entire region from sliding further into problems of insecurity and instability, while our peoples – into misery and destitution,” the Algerian Foreign Ministry emphasized.
“Algeria therefore cautions, calls for prudence and restraint in the face of aspirations of foreign military intervention, which unfortunately appear to be real and feasible options, while being factors that only complicate and exacerbate the current crisis,” the document said.
Algeria and Niger share a land border of over 950 kilometres.
Read more here.
Can America Pass the Mearsheimer test?
By Dr. Mark Katz
International relations (IR) experts widely perceive the US global political influence to be in a decline, especially in regions farther from the US. However, state actors who are gaining influence in their home regions are experiencing their own geopolitical roadblocks. Dr. Katz highlighted the past work of IR theorist, John Mearsheimer, who created a standard for measuring an actor’s great power strength and influence in regions across the world.
Dr. Mearsheimer’s work argues that the US is the only nation to achieve hegemony in one region (the Western Hemisphere) and be able to prevent any other great power from gaining hegemony in any other region. Dr. Katz argued that the question is no longer if the US can grow its own geopolitical influence in regions, but if it can keep its adversaries from increasing theirs.
Dr. Katz emphasized that there is not a definitive answer to how the US can hinder an adversary from gaining political control over a single region. However, a significant indicator of whether the US will have the ability to decrease an adversary’s political influence in any given region is whether other actors in that region are hostile to the US adversary. If these countries believe the US can offset the adversary’s rising power, then it is likely that the US will have a much better chance to stop the adversary from achieving regional dominance. The FIIA Working Paper goes into detail for each global subregion, their current political dynamics, and whether the US can defend its current political influence.
Read more here.
AUSMIN death knell for diplomacy
By Daryl Guppy
The AUSMIN talks confirmed Australia’s status as a client state of the United States. Its shift has taken years but this is a significant change from the previous status of a friend, or ally, because it hands a significant slice of Australian sovereignty to a foreign power. The degree of military integration foreshadowed by Secretary of Defence Lloyd Austin and enthusiastically endorsed by Australia’s Defence Minister Richard Marles suggests that future decisions around conflicts in the region will be made by America and rubber stamped by Australia.
This surrender has a significant impact on Australia’s relationship with China and on the way Australia is able to influence and shape its relationship with Asia. Australia is important in the region, although perhaps not as important as it like to imagine. In many ways the AUSMIN talks further isolate Australia from the region and make Australia less relevant in the formulation of regional decisions.
China in particular will re-evaluate its relationship with what has now clearly become a client state of the United States. It now makes sense to treat Australia as a by-product of US policy rather than as a relatively independent entity. It can be assumed that Australian defence policy, and to a significant extent, Australian foreign policy, merely apes that of the United States.
A number of recent Force Posture Initiatives involving US bombers and submarines are widely seen as essentially relevant only to a future US war with China. The Initiatives include the pre-positioning of material and troops in Australia to enable the US to attack China. The establishment of a Squadron Operations Facility” in Darwin adds to the growing array of permanent military assets in the north, further locking Australia into any future military conflict between China and the US.
Why expend time and diplomatic effort on Australia when it has largely lost the ability to make its own decisions in these areas?
The degree of integration confirmed at AUSMIN means Australia becomes diplomatically irrelevant to the region. It means Australia shapes the region largely through the threat or use of force which in turn is projected at the behest of the United States. The high level of integration, including embedding US intelligence officials in Australian offices and US crew command members on AUKUS submarines, means Australia is inevitably and ultimately, held hostage to US decisions.
Despite denials and assertions that Australian policy remains a sovereign choice, this really is the Stockholm Syndrome in action at a national level. Australia has convinced itself that it is not a victim of foreign influence in its most consequential defence and foreign policy decisions.
Marles and Austin berate the Solomon islands for the ‘secretive’ defence arrangements with China, but these pale into insignificance when compared with the scale of secretive US operations in Australia well documented by journalist, Brian Toohey.
AUSMIN builds on the already secretive defence deals where Australia has no right of full access to the intelligence product or activities. This already applies to intelligence product from bases at Pine Gap, North West Cape and elsewhere. The drone assassinations that are coordinated using US base capabilities in Australia are not subject to Australian oversight. The public is not allowed to know how long the nuclear submarine, North Carolina, will stay Perth – that information is classified even from Australia’s defence minister.
Increasingly there has been a closer and closer alignment of US policy objectives and those of Australia. However, this was not always a lock step approach and there were times of divergence in foreign policy implementation. Former Prime Minister Malcolm Fraser discussed these tensions in his book DANGEROUS ALLIES.
Marles has destroyed that slim gap by replacing the concept of cooperation with integration. This was no mistake. Integration essentially places Australia as part of US forces and effectively subject to their command structure and decisions.
It must have been uncomfortable for Foreign Minister Wong to participate in AUSMIN discussions because Australia’s progress in the diplomacy of the ASEAN region was destroyed by this new client state alignment. Australia can no longer speak as an independent voice. There will always be the suspicion that Australia is reading from a script written and approved by the Americans. This undermines Australia’s ability to act effectively in diplomacy in the region.
The 2023 AUSMIN talks went beyond the jovial backslapping that usually characterises these talks. As a result the ASEAN region, and China, will reevaluate the way they see Australia’s role in the regional architecture of agreements, treaties and discussions. Australia’s ability to influence RCEP, to constructively contribute to discussions around digital standardisation, cross border trade facilitation and other issues is severely compromised by AUSMIN.
Australia failed the first test, its voice absent from any protest against the US decision to supply cluster bombs to the Ukraine. The second test will be Australia’s reaction to the US-led exclusion of Hong Kong Chief Executive John Lee from the upcoming APEC meeting.
AUSMIN announcements have reduced Australia’s room for diplomatic manoeuvre and influence. The announcements have also reduced the imperative for China and the region to engage with Australia as an independent entity in the formulation of policy responses in the region. They now know that Australia has little choice but to do the bidding of the US because that’s what client States do.
Daryl Guppy is an international financial technical analysis expert. He has provided weekly Shanghai Index analysis for mainland Chinese media for more than a decade. Guppy appears regularly on CNBC Asia and is known as "The Chart Man". He is a former national board member of the Australia China Business Council. The views expressed here are his own.
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America’s top 5 weapons contractors made $196B in 2022
By Connor Echols
American weapons makers continue to dominate the global arms industry, with four U.S.-based companies in the world’s top five military contractors, according to a new Defense News ranking of the top 100 defense firms.
In 2022, America’s top five weapons contractors made $196 billion in military-related revenue, according to Defense News. Lockheed Martin dominated all other defense-focused companies, with total military revenue of roughly $63 billion last year. RTX, formerly known as Raytheon Technologies, was a distant second, earning roughly $40 billion in revenue in 2022.
The same five American “prime” contractors have long dominated lists of the world’s biggest arms manufacturers. Lockheed Martin, Northrop Grumman, RTX, Boeing and General Dynamics have remained in the top seven of the Defense News ranking since it began in 2000.
Notably, several Chinese firms have expanded their military operations in recent years as tensions have risen between the U.S. and China. Four Chinese companies are now in the top 20, including one — the Aviation Industry Corporation of China — that became the world’s fourth largest military contractor last year.
The top 5 for 2022 are as follows: Lockheed Martin, RTX, Northrop Grumman, Aviation Industry Corporation, and Boeing.
The U.S., for its part, had 10 companies in the top 20. Italy, the Netherlands, France and the United Kingdom each had at least one of the world’s 20 biggest military firms last year.
The new dataset highlights the extent to which American military contractors rely on government contracts to stay afloat. In 2022, U.S.-based primes got 71 percent of their total revenue from public contracts. Lockheed Martin is by far the most reliant on taxpayer dollars, earning 96 percent of its total revenue from military contracts.
As RS recently reported, these companies invested much of these earnings into controversial stock buybacks, which are meant to attract investors by keeping share prices high; Lockheed Martin alone spent $5.8 billion on stock repurchases last year.
The big five saw a three percent drop in revenue over the past year when compared to fiscal year 2021. But this year’s numbers are unlikely to signal a long-term trend given that many top weapons firms have reported record levels of new orders for military equipment, driven in part by the war in Ukraine.
Read more here.