Obama Admin Recklessly Escalates Confrontation/Russia

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The Obama Administration Recklessly Escalates Confrontation With Russia
By quadrupling military spending on NATO’s forces on Russia’s border, Washington risks turning the new Cold War into a hot one.
By Stephen F. CohenTODAY 5:00 AM

NATO exercise
US Army soldiers deployed in Estonia take part in Operation Atlantic Resolve, aimed at demonstrating commitment to NATO allies. (Reuters / Ints Kalnins)

The Obama administration has just recklessly escalated its military confrontation with Russia. The Pentagon’s announcement that it will more than quadruple military spending on the US-NATO forces in countries on or near Russia’s borders pushes the new Cold War toward actual war—possibly even a nuclear one.

The move is unprecedented in modern times. With the exception of Nazi Germany’s invasion of the Soviet Union, Western military power has never been positioned so close to Russia. The Obama administration’s decision is Russian roulette Washington-style, making the new Cold War even more dangerous than the preceding one. Russia will certainly react, probably by moving more of its own heavy weapons, including advanced missiles, to its Western borders, possibly along with a number of tactical nuclear weapons. Indeed, a new and more dangerous US-Russian nuclear arms race has been under way for several years, which the Obama administration’s latest decision can only intensify.

The decision will also have other woeful consequences. It will undermine ongoing negotiations between Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov on the Ukrainian and Syrian crises, and it will further divide Europe itself, which is far from united on Washington’s increasingly hawkish approach to Moscow.

Astonishingly, these potentially fateful developments have barely been reported in the US media, and there’s been no public discussion, not even by the current presidential candidates during their debates. Never before in modern times has such a dire international situation been so ignored in an American presidential campaign. The reason may be that everything related to the new Cold War in US-Russian relations since the Ukrainian crisis erupted in November 2013 has been attributed solely to the “aggression” of Russian President Vladimir Putin or to “Putin’s Russia”—a highly questionable assertion, but long the media’s standard policy narrative.

Every presidential candidate and the other leaders of both parties, as well as the editors and writers in the mainstream media who profess to be covering the 2016 campaign, the state of our nation, and world affairs are professionally and morally obliged to bring these dire developments to the fore. Otherwise, they will be harshly judged by history—if anyone is still around to write it.

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FEBRUARY 8, 2016
Privatization: the Atlanticist Tactic to Attack Russia
by PAUL CRAIG ROBERTS – MICHAEL HUDSON

Two years ago, Russian officials discussed plans to privatize a group of national enterprises headed by the oil producer Rosneft, the VTB Bank, Aeroflot, and Russian Railways. The stated objective was to streamline management of these companies, and also to induce oligarchs to begin bringing their two decades of capital flight back to invest in the Russia economy. Foreign participation was sought in cases where Western technology transfer and management techniques would be likely to help the economy.

However, the Russian economic outlook deteriorated as the United States pushed Western governments to impose economic sanctions against Russia and oil prices declined. This has made the Russian economy less attractive to foreign investors. So sale of these companies will bring much lower prices today than would have been likely in 2014.

Meanwhile, the combination of a rising domestic budget deficit and balance-of-payments deficit has given Russian advocates of privatization an argument to press ahead with the sell-offs. The flaw in their logic is their neoliberal assumption that Russia cannot simply monetize its deficit, but needs to survive by selling off more major assets. We warn against Russia being so gullible as to accept this dangerous neoliberal argument. Privatization will not help re-industrialize Russia’s economy, but will aggravate its turn into a rentier economy from which profits are extracted for the benefit of foreign owners.

To be sure, President Putin set a number of conditions on February 1 to prevent new privatizations from being like the Yeltsin era’s disastrous selloffs. This time the assets would not be sold at knockdown prices, but would have to reflect prospective real value. The firms being sold off would remain under Russian jurisdiction, not operated by offshore owners. Foreigners were invited to participate, but the companies would remain subject to Russian laws and regulations, including restrictions to keep their capital within Russia.

Also, the firms to be privatized cannot be bought with domestic state bank credit. The aim is to draw “hard cash” into the buyouts – ideally from the foreign currency holdings by oligarchs in London and elsewhere.

Putin wisely ruled out selling Russia’s largest bank, Sperbank, which holds much of the nation’s retail savings accounts. Banking evidently is to remain largely a public utility, which it should because the ability to create credit as money is a natural monopoly and inherently public in character.

Despite these protections that President Putin added, there are serious reasons not to go ahead with the newly-announced privatizations. These reasons go beyond the fact that they would be sold under conditions of economic recession as a result of the Western economic sanctions and falling oil prices.

The excuse being cited by Russian officials for selling these companies at the present time is to finance the domestic budget deficit. This excuse shows that Russia has still not recovered from the disastrous Western Atlanticist myth that Russia must depend on foreign banks and bondholders to create money, as if the Russian central bank cannot do this itself by monetizing the budget deficit.

Monetization of budget deficits is precisely what the United States government has done, and what Western central banks have been doing in the post World War II era. Debt monetization is common practice in the West. Governments can help revive the economy by printing money instead of indebting the country to private creditors which drains the public sector of funds via interest payments to private creditors.

There is no valid reason to raise money from private banks to provide the government with money when a central bank can create the same money without having to pay interest on loans. However, Russian economists have been inculcated with the Western belief that only commercial banks should create money and that governments should sell interest-bearing bonds in order to raise funds. The incorrect belief that only private banks should create money by making loans is leading the Russian government down the same path that has led the eurozone into a dead end economy. By privatizing credit creation, Europe has shifted economic planning from democratically elected governments to the banking sector.

There is no need for Russia to accept this pro-rentier economic philosophy that bleeds a country of public revenues. Neoliberals are promoting it not to help Russia, but to bring Russia to its knees.

Essentially, those Russians allied with the West—“Atlanticist Integrationists”— who want Russia to sacrifice its sovereignty to integration with the Western empire are using neoliberal economics to entrap Putin and breach Russia’s control over its own economy that Putin reestablished after the Yeltsin years when Russia was looted by foreign interests.

Despite some success in reducing the power of the oligarchs who arose from the Yeltsin privatizations, the Russian government needs to retain national enterprises as a countervailing economic power. The reason governments operate railways and other basic infrastructure is to lower the cost of living and doing business. The aim of private owners, by contrast, is to raise the prices as high as they can. This is called “rent extraction.” Private owners put up tollbooths to raise the cost of infrastructure services that are being privatized. This is the opposite of what the classical economists meant by “free market.”

There is talk of a deal being made with the oligarchs. The oligarchs will buy ownership in the Russian state companies with money they have stashed abroad from previous privatizations, and get another “deal of the century” when Russia’s economy recovers by enough to enable more excessive gains to be made.

The problem is that the more economic power moves from government to private control, the less countervailing power the government has against private interests. From this standpoint, no privatizations should be permitted at this time.

Much less should foreigners be permitted to acquire ownership of Russian national assets. In order to collect a one-time payment of foreign currency, the Russian government will be turning over to foreigners future income streams that can, and will be, extracted from Russia and sent abroad. This “repatriation” of dividends would occur even if management and control remains geographically in Russia.

Selling public assets in exchange for a one-time payment is what the city of Chicago government did when it sold the 75 year revenue stream of its parking meters for a one-time payment. The Chicago government got money for one year by giving up 75 years of revenues. By sacrificing public revenues, the Chicago government saved real estate and private wealth from being taxed and also allowed Wall Street investment banks to make a fortune.

It also created a public outcry against the giveaway. The new buyers sharply raised street parking fees, and sued Chicago’s government for damages when the city closed the street for public parades or holidays, thereby “interfering” with the rentiers’ parking-meter business. Instead of helping Chicago, it helped push the city toward bankruptcy. No wonder Atlanticists would like to see Russia suffer the same fate.

Using privatization to cover a short-term budget problem creates a larger long-term problem. The profits of Russian companies would flow out of the country, reducing the ruble’s exchange rate. If the profits are paid in rubles, the rubles can be dumped in the foreign exchange market and exchanged for dollars. This will depress the ruble’s exchange rate and raise the dollar’s exchange value. In effect, allowing foreigners to acquire Russia’s national assets helps foreigners to speculate against the Russian ruble.

Of course, the new Russian owners of the privatized assets also could send their profits abroad. But at least the Russian government realizes that owners subject to Russian jurisdiction are more easily regulated than are owners who are able to control companies from abroad and keep their working capital in London or other foreign banking centers (all subject to U.S. diplomatic leverage and New Cold War sanctions).

At the root of the privatization discussion should be the question of what is money and why should it be created by private banks instead of central banks. The Russian government should finance its budget deficit by having the central bank create the necessary money, just as the US and UK do. It is not necessary for the Russian government to give away future revenue streams in perpetuity merely in order to cover one year’s deficit. That is a path to impoverishment and to loss of economic and political independence.

Globalization was invented as a tool of American Empire. Russia should be shielding itself from globalization, not opening itself to it. Privatization is the vehicle to undercut economic sovereignty and increase profits by raising prices.

Just as Western-financed NGOs operating in Russia are a fifth column operating against Russian national interests, so are Russia’s neoliberal economists, whether or not they realize it. Russia will not be safe from Western manipulation until its economy is closed to Western attempts to reshape Russia’s economy in the interest of Washington and not in the interest of Russia.

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The risk of an unintended war with Russia in Europe, explained in one map
Updated by Max Fisher on February 9, 2016, 11:00 a.m. ET

Russia's aggression in Europe — its invasion of Ukraine, its military flights up the noses of NATO states, its nuclear saber rattling — has faded from the news. But it's still very much a threat, which is why the US is planning to quadruple its military spending in Europe, something NATO's European members have welcomed, to deter Russia.

In other words, the dynamics that brought Cold War–style military tension to Europe in 2015 are still with us. And that tension can be dangerous.

This summer, I wrote about a small but alarmed community of analysts and experts in the US, Europe, and Russia who earnestly worried that the risk of an unintended war had grown unacceptably high. A survey of 100 policy experts yielded an aggregate assessment of 11 percent odds of war and 18 percent odds that such a war would include nuclear weapons. (A subsequent, larger survey backed this up.)

Since then, my informal check-ins with my sources have led me to believe that this concern has not dissipated. And, in late January, scholars with the Zurich-based Center for Security Studies produced a map, as part of a longer report that you can read here, that helps show why this is still a real issue:




Martin Zapfe and Benno Zogg, Center for Security Studies
The map shows military exercises held by Russia and by NATO in 2014 and 2015. Each circle represents an exercise, and the larger circles mean more troops participated.

Obviously, both Russia and European states have been holding military exercises since before tensions spiked last year. And that's exactly the point: Military volatility is baked into Eastern Europe, such that when tensions do spike it has the capability to make the continent suddenly much more precarious.

I want to call your attention to the Baltic Sea, the body of water tucked between Sweden and the NATO-allied Baltic states of Estonia, Latvia, and Lithuania. (Recall that all NATO members, including the US, have pledged to go to war to defend any other NATO member that is attacked.) That little region is the focus of all this.

The geography of the Baltics make it enormously insecure for both Russia and for NATO, and this is why nearly every expert I spoke to warned that it is a potential tinderbox, where some unforeseen accident, miscalculation, or provocation could, in an unlikely but real worst-case scenario, send both sides careening into a conflict that neither wants.

The Kaliningrad problem

Look at the little red spot sandwiched between Poland and Lithuania: That's a part of Russia called Kaliningrad, which Russia took over after World War II. Kaliningrad is heavily militarized, partly because Russia uses it as a base for projecting power and partly because Moscow's conspiratorial-minded leaders fear that Europe is bent on retaking Kaliningrad.

Russia worries that in the case of any conflict small or large, Europe and the US would exploit it as an excuse to seize and pacify Kaliningrad. (If that sounds crazy to you, it doesn't to Russian leaders, who after all just seized and annexed part of a foreign country, and who earnestly believe the US is bent on Russia's destruction.) So it has built up Kaliningrad's defenses.

But Kaliningrad is completely isolated from the rest of Russia; it's surrounded by NATO states. And after Ukraine, NATO began putting a lot more troops and tanks in those NATO states. This was meant to defend the Baltics from a possible Ukraine-style provocation, but it also ended up cutting off Kaliningrad even more. There's other stuff happening as well — for example, the Baltics are moving onto a separate power grid, which could make Kaliningrad more reliant on Europe to power itself.

Russia clearly feels it needs a plan to defend Kaliningrad in the case of a conflict. So it's done two things, which are likely meant as defensive but also have offensive capability — hence their destabilizing danger.

First, Russia has installed a kind of weapon that it's been very good lately at developing: area-denial weapons, such as anti-air missiles, that give Russia the ability to shut down an entire region and prevent NATO from moving in. These are indicated on the map with blue-line circles around Kaliningrad.

Second, Russia has conducted exercises near the Baltics that look at least potentially like they're designed to, if necessary, open a ground corridor from mainland Russia to Kaliningrad. This includes, for example, Russian military flights across or into Baltic airspace, which appear meant to test NATO response times.

The idea would be to prevent NATO from overrunning or isolating Kaliningrad by opening basically a giant military highway to it. But that would mean cutting through the Baltic states that separate them. In other words, it would mean invading them.

The Baltics problem

The dynamic here is that even if Russia's agenda here is purely a worst-case-scenario defensive plan to protect Kaliningrad, it also looks exactly like a plan to invade and seize the Baltic states. As NATO sees Russia building up around the Baltics, it is doing the same.

It's not that US and European leaders think Moscow is going to just up and occupy Latvia out of the blue. Rather, they are in the same situation as Russia is with Kaliningrad: The Baltic states are insecure in ways that require NATO to build them up, and this looks offensive to Russia.

The Baltic states are physically isolated from the rest of Europe. Baltic militaries are very weak compared with Russia's much larger force. And Baltic leaders are convinced, not without reason, that Moscow has designs to launch some sort of Ukraine-style hybrid quasi-war against them — not an all-out invasion, but some sort of potentially violent meddling.

This is why the US has been conducting military exercises in the Baltics and part of why it is quadrupling military investment in Europe: to build up the Baltics as a deterrent against Russia. But the effect of this buildup is to further isolate Kaliningrad, potentially increasing Moscow's paranoia and helping to motivate its own buildup, and so on.

The Eastern Europe security dilemma and the potential for war

These Baltics dynamics are, taken together, a classic example of what political scientists call a security dilemma, in which each side feels insecure and builds up to reach parity, which prompts the other side to do the same.

Because neither side can know the other's intentions for sure, defensive measures are seen as at least potentially offensive, and buildups lead to buildups, which can lead to war.

This is especially dangerous in Eastern Europe because both sides are developing not just stronger but faster military measures, such as air-launched cruise missiles, meant to fight and win any conflict as quickly as possible. This drastically reduces response time, meaning that in case of some provocation or accident that could be misread as something bigger, both sides could have only minutes to decide whether to escalate or deescalate.

The scenarios that could lead to war are discussed in greater depth here. But an accident or misstep is not impossible, given that Russian military jets are already flying in or near NATO airspace with some regularity.

And, yes, this is made all the more dangerous by the presence of nuclear weapons — particularly given Russia's development of small-scale "battlefield" or "tactical" nuclear weapons, and its nuclear doctrine that sets a lower bar for launching warheads than does America's.

To be clear, it is not remotely the case that war is likely. Russian and NATO leaders all want very badly to avoid war, and this is by far the most determinative factor in whether war happens. But this map helps to illustrate how this possibility, while remote, is not unthinkable, either. That, after all, is why the buildup is happening to begin with.

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BBC whips up anti-Russia hysteria to apocalyptic levels
Robert Bridge
Robert Bridge is an American writer and journalist based in Moscow, Russia. His articles have been featured in many publications, including Russia in Global Affairs, The Moscow Times, Russia Insider and Rethinking Russia. Bridge is the author of the book on corporate power, “Midnight in the American Empire”, which was released in 2013.
Published time: 7 Feb, 2016 18:09
Edited time: 7 Feb, 2016 18:11

Once again, Russia is being featured as Dr. Evil Incarnate, the villain that regularly plays opposite peace-loving NATO nations, in a BBC program that has Moscow initiating an invasion on Latvia followed up with a nuclear strike on Britain.
And just in time for the military-industrial shopping season.

Since the collapse of the Soviet Union, Russia has failed Western analysts and political pundits in spectacular fashion. Despite a full-court effort to portray Russia as a barbaric, land-grabbing nation obsessed with the idea of restoring imperial real estate, Russia has stubbornly refused to play along.

Why, even dangling the fat bait of Ukraine before Russia's nose could not get Moscow to react the way NATO had hoped it would.

In fact, while NATO has been hot on the warpath against a number of shell-shocked nations across the Middle East, Central Asia and North Africa, Russia has gone to war on just one (1) occasion, and that was against Georgia, and only after the egomaniacal leader of that tiny Caucasian country tempted fate by stupidly poking the Russian bear first.

Thus, the BBC has apparently found it necessary to contrive an altered state of reality, a veritable twilight zone, to convince its audience of Russia’s ‘real’ intentions: The result is a military contractor’s wet dream, an apocalyptic bunker buster, unsubtly entitled ‘World War Three: Inside the War Room,’ that depicts a sweat-inducing showdown between Russia and NATO and the beginning of WWIII.

It's probably safe to say I would not be playing plot spoiler by revealing here that Russia has been typecast as the aggressor.


To briefly summarize: After the Russian military rolls over little Latvia for no good strategic reason whatsoever, British military commanders and graying bureaucrats with furrowed brows huddle themselves in a bunker, deciding whether to launch Trident missiles at Russia in response.

The Daily Mail breathlessly described the tax-payer paid performance as “an utterly realistic 'war game'” which presents “deeply troubling questions, not least with the current political row over Government plans to spend £100 billion replacing our fleet of Trident submarines.”

Eureka! At the very same time UK military contractors are salivating over the prospect of winning billion-dollar contracts to replace the Queen’s collection of Trident nuclear-armed submarines, along comes a state-funded scaremongering film, starring arch-villain Russia to lend some credence to the initiative.

Russian lawmaker Frants Klintsevich told the Russian News Service radio station the film will give NATO an opportunity to remind member states that they should crack open their tattered purses and boost their military spending.

"They [West] have always demonized Russia trying to show that it is uncontrolled and non-European. As for what happens recently… we qualified this a long time ago as an information war, a very serious and a profound one," said Klintsevich, the first deputy chairman of Federation Council’s committee on defense and security.

"Today the US has a very serious problem of rearmament, the military and industrial sector needs to get financing. A mechanism of the corrupt American elite has been launched. This was in Iraq, is in Syria and around Europe," the senator said.

"Unfortunately, our colleagues from the BBC have lately resorted to making public products, of quite low-quality. Therefore, we haven't always been in a hurry to familiarize ourselves with them," Russian presidential press secretary Dmitry Peskov told reporters when asked whether the Kremlin has stayed up late to catch the film.

"It's simply not worth the time it takes to watch," Peskov said.

On the same day the BBC thriller was released, a report by the totally unbiased Rand Corporation – invoking sexed-up memories of Saddam Hussein’s alleged ability to strike the UK in 45 minutes - said that it would take just 60 hours for Russia to occupy Estonia and Latvia, and that's not taking into account Riga's rush-hour traffic.

"Across multiple games using a wide range of expert participants in and out of uniform playing both sides, the longest it has taken Russian forces to reach the outskirts of the Estonian and/or Latvian capitals of Tallinn and Riga, respectively, is 60 hours," Rand said in its report.


"Such a rapid defeat would leave NATO with a limited number of options, all bad."

It might be worth noting in closing that former RAND chief strategist, Herman Kahn, once forwarded the insane idea of a "winnable" nuclear exchange in his 1960 book ‘On Thermonuclear War.’

This led to Kahn being the inspiration for the title character of Stanley Kubrick's black comedy satire Dr. Strangelove.

As far as the BBC's latest anti-Russia production goes, well, it's just plain strange.