Wednesday, November 05, 2008

How Vladimir Putin Selected President Obama

If you were a foreigner watching the unfolding US election, had a stake in the outcome, and had a few hundred billion dollars to spare, what would you do?

How many people have been in such a position in the current election cycle? Three: Vladimir Putin of Russia, President Hu Jintao of the People's Republic of China, and King Abdullah of Saudi Arabia.

Recent figures show dollar reserves of these three nations have been enormous, and rising briskly. Russia's dollar reserves recently stood at $260 billion. Saudia Arabia has banked over $800 billion. China holds over a trillion dollars. In all cases, current trade surpluses ensure that these reserves are guaranteed to increase briskly for some time to come--none of these autocratic rulers has any reason to be shy about using these funds for any reason of national importance.

Who would these powers prefer to win the US election, and how badly? In all cases, Obama, very badly. In Saudi Arabia's case, there are conflicting considerations. A McCain presidency might be viewed as more friendly to oil interests around the globe, not just domestic US oil company interests. McCain has had a long history of voting against alternative energy initiatives; Obama has supported vigorous support for alternatives to fossil fuels. As long as the US remains dependent upon oil for its transportation needs, imports are inevitable, regardless of how much "drill, baby, drill" unfolds. At first glance, McCain might be the preferred candidate for the Saudis.

But Saudi Arabia's rulers have interests more pressing than just keeping the oil money pouring in. The monarchy has never been entirely politically secure. Religious extremists within the kingdom routinely call for its downfall; al Qaeda has repeatedly called for an overthrow of the regime. More than anything else, the Saudi royal family needs to have political stability in the Middle east. From their perspective, a long-term presence of US troops in Iraq would likely continue to radicalize "the man on the Arab street," threatening the regime's security.

There is also the consideration of Iran. There is no love lost between the Sunni Saudis and the Shi'ite Ayatollahs of Iran. But a McCain administration would seem hell-bent on confrontation with Iran, quite plausibly leading to military strikes. Under such circumstances, the perception of an epic struggle between Islam and the Christian West would tend to overide narrower sectarian concerns; Sunni and Shia would unite in their fear and rage, and the Saudi royal family, being widely perceived as allied with US interests, would be at imminent risk of being deposed.

In contrast, an Obama administration promises a prompt (but not precipitous) withdrawal from Iraq, and dialogue with Iran that seems most likely to avert military conflict, while tending to keep Iran's potential influence in the region relatively reigned-in. This approach couldn't be more appealing to the Saudis if they'd written the plans themselves.

China's considerations in the election are similar, and possibly similarly compelling. On China's border sits North Korea, a nation of 23 million impoverished souls. McCain has publicly advocated a "get tough" policy with North Korea, opposing its removal from the US list of state sponsors of terror. McCain has also joked about engaging in military strikes against North Korea. The prospect of a renewed Korean War involving the US on its border must fill President Hu Jintao with dread. If nothing else, a war on its border would have a devastating effect on foreign investment in China. China would strongly favor a win for Obama.

The case with Russia is more compelling still. McCain has been a vigorous proponent of expansion of NATO within the borders of the former Soviet Union. McCain was especially bellicose during the recent war between Russia and Georgia. The tone of the McCain's commentary seemed to suggest the use of US troops to repulse the Russian invasion. The risk of such conflict between two nuclear powers might alarm the entire world, but nobody more than Vladimir Putin.

So, we have a list of suspects, we have established motive and ability. What would be the modus operandi for this detective mystery? The approach is straightforward. Beginning over a year ago, these three leaders would understand that a US economic downturn would tend to favor the Democratic challenger running against a Republican administration. It would also be obvious that Democratic campaigns have always been under-funded compared to the more wealthy and business-friendly Republican Party.

Two basic, simultaneous approaches would almost guarantee the desired outcome: funnel hundreds of millions of dollars into the Obama campaign, and engineer a severe economic downturn in the US.

Engineering the downturn would have been primarily accomplished by the Saudis. All they had to do (and did) was to dial down the spigots of oil output. Petroleum demand, being inelastic, promptly resulted in marked increases in prices. Overall, this strategy was no sacrifice for the Saudis...their reward for flat or decreased oil pumping was higher net revenues. With additional billions being pumped out of the US economy by oil imports, and with higher costs for economic activity, it is surprising that the economic downturn in the US didn't happen more quickly.

But all those vast holdings of US dollar-denominated assets could be used to push the economy down as well. Federal Reserve data has shown a fall in M3 "money supply" beginnning about a year ago, and accelerating since the summer. This could reflect cashing out investments, and holding currency in reserves in vaults or secured warehouses. There is a process of "money creation" in which currency in circulation expands many-fold as account balances that exist as ledger entries rather than paper bills. If $100 in currency is withdrawn from circulation, the fall in money supply is ten times greater. This piece of the economic maniupulation might have been accomplished most easily by the Chinese. Somewhere, there may be warehouses owned by China, packed with $100 bills withdrawn from the US economy.

The sale of stock and real estate holdings would also tend to depress the stock market indices and real estate prices. A rapid deflationary death spiral was triggered, then, that has been enormously greater than the initial stress to the economy. A firecracker was thrown into a dynamite factory, in effect. Those responsible probably only expected a loud bang. The actual explosion has shaken the entire global economy. Rapid, assertive central bank actions across the globe seem to be putting Humpty Dumpty back together again fairly promptly.

The other leg of the election strategy would have been accomplished by Putin's KGB friends. The goal would have been to funnel perhaps 100 million dollars or so into the Obama campaign without the origin of the funds being detected. KGB agents have long been active in the US, and have cultivated a vast range of contacts across the country. Distributing hundreds of briefcases full of $100 bills to contacts in organized crime syndicates, unions, and selected private groups could then translate into hudreds of thousands of "individual small donors." Donations of under $200 are not then reported by the campaign and would be ultimately untraceable in any case.

If this had actually happened, we would have seen the Obama campaign receive an unprecedented number of small donations, accounting for a remarkably high proportion of an enormous total campaign war chest. Is this what happened? You betcha.

Did the three foreign rulers act in concert, or each individually? Only the leaders of the three states know for sure. Each may have pursued such strategies independently, each unaware that the others were hoping to have a similar influence on the election outcome.

Would the Obama campaign have been knowing accomplices to these actions? Not a chance. There would have been no purpose to letting Obama know that his campaign was getting a foreign boost. If the information had gotten out prior to election day, the facts would have devastated Obama's chances. He'd have remained most effective if he believed all those small contributors were legitimate, patriotic US citizens.

Is there a shred of hard evidence to back up this interpretation of recent events? No. But if the plans had been executed carefully, there wouldn't be any convincing public evidence.

This could make a great movie. Secret plots, briefcases and warehouses full of cash, word leaders conspiring, scenes of Riyadh, Beijing, Moscow, and DC. Some James Bond character jet-setting around trying to piece together the clues, hounded by shadowy KGB agents....only, he discovers the plan only at the last minute, and is prevented from reporting the truth in time....stranded somewhere as the new world order unfolds, he and a beautiful KGB agent decide to make love, not war....

Anyway, globalization may have done more than give foreign nations a stronger interest in the outcome of US elections--it may have motivated actual interventions in the political process. A concern for genuine national security might favor a system of mandatory public campaign financing. Perhaps both parties might now embrace the concept.


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Anonymous said...

If this scenario is actually what happened, the CIA is likely well aware of it. In all probability, they'd judge the truth to be destabilizing to the body politic, and would keep the truth classified.

In reality, such a decision would be bad for national security. Only if the people are made aware of how vulnerable the political process is to foreign tampering will there be the political will to enact necessary mandatory public financing of campaigns.

SteveMDFP said...

Thanks. Sometimes "national security" decisions about secrecy can undermine genuine national security.

Sunlight is the best disinfectant.

David said...

Nice story and well thought theory, you should get a manuscript together and submit it to a publishing house! The zeitgeist is ripe for such playful fiction.