Return to Winter: Russia, China, and the New Cold War Against America (28 page)

The Obama administration’s first major betrayal of our European allies came in 2009, with the decision to scrap the Bush-era plan to install ground-based interceptor missiles in Poland—a technology that would have been able to deter ICBMs, SLBMs, and other offensive
missiles. Instead, the U.S. would deploy a system of reconfigured SM-3 missiles, first on ships and later in Romania, to counter the Iranian missile threat.
¹⁰⁰
SM-3s are part of the Aegis ship-based system, and they are only really effective against short- and medium-range missiles, not ICBMs. Obama claimed that the decision had nothing to do with Russia opposition; it was based, he said, on the notion that the reconfigured SM-3s could be procured more quickly than the bigger interceptors originally envisioned, and that they could shoot down missiles that already exist in the Iranian arsenal. The U.S. would upgrade the SM-3s in a four-phase plan that would, by 2020, be able to counter intercontinental ballistic missiles (ICBMs)—but the SM-3s would be operational against Iranian-type missiles much sooner than that.
¹⁰¹
Russia seemed guardedly pleased. President Medvedev said, “We appreciate the responsible approach of the U.S. president toward implementing our agreements.”
¹⁰²

Thanks to WikiLeaks, we now know that the Obama administration did, in fact, renege on America’s commitments to missile defense in Poland and the Czech Republic to appease Russia. The anti-secrecy organization obtained State Department cables from 2010 that show that Obama scrapped the plan “in hopes of securing Russia’s support for sanctions against Iran.” The release of the cables “confirmed Poland’s worst suspicions and contradicted the administration’s denials that the change in plans was prompted by concerns about Russia,” writes Benjamin Weinthal, a correspondent for the
Jerusalem Post
.
¹⁰³

The administration justified its new missile-defense stance with a fresh intelligence assessment that Iran’s development of long-range missiles was slowing down, meaning that the Bush plan’s emphasis on interceptors for long-range missiles would not be essential. But Henry “Trey” Obering III, a retired Air Force lieutenant general and former head of the Pentagon’s Missile Defense Agency, scoffed at that claim. Obering argued that Iran’s satellite launch and solid-rocket tests in
2009—the same year Obama changed course—showed that Iran was making progress on long-range missiles. “I am very surprised by the new intelligence assessment,” Obering said in 2009. “It is dramatically different from what we were told last spring. To me it flies in the face of what is observable.” Obering believed that the administration’s decision to cancel the ground-based interceptors was designed to boost a diplomatic offensive with Iran and the “reset” with Russia.
¹⁰⁴
The reset, of course, has taken its place on the ash heap of history.

The change in policy caused a rift with U.S. allies. “After today,” said Polish Foreign Minister Radek Sikorski when the announcement was made in 2009, “I think we all know that if we are to look to somebody, we have to look to ourselves.”
¹⁰⁵
After the WikiLeaks cables were published, Polish Prime Minister Donald Tusk commented: “I’m worried—if it really is true—that the U.S. made decisions about our security with mainly its relations with Russia in mind and not the objective security of NATO allies. If the first interpretations and leaks are confirmed, I can only have the satisfaction of being the first prime minister over the past 15 years who isn’t so enchanted with our ally.”
¹⁰⁶

A few years later, Poland announced that it would invest $400 million in its own missile-defense system, which, by 2023, will be integrated into the NATO missile shield. Once more, Russian officials threatened to deploy tactical weapons in Kaliningrad. Gener Koziej, the head of Poland’s National Security Bureau, called the Russian threat “blackmailing which would have been impossible if Poland had powerful missile defense.”
¹⁰⁷

We learned something else from the WikiLeaks cables: just how important American missile-defense plans are to the Russians, and how worried they are when we take any steps to further them (and Russian incursions into Ukraine demonstrate how vital it is to Moscow that Eastern Europe not be protected by American military installations).
Even after the U.S. announced the new system, the cables reveal, American officials viewed the refurbished platform as usable against Russia, should that be needed—contrary to what they had been telling Moscow.
The Guardian
in the UK reported that a senior U.S. official told Poland that the new system could shield against rocket attacks from Iran or Syria but that it could also protect against “missiles coming from elsewhere”—in other words, Russia.
¹⁰⁸

The Russians didn’t know at the time that the U.S. saw the missiles as weapons for potential use against Russia, but Moscow nonetheless had insisted all along that the U.S. make a promise to never use the system against them. The United States refused to do so, prompting Nikolai Makarov, the chief of the general staff of the Russian armed forces, to threaten a preemptive strike against the missile systems: “Taking into account a missile-defense system’s destabilizing nature, that is, the creation of an illusion that a disarming strike can be launched with impunity, a decision on preemptive use of the attack weapons available will be made when the situation worsens.”
¹⁰⁹
In November 2012, shortly after the U.S. presidential election, Russia’s deputy prime minister, Dmitri Rogozin, expressed the nervousness in Russia about American missile defense, saying: “We hope that now, after his reelection, President Obama will be more flexible on taking into account the opinions of Russia and other countries on the configuration of NATO missile defense.”
¹¹⁰

And “flexibility” is exactly what President Obama showed in early 2013, when he made the announcement that the U.S. would scrap the crucial fourth phase of its already-downgraded European missile-defense plan and move an additional 14 interceptors to the Pacific to protect against North Korea.
¹¹¹
This fourth phase, as noted in Chapter 1, would have upgraded the SM-3s to make them at least theoretically viable against ICBMs. As it stands, the European shield is effectively neutered, but it has achieved “interim operability,” which means Europe
is currently protected against short- and intermediate-range ballistic missiles. In short: There is a NATO missile-defense shield in Europe; it is operable, but it is useless against the Russians because Obama has repeatedly given in to their demands.

What might future WikiLeaks cables tell us about these decisions?

An Inadequate, Ill-Conceived Defense

The administration’s March 2013 announcement shifting missile-defense priorities from Europe to the Pacific was disturbing for two key reasons: First, as indicated earlier, it revealed utter strategic confusion. Nothing was happening on the European continent to indicate that it was wise to pull back from missile defense—quite the contrary. Our allies in Western Europe feel as threatened by the potential of an Iranian nuke—and the actuality of Russian ones—as they did before.

Second, the interceptor that was the defining piece of the fourth phase—the ICBM-capable interceptor now scrapped in Europe—is the only element of the system that provided the capacity to defend the U.S. homeland, according to Mike Rogers. “I fear there is now a choice between defending ourselves and defending our allies,” he said. If the administration didn’t push for a major new funding infusion into missile defense, he warned, we would be forced to tell our European allies—for the third time since 2009—that our plans for missile defense on the Continent had changed.
¹¹²

And where do the administration’s decisions leave the American people, in terms of missile defense? Unfortunately, they leave us protected by an incomplete and inadequate system. While some might be encouraged to learn that the United States has added 14 ground-based interceptors in Alaska to the 30 already deployed on the West Coast to defend the mainland, there is less here than meets the eye. For one thing, the interceptors, 44 in all, only get us back to the total
number achieved under the Bush administration, which had eventually envisioned having 54.
¹¹³
Moreover, the new interceptors lack the technological improvements that the Bush administration had supported.
¹¹⁴

The system today, John Kyl explains, could probably guard against the current threat from North Korea, but not against an attack from Russia or China, which have more advanced capabilities. “On missile defense, then,” he says, “the U.S. is now stuck with numbers and technology capable of dealing only with low-level threats.”
¹¹⁵
Meanwhile, just a month before our unsuccessful test at Vandenberg Air Force base, the Russian Strategic Missile Forces tested a prototype of a new ICBM. This was no ordinary missile. Deputy Premier Dmitri Rogozin called it “a missile-defense killer.” He boasted: “Neither modern nor future American missile-defense means will be able to stop this missile from hitting its target directly.”
¹¹⁶
The new missile has a range of 6,835 miles and is the most sophisticated and powerful weapon of its kind. It’s also a major setback to our efforts to engage the Russians on nuclear reduction.

So for all their bluster against our missile-defense systems, the Russians are eagerly constructing their own. Russia has been rapidly upgrading radar and interceptor systems around St. Petersburg and in Russia’s exclave in Kaliningrad.
¹¹⁷
These systems will probably include the forthcoming cutting-edge S-500 interceptor system, which is highly mobile and much more difficult to neutralize.
¹¹⁸
Putin had originally threatened that he would carry out these deployments if we completed the NATO missile shield. Obama backed down on European missile defense in early 2013, but Putin went ahead anyway with aggressive deployment of Russian missile-defense assets in Europe.
¹¹⁹

Here’s a perfect example of how Moscow talks one way for public consumption while acting in an entirely different way in pursuit of its interests. “It’s one of those historical ironies that the Russians, who scream the loudest about our missile defenses, like to ignore, and like us
to ignore, that they keep on building them,” says Mike Rogers, noting that Moscow’s expansion of its missile defenses included nuclear-armed interceptors around Moscow. And he quotes what a former defense secretary told him about treaties with Russia: “We build, they build. We stop, they build.”
¹²⁰

Whatever the cause of U.S. missile-defense failures—Obama’s disinterest, design flaws dating back to the Bush administration, or a combination of these, along with failure to modernize—the program’s defects
must
be corrected, and soon. They need to be corrected before Iran’s nuclear program is up and running or before Kim Jong Un decides that he isn’t interested in talking anymore, and before our relations deteriorate further with Russia—a nation armed with missiles capable of hitting us today.

CONCLUSION

Despite our technological superiority and long history of providing whatever resources were necessary to protect our mainland, the United States has been continually scaling back its nuclear weaponry and nuclear defenses, even as every important adversarial regime is rapidly ramping up its own. Our nuclear stockpile and our missile-defense platform have been systematically downgraded at a time when Russia and China are aggressively modernizing their nuclear technology—and while rogue regimes, such as the ones we examined in Chapter 2, continue to build, stockpile, and proliferate these weapons and technologies.

In previous chapters, in discussing the inadequacy of American responses to the Axis, we have been careful not to lay the blame solely at the current administration’s door. For the most part, these are complex developments, and responsibility can be broadly shared. But in the nuclear area, the Obama administration has been uniquely at fault.
The root of the problem is President Obama’s much-touted desire to get to nuclear zero.

As we have noted before, the notion of nuclear zero is, in the abstract, a noble aspiration, one that no less a Cold Warrior than Ronald Reagan shared. But Reagan’s plan to get to nuclear zero was the polar opposite of the current president’s: Reagan believed, admittedly with some paradox, that the way to reduce arsenals was first to increase them, on the American side—applying so much pressure that the Russians would come to him and agree on serious reductions. In 1987, this strategy came to fruition with the landmark INF Treaty eliminating intermediate-range nuclear and conventional ballistic missiles. The number of nuclear weapons in the world has drastically fallen since Cold War days, demonstrating the wisdom and courage of President Reagan’s approach.

Obama, however, apparently believes that he can reduce weaponry by doing what Reagan would never dream of: bargaining away America’s nuclear deterrent, in the belief that our adversaries, inspired by our nobility, will follow suit. This kind of wishful thinking afflicted the leftists of Reagan’s own era; they called for a unilateral nuclear freeze in the hopes that the Soviets would happily join us. Reagan was never tempted by such naiveté. Yet Obama, a generation later, seems to be reliving this liberal dream. He and his closest advisers must see by now that their approach is not working. Yet it is not clear that they have the political will—let alone the financial wherewithal—to reverse course.

As President Obama said at Berlin’s Brandenburg Gate in 2013, “Peace with justice means pursuing the security of a world without nuclear weapons—no matter how distant that dream may be.”
¹²¹
The dream remains distant for the world, but perhaps closer for the United States than anyone had previously imagined.

CHAPTER 6

The Economic Contest: America on the Sidelines

“What’s happening is a zero-sum game between China and the U.S. where their gain is our loss. It’s about the fact that we don’t make things any more, that we lost our manufacturing base, the 25 million people who can’t find a decent job in this country, the zero wage growth. I want consumers to connect the dots, to go to any store and look at the label and connect the dots between buying cheap China products, which is better for the wallet, and all the other things we lose, like jobs.”

—
PETER NAVARRO, CO-AUTHOR OF
DEATH BY CHINA
¹

“Energy supplies are important in the run-up to winter. I hope you won’t freeze.”

—
RUSSIAN DEPUTY PREMIER DMITRI ROGOZIN, ADDRESSING MOLDOVANS CONSIDERING JOINING THE EU RATHER THAN RUSSIA’S CUSTOMS UNION
²

“I
t will be the same old Smithfield, only better,” Smithfield Foods CEO Larry Pope told a skeptical U.S. Agricultural Committee in July 2013.
³
Pope was trying to reassure skeptical senators that all would be well after China’s Shuanghui International Holdings had paid $4.7 billion to acquire the iconic American company—the largest Chinese acquisition of a U.S. company in history.
⁴
The deal was the latest Chinese effort to acquire companies that could supply a resource needed back home—but this was the first one involving food. Business analysts saw the Smithfield purchase as a way for America to export
more of Smithfield’s products to China—the world’s largest pork market. Many in Congress voiced concerns about the implications of the deal, but it seems to be a fait accompli and a shining example of China’s tireless pursuit of economic advantage around the world—including right here in the U.S.

Along with a French private equity firm, a Chinese conglomerate has taken over the French resort company Club Med. China’s state-owned companies control oil and gas pipelines from Turkmenistan to China and from South Sudan to the Red Sea, with more to come.
⁵
The catch phrase “American Made, Chinese Owned” was common parlance in the 2012 presidential election, and for good reason. Even Detroit, symbolic home of American auto might, at least before it declared bankruptcy in 2013, is slowly giving way: Chinese car companies are proliferating in number and expanding their reach in the distressed Motor City, which is in no shape to resist Chinese intrusion.

By now, even casual observers in America are familiar with the story on China: The Chinese are buying up the world, pursuing economic domination through the power of their apparently limitless cash and labor force. It’s often called “China, Inc.” Beijing’s investment dollars have penetrated every continent, and its cheap labor has killed countless jobs in Europe and the United States. Operating without the democratic pressures that force Western companies to observe established norms and at least pay lip service to social responsibility, Chinese firms have had an open playing field, especially in the developing world, where many despotic governments, on the outs with Western governments over human-rights issues, have welcomed Beijing’s cash. At the same time, the Chinese juggernaut faces mounting political and economic challenges: slowing growth, rampant inequality, massive corruption, environmental degradation, and widespread anger over human-rights abuses and lack of political freedom.

In Russia, too, the economic landscape has shifted over the last five years as the country’s powerhouse energy industry has ran into tough new competition, and as Vladimir Putin has faced political criticism and opposition movements. Russia’s economy has even more serious challenges ahead than China’s. GDP growth has slowed almost to a halt, especially as the energy market has been transformed by the advent of shale gas and the expansion of liquefied natural gas, both of which are cutting into the profit margins of Russia’s state-owned energy giant, Gazprom. While Putin has directed Gazprom’s leaders to respond more creatively to these challenges, he is also looking for stability from other economic sources, such as gold. Putin made Russia the world’s biggest gold buyer in 2013. “The more gold a country has, the more sovereignty it will have if there’s a cataclysm with the dollar, the euro, the pound or any other reserve currency,” said Evgeny Fedorov, a lawmaker in Putin’s United Russia party.
⁶

Where some American commentators take heart in Russia’s recent economic struggles—and the American-led shale-gas boom is certainly worth celebrating—they often lose sight of the impact that economic adversity is having in Moscow. A difficult economic climate makes Russia a more, not less, provocative adversary. Declining economic growth provides an opening for critics of Putin’s iron-fisted rule. To quell the critics, Putin has little choice but to recoup political clout in other areas—whether overseas, as in his cold-blooded stand-down against President Obama on Syria; at home, through the persecution of gays and political dissidents and the rallying of nationalist sentiment; or in the Russian “near abroad,” as with his advance into Ukraine. It’s not clear that he would feel the need for these drastic measures if Russia’s GDP were still humming along at the pace it did from 2000 to 2008.

Facing major economic challenges and the political ramifications that go along with them, both China and Russia have responded in
similar fashion: with more aggression and determination to counter the West economically and politically overseas, and with increased authoritarianism at home. For China, the way to keep the West off-balance and preserve Communist Party stability at home is to ramp economic growth back up to previous levels if possible; for Russia, the economic goal is to shore up its current energy arrangements and prevent the Americans and others from taking its customers and threatening Russia’s already-endangered prosperity.

The United States, meanwhile, seems passive at best in its economic strategy, both at home and abroad. True, new trade agreements hold much potential, such as the Trans-Pacific Partnership (should the United States formally adopt it), a free-trade agreement that seeks to bolster North and South American trade with certain Pacific Rim nations. On the whole, however, Washington has been much more acquiescent economically, especially abroad, than has China or Russia.

As in the other areas we’ve covered in this book, China and Russia have disadvantages of their own to overcome, but they hold one key edge over the United States: They have no ambivalence about defining their national interests and no hesitation whatsoever in pursuing them with maximum force. Economic downturns, new challenges, and the occasional setback only make them redouble their efforts.

CHINA AND RUSSIA: ECONOMIC MUSCLE, POLITICAL VOLATILITY

Both Axis nations have flexed their economic muscles at home and abroad for years, and before the financial crisis of 2008, both enjoyed long runs of economic growth—robust, in Russia’s case, meteoric, in China’s. Since 2008, though, the playing field has shifted in multiple ways, some having to do with the international financial crisis and others with changing technological and macroeconomic trends. Both
countries nonetheless remain bare-knuckled economic players at home and abroad.

The Chinese Economic Juggernaut

One key way that China has grown and keeps growing is through aggressive, sometimes ruthless, use of foreign direct investment (FDI), by which it often funds massive infrastructure projects. China’s FDI is set to skyrocket in the coming years: It’s projected to reach as much as $2 trillion by 2020, according to the Rhodium Group.
⁷
Indeed, China has surpassed other emerging economies because it encourages FDI so strongly—and not just in neighboring countries. China has extended its reach far beyond its natural regional sphere of influence and in the process has garnered tremendous power.

China has become one of the world’s great builders of infrastructure. The U.S., long the leader in this area, seems a laggard by comparison. Already the Chinese have completed a massive oil pipeline from Siberia to northern China. Beijing will soon finish an Indian Ocean pipeline through Myanmar to Kunming, in China. China’s infrastructure push also includes hydroelectric projects in Africa and Latin America: the Merowe Dam on the Nile in Sudan, for instance, and the $2.3 billion Coca Codo Sinclair Dam in Ecuador.
⁸
And China’s FDI work is not confined to the developing world.

Beijing has flexed its economic muscles in Europe and the United States as well. China now invests about $10 billion annually in Europe—a tenfold increase just since 2008. One-third of China’s FDI now goes to Europe. In the U.S., a similar spike has occurred: Chinese investment is now more than $6 billion annually. It had totaled just $1 billion as recently as 2008. Of course, that date is no coincidence; the financial crisis made European and American institutions all too eager for the seemingly limitless supply of Chinese cash.
⁹

In Europe, recession-weary firms welcome that cash with open arms. The Chinese have acquired major European firms such as Volvo and the German parts manufacturer Putzmeister. “Chinese companies are looking for companies that, like Putzmeister, have a technological edge and have become world leaders in niche markets,” write Heriberto Araújo and Juan Pablo Cardenal, authors of
China’s Silent Army
. “Those takeovers also allow them to absorb Western know-how on branding, marketing, distribution, and customer relations.”
¹⁰
The Europeans feel they have little choice but to accept Chinese investment dollars, and that means they check their other objections at the door. “We don’t have any stick,” one European official said. “We can just offer carrots and hope for the best.”
¹¹

That same quid pro quo mentality regarding Chinese money has also taken hold in Canada. Thanks in part to President Obama’s refusal to endorse the Keystone Pipeline—which, admittedly, might turn at any moment—the Canadians were eager to find an export partner for the country’s crude oil. Prime Minister Stephen Harper signed an investment deal with the Chinese just as Beijing was securing its largest foreign takeover yet: a $15 billion deal for its state-owned oil company, CNOOC, to acquire Canadian energy firm Nexen. Since the deals were signed, the Harper administration, once a vocal critic of China’s suppression of dissent, has clammed up—a “clear indication,” Araújo and Cardenal write, “of how China’s economic influence can push the political agenda to the sidelines, even in the West.”
¹²

Araújo and Cardenal argue that the loans Beijing extends around the world—including, among others, $40 billion to Venezuela and $8 billion to Turkmenistan—are even more significant in financial terms than FDI. These loans, they write, provide billions to “foreign countries to acquire Chinese goods; finance Chinese-built infrastructure; and start projects in the extractive and other industries.” They achieve something else, too: buying the silence of these China clients
on human rights, labor, and environmental issues. It’s no accident that China tends to favor countries, such as Angola, Sudan, Iran, and others, that often run afoul of human-rights groups. While the West won’t extend aid to countries that violate these international norms, China has no qualms. Beijing moves in with its money, strengthening Chinese investment and economic opportunity while also shoring up despotic regimes. Through only two state-controlled banks in 2009 and 2010, China has lent more money to developing countries than the World Bank has (although not all loans are made public).
¹³

What’s more, China uses its investments to promote the state’s political agendas at home and overseas. A main vehicle for this is through policy banks, a scheme in which Chinese banks lend money with a mandate to further whatever Beijing sees as its national interests.
¹⁴
These policy banks help free up the flow of raw materials to China and open foreign markets for Chinese companies.

American-Made, China-Owned

China has been the fastest growing source of foreign investment in the U.S. In 2012, “Chinese companies bought 10 companies worth $10.5 billion,” says Reuters. That’s more than 20 percent of the 484 U.S. companies, worth a total of $43.6 billion, that foreign companies have bought this year, Reuters adds.
¹⁵
Indeed, America is the perfect place for China to invest—Beijing wants to be more competitive but lacks the management and technology expertise. By acquiring American companies, they gain access to both. For example, in 2012, Chinese movie chain Wanda bought American cinema chain AMC because “movie theaters are a growing industry in China,” said Thilo Hanemann, a research director at the Rhodium Group. “That acquisition gave Wanda access to an established industry brand, and the technology and management expertise to help it grow the concept in China.”
¹⁶

Nowhere has Chinese investment—and takeover—been more prominent than in the U.S. auto industry. Dozens of companies have been putting down roots in Detroit. David E. Cole, the founder of the Center for Automotive Research in Ann Arbor, Michigan, argues that the Chinese “lack the know-how, and they’re coming here to get it.”
¹⁷
Chinese-owned companies are investing in American businesses and new vehicle technology. They are selling everything from seat belts to shock absorbers in retail stores. And they are hiring experienced engineers and designers in an effort to soak up the talent and expertise of domestic automakers and their suppliers.
¹⁸
But the Chinese are being stealthier about it than the Japanese were in the 1980s. Bill Vlasic wrote, in the
New York Times
: “In contrast to the Japanese, Chinese auto companies are assiduously avoiding the spotlight. Last year, the biggest carmaker in China, Shanghai Automotive Industries, opened new offices in suburban Detroit without any publicity, which is almost unheard-of in an industry that thrives on media coverage.”
¹⁹
Shanghai Auto, China’s largest carmaker, has major joint ventures with G.M. and Volkswagen. But when it opened a Detroit-area office in 2012, even G.M. was surprised.
²⁰