Dollar-bullying the world

“America behaves like wild wolves. Don’t believe them. Using the dollar only damages us. We will not give up. We will be victorious.” Erdogan is defiant.

A crisis that supposedly began and now apparently continues over the detention of an American pastor by Turkish authorities has finally come full circle. Many believe the pastor’s detention was an excuse for Trump to punish Ankara for what really were a number of factors. Top on that list; Erdogan has been seen to be cosying up to Russian strongman Vladimir Putin.

It’s a pretty big deal when a major NATO ally is seen to be purchasing sophisticated missile systems from NATO’s long-time arch-rival, Russia, of course Trump was not pleased. Turkey has also decided to throw its weight behind Russian ownership of the Syrian crisis along with Trump’s other favourite enemy, Iran. As Russia, Iran and Turkey meet this week to sort out the mess in Syria, America’s absence at the table is ominous, considering it’s hard to remember a single crisis the US has not played a role in either exacerbating or resolving, since the end of the Second World War. The US has never been not present at the table.

And so, Turkey is being punished with continuous sanctions from Washington that have decimated the Turkish lira to the extent that this now threatens a global financial crisis. There have been voices in the Trump administration claiming that Turkey can put an end to this downward spiral by freeing the pastor.

Erdogan is unconvinced though, with Russian S-400 missiles scheduled for delivery to Turkey, Erdogan has called the crisis an attack on Turkey’s economy, one that Turks must unite against. With many calling it a “cold war” between the formerly close Nato allies, the US has now showed its hand by using the dollar to torpedo Turkey’s economy. Erdogan, instead of folding, has raised the stakes.

Turkey is now looking towards Moscow for trade. Erdogan is turning to Putin on the, “need to gradually end the monopoly of the dollar once and for all by using local and national currency among us.” Moscow has also faced the wrath of the American dollar. The ruble has crumbled again in the face of fresh sanctions from Washington, needless to say, Putin too is defiant.

As Trump decides to do away with “lengthy, inconclusive and politically incorrect” diplomacy this dollar-bullying is now becoming a global course-of-action for the US under Trump. Iran of course is no stranger to this. After having reached a landmark nuclear deal, Iran and the US had helped restore faith in underappreciated and tenuous diplomatic struggles as hope for an increasingly conflicted world. Having done away with the deal, Trump has assaulted Iran’s economy with intensified dollar-based sanctions.

Head east and the trend continues, days before Mike Pompeo’s visit to Islamabad, the US has cut $300 million worth of funds to Pakistan, supposedly setting the ground rules for talks with Islamabad. Further eastwards, the threat of dollar-bullying looms even for the recently blooming friendship with India. New Delhi was recently warned by Washington against buying arms from Moscow, the threat of course was backed up by US sanctions.

Eastwards still, Beijing has also had to face the wrath of the US dollar. Underlying issues such as the South China Sea and the trade imbalance between the two countries continue to fuel mistrust between Washington and Beijing, with the former resorting to an unprecedented trade war against the latter that threatens global financial stability.

So, at this particular point in time the US is in the process of using the dollar to get its way with, inter alia, Ankara, Moscow, Tehran, Islamabad, New Delhi and Beijing.

Is it working?

After having called the folks in Washington “wild wolves”, there isn’t much space for Ankara to work with. Moscow, similarly, cannot afford to be seen to be bowing to America’s demands when it has already annexed a significant part of Ukraine, considering it should be quite difficult for Putin to un-‘annex’ Crimea now. It’s little wonder then that Ankara and Moscow are increasingly discovering common ground, especially against American pressure. Both, of course, find a natural ally in Tehran as the three powers flex their muscles to shape the Middle East. With the US being sidelined in Syria, Moscow is also looking to increase its influence in Kabul, surely at the expense of the Americans. In sorting out the mess there, Moscow finds eager partners in Islamabad and Beijing, both wary of American demands, and the resulting sanctions as the demands are not met. With a new government in place, there is newfound defiance in Islamabad too. As the US cut military aid to Pakistan, lawmakers in Islamabad were enraged and called for the cancellation of Pompeo’s visit. Rarely, if ever, has a US Secretary of State visited such a defiant Islamabad. As far as New Delhi is concerned, it has been wise to pursue a policy of non-alignment in recent history and so it will be little surprise as a stronger India refuses to align itself under the threat of US sanctions.

With all this defiance, the world is noticing, and taking sides. As Turkey’s lira plummeted under the pressure of US tariffs, Qatar’s ruler paid a surprise visit to Ankara and announced $15 billion worth of Qatari investment in Turkey. At the same time, Qataris reportedly mobilised to purchase millions of lira to protect Turkey against what Qatar’s ambassador in Ankara termed an “economic operation.” The Turkish lira had fallen by roughly half its value against the dollar by then; after the visit, the lira gained more than 5 per cent in a single day.

As Mike Pompeo landed in Islamabad, the usual red carpet wasn’t there for the Secretary of State. On a warm day, for Pompeo Islamabad felt cold as it insisted on negotiating with the US as equal partners. Islamabad had called Trump’s $300 million bluff. The Trump administration is trying to bully the world with the dollar, and it’s failing. This is little wonder when you consider that the Trump administration is currently using the US dollar to threaten Beijing, Moscow, Islamabad, New Delhi, Tehran and Ankara all at once. If you’re going to bully a list of world capitals, surely you don’t want it to be this list.

Published in The Express Tribune, September 7^th, 2018.

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