"When 500 years ago economies of many countries started to integrate Euro-Asia became the centre of the world trade. Country from Eurasia which dominated - controlled 2 out of 3 the most technologically advanced and productive regions of the globe. Approximately 75% of global population can be found in Eurasia that covers 70% of the all energy resources and 65% of the global wealth. - Zbigniew Brzezinski

 

Single country just like a group of countries who control resources of Eurasia, controls the global economy. The alternative to control the continent is to rule oceans. This gives control over sea trade routes and the flow of strategic resources indirectly giving keys to Eurasia.

 

It is year 1900. The British Empire is at its peak. No other country can match the power of it. They controlled Eurasia with a vast number of naval bases spanning from North Atlantic to Mediterranean Sea, Persian Gulf, Indian Ocean and Hong Kong. Colonies and bases guaranteed the maritime empire to control the Eurasia.

The twentieth century this control has been taken over by America. Just like British, now Americans control Eurasia with number of military bases. Number of American military bases is greater than the rest of the world altogether! Regarding military the US dominate technologically (with only few exceptions) especially over countries they control.

The biggest opposition against the US hegemony is demonstrated by China and Russia. They cannot rival the naval power of Americans but they are trying to neutralize it. Since 1850 those who dominate oceans, could control the world. Right now Russia and China try to change Eurasia in a way which diminish strategic importance of ocean control.

Below you can see how controlling just few key straits translates into controlling maritime trade.

Diminishing role of sea trade is of huge geopolitical importance. Transformation we see in front of our eyes in the Eurasia is one of the paramount international changes since the end of Second World War.

The big stake: Control. Americans are worried about one thing now. The new ‘Silk Road’ which can again join Europe and Asia. In the past it was the most important trade route in the world crossing 6,500 km.

China tries to revive this idea with the use of high speed trains, modern highways, airports, seaports, energy networks and IT infrastructure. Beijing attempt to connect commercially area from the coasts of Pacific to Western Europe. This ambitious goal could make you get from London to Beijing in just two days!

The new Silk Road is the biggest infrastructural investment in the history of mankind! Dirupting rules of existing 150 years old rules of geopolitics. Linking Europe and Asia with land trade routes makes tens of countries independent from sea trade routes and by implication from the US military dominance on the oceans.

When Xi Jinping announced the idea it was not supposed to be counterbalance against the US but rather the axis to cooperate between Europe and Asia. Chinese generally are very cautious in designing plans like that. Nevertheless last 15 years showed that they are very effective and consistent in this job and with access to the right tech, enormous financial resources and political will to realise project of that scale it may be just another success story.

At the end of last year, train from Yiwu delivered goods to Madrid. It was the first time in history this sort of transport was done on land! Today it is the longest trade route in the world and the first element of the new Silk Road – an alternative to trade by sea.

New ambitious Silk Road is one of the integrating elements of Eurasian economy. In the last three years the New Development Bank, the Economic Eurasian Union and the Asian Infrastructure and Investment Bank (AIIB) were created. Creation of independent from the US transaction system is underway.

The Asian Infrastructure and Investment Bank (AIIB)

Main goal of the AIIB is to finance investments correlated with the new Silk Road. Starting capital of 100 bn USD will definitely be increased as declared by Chinese authorities. The AIIB is Asian alternative to the IMF or the World Bank led by the USA. The main shareholder is China, Russia and India. Over 60 cuntries joined mostly from Asia and Europe with the US and Japan refusing. American allies as the UK, Australia, Germany, France broke from the line and also joined the bank.

National Development Bank

The NDB is another initiative designed to fund infrastructural project but realised through BRICS cooperation. NBD should support members in the event of an economic/financial attack.

The NBD (similarly to the AAIB) is financial organisation with capital of 100 bn USD offering alternative to the IMF and the World Bank. Its headquarters is in China but highest office is manned by an Indian representative.

Both the NDB and the AIIB are not supposed to compete against but supplement each other. The AIIB should help internal integration of the whole Eurasia. The NDB aims at integrating Chinese economy with other BRICS members and will be involved in infrastructural projects in Africa.

All projects will be financed only with national currencies cutting USD out of the deal lowering ability of the US to influence or pressure the institution.

Alternative for SWIFT

BRICS – especially Russia and China – are testing new transactional system independent from the US.  The SWIFT (just like it was showed 3 years ago) can be used as a powerful weapon.

In 2012 due to economic sanctions against Iran country was disconnected from international payments realised through SWIFT. Without that no financial transaction could be realised (neither in nor out of Iran). It was very effective weapon which hit Iran’s economy really hard.

From this moment SWIFT was used as against political opponents. Knowing that BRICS started working on an alternative. China and Russia finished project. India, Brazil and the Republic of South Africa need approximately 2 years to go completely independent from SWIFT.

Eurasian Economic Union (EEU)

Initiated by Russia, will be area of free trade enabling movement of goods, services, capital and people. The EEU consists of Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia. Talks may bring Iran, India and Vietnam to this club.

The EEU is composed of countries which will participate in building the new Silk Road but Egypt and few countries of South America (Brazil, Argentina, Uruguay, Paraguay and Venezuela) started discussing possibility of accession.

The Shanghai Cooperation Organisation (SCO)

The SCO is an alternative for the NATO. China, Russia, Kazakhstan, Tajikistan and Uzbekistan are members. In 2016 India and Pakistan should also join although it seems strange as both of those countries are in a state of silent war. Iran is also negotiating its way in.

Summary

The United States of America, just like any other empire, do whatever it can to hold onto the status of global hegemony. Simultaneously both China and Russia understand that to effectively combat this dominance they need to work together.

Now due to US dominated oceans anyone defying the US can be hurt economically by this control. Economic projects such as the new Silk Road or the EEU can create circumstances in where land trade will be possible and independent form the US will. What is more creating infrastructure will help integrate those economies and lower trade barriers.

Project being realise are astonishingly ambitious but as we see with internationalise yuan Chinese are very effective in turning their plans into reality. In just 3 years yuan from local currency is now 5th most used trade currency in the world. Few weeks ago Chinese started to issue oil futures in yuan. For recap: oil trade in different than USD currency was the reason to attack Iraq and Libya.

Those ambitious project will inevitably face strong opposition. The US and its allies will not make it easy for China. Leader will do everything it can to hold onto yellow shirt. This is how the world goes.

Therefore, we can see distractions and disturbances (like Ukraine situation) that would destabilise between Europe (Germany) –Russia – China cooperation. This block can threaten the US. Russia is the biggest producer of energy and mineral resources. China have the biggest labor reserves and capital. Germany are technological and industrial powerhouse. From the American point of view everything should be done in order to fend off economic and political competition.

In my opinion economic interest of individual countries will win against political goals of the US (Ukraine situation) and in 5-8 years integration inside Eurasia will attain higher level. The real question is in what state Europe will be then? (now it is nose diving with too much regulation, socialism and extremely high taxes on its back…)

 

Trader21