The Strategic Consequences of Brexit

Brexit can be seen as a major US strategic success and outlines the end of the "third pole" between East and West, which sometimes the EU has dreamt of being. Prof. Giancarlo Elia Valori discusses the implications of the UK referendum

The Strategic Consequences of Brexit

Photo: AP

Though with a knife-edge majority, Great Britain has relinquished its economic and political relationship with the EU.

Obviously, account shall be taken of the many people who voted in favor of Bremain, since they will not disappear all of a sudden. The strategic, military and geopolitical effects of this new UK position shall be assessed as well. A position which today seems to be mainly economic and commercial, but which will soon herald wider choices than the mere give-and-take between Great Britain and the European Union.

The British people have never liked the European Union. In 1975, Margaret Thatcher put intense pressures for the United Kingdom to adhere to the European Union. However, the idea of the Iron Lady was to become a member with a view to controlling a powerful entity, such as the EU, thus avoiding the creation of an axis between France and Germany to isolate Great Britain, as, indeed, later happened. Also from the commercial viewpoint.

Prime Minister Thatcher decided to adhere to the EU as some businesspeople do with potentially dangerous companies of which they buy a significant shareholding so as to manage them better from the inside.

It is worth recalling that there was still the Cold War that Great Britain was fighting with great care and intelligence wisdom. At the time, Prime Minister Thatcher and the other EU officials viewed the European bloc as an economic agreement preventing the USSR from extending its economic, if not military, influence over what the French philosopher, Raymond Aron, called "the great Central European plain." The plain that the Warsaw Pact planned to conquer quickly to reach the Atlantic and seal the UK into the North Sea.

Without Great Britain, there would be no European nuclear arsenal and the French one would fall immediately into Russian hands.

Furthermore, in her book of 2003, Statecraft: Strategies for a Changing World, Margaret Thatcher did not dismiss the possibility of Brexit as “unthinkable”, but thought that the issue had to be analyzed very carefully.

It had to be assessed in terms of strategic and commercial routes and terms of UK influence over the EU decision – making process, as well as for evaluating the balance between the euro and the pound sterling. These are the decisive factors of the EU-UK matrix, not others.

Currently, the European framework is obviously much more complicated than in the 1970s. It is not true, however, that the Union rescued Europe from the fratricidal wars which scarred it as from Napoleon I onwards. The European Civil War, as the German historian and philosopher Ernst Nolte called it.

Conversely, peace in Europe was preserved by the military balance between NATO and the Warsaw Pact. The "economic basis of the war" between Germany and France, from Alsace-Lorraine to the Ruhr region, was an old strategic concept which had already been solved with the European Coal and Steel Community (ECSC) in 1951. 

Nevertheless, as from 1980 onwards, it was precisely Margaret Thatcher who put pressure on the EU to "get her money back," by considering the agreements between the EU and the UK unnecessarily too burdensome for her country.

In her speech delivered in Bruges in 1988, the Conservative Prime Minister spoke clearly against "a European super-state exercising a new dominance from Brussels."

Here is the core of the issue: the British people have never wished to turn the economic “contract” among the European Member States into a specifically political deal. They wanted and still want to have a free hand in the global financial framework. Finally, they intend to avoid the geopolitical effects of the economic and trade ties established in Brussels.

Great Britain is a great nation, which needs overall global autonomy which, on the contrary, the EU manages according to covertly Franco-German interests that are potentially opposite to the UK ones.

It is not the British leaders’ perception; it is the truth. However, in politics, perception counts as reality, if not even more. As is in A Midsummer Night's Dream by William Shakespeare. 

With this choice, Great Britain, which still has the "imperial dominance spirit of Lawrence of Arabia" – as the former Italian President Francesco Cossiga (who was a close friend of Margaret Thatcher) called it – is trying to play some cards which are potentially valid, despite the "mists of tomorrow."

The UK-US Relations

Firstly, the relationship with the United States, also at an economic level, comes back to the fore.

When the United States celebrated the bicentennial of their independence in 1976 (from Great Britain, by the way), a British sailor arrived in the New York port holding a banner with the inscription: "Come back home, guys, we have forgiven you."

Hence, Great Britain still considers itself an empire – currently a British empire of finance and technology, but an empire nonetheless.

With a view to becoming again "what it is" – along the lines of Friedrich Nietzsche’s journey of becoming a free spirit – Great Britain just needs to revive and revitalize its unique relationship with the United States.

In 1958, a Mutual Defense Agreement was signed between the United States and Great Britain regarding the two nuclear arsenals. In 2010, thanks to a subsequent bilateral treaty with the United States, Great Britain had the opportunity of overcoming many of the controls and limits imposed by the Americans on its advanced defense technologies – limits also imposed on NATO members.

Great Britain is the second largest economy in the English-speaking world and the sixth largest global economy. It is the largest US trading partner and a member of the UN Security Council. It hosts the highest number of US military bases abroad and, above all, it is the global financial hub which periodically rescues US banks from their insolvency crises.

Hence, it is clear that Brexit can be seen as a major US strategic success and outlines the end of the "third pole" between East and West, which sometimes the EU has dreamt of being.

The dollar zone has never liked the euro. Quite the reverse, it has fought it harshly. For the United States, the European single currency was and still is a strong competitor, as well as a threat to their role as hegemonic global financial power – an insane "Napoleon’s Dream".

Moreover, the idea of bringing the euro to an often forced parity with the US dollar has undermined EU exports, by compelling them to be carried out with a currency having a too "high" value which has restricted the end-markets.

Not to mention the many temptations generated by the euro on world commodity markets: it is true that – among many other assessments and considerations – the United States attacked Saddam Hussein for his still secret choice of trading most of his oil and petroleum products in euros.

It is also true that, in the phases characterized by significant international tensions, Iran traded part of its oil and petroleum products in euros, especially on the "stock exchanges" in Kish and the other islands of the Persian Gulf.

The Brexit effects, however, increase the volatility of the pound sterling against the dollar, with a spread of approximately 15% compared to the pre-referendum values. Financial analysts’ imbalances which, by now, are mainly trolls, namely IT automatisms.

Certainly, Great Britain will not be granted a preferential treatment by the United States in the framework of the TTIP negotiations. US President Obama has explicitly warned that the UK would be at the "back of the queue" in any trade deal with his country if it chose to leave the EU and would have the same treatment and the same barriers to entry as countries like China, Brazil or India. 

Nevertheless, Barack Obama is about to leave the US Presidency and, if Donald Trump were to be the next President, he would have every interest in dividing the European competitors and favoring them against the aggressive practices of countries like China and, in the future, India.

Also, Hillary Clinton cannot avoid using this leverage offered by Great Britain for the TTIP negotiations. The British TTIP is a bet on the future which, however, the UK could win by relying on its great financial strength.

Bilateral trade between the United States and the UK is very significant: America is the first destination for UK exports, and the United States are the third generator of imports for the UK, after Germany and China. North America and Great Britain are the largest mutual foreign investors. A situation which cannot change all of a sudden, in spite of the US discontent and dissatisfaction with Brexit.

Furthermore, the British government stated that TTIP could provide to the British economy a surplus of approximately 10 billion pounds a year.

There is the need to recover much of the Brexit cost and rebuild a strategic and military relationship with the United States, which the UK sees as the only bulwark against two EU and NATO structural dangers. The first is the EU decision-making weakness in the Middle East. The second is the explicit German polemic against the Atlantic Alliance’s anti-Russian posture, which has been mounting in recent months.

In Great Britain’s mind, Germany is always the country of the old definition by Lord Ismay, who was NATO Secretary General from 1952 to 1957: "The Atlantic Alliance’s purpose is to keep the Americans in, the Russians out and the Germans down."

Great Britain does not want the strategic and economic exchange between France and Germany, in which Germans buy French government bonds massively and, in return, are entitled to the "enhanced and extended protection" of the French military nuclear power.

Great Britain does not even want a euro which, as "a German mark in disguise", penetrates the major British export expansion areas. Moreover, considering the EU strategic inanity, Great Britain fears for its corridors to and fro its Asian Commonwealth.

With its operations in Crimea and Ukraine, the Russian Federation blocks and distorts the direct line between Great Britain and India, besides changing the balance of power in Central Asia, where the UK has still substantial interests.

Since 2001 to date, Great Britain has deployed its military units in Afghanistan, in the framework of the US Enduring Freedom operation. It is not only for mere "Atlantic loyalty" as other countries have done but to afford still the regional strategic viability and role which are essential for it to keep Northern India, the central Asian countries and the routes from Southern China. Those who think globally – as the decision makers of what was once a great empire – do not stop doing so all of a sudden.

The EU Misconceptions

Unfortunately, the EU’s mistakes are known to everybody: an artificially overvalued currency – maybe to compete with the dollar; an insane disconnection between EU foreign and economic policy; the idea of controlling 29 countries simultaneously, all competing one another, with different tax systems and public spending mechanisms, not to mention the autonomous and conflicting public debt securities markets.

The EU could indeed reform itself by establishing, within the ECB, a single market of government bonds, possibly managed (and not tiered and capped) with the issuance of "European debt securities," that Germany does not want and with good reason.

Moreover, the Union could also make the various Member States develop an export plan, with a view to analytically protecting one commodity or the other, without dangerous generalizations.

From chocolate to wine, up to the hilarious theory of the ''Polish plumber” – popularized by Philippe de Villiers as a symbol of cheap labor coming from Central Europe as a result of the Directive on Services in the Internal Market during the EU Constitution referendum in France in 2005 – in the field of exports, so far Italy has lost and has hence paid for its mistakes related to its "scarce incisiveness" in Europe.

It is worth recalling that the Polish plumber was supposed to come and work in the EU at the same rates he charged in Krakow. However, the cost of living in this Polish town is very different from the cost of living in the center of Munich.

Abstract free-trade and liberal theories, typical of a bad macroeconomics handbook, mixed with old-fashioned protectionism – this is exactly what the EU has often been.

Hence, following the ideas of General de Gaulle, another great "Eurosceptic," the issue lies in returning to a Europe of Nations and States where only what is already in common is decided jointly – and it could not be otherwise. This means European protection from asymmetric shocks, selective penetration of new foreign markets and domestic liberalization of goods and services.

The idea of making the EU be the controller of the Member States’ public budgets, with abstract and binding rules, paves the way for some exceptions which inhibit the rule, or for a covert economic struggle between EU wealthy and emerging countries. We have already experienced it in Greece, and this could also happen in Italy and Spain.

Furthermore, the EU has insisted on implementing a common "foreign, security and defense policy," with the obligation to "make the Member States’ civilian and military capacities available to the EU." 

Shall this be done in agreement with NATO? Where is the chain of command of this 29-Member State army? Who develops its plans and sets its goals?

All this is for stabilization, humanitarian and conflict prevention missions, disarmament or military assistance and advice. And what is the role played by the United Nations, despite all its limits?

In short, as from a certain phase onwards, which we could identify with the 2001 crisis, the European Union has believed to be what it was not and had not been conceived and meant to be.

After all, even the old anti-Soviet dissident Vladimir Bukovsky, was not entirely wrong when, from his new English homeland, equated the European Union with his former USSR.

Hence if the EU can reform itself not only at organizational but also at the domestic financial level, it will be in a position to keep on selling its merchandise: protection against asymmetric shocks, a strong currency widespread in the world, as well as a free internal market.

Conversely, if it continues to pursue its Napoleon’s dream of "uniting Europe", it will have to face "one, a hundred, a thousand Brexit" – just to paraphrase Che Guevara’s words.

Furthermore, the issue does not lie in asking for "greater budget flexibility" in exchange for abstract reforms which may be suitable for the Finnish people, but not for the Flemish population.

The problem is entirely different: to have the possibility of drafting autonomous budgets so as to check their effects subsequently over a period of two years, without prior diktats.

Briefly, a more modest EU will survive very well – even after Brexit.