Introduction
According to Samuel Huntington and his famous ‘clash of civilizations’ thesis, civilizations clash over culture, not countries. However, ancient and persisting civilizations like China, India and Persia have a long track record of coexistence with each other and a cultural maturity that is lacking in relatively more adolescent and messianic experiments like the EU, America and Israel. The proof is in the pudding: thousands of years of continuous survival. While culture indeed plays a significant role in civilizational clashes, my counter-thesis to that assertion is that the modern ‘Westphalian’ system of the West has been egregiously failing for at least since the 19th century. Oswald Spengler was the first Western intellectual to lay out a strong case for this failure as far back as 1918 after the shocking events of the Great War had revealed to the world of the West’s inability to keep peace in its own Westphalian backyard, despite being the leading economic powerhouse on the world stage at the time. The Westphalian system gave rise to the concept of the modern day ‘nation-state’ as a way to, in theory at least, prevent internecine perennial conflict in Europe reminiscent of the ’30 Years War,’ the ’80 Years War’ and the ‘100 Years War’. European colonialists took this concept and exported it abroad to all corners of the world with wanton force through gunboat imperialism, carving out artificial Westphalian statelets with little to no regard for cultural sensitivities to geography. Thus, I argue that the failure of the Westphalian system is proof that states – not cultures, cause civilizational conflicts. States are smaller subsets than civilizations, they often attempt to hijack and steer civilizations, they tend to be much younger constructs than civilizations and in many cases they are quite simply artificial, especially when devised by all-conquering imperialists with an eye for lands much farther than their homelands: lands and cultures they care very little about.
Today, the ruling elites in the West have taken George Orwell’s 1984 and Aldous Huxley’s Brave New World as instruction manuals. Oceania’s citizens were persuaded by their rulers to switch their ‘two minutes of hate’ back and forth between East Asia and Eurasia every so often, ad nauseam. With a little government subsidized soma thrown into the mix, robbing enough ‘Peters to pay the Pauls’, Western elites can always rely on the support of enough Pauls to browbeat the Peters into compliance. Until of course, the Peters wise up and walk off the plantation. That way, society is kept always divided and unable to mount a unified resistance against the Western plutocracy, hypnotized with the illusion that ‘voting’ in a rigged game is the only way forward. World peace is a frightening concept to these people, it provides no foreign bogeyman to rally and distract the Peters and Pauls, or justify any global imperialist designs on the planet. The Manichean nature of Western public discourse is reduced down to infantile soundbites and a glassy, brittle exceptionalism – ‘its okay when we do it, but its terrorism when they do it‘. When at least half a society goes collectively mad from mass formation psychosis, as in Israel, Britain, America and the EU, the intelligence community has a whole lot of extra trouble on its hands. People tend to betray their country when things become unsatisfactory, usually for money, ideology, coercion/compromise or ego. As such, foreign agencies have a much bigger target bank to prey on. Oceania’s destiny is war. War is the failure of diplomacy, and sanctions are war by other means.
A Primer On Sanctions
Sanctions as a normalized foreign policy tool are a recent phenomena, despite having pre-dated the modern era. At the turn of the 20th century, the Allied Powers sanctioned the Axis Powers during the Great War in what was the first large-scale, collective application of economic sanctions in the modern era. The second half of the 20th century saw sanctions increasingly used – especially by the US – against adversarial governments it did not like. US sanctions have been slapped against entities from South Africa, Cuba, Angola, Iran, Iraq, Russia, Myanmar, China, North Korea, Libya, Syria, Serbia, Venezuela, Ansar Allah and Hezbollah, just to name a few. Inevitably, members in the ‘club of the sanctioned’ have an incentive to deepen cooperation with each other. The US sanctions against Cuba were especially spiteful, imposed since the late 1950s, in anger at a Marxist regime daring to gain a foothold a mere 100 miles from the underbelly of ‘Capitalist’ America. Sanctions have also been wielded by non-Western countries, such as Russia/USSR, China and Türkiye. However, the overwhelming majority of sanctions have been imposed by the West, namely the US, even against supposed ‘allies’ like Türkiye in the wake of its 1974 annexation of Northern Cyprus. Specifically, financial sanctions have become a major non-kinetic weapon spearheaded by the US Treasury in the aftermath of 911, in its fight against what it deems ‘rogue’ non-state and state actors. In the wake of the 2008 American Financial Crisis, KYC/AML regulations suddenly sprang up across global banking systems. On the surface, the regulations appeared to filter out fraudsters but in reality, they were laid out to pave the groundwork for financial sanctions. The larger and more interconnected the financial system of a sanctioning country, the more effective its sanctions could theoretically be. This is why sanctions are usually pursued by significant economic powers or blocs, especially the US with its systemically important financial system, specifically the New York trading desk of the Federal Reserve bank and its primary dealers. Between 1914 and 2000, out of 178 documented cases of international sanctions, 63% of them (or 113) have been initiated by the US. An academic study over the same period has determined the ‘success’ rate for unilateral US sanctions episodes as merely 30%, leaving 70% of sanctions episodes to be registered as ‘failures’. Other studies give a more optimistic success rate of 40%.
Sanctions are tools that can either substitute or complement a military intervention. They are essentially the continuation of war by other means. In most cases they are economic in nature but can include state-level travel bans and various other restrictions based on the principle of guilt by association, tarnishing a target country’s reputation and global standing. Arms embargoes against warring factions or states can fall under the umbrella of sanctions. Often sanctions are used to substitute direct military intervention where the goal of the sanctioning country is to change the behavior of the sanctioned country. The US frequently uses sanctions for coercion purposes, to stifle economic and military development of the sanctioned country, with an eye to ultimately pressure the sanctioned government towards a more US-friendly position or to outright overthrow the government altogether. The West prefers to ‘restore’ what it calls ‘democratic’ governments, or overthrow what it calls ‘autocratic’ governments. To translate this sophistry into basic English for the layman: ‘democratic’ governments are easily manipulated by the West and prone towards subservience to Western power plays. ‘Autocratic’ governments are harder nuts to crack therefore more difficult to manipulate. Autocracies also tend to pursue sovereign interests rather than Western interests. This is why ‘democracy’ is so ‘sacred’ to the West: it is a tool used to interject Western meddling into the fabric of nations, with the US bestowing itself the self-anointed arbiter of the global ‘democratic’ process. The false dichotomy of ‘democracy vs autocracy’ as is often sold to dazed and confused Western masses, hides the real Manichean divide – those states seeking sovereignty from Western influence versus states who submit to Western influence.
Sanctions are essentially laws and regulations that can be applied on individuals, companies or governments, to prohibit them from investing or trading in particular jurisdictions, goods, services (e.g. insurance), projects, instruments or currencies. They can be used to stifle business dealings with persons from the sanctioning country or with third parties from anywhere in the world. Financial sanctions are increasingly popular. The main mechanisms that financial sanctions can ‘bite’ the target are restrictions imposed on its exports, its imports or its access to finance. The US can for example, issue export bans on its weapon manufacturers against foreign blacklisted importers. It can threaten fines against any intermediaries who facilitate the export of Iranian oil products. Many settlements with US sanctions violators involve the payment of fines to the US Treasury Department (Office of Foreign Assets Control) and the Department of Commerce (Bureau of Industry and Security). Alternatively, the Treasury Department can freeze financial assets within US jurisdiction of sanctioned targets, or lobby for the same to be done outside US jurisdiction, as in the case of Banco Delta Asia, a Macau-based bank used by North Korean government officials whose assets were frozen by China. Sanctions do have some legal basis in international agreements, for example in Article 21 of GATT, there are grounds to interpret the wording as such. Indeed, various sanctioning countries have invoked this very clause when levying sanctions, mostly on the grounds of protecting ‘essential security interests’. Some sanctions are approved by the UN and thus have international moral clout, such as those against Iraq (1991), Libya (1992), Rhodesia (1965), Portugal (1963), North Korea (2002) and South Africa (1962). UNSC Resolution 1718 as an example, banned all imports to North Korea that assisted in the development of North Korean nuclear and missile technologies. Japan has taken further steps and blocked any ships docking in its ports which have previously docked in North Korean ports.
The sanctions against Iraq in the aftermath of its invasion of Kuwait in 1990 brought the Iraqi economy close to ruination but were blunted by the 1996 ‘Oil-For-Food’ programme rooted in humanitarian concerns. Since those sanctions were UN approved, humanitarian concerns ultimately forced an easing, proving that humanitarianism does exist in the halls of international assemblies. US-only sanctions are generally bereft of humanitarian concerns for underlying populations, since ‘collective punishment’ is a strategy pursued by Israel and the US, where messianic narcissists in the Knesset and Congress share very little concern for collateral damage. The BDS (‘Boycott Divest Sanction’) movement against Israel is an interesting sanctions movement meant to punish Israeli affronts against international law and Palestinian dignity by taking aim to hit Israel’s economy and its global standing. The reactions from Israel and the US have predictably been hypocritical, given their proclivity to dish out sanctions to others. RAND had once estimated losses to the Israeli economy close to $50 billion over a decade due to the BDS movement. Some states in the US have even banned BDS as a legitimate avenue for protest against Israeli crimes against humanity and transgressions against international law. Another crude but effective form of sanctions that has harmed the Israeli economy in response to its ongoing ethic cleansing campaign against Palestinians has been the Ansar Allah blockade of the Bab-el-Mandeb chokepoint in the Red Sea. Tankers docking in Israel have been singled-out and attacked by missiles, raising their insurance premiums to prohibitive levels. The fallout has included the port of Eilat declaring bankruptcy and many Israeli businesses suffering losses. Images of starvation and social collapse have led to broad backlashes on humanitarian grounds against comprehensive UN sanctions imposed against Iraq, Yugoslavia and Haiti, leaving a bad taste among the international community of sanctions and their efficacy. The appetite for levying comprehensive UN sanctions against states has reduced greatly since the mid 2000s, leaving sanctions to be chiefly promoted by the US and EU since then. Reprehensible US sanctions remain against Syria, Yemen and Afghanistan, still devastated from Zionist-imposed regime change operations.
The vast majority of sanctions initiated by the US however, are unilateral sanctions that are not backed by any international law. The legality and morality of unilateral sanctions is a grey zone – and perhaps their greatest weakness. They are merely enforced by ‘long arm’ American law with its pervasive, weaponized financial system. US sanctions have nevertheless succeeded in blackmailing and browbeating many Western and non-Western states into compliance, despite having no root mechanism in international law and being abjectly immoral in most cases. Threats of monetary fines and jail time are strong motivators of compliance, despite the underlying enforcement mechanism being largely American in origin. A notable case of gross unethical sanctions have been those imposed against the Syrian people, after enduring a failed but brutal foreign sponsored regime change attempt by Western intelligence agencies during the years 2011-2019. Quite clearly, the American-Jewish architects of the failed regime change operation were spiteful and bitter about their loss, taking aim to punish the Syrian people for their failure. President Trump passed the Caesar Act of 2019, which was pushed by spiteful Zionist lobbyists insistent on destroying the Syrian economy. The sanctions were notably exempt in regions occupied illegally by American troops, north of the Euphrates River. Few people also know that the US imposed an oil embargo on imperial Japan in the 1930s, well before the Pearl Harbor attacks of 1941. Those attacks in turn, could be construed as Japan’s forceful reaction to the embargo. It is also possible that US policy-makers understood very well how an embargo against a small island-nation like Japan could have posed an existential threat, prompting a forceful response and thus dragging the US into the war.
Sanctions can have a big impact on the sanctions target if trade dynamics between the sanctions target and sanctions originator result in significant trade balances, i.e. there is sizeable trade going on. US sanctions on American exports going to North Korea, Iran or Russia, have lost much of their bite, as the countries in question have minimal trade balances with the US and have sought new trade partners, export markets or become members of larger trading blocs like BRICS+. The focus of US sanctions have instead honed in on denying access to finance and limiting Russian, North Korean or Iranian exports by way of secondary sanctions against the Global South and its own allies. Arms embargoes against self sufficient arms producers like Russia and China will never be very effective. There is a very fine line between under-sanctioning and over-sanctioning a country. In both cases, sanctions have a high likelihood of not only failing but backfiring. The success of US sanctions increasingly depends on its network of satellite vassals in helping to enforce them. But how far are vassals willing to sacrifice national income and trade to appease American interests? That really is the million dollar question. If the US presses too hard, it risks alienating its own ‘allies’, thus the entire edifice of sanctions could become quite brittle. Evidence supports the assertion that ‘democratic’ states are more susceptible to economic pressure than ‘autocratic’ states. This is why pushing too far against energy exporters like Russia or Iran can backfire against the West with price inflation, which is something Western populations will be quite vocal about.
Sanctions are generally self-defeating, since their success is largely defined by striking a very precarious balance between risks of underwhelming pressure hence losing credibility in the process, and risks of overwhelming pressure and backfiring. The balance in question is not only very difficult to pull off but is usually fleeting, as the constant judo-type tug of war between sanctions, their evasion, counter-sanctions and so on, plays out. Successful cases of sanction impositions are those which minimize collateral damage to innocent populations, thus do not appear to be cruel, whilst targeting very specific individuals, projects or industries in painful ways that harm only elite interests. This is easier said than done and given that the majority of sanctions today are financial in nature, they overwhelmingly focus on deterring investments made in certain target nations. Consequently, avoiding collateral damage becomes impossible. By elevating perceptions of risk associated with doing business with sanctioned targets, capital flight, reduced foreign investments, access to markets and technologies does impact innocent civilians through phases of higher unemployment, lower GDP growth, higher cases of non-performing banks loans and various other inconveniences such as restricted travel, depreciating currencies (inflation) and shortages. But by creating shortages, hence price spikes in the sanctioned goods or services, it naturally opens up incentives for black and grey market participants to step in and fill the gap with more convoluted supply chains. Furthermore, by limiting Western firms’ access to Russian, Iranian or Chinese markets, it naturally opens up incentives for others to step in and seize those markets, replacing their Western competitors’ market shares. After the 2022 Western sanctions attack, Russian, Turkish, Iranian, Indian and Chinese firms have stepped in and replaced outgoing Western competitors from the Russian market.
In other cases, sanctions have damaged economies and enabled the persistence of failed states. Notable examples include Syria and Somalia. Syria has had very cruel sanctions slapped onto its banks and grain exporters, with the deliberate aim of preventing re-construction revenue in the aftermath of a foreign-instigated regime change operation launched from Jordan and Türkiye by Western, Israeli and Sunni intelligence agencies, devastating its economy in the process. Moreover, vital parts of Syria’s oil and gas fields, crucial to generating revenue for its recovery, have been commandeered illegally by Kurdish rebels. We are referring to the Al-Omar and Conoco fields north of the Euphrates river in a part of Syria known informally as ‘Rojava’. Their seizure has been conducted by Kurdish rebels under the aegis of illegal American occupiers on Syrian soil. The gas and oil that can be extracted, is stolen by being smuggled into Iraq and Türkiye where it is subsequently exported to Israel and other states, generating illegal revenue for American squatters and their Kurdish proxies, along with cuts going to Iraqi and Turkish middlemen. The unintended consequence of this outrageous but typically repugnant American-Jewish behavior is that Syria is forced to solidify its reliance on Iran, Russia and China, who have forgiven historic Syrian debts, invested in the country’s infrastructure and extended lines of credit to its banks. As for Somalia, the quest to bust Al Qaeda financing resulted in shutting down major money transfer operators with ties to the American banking system. These networks facilitated remittance markets, prominent in developing economies with sizeable diasporas such as Somalia, where relatives residing in the West send financial assistance in US dollars to their families back home. The disruptions negatively impacted many legitimate users of the services and worsened their family’s economic plight back in Somalia. Naturally, the market response was a preponderance of hawala networks which stepped in to fill the void left by money transfer operators, – something even more difficult to regulate and monitor than money transfer operators. Hawala networks are regarded problematic by Western sanctioners due to their reliance on clannish connections and a lack of digital trail. They are very common in South Asia, the Middle East and parts of Africa. On the bright side, a move towards cashless mobile apps, including blockchain-based and digital hawala apps, is gaining traction in Somalia. Markets always innovate a way around sanctions and their consequences, whether they be white, grey or black markets.
Various policy recommendations have been made by pro-sanctions Western think tanks. Some of the recommendations focus on increasing cooperation with British banking interest groups and the British Treasury, improving econometric modelling of sanctions impacts and holding seminars with the aid of intelligence plants to help ‘educate’ (read: sell) sanctions to business industry groups. Other recommendations focus on increasing information sharing on underlying data sets of Suspicious Activity Reports (SARs), increasing training to banking regulators of sanctions enforcement, and improving preparedness in countering foreign counter-sanctions and retaliatory responses. Successful applications of sanctions depend on the end result the sanctioning party wishes to extract from the sanctioned party. This depends on well-informed research, intelligence and an understanding of the target nation, its social and economic dynamics, political system, important business linkages and overall cultural resolve especially in the face of external pressure. How do policy-makers measure sanctions success? By studying the target response, with economic and sentiment indicators before and after sanctions. The tone of official statements and state press could be indicative, although one must always be careful, – many statements are aimed at domestic audience consumption rather than international audience consumption. The most important metrics to follow are foreign policy position changes and diplomatic overtures made in international arenas by the sanctions target in the aftermath of sanctions. Financial intelligence is also a source of not only measuring sanctions impacts but understanding financial ecosystems and refining sanctions policy. US Treasury agents have a very wide network of contacts in the highly weaponized US-centric financial system. These agents collaborate with officials from central banks, commercial banks, finance ministries, NGOs and international organizations such as the IMF, BIS, FATF and World Bank to glean insights and data on global financial flows, to better shape their sanctions policies. In the aftermath of 911, US Treasury pressured SWIFT to share its banking data to help uncover ‘bad actors’, – something SWIFT had been strongly resisting on the grounds of client privacy. There was a perverse utility to be had with shock false flag attacks like 911 in helping the US government get what it wanted. US Treasury access to SWIFT data thus became normalized, as the transatlantic relationship between the EU and US became ever more entangled and prone to a master-slave dynamic. Switzerland tainted its image of ‘neutrality’ in the aftermath of the NATO orchestrated proxy war in Ukraine of 2022, by weaponizing its famous Swiss banking ‘secrecy’ laws against Russian assets. Coupled with the politicization of SWIFT, it highlighted how valuable financial trails and relationships could be, when assisting with sanctions policy. The consequential costs to the Western financial system have been irreversible and very harmful.
Let us now distinguish between primary and secondary sanctions. Primary sanctions aim primarily to hurt the direct sanctions target itself. Secondary sanctions aim primarily to hurt third parties who act as intermediaries in the trade and supply chain of the primary sanctions target. Secondary sanctions seek to deter third parties from engaging with sanctions targets by way of reputational risk rather than hurting bottom lines, which would be the aim of primary sanctions. Secondary sanctions have been increasingly the focus of American and European efforts to sanction Iran, North Korea and Russia, by taking aim for example, at Indian importers of Russian crude. The Office of Foreign Assets Control or OFAC for short, a sub-division of the US Treasury, is the most powerful grouping within the US Treasury which strategizes, implements and enforces US sanctions. OFAC requires all US citizens and residents, non-US citizens and residents on US soil, all legal entities incorporated within US jurisdiction and basically anybody using US dollars or operating through the global US financial system, to comply with primary sanctions. This at its essence, is how ‘long arm’ American financial coercion works. Secondary sanctions target non-US entities doing business with US dollars or through the US financial system and are more murky, given the questionable legal reach of American law over a wider extra-territorial purview and the hindrances they pose to trade, even among American allies. Non-US entities are threatened with civil and criminal penalties in accordance to US laws, such as fines and threats of imprisonment. Financial sanctions are commonly applied through blacklists in inter-bank messaging systems, like SWIFT. This includes the Specially Designated Nationals and Blocked Persons list (SDNs), for individuals. The drafting of SDNs is normally the remit of OFAC. Before inter-bank transactions are executed, they can be blocked, as KYC procedures layer in various checks involving blacklists. At an institutional level, and within US jurisdiction, the Financial Crimes Enforcement Network (FINCEN) can prohibit any US financial institutions from maintaining correspondent bank accounts on behalf of the sanctioned target, thus cutting them out from the US financial system. The Treasury Executive Office for Asset Forfeiture (TEOAF) on the other hand, oversees asset seizures within US jurisdiction. The Treasury can instruct financial and non-financial institutions to freeze assets, close accounts, block transactions and report on financial data. They can instruct regulators to revoke banking licenses, cutting banks out from the US banking system. Entire compliance practices have been created just to heed OFAC, FINCEN and TEOAF sanctions, which are not even rooted in any international law. All the proof one needs to witness the full weaponization of the US dollar and US financial system is laid out bare in the open, for the world to use at its own peril. The EU too, weaponizes its own financial system in a similar manner.
The US has enthusiastic support from its own Congress and a broad legal authority to impose and enforce sanctions worldwide. There are some notable pieces of legislation that impart such powers, starting with the oldest – the Trading With the Enemy Act of 1917. Amendments to the Export-Import Act of 1945 have allowed the withholding of trade credits from foreign parties. Clauses in the Foreign Assistance Act of 1961 allow for the withholding of foreign aid. The International Emergency Economic Powers Act of 1977 has been frequently invoked by the US when implementing asset freezes and asset forfeitures. The Export Administration Act of 1979 and its abrogated version, the Export Control Reform Act of 2018, have governed US export controls and enforced an anti-Israel boycott bias. There have been very specific pieces of legislation such as the Iran and Libya Sanctions Act of 1996 and the Comprehensive Iran Sanctions, Accountability & Divestment Act of 2010 (CISADA). Amendments to the Arms Export Control Act of 1976 have resulted in sanctions levied against both India and Pakistan in the 1990s, for their mutual nuclearization. The Patriot Act of 2001 stipulated various clauses for disrupting terrorist financing and money laundering, involving sanctions and blacklists. More recently, the Magnitsky Act of 2012, Global Magnitsky Act of 2016, Countering Russian Influence in Europe and Eurasia Act of 2017 (CRIEEA), Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA), Caesar Act of 2019 and Protecting Europe’s Energy Security Act (PEESA) of 2019 have guided sanctions against Russia, Syria, North Korea, China and Iran in pre and post-Trump America, while a NOPEC bill still lingers in Congress to potentially sanction OPEC. Sometimes ‘sanctions waivers’ are sought by US allies to conduct business with sanctioned targets. Undoubtedly, the US abuses this leverage over its allies to curry quid pro quos with allies. The ideologically stubborn and messianic foreign policy advisory class of the US has undoubtedly contributed to the escalation of sanctions policy, something correlated to poor staffing selections among recent Obama, Trump and Biden administrations. Picks like Elliot Abrams, James Jeffrey, Brian Hook, John Bolton, Jake Sullivan, Anthony Blinken, Victoria Nuland, Hillary Clinton and Mike Pompeo ensures the continuity of flat learning curves and the blunting of American swords being wielded against emerging mountain ranges of resistance and defiance.
The sanctioning party itself may be vulnerable to blowback and hefty costs of the sanctions themselves. The rupturing of correspondent banking relationships can harm US allies, global trade, remittance markets and ultimately undermine the primacy of the US dollar and its financial system. As the ‘club of the sanctioned’ grows in size, incentives emerge for sanctioned nations to cooperate among themselves to carve out alternative payment systems which bypass said sanctions. Prominent US vulnerabilities lie in its enormous debt and its negative trade balance. By virtue of having to sustain a global reserve currency (‘Triffin’s dilemma’), persistent trade deficits have become a feature of the American trade balance. Therefore, any shocks to foreign income receipts – i.e. foreign markets, will serve to deepen the deficit and be deleterious to American interests. This may come in the form of counter-sanctions, whether primary or secondary. China can hurt the US significantly in this regard, – it is the only country in the world that can meaningfully sanction the US and cause it to suffer on a large scale. Furthermore, the offloading of US debt (Treasuries) can hurt the US by exposing it to currency shocks, potential inflation and the capture of its monetary policy to external factors. These are some of China’s potential trump cards that bolster its arsenal with a deterrence insurance against US sanctions on China. Sanctions have encouraged de-risking into non-US currencies and alternative payment systems. One particular negative impact of US financial sanctions abuse on global banking has been the decline in correspondent banking. Most of the terminated correspondent banking relationships have been unsurprisingly made by American banks. The consequence of this trend has been increasing difficulties for the processing of global financial transactions, with less nodes available in the global banking network to connect divergent transacting parties over the world. I will touch on this again later, tying it to some of the proposed solutions seeking to mitigate such risks.
By spending so many resources in devising sanctions legislation and more generally, on preventing other nations from achieving their full economic and social potential, this tremendous waste of energy in constantly plotting to subvert and undermine others is ultimately a Sisyphean endeavor rooted in bad faith. Sanctions ‘victories’ are all but Pyrrhic. Abuse of sanctions by the US conveys to the world that control freaks are attempting to micromanage the world, with a deleterious effect on global commodity prices and free trade, standing against claims made by Western governments of championing ‘freedom’: freedom of association, that is. In other words, sanctions damage the reputation and credibility of the West. US Treasury officials and sanctions advocates argue that with globalization comes a dark side – an unprecedented proliferation of organized criminal networks and ‘rogue’ actors exploiting globalized financial flows. This may be true. However, the failure to include the US in the list of ‘rogue’ actors is notable, especially its Office of Special Operations and Low Intensity Conflict (SO/LIC) and the Directorate of Operations (DO), – the Pentagon and CIA’s covert operations desks. The tendency for individuals hailing from these nefarious organs to drink the ‘Captain America’ koolaid is strong. Has one ever wondered why the West consistently misunderstands some cultures and under-estimates their resolve? We are specifically referring to Persian, Russian and Chinese culture. None of these cultures react well to external pressure and embrace the concept of martyrdom that Westerners simply cannot comprehend. When Western elites apply external pressure, they expect subservience. What usually always happens is the opposite – said cultures become ever more defiant in the face of bullying. The misunderstanding that Western elites have about Persian, Russian and Chinese culture has resulted in perennial failed and failing policies. But as we know, failure does not dissuade some policy-makers from repeating their mistakes. The underlying issue here is the delusional expectation that the world ought to bend to the will of certain messianic and relatively infantile cultures, not the other way around as it should be: their will bending to world history and more mature cultures.
How correspondent banking works in the global economy. Sanctions attempt to choke off correspondent relationships.
Iran & Sanctions
Relations between Iran and the US were over-turned in 1979 when an organic Iranian revolution deposed the Western backed strongman, Shah Reza Pahlavi, forcing him to flee the country. He was originally installed by force through a CIA operation in 1953, in response to the actions of his democratically elected nationalist predecessor, Mohammad Mossadegh, who vowed to nationalize Iranian oil assets out of the hands of the Anglo-Persian Oil Company (known today as British Petroleum). The West did not like the idea of Iranian national sovereignty, especially over its own oil assets. With suzerainty over Shah Reza Pahlavi, the Americans, Israelis and British could control and benefit from cheap Iranian oil resources. Along with Israeli and Anglo- French support, Iran under Shah Reza Pahlavi was armed with Western weapons including a modern air force (at the time) of American F-14, F-5 and F-4 jets. Its brutal SAVAK mukhabarat was trained and modelled on Mossad and CIA torture and interrogation methods. Contrary to common knowledge, the Iranian nuclear programme began in the 1960s with deep French assistance provided to Iranian nuclear scientists. Prior to the revolution, Ayatollah Ruhollah Khomenei lived in exile in France. As the tide of relations between Iran and the West turned sour in 1979, Khomenei returned to Iran to lead the revolutionary government. There were strong repercussions for the regional and global balance of power. The first manifestation of change was the hijacking of the American den of spies long implicated with meddling over Iranian affairs: the US embassy in Tehran. It was a deeply embarrassing incident to American prestige, with Jimmy Carter’s botched handling of the affair still drawing ire to this day, especially among Reaganite left-overs.
In the following years when Israel invaded Lebanon in 1982, massacres were committed by Israeli-backed Maronite ‘Phalange’ militias against Palestinians and Shia Muslims in Lebanon. With Shia Muslims lacking their own protective militias, Iran seized the opportunity and in 1983 a powerful Shia militia was formed called Hizb’allah. The ‘Party of God’ as it was known, won international attention with its first major victory by defeating the IDF and routing the Israelis in a retreat out of Lebanon. The significance of that defeat continues to shape Israeli and American designs on Lebanon to this very day. In the same year, the 1983 Beirut barracks bombing abruptly ended the American and French armed presence in Lebanon, hastening their military withdrawal with the killing of 241 American personnel and 58 French personnel. The American embassy in Beirut however, continued to remain one of the biggest American spy missions in the world, working in tandem with British GCHQ eavesdropping operations from nearby Cyprus and Israel’s Unit 8200 counter-part in Gilot. The spy operations have been ongoing since the 1980s in an attempt to crack Hizb’allah communications. Bearing in mind that in 1980 the US had provoked Saddam Hussein in unleashing a horrific 10 year land war against Iran that resulted in the deaths of over a million men on both sides, Iran threw a few decisive blows of its own in Lebanon against the US and Israel. In 1984 Iran was officially named a ‘state sponsor of terrorism’ by the US. Iran did not need to declare the same: it already knew that the US was a state sponsor of terrorism. In July 1988, the US air force shot down Iran Air flight 655, killing 290 people in a very suspicious incident. Later in the year, in a likely tit-for-tat response, Pan Am flight 103 was blown up over Lockerbie, killing almost the same number of people as Iran Air flight 655. There was an undeclared covert proxy war between Iran and the US which had arisen from the liberation of Iran from Western subjugation. The fallout from Iranian blows were ultimately used to justify ensuing sanctions by the American side.
The Iran-Libya Sanctions Act of 1996 was the start of US Treasury sanctions against Iran. They targeted Iran’s oil and gas sectors. The EU remained generally opposed due to dependence on Iranian energy which Greece and Italy in particular, were reliant on. In 2002, an Iranian Communist terrorist dissident group (MeK), operating out of Albania, had revealed intelligence dossiers within Iran of secret nuclear facilities. The facilities were likely commissioned as deterrents against a possible attack on Iran in the run up to the 2003 US invasion of Iraq. MeK would later be removed from the US terrorist blacklist in 2012 as a pressure tactic. As Iran began nuclear enrichment activities, the IAEA reported Iran to the UNSC for violations of the IAEA statue, resulting from Iran being a signatory to the Non-Proliferation Treaty (NPT). Israel on the other hand, was not a signatory to the NPT, thus avoiding international attention over its menacing nuclear arsenal at the cost of being a pariah state. In 2005, US Executive Order 13382 authorized asset seizures of NPT violators in the US financial system. Individuals and entities tied to Iran were added to the Treasury Department’s Specially Designated Nationals and Blocked Persons (SDN) list. The SDN was used by global banks to flag and block transactions involving any parties on the list. Furthermore, the CIA began to spread propaganda to business communities around the world to invoke fear of doing business with Iran. Secondary sanctions were imposed on third party banks who transacted with institutions tied to the Pasdaran, otherwise known as the IRGC. The IRGC is central to the Iranian government like the People’s Liberation Army in China and Rosoboronexport in Russia. It can be regarded as a very important State Owned Enterprise (SOE). Due to the centrality of SOEs, it is impossible to fully disrupt their operations and extricate them from the global economy. Even under the JCPOA, many foreign deals with Iran ran directly through the IRGC. In 2010 a ban on gasoline imports to Iran went into effect. Gasoline imports dropped 60% but the policy failed to cripple Iranians from using vehicles as Iran pursued unconventional means to skirt around the shortages. Sanctions against the aviation sector of Iran were imposed by banning the export of spare parts and maintenance services from the West. The policy was done in bad faith, as poorly maintained aircraft harmed innocent civilians and raised safety concerns.
Sanctions against Iran escalated to a crescendo during 2008-2015. In 2010, an unprecedented and highly sophisticated cyber attack had crippled some of Iran’s centrifuges by over-spinning them, causing physical degradation via a Siemens industrial control system using a Windows OS. The malware was discovered by a Belarussian security firm and called ‘Stuxnet’. It was likely planted by someone with an infected USB at Iran’s enrichment facilities, possibly by an IAEA observer or a spy among Iran’s scientists. The worm contained 4 zero day exploits of Microsoft Windows and Siemens software, suggesting state-level resourcing and multilateral collaboration, likely between Israel’s Unit 8200 and the NSA’s Equation Group, part of its wider Tailored Access Operations (TAO) unit. There may have been German and other foreign involvement. Undoubtedly Stuxnet had some success in slowing Iran’s enrichment programme, and coupled with the severity of US sanctions pressure, finally fostered a negotiated compromise to Iran’s enrichment activities, culminating with the landmark 2015 JCPOA agreement involving a multilateral ‘P5+1’ format i.e. Iran with all UNSC members plus Germany. The essence of the compromise was an easing of sanctions against Iran in exchange for the freezing of Iran’s nuclear enrichment. It was arguably the greatest achievement of the Obama administration. During a very brief sanctions respite afforded to Iran, Iran signed over $36 billion worth of contracts with the West to upgrade its ageing airline fleets, vowing to purchase hundreds of jets from Airbus, Boeing and ATR. However, the window was short-lived: barely one year into the JCPOA, the Trump presidency in 2016 had buckled to Israeli lobbyists, who selfishly managed to torpedo the deal involving 6 parties without Israel ever being a signatory to the deal. Contracts were reneged on that Iran had signed to purchase new jets, with the EU and OFAC revoking export licenses for Western aircraft manufacturers dealing with Iran. A common misconception among opponents to the JCPOA were Israeli and Republican talking points that the US had ‘gifted billions of dollars to Iran’. In reality, these monies were Iran’s funds which were frozen by the US Treasury. But truth did not stop the shameless Zionist factions from destroying diplomatic outreach, refusing to give an inch to the Iranian people, as if Iran deserved no respite from sanctions in exchange for agreeing to freeze its nuclear enrichment programme. The welfare-addicted Israeli settler state had gotten used to getting everything it wanted from its American sponsor. Any deal with Iran which gave something back was deemed totally unacceptable. The failure of the JCPOA upended any successes from sanctions and dealt a fatal blow to Iranian faith in the West, highlighting to the world once again of the parasitic, spiteful and subversive nature of American-Jewish lobbyists.
As the Trump administration pursued a ‘maximum pressure’ campaign against Iran by escalating sanctions under the expanded scope of CAATSA, it became clear that the law of diminishing returns was reached: each new round of sanctions juiced less from the Iranians. Iran had already garnered many years worth of experience in skirting and evading sanctions. It had developed an advanced indigenous military industrial capability, especially ballistic missiles, rocketry and drones. The UAE’s ports are important trading nodes for Iran where many Iranian exports are re-exported on its behalf, bypassing primary sanctions. Nearly half a million Iranians live in the UAE and Iran-Emirati bilateral trade is the second highest after trade turnover with China. The UAE’s multivector diplomacy ensures it can never fully be sanctioned by the West. Such Iranian inroads in the Persian Gulf are impossible to prevent due to their mutual geographic and cultural ties. A 2011 incident gifted Iran with some advanced US technology when Iranian cyber hackers successfully commandeered an American RQ-170 Sentinel UAV flying over Afghanistan and landed it in Iran, where scientists were subsequently able to reverse-engineer its then-secret designs. The loss was bitter for the Americans, with the technology not only shared with the Russians and Chinese but also forming the basis for new designs of Iranian drones. To add insult to injury, the sanctions against Iranian oil and gas had tempted Chinese state-owned oil companies SINOPEC and CNPC to tap into great business opportunities in Iran and lock in valuable long term discounts: China was an economic power big enough not to heed US sanctions, as it signed a multi-decades strategic agreement with Iran in 2021 worth $400 billion. The Iranian economy’s integration into the SCO and BRICS+ was the final nail in the coffin in American efforts to choke off Iran, with Iran securing steady cashflow from its new alliances, offsetting existing and future sanctions. Just as the West expanded its list of sanctioned Iranian entities to gain leverage over Iran, so too did Iran expand its nuclear facilities and centrifuges to gain leverage over the West. At the end of the day, the West can only delay – not prevent – the inevitable. If the ultimate goal of sanctions was to change the government in Iran to one more pliable to Israel and the US, perhaps it is Israel and the US who need to adapt to regional realities rather than expecting the region to align with their messianic impulses.
Russia & Sanctions
Relations between Russia and the US have been rocky for far longer than those between Iran and the US, especially given that the two superpowers endured a long first Cold War before relapsing into confrontation again. American diplomat George Kennan, once presciently warned “that expanding NATO would be the most fateful error of American policy in the entire post-cold-war era“. Neocon hawks like Brzezinksi however, saw it another way. Brzezinski said that “Russia is the prize for the winner of the Cold War“, regarding it as prey. Unfortunately it was Brzezinski, not Kennan, that won over the State Department post-1991. The first shots of a pre-planned sanctions war against post-Soviet Russia were fired in 2012 but done so in a way as to not spook Russia – yet. The Magnitsky Act of 2012 was passed by Congress in response to the Hermitage Capital Management fiasco. The Act justified targeted sanctions against Russian individuals apparently implicated in the death of a tax solicitor, Sergei Magnitsky, who was representing the aforementioned American fund against the Russian government in a corruption court case. Hermitage Capital Management was founded by a notorious American-Jewish conman by the name of Bill Browder. Hermitage Capital’s operations were stymied by Russian regulators when Bill Browder was implicated in corruption and subsequently barred from Russia as persona non grata. The event undoubtedly set the tone for the Russophobic rants Browder was well known for in later years. Strangely, the Magnitsky Act also granted Russia a favorable trade status with the US: Permanent Normal Trade Relations status (PNTR). This was done in conjunction with Russia’s entry into the WTO, to soften the blow of sanctions so that Russia did not have sufficient reason to retaliate. In its typical duplicity, the State Department was busy cooking up a plot in the shadows, that would ultimately deteriorate relations with Russia permanently. Merely a few years later, relations blew up dramatically in early 2014 when a CIA operation violently overthrew the democratically elected Victor Yanukovitch government during the notorious ‘Maidan’ coup. Leaks of telephone conversations between American embassy staff in Kiev, more specifically between Victoria Nuland and Geoffrey Pyatt, had provided undeniable proof of the American hand behind the plot. Georgian snipers were hired and positioned on rooftops in downtown Maidan and crowds of people were led by Ukrainian ‘Banderite’ ultra-nationalists under the umbrella group of the OUN (Organization of Ukrainian Nationalists) towards killing grounds where the snipers would shoot them in cold blood. The event was sickeningly framed as Yanukovitch having attacked anti-government protesters, in order to whip up an international outrage and normalize the regime change operation. The OUN has fostered close connections with the CIA since the 1950s and more recently, found strong backers in Canada, Britain and Europe where influential OUN expat communities reside. Canada’s adamant support of Maidan passes through captured Canadian ministers such as Stephen Harper and Chrystia Freeland, with Chrystia Freeland having Banderite roots herself. Canada is also home to a community of Nazi war criminals, despite the lipstick the country places on itself as a bastion of ‘liberal’ values. Canada’s parliament held standing ovations for 98 year old veteran Nazi, Yaroslav Hunker, in 2023 when accompanying Zelensky on one of his global sympathy-milking tours. Canadian lawmakers played dumb of course, to Hunker’s presence.
The success of the false flag operation installed a series of anti-Russia and pro-Western lackeys in power and the golden age of Ukraine-Russia relations came to an abrupt end. Millions of Russian-speakers in Ukraine felt cheated, their voices had been overturned without their approval. There were deep historic reasons for pro-Russia regions to exist in Ukraine. For one, there were vestiges of Russian communities within the Ukrainian SSR from the days of the Soviet Union. For another, there were the famous Zaporizhian Cossack traditions, a people who refused to submit to the diktats of the Polish-Lithuanian Commonwealth and sought union with Russia instead. The ideological reason for the overthrow was the long-held Brzezinski view which had shaped Russophobic American-Jewish Neocons like Robert Kagan and Victoria Nuland, along with fascist sympathizing allies in Canada, Britain and Europe. The view that without Ukraine in its grip, Russia would no longer be an empire. This was a very antiquated view of Russia. Under Yanukovitch, Ukraine-Russia relations had blossomed to a golden age. The majority of Russian-speakers in eastern and central Ukraine voted for Yanukovitch. A Ukraine under Yanukovitch was rebuffed by the EU when he sought long term economic integration deals to bolster the Ukrainian economy, with many meddlesome conditions attached which pressed Ukraine to distance itself away from its Russian neighbor. Naturally, Yanukovitch then turned to Russia, which offered membership in Russia’s EEU (Eurasian Economic Union) with minimal strings attached. Yanukovitch’s agreement to integrate the Ukrainian economy with Russia’s was most likely one of the major events that had spooked Western elites into taking action with the coup. Other strategic reasons for the coup were to neutralize Ukraine as a transit zone for Russian gas and oil into Europe, to embrace Ukraine into NATO and to position nuclear missiles on Ukrainian soil, a very provocative posture that would reduce the time for a nuclear first strike against Moscow down to mere minutes. Even a NATO admiral has admitted that if Russia did not have nuclear weapons, NATO would have invaded Ukraine a long time ago and attacked Russia directly.
Ukraine was an important money laundering node with various transatlantic mafia factions, most notably those from American, British and European governments. As Ukraine was press-ganged into becoming a pro-Western stooge state, Ukraine’s ruling oligarchs in the wake of the 2014 Maidan coup were locked into lucrative embezzlement and money washing pipelines with Democrat and Republican party insiders and their corporate backers, London ‘City’ interests and European fascist interests. Igor Kolomoiski, Gennady Bogoliubov, Petro Poroshenko, Victor Pinchuk, Dmitro Firtash and Rinat Akhmetov are some of the more prominent billionaire oligarchs in Ukraine. They represent clans, interests and networks of agents and pawns in the Verkhovna Rada and media, each owning significant stakes in Ukrainian wealth and vying against the others for influence and foreign donors. Kolomoiski and Bogoliubov are Jewish Ukrainians and have donated to the Azov battalion and other Nazi paramilitaries in Ukraine. They have close ties to Israel, Jewish ‘charities’ and have bankrolled controversial excavations under the Haram al Sharif. It is therefore no surprise that they also have ties to Republican party factions in the US, Likud in Israel and the Chabad Lubovitch school known for its ties to the Trump family dynasty. Kolomoiski was stripped of his Ukrainian citizenship in 2022 and had his assets seized by his rivals, which included former Ukrainian president and magnate of the Roshen confectionery company, Petro Poroshenko, Ukrainian president Zelensky and fellow oligarch Victor Pinchuk. There was even an investigation into Kolomoiski by the FBI and sanctions were applied against him by the US Treasury – all of course because he was on the wrong side of post-Maidan clan politics. Kolomoiski subsequently fled to Israel. The fundamental reason for his escape was the ascendancy of Ukrainian oligarchs backed by Democrat party factions involving the Biden and Clinton families, CFR, Atlantic Council, Blackrock and George Soros. The man behind president Zelensky, Andrey Ermak, is also cozy with Soros and Blackrock, facilitating deals to sell Ukrainian agricultural lands and mineral deposits as collateral for financial lifelines underwritten by Soros, Blackrock and the governments behind them all. Not only that but Ermak conspired to sell land in Ukraine to Blackrock and Soros so that their vested stakeholders, i.e. chemical companies, could use Ukrainian land to dump the West’s toxic, hazardous waste in western Ukraine much the same way that other poor countries are bribed to take the West’s excess plastic trash. In 2021 a law was passed to allow land in Ukraine to be sold to foreigners, due to external pressure from Ukraine’s “allies” in the West.
After the war broke out, pro-Democrat party factions and their oligarch networks were lobbied by Blackrock, Blackstone and Vanguard to purchase arable land in Ukraine via the companies of Monsanto, Cargill and Dupont. Close to 40% of Ukrainian arable land was sold to these companies, pledged as collateral in exchange for IMF loans to the bankrupt, failing Ukrainian regime with its back against the wall. Titanium and lithium deposits in Ukraine were also highly sought by external players i.e. the Pentagon and Western EV companies, who lobbied oligarchs with ownership stakes in mines for supply contracts. It is perhaps good to be mindful that Ukraine has over $10 trillion worth in natural resources and warring parties inevitably factor this into their calculus, whether internal or external. Another faction includes oligarchs Rinat Akhmetov and Dmitro Firtash, who are closer to British establishment interests, the ‘City’ and MI6. British insiders and their entities, – Richard Brady, James Wilson, the Asquith family dynasty and the British-Ukrainian Society used their clout over Firtash and Akhmetov to promote British influence and some Dutch and Swedish interests. Shortly after the Maidan coup, Hunter Biden, son of President Biden, was granted a cozy directorship position at a Ukrainian gas company, Burisima Holdings, despite having no industry experience. It highlighted the beginnings of nepotistic American Democrat party clout over Ukraine, asset-stripping the country in what US Neocons notoriously did with all former Soviet allies. This came at the expense of British and European influence, however, which generally declined as the Americans muscled in on Ukraine. Many old-money pro-British and pro-European oligarchs were arrested or fled the country as American backed oligarchs rose to power. Some British ‘proteges’ remained in Ukraine under the Zelensky regime, most notably Valery Zaluzhny (commander-in-chief), Kirilo Budanov (internal intel chief) and Vitali Klitchko (mayor of Kiev). When Russia destroyed the to-be British base in Ochakiv, something the British were long planning to establish on Ukrainian soil as a base of operations against the Russian Black Sea fleet, the Americans quietly welcomed some of Russia’s actions, especially those which undermined the positions of their own ‘allies’ with which they were competing with in Ukraine. The carve up of Ukraine can thus be viewed as a battleground not only between NATO and Russia, but among competing Western power factions within NATO itself. In Ukraine, the British compete against American and European financial-military-industrial mafias for influence, often at odds over the division of assets and future direction of the country, each using their own Ukrainian oligarch clans and henchmen to further their external interests. Western power factions bestowed themselves a contract to destroy Ukraine, while trying to position themselves at the same time, on winning a contract to rebuild Ukraine, making money on both. Russia was the only wildcard in their schemes.
None of the blatant Western meddling in Ukrainian affairs was acceptable to Russia and so the Russian leadership began to push back. Before the coup, Russia had signed a long term lease agreement with Ukraine over operating a strategic Black Sea naval base in Sevastopol until the early 2040s. After the coup, and faced with the prospects of NATO threatening its Black Sea fleet, the Russian leadership organized a referendum in Crimea very quickly in March 2014. Over 90% of Crimeans voted to be part of Russia than be part of a CIA occupied regime in Kiev. The Russians used the referendum to then quickly annex Crimea bloodlessly and the Crimeans were liberated virtually overnight. The move outraged the West and the event triggered the first large-scale sanctions attack against Russia. The era of rapprochement between Russia and the West was over and a great strategic divorce had begun, although not many outside the Russian siloviki class could yet grasp it. Ukraine began receiving NATO armaments and mercenaries, which it used to attack Russian-speaking oblasts including the shelling of Donbas cities. The Donbas is short-hand for the ‘Donetsk Basin’, a geographic depression in eastern Ukraine rich in minerals and carbon deposits, once upon a time Ukraine’s premier manufacturing, mining and metallurgical hub. Fascist paramilitaries began to dig trenches along the line of contact with Donbas, in preparation for protracted warfare. At the opposing end, the two main pro-Russian separatist oblasts in eastern Ukraine – Lugansk People’s Republic (LPR) and Donetsk People’s Republic (DPR) began to receive Russian armaments, training, intelligence and material support. Fascist paramilitary units from the broader OUN grouping began indiscriminate shelling of civilian targets in Donbas using Tochka missile batteries and artillery, killing thousands of civilians indiscriminately. Some of the groups in question included the ‘Right Sector’, ‘Aidar Battalion’ and ‘Azov Battalion’. A Russian investigative committee opened a criminal investigation into the atrocities committed against Donbas civilians that very few in the West were even informed of. Western media obfuscation efforts downplayed and whitewashed these crimes to dazed and confused Western masses. The findings of the investigation were documented in a report dubbed ‘War Crimes and Crimes Against Humanity Committed By The Ukrainian Military-Political Leadership In Donbass‘. Among the findings, 467 criminal cases were prepared, mass graves were unearthed, damages exceeding €350 million were estimated and more than 22,000 civilians were deemed victims of atrocities, including over 10,000 deaths before 2022. This was the side of the war in Ukraine nobody in the West cared about or could admit, because the victims were mostly Russian-speakers.
While fighting between pro and anti-Russia forces raged in the aftermath of the coup in early 2014, the West was busy sharpening its sanctions knives. With some partial successes attained against Iran, Western elites were confident that they could apply the same pressure levers against Russia. However, Russia was a much more challenging country than Iran to crack, as the West would learn. They first needed a daring false flag attack to provoke a public outcry in order to justify further, unprecedented sanctions against Russia and to throw Russia off balance while its proxies were winning the military conflict in eastern Ukraine. During the heat of battles in July 2014, Malaysia Airlines MH17 was shot down while flying over Donbas, killing all onboard. The horrific depth to which some would plumb in order to do the bidding of their handlers was apparent. The Russians had absolutely no motive in executing such a heinous terrorist attack, which clearly stood to damage them more than any other party in Ukraine. Peculiarly, the attack came at precisely the same time pro-Russian forces were gaining the upper hand in battles by mid 2014 against NATO mercenaries in Donbas. The same script was being played out as happened in Syria the year before, when pro-Assad forces were on the verge of liberating Damascus from Western backed terrorists. Suddenly a false flag chemical attack in Ghouta appeared out of nowhere, supposedly done by pro-Assad forces. The notorious British MI6-backed ‘White Helmet’ stage show were first on the scene to broadcast the cooked up event to gullible Western audiences in order to ‘steer’ public opinion against Assad. The downing of MH17 was done in similar fashion, in a more sadistic way. In all likelihood, the false flag attack was perpetrated by NATO mercenaries or Ukrainian fascist paramilitaries using a Russian BUK missile in the possession of the Ukrainian armed forces.
The intention was to throw Russian forces off balance and drag the West into the war on Ukraine’s side, just as Russia was about to win a strategic victory. It was suspicious that while during the investigation, Ukrainian authorities refused to share any military radar data with investigators, which would have revealed the source of the attack. The emotional outcry was enough to draw in the West, who declared Russia as guilty before the investigation had even finished gathering evidence. The Netherlands would handle the investigation on the West’s behalf, with a flimsy attempt made to portray the investigation as impartial, it was anything but: the Dutch political class and Dutch royalty were fully captured and in the pockets of their NATO handlers. To the chagrin of Ukraine, the West did not take the bait and get involved militarily, they did however, exploit the tragedy of MH17 cynically to escalate their sanctions war against Russia. By August 2014, the Ukrainians were routed at Illovaisk and sued for a ceasefire. The ‘Minsk I’ agreement was signed in deception to give Ukraine a respite to re-group. The Russians at this stage were still in their honeymoon phase with trusting the West’s insincere diplomatic overtures. The NATO-infiltrated Organization for Security and Cooperation in Europe (OSCE) would monitor the ceasefire. In reality, OSCE agents, like the White Helmets in Syria, were staffed with MI6 and CIA agents who spied on Russian positions and conveyed intelligence back to Ukrainians, who would violate the ceasefire with targeted shelling. Predictably, ‘Minsk I’ failed and hostilities broke out again. By mid 2015, pro-Russian forces once again routed NATO mercenaries and Ukrainian fascist paramilitaries at the infamous ‘Battle of Delbatsevo’. Another charade ceasefire – the ‘Minsk II’ agreement, was signed and not adhered to by Ukraine. Heavy weapons were not pulled away from civilian areas as per agreement, shelling continued against Donetsk and the rights of Russian speakers, their language, religion and customs continued to be assaulted by edicts issued by the Verkhovna Rada. Ukraine was using the lull in fighting to arm and prepare long trench lines and institutionalize Russophobia in Ukraine. Why would Russians in Ukraine not align with Russia if they were under attack by their supposed government in Kiev? The stage was being prepared for future combat again.
Meanwhile, all throughout 2014 the US rushed through a series of executive orders implementing sectoral sanctions targeted against Russian finance, defense and energy sectors. The sanctions would be devised under the remit of OFAC. Hundreds of Russian individuals with ties to the Russian government were blacklisted, in addition to state-affiliated corporations and Russian intelligence agencies. US persons and entities were blocked from facilitating debt issuance to Russia longer than 30 days maturity (medium and long term debt finance). US persons and entities were further blocked from transacting with any entities based in Crimea. US persons were also curtailed from trading with any entities, Russian or otherwise, having at least a 33% stake in the voting rights of any projects tied to the drilling of Russian Arctic deep-water energy deposits and basically any Russian energy projects deemed competitive to US shale and fracking interests. The focus here was against technology transfers to Russian State-Owned Enterprises (SOEs) and major foreign investors in Russia by curtailing the transacting parties from the US side. In public, the sanctions were advertised as punishing Russia for its ‘unprovoked’ annexation of Crimea. In reality, a financial war was declared in an attempt to cripple the Russian economy that went well beyond Ukraine, with the hand of the US shale industry lobby clearly behind some of the efforts. The Obama administration was full of Russophobic Neocons who were also benefiting from projecting their own disdain for ‘democracy’ by blaming Russia for the very things they were doing inside and outside of the US electoral system – election meddling. President Trump would later expand on the aforementioned Obama era sanctions using newer Congressional authorities in 2017 granted under CRIEEA and CAATSA and in 2019 granted under PEESA. Further sanctions were slapped against vessels and entities participating in the Nordstream II pipeline project, a solely bilateral affair between Germany and Russia. The US did not view it that way however, regarding Germany as nothing short of a vassal with no agency or independent interests of its own, even describing the project as one involving the ‘coercive use of [Russian] energy exports’. Sanctions levied against Russian and Iranian gas sectors were really an attempt to slow down various projects in the LNG space which competed with American LNG exporters. It was also a manifestation of the hidden American war against OPEC+ happening behind the scenes. The US had partial success in slowing down Russian LNG projects in the Arctic that relied heavily on Western technology. Russia managed to cleverly blunt the vast majority of unprecedented sanctions because it had an extremely competent leadership class.
By late 2014, as it became clear that Ukraine was being weaponized against Russia as a NATO battering ram, Russia began to make strategic moves in anticipation of future sanctions and confrontation with NATO. On the economic front, 4 major shifts occurred: 1) The Russian rouble was floated, allowing it to free itself from a peg against the USD. The market quickly correlated the valuation of the rouble to the price of oil, given Russia’s standing as a major energy exporter. The Russian currency was then positioned to absorb blows from sudden shocks, leaving the Central Bank of Russia to exercise more independence over monetary policy. 2) The quiet dumping of Russia’s USD reserves began. This was directly tied to the floating of the rouble, – the previous fixed exchange rate mechanism required accumulation of USD reserves to maintain the peg. The Russian state held over $100 billion in USD reserves prior to 2014 and after a few years, it was reduced to zero – sold to the secondary debt market. 3) The expansion of gas pipeline infrastructure that bypassed Ukraine. The total gas output to Europe from Russia prior to 2014 was approximately 144 bcmpa (billion cubic meters per annum): 55bcmpa from Nordstream I, 33bcmpa from Yamal, 40bcmpa through Ukraine in various pipelines and 16 bcmpa from Blue Stream. Ukraine constituted an important transit country for gas into Europe, with 28% of all Russian gas exports to Europe transiting Ukraine. There was also a legacy ‘Friendship Pipeline’ built from Soviet times which transited Ukraine, but it transported oil rather than gas. 4) The prominence of voices from the pro-Eurasia camp such as Alexander Dugin and Sergey Glazyev began a renaissance of influence within the Russian establishment while Neoliberal elites still enamored with the West began their decline, as the facts of the escalating campaign of Western hatred of Russia became ever so clear and visceral. There was now strong ideological ground to enhance economic and security integration with the East as a hedge against the West.
It is important to note that Russia is a direct competitor with the US in the European oil and natural gas market, particularly with LNG. Other regional competitors for the European market include Azerbaijan, Qatar, Iran, Israel, Egypt, Turkmenistan, Algeria and Libya. One of the key aims for the US has been to stifle Russian gas and oil exports into the European market and to force existing exports to transit through Ukraine, to prop up the anti-Russia project in Kiev. The Russians in late 2014 had scrapped the South Stream project due to pressure from the EU and US forcing Bulgaria to renege on its initial commitments. Bulgaria would have earned billions of euros in transit fees, but Bulgarian interests were hardly the concern of the EU and US. Consequently, the Russians pivoted to two alternative pipeline projects which were to bypass Ukraine but still deliver to the European market: Turkstream and Nordstream II. Turkstream would bolster Blue Stream gas into Türkiye with an additional 32bcmpa while Nordstream II would bolster Nordstream I gas into Germany with an additional 55bcmpa. With these additional two pipelines, Ukraine’s percentage of transit for Russian gas into Europe would drop to 17%. This outraged the Western foreign policy establishment, as they tried all sorts of plots to undermine the project including using NATO officers in the Turkish air force to shoot down a Russian jet flying over Syria and attempting an actual overthrow of the Turkish government. The shooting down of the Russian SU-24 jet saw Russia briefly suspend the Turkstream project and slap sanctions on exports to Türkiye, but eventually the two powers had enough maturity to resist Western pressure tactics and managed to re-establish trust again, seeing the continuation of the Turkstream project. In the following year of 2016, Russian intelligence tipped off President Erdogan about an impending CIA-Gülen coup against him. Erdogan’s AKP took action and purged more than 50,000 Gülenists from office, solidifying his grip against internal threats. The West was bitter over not being able to stymie the Russian-Turkish relationship, so they tried once again to throw a wrench in the works with the assassination of the Russian ambassador to Türkiye in late 2016. But the event did not derail Russo-Turkish relations. The Trump presidency continued the Deep State sanctions policy against Russia from 2017 onward, including sanctions levied against the Nordstream II project and its affiliated vessels, whilst quietly providing military-industrial support to Ukraine. By 2021, the Nordstream II pipeline was officially constructed after weathering all sanctions attacks by the West. But it was never certified by Germany due to American pressure, a rather suicidal stance to take after so many billions of euros already invested. Germany owed Russia monies for reneging on the deal. The pipeline never entered service, as Europe’s bondage to the US was all but complete.
By 2022, the stage was set for further confrontation. OSCE observers registered an uptick in Ukrainian attacks against Donbas positions. As the Russians amassed troops on the border with Ukraine, NATO mercenaries were working in tandem with the entire might of NATO’s sprawling ISR (Intelligence, Surveillance & Reconnaissance) to directly assist Ukrainian attacks against ‘Novorossiya’ – the pro-Russian oblasts of Ukraine. The West ran a flimsy propaganda campaign in an attempt to sway world opinion that it was doing everything it could to prevent war. The truth was the exact opposite – Britain, the EU and the US were inflaming tensions with a calculated provocation. British and EU diplomats made insincere appearances in Moscow in early 2022 in the typical British fashion of ‘keeping up appearances’, achieving nothing tangible. A few weeks before Russia launched its Special Military Operation (SMO) in Ukraine, Spanish newspaper El País was used to channel a limited hangout on behalf of NATO, attempting to further convey the notion that NATO was doing everything it could to prevent a war in Ukraine. Very few people understood that the hasty withdrawal of US troops from Afghanistan in 2021 had its reason ultimately with Ukraine: as the US departed Afghanistan, a war against Russia was being planned by NATO at the very same time. The reason for the withdrawal was to prevent a Russian retaliation against Western troops in Afghanistan, once hostilities had broken out in Ukraine. With the failed diplomacy of ‘Minsk I’, ‘Minsk II’, it was clear that the Anglo-American establishment, its European satellite states and Ukrainian proxies were hell bent on war with Russia. The decision had been taken at the highest level well before 2022. The topping on the cake was the Kiev regime declaring its intention to acquire nuclear weapons, while the final signal for impending war was lock-step announcements by Western governments of pulling out all their diplomatic staff from embassies in Kiev. In February 2022, Russia finally gave up its patience with the league of non-agreement capable Western kakistocracies. Russian troops moved into Ukraine to decisively put an end to the aggression against their compatriots and to break NATO’s attempted monopoly on Ukraine. Almost immediately, a meticulously calculated and unprecedented sanctions war escalated in parallel against Russia.
The Western Atlanticist ‘liberal’ establishment were embarking on quite a mad feat, projecting the ‘cancel culture’ of their grassroots ‘liberal’ allies on a global scale: the cancelling of Russia from the global economy. It was a bizarre policy position to go ‘all-in’ on. There must have been something existential to Western elites in Ukraine. Many life careers and egos had been staked with Project Ukraine. The British MI6-infested Guardian propaganda outlet went a little too hard on all the commotion – permanently changing its logo to the Ukrainian flag. Perhaps a little too carried away by all the confirmation biases and echo chambers in Anglo American think-tank land, there was a rude awakening to be had: Russia was the world’s behemoth in commodities and energy exports. It did not take a genius to see inflationary pressures and supply shocks harming global populations from reckless crusader attempts to cancel Russia from global supply chains. It merely took an Ivy League education not to see it. Energy still drives the economy, while finance steers it. Western elites, despite their Ivy League education, had utterly failed to grasp the importance of Russia to the global economy. Their belief in the control of finance, the belief that steering the global economy away from vital Russian exports would somehow get the tick of approval from everyone outside their ideological bubble, was at best naive. Hubris on such a scale often has no ‘Plan B’, – and failure was certainly not an option for ideologically committed folk. They say that people go insane in groups and return back to sanity one at a time. To the keen eye, it was obvious that the ‘Sunk Cost Fallacy’ of the ill-advised ‘Project Ukraine’ would ultimately prove its undoing. The escalation ladder between NATO and Russia ends with nuclear war. Was the West ready to risk destroying the planet over a Nazi infested suicidal wasteland? Post-Maidan Ukraine was highly symbolic of everything wrong with the West – the place where Jewish Nazis mingled with Slavic Nazis, an utterly depraved Democrat Party money laundering machine, a weapons testing ground for NATO and Pentagon biolab network, a ghastly human and organ trafficking hub, the most racist and corrupt failing state in Europe and the place where Russian culture and heritage was being erased from history. These were the threats that Russia was having to deal with on its doorstep. From the outset, the West declared that it wanted to deal a strategic defeat against Russia and called for the entire global community to punish and isolate Russia for its ‘unprovoked’ invasion. When ‘unprovoked’ was being emphasized so bluntly, the doublespeak only meant that the war was most definitely being provoked. An unprecedented propaganda blitz was coordinated from London, New York and Brussels, with Western mainstream media in full cahoots with Five Eyes directives of barking very loudly on social media and news rooms, that Russia was a third rate military on the verge of collapse and about to be defeated by NATO’s proxy army in Ukraine. The reverberations were almost convincing, had one heard the noises only inside an echo chamber. If Russia was so weak, then why did the US need NATO? Logic was not required.
The entire collective might of NATO, its vast advantage in conventional forces and ISR over Russia, the long arm of the American financial system and global Western propaganda apparatus were anticipating to cripple the Russian economy within weeks, and with a few angry tweets. Sadly for their credibility, they over-estimated their power and under-estimated Russia. This was not surprising at all to yours truly. When Russia commits to war, it is a very serious affair. Unlike Britain or America, who casually stumble into wars in lands they care very little about, mostly for pirating forays, the Russian war machine is extremely cautious. It takes a long time to get on the saddle, but once saddled, she rides swiftly. As the long litany of NATO’s weapons catalogue were methodically checked off and pumped into Ukraine, they were touted as ‘wunderwaffen’. The Russians simply chewed them up one by one and quickly adapted their weapon systems to neuter them. NATO tank and APC ‘trophies’ were seized, towed away and put on display in Moscow and Saint Petersburg to boost public morale. Hundreds of NATO officers and brass were eliminated by the Russians in Ukraine, including Polish Brigadier-General Adam Marczak. NATO war planners were clearly not prepared for real peer-to-peer conflict. 30 years of battling asymmetric guerilla rag-tag forces in the Middle East had pampered them into a false sense of bravado and fattened them up with excess bureaucracy and outdated weapons. NATO’s superior ISR capability was eventually blunted by Russia’s world class electronic warfare (EW) capabilities, where active interference confuses NATO’s frequency spectrum and passive interference obfuscates NATO signals intelligence. Moreover, NATO’s focus on maneuver warfare was no match for the Russian preference of industrial attrition warfare where logistics and industrial capacity favored Russia overwhelmingly over the West. It was not yet apparent to the West of what exactly they were getting themselves into.
President Biden openly declared that he wanted to turn the rouble to ‘rubble’ with sanctions and crash the exchange rate nearer to 200 roubles per dollar. His handlers also pushed to revoke Russia’s PNTR status so as to justify further tariffs outside the WTO framework. Russia and Belarus both had their PNTR statuses revoked by Congress and were banned from the SWIFT inter-bank messaging system. Russia’s massive 2800-strong merchant vessel fleet was banned from docking in European and American ports, except of course when ferrying goods excluded from sanctions. The EU further banned all Russian airline carriers from traversing European airspace and Russian citizens in the West had in some cases bank accounts frozen and came under extra-judicial scrutiny in what can only be described as institutionalized racism. Here was the supposedly ‘inclusive’ West practicing exclusion. It was followed by a coordinated effort by both the US and EU to ban Russian gas, oil and coal exports. Imports of Russian LNG however, continued. This was largely due to the gaps in supply that the EU faced after miscalculating with its knee jerk pivot away from Russian gas. It generally takes time to find alternative gas suppliers especially when Europe was foolhardy not to lock in long term contracts at deep discounts when prices were low, which was what the Nordstream II pipeline would have afforded. The EU found itself playing a fool’s errand, relying on an increasingly expensive, volatile and competitive spot market, competing with hungry Asian buyers. The best case scenario would have seen the EU immediately replace all Russian gas with American LNG. In 2020, annual EU gas consumption was 330bcm. With 40% being of Russian origin, it would have left 132bcm to be delivered by LNG tankers. An average tanker carries 180,000cm and LNG is about 600 times denser than natural gas. The global LNG fleet is over 700 vessels. Back of the envelope calculations give about 1200 round-trips a year between the US and EU. Depending on travel and loading time assumptions, the entire operation may consume at least 20% of the world’s LNG fleet during the year, every year. This would pose problems for other LNG consumers and squeeze competition for tankers. The EU would have to pay premiums to secure tankers but there would be another problem. Europe does not have sufficient terminals to re-gasify LNG. Poland and Netherlands have LNG terminals, but they are completely inadequate for the continent’s total appetite for gas. Europe would end up paying at least 5 times more for LNG over cheaper, securer and more reliable piped gas from Russia at spot market rates, not discounted contractual rates. The result was permanent social unrest and the de-industrialization of the European economy. Some may call it folly, some may call it assisted suicide, but others may just call it the Marshall Plan’s margin call.
The EU did achieve a ‘success’, nevertheless. The European market managed to wean itself off Russian gas in a relatively short period of time. Pre-2022, the EU sourced 40% of its gas needs from Russia. Within a year, the figure dropped to less than 10% – on the surface of the matter, quite a feat. But at what price? Intelligent policy-makers would have secured alternative sources first before pulling the plug on Russian gas, but Europe was not gifted with intelligence in this department. It was a knee jerk operation done under American duress, prompted by the bombing of the Nordstream II pipeline. Alternative supplies were not found on time. Thus, inflation and rising costs of living rattled the continent, leading to social tensions within European societies. The EU imposed its own sanction packages on Russia alongside US and G7-initiated measures. The EU went through at least 14 rounds of sanction packages as of 2024. €50 billion worth of European exports were banned to Russia including all aviation exports, space components, cutting edge technology, oil refining machinery, luxury goods, armaments, IT consultancy, business software, crypto wallet services, advertising and accounting services. €100 billion worth of Russian imports were banned to the EU including 90% of the EU’s Russian oil imports, coal, steel, diamonds, gold, wood, seafood, various metals and helium. Notable Russian exports not yet banned included LNG, fertilisers, wheat and agricultural foodstuffs. Some of the world’s largest producers and exporters of nickel and aluminum were Russian, Norilsk Nickel and Rusal, arguably too big to sanction given their importance to Western supply chains. This could very well change in the future, however. There are other key Russian commodities giants that were sanctioned. Alrosa is a world leader in diamond exports, overtaking De Beers in 2020. The EU and US placed import bans on its products. One of the consequences of the ban was the disruption of Europe’s premier Antwerp diamond exchange, which previously traded much of the Russian diamond market. The West was keen to cut its nose to spite its face. Antwerp’s diamond exchange competitors who refused to sanction Russian diamonds, those in China, India, Israel, UAE and Türkiye would pick up its lost market share. Another key Russian commodity – uranium – had an interesting story to tell. Russia is the world leader in enriched, processed uranium when one also includes Kazakhstan’s share, because Kazakhstan’s uranium is enriched in Russia and Rosatom owns stakes in Kazakhstan’s uranium ore mines. Russian enriched uranium accounts for almost 40% of the total US uranium supply of which 90% is imported from abroad. Much of Russian uranium powers strategic American nuclear facilities and power plants. One of the first deals signed between the US and Russia immediately following the collapse of the Soviet Union were deals involving nuclear energy. Ukraine was immediately stripped of its Soviet nuclear arsenal, repatriated back to Russia at American insistence. A 20 year US-Russia deal was signed in 1993 for Russia to supply the US with a cheap supply of uranium, riddled with unfavorable terms to Russia. The State Department exploited the Yeltsin government to milk Russian uranium for itself at incomprehensible bargains. The US had always coveted Russian resources, especially uranium since the US was totally lacking self sufficiency with processed nuclear fuel. In 2024, uranium imports from Russia were finally banned by the US. The logic assumes a supply pivot towards Canada, Japan, France, Britain and indigenous American production, in what is called the ‘Sapporo 5′ friend-shoring supply chain. But there could be more at play for the bold move. China has a monopoly on many rare earth metals and trace elements, it too is battling a sanctions war against the US albeit on a much slower time frame. Control over cutting edge semiconductor chips is the main crux of the China-US sanctions battle, since the current AI and emerging quantum revolutions will be centered on primacy in processing power. There is increasing demand for AI chips and GPUs to drive cloud data centers, CDNs, large language models (LLMs) and technology companies’ algorithms. With the US restricting TSMC semiconductor chips and Dutch ASML lithography machines (due to underlying patented American technologies) to China, in turn China has issued restrictions on critical graphite, gallium and germanium exports to the US and EU. These elements are used in batteries and EVs. With a broader sanctions war escalating with China, the ban on Russian uranium could be a long term pivot, mindful of China’s global lead in the construction of brand new nuclear reactors, powered by Russian nuclear fuel.
Low hanging fruit like travel bans and asset freezes on blacklisted Russian individuals and entities were already exhausted. The EU and US then turned towards unprecedented piracy, catching Russia off-guard and setting a very ominous precedent which rattled confidence in the G7 financial system. €25 billion in private Russian assets were frozen in the EU financial system and €210 billion in Russian central bank reserves were frozen in EU jurisdiction. Another $100 billion worth of Russian assets were frozen outside the EU, held in G7 currencies and jurisdictions. The principal monies were frozen and untouched, while interest components were drawn down and ‘donated’ to Ukrainian or Western slush funds relating to the war, in what was essentially an act of legalized piracy. Russia had liquidated almost all of its US dollar holdings since 2014, but was caught by surprise at the EU asset freeze. Yet still, a G7-initiative known as the ‘oil price cap’ attempted to limit the price of Russian oil exports to a maximum upper cap of $60 per barrel – quite a ridiculous attempt to manipulate the market and browbeat global oil importers into complying with unilateral Western diktats. Oil carriers who traded with Western suppliers and used Western maritime insurance companies would be asked by Western regulators at what price oil was to be delivered to the buyer. If the price was above $60 per barrel, insurance would be refused. This was how the price cap would be enforced at the supply side. Even TSMC of Taiwan was pressured by the US to stop producing Russian designed Elbrus and Baikal microchips. The West essentially threw the kitchen sink at Russia with sanctions, but they failed to decisively cripple the Russian economy. Russia became the most over-sanctioned country in the world. We will now shift attention to the response of the Global South and Russia to the sanctions and the wider consequences of this reckless G7-instigated financial war. Other than attributing it to sheer arrogance and miscalculation, the West was destroying the foundations of its own very post-WW2 financial-political order. One can only speculate on whether Western elites truly believed, short of total control over the entire planet, that it was preferable to rule over its ashes. Whatever the case may be, the world would no longer be the same again after NATO’s cooked up fiasco in Ukraine. And perhaps it would be for the better – only time would tell.
One of the first things Russia did in response to the Western onslaught was draw up a list of ‘friendly’ and ‘unfriendly’ states. Unsurprisingly the ‘unfriendly’ list included all G7 members, most EU states, Crown dependencies and various other lackeys who jumped on the sanctions bandwagon – Ukraine, Taiwan, South Korea, Australia and others. Diplomatically, there was a tit-for-tat in the reduction of embassy staff with various ‘unfriendly’ states. Each side declared a proportion of the other’s embassy staff persona non grata and booted them out on short notice. Such acts tend to happen during wars or before major conflicts, as the warring parties reduce each other’s espionage capabilities on their home soil. At the UN, while most UNGA resolutions condemned the war and hostilities on both sides, the general reaction of the Global South had shocked Western elites: the vast majority of the world did not single out Russia and condemn her in the way the West had hoped. Furthermore, most of the world did not support sanctions on Russia. They understood well of Russia’s significance to global supply chains, while Western elites operated within echo chambers, paid by ‘intelligence’ handlers to not understand this simple fact. The West had sanctioned and isolated itself from the global democracy of nations, while trying its very hardest to do that very thing to Russia. In short: the cancel culture brand of the West had utterly failed to cancel Russia in the court of world opinion. This was a snapping of the rubber band, a stark reminder that there were indeed limits to Western influence, especially when bereft of any logic or common sense. Russia’s ‘unfriendly’ list was leveraged by the Russian finance ministry to introduce restrictions on Russian exports and restrictions on foreign investments into Russia, in what can only be described as Russian counter-sanctions. Additional measures were taken using the ‘unfriendly’ list: nostro accounts from unfriendly jurisdictions were required to transact in roubles only and some bilateral double-taxation treaties were scrapped. Despite the loud and boisterous announcements across the West of sanctioning Russian gas and oil, the reality on the ground was different: Western states continued to import Russian gas and oil. Russia found ingenious ways to circumvent the sanctions and sell its products to the West through friendly countries. The revenues lost to Western customers were more than compensated by Global South refiners who purchased Russian crude and gas at deep discounts, boosting revenue through volume. The Russians could afford to offer below-market rates to lure in buyers into signing contracts to insulate the Russian state with a steady stream of foreign income. The main beneficiaries of this scheme were ‘neutral’ or ‘friendly’ countries – UAE, China, India and Türkiye, for example, who bought Russian gas and oil, marked it up, and re-sold it to the EU and US at great profits. Western consumers paid for these schemes. Some of the tactics used were ‘mixing’ gas or oil from multiple sources, taking for example, proportions of Turkmen, Azeri and Russian gas into Türkiye, combining them then exporting the ‘mix’ to the EU. Any Russian-origin gas was cleverly blurred. The EU could choose to waste tremendous resources in policing this ploy or playing dumb and meeting its economic needs. Predictably, the EU looked the other way. Alongside this scheme, Russia’s proposal to turn ‘neutral’ or ‘friendly’ countries into regional gas hubs was another clever longer term idea to build economic lifelines while still selling its gas and oil to the EU. Various proposals were floated to build pipeline extensions linking the central Asian states from the existing TAPI project. Other proposals focused on building new pipelines to Türkiye, China (Power of Siberia II) and Iran (CaspianStream), so that capacity lost with the destruction of Nordstream II could be more than replaced with regional gas hub projects. China, Iran and Türkiye in these potential scenarios would gain a significant competitive advantage against the West, locking in long term gas discounts from Russia for their economies and keeping inflation low, leaving the West relying on volatile spot markets. An investigation by the Washington Post had revealed that despite a US ban on Russian oil, the Pentagon was still importing Russian sourced oil. It remains unclear how the investigation determined the fact, but an elaborate supply scheme using aforementioned gas ‘mixing’ was outlined involving the UAE, Türkiye and one of the Pentagon’s strategic suppliers of oil – the Greek Motor Oil Hellas refinery. Exports of Russian hydrocarbons to ‘unfriendly’ states fell to record lows in 2022, with the G7 celebrating lost revenues to Russian state coffers. Such premature glee misses the forest for the trees: in 2022, Russia made records profits and revenues from not only hydrocarbons but all its exports: almost $600 billion worth. This was mostly due to the bout of high commodities prices during 2022 in the wake of the war, and more importantly, due to sanctions. In 2023, the Atlantic Council gleefully boasted of the YoY decline in Russian export revenue to $270 billion. But the fall was due overwhelmingly to a slump in commodity prices, than any sanctions genius. As quickly as the West pivoted away from Russian energy, Russia in turn pivoted quickly to new buyers in Asian and Middle Eastern markets, with over 90% of its energy exports having diverted there.
In response to the freezing of Russian central bank reserves in EU and US jurisdictions, amounting to approximately $300 billion worth, Russia took proportional measures against Western assets in Russian jurisdiction. The measures included freezing financial assets and seizing foreign owned factories and physical assets. The total value of Western assets confiscated by Russia was comparable to the $300 billion the West had confiscated of Russian assets. While Western governments rarely spoke of this Russian counter-move, many Western corporations who bore the brunt of the asset forfeitures were now faced with legal quagmires and slashed revenues, hence lower shareholder valuations. Many foreign investors in Russia had their correspondent ‘C accounts’ locked. Iconic Western brands like McDonalds, Shell, Microsoft, Amex, Visa and Mastercard, among many others, suspended or rushed operations out of Russia by virtue of decree by their host governments. It could not be any clearer to ordinary Russians, that the West had been waging an incredibly insincere effort for the past 30 years to woo Russia as a ‘partner’. It all came tumbling down rather quickly. Even die-hard pro-Western Russian oligarchs had awakened to the harsh truth, while their bank accounts, yachts and apartments were arbitrarily seized and frozen by Western governments. With the exit of Western companies out of Russia, it was a very big strategic mistake for the West. The Russian economy suffered in the short term, unemployment spiked and sentiment dipped. But merely within a year it was inflating and growing again, smashing all expectations. The growing importance of the defence sector and dual-track war-civilian economy was actually growing income in Russia at a staggering rate, so much that interest rates needed to increase again. By 2024, the Russian GDP in PPP terms had become the world’s 4th largest behind India, US and China. Meanwhile, the British, German and Japanese economies all tumbled in global rankings. Russian, Indian, Turkish and Chinese firms stepped in the Russian market to fill the void left by Western firms, and gobbled up the opportunities left by their competitors. Russian firms and weapons manufacturers proved to be remarkably resilient and innovative, learning quickly from the battlefield and tapping into deeply patriotic roots to innovate for the motherland. Russian technological independence got a shot in the arm, something Russia should have learnt long ago from China, instead of relying overly on Western technology companies, which had now closed the door on Russia. China banned Google Mobile Services (GMS) long ago to protect its population from Google’s subversive and monopolistic practices. GMS is the core infrastructure for Google’s services and proprietary apps. Russian alternatives to Youtube, Facebook and Google began their rise to prominence, especially after the exit of Silicon Valley tech giants from the Russian market. Russian Linux distributions like Astra and Aurora sprang up to replace Microsoft and Android operating systems, especially for sensitive government clients. Interest in a Russia-only internet network dubbed the ‘Ru-net’ became a strategic focus of the Kremlin. The West had recklessly squandered the greatest opportunity it had for any soft power influence over Russia internally, by forcing its firms to leave the Russian market. Some firms stayed on in Russia despite the sanctions, namely French and German automobile manufacturers. Production of Russian-designed Baikal, Elbrus and Mikron dual-use microchips switched away from foreign plants to Russian production plants. It was a matter of strategic national security. However, a notable weakness of Russia had always been its aviation sector, especially turbofan engines and commercial jets, which relied on mostly foreign sourced components. The USSR was quite self-sufficient in turbofan engines, but Russia since 1991 had closed down much of the research and production around those propulsion systems. This was one sector that the West did manage to hurt Russia, which now faced a similar problem as Iran, being barred from maintenance services and spare parts for its existing Airbus and Boeing fleets. Thus Russia was forced to adapt and resurrect Soviet civil aviation propulsion system programmes. There was a need for 500 new planes by 2030 to keep Russian airlines happy. Domestically built projects with import-substituted components from ‘friendly’ countries or indigenous production accelerated, including the SSJ-100, MS-21 and TU-214 jets. The goal was to work towards or close to, having a 100% build with Russian-only components – not an easy feat to achieve very quickly. New Russian turbofan engines, PD-35 and PD-21, are currently under development to meet this need. A joint Russian-Chinese project to build a long range, wide-body twinjet called the C-929, co-built and designed by Russia’s UAC and China’s COMAC, began auspiciously but was crippled by Western sanctions on UAC, with China’s COMAC taking full ownership of the project. China’s risk aversion towards working with sanctioned partners was the reason for the change. Russia nevertheless continued its long path towards self-sufficiency in commercial aviation.
The West was hit with some sanctions of its own making. Rocket engine exports to the US were suspended by Roscosmos. Previously, the Russian RD-180 engine was used extensively by US Atlas launch vehicles prior to the ban. Russia pulled out of the International Space Station (ISS), having been the only country to actively support international crews at the ISS. British fishing vessels were barred from fishing in Russian territorial waters, where a significant chunk of haddock was sourced for England’s iconic ‘fish and chips’, ever since a rusty old agreement in 1956 granted such rights in the Barents Sea. In response to banning Russian air carriers from transiting through European air space, Russia banned European airlines from transiting over much vaster Russian air space. The consequences were devastating for European airlines who relied on the Asia-Europe route, making journeys longer and more expensive. Moreover, since Chinese airlines were exempt from the ban, it made Chinese airlines much more cost and time competitive over their European peers on the Europe-Asia route. Russian banks switched to Chinese payment systems like UnionPay to replace Visa, Mastercard and Amex. The Russian experience demonstrated clear limits to Western sanctions. Russia was a central linchpin to the global economy unlike Iran or North Korea, therefore Western sanctions could be brushed off by Russia like a bad case of fleas – a privilege only one other country has – China. Sanctions were manifesting themselves to be self-defeating – they caused short term commodity prices to spike, bringing more revenue to Russia. Over the medium term, they compelled Russia to crank up industrial production, thereby adding value to its GDP, offsetting losses incurred from Western boycotts. And over the longer term, a strategic decoupling from Western influence guaranteed that Russia permanently remained out of its reach. From a military perspective, the manufactured conflict in Ukraine has blown back for all warring parties including Russia, but especially for NATO. While Russia was now faced with two new entrants into NATO on its borders and decidedly hostile, Finland and Sweden’s accession into NATO were more akin to consolation prizes for the US after losing Ukraine. The combined financial-technical might of NATO and its partners constituted over 50 countries, yet still unable to roll back Russian gains in Ukraine. NATO’s ‘Article 5’ was revealed as a giant bluff and Ukraine was taken off the table for integration into NATO. NATO weapon stockpiles were exhausted from the war, exposing the global hegemonic ambitions of the EU, Britain and the US to shortages and inadequate industrial capacities. It became clear that the US was unable to wage 2 let alone 3 major global fronts against peer or near-peer adversaries at the same time. The belief among Western elites was that sanctions and ‘superior’ Western weaponry would defeat Russia fairly quickly in Ukraine so that the US could then pivot towards a war against China, – whatever that was supposed to achieve in the sophomoric minds of the Atlanticist establishment. But the realization that NATO weapons were overrated and Russian technological prowess was under-estimated, had itself dawned at least, to a small group of well-informed insiders. Some Pentagon-affiliated think tanks (RAND, CNAS) saw another threat entirely, that the war in Ukraine was benefiting the Russian war machine to such an extent that it was providing a constant stream of training to sharpen tactics, weapons systems and the reverse engineering of NATO systems while the US sat largely on the sidelines with no skin in the game. Of course the reverse could be said of NATO studying Russian systems and methods, but in the absence of being directly involved and having less skin in the game, Pentagon-affiliated think tanks and US military brass have acknowledged that Russia after the war would come out a much more formidable and stronger adversary. The war and sanctions have accelerated the modernization and expansion of the Russian armed forces, the purging of corruption and bureaucracy from its ranks, the promotion of innovation and good target practice against NATO. Russia officially adjusted its nuclear doctrine in 2024, lowering the nuclear threshold and granting itself the right to use nuclear weapons against military blocs like NATO from mere conventional attacks through proxies such as Ukraine. Furthermore, a novel intermediate range ballistic and hypersonic MIRV system was fielded in actual battle in late 2024 by Russia. The ‘Oreshnik’ missile system could be armed with nuclear and non-nuclear warheads and was outside the remit of any Western counter-measures, placing all European capitals within minutes reach. As such, innovations such as the ‘Oreshnik’ were the result of NATO’s folly and particularly, the folly of the Trump administration walking off the INF Treaty in 2019. The ‘Oreshnik’ was merely Russia’s answer to the revocation of the INF Treaty. It altered the ladder of escalation and nuclear posturing vis-a-vis NATO so that the conflict being contained within Ukraine and the West winning it, became mutually exclusive events. Such strategic posturing ensures that the West will never truly ‘win’ a hot war in Ukraine. Russia also amended its foreign policy stance to officially promote a fairer multipolar world order, oppose full spectrum global imperialism from the US, uphold the centrality of international law and recognize the plurality of civilization-states over and above toeing the line of one particular ‘brand’ of hegemonic system. It remains to be seen if Western elites were registering the cascade of unintended consequences arising from their poor decisions.
Another significant impact of Western sanctions has been the re-jigging of global supply chains with regards to Russian commodity and energy exports. Due to poorly thought-out sanctions, vast new black and grey markets in smuggling networks have mushroomed. These markets lead eventually to ‘white’ market actors to step in, effectively ending the monopoly the West had once enjoyed in the shipping insurance and reinsurance market. One of the unspoken truths about sanctions, or more correctly, the abuse of Western sanctions, has been their direct cause of black and grey market proliferation in the short-to-medium term. The dominance that Lloyd’s of London once enjoyed with providing maritime insurance is now being actively undermined, with new non-Western maritime insurance companies springing up in India, Russia, China and elsewhere, to seize business opportunities that Western insurance firms refuse to take. All the West can do to mitigate this loss of power is to lobby foreign governments to put their interests in second place to G7 interests (unlikely) or attempt to gain controlling shareholder stakes in said companies – infiltration in other words. Restrictions will likely be in place to prevent such scenarios. The international P&I Club cartel represents the bulk of Western insurance and reinsurance companies who are barred from insuring vessels carrying sanctioned Russian oil and gas. Over 1000 vessels have dropped P&I Club liability cover and shifted elsewhere since 2022. P&I Club, Shipowners Club and Lloyd’s have admitted to the difficulties of enforcing effective sanctions as new players enter the scene and Russia builds up a huge shadow tanker fleet beyond Western control and insurance. Before 2022, 63% of Russian crude was insured by Western companies. By October 2024, it dropped to an all time low of just 13%. Sanctions have created a brand new Russian shadow fleet outside of Western control, consisting of over 2300 vessels. Many of the vessels engage in black or grey market smuggling activity, until at least ‘friendly’ maritime insurance companies establish themselves. Russia has been purchasing tankers at a voracious pace since 2022. A large subset of tankers are known as the ‘dark fleet’, operating with foreign flags and obfuscated registrations, spoofing transponders or having transponders turned off entirely, as a way to evade data leakage to eavesdroppers. Sovcomflot is Russia’s gargantuan shipping giant which manages its shadow and non-shadow fleet. Predictably, OFAC has added ships and entities tied to Sovcomflot to its SDN blacklists, but the efficacy of such bans no longer remains critical due to the proliferation of non-Western alternative routes, tankers, markets and insurers. The G7 ‘price cap’ on Russian oil had further failed to establish a price below $60 per barrel, with Russian crude trading higher than the price cap, much to G7’s disappointment. Russian oil exports in general are divided into two major grades – ESPO and Urals. ESPO grade is based in the far east and serves predominantly the Asian and Pacific market. Urals grade is shipped out of Novorossiysk in the Black Sea and serves predominantly the European and Atlantic market. The West had further hoped that OPEC+ would abandon Russia from its cartel but the exact opposite happened. The Global South were not buying any Western attempts to weaken Russia. The law of unintended consequences arising from sanctions had no mercy on its curators. The Northern Sea Route (NSR) project was increasingly attracting attention from not only Russia, but India and China, who were interested in bypassing unpredictable sea routes subject to Western manipulation, especially the Suez canal. Russia’s world leading nuclear powered ice breaker fleet was expanded to help de-ice NSR routes, with the view that the NSR could one day remain permanently ice-free all year round, making a trip from Murmansk to China in 3 weeks instead of 8 weeks through the Suez canal. China as a partner in the NSR was given more oversight. The Bab-el-Mandeb chokepoint in the Red Sea, after October 2023 became impassable for Western and Israeli-linked tankers due to an embargo the Ansar Allah movement in Yemen had enforced out of sympathy with Palestinians. As a result of Ansar Allah’s ‘hard’ sanction policy, over 90% of oil traffic passing through the Red Sea was of Russian origin. The West had itself become sanctioned in a vital sea lane that it was unable to re-open by force.
As for President Biden’s attempt to cripple the rouble to ‘rubble’ in the 200 roubles per dollar range, the exact opposite happened: after initially depreciating to over 100 roubles per dollar right after the war, Russian policy-makers reversed the slide by ensuring demand for roubles, thereby strengthening the currency. How was that possible? President Putin issued several decrees. One decree mandated that debt payments to foreign creditors, especially those on the ‘unfriendly’ list, were to be made in roubles only. Another mandated Russian export-linked banks to accept roubles only for commodity and energy exports. The Moscow Stock Exchange suspended trade in all euro and dollar exchange-traded instruments, making euro and dollar trading the sole domain of the OTC market through approved Russian conduits. By forcing customers of Russian exports to pay in roubles, the exchange rate strengthened dramatically towards the 50 roubles per dollar range, before the Bank of Russia announced that it was too strong and needed to weaken again. When the rubber meets the road and Western firms had to pay up in roubles, Western and Russian traders worked around sanctions together. There are a few schemes to illustrate the idea. The ‘official’ route is now for Western importers of Russian gas to pay say, euros from their Russian subsidiary bank to Gazprombank in Russia, which then sells euros in the OTC market for roubles with the Bank of Russia or other big players. Previously, payment was made in EU jurisdiction to a Gazprombank account which then converted some euros into roubles and wired it back to Russia. Under another semi-official scheme, a Western producer say BMW, sells vehicles to Russia for roubles. The roubles are sold to the ECB by BMW for euros. To rid itself of roubles, the ECB acts purely as a clearinghouse in this arrangement, selling roubles to EU gas importers for euros. The gas importers are thus able to have rouble liquidity when making rouble payments to Russia. In yet another unofficial scheme, Samsung sells 2000 smartphones to its Russian subsidiary, Samsung Russia. Samsung Russia then sells the smartphones and receives roubles. Now comes the interesting part – Samsung has an agreement with another party, say Uniper of Germany, where roubles are exchanged between both Russian subsidiaries, from Samsung Russia to Uniper Russia. The rouble transfers happen within the Russian economy. Uniper Russia then buys gas from Gazprom and pays Gazprombank with roubles. Uniper receives piped gas from its Russian subsidiary and sells it for euros in the European market. Finally, Uniper converts the euros to dollars and pays Samsung for the smartphones. Not only are rouble payments being mandated, but real de-dollarization was happening. Bangladesh agreed to pay Russia in yuan for the Ruppur nuclear power plant. Indian refiners are paying for Russian crude in rupees, roubles and yuan. Another decree by Putin mandated a fixed exchange rate of 5000 roubles per gram of gold. This further strengthened the rouble, accelerated de-dollarization and provided an additional route of exchange for goods, using gold as an intermediary currency. The rouble-gold fix worked by deliberately creating arbitrage incentives to encourage trade between gold for roubles or foreign currencies for roubles using gold. Additionally, the gold-rouble fix could be used to adjust the rouble exchange rate with fiat currencies. Gold has no counter-party risk when it is held by its custodians. The West had utterly failed to crash the rouble because Russia was well prepared for the most part, and managed by competent elites. It should be mentioned that ‘Gold Standards’ usually accompany eras of monetary transitions, they seldom last because ‘Gold Standards’ suffer from the very same shortcomings as fiat currencies – they are ultimately faith-based and suffer from ‘run risk’ during crises. The 1971 abandonment of the Bretton Woods system by the Nixon administration demonstrated such a run risk scenario – only that time it was US government refusal to honor gold withdrawals from global customers that sparked a crisis of confidence. As such, one should not expect any ‘Gold Standard’ to be an enduring, permanent fix to structural problems, merely a transitional arrangement.
Sanctions Antidotes
Just as Western intelligence plants work alongside US Treasury officials to ‘educate’ global business communities of the imperative need to heed their haughty sanctions, it might also be a good idea to educate global business communities of the consequences of sanctions. That, by partaking in Western sanctions, they are harming innocent populations who are unable to fly safely or earn income to re-build their war-ravaged nations by exporting their wheat. Business communities ought to ask themselves whether compliance with unilateral punitive measures not rooted in any international law are more important than morality. Will Western virtue signalling corporations show any concerns for the suffering of Yemenis, Syrians, Iraqis, Libyans or Iranians? The business community should hear both sides of the story, not just the American ‘brand’ of truth. Another simple solution is to limit Global South sovereign wealth investments in unfriendly, weaponized Western financial systems where they are exposed to piracy and asset forfeitures, and instead invest them in friendlier jurisdictions. The promotion of other reserve currencies in tandem with the shunning of the US dollar and euro by potential sanctions targets would be wise. This should include the engineering of new financial architectures and payment systems, which I will discuss in more detail next. Already Russia has integrated its inter-bank payment messaging system, SPFS, with China’s (CIPS), Iran’s (SEPAM) and India’s (SFMS) as a way to offset its eviction from SWIFT. This integration will streamline cross-border institutional transactions. For retail transactions, the integration of payment systems such as Russia’s Mir with Iran’s Shatab, China’s UnionPay (the world’s largest) or the banking system of any nation with sizeable Russian expats and tourists, like Türkiye for example, will help ease the burden on sanctioned populations. Another temporary alternative would be to engage trade in bilateral currencies or barter, bypassing the US dollar until a more stable architecture is in place. By trading Russian commodities for Chinese machinery or Russian wheat for Egyptian cotton, the exchange eliminates the US dollar from the equation. Russia changed the rules of the game in 2022 when it took the unthinkable step to begin exporting its oil and commodities in roubles, effectively annulling the Western attempt to deprive it of foreign cashflow and depreciate its currency. As such, banks like Sberbank and Gazprombank were directed to convert foreign receivables from unfriendly customers in euros and dollars, to roubles in the open market, which had the effect of strengthening the rouble much to the dismay of the West. Friendly customers like Indian refiners, settled directly with roubles, while Chinese customers could pay with either roubles or yuan. Russia would then accumulate yuan reserves and use them in turn to finance imports from China or from Chinese allies such as Pakistan. Pakistan would in turn use the yuan to purchase goods from China and so on. Any large exporter with clout like Russia, could invoice its exports in its own currency, eliminating exchange rate risk and ensuring un-sanctioned cashflow into its state coffers. The only question yours truly has, is why was this not done any earlier?
US policy-makers may wish to re-consider the temptation to be slapping sanctions so blithely and instead tilt towards a carrot approach, whereby promises to lift or waive sanctions are used as leverage to foster a more cooperative approach amenable to negotiated settlements. Perusing the list of sanctioned entities by the US Treasury today is a rather comical affair. It could be said that the US has sanctioned so much of the world already, that it has actually sanctioned itself from the world in the process. It really does not take much imagination to see how unnecessary red tape has arisen from the abuse of sanctions and added to KYC procedures, transaction costs, delays and general barriers to free trade and freedom of association. It was already mentioned that black and grey market activity proliferates heavily in the wake of sanctions. When weaving a web so intricate, one must always make sure not to get entangled in that very web. It is no wonder why multilateral organizations like BRICS+ are beginning to coalesce. The US is well past its ‘unipolar’ moment, no longer the only game in town. The appetite for the global ‘Sheriff’ is waning, especially after the ugly influence of Zionist Neocons. Here, we can go further and make an even bolder observation and subsequent recommendation: why is it that US elites always need to bully their way around the globe as a first resort? If they actually had any real soft power and offered good faith ‘win-win’ deals to the world, there would be absolutely no need for any sanctions in the first place. The crux of the problem therefore is psychological and ideological. But perhaps the most comical aspect to the entire edifice of sanctimonious sanctions episodes is that it never crosses the minds of American-Jewish Treasury officials that they themselves are the very ‘rogue’ actors they rile so much about. Their funding of terrorist proxies threatens global security: their wanton weaponization of the Western financial system actually undermines their own long term credibility and primacy in the world.
The Genius Of Blockchain
Before we proceed further towards understanding sanctions mitigation strategies, we will go over the basics of a relatively new technology that has emerged directly from the ruins of the 2008 American Financial Crisis: blockchain and crypto-currencies (digital currencies). In early 2009, anonymous cryptographers published a white paper on a new technological innovation – an entirely new financial ecosystem that could execute and verify transactions without the need for a third party intermediary such as a bank, in effect, a trustless network. To achieve it, a marriage between mathematical cryptography and finance was proposed that leverages Metcalfe’s Law, helping to revolutionize peer-to-peer transactions. The innovation went live on the web with its genesis ‘block 0’, – a self-validating public ledger using a ‘crypto’-currency’ called Bitcoin. The public ledger was open source and visible to anybody on the web, it was called blockchain. Bitcoin’s blockchain utilizes a robust cryptographic encryption algorithm (SHA-256) and an innovative consensus algorithm which coordinates between decentralized server nodes in the blockchain network and is able to overcome significant technical challenges in order to be functional to netizens. For one, there was a mechanism to verify transactions and ensure a logarithmic rate of minting new currency. An upper limit to the supply of Bitcoin that could ever be minted in the entire world was locked in at birth (unlike fiat currencies), at 21 million Bitcoins. The supply of Bitcoins would be gradually minted over time until they reached the upper limit, inheriting the property of scarcity, much like a digital version of gold. There would in theory be no upper limit to the price of Bitcoin because there was no upper limit to printing fiat currencies. History shows that every fiat currency is ultimately destroyed by its central bank due to hyperinflation. Bitcoin was attempting to hedge against that in digital form. Other highly academic and technical problems were overcome: the double spending problem was solved, a 51% attack was minimized and Byzantine Fault Tolerance was attained. I will not be describing them in any more detail, sparing the reader much time. Suffice to say that blockchain is a type of Distributed Ledger Technology (DLT) while Bitcoin is a type of blockchain.
The consensus algorithm was known as a proof-of-work mechanism, where electrical energy would be expended in decentralized computer servers (nodes) spread out all over the globe, each competing against one another in a race to perform tedious mathematical computations to solve trivial riddles. Thus, work would be expended to generate new supply of Bitcoin. The winning node would get rewarded with newly minted Bitcoin and this reward would algorithmically halve every 4 years in what is often called the halving. The mechanism would help the overall ecosystem validate user transactions in a decentralized manner, by tapping into a backlog of pending transactions – the memepool, prioritizing them based on their voluntary fees and including them in the new ‘block’, which would be appended to the previous block in hashed chains, i.e the blockchain. This was the public ledger of all transactions in the history of Bitcoin. The rate of increase in the supply of Bitcoin would diminish over time in a logarithmic rate, as would the reward to validator nodes. The winning node would be mathematically guaranteed to be only 1 at a time, so no 2 nodes could claim the same transaction hence defraud the system with double spending. The decentralized nature of the Bitcoin network meant that no banks or governments could centrally command it. State actors could theoretically attempt to own 51% of the nodes to manipulate the network, but the risk remains technically infeasible to pull off. In the future, the advent of quantum computers may pose existential issues to blockchains running on pre-quantum encryption algorithms, but the silver lining would be the creation of new quantum-resistant blockchains.
At its core, Bitcoin relies on a very important cryptographic technique called hashing, which is performed by a hash function. This is a mathematical function (or formula), with an established algorithm, that takes some input data of any length and converts it to some output data with a fixed length. It is also known as a one-way function, because its entire premise in terms of providing data integrity, lies in that the output value (known as the hash, checksum or digest) can never feasibly be used to recreate the input value (the message). Hash functions must also have some useful mathematical properties to help them achieve this aim: they must be deterministic, meaning the same input must always produce the same hash (output), no matter who applies the hashing algorithm. They must be able to compute hashes very quickly. They must operate with an element of randomness, generating completely different hashes when the input data is tweaked even slightly. And of course, while it remains mathematically possible for two different messages to produce the same hash, something known as a collision, this must be statistically infeasible. We can begin to appreciate how trust can be enforced using mathematical hashing, by virtue of being able to calculate irreversible data that cannot feasibly be tampered with, eliminating the need for trusting third parties to facilitate transactions. Hashing is a core fundamental of all blockchains. Decentralization is a core fundamental of Bitcoin but not necessarily for all blockchains. There are highly centralized blockchains where hashing power is not scattered all over the globe in disparate networks of nodes, rather, in much smaller networks of nodes where certain nodes are much less ‘egalitarian’ than others. There are benefits and pitfalls to each design. Centralized blockchains are generally preferred by institutions because at the moment, they offer higher speeds, bandwidth and lower costs than decentralized blockchains. That is not to say that decentralized blockchains will not be able to do that in the future, for the moment they face key technical hurdles yet to overcome – like scalability, which affects their speed and bandwidth. For the more technical minded, there are many nuances to that assertion. There are different layered blockchains, – ‘Layer 1’ blockchains and ‘Layer 2’ blockchains for example. Certain technical solutions have been adapted to various crypto-currencies and their underlying blockchains in order to streamline speed, bandwidth and transaction fees: sharding, side chains, off chain processing and rollups are some such solutions. Since many blockchains are open-source code, they can be regarded as consensus-driven continuously evolving agile projects. Any team of developers can grab the code and ‘fork’ it, creating a custom version of the blockchain split off from an instance of time in the blockchain’s historic record. As such, the ‘forked’ blockchain version inherits an updated ledger of transactions from that moment on. As one can imagine, there is no limit to how many crypto-currency projects can emerge in the aftermath of the blockchain revolution. Some projects are very risky and the value of their crypto-currency reflects that risk akin to the stock price of a company.
Bitcoin was the first-mover in what was to become a gargantuan ecosystem of crypto-currencies emerging in its aftermath. Many other consensus algorithms sprang up to compete with Bitcoin’s proof-of-work algorithm using different principles such as proof-of-stake, among many others. Some crypto-currencies were much more centralized than Bitcoin, with management structures bearing much more weight to their ecosystem success rather than the utility of a decentralized network. As such, they were treated as securities rather than commodities by regulators. With the crypto-currency ecosystem catching on with the retail market, the institutional market began to take note, initially treading very carefully, with so many risks and uncertainty surrounding Bitcoin and blockchain. From 2009-2015, high profile hacks of Bitcoin exchanges and negative publicity from fraud involving nascent crytpo-currency projects had kept the mainstream financial world at bay from deeper forays. Moreover, there was a complete lack of regulation, which further hindered wider adoption of crypto-currencies. The benefits of blockchain were still not apparent to most, with only the boldest venture capital funds getting involved with what was still largely an experimental technology. Mainstream economists grossly misunderstood blockchain because one had to also understand cryptography and computing networks, not only finance concepts. Early adopters and die-hard believers however, grasped the revolutionary nature of blockchain and they were ultimately vindicated by price action. As Western sanctions attacks continued to escalate into the 2010s, it began to dawn on some that trustless peer-to-peer blockchain networks could help bypass sanctions. The underlying technology after all, was designed to ensure permissionless transactions where no third party could interfere and sanction the transacting parties. However, there are some caveats to that assertion. At the interface where fiat currency and crypto-currency conversion takes place, namely crypto exchange end points, KYC regulations are enforced, therefore governments through regulators, banks and taxation authorities have jurisdiction over fiat currencies, hence over their conversion into crypto-currencies. Consequently, they could block account holders and transactions going into and out of crypto-currencies. Exchanges are the weak points in the ecosystem where sanctioning authorities could intervene. It is only when crypto-currencies attain widespread adoption and there is no longer any need to convert them into fiat currencies, that they fully achieve what they were originally set out to do: bypass the middleman in peer-to-peer transactions.
Stablecoins, CBDCs & Banking
In light of the last few paragraphs, we learnt what blockchain and crypto-currencies (digital currencies) are. Many crypto-currency projects are decentralized with no central management structure, including the dominant ‘first mover’ Bitcoin project. This poses a problem for sovereign governments and commercial banks, since these crypto-currencies are outside the realm of their direct control. Most central banks, Western and BRICS included, have a negative view of Bitcoin and decentralized crypto-currencies. Some countries have even banned Bitcoin trading. As such, decentralized crypto-currencies are unlikely to be adopted or promoted as ‘solutions’ to countering sanctions, let alone be used for novel cross-border settlement payment systems. Instead, banks and governments have co-opted open source blockchain technology and wrapped it inside a centralized, proprietary structure of their making. That way, they can have the best of both worlds – the innovation of blockchain while fully controlling and patenting the currency itself. This goes back to the point made about centralized blockchains being preferred by institutions. Another problem with decentralized digital currencies is their volatility, which can be orders of magnitude greater than stocks. High volatility is by definition the opposite of stability, and stability is ultimately needed for cross-border settlement systems between institutional and sovereign players. One subset of digital currencies does have some stability characteristics, they are known as ‘stablecoins‘. Stablecoins are digital currencies pegged algorithmically to underlying assets, usually fiat currencies. They are quite often overlooked but they play a pivotal role in the crypto ecosystem. Stablecoins allow traders to switch between crypto-currencies and fiat currencies by proxy, without necessarily needing to touch actual fiat currencies, unless the trader wishes to do so. The actual stablecoins are a claim on their underlying assets – fiat currencies for the most part. In theory, there is a 1-to-1 conversion ratio so that one can convert all stablecoins into fiat currencies. The value of stablecoins is algorithmically anchored to the value of fiat currencies, therefore they experience minimal volatility unlike other crypto-currencies, except during extraordinary market conditions. Tether and USD Coin are two stablecoin projects accounting for over 80% of the total market capitalization of stablecoins in the crypto ecosystem – with both being digital currency proxies for the US dollar. The company and management structures behind Tether and USD Coin render them securities from a regulator’s point of view, not commodities like Bitcoin. The implications are that regular audits are conducted to make sure the stablecoin is backed by a proportion of the underlying asset, US dollars or highly liquid Treasuries. Note that under this arrangement, stablecoins inherit the very same weaknesses as gold standards and fiat currencies – potential run risk. There can be far more claims on the underlying assets than the underlying assets themselves during a crisis scenario and the stablecoin issuer may be left with a giant shortfall after liquidating underlying assets to honor withdrawals. Pegs will then break as was the case with TerraUSD, which fell from grace due to ponzi tokenomics. But assuming conditions are favorable, stablecoins can offer exchange rate stability: $1 in US fiat dollars will equal $1 in digital stablecoin dollars. Stablecoins can in theory be contenders for cross-border settlements however, they have inadequate properties for institutional and sovereign requirements within the context of de-dollarization and neutering Western sanctions. Especially when the US government regards Tether and USD Coin as extensions of its own ‘long arm’ jurisdiction.
Another concept is known as Central Bank Digital Currency (CDBC). This is a fully centralized, bastardized version of peer-to-peer digital currency. The mechanism is often used between a central bank and an individual with an account at the central bank or between a central bank and an institution with an account at the central bank. A CBDC would be the liability of a central bank, not a commercial bank. Central banks all over the world are exploring the merits of such an arrangement. Downsides include overshooting inflation and pervasive surveillance. Upsides include the ability of central banks to potentially eliminate bank runs and recessions by making instantaneous and targeted cost-free benefit payments. They can also give rise to time-sensitive welfare payments (‘here is $1000, spend it by next Friday at ABC merchant or it vanishes’) or even form pipelines for the implementation of Universal Basic Income (UBI) payments to citizens. Direct individual accounts with central banks are not yet possible but if CBDCs are implemented with regular depositors this way, individuals will be able to open direct accounts at their central bank. Commercial banks will then find themselves competing against the central bank for customer deposits, risking interest rate divergence from the official prime rate and perturbations to their loan-making business, hence effective transmission of monetary policy. Many countries are currently conducting pilot studies of CBDCs. While the US Federal Reserve is exploring its ‘FedNow’ CBDC, a White House paper has already delineated the typical exclusionary practices of haughty Western evangelism: “A potential US CBDC could also help support other policy goals. For example, a potential US CBDC could help ensure that such payment systems are aligned with the principles of human rights, democratic values, and privacy“. For emerging economies, CBDCs between a central bank and institutions can alleviate some inflationary effects should a central bank having limited government securities needed to sterilize foreign exchange operations. For countries with weak commercial banking systems, CBDCs may crowd out funding and channel it to the central bank instead, destabilizing the commercial banks. As we can see, there are potential implications with CBDCs that require further study.
Central bank money, also known as high powered money or reserve money, is the safest form of money. It has almost no credit or liquidity risk. In the standard fractional reserve banking system which expands the money supply out of an initial injection of reserve money by the central bank, the logical starting point is an extremely important inner circle of institutions called the market for bank reserves – essentially the central bank and all authorized depository institutions with accounts at the central bank. A reserve money injection by the central bank triggers a cascade of commercial bank lending due to financial incentives to do so, expanding the money creation process mostly through bank lending but also through bank investments. When principal is lent to borrowers by depository institutions for a mortgage loan for example, that money is brand new money in the economy, credited to the borrower’s account by a bank clerk. Most authorized depository institutions in any nation’s banking system will have accounts directly with the central bank to settle overnight imbalances with each other (the ‘interbank’ market) or with the central bank itself. There are many assets which can facilitate such functions – overnight money markets, certificates of deposit, repurchase agreements or reverse repurchase agreements. All reserves are liabilities of the central bank balance sheet – whether physical cash for public use or digital cash accounts at any depository institution having an account with the central bank. A proportion of a commercial bank’s reserves are always kept on hand with the central bank to meet regulatory requirements or to meet a bank’s daily business needs – required reserves. Banks can keep some reserves in excess of requirements – these are known as excess reserves. The reasons for doing so are usually related to insuring against crises conditions such as credit crunches, bank runs or a lack of trust in the inter-bank market. If trust breaks down in the inter-bank market, the consequences to an economy can be devastating: a central banker’s worst nightmare is a deflationary spiral.
During crises conditions involving systemic bankruptcies of key inter-bank participants such as the Lehman Brothers bank in 2008, one participant’s toxic assets will impact counter-party balance sheets. Other banks will be reluctant to lend to each other, fearing the true mark-to-market value of their balance sheets, inherited from the systemic default of one key participant. The economy can grind to a halt when the commercial paper market seizes up. During these extraordinary conditions, the central bank will step in as the ‘lender of last resort’ to unblock the credit crunch and facilitate trust and lending again among inter-bank market participants. It will do so by offering higher interest rates to incentivize banks to park their funds at the central bank rather than with each other and it could even agree to undertake swaps with toxic banks, taking toxic assets off their balance sheets and onto its own, injecting much needed cash in return. In most cases, banks will use reserves to make more money from lending with the multiplier effect, keeping only a bare minimum as required reserves. Required reserves do not earn much interest: lending earns them higher rates of interest. $1000 in central bank reserve money can end up creating $1000000 in additional new money at the stroke of a keyboard when a principal loan is made. To pay interest, new principal always needs to be created from lending. This is why all modern day fiat systems ultimately die from a death of default and hyperinflation, plagued by perennial boom-bust cycles: there is never enough money in existence to pay off future debt and the reckless printing of money always erodes the purchasing power of fiat currencies. One US dollar in 1913 is worth less than 4 cents in 2024. The Romans diluted the silver content of their Denarius over time, having the same effect. The government becomes insolvent leading eventually to default. Insolvency means liabilities are greater than assets. An entity can be insolvent but still have cashflow and meet debt payments. Once cashflow dries up and debt payments are missed, default is legally declared and bankruptcy proceedings could be initiated depending on the debtor-creditor relationship. Insolvency can be illustrated with the following example. In Japan during the ‘lost decades’ after the Plaza Accord and 1989 Nikkei stock market / property crash, many Japanese corporations, banks and pension funds became insolvent but not bankrupt. Entities were kept afloat by generating cashflow from their business, used for the most part of the 1990s and 2000s to pay down liabilities so that they could match depressed asset valuations. This was the main reason why the Japanese economy had stagnated for so long. It was called a balance sheet recession because the asset side of many corporate balance sheets had been slashed due to the 1989 Nikkei / property crash while liabilities remained unchanged. As such, the balance sheets were insolvent and this was happening everywhere in Japan. In general, governments almost always prefer to print their way out of debt spirals, – this is where hyperinflation comes in. A government can raise funds in 3 main ways: issuing debt, raising taxes or printing currency. When too much onerous debt destroys a government or an economy, there are only 2 ways to ‘fix’ a debt crisis: either by transferring assets from debtors to creditors or by writing down debts on the creditor side. When debt balloons too quickly, a central bank pops the bubble with higher interest rates and by virtue sets the motion for the next crisis, ad infinitum. Central banks in other words, are their own worst enemies. In theory, digital currencies potentially offer a way of solving the bank run problem that has plagued many gold standards and fiat currencies throughout history. The only cost to such a solution is to go 100% cashless and pure digital. That way, there would be no cash to withdraw and cause bank runs.
Bank assets kept aside for settlements should have specific properties – liquidity being foremost. A CBDC can serve as a settlement reserve kept in master accounts with the central bank. It would be both a liability to the central bank and a settlement asset. A US dollar CBDC for example, would eliminate counter-party risk from any intermediaries handling US dollars such as Eurodollar banks. It would not eliminate counter-party risk from the Federal Reserve bank however, which is owned by a cartel of private Western banking interests, not the US government. From a Western central bank perspective, there is limited attention paid to sanctions risk since most sanctions are dished out by Western banks and finance ministries. Therefore a CBDC settlement currency is not a burning issue or priority for Western central banks. Its adoption would better serve to build layers on top of existing technology stacks by integrating with other networks of private banking groups or like-minded clubs of banks or institutions in a variety of projects including of course, politicized projects. The payoffs from building a US dollar CBDC to bolster the existing US fiat dollar system might not be worth the effort, given that the US already extracts significant benefits from the dollar system itself. A US dollar CBDC may be limited to US jurisdiction and US banks only, constricting its utility for international non-residents, who would be hampered by access issues. Non-residents would thus not be able to utilize the full spectrum of benefits that a CBDC would normally entail and for this purpose, an American CBDC would be better suited to its internal economics and social dynamics instead. Non-residents are not be able to open accounts at the Federal Reserve bank, only foreign primary dealers are. The existing Western financial system imparts Western central and commercial banks unfair advantages that BRICS+ nations do not enjoy in the same manner: global reserve currencies and disproportionate influence over finance. With this in mind, from a BRICS+ central bank perspective, where sanctions risk is very real, a CBDC settlement currency within a common BRICS+ banking system would be a priority to establish if any alternative architecture to the Western financial system is to be devised. The system could then expand and have global reach, competing against the G7 shaped system. The first problem to solve is to enable large sovereign and institutional cross-border payments to settle instantaneously and with minimal overhead cost. This would constitute significant progress because aforementioned bilateral currency swaps of the de-dollarized kind, along with barter arrangements, are merely transitory and not optimal over the long term. What is needed is a highly liquid, common unit of account that can serve as a replacement to the US dollar, as a settlement and reserve asset agreed to by the BRICS+. A CBDC can do just that. As already outlined, from the US Federal Reserve bank’s perspective, a US dollar CBDC is not a pressing priority because the primacy of the existing US fiat dollar and the Treasury market are perceived to remain sufficiently adequate for American interests. Consequently, US dollar CBDCs are not deemed threats to this legacy arrangement. What would be a clear and present threat to US dollar primacy however, is a BRICS+ CBDC architecture.
BRICS+ & The New Financial Architecture
At the present moment in 2024 we are in a transition phase with the global financial architecture, as the world scrambles for alternatives to the US-dominated system which is now failing the vast majority of the world. NATO has similarly failed all the hype, failing to deliver peace and security to the European continent. It has outlived its utility – it should have been disbanded in 1991 in parallel to the disbanding of the Warsaw Pact. However, Western strategists and think tank land continued to push for the expansion of these failing enterprises, with so many lifelong careers and egos on the line. Doubling down on the sunk cost fallacy is a dangerous psychological glitch, and one should not expect any hope to shine from London, Brussels or Washington DC on the matter any time soon. Those capitals are beyond salvation, they are polluted with abject immorality and delusions of grandeur. Therefore, in the absence of any intelligence from Western policy-making, the rest of the globe has a new mandate on its hands – to develop alternative systems to Western systems. It is all but fait accompli – the Western imperialist school of thought will never voluntarily reform itself nor step down peacefully. Sharing the mantle with other global civilizations is anathema to the ideologically handicapped Western foreign policy establishment, stuck in the unrealistic fantasies of full spectrum dominance. The task of working around their perpetual conflict machine is now solely the domain of the Global South. The realization has been understood by the heads of state of BRICS+, an organization led by the largest non-Western G20 economies – Brazil, Russia, India, China and South Africa. The club has since its heyday, expanded to beyond its 5 founding members and offered membership and observer status to a long litany of interested applicants. There has been overwhelming interest from Global South nations to join BRICS+, but the core is proceeding slowly with expansion. Delivering new strategy and architecture takes precedence to aggrandizement. The rise of BRICS+ has only accelerated since NATO’s reckless Ukrainian miscalculation in 2022. As such, its subsequent membership expansion can only be construed as a vote of no confidence in the West. To illustrate the kind of system the US has been abusing for the most part since WW2, at the expense of the rest of the world, we have to go over some basic economics. Since 1982, the US has been running almost constant trade deficits. The deficits have emerged due to the ‘Triffin Dilemma’, which stipulates that by design of having to bankroll a global reserve currency racket, the US Federal Reserve has to print dollars and send them abroad to satisfy global demand. Inevitably over time, the process causes perpetual trade deficits. Most countries with persistent trade imbalances on the deficit side will see their currencies weaken in that scenario, as currencies generally fluctuate in correlation with their current account balance. But not the US – its reserve currency affords it an exorbitant privilege over everybody else – the privilege of having a strong dollar and running trade deficits at the same time. The US dollar has strengthened as a result of an elaborate smorgasbord of schemes – central bank swap lines, Eurodollar markets, Petrodollar agreements, CIA blackmail operations, military coercion and so on, all working to bolster artificial demand for the dollar. Such arrangements make no economic sense in theory because they are artificial constructs – persistent trade deficits and a strong currency are generally mutually exclusive. A strong dollar is advocated by Washington Consensus advocates and helps the US reduce its inflation by holding import prices down. But US policy-makers have prioritized monetary competitiveness at the expense of industrial competitiveness. A strong dollar has de-industrialized the US over the years, with BRICS+ economies picking up industrial capacity instead. In economics, there is always a trade-off for every action.
The bedrock of a BRICS+ payment system builds on the UN, SCO, EEU, international law and some aspects of Bretton Woods. According to one key insider from Russia, Sergey Glazyev, BRICS+ should have an in-house system of settlements and reserves, free from external sanctions. It should be based on the concept of the IMF’s ‘Special Drawing Rights’ (SDR), which in turn is the brainchild of Bretton Woods founder and chief economist John Maynard Keynes. The SDR is itself regarded as an internal reserve asset, held by central banks at the IMF. The SDR is a synthetic exchange weighted unit of account based on a basket of national fiat currencies, with SDR holdings being claims on foreign currencies by members, against fellow members within the IMF. The BRICS+ is looking to adopt two such baskets, one of member currencies and one of commodities. An internal BRICS+ currency would be ‘valued’ by being indexed to both baskets based on relative weights of member states’ GDP, to ensure stability. Of course we must remember that the SDR was very stable because in its heyday, most exchange rates were fixed. Today, there are more floating currencies and commodity prices can be volatile, so stability may vary within wider bands of volatility vis-a-vis the SDR. The idea would be to eventually have most commodity pricing benchmark hubs located not in the West, but in Eurasia, like the Shanghai Gold Exchange for example. Reliance on Western pricing benchmarks will eventually fall and commodities will start to see multiple prices depending on regional markets, as the global democratization of valuation takes hold. Arbitrage opportunities will inevitably arise for savvy traders. Regardless of challenges, Glazyev sees the introduction of a BRICS+ currency to help settle transactions between member states as a straightforward affair once all member central banks approve of the venture in principle, which occurred during the Kazan BRICS+ summit in 2024. Business communities will then be free to utilize it as they see fit. As Western sanctions continue, Global South businesses and their partners will be attracted to use the new settlement currency. Moreover, in light of the blockchain revolution, the BRICS+ settlement system will inherit digital currency characteristics. In practical terms, what this means is the currency can be settled outside the private Western banking system, in a direct peer-to-peer manner. This would streamline payments to be instantaneous, secure, cost-free and above all, permissionless. Thus, blockchain and CBDC characteristics takes the BRICS+ payment system beyond the traditional SDR. The London and New York private banking clearinghouses will be bypassed under such a system, involving the world’s largest economies connected via their central banks peer-to-peer. Agreements will be voluntary and based on international law, the very opposite of involuntary blackmail-based unilateralism. Liberal globalization will give way to true globalization, without the haughty prefixing ideology. Eventually in the future, Western currencies will be completely bypassed and irrelevant to the Global South – they will still remain relevant, but to a much smaller segment of the world economy. By that stage, the BRICS+ financial architecture would have reached maturity. Many Global South nations have been plundered by the IMF and US Treasury, having their gold and FX reserves stolen while sinking into dollar denominated debts – countries like Russia, Libya, Ukraine, Iraq, Venezuela, Afghanistan and Iran. They will now be offered to join a club where they are not subordinates to a hegemon, but equals. Their consolidation into the new BRICS+ architecture paves the way for ultimately jettisoning debt burdens owed to the Western financial system. The balance sheet impact under such a scenario would truly be a ‘bazooka’ option. Depending on how the West responds to the death of its financial prowess, they could be encouraged to default on their dollar and euro debts and nationalize all key, remaining natural resources and assets as a pledge of confidence in having sovereign collateral. By that stage, the old predatory Anglo American banking system would have lost a major global market share, hollowing out its legacy power. It is expected to fight and resist the disruption to its once lucrative and exploitative colonialist model by attempting to undermine BRICS+ unity and executing various financial, military and socio-cultural attacks against its members.
China’s BRI project spurred the creation of colossal new bank credit institutions such as the Asian Infrastructure and Investment Bank (AIIB). This is the sister organization to its analogue in BRICS+, the New Development Bank (NDB). Both institutions focus on credit and development in their geographic areas of interest, with the AIIB being more capitalized and having a larger membership pool. Multilateral banks unlike commercial banks, do not print money. They raise funds with debt issuance and capital injections from members. By using blockchain technology to help facilitate inter-member settlements with the use of native digital currency, a BRICS+ settlement system will lessen dependence on the Anglo-American dominated private commercial banking clearinghouses, which are the linchpins for the broader Western global hegemonic financial order. In mid 2024, a project dubbed ‘mBridge’ became a minimal viable product. Its key innovation was the ‘mBridge ledger’, basically an internal blockchain. It was spearheaded by the BIS and Bank of China, involving the Thai, Saudi, UAE and Hong Kong central bank authorities: a product built by central banks for central banks. There were many international central banks acting as observers to the trial, even the AIIB. The project was the first successful implementation of a cross-border multilateral wholesale CBDC (wCBDC) pilot trial. By October 2024, the project moved out of BIS oversight and into stakeholder hands. One attraction of mBridge was that having a domestic CBDC system was not a precondition for joining the mBridge platform. Another attraction was that it supported the use of local currencies in international transactions where local currencies were illiquid in the international payment arena, hence the inclusivity effect of connecting disparate economies together. The mBridge ledger was deployed on the cloud in Hong Kong during the trial, access granted through a web based front-end UI. Should instances of wCBDC enter their production phase, it is likely for access to be spread across global cloud servers beyond Hong Kong. Various testing had been done to execute real-time, peer-to-peer transactions between parties using multiple validation nodes. The system directly integrated each central bank’s domestic wCBDC or payments system to the mBridge platform. The automated manner of transacting with mBridge relied on central banks in each jurisdiction settling via mBridge on behalf of their commercial banks. When ‘commercial bank 1’ in ‘jurisdiction 1’ pays ‘commercial bank 2’ in ‘jurisdiction 2’, the transaction is called an issuance by ‘commercial bank 1’ (the opposite would be called a redemption). ‘Commercial bank 1’ pays a designated wallet of ‘commercial bank 2’ on mBridge by first paying its central bank via its domestic wCBDC or payments system, this automatically triggers the central bank in ‘jurisdiction 1’ to settle a wCBDC issuance on mBridge with the central bank in ‘jurisdiction 2’ and the final leg of the transaction is completed when ‘commercial bank 2’ is paid by its central bank via its domestic wCBDC or payments system. The success of this multilateral wCBDC system in connecting different jurisdictions within a common technical blockchain infrastructure that settled instantaneously and with minimal overhead cost, had now formed the springboard for a BRICS+ settlement system. There were several other pilot projects that involved multilateral wCBDCs – Mariana, Jura, Icebreaker and Dunbar. Some were corporate projects and had issued crypto-currencies to the public like Stellar and XRP. A wCBDC architecture with a multilateral format would have a common digital token that would algorithmically link to the digital currency forms of participating national currencies which are issued and redeemed solely by respective central banks. In many pilot tests, both cross-border payments and offshore payments were made. Cross-border payments take place between a payer and a payee who are residents of different jurisdictions, while offshore payments take place between two institutions, neither of whom is resident in the jurisdiction in which the payment is being made (the payment is made in the jurisdiction currency).
While there are legal and governance hurdles to overcome, the technical feasibility of multilateral wCBDC settlement systems proves that the world of international finance is set to change in the near future, especially on the back of unhinged and rogue sanctions attacks from Western central banks and finance ministries. Privacy and anonymity controls can be layered in if necessary, to protect sensitive payments. Other than bypassing and insuring against primary and secondary sanctions, the emergence of multilateral wCBDC settlement systems stands to potentially fill gaps between bank relationships. Commercial banks can lack direct relationships with offshore counter-parties and they often need to rely on a global network of correspondent banks. As was previously discussed, due to unilateral US sanctions and multiple financial crises, there has been a collapse in correspondent banking in recent years, leaving many institutions and economies cut off from the global financial system. This is one area where wCBDCs can help create additional linkages in a peer-to-peer manner, sidestepping private bank intermediaries altogether. Another area where wCBDCs can help economies, is by offering PvP protection to FX transactions involving currencies bereft of PvP mechanisms. A PvP is a technical way of facilitating FX transactions in international finance where the final transfer of a payment in one currency occurs if and only if the final transfer of a payment in another currency takes place. Many exotic currencies are not supported by global settlement systems with PvP and in this regard, wCBDCs can offer such currencies the means to settle in a PvP-like manner using digital ledgers and wallets as previously outlined with the example of mBridge. The vanilla banking system takes days to settle transactions with high costs skimmed by intermediaries, while a wCBDC system can offer tangible improvements over legacy systems with minimal fee skimming, high bandwidth and instantaneous speeds of settlement. Furthermore, the programmable and adaptable technology stack of wCBDCs signifies that they can be tweaked and integrated into other systems using API end-points. Smart contracts can also be programmed between parties on the blockchain. A smart contract is an algorithm that automatically executes when programmed conditions are met and agreed to by transacting parties, without the need for any third parties.
In October 2024, the BRICS+ conference in Russia had published some artifacts that shed light on the direction that BRICS+ is heading with wCBDCs. The ‘Kazan Declaration’ had a few important clauses in this regard, notably clauses 65, 66 and 68: the recognition of the need to develop fast, transparent, low cost, unimpeded and inclusive cross-border settlements using local currencies in what is provisionally called ‘BRICS Clear’. Reading between the lines leaves very little doubt that the wording implies a project very much along the lines of mBridge. Further emphasis is made on the need to establish a voluntary BRICS+ reinsurance mechanism, alluding to the points I have already outlined about shadow tanker fleets evading sanctions. With legitimate non-Western insurers from BRICS+ stepping onto the scene, shadow tanker fleets will be able to come out of the shadows. Another striking point is made about a BRICS+ ‘Contingent Reserve Arrangement’ (CRA) that would be a fund akin to an IMF or World Bank minus the meddlesome Western strings attached, providing a mechanism to ease short term balance of payment pressures among members, thus strengthening financial stability. What this means is the laying of a groundwork for exchange rate stability required for the basket of currencies needed to underpin the actual token or currency used by ‘BRICS Clear’ in the way that the SDR was designed but also in the way that mBridge settles between central banks.
It should be noted that China has already built some contours of a global financial system for itself and its vast partnerships, albeit not yet powerful enough to overtake the US-centric system due to policy limitations on its behalf, most notably that of its currency, the Yuan, still pegged to the US dollar in a mercantilist posture. China’s SWIFT alternative for payments and messaging is its Cross-Border Interbank Payment System (CIPS). It does so by promoting central bank swap lines with trade partners directly tied to the Bank of China without the need for offshore Yuan clearinghouses or banks. These are bilateral lines of liquidity in local currencies and the Yuan, bypassing US dollars, with more than a quarter of the globe’s nations. Promoting Yuan liquidity helps domestic banks in foreign jurisdictions trade with Chinese banks. As of 2023, the Yuan and gold have become the largest foreign reserve assets of Russia. The likely future financial state of China will involve the internationalization of the Yuan to reserve currency status, not to replace the US dollar but to complement it. Chinese strategists have repeatedly said that China does not seek to replace the US empire with bloodletting, they merely want China to overtake the US bloodlessly. The path towards that will inevitably involve de-pegging from the US dollar, floating the Yuan and liquidating $750 billion worth of US dollar reserves. The Yuan will strengthen on the back of these moves, automatically eating up a larger chunk of global trade and attaining reserve currency status in the process. This is the likely future path to be tread by the Politburo, at a time of its choosing. The Politburo will be careful however, in how such moves are implemented. A sudden shock like the Plaza Accord to the Chinese economy as it did to the Japanese economy, would most definitely not be welcome.
Conclusion
The outgoing American-dominated system has had a good ride for the most part since the end of WW2. The US-dollar system is still the dominant financial architecture of the globe today and its currency still accounts for over 50% of global foreign exchange reserves and export invoicing, with almost 90% of foreign exchange transactions still denominated in dollars. While there have been benefits to the globe at large arising from this system, they have disproportionately favored the West over the ‘Rest’. Additionally, the system has overseen colossal wealth transfers occurring from the ‘Rest’ to the West due to duress, coercion, blackmail and subversive confidence trickery. It was partially why the West became so wealthy, relying on its financial robber-baron system. A system with that kind of foundation is totally unacceptable and unsustainable to an increasingly multipolar world. For one currency to dominate transactions and for one country to print its currency and invoice all its purchases with the rest of the world with zero exchange rate risk, is by definition grossly unfair in the eyes of everybody else. The US system is not a fair or just system for the vast majority of the globe. What the world needs is alternative settlement systems and reserve currencies. To that end, the US dollar will be joined by a constellation of other fiat currencies, digital currencies and perhaps even commodity-backed synthetic currencies. China’s economy is the world’s largest by PPP yet its currency accounts for less than 5% of global trade. Russia is the world’s largest natural resource exporter, yet its currency does not even register tangibly for global trade flows. Sanctions are tools that the Western plutocracy wages war by other means against non-compliant state and non-state actors. While there may be some successful applications of sanctions, their designs are rooted in bad faith and entitlement complexes. The bewildering and dizzying efforts required to sustain them does not justify the end, when the very simple work-around is to fall back on common sense and the spirit of good faith. The wanton abuse of sanctions has contributed to the poisoning of not only free market principles, but of international relations and the spirit of free association. As such, the West’s position in the world has been irrevocably undermined in spirit, intellect and morality. The spectacle of Western foreign policy establishments beleaguered with psychologically unsound policy-makers stuck in ideological cul de sacs, unable to fathom that as problematic, is a wretched thing to witness in a world yearning for justice. With time, if such policy positions do not change, the West will only fall behind the rest of the world, stuck in a phantom world of a bygone era, while the rest of the world moves on with superior pragmatism, forging ahead with unrelenting cooperation. As of 2024, BRICS+ has overtaken the G7 in terms of GDP power. Gold holdings have shifted West to East, in a prescient sign of change. BRICS+ constitutes almost 40% of global GDP and is only set to rise as demographics and resource abundance inevitably pits Eurasia at the center of global trade and power once again. BRICS+ includes the world’s largest commodities and energy exporters, population centers and enduring civilizational states, forging increasingly deeper economic links with each other, aimed at insuring against Western sanctions and coercion. The era of European-American private banking cartels printing their way to prosperity is coming to an end. Debts are dangerously onerous and the number of countries that are gullible to plunder by the West are decreasing in an age of instant information. Commodities and energy cannot be printed. They are the ultimate ‘hard stop’ and reality check against rampant speculation and financialization. The G7 dogs will continue to bark, while the BRICS+ caravan rolls on. Today, China remains the world’s biggest economy, while Russia remains the only country in the world that can obliterate the US to ashes. It is best that the US tread carefully – and differently, in the new era.