On an American Suez

A major Anglo-Saxon power begins a war far away from home with the help of Israel and without the support of its allies. The main objective is the control of one of the world’s most important maritime trade routes, but the aggressor may have to back down — partly from the rising oil prices at home. This could either describe the 1956 Suez crisis, when Britain and France invaded Egypt over their nationalisation of the Suez canal, or the contemporary Israeli-American bombing campaign and blockade of Iran (“Operation Epic Fury”). Is the war in Iran then an American Suez?

There is currently a cultural meme spreading about the American empire’s¹ decline from dominance. This has many names, and in the academic ir tradition it is most often refereed to as a transformation toward a “multipolar” international system, in contrast to the unipolar one that followed the collapse of the Soviet Empire(s) between 1989 and 1991. This feeling, at least in my own personal experience, seems to be more of a American one above all else. The otherwise overconfident Yankee who boasts about the usa as that “shining city of a hill” has suddenly shrugged back, and now instead views his nation as being assaulted on all sides, within as without, by unfair, corrupt, and malicious actors that wish to tear it all down. By comparison we Europeans seem to (perhaps hopelessly) cling on to the idea that the us not only has our back — as we do theirs — but that they will remain the primary superpower for the rest of our lives.

The English and French had performed many wars, operations, and gunboat displays of force in the past — the Suez war was no different. What was different was being entirely reliant on another power to project said force. All industrial nations of the world are reliant on each other in some regard; no country has been able to become entirely autarchic² without grave sacrifices to their economy and/or military might. It should therefore be made clear that none of the European empires were ever safe from reliance in theory, but in practice standing up against the barbarism of these empires had outsized costs to whoever did so that most countries were not willing to bear.

What changed was the emergence of the two superpowers after the second world war — The usa and ussr. Britannias reaction the us emergence was perhaps not so foolish, they had surpassed the uk as the world’s largest economy before even the first world war, but had always seemed to be reluctant to intervene when necessary outside of the western hemisphere. What changed after the Suez crisis was primarily then a change in America’s view regarding herself. She now saw herself as a proper great power, one whose interests should always be consulted regardless of where in the world an event took place.

The Franco-British operation could have continued, but America chose specifically to insert herself into the affairs of her fellow empires, and her de facto dominance made it impossible not to obey. The world may now be in a similar place, it is too early to say.

I must confess that I myself was at first a proponent of seeing the war in Iran as an American Suez; as the death throes of a decaying empire whose will would not be respected unless enforced through the barrel of a gun. But the clearest counterexample to this thesis is the very fact that this war has carried on for as long as it has. If the usa had declared defeat and retreated, it would no doubt suffer a significant blow to her prestige,³ but it would not sound the death knell of her global position.

Instead what has been made clear is the fact that even if the usa is retreating, there is no real actor that can take her place. Most people’s minds likely go to the People’s Republic of China (prc), but while they by far are the single state closest to the us’ global power, they are in practice nowhere near capable enough at the moment to fully replace America.⁴

The prc is the third largest foreign holder of us treasuries. It could, particularly in the current environment of slowly increasing us yields, at any moment threaten a large-scale sell-off of its position and in doing so bury us hegemony for the foreseeable future. Committing to this would be incredibly damaging for the prc, as the liquidity of the market for us treasuries — despite being the world largest such market — would not be able to absorb this position. In fact, this is part of what the United States threatened to do against the uk.

That the prc has chosen not to do this is telling. It means either that the prc accepts American behaviour toward Iran⁵ or that it does not feel confident in its ability to act as an international hegemon in the aftermath of such an action. This is similar to the position that the us itself was in in the late 19th century and early 20th century. While many of the underlying fundamentals may now be in the China’s favour (and this point is still heavily debatable) there are still serious obstacles, both material and immaterial ones, for a world of Chinese dominance.

The major one is of course the nature of the renminbi,⁶ the currency of the prc. While the dollar has been continually weakening, there is no good alternative to it. Some have proposed that the renminbi would replace the dollar, especially after Iranian tolls were paid in it, but this is pure fiction only founded on the surface-level similarity that the currency is needed to buy gulf oil. The renminbi will never take the place of the dollar for as long as the prc maintain strong capital controls. The fundamental benefit of America’s “exorbitant privilege” has been that the us makes fancy pieces of paper, and in return gets oil, raw resources, machined goods, and computers. This deal does not work if you are not allowed to send the fancy pieces of paper (money) abroad.⁷

What is instead much more likely is a slow decline of the dollar, and instead a return to a “basket of currencies”-type global financial system perhaps utilizing or akin to the International Monetary Fund’s Special Drawing Rights.

The prc leadership is also trying to solve a hard dilemma. They are obsessed with increasing domestic consumption, partly to reduce reliance on foreign exports, but are at the same time afraid to absorb the loss in foreign competitiveness that a corresponding strengthening of the currency would expect. Authoritarian governments have an easier time artificially maintaining an undervalued currency, since they do not have to accede to voters about the rising costs of imported goods. The opposite can be clearly seen in the developments in Japan — a Yen that is dropping in value drives inflation. As both Lenin and Keynes say, inflation erodes away at the structure and trust of society; the trust that would be needed for democratic life:

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

— Keynes, 1919.

While the us has a history of global military interventions, there are primarily two similar events in American history: The Iraq and Vietnam wars. Both were highly controversial both at home and abroad, and turned into quagmires of anti-counterinsurgency warfare, a type of war really only ever won by the British in Malaya. But the primary differences were again the international situation. The Vietnam war, while largely unpopular, was more merely controversial, where there existed a semblance of geopolitical objectives to be met (the counteraction of communist interests) and the war thus had international and global allies supporting it. Iraq also occurred during a unique time period, where the us was at its strongest position ever attained due to the collapse of Soviet rule in Europe.

That is why the situation in Iran is so interesting. It has all of the semblance of a strong empire bullying weaker nations, but the empire is sitting atop increasingly shaky foundations. Meanwhile no country or major international actor is acting like that is the case, because the consequences of such a fundamentally changed world order are enormous. Europe, and the rest of the world, would be wise to prepare for such an eventuality not in order to hasten its occurrence, but to survive and thrive in its aftermath.