How US power came out from the shadows
The support of Ukraine has reminded the world that the United States is a military and financial superpower capable of standing up against dictators.
Washington| On February 23, when Ukraine forces used a cache of American Javelin missiles to send hellfire into a row of invading Russian tanks, they caught, first-hand, a glimpse of the extraordinary military might of the United States.
Less than 24 hours later, Russia got a taste of a different type of US weaponry. It was a sentence from US President Joe Biden that spelled it out. “We’ve cut off the Russian government from Western finance.”
US President Joe Biden announcing additional security assistance to Ukraine this week. AP
The words sent an economic missile into Russia’s MOEX sharemarket index, causing a $US189 billion ($256 billion) haemorrhaging of shareholder wealth in a single day – the fifth-worst in the history of any global index – and sending the rouble plunging to the value of an American penny.
The damage has been extraordinary, especially considering not a single US soldier’s boot has stepped into Ukraine. This week, Biden announced another $US800 million of assistance to Ukraine, including hundreds of anti-air systems and thousands of anti-tank weapons.
“The American people are answering President [Volodymyr] Zelensky’s call for more help, more weapons for Ukraine to defend itself, more tools to fight Russian aggression,” he said.
“It demonstrates our commitment to sending our most cutting-edge systems to Ukraine for its defence. And we are crippling Putin’s economy with punishing sanctions that’s going to only grow more painful over time.”
As Australia’s director-general of the Office of National Intelligence, Andrew Shearer, reminded guests at The Australian Financial Review’s Business Summit last week, America’s military power alongside its technological and economic strength is unmatched.
“We’re seeing in the US-led sanctions an extraordinary mobilisation of financial power, and a reminder that, when sometimes we’re inclined to think the US may in fact be in decline, that the reservoirs of American power run incredibly deep,” he said.
Depths of military might
How deep those reservoirs are and how they are used have become two of the most important questions being asked by the Western world right now.
Although still robust, the US defence budget is barely breaking 3 per cent of GDP. During the Cold War, military spending was between 5 per cent and 6 per cent.
The Heritage Foundation’s senior research fellow, Dakota Wood – who pulls together the leading annual military capacity index for US defence, assessing everything from the number of submarines to paper clips on desks – gives a snapshot of the level of the US military reservoir.
“At the end of the Cold War, the US army had almost 800,000 troops in the active component. Today, the army has 480,000,” he says.
“In the late 1980s, the navy had nearly 600 ships. Today, they have fewer than 300. Air Force pilots in the Cold War used to fly 200-plus hours a year, today it’s 120.”
Comparisons with China are also frightening on a material capacity and readiness basis, but China’s experience in terms of command and control in the battlefield is not as superior as America’s.
Still, Wood says that in America’s current state, it could not fight two theatres of war in Europe and the Indo-Pacific like it did in World War II.
“If you got all the available military capabilities through all the different theatres where it’s currently deployed, the US would likely have the ability to handle one major conflict,” he says.
“People realise that if you commit to one theatre, there’s not going to be a whole lot left over to ride to the rescue anywhere else. If the US has to commit to Europe, to deal with Russia, China will see great opportunity to make its move on Taiwan.”
Wood says that everybody counts everybody else’s military capabilities, so this shortfall in reservoirs, “is no secret”.
“Vast intelligence services, in Beijing and in Moscow, track naval deployments and flight patterns from the US Air Force deployments. They look at the same bunch of documents that we look at about what the army is buying, when the Marine Corps are buying, and production problems they have.”
Cyber mystery
But it’s a lot harder to track the US cyber and intelligence-gathering capabilities.
In 2020, a record $US85.8 billion was approved in the US intelligence budget consisting of two major components: the National Intelligence Program and the Military Intelligence Program. This includes everything from open-source intelligence collection to signals, imagery and human intelligence – all of which have been crucial in the Ukraine conflict.
Former CIA senior intelligence officer Martijn Rasser, now a director of the Technology and National Security Program at the Centre for a New American Security, says it’s hard to measure the reservoir of US cyber capability and intelligence at any one point, let alone in Ukraine.
“What’s been remarkable ... is that Zelensky and other Ukrainian officials are still broadcasting on television, that they’re on radio, they’re all over social media, and it appears that Russia is powerless to stop it,” he says.
“I was expecting Russians to decimate Ukraine in cyberspace. For whatever reason, Russia really hasn’t used cyber as an instrument of war, much at all in this conflict.”
Microsoft’s Threat Intelligence Centre in Seattle was reported as playing a crucial role in this.
Three hours after the Russian invasion, Microsoft identified a piece of “wiper” malware aimed at the country’s government ministries and financial institutions and reported it to Ukraine’s top cyber defence authority and the White House’s deputy national security adviser for cyber and emerging technologies Anne Neuberger.
Microsoft had the code to block the malware and shared it with other prospective targets of Russian aggression.
“In terms of US capabilities, so much of it is classified, so there’s very little in the public domain that would actually give us a good indication of how good a country like the United States is,” says Rasser.
“So much of this is happening in the shadows and, in a military conflict, it’s interwoven with all the other operations, so it becomes harder to distinguish.”
But, as he points out, “absence of evidence is not evidence of absence”.
Biden observed after the withdrawal of Afghanistan that the US could still “conduct effective counterterrorism missions against terrorist groups in multiple countries where we don’t have a permanent military presence”.
Financial clout
While the US military and cyber power has superiority, the big ticket weapon is financial power.
Castellum.AI, a company building the world’s largest compliance database, notes that Russia is now the world’s most sanctioned country. “The crippling economic sanctions which targeted Iran were adopted over the course of nearly 10 years. Half of the sanctions adopted against Russia have been implemented in 10 days.”
Russia is now subject to more than 7000 targeted sanctions, more than Iran, Venezuela, Myanmar and Cuba combined. The US has slapped sanctions on more than a dozen Russian oligarchs and others in President Vladimir Putin’s inner circle, including his so-called chef Yevgeny Prigozhin, whose elite restaurants cater for Kremlin banquets.
Multimillion-dollar yachts and private jets have been seized and real estate assets frozen. Russian diamonds and commodities have been banned, and exports of crucial technology into Russia are now illegal.
Western companies have also bailed out of Russia – from McDonald’s, Coca-Cola and Pepsi, to JP Morgan, Goldman Sachs, American Express, Mastercard and Visa.
But the biggest move in the sanctions war came from cutting off Russia’s central bank and its top 10 commercial banks from the SWIFT payment system.
Kicking a country out of the US dollar system is a profound statement. In 2020, the Congressional Research Service found that central banks around the world held 61 per cent of their foreign exchange reserves in US dollars, that half of international trade was invoiced in dollars, and about half of all international loans and global debt securities were denominated in dollars.
Furthermore, in foreign exchange markets, where currencies are traded, dollars are involved in nearly 90 per cent of all transactions.
The world’s most powerful banker, Federal Reserve chairman Jerome Powell, this week backed the sanctions against Russia.
Paul Massaro, who advises on sanctions at the US Congress’ Commission on Security and Co-operation in Europe, says the sanctions are as tough as any he has seen in decades.
And macroeconomist at the Centre for Strategic and International Studies, Gerard DiPippo, says the sanctions have been “a massive shock to Russia’s economy and, if sustained, could be crippling”.
“These sanctions have triggered an enormous depreciation of the Russian rouble and are causing rapid inflation and shortages for Russian consumers,” he says.
But others, such as economist Peter Earle, point out that severe sanctions didn’t stop Iran and North Korea from developing weapons of mass destruction.
“They may in some cases entrench dictators ... Syria is one example. There’s evidence that sanctions made Bashar al-Assad and the forces fighting on his behalf more ruthless as the financial/trade ratchet tightened,” he says.
Quest to join NATO
The question for many strategists now becomes how far should the US go in deploying its power, and how far will it go when it comes to protecting other democracies?
Ash Jain, director for democratic order with the Scowcroft Centre for Strategy and Security at the Atlantic Council, says there is growing nervousness from countries that stand outside organisations such as NATO.
“Biden’s reaffirmation of NATO Article 5 and his pledge to defend “every inch” of NATO territory has been comforting to NATO allies, and those with similar security commitments such as Australia, Japan, and South Korea, as it signals a clear and unequivocal US commitment to their defence,” he says.
“But what Russia is doing to Ukraine has raised alarm among many democracies that stand outside of these protective umbrellas. They are left wondering what will happen to them if they are one day faced with the prospect of an attack by Russia or China against their territories.
“That’s why we’re seeing a sudden surge of interest in NATO membership among countries like Sweden and Finland. And Taiwan is certainly going to be looking for greater US assurances in light of what’s taking place in Ukraine.”
Australia’s chairman of the Parliamentary Joint Committee on Intelligence and Security, James Paterson, who met with officials from the CIA, FBI, National Security Agency and Congress in Washington this month, certainly gets the sense the US would go as far.
“The United States has already imposed sanctions on some Chinese companies like Huawei to prevent them from getting access to US technology in peace time,” he says.
Nadia Schadlow, an expert in Foreign Policy International Relations at Hudson Institute, says there are some big decisions coming, not just for the US, but for its allies too.
“I think this has been a wake-up call for our allies and partners,” she says. “Russia’s invasion of Ukraine has reminded us that military power still matters.
“Russia, as well as other revisionist powers, cannot be deterred and, if necessary, defeated simply through repeated praises of democratic principles or international rules.
“Military power underpins other economic and political instruments. All three need to be working together to deter war and shape positive developments, and restore and keep peace.”
In September, when Biden met with Zelensky, the US President was clear. “Ukraine’s success is central to the global struggle between democracy and autocracy.”
Two months later, just before his summit on democracy, Biden pointed out that: “Both Putin and Xi Jinping have indicated to me that they don’t think democracies can work in the 21st century because it takes too long to arrive at a consensus; that’s why autocracies are going to win the day.
“The question the world is asking: Is America really back? They’re asking if American democracy can deliver? My answer is: Not only can we deliver, we have to deliver.”
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