The US will lose out to the axis Moscow-Beijing

Interview with Folker Hellmeyer*, chief analyst at Bremer Landesbank

Folker Hellmeyer, chief economist at Bremer Landesbank, has no doubts about the future of the global economic system: The axis Moscow-Beijing will prevail against the old hegemon USA. Both countries are looking for a long-term strategy and not for short-term profit. Because of their blind obedience, the EU could be among the losers. The sanctions have already damaged Germany as well as the other EU countries enormously.

“Deutsche Wirtschaftsnachrichten”: The EU countries report new losses due to the sanctions imposed against Russia. In your estimation, what damage have the sanctions already caused?

Folker Hellmeyer: The damage is much more comprehensive than the statistics show. Let’s start with the economy and the accumulated damages so far. The decline in German exports [to Russia] in 2014 by 18% or in the first two months in 2015 by 34% year on year recorded accounts only for the primary segment. There are secondary effects. The economy in European countries with strong business in Russia, among them also Finland and Austria, suffer gravely. Subsequently these countries order less in Germany. Even more European multinationals are considering building production facilities at the highest efficiency level in Russia to circumvent the sanctions. Thus we lose potential capital stock here, which is the basis of our prosperity. Russia wins this capital stock.

It’s not yet clear that the sanctions will end in the foreseeable future. How much can the bill become for the German export industry?

Germany and the EU have disposed of their economic reliability towards Russia. The relationship of trust has been broken by Germany and the EU. It will take several years to rebuild the confidence. Plant construction for German and European exports takes up to five years between signature and delivery. For this reason, Siemens has been kicked out of a great project. Alstom lost the contract for the railway line Moscow-Beijing. Ergo the potential for damage is much more massive than the current figures reveal, not only for Germany, but also for the EU. The future damage cannot be quantified precisely, however, it is definitely significant.
Moreover, the Beijing-Moscow axis within the framework of the Shanghai Cooperation Organization (SCO) and the BRICS countries is planning the largest growth project in modern history, namely the development of the infrastructure of Eurasia from Moscow to Vladivostok, further to South China and India. It remains to be seen to what extent the sanctions policy of the EU and Germany in these mega projects, on the part of the emerging countries, will be interpreted as affront not only to Russia.

Obviously, some of the participants of European policy are lacking any capacity of abstraction regarding the full scope of their actions on our behalf.
In the end, who will pay for the damage?

The measurable damage is the loss of growth, i.e. lost wages, lost contributions to the social system and lost tax revenue. This applies to the previous 12 months, and it applies to the coming years. Thus, the people in Germany and the EU pay the price through lost prosperity and stability increase. The non-measurable damage lies in an elevated geopolitical risk situation for the people in the EU.

If one realistically considers the situation in Ukraine: The Kiev government seems mainly to be interested in keeping the situation hot in order to continue receiving new loans. Is there no western politician who is willing to tell them outright?

This is indeed annoying. People who are focused not only on “Western quality media”, are surprised that the media are concealing Kiev’s aggression and their governments discriminatory laws, which are grossly disproportionate – compared to the claim of Western values and democracy. I think it might be Mr Steinmeier’s credit, that he speaks plain text behind closed doors. The question is whether the behaviour across the Atlantic supports Mr. Steinmeier. In this regard I am referring to the submissions made by Victoria Nuland, the US Assistant State Secretary for European and Eurasian Affairs. The fact is, that with the coup in Ukraine, the oligarchy and its friendly tendency towards Moscow was replaced by an oligarchy now devoted to the United States. It’s geopolitics, which benefits third forces, but definitely not Germany, not the EU, not Russia and not the Ukraine.

Finance Minister Natalie Jaresko is a former employee of the US State Department, who received Ukrainian citizenship only one day before her inauguration. Is the former investment banker simply invincibly good or is there a master plan behind her?

I do not know her personally. Much has been written about her. This results in a picture that does not allow the term “invincibly good”. The fact that important posts in the Ukrainian administration were occupied by external forces with extreme proximity to the United States and their institutions, underscores the geopolitical character of the coup. Ergo, the term master plan is at least defensible.
An important figure of recent German policy who is no longer in office, said in a bilateral meeting that the picture is best described by speaking of US geopolitics on the chessboard of the Ukraine with the blood of Ukrainian “farmers” via the gang of Moscow against the centre of power in Beijing. This is a perspective which I share, indeed.
The fact is that the emerging countries emancipate themselves from US hegemony. This has become evident in the foundations of competitive institutions to the World Bank (AIIB) and the IMF (New Development Bank) by the axis of the emerging countries. This displeases the still prevailing hegemon. The current international crises of Afghanistan, Iraq, Syria, Libya, Egypt and the Ukraine are an expression of this clearly identifiable power confrontation going on in the background. Didn’t we want to establish democracy and freedom everywhere? Let’s take a look at the success …

Several EU countries, such as Italy, Austria or Hungary grumble increasingly audibly about the sanctions. In Germany, however, there is an almost eerie silence. Why is that?

The German citizen is very satisfied. Things are still going well despite the loss of business: the next holiday is just around the corner. The media are dealing, in politically correct terms, tamely towards the US geopolitics, towards our policy as well. The smoothing out of this complex issue by politics and media is working.

What are the sanctions’ consequences on the German-Russian relations?

At the level of politics that relationship has collapsed. Yet the dialogue continues from both sides. Basically, that’s positive. The Moscow’s disappointment about the German policy is massive. In Moscow there is a very realistic assessment of Germany’s and Europe’s ability to formulate and live a policy independent of US interests. In the area of business things are better. Because the different levels of conversation are used. Here they are preparing for day X after the sanctions. A quick revival of the pre-crisis levels is unlikely. Russia is a bear. Now new supply routes are established and they will not be given up after the sanctions policy has ended. Arbitrariness may be “en vogue” in the West, but not in Moscow. With every day that passes in the sanctions policy, we are consuming our common future.

What are the consequences of the sanctions for the economies of the EU?

We are missing export growth, we are missing a peace dividend. We are reforming the weak countries of the euro zone and are re-establishing their international competitiveness under grave sacrifices just to deprive them of the markets, afterwards. Does the left hand of German and EU politics really know what the right hand is doing?

What are the risks for European banks?

These risks are manageable, for the greater part. The monitoring that is and has been undertaken in this regard by the supervising authority is effective and does not allow any sustainable accidents.

Why do the big associations like the Federation of German Industries BDI knuckle under? One would think, their raison d‘Ítre is to represent the interests of the industry?

There are considerable differences between public statements of the associations and their internal situation and mood. In the field of business there is considerable discontent. However, I am disappointed with regard to the associations’ public statements. They act politically correct. Political correctness is a restricted correctness and thus incorrect by definition.
For an export-oriented economy the subject of sanctions policy is of striking and for some companies even of existential significance. Fantasising here on the primacy of politics means a partial denial of responsibility with regard to the tasks of these associations.

The contempt of the US government in dealing with the Europeans is remarkable, indeed – catch-words NSA and “Fuck the EU”. Are European politicians lacking self-respect or are they just cowards?

Those, who are true democrats, who take seriously their duties as politicians for the res publica, who respect the right for self-determination, have to draw conclusions from these statements. Those who do not, have deficiencies with regard to the above mentioned canon of values. I‘m the wrong person to ask about these issues. You must submit these questions to our political leaders.

Inverse proportionate to the attitude of bowing down before Washington is an attitude of aggressiveness inside: At first dissenters were defamed as “Putin understanders”, most recently the one who does not howl with the wolves is called a “Putin-Troll”. Does the Cold War already claim the negation of part of our democratic freedoms?

In late 2007, I wrote in the preface of my book “Endlich Klartext”: “First, free markets die, then democracy dies!” In this book the US hegemonic system was analysed. The current geopolitical conflicts are abused for the demolition of democratic liberties at home. The pace is increasing. I am more worried than ever. Currently I am dealing with the term “terror of the mainstream.” We pretend to be tolerant and pluralistic. However, who takes views differing from the mainstream in politically sensitive issues is exposed to the risk of isolation or defamation. These developments are an absolute contradiction to the claim of democracy and freedom. Yes, the current conflicts undermine democracy.

In the USA – different from Germany – there is a very lively debate on the hegemonic behaviour of the government – right across the political spectrum. Why not in Germany?

That’s correct, only that debate in the USA you are referring to has no political consequences regarding the situation in parliament. In our country the debate is less pronounced, but the parliament is a little more colourful, even though hampered in terms of efficient opposition by the grand coalition. In the end many Germans may confuse prosperity and freedom of movement with liberty?

How will this conflict go on? Is it conceivable that Americans and Russians will get together again – for instance because of the IS or Syria – and the Europeans will be running after the two superpowers and pay the bill in the end?

For me the conflict has already been decided. The axis Moscow-Beijing-BRICS is winning. They are fed up with the West. In 1990 these countries had a share of 25% of the global economic output. Today they have 56% of the global economic output and represent 85% of the world population. They control approximately 70% of the world currency reserves. They have an average annual economic growth of 4 to 5%. As the USA was not willing to share international power (for example votes in IMF and World Bank), an own financial system in the sector of the emerging countries is being established. There lies the future.
At the moment the EU is drawn in into the conflict which was caused by the USA, because they didn’t and don’t want to share power. Thereby the EU’s own development opportunities are paralysed. The longer we follow such policies in the EU, the higher becomes the price, the less we will be taken serious as dialogue partners.
Without Moscow and Beijing no problem in the world can be solved. The USA indeed could act much more pragmatically than we can imagine today. The lack of an own agenda on the part of the EU and Germany lets us appear as losers.

What must happen before we will see an independent foreign and economic policy in Germany again?

I won’t respond to this question, I beg your pardon!

What does it mean for a business location if a government plays geopolitical games rather than really represent German national interest like all others do?

It means that one’s own location is being damaged.

Does the ordinary parliamentarian understand the interaction of politics and economics?

I am sceptical.

Does politics become better while politicians understand less and less of economics but their number rises?

Definitly not! The stability of a democracy depends on the stability of economy. If lasting harm is permanently caused to economy, the radicalisation of society will grow as the experience in he German Reich showed in 1933. Besides there is another version i.e. that democracy becomes a “Demokratur” and ends up in oligarchy. With regard to the USA there exists a study of the Princeton University. Original sound: The USA is no longer a democracy, it is an oligarchy! Oops, this was not politically correct …
At the moment there is more at stake than the man or the woman in the street believes or wants to believe. You see me deeply concerned.     •

Source: Deutsche Wirtschaftsnachrichten 24.7.2015

(Translation Current Concerns)