"America Alone"?

It’s not just Iran. The Trump Administration is bent on global regime change, undermining the transatlantic alliance.

Appetite for destruction

“The twin pillars of Europe’s place in the world are multilateral rules-based order and the transatlantic alliance. Mr Trump seems to be forcing Europeans to choose between them.”

Charlemagne, The Economist, 19 May 2018

There may be something deeply, if almost certainly accidentally, symbolic about President Donald Trump’s choice of 8 May effectively to withdraw the US from the Joint Comprehensive Plan of Action (JCPOA), to give the Iran nuclear agreement its official name. It is, after all, VE Day, the anniversary of the end of the Second World War in Europe and (although the war in the east was to last a further four months) therefore arguably the start point for the rolling out of the post-war rules-based system which has served the world — including America — well since 1945 and for which the US takes the vast majority of the credit. And yet, as Edward Luce, remarked in the Financial Times (FT, subscriber access only) the following day:

“History may recall [8 May 1945] as the day the US abandoned its belief in its allies…. For the first time in decades, the US is acting without a European partner.”

Two days later, and again based primarily on Mr Trump’s withdrawal from the JCPOA, another FT ‘heavyweight’, Gideon Rachman, opined as follows:

“These policies are not just ‘America First’. Increasingly they look like ‘America Alone’.”

The other policies he had in mind were the US’s withdrawal from the Paris climate change accord; the 14 May move of the US embassy in Israel to Jerusalem; and Washington’s increasing resort to aggressive unilateralism in its trade relations. All in order to address the key question he poses at the outset, ie:

“Can America run the world without allies?”.

Power to the POTUS

“…while Mr Trump has never hidden his allergy to multilateralism, today his cabinet has fewer dissenting voices.”

Charlemagne, The Economist, 19 May 2018

It seems that the unilateralists hawks who now have their hands firmly on the foreign policy levers and the economic nationalists who dominate on trade — individuals who share Mr Trump’s world view — believe that it can.

In common with Mr Rachman, in the short- to medium-term I suspect they are probably correct. America probably can rely on the “power-based order” to which it is shifting under Mr Trump’s leadership.

“Our currency, your problem”

“The global financial system is like a sewer and all of the pipes run through New York.”

Jarrett Blanc, Carnegie Endowment for International Peace, May 2018

Mr Rachman sees underpinning this not primarily America’s military muscle, important though that is, but its economic supremacy, the cornerstone of which is its “central role in the global financial system” — as the 61st Secretary to the US Treasury, John Connally suggested in the quote I paraphrase as the heading to this section. The Economist of 19 May (‘America must use sanctions cautiously’ — subscriber access only) elaborates thus:

“The world depends on America’s currency, and hence on access to dollar payments systems and the banks America has effective control over. Greenbacks fuel trade everywhere. On average, countries’ dollar imports are worth five times what they buy from America. More than half of all global cross-border debt is dollar-denominated. Dollars make up nearly two-thirds of central-bank reserves. That gives the Treasury a veto over much of global commerce.”

As far as Europe is concerned, this is clearly correct, as the example of how to respond to Mr Trump’s move on Iran makes abundantly clear. I am confident Europe’s politicians will do what they can to try to keep the nuclear agreement alive; and that Tehran will not take any immediate action which would kill it off completely despite longstanding hardliner opposition to the deal. But I doubt the Europeans — despite Mr Trump’s u-turn on ZTE, which was punished by the US for breaches of sanctions on Iran and North Korea — can either secure exemptions from secondary US sanctions for their companies or provide them with persuasive protection in any other way. And, in the light of the experience of the likes of BNP Paribas, absent assured immunity from punishment by the US it would be a brave company indeed which would do business in or with Iran, even indirectly. As the article in The Economist which I cited earlier puts it:

“…faced with the threat of being cut off from American markets and banks, European firms probably have little choice but to follow America’s lead.”

This is certainly the view of Jeremy Shapiro, writing in Foreign Policy on 15 May under the heading 'Why Trump can safely ignore Europe' as follows:

“But laments and indignation do not add up to strategy. The real question is not whether Europeans are pissed off but whether they will do anything in response to [Mr] Trump’s actions. The answer is most likely no.”

However, he continues…

“[Mr] Trump’s withdrawal from the deal is therefore not merely a threat to regional stability and nonproliferation but also a repudiation of the notion that Europe can influence the United States on difficult security issues”.

In other words, the ‘collateral damage’ to transatlantic relations stands to be significant. Or, as Mr Rachman puts it — and contrary to what seems to be the prevailing view in Washington — the shift there is not “cost free”.

The consequent costs may not be immediately apparent. But, over time, they are likely increasingly to manifest themselves not only through individual initiatives such as the gradual setting up of alternative payment systems (more on which below), but also — and much more fundamentally — through the erosion of America’s legitimacy as the global leader if Washington insists on laying “down the law and others are compelled to follow”. So, the ‘real question’ is not whether the transatlantic relationship be damaged but just how great the damage will be.

As Steven Erlanger reflects in the 9 May edition of The New York Times and as Mr Rachman’s examples above make clear, for the Europeans the conduct of the Trump Administration now amounts to “a familiar, humiliating pattern”. But this is only the first part of the Europeans’ problem. The second is finding a response on which the EU, highly committed to multilateralism more or less by definition, could agree and which would offer a reasonable prospect of preserving the transatlantic alliance. As former French ambassador in Washington Pierre Vimont puts it:

“Nobody thinks the transatlantic alliance is over. But how do we make it work with a US leadership that doesn’t want to play the role of leader? How do we move ahead in a world, not without the US, but with an American leadership not willing to play its traditional role?”

One suspects that at least some Europeans may be betting on Mr Trump failing to win a second term. But it is far from being an odds-on certainty that he will be defeated in 2020 (let alone fail to complete his first term). In which case, Ivan H Daalder, a former US ambassador to Nato, may be correct when he says:

“At some point — after having pushed the Europeans on Nato, Paris, the Jerusalem embassy move, trade and now Iran — the Europeans will come to the conclusion that they’re better off going their own way. And that point is rapidly approaching.”

In any case, as Charlemagne astutely points out in The Economist of 19 May:

“…it would be myopic to blame The Donald alone for the sense of transatlantic drift. The end of the cold war, and growing threats elsewhere, set America on a different geopolitical course. Even Barack Obama, who believed in alliances and knew how to appeal to Europeans’ vanity, wanted to pivot America towards Asia. It is hard to imagine a president who would not. Mr Trump’s successors may not share his aversion to partnership. But nor will they preside over a return to the status quo ante.”

Divided we fall

“Looking at the latest decisions of Donald Trump, someone could even think: with friends like that, who needs enemies.”

Donald Tusk, 16 May 2018

However, even the President of the European Council is correct that Mr Trump’s “capricious assertiveness” has forced Europe to lose its illusions evolving to cope with what is almost certainly the ‘new normal’ will not be easy for the EU. Charlemagne again:

“…maintaining unity is difficult when many European countries, especially in the east, are not convinced that they must line up with their own continental partners in geopolitical affairs. Only last week three governments vetoed a planned EU statement condemning Mr Trump’s decision to move America’s Israeli embassy to Jerusalem. Standing up to Mr Trump feels intoxicating, but Europe’s options are limited by its own divisions and dependence.”

As the FT points out, one very important and possibly immediate test of Europe’s determination may well arise if Washington decides it wants Iran locked out of Swift international secure cross-border payments system which answers to Brussels. President Barack Obama did manage to persuade the Europeans to close Swift to Iran in 2012; but the prevailing circumstances at that time were very different to today’s and EU and US interests were broadly aligned. Nevertheless, Mr Trump may well be able to force the Europeans’ hand — but only at the cost of increasing the probability of the likes of China setting up an alternative payments system, something which not only Beijing but also Moscow is very open about wanting and which would likely quickly win support among countries which wished to minimise its exposure to Washington’s throwing its weight around. This would likely prove to be the thin end of the proverbial wedge. The FT again:

“The widening transatlantic divisions are ominous. In less than two months, the US-led Nato alliance will hold its annual meeting in Brussels. Mr Trump is rediscovering his old habit of openly questioning the value of the alliance. Mr Tusk says ‘we have got rid of all illusions’ about US support. Mr Trump may be right about the allies needing to spend more on defence. But he is wrong to assume that friendships are purely transactional.”

Indeed, for the transatlantic alliance this looks very much like a path which would soon find it following William Shakespeare’s famous stage direction from 'A Winter’s Tale', ie “exit, pursued by a bear”. And, of course, a dragon.

Alastair Newton