The Rapallo Syndrome in the 21st Century.

Hegemonic Stability by
Military Means
Paper for the World Public Forum, Dialogue of Civilizations, Rhodes, 9-11 October 2015.

Kees van der Pijl

Centre for Global Political Economy
University of Sussex UK
Summary
In this paper I argue that the current crisis in Ukraine (a well as, in hindsight, that in Yugoslavia in the
1990s), reveal that the English-speaking West no longer can rely on a competitive advantage in
production to meet the challenge of new Rapallosa rapprochement along the lines of the 1922
treaty between Weimar Germany and Soviet Russia. Ever since, the Anglophone West has responded to
such events by re-connecting Western Europe to Anglo-Americas economic powerhouse. The Dawes
and Marshall Plans were cases in point. In the crisis of 1970s when the US uncoupled the dollar from
gold and the global political economy entered the phase of perennial instability that is continuing today,
Charles Kindleberger came up with the new version of the Rapallo response by reserving the role of a
hegemon providing stability for the US. When the NATO treaty expired in 1999, it was renewed
under an offensive military doctrine to allow, among others, the US to rush in whenever Europe,
meanwhile led by a reunified Germany, appeared to adopt a compromise attitude to the Eastexcept
that the economic component has meanwhile receded behind the military one.

Introduction: From Rapallo to Hegemonic Stability

Today world politics is dominated by the relative decline of the English-speaking
West, and the United States in particular, to the status of an over-armed giant whose
survival depends on the continued financial control over globally dispersed
production and resources. This has worked to erode the liberalism of the West in the
process. What used to be a Lockean heartland (after the key ideologue of possessive
individualism) is today regressing to a pervasive authoritarianism, with different
accents but otherwise matching the authoritarianisms of the remaining contender
states, China, Russia, and Iran, which all combine their historically strong states with
an oligarchic, neoliberal capitalist economic model.
In the case of contemporary Russia, it inherited the contender posture of the Soviet
Union, although during the Yeltsin years a comprador tendency temporarily appeared

to throw open the entire Soviet space to predatory incursions by Western capital. The
Soviet model was established by Stalins revolution from above in the late 1920s,
which gave the USSR its particular contender state/society complex. By this
transformation the Soviet state inserted itself into the historical sequence of prior
contender states, from France under the Cardinals and Napoleon, Wilhelmine and
Nazi Germany, Meiji Japan, and a host of lesser contenders. For all their political
differences, these formations shared a totalitarian, all-encompassing state that
centralises all social energy and initiative.
Well before the Stalin transition, in 1922, in the aftermath of the Great War and the
October Revolution, the Bolsheviks in power in Moscow and the government of the
defeated German Reich, recast as the Weimar Republic, concluded a treaty on the
margins of the Genoa reparations conference, in nearby Rapallo (both states were
excluded from that conference). Under the provisions of Rapallo, Germany was able
to compensate for the loss of European and overseas raw material bases by gaining
access to Russias oil, ores, and grain, whilst obtaining a market for its heavy
industries. Rapallo, which also contained secret clauses allowing the German army
and air force to conduct exercises on Soviet soil, appeared to Western statesmen as a
dangerous step towards constituting an unassailable geopolitical bloc, as outlined by
the British geographer, Halford Mackinder.
Mackinders famous assessment (1904) argued that states controlling the land
bridge at the heart of the Eurasian land mass, the heartland and the world island,
respectively, would eventually rule the globe as well. Of course the author also noted,
in the very same paper, the formation an outer ring of outer and insular bases for seapower and commerce surrounding the Eurasian heartland. Since his analysis
privileged geography over political economy, he did not infer that the growth of
capitalism in this outer and insular ring would in effect turn the scales against
Eurasia, so that what I call the Lockean heartland comprising the majority of the
worlds financial and industrial assets, would rise to global pre-eminenceand not
the land mass facing it.
Yet the mere threat of a Rapallo-style unification of German ingenuity and
Russian raw material wealth prompted the states of the Lockean West to respond, in
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1924, by the Dawes Plan rehabilitating German finances and ushering in a flow of
foreign investment (both portfolio and direct) and in 1947, by the Marshall Plan that
laid the foundations for a Fordist mass production/consumption economy. In both
cases the economic assets the Anglophone West could bring into play were enormous.
Today, the Rapallo syndrome has still not been overcome except that the response to
it, tying in Europe and especially Germany, with Anglo-America, no longer rests on
overwhelming economic might. Increasingly economic warfare backed up by the
military capabilities of the United States and NATO are replacing the weight of
economic assets in the attempt to undermine any perceived rapprochement of Europe
and Eurasia and reorient it to an Atlantic format. The attempt to conclude an Atlantic
free trade zone (TTIP) appears as a desperate move and has to be negotiated behind
closed doors because of its deleterious consequences for society at large (Bizzari and
Burton 2013).
The moment in which the priority of economic assets over sanctions and threats in
the Atlantic response to new Rapallos was reversed, has been identified by Yanis
Varoufakis (2013) as the transition from the Global Plan to the Global Minotaur,
the Cretan monster devouring human tribute from Athens. It came with the Nixon
administrations decision to uncouple the dollar from gold in 1971 (sanctioned in
1973). Although not immediately apparent, henceforth the US would rely on the rest
of the world covering its deficits. At the very same juncture Charles Kindleberger
came up with a new theory to legitimise US primacy, the theory of hegemonic
stability. Formulated in 1973, it is based on the idea that a state enjoying
overwhelming power, a hegemon, must back up the operation of the world economy
and that the Depression of the 1930s happened because Britain could no longer
perform this role (Kindleberger 1973; Desai 2013). Whether this power is economic
or military, is optional; the point is that it is necessary, a benevolent force to bring
order to the world.
Shifting Grounds of Western Pre-eminence
The opposition between a liberal West and successive contender states seeking to hold
their own against it whilst catching up (in a sense, all non-liberal, non-Western states),
gave rise to a transnational directive class structure in which, in the Lockean setting,
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there is a differentiation between a hereditary ruling class and a managerial governing

class or (in the economy) cadre. In a contender formation, on the other hand, the
classes associated with capitalist economic practices, to the extent they exist at all, are
enclosed within or subordinate to a state class, that is, a ruling-cum-governing class
which owes its pre-eminence to its hold on to state powerirrespective of its
sociological profile or political orientation (Lefebvre 1977).
In the process of the shifting frontiers between the Lockean heartland and the
paramount contender(s), certain features of the state-led experience of prior
contenders may persist, e.g. French tatisme lingering on until very recently (because
the ascent of unified Germany after 1870 required Frances mobilisation on the side of
Britain) and so, pressure to liberalise had to be relaxed. The same holds for the need
to enlist Western Europe and Japan in the Cold War with the Soviet Union. This
likewise extended the licence for a state role in the economy. Russia itself, after a
harrowing process of dissolution and disempowerment of the Soviet state class, the
nomenklatura, recovered by restoring aspects of the contender experience after 2000
under a resurgent state class around Vladimir Putin. China, finally, has likewise
retained a state hold on the economy although the heartland/contender structure itself
can be argued to have meanwhile succumbed to the crisis of hegemonic stability and
renewed authoritarianism in the West (see my 2006: 297-407).
For most of the period in which the heartland/contender structure has operated,
national political integration along with modernisation forced on the contenders by
the pre-eminence of the liberal West had a distinct productive aspect. The overarching
geopolitical structure thus worked to mediate the spatial extension of the circuit(s) of
productive capital through combined development as theorised by Radhika Desai, that
is, via state-led development accelerating the pace of social change in order to meet
the challenge of the Atlantic first movers (Desai 2013: 3). Until the 1970s this
productive/industrial combined development had a stabilising aspect also because it
fostered class compromise with organised labour. In the expanding liberal heartland
this came about on the basis of sharing the spoils of empire (also to obtain consent for
neo-colonial wars and interventionsno compromises there); in contender
formations, class compromise was obtained by social protection from above.

The spread of productive capacity through this historical heartland/contender

structure can be documented in various ways. Britain until the 1860s accounted for 40
to 45 percent of manufacturing output in the world (Senghaas 1982: 31). France made
some headway catching up with Britain in textiles in the 1830s (see my 2006: 23,
table 1.1), but the real challenge came from Germany, which inherited the position of
the main contender to the Anglophone West following the defeat of Napoleon III in
the Franco-Prussian war of 1870-71. As US heavy industrialisation took off in the
slipstream of a railway boom boosted by British money capital, the long-standing
bonds between the ruling classes of Britain, its settler colonies, and the United States
were intensified to meet the new challenge.
German steel production in 1880 reached a level of 23.6 percent of the combined
steel output of the heartland states (US and UK, with France included), 38.2 percent
in 1900, and 36 percent in 1910, before collapsing back to 10 percent in 1925, after
the defeat in World War I. By that time the threat of socialist revolution had been
contained, albeit that after the crisis of the 1930s the humiliating Versailles Treaty led
to a political crisis in which Hitler was entrusted with power by a frightened ruling
class. Productive capital in its industrial centres by then had reconstituted itself
following the Dawes Plan. Bolstered by portfolio investment from the United States
and the World War I neutral economies (Netherlands, Sweden, Switzerland), German
steel production reached 51.8 percent of the combined heartlands in 1938 (I leave
aside the massive shift from the UK to the US in the same period, see my 2006: 26,
table 1.2). In addition direct foreign investment in the automobile and electrical
equipment industries (Ford, GM-Opel, GE-AEG) reinforced these sectors relative
to economic interests associated with a rapprochement with the USSRwhich briefly
enjoyed a resurgence during the Hitler-Stalin Pact.
The point is that antagonisms in the international sphere are contravened by a
growing interconnectedness in a productive grid. This explains why there were
appeasers to Nazism in the United States and Britain (the Dulles brothers, the
Cliveden set, etc.) not just on political, fear-of-the-workers grounds but also because
of cartel membership of industries across the divide, investment links etc. Freefloating finance, money-dealing capital was even curtailed in the 1930s to prevent it
from upsetting long-term investment, which also requires money capital but with a
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different mission, that is, to sustain the capitalist system. Hence in all developed
capitalist countries, nowhere more clearly than in the United States through the GlassSteagall Act of 1933, risk-avoiding, long-term money capital held by commercial
banks was separated from speculative, risk-taking money-dealing capital, which was
repressed to allow the post-war Atlantic mass production economy to flourish.
Yet speculative money-dealing capital was never truly extinct even during the
Fordist-Keynesian epoch of financial repression. As Gary Burn shows, it hibernated,
notably once City of London merchant bankers in the 1950s began accepting dollars
circulating outside the jurisdiction of the US monetary authoritiesthe Euro-dollar
and Euro-capital markets (reference of course to Europe, not todays euro). After
the oil price hike in response to the inflation following the Nixon shocks of 1971,
petrodollars began to be recycled through these City markets and greatly expanded
their size. Between 1960 and 1983, total net Euro-deposits in the City grew 1,000 fold
to $1 trillion (Burn 2006: 17; Bassosi 2012). In the circumstances these dollar pools
were tapped into by both Western governments and modernizing state classes the
world over. Seeing a chance to profit from favourable lending conditions (with goldreferenced prudence gone, dollar inflation soared to around more than 10 per cent a
year, Parboni 1981: 89), state-socialist countries sought to upgrade their industrial
economies, whilst an assertive Third World coalition aimed to finance their
independent industrialisation plans by tapping into this source.
Hence in the 1970s a process of catch-up industrialisation/industrial modernisation
was occurring again in a series of contender states, both the Soviet bloc and the
coalition of Third World states clamouring for a New International Economic Order.
But this time it was not accompanied by a broadening of the global productive
economy generally but instead coincided with the evacuation by capital from the
existing zones of class compromise, a process lubricated by money capital being set
free from New Deal-type constraints. Capital was abandoning what now was revealed
as a temporary social contract with labour, in response to workers militancy,
declining profits, and US imperialism struggling to stop the advance of socialism
(Southeast Asia, Portuguese Africain spite of murderous reversals in Indonesia and
Latin America). No longer therefore the Wests pre-eminence was based on
production in its own sphere, but on rapidly widening circuits of money capital, both
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systemic, long-term investment money and, in its slipstream, speculative moneydealing capital rearing its head again. It was at this point that Kindleberger developed
his thesis concerning the US role as the hegemon.
Hegemonic Stability amidst Turbulence
The crisis as we experience it today, dates not from 2008 but from the late 1960s.
What was new of 2008 was merely that the remedies, each intended, as Wolfgang
Streeck has argued, to buy time (inflation, state indebtedness, private indebtedness)
had all been exhausted and the entire edifice came down crashing (Streeck 2013; the
Global Minotaur collapsed too, as we see below). Kindleberger was not too
concerned about the need to balance the US budget or maintain foreign trade and
payments in equilibrium. Instead he claimed that as long as the rest of the world
recognises the necessity of US leadership, foreign creditors would continue to cover
any deficits, knowing that they were in fact investing in the provision of certain public
goods serving the system as a whole (Kindleberger 1973; Desai 2013: 71-2 113-6 &
passim; on the debate with Triffin and monetary orthodoxy, see Bassosi 2006: 34, 37,
40).
Paul Volcker had been charged with preparing the 1971 dollar shock, and again
applied a shock named after himself when as head of the Federal Reserve he slammed
the brakes on dollar expansion in 1979, the Volcker Shock. This ended rampant
inflation and threw the world into the debt crisis. Briefly before his Fed appointment
Volcker highlighted that hegemonic stability was not about stability at all, but about
Western and more particularly, US interests. In a talk at Warwick University he
dismissed the idea that the market is an impartial arbiter because retaining freedom
of action for national policy comes first, for the US especially. He added that a
controlled disintegration of the world economy should be the target in the 1980s
(cited in Varoufakis 2013: 100). Hegemonic stability in other words was a feature of
a neoliberal turn charged with in-stability and conflict. It entailed Naomi Kleins
Shock Doctrine (Klein 2007), tested out in Latin America before it was applied to
the heartland itself under Thatcher and Reagan; and a new Cold War, which in
combination with the credit squeeze was intended to knock the foundations from

under the Soviet bloc and Yugoslavia as well as the industrialisation plans of the Third
World state classes.
With the decline of production in the West itself, the centre of gravity of domestic
class compromise shifted to asset-owning middle classes. They paradoxically had
been the net beneficiaries of the post-war class compromise with organised labour
(which only profited from stable, inflation-proof wages and from the expansion o the
public sphere; Piketty 2014: 260, 347; Bengtsson and Ryner 2014). The appreciation
of middle class assets (especially home ownership) gave this class a stake in the
ascendancy of money capital required for the relocation of production away from
capital-labour compromise (Dumnil and Lvy 2004: 30). However, the lifting of the
restrictions on finance (culminating in the 1999 repeal of Glass-Steagall) and the
attendant liberalisation of exchanges and expansion of stock markets also fuelled the
securities business and brokerage, which come under the heading of money-dealing
capital. The rise in rentier incomes, of which the big acceleration began around
1979 or 1980 (Epstein and Power 2002), soon assumed the format of a veritable
revenge of the rentier (Morris 1982), the class of functionless investors that
Keynes had recommended to eliminate but whose fortunes had been hedged in the
City.
Hegemonic stability in this highly fluid context relied on what in effect was a class
war against organized labour and Left intellectuals, economic warfare against
remaining contenders, and actual Contra wars against progressive regimes and
movements, in Central America, Portuguese Africa and elsewhere. The deepening of
capitalist market discipline was kept in motion by unceasing reform. Structural
instability and a marked tendency towards the concentration of income and wealth at
the top are now in full view thanks to the work of Thomas Piketty (2014). He too
emphasises the global dispersion of production away from the Lockean heartland:
From 1900 to 1980, 70-80 percent of the global production of goods and services
was concentrated in Europe and America, which incontestably dominated the rest
of the world. By 2010, the European-American share had declined to roughly 50
percent, or approximately the same level as in 1860. In all probability, it will

continue to fall and may go as low as 20-30 percent at some point in the twentyfirst century (Piketty 2014: 59).
What remains, but precariously so, are the financial proceeds from dispersed
production through the centralisation of global profits in the West (Panitch and Gindin
2012; Starrs 2014). Yet this control may capsize at short notice. Indeed the collapse of
state socialism has brought to the surface a contradiction that until 1991 remained
relatively invisible, viz., the fact that the relocation of production away from the
original Atlantic heartland has implanted parts of the circuit of productive capital
including its resource bases in states enjoying formal sovereignty. In order to sustain
global capitalism, these states must therefore subordinate their formal sovereignty to
that of capital. Or in the words of Philip Bobbitt, all the leading members of the
society of market-states may come to accept that capital markets have to become
less regulated in order to attract capital investment access to all markets has to be
assured (Bobbitt 2002: 667).
Hence, to cite Claude Serfati, the defence of globalisation against those who
would threaten it should be placed, along with military threats properly speaking,
at the top of the security agenda (Serfati 2001: 12). In combination with the decline
of productive capacity in the West itself, this further works to shift the emphasis in
providing hegemonic stability to the coercive end of the spectrum. Let me list three
aspects to the current form of exercising hegemonic stability.

First, the aspect of the loss of diplomatic conservatismthe replacement of

restraint and courtesy by shrill public diplomacy, insults, etc. I see this as a
consequence of the populism replacing domestic class compromise. Growing
disparities in wealth have reawakened class tensions; and political pragmatism
has been losing ground to ideological extremism (Kupchan and Trubowitz
2007: 9). The liberation of finance across the board from 1930s constraints
also undermines the class compromises with domestic middle classes, so we
now move to a compromise that is primarily achieved horizontally, within a
network of transnational financial elites, who often elect politicians and run
governments from behind the scenes (Hossein-Zadeh 2014).

Hence the concern with access to all markets and the defence of
globalisation (which includes the Rapallo syndrome in relation to EuropeanEurasian rapprochement) today is a shared concern of both the directive
classes in the English-speaking West and the oligarchic cliques enriching
themselves financially by preying on globally dispersed productive and
resource economiesand importantly, accepting hegemonic stability from the
West led by the United States. One sign of this is buying US assets, public and
private. For the United States provides public goods to the globalising
oligarchies (first of all its own) by putting its debt up for purchase. That
means, as Tim Di Muzio has argued (2007), it sells off its power to tax
through public bonds as well as its power to make war.

Therefore, even if hegemonic stability today relies more than ever on coercive
means, the US-led war machine does not stand for a random capability for
violence. It is geared, as Di Muzio highlights, to the task of forcibly opening
up other states for commodification and exploitation, introduce and intensify
what Marx called the silent compulsion of the market across political
jurisdictions sheltered from the complete instantiation of market imperatives
(Di Muzio 2007: 519, cf. 531-2)brief, enforce neoliberal global/good
governance and back up the application of the Shock Doctrine. This has led to
a specific form of economic warfare and application of military force, a new
art of military intervention premised on the temporary occupation and
technocratic reconstruction-reconstitution of illiberal societies (Di Muzio
2007: 517-8).

The United States, then, from this perspective has become the life insurance of the
worlds propertied classes (including the sovereign wealth funds of states potentially
ranged against it, such as China), a super hedge fund that uses its military might
under the auspices of a War on Terror to enforce liberal global governance on the
worlds states. However, this mission is being compromised by rivalries carried over
from the heartland/contender structure that characterised the global political economy
for so long. This legacy leaves a chain of weak spots in the global governance regime,
potentially upsetting it as states retain the options inherent in formal sovereignty.

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Here the nature of the current crisis, dating from 2008, comes back to haunt the
architects and operators of hegemonic stability. As noted, the Global Minotaur, the
mechanism of funding hegemonic stability, has run into trouble too. Of the four ways
in which according to Varoufakis, post-1971 US deficits had been absorbing foreign
surpluses, after 2008 only the sale of US government bonds remainsthe US market
for foreign exports, foreign direct investment into the US, and credit to US
companies, have all been knocked from under it, and the Minotaur in his view
remains fatally wounded (Varoufakis 2013: 226-9, Figs. 9.2, 9.3, 9.5). Indeed as
Streeck has argued, what we are facing today is the final reckoning of the crisis of the
later 1960s, early 1970s after all mechanisms for buying time (the title of the English
translation of his 2013) have been exhaustedinflation, state indebtedness, and
private indebtedness. What awaits us now, according to his pessimistic analysis, is an
attempt to abolish meaningful democracy altogether and replace it with entertainment
(including elections as sports matches) and other forms of distraction. These
increasingly include populist mobilisation for military adventures against demonised
enemiesPutin being the latest one to be targeted for daily media abuse in the West
and presented as a threat. Yet the West retains military superiority (the picture below,
from the Bank of America atlas gives defence budgets in billions of dollars, most
recent figures).

Financing the US war machine, the key element in the contemporary hegemonic
stability, happens to be the one leg of the Minotaur still functioning. Investment in
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the power to tax and the power to make war if we follow Di Muzio, comes mainly
from US domestic investorsthree-quarters of the around $16 trillion Treasury debt
is held there. The rest is held by the Chinese state class, the one state which has a
military even remotely matching the US and NATOs (according to the latest figures,
Chinese state and sovereign wealth funds hold 1.2 trillion dollars in US Treasury
paper, slightly more than Japans 1.1 trillion), OPEC countries (mainly the Gulf Arab
monarchies) 262 billion, Brazil, 251, Caribbean tax havens, 250, and so on further
down. This motley coalition thus assists in the financing of hegemonic stability , in
some cases, as in Chinas, directed against itself.
The Rapallo Syndrome in Yugoslavia and Ukraine
After 1991, the collapse of the Soviet Union and its bloc led to a general weakening
of the post-World War II inter-state grid in the region, with many states succumbing to
their internal and trans-border foreign relations. Along with speculative raids on
illiberal formations in Asia and elsewhere, the foreign policy of the United States has
increasingly become geared to regime change, ideally through colour revolutions as
in Serbia, Albania, Georgia and Ukraine, and Kyrgyzstan.
The NATO intervention in the Yugoslav break-up in the 1990s marks the moment
in which the alliance was transformed into an out-of-area military mechanism through
which the US can impose its strategic interests on the EU, and for which the Soviet
collapse offered the opportunity. Besides serving as a catalyst for expanding the
alliance eastwards, in overt breach of solemn reassurances by Secretary of State Baker
to Gorbachev in 1990-91, the intervention in Yugoslavia was a response to an initial
German foray to which the United States responded and thus gained the upper hand in
ordering the European periphery after the demise of state socialism.
After reunified Germany, with Austria and the Vatican also active, right in 1991
decided to support the aspiration of pro-European elites in Slovenia and Croatia to
secede, the United States responded by encouraging Bosnian Muslim statehood, and
later by siding with the Albanians in Kosovo. By establishing bridgeheads among
Islamic communities in Yugoslavia (also from a perspective of a Central Asian design
to gain access to energy resources left unprotected after the dissolution of the USSR
12

in 1991) it appeared, as Susan Woodward writes, that the United States had chosen to
divide spheres of influence north and south in eastern Europe with Germany
(Woodward 1995: 159-60).
For the continental EU countries, the stakes in Yugoslavia were primarily economic;
for Britain and the United States, global resource politics and military forward
positioning was predominant. This activated the Rapallo syndrome and it was in the
NATO confrontation with Serbia (which retained key characteristics of a contender
state, see my 2006: 270), that the defence of globalisation and hegemonic stability
were finally asserted. Thus a joint operation served to restore the primacy of the
Atlantic bondnot least by compelling France to reintegrate into NATOs military
organisation. Historically the instrument to keep the Russians out, the Americans in,
and the Germans down (in the famous phrase of its second Secretary-General, Lord
Ismay), NATO proved the instrument of choice through which the US hegemon
prevailed over any particular interests on the part of the Europeans. As a Wall Street
investment banker, Richard Holbrooke, entrusted with the Yugoslavia portfolio in the
State Department, was fully literate on the implications of any divergence from the
neoliberal line, just as he was able to see the value of NATO in keeping the EU from
compromising. In his 1995 article in Foreign Affairs, America, a European Power,
Holbrooke argued that the West must expand to central Europe as fast as possible in
fact as well as in spirit, and the United States is ready to lead the way (Holbrooke
1995: 42).
Thus the hegemon, acting for a broader ruling class interest, strikes twice: once to
overcome European hesitations by forcing the allies into the actual confrontation;
secondly, in the attack on the illiberal state/society complex itself. Today this
confrontation has moved up a notch into a confrontation with Russia over Ukraine. In
the crisis over Ukraine that erupted in 2013-14, German-led Old Europe was more
amenable to compromise, but the US and Britain responded in the spirit of the
Rapallo syndrome. The current Russian ruling class, although also on the path of
neoliberal reform, yet is unwilling to submit to the dictates of Western-style
hegemonic stability. It is replicating the role of Serbia in this respect, i.e. at the
receiving end of a policy in which Old Europe too is being disciplined.

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Already at the time of the Kosovo crisis the former Soviet republics of Georgia,
Ukraine, Azerbaijan, and Moldova welcomed Uzbekistan into GUAM constituted the
year before under the auspices of the United States, Britain and Turkey (Uzbekistan
added a second U to the acronym but would soon leave again). Ukraine and
Azerbaijan certainly demonstrated that they took their commitments seriously by
obstructing Russian deliveries to Serbia during the NATO air war. The opening of the
oil pipeline from Baku to Supsa in Georgia in the same year, 1999, highlighted the
geo-economic significance of GUUAM, as for the first time, an energy highway
connected former Soviet republics with the West without Russia exerting its
influence. Among the post-Soviet Caucasus states only Armenia remained allied to
Russia. This of course was also the year in which, with Vladimir Putin taking power
on the basis of a compromise with those oligarchs willing to forego a political role,
Russia was beginning its long climb back from near-disintegration itself (Radvanyi
and Rekacewicz 2000).
At the start of the Bush Jr. presidency, the defence of globalization was focused on
securing oil reserves in the Middle East and on executing the War on Terror for which
the blueprint had been laid down in conferences already during the Reagan era (see
my 2014: 208-11). This conforms to the shifts in emphasis between Republican and
Democratic administrations documented by De Graaff and Van Apeldoorn (2011; they
stress the continuities at the same timenotably in finance) The blueprint for an
intervention in Ukraine was part of the project devised by Stanford International
Relations scholar Stephen D. Krasner after he had been brought to the State
Department as policy planning director under Condoleezza Rice in 2005. Krasner had
long argued against allowing non-Western states to mobilise their sovereignty against
the liberal economic order (cf. Krasner 1985) and in his new capacity Krasner drew
up a list of countries liable to collapse in conflict. His collaborator in this project
was the former US ambassador to Ukraine, Carlos Pascual, who was appointed as
Coordinator for Reconstruction and Stabilization.
In a joint piece in Foreign Affairs Krasner and Pascual made the case for preventive
intervention in weak states (weakness including ethnic or religious divisions) and
then apply a stabilization and reconstruction rulebook to establish the required
market democracy (Krasner and Pascual 2005: 156-7). Indeed there would be no
point waiting for a conflict to erupt before rebuilding a state, Pascual explained in a
14

talk. To create democratic and market-oriented states could also proceed on the basis
of pre-completed contracts [with] countries that are not yet broken and where an
active tearing apart the old might be necessary first (cited in Easterly 2006: 238,
emphasis added). Krasner referred to such pre-completed contracts as voluntary
agreement[s] between recognized national political authorities and an external actor
such as another state or a regional or international organization (Krasner 2005: 70,
emphasis added).
Initially the Bush Jr. administration was not keen on GU(U)AM as it sought Russian
support to invade Afghanistan, but this soon changed again after Russia sided with
the continental European opposition to the invasion of Iraq in 2003 (Cheterian 2004)
In late 2003 a Western-supported take-over brought US-educated Mikhail Sakaashvili
to power in a key GUAM state, Georgia. In 2004, a rock music coup in Ukraine, the
Orange Revolution, in response to electoral fraud by the Party of Regions of Viktor
Yanukovych, a protg of former president L. Kuchma, conveyed that GUAM now
was being turned into a high road of colour revolutions which previously had
occurred in Belgrade and Tirana and from which Minsk or Moscow would not be
exempt either. These colour revolutions tend to follow a common trajectory in which
authentic protest is hijacked by an increasingly sophisticated democracy promotion
machinery headquartered in the US and operating through the revamped NATO
underground (see my 2014: 214-19 and Gent and Rouy 2005). By 2008, with the
eyes of the world focused on the opening ceremony of the Beijing Olympics,
Sakaashvili felt sufficiently bolstered by NATO and Israeli arms and promises to
attack the breakaway province of South Ossetia, only to be beaten back by the
Russian 58th army rushing in from the north (Mardirossian 2008).
After the crisis of 2008 attention in the West temporarily switched to saving the
banks and drawing up the bill that was to be presented to society in the form of
austerity policies after 2010. The Democrats old hand in foreign policy, Zbigniew
Brzezinski, had previously spelled out his own ideas on cutting up Russia in an update
of the old Mackinder argument (Brzezinski 1997) and Ukrainian oligarchs began
investing in US patronage right from the new presidents taking office. According to
the Wall Street Journal the Kiev-based pipeline king, Viktor Pinchuk, Kuchmas sonin-law, in 2009 pledged a five-year, $29 million commitment to the Clinton Global
15

Initiative, to train future Ukrainian leaders to modernize Ukraine. With Hilary

Clinton as Obamas Secretary of State, the fact that the Ukrainian contribution
(mostly Pinchuks) topped the list of foreign donors of the family foundation (before
Britain, Saudi Arabia, Germany, and so on), reveals something about the push and
pull directing the Obama foreign policy (just as its revelation today may be part of
Republican opposition to Hilarys presidential bid). The quest for Western patronage
on the part of Pinchuk aimed at making sure that, as his own foundation put it,
Ukraine become a successful, free, modern country based on European values
(Russia Today 2015).
This aspiration was reciprocated by a series of offers by the EU to the GUAM
countries (minus Uzbekistan) as well as to Belarus and Armenia, to enter into
association agreements with Europe. In 2010 the Russians responded to the EU plans
with a customs union (mutual free trade, a common external tariff) with Belarus and
Kazakhstan. When Yanukovych, elected again on a federalist programme, accepted
the EU offer for a far-reaching free trade agreement between Ukraine and the EU in
2011, he simultaneously proposed a 3+1 formula that would give Ukraine, and
indirectly, the EU, free access to Moscows customs union (the Russian market was
then roughly 30 percent of Ukraines foreign trade). This would expose Russia to the
EUs competitive advantage whilst jeopardising the survival of Ukraines own
Donbass industrial belt, so Moscow imposed trade restrictions on its neighbour. Since
the EU offered nothing whilst Russia promised covering Kievs deficit and unpaid gas
bills, this in mid-2013 swayed the Ukrainian president from proceeding with EU
association.
The Maidan protest occupation that followed would eventually evolve into a fullfledged, Western-supported coup dtat bringing an unelected, anti-Russian
government to power in Kiev. On the one hand, this was achieved via bitter and
continuing struggles between the different clans of oligarchs who had divided the
spoils of Soviet Ukraine among themselves (Yurchenko 2012). On the other, it
instigated a fresh round of rival strategies on the part of the large continental EU
states (Old Europe to use former defence secretary Rumsfelds expression), which
had specific economic aims given its much higher level of trade and investment in
Ukraine and Russia (roughly ten times the US level). The US and Britain and their
16

allies in the former Warsaw Pact states and the ex-Soviet Baltic republics on the other
hand are motivated by military-strategic or just anti-Russian considerations.
Once again the Rapallo syndrome played out here. As the Maidan demonstrations
took on ever more violent forms with incendiary bombs and use of firearms, the US
was temporarily sidelined following the exposure of Assistant Secretary of State (and
neocon holdover) Victoria Nulands low opinion of EU concerns. A foreign ministerlevel EU agreement with Yanukovych was agreed on the 17th that covered an amnesty
for demonstrators, new elections and constitutional changes. However, according to a
detailed report in the New York Times (Higgins and Kramer 2015), on the 20th a
meeting of NATO diplomats (including the US ambassador) took place in the German
embassy in Kiev. Here Andriy Parubiy, founder of the neo-fascist Svoboda party and
in charge of the armed wing of the Maidan revolt (and suspected of a bloodbath
among police and demonstrators immediately following the agreement with
Yanukovych), threatened more serious violence if the president was not removed,
citing a looted armoury in the hands of his supporters in Lviv. The 21st the police
melted away for fear of being targeted and Yanukovych fled Kiev, leaving power in
the hands of the caretaker of Yuliya Timoshenkos party, A. Yatsenyuk, the
Americans favourite; whilst Timoshenkos security chief during the Orange
Revolution, then head of intelligence, became president. The former boxer, V.
Klitschko, Chancellor Merkels choice, on the other hand was sidelined (Sakwa 2015:
83-93).
There is no point detailing further instances of the US and NATO overriding EU
proposals. In each case, violence interrupted what appeared to be EU-brokered
compromise, beginning with the Kiev armys attack on the Donbass rebels (an assault
sanctioned by a visit of CIA director John Brennan the day before); a deadly assault
by neo-fascist volunteers at Slavyansk derailing the Geneva agreement (a mirror
image of the EU agreement with Yanukovych, this time amnesty etc. for the Donbass
occupiers); and finally, the shooting down of Malaysian Airlines flight MH17.
Although here no definitive verdict has been reached at the time of this writing, the
disaster happened just when secret talks on a comprehensive agreement were going on
between President Putin and Chancellor Merkel, which were promptly suspended
(Pagano 2014).
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Russia is not Serbia, and Moscow is obviously still well beyond the reach of USdesigned regime change (under the impact of Western-imposed sanctions, it is
actually restoring the dual roles of a state classwith ministers taking their seats on
company boards of Gazprom, Rosneft, etc.Russia Today 2014). However, the
retooling of a rump-Ukrainian state, albeit practically bankrupt and unable to control
its territory, has certainly put an end to hegemonic stability in Europe. The rumpcountry controlled from Kiev has signed on to a radical neoliberal programme, as
testified by the appointment of several non-Ukrainian (American, Lithuanian and
Georgian) figures from the world of private finance and market-driven health care to
the key posts. Western sanctions against Russia were imposed over the Crimea
secession and also immediately followed the downing of MH17. The Minsk
agreement of September 2014 was brokered by Chancellor Merkel (with Franois
Hollande as an extra to avoid media comparisons to the 1939 Pact) at a juncture
where the Ukrainian army threatened to be annihilated. Also the EU economies were
beginning to feel the pain of Moscows countermeasures and the sanctions themselves
(as in the case of the French-built warships built for Russia but not delivered under
pressure from NATO).
All signs are that the Rapallo syndrome continues to block the resumption of
normal relations between the German-led EU and Russia. So far the much more
competent diplomacy of the Russian foreign ministry continues to outsmart the
contradictory policies coming from the West, both in Ukraine and in the Middle East.
But the continuing tension carries grave risks, not just arising from the confrontation
itself but also from the socially destructive effects of the continuing commitment of
the Russian state class (and its Chinese and Iranian counterparts) to neoliberal
capitalism, a system caught in a world-historic crisis from which no way out can be
imagined other than one drastically rolling back the market discipline of capital.
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