Global War Update: Economic Attrition Front

Back on February 12 I ran a summary of several John Helmer articles on the American Empire’s war on the world—a war to roll back history to the time after the Cold War when no regional powers had yet arisen that could challenge US global hegemony. My own post was a day too early for the confirmation of one of Helmer’s key theses: That the Middle Eastern “Axis of Resistance” is waging an economic war of attrition against Israel—a war that is also placing pressure on the relationship of the American Empire with its European vassal states. You can find my post here: Helmer's Status Report On The Global War. However, here is the intro to the portion that deals with the Middle East. I begin by quoting Helmer, and then pose the key question: Given that the US and Israel find that they are in an economic war of attrition, how can such a strategy be effectively countered?

ATTRITION WAR — HOW ISRAEL IS LOSING ON THE ECONOMIC FRONT

The Axis of Resistance — that’s the Arab militaries with Iran and in the background, Russia – knows how to wage economic warfare against the US and its proxy, Israel. The Houthi sanctions on shipping, for example, are showing more effectiveness in stopping Israel-bound or Israel-linked vessels in the Red Sea than US sanctions have been to block Russian oil shipments.

In attrition war, on the economic front just like the Gaza and other fire fronts, the Axis of Resistance wins by maintaining its offensive capacities and operations for longer than the US and US-backed Israeli forces can defend. Like troops, tanks, and artillery pieces, the operational goal is to grind the enemy slowly but surely into retreat, then capitulation.

In this regard, we observe that this dynamic is undoubtedly known to the US and the Israelis. The problem for the US and Israel is, How to counter such a strategy?

The Israeli strategy appears to be straightforward: Do everything in its power to provoke a wide regional war that will draw the US military into a hot war across the Middle East. The objective of this strategy is to bring the economic war of attrition to a crashing and precipitous end by dint of military force. The risks are obvious—there is no lack of military experts who warn that such a war would bring reprisals against Israel that would involve mass casualties and destruction, due to the missile arsenals possessed by Iran and Hezbollah. Israel is only willing to take this risk because it sees itself painted into a corner and under existential threat.

The reason Israel doesn’t precipitate such a regional war with an all out first strike is because Israel knows that it cannot win that war on its own—only the US, they believe, can do that for them. But a major first strike, sufficient to precipitate a proportionate response from the Axis of Resistance, might lead to popular opposition to war in the US, with Israel recognized as the aggressor. To ensure US entry into a regional war, Israel must play the victim card—a strategy that is wearing very thin in the West. The American Empire, however, has many geopolitical irons in the fire—Russia and China for major starters—and is not eager to begin another war when it’s losing it’s major power competition in Ukraine and is failing to face down China in the Pacific.

And so the economic war of attrition continues, while Israel does what it can to provoke a war that could bring it all to a quick end, but the provocations must fall short of all out war. Will the promised genocide against refugees in Rafah finally lead to regional war? Stay tuned.

Meanwhile, Helmer has updated his earlier article to take into account the downgrading of Israel’s bonds and currency by the major rating agencies:

MOODY’S JUST TOLD YOU SO — DOWNGRADES ISRAEL, WARNS THAT WEAKER US BACKING FOR ISRAEL, WAR WITH HEZBOLLAH WOULD TRIGGER CRASH

This wasn’t exactly front page news in the US, but it should be. The ICJ ruling on Israeli genocide isn’t going away, even if the US refuses to give it credit. The rest of the world does—including many US vassals (Norway most recently issued a strong condemnation)—and pressure on the US will grow to force Israel into a ceasefire. Per what I just wrote, a ceasefire is the LAST thing Israel wants. Israel wants an escalation, and a major escalation at that. The slowly building economic pressure is an existential threat.

Here are some excerpts from Helmer’s article. Note carefully several aspects. First, the Neocon run governments of the US and UK exerted strong pressure, but failed to stop the downgrades. Second, the rating agencies pointed to predictable factors that could lead to further downgrades.

Twice already the warning of the obvious has been posted in the money markets — Israel cannot survive a long war with the Arabs and Iran.

In this long war, the gods do not favour the Chosen People, ...  The decline in Israel’s export earnings from tourism and diamonds; the loss of imported supplies for manufacturing and consumption from the Houthi blockade of the Red Sea; and increasing risk to both imports and exports at the Mediterranean ports within range of Hamas and Hezbollah strikes were identified at that time.

The international ratings agencies, Moody’s, Fitch and Standard and Poors, postponed announcing the obvious for as long as they could.

In attrition war, on the economic front just like the Gaza and other fire fronts, the Axis of Resistance wins by maintaining its offensive capacities and operations for longer than the US and US-backed Israeli forces can defend. … for several days senior [Moody’s] management fended off a ferocious attack from Israeli officials and their supporters in the US trying to compel postponement of the downgrade and the analytical report  substantiating it.

... A ratings downgrade is a signal to the markets to go negative against the issuer – this usually comes after the smart money has changed its mind and direction.  ...

That Israeli and US tactics had forced postponement of new reports from the troika [Moody’s, Fitch and Standard and Poors] was obvious. A fresh warning was published on this website: as real estate and other tax collections collapse, Israel will have to make a large cash call on the US. ... The longer both wars are protracted, the more obviously the loss of confidence expresses itself in Washington.  

Predictably, the financial press in London and New York reacted strongly against the rating agencies, led by Netanyahu and Fox.

Three points have been missed in the Anglo-American counterattack and Israeli government’s bluster. The first is the warning that Israel will soon have to request enormous cash backing from the US, and if there is any sign of weakening on that in Washington, the collapse of the Israeli economy and its capacity to continue its war is inevitable. The Moody’s report camouflaged the point this way: “The related issuances benefit from an irrevocable, on-demand guarantee provided by the Government of the United States of America (Aaa negative) with the government acting through USAID. The notes benefit explicitly from ‘the full faith and credit of the US’ and as per prospectus, USAID is obligated to pay within three business days if the guarantee is called upon.”

The second point strikes at announcements from Israel Defence Forces (IDF) generals and Netanyahu of their plan to expand their operations on the northern front – the Litani River ultimatum they called it in December. According to Moody’s report, “downside risks remain at the A2 rating level. In particular, the risk of an escalation involving Hezbollah in the North of Israel remains, which would have a potentially much more negative impact on the economy than currently assumed under Moody’s baseline scenario. Government finances would also be under more intense pressure in such a scenario.”

The third point is the most explosive. After cutting Israel’s rating to A2, Moody’s warned that further and deeper downgrades may follow, but that there is presently no way the ratings agency can predict what will happen next. “The ongoing military conflict with Hamas, its aftermath and wider consequences materially raise political risk for Israel as well as weaken its executive and legislative institutions and its fiscal strength, for the foreseeable future.”

In flagging those last four words – “for the foreseeable future” — Moody’s has told the markets  that the strategic initiative in this war has now passed to the Axis of Resistance. Of course, the Arabs and Iranians already know.

Now, Helmer quotes Moody’s rationale for the rating downgrade in full. I’ll only quote the briefest of excerpts from that justification. However, with regard to the US Government guarantee, noted above, Helmer points to the reason why the ICJ ruling could prove significant as a catalyst for strong pressure on Israel. The US guarantee is not unconditional and the conditions are directly related to the ongoing Israeli genocide:

For the history of the US Government’s loan guarantees to Israel, click.  The US Congress and President may revoke loans and loan guarantees if there are US weapons violations, breaches of international law, civil activities outside the 1967 borders of the state, etc.  The first ruling by the International Court of Justice on Israel’s genocide in Gaza is the most powerful judicial challenge to date for the US Congress.

Moody’s doesn’t so much as mention the ICJ ruling, nor upcoming hearings, but you can bet that they’’re well aware of those issues. Thus, Moody’s rationale repetitively stresses the uncertain future for Israel which is not likely to change even with a cessation of fighting:

The main driver for the downgrade of Israel’s rating to A2 is Moody’s assessment that the ongoing military conflict with Hamas, its aftermath and wider consequences materially raise political risk for Israel as well as weaken its executive and legislative institutions and its fiscal strength, for the foreseeable future. …

One key driver for the downgrade of the ratings to A2 is that Israel’s elevated exposure to political risks will likely persist for the foreseeable future, even through a reduction in the intensity of or pause in fighting in Gaza. …

More generally, the consequences of the conflict in Gaza for Israel’s credit profile will unfold over a long period of time, potentially well beyond the period of active fighting. The negative impact on the country’s institutions and public finances outlined above may prove more severe than Moody’s currently assesses.

Please note that if I’m correct that Israel regards a major escalation as the only way out of its strategic dilemma, then the analysis of the rating agencies runs directly counter to that strategy. No doubt Israel is aware that a major escalation will likely be a body blow to its economy, just as surely as the continued economic war of attrition. The hope, likely, is that the major escalation will maintain the US guarantee going forward. Escalation and regional war coupled with open ended US taxpayer funded financial guarantees is the only way forward.

@zei_squirrel

oh my god. One of the three authors of the New York Times' "mass rape" atrocity propaganda hoax is Anat Schwartz. She liked posts calling for Gaza to be turned into a "slaughterhouse". This the person the NYT hired to write about Palestinians and frame them as sub-human monsters

10:39 PM · Feb 23, 2024

Anat Schwartz has now deleted her account entirely.