Conflict in Israel-Palestine throws American relations with its Middle Eastern partners into chaos. Oil price rises strengthen the hand of petroleum-producing states, and offer the prospect of a realignment away from the central powers of the United States, Europe and Russia. The West is in retreat, trying to manage a situation in which they are suddenly no longer in control of world events. The year is not 2023 but 50 years ago, 1973, at the outbreak of the Yom Kippur War, which leads Arab oil-producing states to embargo shipments to the US and other supporters of Israel. The anniversary is likely no coincidence and must have been part of Hamas’s plans for its attack on 7 October, but it is worth asking what the difference was between now and then. How have conditions changed? Do the poor have more or less leverage than they did then?
A new book by Henry Farrell and Abraham Newman, Underground Empire: How America Weaponised the World Economy, helps answer this question. The weaponisation of oil in 1973 was possible because of the existence of choke points in the production system. While the US was still a significant producer, western Europe in particular was dependent on shipments from the Middle East. There was a spigot that could be turned on and off to potentially devastating effect. What Underground Empire shows is that directly – and more often indirectly – the US learned its lesson from this moment of exposure. Farrell and Newman describe the rise over the past 50 years of what they call America’s “network imperialism”. In an era where markets were supposedly becoming ever-more disembedded from states, the authors show that the opposite was the case. The US, in particular – with China as an adept late innovator – was, in fact, cleverly devising ways to turn the apparently disordered globe-spanning infrastructures of finance, information, intellectual property and production supply chains into nooses to be held in its hand, controlling and potentially choking out any challenges to American power.
The Opec embargo and the Yom Kippur War were both 1973, but it was also the year of the founding of the Swift (Society for Worldwide Interbank Financial Telecommunication) financial transactions system in the Netherlands by the Dutch banker Jan Kraa. This allowed banks to “talk to each other across borders” replacing the previous system in which operators had to “perform logarithmic calculations using shared code books” to ensure security. By 1975, 270 banks were signed up. Today, more than 11,000 banking institutions send on average of 42 million messages per day. By the late 1990s, Swift was the clearinghouse for most transactions. It also served as an all-important means of what the authors call “warfare without gunsmoke” for the US government against its geopolitical opponents. The first trial run was against a founding member of Opec, Iran, which had wielded the oil weapon itself after the revolution in 1979. By cutting out from Swift those who did business with Iran in the 2010s, the country was effectively quarantined from the global financial system.
The second tool that was used was the so-called Entity List, which prohibited countries from selling US-made technology or products to businesses considered national security risks without a licence. Even though the US had outsourced most of its own manufacturing, it often continued to produce small key components or, more importantly, held the patent on key parts. Since the Trump administration’s declaration of a trade war with Beijing, China has been the primary target for this form of export control, restricting the freedom of manoeuvre of third parties by way of globally enforceable intellectual property law.
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A half-century ago, the coalition of developing countries in the United Nations, called the G77, viewed cutting off oil supply as a way to pressure if not blackmail the richer countries into a broader transformation of international relations that was referred to as the New International Economic Order (NIEO). Even though poorer nations themselves suffered from higher oil prices, the idea was to use the threat of future blockades on other key commodities to compel the Global North into expanding development aid, accept commodity price stabilisation agreements, and perhaps even offer reparations for colonialism. A lesser-known part of the NIEO was the demand for a New International Information Order. Because the capacity to report on global events was highly concentrated in the richer countries, new nations were too frequently dependent on the wire services centred in the old colonial powers for their day-to-day news. The New International Information Order proposed the decentralisation of journalism and communication infrastructure.
Although those demands had little traction in the 1970s, for a moment in the 1990s and early 2000s, some felt that such a democratisation of news creation had emerged with the rise of so-called citizen journalists, and a faith in the open platforms of social networks such as Facebook and Twitter and video platforms like YouTube. Underground Empire shows how misguided such optimism was. The apparently open networks of the internet were always running through fibre-optic cables with choke points as easily identifiable and observable as oil pipelines. While there was a brief idea that fibre-optic technology was harder to spy on because it did not leak audibly in the way that traditional wires did, it soon became clear that it was actually even easier to get complete access with the complicity of the private service providers that operated the internet.
In one of their many evocative passages that makes visible the hidden infrastructure of everyday life, Farrell and Newman describe how “the cables terminated in Folsom Street [in San Francisco], allowing the NSA [the US’s National Security Agency] to use a prism to split the beams of light carrying information along fiber-optic cables into two separate and identical signals. One conveyed people’s emails, Web requests, and data to their expected destinations, while the other was diverted to room 641A. There, it was parsed and analyzed by a Narus STA 6400 machine, built by an Israeli company with deep intelligence community connections.” Private communication became the property of US intelligence. Companies were richly compensated for opening these back doors, they write, and those who baulked were threatened with crippling fines.
Globalisation in the story that Farrell and Newman tell was always quietly reinforcing the unipolar power of the United States. Given their portrait of the world economy in the 2020s, it would seem that any effort in realignment along the lines of the 1970s is doomed to be caught in the networks of the US’s underground empire. Certainly, this is what American policymakers hope. Startling to the authors themselves, parts of the US government picked up on an earlier version of their argument that introduced the term “weaponised interdependence”. Describing the use of choke points in the trade war with China, an official in the Trump administration reportedly remarked “weaponised interdependence. It’s a beautiful thing.” Late last year, the European Commission vice-president Margrethe Vestager used the term too, somewhat fatalistically saying that the EU had “had a hard awakening into the era of weaponised interdependence” after realising the “stark limits of a production model based on cheap Russian energy and cheap Chinese labour”. Is this form of empire one that will be eternal?
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Perhaps. But there might be another way to read their evidence. The outcome of the sanctions regime against Russia suggested that being excluded from the global financial system by the US was perhaps not the immediate death blow that many people expected it to be. While trade denominated in non-dollar terms remains a small (if growing) part of the world economy, there are nascent and halfway plausible efforts at building other empires. Farrell and Newman make clear that for this to have a chance, however, they need a combination of two things: a large domestic market, access to the extractive resources necessary as inputs into a modern digital and still carbon-driven economy, and the means of self-defence against a potential US-backed opponent.
The authors are fans of science fiction and the book is peppered with illuminating references to novels throughout. One comes from Neal Stephenson’s Snow Crash, a 1992 novel that is a vision of the near future of commercialised sovereignty. It bears dim resemblance to the techno utopias of the 1990s – it offered Mark Zuckerberg the possibly Pyrrhic concept of the “metaverse” – but with a much grimmer undertone. Stephenson reminds the reader that Louis XIV’s cannons were inscribed with the slogan ultima ratio regum, or the last argument of kings. None of the would-be decentralisers in Underground Empire, from the Citibank head Walter Wriston who dreamed of an offshore world free of state control to the Ethereum head Vitalik Buterin’s fantasy of decentralised autonomous organisations, are ever able to escape the gravitational pull of state power backed up by the monopoly of violence. It is only the gargantuan “civilisation-states” of Russia and China that have a chance.
Given the story of Underground Empire, we can see that, as was the case 50 years ago, the Palestinian people themselves have no means of fighting a war on their own based on weaponry, finance, information or capital-intensive manufacturing. Then, as now, their putative allies in the region have only limited interest in creating a genuine New International Economic Order that would turn the world economy on its head. Why would they? The current one is serving them too well. The resolution of the first oil crisis was the quadrupling of the world oil price, thus quadrupling the receipts for the Gulf oil-producing states and creating the ocean of liquidity that sloshed into the London property market, private equity and now into futuristic projects of urbanism in the desert and (potentially) green breakthrough technologies. The current conflict in Gaza may have disrupted the détente between Israel and Arab countries but it will not change the bleak fact that in the medium term, the plight of the Palestinian people is no more than a footnote in the region’s power play.
Rhetorically, the dream of realignment is alive. A renewed Declaration of a New International Economic Order passed the UN General Assembly last year. A gathering of the Brics nations (Brazil, Russia, India, China, South Africa) in South Africa promised expanded horizons for so-called South-South collaboration. But what Farrell and Newman’s book helps us to see is how sluggish any potential realignment might be. Fibre-optic cables travel across oceans and cannot be doubled overnight, nor can semiconductor foundries which require investment in the tens of billions and time scales near decades. The vision one leaves their book with is one of great-power conflict where, as usual, those at the bottom of the world’s hierarchy of wealth continue to suffer the most, with no refuge in sight. “What we will not do, because we cannot,” they warn, “is map plausible escape routes from the underground empire. It’s easy to descend into it but not so easy to get out.” In the 1970s, the G77 said what it was calling for was economic decolonisation as a complement to political independence. The underground empire suggests that is further away than ever.
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This article appears in the 08 Nov 2023 issue of the New Statesman, The Age of Fury