Drawing geoeconomics redlines, few takeaways

Often major powers draw redlines regarding security and defence spheres. What was limited to military affairs has now crept into the field of geoeconomics. Already military type redlines have had the history of failing to accomplish the objectives for which these were placed in the first place. Now the West is relying on geoeconomics redlines. What would be their fate be. Read for more… 

Redlines are defined as limit of tolerance a power imposes in the shape of  boundary, crossing, demarcation or condition that others should conform to, respect and must avoid probable breach of it lest incurring punitive action on behalf of the issuer or at his behest by some other entity.

Breach of redlines can occur in two way: an actual happening of the breach observed or recorded is the common one. The second one is the most potent in the sense an issuer presumes the breach could probably occur in the near future. Although it may be not sensible to the outside world an issuer could declare it as fait accompli and carry on. Huawei ban by America rests on the second pillar even though there was no evidence produced by USA. 

Importantly, when such breach occurred an issuer of redlines can simply ignore it after making hue & cry. An illustration often seen in geoeconomics relates to Iran. She continues to supply fuel to countries such as Venezuela, Syria and now to Lebanon in open defiance of all sanctions regime covering imports of fuel by the above countries. The fact of the matter is the oil transported is by Iranian tankers over which any attack would be construed by Iran as declaration of war.

After making several threats USA cowed down because of the ramifications surrounding the oil embargo. Here the threats of such announcements are not to be taken as credible. To make a credible threat an issuer needs both offensive and defensive postures to punish both parties. Similar to Iran, North Korea is also under sanctions, this time BY UN Security Council. Both Russia & China openly violates UN Security Council resolutions on the basis of human rights, the mantra USA bandied in several occasions when invading less powerful nations such as Panama, Iraq, Afghanistan and Syria and so on.

In certain cases an issuer does not fly off the handle on a purported breach but bides for time to bring down retribution from another quarter. Placing Pakistan in grey list of Financial Action Task Force (FATF) after accusing her to have facilitated money laundering on anecdotal evidence that remains unsubstantiated till today has done more damages to her than any forceful retaliation by USA and its allies. Evidently, Pakistan has suffered financial losses to the tune of $38 Billion.

But the most troublesome feature of redlines saga is the dichotomy between declared redlines and undisclosed redlines. America is the solo country that declares geoeconomics redlines more often. A good example is that America girds up for confrontation with any party that makes counterfeit of greenback anywhere in the world.

Undisclosed geoeconomics redlines are though not expressed in black white could be surmised somewhat by the nuances in official statements put out by both America & China. Both titans have these in their back of their minds. USA for example considers de-dollarization as an undisclosed redline.  Not to be outdone China would defend to the hilt any defanging of her Renminbi!

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

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E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist