Whilst financial markets have been battered on the back of central bank action on interest rates and liquidity, far more serious developments are underway on the geo-political front. Edward Luce, the US national editor at the Financial Times, someone with a long history of covering America’s role in the world order as the Washington bureau chief as well as the speechwriter for Larry Summers in the Clinton administration talks about his takeaways from the recently held FT Weekend Festival in Washington, where the 99yr old Henry Kissinger and the current CIA chief William Burns shared their thoughts about the emerging situation.
“Fifty years ago, Kissinger and his president, Richard Nixon, changed the cold war by opening up to Mao Zedong’s China. By cementing the split between the world’s largest communist country and its most powerful, Nixon’s visit to China was arguably America’s biggest move on the cold war chessboard. There was a time when the US and China would happily toast the 1972 Shanghai communiqué that Nixon signed with Mao — and which Kissinger had secretively planned on incognito trips to Beijing via Pakistan. But its 50th anniversary in February passed in silence. Joe Biden’s White House ignored China’s requests for a joint event to commemorate the date. History has now turned 180 degrees. In 1972, Nixon easily brushed off criticism from the right for doing a deal with Mao in the midst of China’s Cultural Revolution. America’s foreign policy establishment instinctively grasped the upside to a move that left the USSR isolated and weaker. It was amoral but effective. The same, of course, is often remarked of the US-UK alliance with Stalin’s USSR to defeat Nazism.
Today’s Washington, by contrast, is virtually unanimous on a foreign policy that brackets China and Russia as twins, although this time with Russia as the junior one. President Biden has framed the global stakes as a contest between autocracy and democracy. Kissinger clearly disapproves, though he is careful never to say anything significant in plain language. The venerable figure not only answered in Yoda-like terms; his hunched posture resembled the Star Wars sage. Differences in ideology should not be the main issue of confrontation, he said, “unless we are prepared to make regime change the principal goal of our policy”.
But what does the CIA think? The question is more than usually relevant because Burns — the first career diplomat to head America’s main spy agency in its almost 80 years of existence — is rated as highly as anyone in the US administration. Among his most enduring fans is Biden. Yet Burns was unanimously approved by the evenly divided US Senate, which is as rare as a UFO sighting in today’s toxically divided Washington. Some foreign diplomats refer to him as the “shadow secretary of state”. Last November, as Russian forces were massing on Ukraine’s border, Biden sent Burns to talk to Putin in Moscow. This was another first. Spy chiefs are not normally recruited to parlay with heads of nuclear-armed states. Though Putin used to head the FSB, formerly known as the KGB, they are not counterparts. But Burns is an unorthodox spy chief. Having spent many years in DC, I have yet to come across a public figure about whom no one has a bad word to say.
There is a surreal quality to a CIA chief talking in real time about an almost-proxy war with the other big nuclear armed power (Russia has as many strategic nuclear warheads as the US; on this measure alone, China comes a distant third). As a Russian-speaking former US ambassador to Moscow, Burns knows Putin well. “I had dealt with and watched President Putin for many years and what I’ve seen, especially over the past decade, is him in a way stewing in a very combustible combination of grievance and ambition and insecurity [that] are all kind of wrapped together,” said Burns. “His risk appetite has grown over the years as his grip on power has tightened and also as his circle of advisers has narrowed.”
Whilst Biden has been confrontational, Luce cites a more sober CIA chief who recognises the grave danger in provoking a nuclear-armed Russia: “This is especially true when your nuclear-armed opponent is dropping escalatory hints thick and fast, as Putin and his officials have increasingly been doing. Though Burns says US intelligence has not detected concrete signs that Putin is deploying tactical nuclear weapons, this could change at any moment. Moscow’s doomsday rhetoric is in terrifying contrast to most of the cold war — at least since the 1962 Cuban missile crisis — when Washington and Moscow learnt to speak of nuclear weapons in only the most elliptical language. “I think what’s incredibly important for both Russians and Americans to remember is that we are still, at least today, the world’s only nuclear superpowers,” said Burns. “Together we control 90 per cent of the world’s nuclear weapons and even in the worst stages of the cold war, both Russian and American leaderships demonstrated a realisation that we had unique capabilities but also unique responsibilities.”
So where does it go from here? America’s official aim is for Russia to be defeated in Ukraine. Its unofficial one, which Biden is not trying too hard to disguise, is to bring Putin to account for his war crimes. The US, in other words, would like nothing more than a regime change. The same is implicitly true of China. As Burns put it, talking to the FT: “I don’t for a minute think that it [the Ukraine war] has eroded Xi’s determination over time to gain control over Taiwan,” Xi’s China remained the “biggest geopolitical challenge we face over the long term as a country””
If you want to read our other published material, please visit https://marcellus.in/blog/
Note: the above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services. Marcellus Investment Managers is also regulated in the United States as an Investment Advisor.
Copyright © 2022 Marcellus Investment Managers Pvt Ltd, All rights reserved.
