Category: Daily Escape

Will Sanctions Hurt the Dollar’s Role in Trade?

The Daily Escape:

Cherry Blossoms, Univ of Washington, Seattle, WA – March 2022 photo by Erwin Buske Photography

One of the most important elements in the undeclared war between the West and Russia is how sanctions are changing both international trade and the international payments system.

The West has basically frozen Russia out of both. First, by taking Russia out of the SWIFT payments messaging system, and second, by sanctioning Russian banks and the Russian Central Bank. Third, by seizing Russia’s currency reserves that were held in the West.

All of this means that Russia can’t easily accept dollar/euro payments for exports and then convert them into rubles for use at home. By losing access to the international currency markets, it’s become impossible for Russian businesses exporting their energy, goods, or commodities to get paid. This may be a historic moment in economic history.

By freezing hundreds of billions of dollars of Russian reserves, the Russians no longer can access those dollars or euros. Sanctions mean that even the dollars and euros they could create through trade cannot buy much in the countries that support the sanctions.

Naturally Russia is looking for work-arounds for this dilemma. Selling the West anything in dollars or euros no longer makes sense: They can’t use them at home without exchanging them for rubles. And sanctions make that very difficult, since they’re closed out of our banking system.

There are two ways around this. Either use Russian banks that are not banned from SWIFT or go through an informal third-country currency exchange. Russia’s first effort is to only accept payment in rubles for its exports to “hostile nations”. That is, those nations who have imposed sanctions because of Ukraine.

In order to buy Russian oil and gas which they desperately need, Europeans will have to pay in rubles. That means either selling dollars/euros for rubles or selling them for yuan (China) or rupees (India), two countries that are not part of the sanctions regime.

The West’s move has the potential to upend the world’s trading system which today relies on payments in dollars. The dollar has been the world’s principal reserve currency since the end of World War II and is the most widely used currency for settling international trade. The dollar represents about 62% of global trade, down from much higher levels before the euro was established. The other important currencies are the euro at 20.1% and the Japanese yen at 5.7%. China’s yuan is at just 2.0% of trade settlements.

It is increasingly likely that Russia’s move will result in a further “de-dollarization” of trade. Recently, there have been new attempts to abandon the dollar. Saudi Arabia and China are planning to use the yuan in a new oil deal. Russia and India are negotiating to pay for trade in rupees.

China’s energy trade with Russia uses the dollar. Chinese energy imports from Russia soared 47.4%, an increase of more than $52.9 billion from 2021. This accounts for more than 65% of China’s total imports from Russia. Since the sanctions, both countries have stated their intention to move more of this trade to yuan.

A new multilateral financial system is emerging before our eyes. Who the participants will be, and what rules they will follow, are up in the air. The dollar will remain primary between the US and its allies, but alongside it, there could develop Russia-yuan, Saudi-yuan and India-yuan arrangements for trade in oil, minerals, and industrial products. Shifting just part of the global oil trade into the yuan is potentially huge. Oil is the world’s most traded commodity, with an annual trade value of around $14 trillion, roughly equivalent to China’s GDP last year.

We’re likely to see more trade occurring in more currencies, probably on a number of exchanges. We will see the world realign into different trading and monetary blocs, like there were in the past.

However the Ukraine war is settled, the Russian claims that the US has shot itself in the foot about the dollar’s dominating role in trade has a ring of truth. In the past, the US took Iran’s reserves after the Shah was overthrown. We froze Afghanistan’s foreign reserves earlier this year and now the West has done the same to Russia. A few years ago, the UK froze Venezuela’s gold in the Bank of England.

These systems are built on trust, and for the next few decades, trust may be lacking. So we’re looking at the possibility that there will be two quite different geo-political philosophies operating as trading partners as the non-US world develops its alternatives to the dollar as the world’s dominant trading currency.

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Monday Wake Up Call – March 28, 2022

The Daily Escape:

Soaptree Yucca at sunset, White Sands, NP – March 2022 photo by SkyVista Photography by Steve Luther

Biden ended his four days in Europe with a speech. It was designed as a call to democratic countries to stay unified even as Putin’s forces trash Ukraine. But with nine ad-libbed words at the end of a 27-minute speech, Biden created a furor by calling for Russia’s President Vladimir Putin to be pushed out of office. Biden said:

“For God’s sake, this man cannot remain in power,”

That last line was a logical conclusion to Biden’s argument in the speech about the struggle between democracy and autocracy. But it prompted many pundits to treat what Biden said as a gaffe, since it changed his long-standing insistence that the US is not engaging in regime change but is supporting Ukraine’s right to exist.

From Charlie Sykes:

“The moment was electrifying — a sort of “Mr. Gorbachev, tear down this wall” moment — until the White House hastily walked it back, insisting that what the president really meant to say was that the butcher of Ukraine should not be allowed to exercise power over his neighbors.“

Sykes says: “Biden had it right the first time.” David Rothkopf hit the nail on the head with his reaction:

“There is within Biden’s comment a kernel of truth….Vladimir Putin can’t lay waste to a country, kill tens of thousands of civilians, commit serial war crimes, and expect to be welcomed back into the community of nations. If Russia wants to be part of the community of nations, then they are going to have to produce change.”

Support for Biden’s idea also came from former Russian Chess champion Gary Kasparov, who said what the world is thinking:

This is precisely correct. Many pundits are critical of Biden for saying something provocative. But there shouldn’t be a resumption of the status quo ante, even once there’s an agreement between Russia and Ukraine. By attacking Ukraine, Russia has become a pariah state. It will remain so as long as it threatens its neighbors and as long as Putin is in power.

There can be no lifting of sanctions or concessions of territory (unless Ukraine insists on conceding it), and no reward or face-saving after the fact for Putin’s War.

Biden’s goal isn’t to negotiate an end to the war. If Ukraine wants to make concessions to Putin which allow him to keep huge chunks of their country, pay no price for the damage he’s done, do nothing to rebuild Ukraine’s flattened cities, and wait a minute until the sanctions are lifted, they can make that call themselves. Neither Biden nor our allies should press that kind of decision on them.

But let Wrongo be the first to say that Russia must be made to pay reparations for the destruction of infrastructure in Ukraine. And keeping sanctions in place until Russia pays up is the right thing to do. You don’t just get grounded for a week when you invade another country.

Russia must leave Ukraine and pay reparations. Russia must work to rejoin the community of nations. That means reestablishment of normal diplomatic and economic relationships. That won’t be possible with Putin in charge.

Russia’s military leadership certainly understands this. And they’re the ones who will have to remove Putin from power and negotiate the peace. So Biden’s frank talk makes transparent what was sub-rosa: The West is using Putin’s War as a way to weaken him to the point where he is ousted from power.

So, when pundits and foreign policy experts get upset with Biden, saying that he gave Putin less reason to negotiate, you have to ask what is there to negotiate? And who, other than Zelensky, should be negotiating with him?

Putin will leave office one way or another, and what Biden said didn’t change that.

It’s time for the pundits and foreign policy wonks to wake up! While it’s true that words matter and can sometimes express risky things that cannot be taken back, what Biden said was worth saying. Biden wasn’t talking to Putin; he was speaking to Russians with the power to remove Putin. And that’s the right strategy.

To help them wake up, listen to Sting reprise his song “Russians” originally from his 1985 debut album titled “The Dream of the Blue Turtles”. The tune was based on the Cold War. Here is his March 2022 version for guitar and cello:

Sting says:

”I’ve only rarely sung this song in the many years since it was written, because I never thought it would be relevant again. But, in the light of one man’s bloody and woefully misguided decision to invade a peaceful, unthreatening neighbor, the song is, once again, a plea for our common humanity.”

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Saturday Soother – March 26, 2022

The Daily Escape:

Crocus in bloom, Holliston, MA – March 2022 photo by Karen Randall

Let’s take a look at three stories that didn’t get their due this week. First, from the LA Times, about gang infiltration of the LA County Sherriff’s department:

“The top watchdog for the Los Angeles County Sheriff’s Department has identified more than 40 alleged members of gang-like groups of deputies that operate out of two sheriff’s stations…..Inspector General Max Huntsman said his office has compiled a partial list that includes 11 deputies who allegedly belong to the Banditos, which operate out of the East L.A. sheriff’s station, and 30 alleged Executioners from the Compton sheriff’s station.”

Huntsman told the LA Times that about a third of the 41 deputies on his list had admitted that they had gang tattoos or belonged to the groups. Allegations aren’t proof but apparently, there is a long history of allegations like this one surrounding the LA Sherriff’s department.

Also consider this article in the WaPo about police wrongdoing:

“The Post documented nearly 40,000 payments involving allegations of police misconduct in 25 departments, totaling over $3 billion. Departments usually deny wrongdoing when resolving claims.”

They found that more than 1,200 officers in the departments surveyed had caused problems resulting in at least five payments each by their municipalities. More than 200 had 10 or more payments for actions that resulted in lawsuits. New York City leads the way with more than 5,000 officers named in two or more claims, accounting for 45% of the money the city spent on misconduct cases. There are 36,000 officers in the NYPD. That’s 13.8%.

Settlements rarely involve an admission of guilt or a finding of wrongdoing. City officials and attorneys representing police departments say settling claims is often more cost-efficient than fighting them in court. Since there’s no formal list of bad actors, there’s little reason to hold these officers accountable.

Law enforcement throughout America gives itself a black eye whenever stories like these are written.

Second, the NYT reported that several of the Republican Senators who suggested that Judge Ketanji Brown Jackson had given uncommonly lenient sentences to felons convicted of child sex abuse crimes had all previously voted to confirm judges who had given out similar prison terms below prosecutor recommendations, the very problem they had with Judge Jackson:

“But Mr. Hawley, Mr. Graham, Mr. Cotton and Mr. Cruz all voted to confirm judges nominated by President Donald J. Trump to appeals courts even though those nominees had given out sentences lighter than prosecutor recommendations in cases involving images of child sex abuse.”

You can read the article for the examples.

Hypocrisy is fuel for politicians, so maybe we shouldn’t be surprised. We know that Sen. Graham had voted only a year ago to confirm Judge Jackson, despite the sentencing decisions she had made as a district judge, the same ones that he now objects to.

Third, Bloomberg reported that private equity money is again pouring into residential real estate markets. They cite Phoenix, AZ as a prime example: (brackets by Wrongo)

“The median home [in Phoenix] was worth about $285,000 at the beginning of the pandemic; it was valued at $435,000 two years later.”

That’s a 53% increase. This is also true in NJ, where Wrongo’s son just got an all-cash offer from an investment group for his home, sight unseen, at 11% higher than the closest offer from a retail home buyer who needed a mortgage.

This is turning first-time home buyers into long-term renters, with real-world consequences.

Home equity represents a huge portion of individual wealth in the US, especially for moderate-income families that have few other opportunities to use borrowed money to purchase assets that can increase in value over time. Price appreciation lets owners accrue wealth which can be tapped later on when they have a large or unexpected expense.

Wall Street’s spin is that there just aren’t enough rentals for families who want to live in good neighborhoods but can’t afford a down payment. So they’re providing a necessary economic service. You be the judge.

Enough of this drama! It’s time to find a way to let go of the tragedy in Ukraine and the clown show surrounding Judge Jackson for a bit. It’s time for our Saturday Soother.

Here on the fields of Wrong, it’s time to take down the deer fencing and put up the bluebird nest boxes. We also need to watch what we can of college basketball’s March Madness.

To help you get ready for the weekend, grab a chair by a large window and listen to Mozart’s “Turkish March” played here on bamboo instruments. It was performed in 2015 by Dong Quang Vinh on a bamboo flute along with the Bamboo Ensemble Suc Song Moi, in Haiphong, Vietnam:

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Which States Have the Highest Homicide Rates?

The Daily Escape:

Moonrise over Salt Run, St. Augustine FL – March 2022 photo by Bob Willis

Republicans can’t stop talking about how the murder rate in America has grown. It’s true that the homicide rates are up, although they remain well below their historic highs of the 1990s. There were more than 21,500 murders in 2020, the latest year for which we have data. The national murder rate in 2020 was about 6.5 per 100,000 people, about 40% below what it was in the 1990s.

With the Supreme Court nomination of Judge Ketanji Brown Jackson, the trope about a liberal soft-on-crime plot against America returned. Senate Minority Leader Mitch McConnell said:

“We are in the middle of a violent crime wave including soaring rates of homicides and carjackings….Amid all this, the soft-on-crime brigade is squarely in Judge Jackson’s corner.”

Would you be surprised to learn that McConnell’s home state of Kentucky has the third-highest homicide rate per capita in the US? In fact, eight of the 10 states with the highest homicide rates in 2020 voted that year for Trump. The truth is that Red states (those run by Republicans) have a bigger problem with murder than do the Blue states; their murder rate is higher.

Jonathan Capehart says in the WaPo: (emphasis by Wrongo)

“This startling data is revealed in a new report from centrist think tank Third Way. Mississippi leads the way with a 2020 homicide rate of 20.5 per 100,000 residents…the five states with the highest murder rates, all Trump-voting states, had rates at least 240% higher than New York’s murder rate and at least 150% higher than California’s.”

Here’s a chart from the WaPo:

The per capita homicide rates above are per 100,000 people. Remember that the national average is 6.5 per hundred thousand people. Beyond the top 10 states, the report looked at the 2020 murder rates in the 25 states that voted for Donald Trump and compared it with the murder rates in the 25 states that voted for Joe Biden.

The news was the same. The murder rate in Trump states (8.20/100k) was 40% higher than the 5.78/100k murder rate in Biden states. These facts really hurt the Republican narrative of “crime-is-out-of-control” in cities like Los Angeles, New York City, Chicago, Detroit, Philadelphia, Portland, Baltimore, and Minneapolis, all of which have a bad rap among our Red state friends.

When you dig into the report by city, Jacksonville FL, a city with a Republican mayor, had 128 more murders in 2020 than San Francisco, a city led by a Democrat. Despite having comparable populations, few would say that San Francisco is a safer city than Jacksonville.

The narrative by the Right (and supported by the media) about crime and murder is both convenient and wrong. Many on the Right attribute the homicide increase to Democratic policies, specifically about police reform. The fact is that murder rates are actually higher in Republican states that haven’t even flirted with ideas like defund the police.

The eight of the ten Red states in the top ten are not only Trump-voting states, but they have been bastions of GOP policy for the last 25 years. The true conclusion from the data is that Republicans do a far better job of blaming others for high murder rates than they actually do to reduce murder rates.

Sorry Mitch, the increase in murders is not a liberal cities problem. It’s a national problem.

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Dog Whistles in the Senate

The Daily Escape:

Poppy bloom, Lancaster, CA – March 22, 2022 photo by Matthew Mactaggart

There are many urgent issues that the Supreme Court is considering, but whether a children’s book should address racism isn’t one of them. At the Senate Judiciary Committee hearings on the qualifications of Judge Ketanji Brown Jackson for the Supreme Court, the curriculum at a private children’s day school in Georgetown was among the questions Republican Senators felt she needed to address.

This is more than simply a performative effort by a few Republicans to dog whistle to their supporters. It’s part of a decades-long effort by conservatives to control public education.

Bob Oakes of Boston’s WBUR had a report about how local Massachusetts school boards, like school boards across the country, have been facing angry questions about everything from Covid restrictions to the way schools teach about racism:

“WBUR found dozens of districts have faced criticism over how teachers discuss race and diversity in the classroom, as well as sex education.”

Oakes reported on the school committee at Dudley-Charlton, two small towns that share a school district and a high school. For years, local school committee meetings had focused on routine items such as staffing and trips by the marching band. More from WBUR:

“….that all changed last July when dozens of parents and residents packed a committee meeting to protest the school’s efforts to combat racism, including the hiring of a new diversity consultant.”

That led some residents to push unsuccessfully a recall of five school committee members over issues including Covid mask requirements and the hiring of the diversity consultant.

Jill Lepore has an article in the New Yorker about the history of efforts to control public education stretching back to the 1880s. She notes that for more than a century, from the teaching of evolution to anti-racism, parents have clashed over who gets to tell our origin story. She points out that community control began in the 1880s with the move to mandatory public education:

“Some families objected, citing “parental rights,” a legal novelty, but courts broadly upheld compulsory-education laws, deeming free public schooling to be essential to democratic citizenship.“

By 1916, nearly every state had mandated school attendance.

We have generally accepted that local and state school boards set curricula with the intention of having our students absorb a consensus-approved range of subjects which collectively tell a story about how we want our children to develop into adults.

This means teaching math and science, history and civics, the novels of Steinbeck and Toni Morrison in English class, along with the foundational myths we feel are important to the American story. All of this – the curriculum and the teaching – cohere to mold young citizens.

As Lepore notes, some Americans keep their children out of public schools because they don’t believe in a community of interests. That isn’t what they say of course. They put their children in charter and private schools, because they prefer their “quality.” What they won’t admit is how their search for a “quality” education also implies a question: What kind of information and what kind of child will their private school keep away from their children?

From Lepore:

“A few parents around the country may not like their children learning that they belong to a much bigger family—whether it’s a human family or an American family—but the idea of public education is dedicated to the cultivation of that bigger sense of covenant, toleration, and obligation. In the end, no matter what advocates of parents’ rights say, and however much political power they might gain, public schools don’t have a choice; they’ve got to teach, as American history, the history not only of the enslaved Africans who arrived in Virginia in 1619 and the English families who sailed to Plymouth on the Mayflower in 1620, but also….everyone. That’s why parents don’t have a right to choose the version of American history they like best, a story of only their own family’s origins. Instead, the state has an obligation to welcome children into that entire history, their entire inheritance.”

Parents trying to bully school boards into changing the curricula to suit their worldview is inherently wrong. The argument that “parents have the right to control what is taught in public schools because they’re our kids” is un-American. The Supreme Court found that to be true in 1943 in West Virginia State Board of Education v. Barnette, when the Court struck down a statute that required schoolchildren to recite the Pledge of Allegiance, saying it was a violation of the First Amendment.

The purpose of public school is to teach kids what society needs them to know. It’s the parents’ job to teach them what they WANT them to know.

Listen up Republicans: the “customer” of the public school system is the entire community, not individual parents or specific political parties. Those parents aren’t harmed, and they haven’t lost any “freedom” when curricula are set by school boards.

They still have the right to send little Jason and Janey to the private school of their choice at their own expense.

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Saturday Soother – March 19, 2022

The Daily Escape:

Cherry blossoms, Tanque Verde Ridge, AZ – February 2022 photo by Bel Meader

Wrongo and Ms. Right started our return trip from Florida yesterday. We said goodbye to being able to sit on the patio with our coffee at 8 am and to walk without wearing a jacket. Two observations from our visit: First, it’s clear that all older people there are members of a “club”. On our morning walks, everyone said hello, something that doesn’t routinely happen in the north. Second, virtually everyone is maskless in public spaces.

That’s largely due to the public health policies of Florida’s governor and legislature. This time around, it didn’t work out badly for them. But we all should be at least somewhat concerned about what’s visible on the Covid horizon.

We’re talking about the arrival of the Coronavirus BA.2 subvariant. The Omicron we know is BA.1. CNN reports that the BA.2 variant is 80% more transmissible than trusty old Omicron, and about as serious an illness. They also say that BA.2 has been growing steadily in the US. The CDC estimates it is causing about 12% of new Covid-19 cases in America.

Hong Kong is in the throes of a severe wave caused by BA.2. It currently has the highest Covid-19 death rate in the world. The WaPo reports this from China:

“China’s worst coronavirus outbreak in two years has reached almost all parts of the country, stretching medical resources, shuttering businesses, and manufacturing outfits, and raising questions about the government’s staunch commitment to its “zero covid” policy.”

Meanwhile, BA.2 now accounts for more than 50% of cases in the UK and in several European countries.

Here’s an interesting chart from Charles Gaba, showing the point at which Covid deaths in Red states overtook Covid deaths in Blue states:

They crossed when Biden was inaugurated. The graph includes all variants of Covid. It shows the cumulative Covid death rates in the reddest and bluest tenths of the US at the county level. The total population of the 50 US states, plus DC, is right around 331.4 million people. That puts each tenth of the population at around 33.1 million each.

The date may be a coincidence, but the data aren’t. You know why this happened.

We look like we’re about to have another surge. That’s depressing since we are barely past the Omicron surge. If the data coming in from places where Omicron BA.2 is surging hold up, it means that our vaccinations should mitigate the worst of it.

But if you are over 60 or are unvaccinated, or unboosted, or have any medical vulnerabilities, you’d better wear your mask when out and about, even in Florida.

A whole lot of people won’t do you the favor of wearing one, so you should be extra careful.

Time for our Saturday Soother, where we try to forget about what’s happening in Ukraine, or whether Jessie Smollett deserves to be out of jail on appeal. Let’s unplug and relax and think about how Spring is just around the corner. Of course that means yard work on the Fields of Wrong, but it also means enjoying weather like we were having in Florida.

To help you relax, grab a seat by a window and listen to Mozart’s Rondo from the Horn Concerto Number 4 KV 495. This is a trio arrangement played by Sarah Willis (horn), TamĂĄs Velenczei (trumpet) and Jesper Busk Sorensen (euphonium). It was performed live in a virtual concert in the Berlin Chamber Music Hall for the Pacific Music Festival 2021:

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Helplessness Isn’t Solved by Playing Nuclear Chicken

The Daily Escape:

Sunset, Lake Waramaug, Warren, CT – February 2022 photo by Dave King

We’re feeling helpless as we watch what’s happening in Ukraine, because America and NATO won’t step up and stop Putin from laying waste there. Last week, Biden declared:

“I want to be clear: We will defend every inch of NATO territory with the full might of a united and galvanized NATO….But we will not fight a war against Russia in Ukraine. A direct confrontation between NATO and Russia is World War III. And something we must strive to prevent.”

Biden has drawn a red line. Unfortunately, he’s signaling to Putin the things we won’t do. The catch is that Biden’s red line doesn’t cover several non-NATO European countries that Putin might be interested in taking over. It creates a couple of strategic problems.

First, it puts a target on non-NATO countries. NATO fought for Kosovo and Kuwait in similar circumstances. And what about Finland or Taiwan? Second, what should NATO do if Putin uses WMD in Ukraine? Biden’s statement is a failure of strategy. Every time the US says, “We will defend every inch of NATO territory,” Russia hears, “It’s OK to take the rest.” When Putin learns that NATO will do nothing directly to stop his invasion, it decreases his costs of war, and increases what he will demand in the “peace” negotiations.

Back to helplessness. When we feel helpless, our level of anxiety goes up. When our anxiety is high, we say “We have to do something.” It doesn’t take long for us to say, “This is something, so let’s do it.”

That has led Ukrainians and Americans to talk about a No Fly Zone (NFZ) over Ukraine. Robert B. Hubbell had a practical take on what an NFZ requires: (brackets by Wrongo)

”…the no-fly zone over Washington, DC after 9/11 required twelve fighter jets in the air continuously…. DC is 68 square miles, and Ukraine is 233,031 square miles….Ukraine’s [landmass] is 3,400 times larger than DC….it would require a massive commitment of fighter jets to enforce a no-fly zone.”

Hubbell points out that jets on patrol must refuel every two hours, requiring KC-135 tankers to refuel them in mid-air over Ukraine. Our KC-135 tankers would be easy targets. The KC-135s can only stay aloft for six hours, requiring a constant rotation of multiple refueling tankers to keep our combat jets in the air.

We would have to establish air traffic control for our hundreds of aircraft over Ukraine. That would require AWACS aircraft to manage the airspace and detect oncoming threats from Russian jet fighters. Our AWACS would also be targeted by Russia’s advanced S-400 air defense systems that can see deep into Ukraine.

To maintain a no-fly zone in Ukraine, the first action necessary to protect US jets would be to attack S-400 missile systems on Russian territory — an act of war.

The threat of using nuclear weapons is palpable. We know that Putin has thousands of tactical nuclear weapons, while NATO has less than 100 in Europe. Putin declared two years ago that Russia reserved the right to use tactical nuclear weapons in response to conventional attacks. Nuclear weapons are real and deadly threats. We’re in a tight spot with Putin and he seems more willing to use the threat of nuclear weapons than is NATO.

Shay Khatiri offers a different view:

“It would be wrong to assume that, if the US military enters the conflict in Ukraine in some capacity, nuclear war would inevitably follow. First, it wouldn’t be the first time that Americans and Russians have killed each other. The Soviets reflagged their aircraft during the Korean and the Vietnam Wars and directly engaged with their American enemy. They also launched missiles at American aircraft during the war. The United States, on the other hand, has killed Russian mercenaries as recently as 2018 with no ramifications.”

There have been just two conflicts between two nuclear-armed states, (between China and Russia in 1969 and India and Pakistan in 1999). Both were border disputes rather than major wars, partly because the parties were wary of a nuclear escalation.

Nobody knows for sure how Russia and the US would react if they fought in earnest.

Direct military confrontation doesn’t always mean war, much less World War III. Remember that Turkey shot down a Russian warplane on the border with Syria in 2015, without setting off a global conflagration.

Is there a point when NATO will show Putin that it’s not afraid to act? Don’t count on that.

The pressure to act in the coming days will become enormous. The images of Ukrainian suffering already stirs the public, and the images will get worse. The calls for Biden to act will grow louder. American and NATO support to Ukraine has helped the country to resist so far. But Washington and its allies must be honest about the limits of that support and whether we have the willingness to step up to support Ukraine’s needs.

How will Biden handle the great dilemma presented by our feeling of helplessness in Ukraine? Will he play annihilation chicken with Putin?

Watch Fiona Apple’s cover of the Lennon/McCartney song “Across the Universe”. See if it provides you with any insight into Biden’s dilemma:

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China’s Reaction to Putin’s War

The Daily Escape:

Snow on the Fields of Wrong, March 10, 2022                 Sand on the beaches of Florida, March 2022

(This is the last column for the week. New content next week will be light and variable as Wrongo and Ms. Right make our annual pilgrimage to Florida to visit Wrongo’s sisters.)

Subsequent to the meeting between Putin and Xi Jinping in Beijing at the start of the Winter Olympics, the Chinese government’s statements and actions about Putin’s War in Ukraine have been a kind of doublespeak.

With its public statements, China’s been supportive. The foreign minister has referred to Russia as its “most important strategic partner.” China hasn’t endorsed Russian sanctions and its state media seems to repeat a lot of Russian disinformation about Ukraine.

On the actions side, the Chinese government has called for an end to violence and has promised to send humanitarian aid to Ukraine.

One thing that hasn’t been public is Chinese financial institution’s hesitancy about new deals with Russia. Chief Investment Officer magazine (CIO) quotes Yuan Jiang, a Chinese PhD candidate at Queensland University who specializes in Russia-China relations:

“Currently, the risk is simply too huge…”

Jiang said that traditionally, only state-funded institutions or large corporations would transact or directly invest in Russia, but even these institutions were wary of Russia:

“Russian markets are full of political corruption and other dangers…”

China’s financial sector has been leery of being caught up in the Western sanctions. Two major Chinese state-owned banks are now restricted from financing Russian commodities, according to Bloomberg. Reuters reports that the Bank of China in Singapore stopped financing Russian oil trades.

CIO also reports that some banks with partial Chinese state ownership have also been backing out of Russian deals. The Asian Infrastructure Investment Bank, which has many Asian governments as shareholders, suspended its business in both Russia and Belarus after the invasion. Similarly, the Shanghai-based New Development Bank, which has China as one of its founding members, also has terminated its business with Russia.

Now Russia is barred from participating in SWIFT, the global financial messaging system. In the past, China’s large banks have complied with American sanctions against Iran and North Korea because of the importance of clearing via SWIFT. The Chinese distancing from Russian transactions makes it clear that Beijing intends to continue complying with this Western sanction.

The Russians are looking to China as a lifeline in the midst of the sanctions. And the Chinese government is providing some help. China’s UnionPay card service will serve as an alternative for credit and debit card holders now that MasterCard and Visa have ended the ability of Russian citizens to use their cards abroad. UnionPay is accepted in 180 countries.

But China is shying away from a full rescue. Former US Treasury official Peter Piatetsky said in an interview with RadioFreeEurope:

“China can essentially do one thing here, which is to buy more Russian goods, but they don’t seem to be willing to do that….Russia doesn’t have that many different goods that China is willing to buy….The relationship between Russia and China is very transactional….They both dislike the US and dislike the US-led world order, but aside from that, I don’t think there’s much there.”

China could buy up Russia’s oil that’s no longer going to Europe if it wanted, but it doesn’t appear to be doing so, at least not yet. According to Jiang, ultimately the US has much more to offer China economically:

“Investing in the West is much simpler and more secure. No more unnecessary economic risk, not many political factors, and more transparent…”

And importantly, the US is China’s largest trading partner. The US buys 16.75% of all Chinese exports, creating a relationship that the Chinese government can’t afford to lose. Although ideological differences might dominate headlines, the US-China relationship is strategic for both.

It’s likely China will continue to keep Russia close and expand the relationship should relations with the West shift. And since the stated US strategy is to use Ukraine to destabilize Putin’s hold on power, China worries that it’s next.

Jiang says that Beijing is particularly afraid of “color revolutions,” a phenomenon in which popular uprisings result in regime change:

“Moscow and Beijing share almost indistinguishable views on the potential domestic and international security threats posed by color revolutions, and both nations view these revolutionary movements as being orchestrated by the US and its Western democratic partners to advance geopolitical ambitions.”

Despite the havoc that Western sanctions have brought on the financial system, China’s strong economic relationship with the West will help it keep Russia at arm’s length. If anything, the Ukraine war has shown just how much China relies on the West for its economic prosperity.

China and the US are particularly intertwined financially, and despite ideological differences, China will continue to prioritize its economic relationship with the US.

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Russia’s Repeating its Syrian Strategy in Ukraine

The Daily Escape:

Quiet stream, rural NH – March 2022 photo by Betsy Zimmerli

There are lessons from history that inform what Putin is doing in Ukraine. First, Syria demonstrates how Putin intends to operate. Putin got Russia involved in Syria in 2015 and helped Bashar al-Assad take back control of most of the country.

One part of Syria that isn’t under control is Idlib Province. That’s because Russia’s Syrian strategy was intense aerial bombardment of cities, followed by the establishment of temporary “humanitarian corridors”. That pushed civilians and fighters eventually into Idlib.

During the Syrian civil war, the Russian and Syrian militaries systematically besieged opposition-held cities, towns, and districts. They rained destruction on the populations with airstrikes, artillery and rockets blasting residential districts, hospitals, and infrastructure.

Eventually, the Russians and Syrians offered humanitarian corridors, allowing civilians and fighters to leave, and be funneled into the northwest province of Idlib. Idlib remains today the last opposition-held part in Syria. Hundreds of thousands of people used the corridors to get out of the war zones. The largest and most notorious example was the evacuation of Aleppo City in 2016, ending four years of siege. These internally displaced Syrians now make up about two-thirds of the 3 million people living in Idlib province. It is still surrounded by Syrian forces and is still hit by Russian airstrikes.

It’s now clear that Putin will bomb Ukrainian cities much like the carpet bombing of Grozny in Chechnya, or Aleppo in Syria. What’s happening on the ground in Ukraine should sound familiar to anyone who watched Russia in Syria. Here’s an up-to-date map of the military conditions in Ukraine from the UK Defence Intelligence Agency:

The map shows that despite many setbacks, Putin’s forces are close to (if they are not already) surrounding Kyiv. If you note the map legend showing “Assessed Encirclement” areas, those are places that the Russians have either captured, or are close to surrounding. They include most major Ukrainian cities.

In response, the Ukraine government in conjunction with the Russian military, have announced humanitarian corridors to allow civilians to leave cities where there is fighting between the Russian and Ukrainian armies.

In Syria, this strategy was effective. The Syrian government regained control by removing large opposition populations, many of whom remain unable to return to their home cities and towns.

This is Putin’s plan for Ukraine. Create a pocket within Ukraine that can be cut off from most resources, a rump state where most of the opposition is located. Damage or destroy most of its infrastructure. Leave it as a broken state unable to exist without outside humanitarian support. That rump state might be as small as a province, or as large as the majority of Ukraine west of the Dnieper river, as Wrongo has suggested.

A second lesson was learned by the Soviet Union’s military in Hungary. Russia’s military won’t repeat their Hungarian experience in Ukraine. In 1956, Hungarians attempted to overthrow their pro-Soviet leadership. In October 1956, the Soviets sent tanks into Budapest to crush the uprising. Many Hungarians, (called “freedom fighters” by the West), rose up against the Soviet invaders. From History.net: (emphasis by Wrongo)

“Incorrectly assuming that the sight of Soviet armor rumbling through the Hungarian capital would quickly cow Budapest’s restive population, Kremlin leadership sent in tanks without the support of infantrymen….Over the next several days, small teams of Hungarian freedom fighters throughout Budapest took on the Soviet tanks, sniping at…crewmen or destroying the vehicles with Molotov cocktails.”

The freedom fighters’ most effective tactic was the “decoy and ambush,” where a decoy team fired at a Soviet tank to attract the crew’s attention and then fled down a side street to lure the tanks into a predetermined “kill zone.” This hubris on the part of the Soviets was a mistake that wasn’t repeated in Grozny and will not be repeated in Ukraine. Hungary didn’t achieve its freedom until 1991 when the USSR collapsed.

But have the US and NATO learned any useful lessons? The West has two conflicting goals in Ukraine. First, imposing strategic defeat on Russia. And second, defending Ukraine’s sovereignty. If our only goal was protecting the sovereignty of Ukraine, then our available options might include putting boots on the ground or imposing a No Fly Zone. But we’re not willing to do either one.

Peter Pomerantsev, a Soviet-born British journalist said the West:

“is doing an AMAZING job…of responding to 2014. That’s when we needed sanctions and arming Ukrainians. We’re ‘winning’ the last war. Not sure we’ve quite caught up with this new one yet.”

The US has discussed an arms lend-lease program for Ukraine. Alexander Vindman asks where are the: (parenthesis by Wrongo)

“…medium- and long-range air defense systems, antitank weapons (beyond the Javelins that have already been provided), advanced extended-range antiarmor capabilities, coastal defense systems, high mobility artillery, and critically important UCAVs” (drones)?”

The West is dithering on the correct level of support for Ukraine. If the US and NATO provided lethal aid via lend-lease, there’s a risk that Russia will escalate. But there’s a better chance that they will not.

It would be a gamble for Putin to escalate, and it’s a gamble for Biden to provide the weapons. Our reaction so far says that the US has lost its nerve without saying the US has lost its nerve.

Sorry Ukraine, we can’t follow your example.

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Russian Sanctions: Who Blinks First?

The Daily Escape:

Secret Canyon, Moab, UT – February 2022 photo by Klaus Priebe Photographer

Collateral damage from the US and European sanctions is growing. One question is whether the West will blink before Russia.

First, a few words about Putin’s strategy. It doesn’t seem that Putin was intent on “recreating the Russian Empire” as many pundits said. Instead, he’s going to partition Ukraine, with Russia controlling Ukraine east of the Dnieper River. That includes much of Ukraine’s industrial base. The southern part of Ukraine contains 13 seaports. In 2021, they exported over 150 million tons of cargo, representing 60% of exports and 50% of imports for Ukraine. Russia has already ended Ukraine’s access to the Black Sea.

When hostilities end, Ukraine will be a land-locked country.

The Russian army will ensure that what is left of Ukraine west of the Dnieper is a broken, third-world country. The indiscriminate missile, artillery and bombing in Ukraine’s west shows that is their intent. Whatever remains of western Ukraine will be the buffer state that Putin wanted prior to the start of his war. In the end, NATO will be forced to agree to a buffer state that is smaller and much weaker than the one NATO originally refused to agree to.

The US strategy for Ukraine had several elements. First, to make the cost of Putin’s War so harsh that he wouldn’t proceed, or after proceeding, would cause him to look for an early way to end hostilities before both were badly damaged: Ukraine by Russian weapons, and Russia by Western sanctions.

Another strategy was to get Germany to reduce its dependence on Russian gas. That has begun. Last week Germany unveiled plans for a terminal to import liquefied natural gas (LNG). Germany currently has no LNG import terminals.

It shouldn’t be a surprise then to learn that the US is the prime producer and exporter of LNG, ahead of Qatar and Russia. But LNG delivered to Europe is 50% more expensive than the gas delivered by pipeline from Russia. It’s true that there’s plenty of European LNG capacity besides Germany’s new planned facility. From the National Law Review: (emphasis by Wrongo)

“The current large-scale LNG receiving countries in Europe are Belgium (one terminal), France (four terminals), Greece (one terminal), Italy (three terminals), Lithuania (one terminal), Malta (one terminal), the Netherlands (one terminal), Poland (one terminal), Portugal (one terminal), Spain (six operational), Turkey (four terminals) and the UK (three terminals). Collectively, their overall LNG capacity is 237 billion cubic meters (of gas)…which is sufficient to cover approximately 40% of Europe’s gas demand.”

It’s possible to reduce German reliance on Russian gas imports, but they can’t easily achieve total independence. Substantially higher gas prices would definitely hurt the competitiveness of German industry, and slow global economic growth. It could become German economic suicide.

A third US strategy was that Putin’s rush into Ukraine would lead to a stalemate on the ground, and that sanctions would lead to a change of government in Russia. Then the new government might turn more towards the West.

The calculation was that Russia can’t win a major (non-nuclear) war without the economic support of the West through purchases of gas, and exports of technology. We’ve discussed natural gas. Protocol’s report on Russia’s dependence on foreign chips found that European and US companies sell them a lot of microprocessors, while their memory chip imports come mostly from South Korea and the US. All are now embargoed.

It’s possible that in executing these strategies, we’re burning up the world’s economy at the same time. These strategies have helped push oil prices above $130 a barrel. Natural gas prices have shot up to over $3,900 per 1,000 cubic meters for the first time in history. This will destabilize more than a few EU countries. As we wrote, the Ukraine war has slashed wheat exports, which will lead to high food prices and shortages in countries that rely on wheat from Russia and Ukraine.

We must be careful that we aren’t sanctioning ourselves. We already have a blowback effect on the sanctions inflicted on Russia. We may see double-digit inflation globally before the end of the year.

It’s possible that every dollar of Republican and Democratic campaign spending for the November mid-terms will be spent on stickers for gas pumps: The Republican sticker will feature Biden saying “I did this” while pointing at the price on the gas pump.

The Democrats’ sticker will feature Putin pointing at the gas prices and saying, “I did this”.

Then campaign workers will spend all of their time pasting one over the other’s sticker.

Pick your poison.

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