World-class chess players know the difference between strategy and tactics better than politicians do. To win in chess you need to start with a strategy — a long-term plan that gets you to a position of superiority. Then you close in with a sequence of tactical moves. As Max Euwe, the Dutch chess grandmaster of the 1930s, once observed: “Strategy requires thought. Tactics require observation.”
The West is all tactics. The East is mostly strategy. You need both because even the most brilliant short-term moves do not add up to a strategy. Just look at the history of US military intervention since World War II. Each of them had their short-term rationale, even Iraq. But has it made the US safer? Has it made the world safer? Has it brought democracy? Has anyone become more civilised as a result?
Israel’s strike against Iran is a classic case of a trade-off where a short-term tactical manoeuvre is bought at the expense of a weaker strategic position in the long run. I am not the first commentator to observe that Israel’s attack against Iran will succeed tactically, possibly with sensational success, but it will not stop Iran’s nuclear weapons programme. Any future Iranian strategic planner will logically conclude from the last series of attacks that Iran absolutely needs the bomb. Other countries in the region might too. Ukraine’s biggest regret is having agreed to give up its Soviet-era nuclear weapons. Had the country kept them, Putin would never have attacked.
Lack of strategic thinking plays an important part in the decline of the West. The biggest strategic own-goal of all has been to drive China and Russia closer together — and Iran closer to both. These countries do not form an alliance in the Western sense. What they have in common is an overriding strategic goal: to become independent of Western coercion.
Our sanctions, our bans, our wars and proxy-wars have had the opposite effect of what we intended. Some, like the sanctions, failed tactically. Russia has outgrown the West and has shifted to a war economy that the Europeans struggle to keep up with. But the most consequential failure of the policy was strategic. The financial sanctions persuaded China and Russia to develop a joint payment system.
Until a few years ago, the world of finance depended on the US dollar and Western-controlled global payments infrastructure. Part of that infrastructure was Swift, a Brussels-based quango that provides the main networks through which international banks communicate. When Russia invaded Ukraine, one of the first actions taken by Western governments was to cut off some Russian banks from Swift, so they could no longer transact. The West also froze Russian financial assets, a large chunk of which is held in vaults in Belgium. Russia was essentially cancelled by the global financial markets.
The result is that Russia, China and other countries have been developing their own parallel financial infrastructure. The first part is called Brics Pay. Brics stands for Brazil, Russia, India, China and South Africa. The name “Brics” came up 25 years ago as a short-form to denote the five newly-developing economies most likely to succeed. The group has since grown to ten countries, and now includes Indonesia, Saudi Arabia, Egypt, the United Arab Emirates and Iran. They are not like Nato or the European Union. India is a bit of an odd-one out here. What they have in common is a desire to be independent of Western infrastructure monopolies.
Payment systems are to financial capitalism what plumbing is to the water supply — not something we talk about until we have a problem with it. The Western payment monopoly makes it possible for the US and Europe to impose financial sanctions in the first place. But financial sanctions are like the cake you can either have or eat. When you start abusing your monopoly powers and impose sanctions on too many countries, you give an incentive to break out of the system.
“When you start abusing your monopoly powers and impose sanctions on too many countries, you give an incentive to break out of the system.”
Brics Pay was developed by scientists from Saint Petersburg State University. It works differently from Western payment systems. Brics Pay is decentralised. It has no hub, no owner. It is based on the same underlying technology as crypto currencies — the blockchain. Brics Pay is sanctions-proof. No member can sanction any other member. If you want to make yourself independent from the US, starting with the payment system is the smartest thing to do.
I lost respect for virtually every single Russia or China expert in prominent think-tanks because they kept on misjudging this key element of China’s and Russia’s strategy. They still tell us that China and Russia will never align, or that China would step in and stop Putin from using a nuclear bomb. The misjudgements continue on all levels. The previous US administration misjudged the dynamics of the semiconductor ban, through which they hoped to keep China in the digital dark ages for a little while longer. They expressed surprise when Huawei succeeded in integrating a state-of-the-art chip into one of its latest models. The semiconductor ban is a classic case of the unintended consequences of sanctions. China learned how to make semiconductors, and the Russians learned how to build a payment system.
Officials in the US State Department think of the dollar as a political weapon through which they can force their will on others. They got bad advice from macroeconomists who told them that no other currency in the world could ever challenge the dollar. They are not telling the whole story. What is true is that no other official currency will challenge the dollar. The euro started as the world’s second-largest currency for foreign exchange reserves and has now been pushed into third place by gold. Where the observation goes wrong is that it fails to see the true threat. It comes from alternative payment systems, crypto currencies and blockchain technologies that allow other countries to diversify away from the US without having to create new currencies of their own. Macroeconomists still live in the world of fiat money and central banks — all creations of modern industrial society. But China and Russia are changing the game. It’s not cricket anymore.
The trouble with our misjudgements is they have no corrective mechanism. If you are a financial trader, your misjudgements cost you money. You cannot keep getting everything wrong and expect to stay solvent. That is not the case in foreign policy, because the people who keep on making those serial misjudgements are not the same people who are paying the price. It is also why dysfunctional economic theories persist even if there is no empirical evidence that supports them. Economists, State Department officials and journalists live in a space of mutually reinforced misjudgements. They celebrate each tactical victory — and never win wars.
The West did have a strategy once, which is what put us into the position of superiority in the first place. It originated in science and was leveraged by smart political decisions. But it all happened a long time ago. The Second World War was the beginning of a breathtaking series of innovations that started with the Manhattan Project and that were co-sponsored by the US Army: the transistor, the semiconductor, the integrated circuit, the personal computer, the internet, and now AI. It was technology that gave the West a strategic advantage. European integration was in that category of big strategic moves until it turned into a sprawling mess with EU enlargement.
China made two big strategic moves in succession. The first was the policies of economic modernisation by Deng Xiaoping, who came to power in 1978. As Frank Dikötter, the Dutch historian, explained in his masterpiece China After Mao, the West misjudged Deng’s reforms as a transition from communism to capitalism. The real goal was to make communism work better. Deng’s reforms were a long-term project. His reforms started in the 1980s and were continued by his successors. When he died in 1997, China was still at an early stage of industrialisation. Today, it is one of the world’s most advanced industrial nations.
China’s second important strategic move was Xi Jinping’s decision to leverage critical raw materials, like rare earth magnets, to turn China into the world’s indispensable producer. The US still enjoys the fruits from the digital revolution. But it is no longer alone. And China is about to take a lead in this area too.
A report by Stanford University tells us China publishes more AI research papers than anyone in the world. The big prize in AI will go to those who can leverage it to create AI-based manufacturing: plants that are operated by intelligent robots and are linked to large data centres that optimise the production flow. What is known as Industry 4.0 still requires raw materials as inputs, but China is better placed in this area too. I call that a strategy.
You can think of a tactic as a shiny gift, and of strategy as a gift that keeps on giving. We Westerners are, by our inclination, more tactical than strategic. We like to close in. That is not necessarily a bad thing, for as long as you have an underlying strategy in place.
Chess players know that. One of the greatest chess grandmasters of all time, the American Bobby Fischer, said: “Tactics flow from a superior position.” The West has lost that superior position. So has Israel. We are the ageing grandmasters of geopolitics, eager to play one more game.
