09.02.2022
The Empire Strikes Back
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Vlad Ivanenko

PhD in Economics, Ottawa, Canada.

In the famous lightsaber duel featured in the film “The Empire Strikes Back”, the two main characters, representing universal good and evil, clash in hand-to-hand combat. The personage representing the good loses the fight but refuses to concede defeat, citing his irreconcilable antagonism with the opponent. To his shock, the winner reveals that they are related by blood.

The mainstream media describes the current clash between the collective West and Russia as a battle of good against evil; however, as it often happens in real life, good can effortlessly transform into evil and vice versa under the right circumstances. This innate amorphousness of the moral assessment of global players baffles analysts who want to explain their moves on the international chessboard. The hidden dynamics of prospective actions on both sides needs to be revealed without moral judgment.

 

Russian Concerns Exposed

On 17th December 2021, the Russian Ministry of Foreign Affairs posted online two proposed security guarantee agreements to be signed respectively with the US and NATO. The audacity of the demands filed in these documents shocked Western observers. Josep Borrell, the EU High Representative for Foreign Affairs, even noted that only winners can put its agenda on the table as brazenly as Russia did.

A month later, the US delivered its response, which it asked the Russians to keep confidential; however, the response did not satisfy Russian core concern about NATO as Sergei Lavrov, Russian Minister of Foreign Affairs, claimed while adding that it gives “hope for the start of a serious conversation” on secondary questions. The Russian reaction indicated that the US seems to be open to negotiations on a bilateral basis but only behind closed doors. Apparently, arriving at a consensus among numerous US allies has been judged by Washington to be unnecessarily problematic.

What Russia sees as its main concern seems to be its perceived strategic vulnerability due to the overly close geographic positioning to its borders of hostile military forces. From the Russian standpoint, the current status quo cannot be tolerated due to its self-perceived international status. First, the Russian military believes that it maintains a greater degree of readiness than is appropriate for a ‘superpower’ because of potential ‘mosquito bites’ from what it considers to be US ‘clients’ (like the Ukraine). Second, Russian politicians believe that the country has the right to have its own sphere of influence on the grounds that it possesses the means to impose its supremacy on the near abroad. Russia also estimates that the professed US military protection of nearby countries is of largely symbolic value and can be nullified with a proper push.

That is how the global positioning is seen on the surface: the clash of two systems — described in the media as ‘democratic’ (good) and ‘authoritarian’ (evil) — but this one-dimensional representation of reality hides an important nuance, which has been alluded to above: namely, that the good and evil within a nation’s mindset can easily transform into its opposite depending on the context. In order to avoid running into shallow moralization, let’s consider a simple model of power alliances as it provides framework for a more advanced analysis.

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A Bit of Theory: Global Power Elites and their Objectives

To put the status of the current conflict between the West and Russia into context, let’s divide the national power elites into two distinct antagonistic groups that compete for power both within and across the national borders. As political analysts like to display a cynical attitude towards authorities, these groups competing for power can be tentatively referred to as ‘roving bandits’ versus ‘stationary bandits’, borrowing the famous metaphor coined by Mançur Olson in 1993. But the rules of political correctness require less derisive terms: that is why ‘global elites’ versus ‘national elites’ (or ‘globalists’ versus ‘nationalists’) are used in this paper to emphasize the affiliation of the groups with both geographic borders and their political affinity (like ‘liberals’ versus ‘conservatives’ which can also be employed). In addition, let’s define the national power elite as a group of individuals who have real control over others (be it political, financial or moral control) and, as a result, have privileged access to available goods and services within a specific community.

The two groups of elites differ in what they consider to be the natural borders of the communities under their control. The globalists deem every part of the ‘liberalized’ world (that adheres to the rules of unimpeded cross-border transfer of goods, services and money flows) to be their legitimate domain. The nationalists believe that their power base lies within the nation-state. This distinction sets different narratives proclaimed by each group. The globalists emphasize that open national borders attract wealth and, hence, everyone within their community enjoys a higher standard of living, stressing the importance of consumerism. The national elite rely on the concept of patriotism, which brings about the spirit of social solidarity and, thus, equal access to common wealth. To this end, they oppose opening national borders because it will facilitate the “outflow of local wealth” and the “inflow of unwanted aliens.”

This distinction between two types of elite can be easily detected in various political slogans of today. Taking the US as an example, it is evident that the slogan ‘Make America Great Again’ is promoted by those who belong to the nationalists as it requires control over the national borders whereas the banner ‘Build Back Better’ is upheld by American globalists who support ‘equal rights for all.’

Therefore, a political slogan is a useful indicator of who is who within the elite with one of the main indicators being to consider if the slogan is only valid within the national borders or applicable beyond the borders as well.

It should be noted that neither elite professes intrinsically good or evil ideas in moral terms. The national elite may assess themselves as benevolent because they feel obligated to take care of the local underprivileged members of the community. Similarly, the global elite may depict themselves as being compassionate because they care about disadvantaged groups across the border. In reality, however well-intentioned any elite may appear, it is necessary to keep in mind that their prime objective is to obtain privileged access to the resources available within a community, even if a portion of these resources is then redistributed back among the poor for one of the more mundane reasons as explained below.

The privileged access creates inequalities and, inevitably, these inequalities produce strains in their respective communities that require action to keep them from spiraling out of control. To that end, the social fault lines — fraught with uncontrollable (revolutionary) changes — need to be mended, impelling the elites to share the common resources, which goes contrary to the very same reason of being an elite: the privileged access to common resources. This inherent antagonism between the elite’s greed and their need to share can be resolved if there is a positive flow of resources into the community, which can be assured through two mechanisms.

First, the nation-state can rely on technological innovations to generate new resources internally. In this case, social stresses dissipate because growing general welfare benefits everyone. This is the mechanism that favors the development of national elite. However, technology does not develop quickly and when stresses accumulate, another stress-removing mechanism is required.

As known from static mechanics, a stress in one area of a rigid structure can be alleviated through the reinforcement of the affected area at the expense of other locations, where this stress is transferred to. Similar to mechanical stress, social stresses are mended when resources are transferred to one community at the expense of other communities that become more stressed.  The global elite have developed methods, mostly through financial instruments and price-setting arrangements, to extract resources from what they consider communities foreign to them. This process of resource extraction may be called ‘neocolonialism,’ but the term ‘export of chaos’ introduced by Vladislav Surkov, a former personal adviser of President Putin, is more apt in the context of the current round of international competition as it highlights a darker side of global competition for resources: revolutionary changes are chaotic by definition. Thus, to keep troubles from brewing at home it is necessary to foment revolutions somewhere far away from the national borders.

Members of the global elite and national elite can be found everywhere in the world, but their proportions in nation-states vary according to the gravity of local social fault lines and the capacity of nations to either engage in technological innovation or to shift the stresses abroad. Historically, richer nation-states are more innovative and receive more resources that poorer nation-states. Consequently, globalists dominate the elite of richer countries whereas nationalists have a greater appeal in poorer nations. In the extreme cases of so-called ‘failed states’, no local elite is present and these places cannot effectively resist the extraction of local resources by foreign powers.

The distinction between two groups of elites, combined with their capacity to innovate or to shift social stress elsewhere, provides sufficient tools to describe the disposition of elites worldwide and to envisage the outcomes of the current round of Russia-West competition.

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Russia, West and other countries: Relative Strength of National Elites

In 1992, Russia emerged as an antipode to the Soviet Union. From the beginning, the elite of this new country was dominated by globalists — then called ‘liberals’ — who indiscriminately opened the border to free movement of goods and services. This lack of foresight did not bode well for the Russian globalists. As the country plunged in economic disarray, culminated in the 1998 crisis, their number was greatly reduced and the composition of the elite changed drastically in favor of the nationalists — known as ‘siloviki’ — under the leadership of Vladimir Putin. Let’s assume that the current proportion of nationalists to globalists in Russia scaled to unity is 0.8:0.2.

In the 1990s, the U.S. enjoyed an unprecedented period of economic growth driven by their technological superiority coupled with ascending global power that ensured the steady influx of foreign resources. The elite had enough resources to meet their own demands and to mend cracks within the American community that wholeheartedly embraced consumerism. Correspondingly, the US elite became increasingly more populated with globalists, a large chunk of whom were engaged in the export of financial services. However, as technological advances in 2000s mostly stalled and the rest of the world worked towards price convergence, the influx of resources diminished in time and social cracks reappeared in the US society, especially after the financial crisis of 2008. That crisis was mitigated with unconventional monetary policy that relied on the strength of the US currency. Yet local producers were unhappy and many elite members considered repositioning their power base back home from abroad. The resulting changes in elite brought forth to prominence a charismatic leader in Donald Trump, but the globalists were still the dominant force within the US elite, as shown by the victory of President Biden. However, judging by his current political woes and sinking popularity, the supremacy of the globalists seems to be declining. Let’s consider that the proportion of globalists to nationalists is 0.6:0.4 in the US and assume that the same proportion holds for the rest of the West (loosely combined in the OECD.)

Since the 1990s, other countries have raised their international profile. In particular, China has gradually reduced the leakage of resources from its country and is coming close to becoming a resource recipient (at the expense of lesser affluent neighbors). This process is beneficial to the development of globally oriented elite in China. However, the Western globalists hinder the ascendance to power of their like-minded colleagues by needlessly escalating the topics of an independent Taiwan and human rights in Xinjiang. That approach strengthens nationalist sentiments as it reminds the Chinese of the former humiliation of their country at the hands of the West. Thus, nationalists continue to dominate the Chinese elite. Let’s assume that the Chinese elite are currently divided between nationalists and globalists at a proportion of 0.7:0.3, as does the rest of the world (RoW.)

Assuming the international importance of the Russian, US (with the rest of OECD) and Chinese (with the rest of the world) elites to be 0.15, 0.50 and 0.35 respectively, the following table of the relative strength of nationalists versus globalists worldwide can be developed, as seen in Table 1.

Table 1: Relative strength of global elites worldwide

While the resulting totals indicate that the present relative strength of both types of elites is about equal, the above discussion shows decline in the significance of globalists over time. In this setup, Russia distinguishes itself as being the country where power is already firmly consolidated in the hands of the siloviki. Therefore, the current disposition of forces is favorable to the existing Russian elite as their long-term goals do not challenge the objectives of national elites ascending elsewhere.

 

Western Moves Expected to the Russian Demands

Which potential Western moves have been already publicized by the media? They say that the West has already ruled out any military engagement — apart from the shipment of some weaponry to the Ukrainian forces — and threatened with ‘unprecedented sanctions’ alone. Judging by the lack of will to respond with arms, something the nationalists like to resort to if feeling aggrieved, it is reasonable to conclude that the active opposition to the Russian demands comes from the globalist part of the Western elite, whose importance, as discussed above, is already in decline.

The list of possible sanctions that the BBC mentions in “Ukraine: What sanctions could be imposed on Russia?” include:

  • Financial restrictions: excluding Russia from the global financial messaging service SWIFT; banning Russia from financial transactions involving US dollars; or blacklisting several Russian banks;
  • Controls on advanced technology exports to Russia and restrictions on the purchase of Russian energy;
  • Targeting individuals, including the ability of Russian individuals to invest and live in London.

The last two sets of potential sanctions are anything but new to Russia and do not represent significant threats. First, the West (the US especially) already made it clear to the Russian elite years ago that they were not welcome in global technological chains. For example, in the aftermath of the financial crisis of 2008 when Russia was flush with cash, the Russian globalists attempted to obtain control over several Western corporations in distress, like Opel, but these attempts were thwarted by their Western partners. Such an affront weakened the reputation of Russian globalists at home and raised the profile of its nationalists. Regarding sanctions against wealthy Russians abroad, it suffices to say that as early as in 2014, President Putin warned the local affluent not to keep their wealth abroad as the country would not be able to protect them from foreign expropriation and ordered to the public servants to bring their wealth home or resign. Thus, only remnant Russian-in-name-only mavericks will be affected by sanctions that prevent individuals from keeping wealth in London.

The impact of the first type of sanction, that of financial restrictions, is harder to predict as such broad sanctions have never been tested on an economy the size of Russia before.

Still, the Russian economy is likely to withhold the pressure. First, the country operates its own system for the transfer of financial messages (STFM) that can supersede SWIFT if necessary. Second, national trade can still thrive without the US dollar as the country has sufficient experience in trading in other currencies. More so, Russia has its own country-specific know-how in organizing non-monetary operations through the use of bills of exchange, as it did in the rocky years of the 1990s.

The reverse impact of sanctions on Western economies is even more clouded in mystery. The mechanism by which money generates economic value is largely unknown, but it is reasonable to suggest that its value grows exponentially as it expands its employment. Since Russian exclusion from operating the US currency will decrease its global reach, the US dollar will lose some value but for how much its purchasing power will decline is unclear.

It is more certain that the anticipated sanctions will deal another blow to the status of Western globalists. Actually, targeting a significant nation-state like Russia for punishment is such a risky endeavor that they will almost be playing a make-or-break game. If they fail, the trend towards regionalization will only accelerate; thus, self-defeating the very same purpose why the sanctions are sought in the first place: to preserve the unipolar, US-dominated world.

Unlike the Western threat of unspecified sanctions, which implies that nothing has yet been agreed upon aside from tough talk, Russia’s next move has been made public: if its demands are dismissed, the country will employ “military and technical means” to raise the level of insecurity, mostly for the US, to match Russia’s own perceived insecurity. This disclosure implies that Russia will not attack the Ukraine or any other neighboring country unprovoked, but instead exploit perceived vulnerabilities in the US-NATO defense system that are already known to the Russians. Needless to say, such a response will heighten tensions within America and bolster the proportion of American nationalists in the US elite. Again, this development will not bode well for American globalist faction.

 

Conclusion

The original Russian demands, albeit seemingly expressed in good faith, should be seen as contingency planning. Its first move fits the agenda of nationalists worldwide and they will not object, but the globalists who still dominate the Western elite will react with vengeance. They place their faith in the global financial machinery under their control, which has delivered the wanted results up to now, and in trying to seduce some of the national leaders to switch sides. However, their capabilities appear to be limited in the long run, implying that they have to wage a ‘blitzkrieg’ to break the Russian resolve. The only real challenge for Russia lies in an unforeseen but coming soon technological innovation — for example, fight against climate change might result in finding a new source of abundant energy or Elon Mask succeeds with Hyperloop — but otherwise, the Russia is likely to withhold the short-term pressure and its demands will be accommodated by the West in due time.

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