The Return of Diplomacy?

Opinions

The House the Dollar Built: The United States and the Decline of Liberal Hegemony

09.12.2024
Andrey Sushentsov
VALDAI CLUB RU.


In December 1941, a meeting took place in Moscow between Soviet leader Joseph Stalin and British Foreign Secretary Anthony Eden. The minister did not know the details of the meeting’s agenda and had to guess what the Soviet leader might inform him about. Perhaps the meeting would focus on moving the capital to the East? Perhaps the Soviet Union was ready for separate negotiations with Germany? Anthony Eden was pleasantly surprised by the fact that the meeting’s topic was the structure of the world after the victory over the Third Reich.

Even in December 1941, the Soviet leadership was firmly convinced that thanks to its mobilisation potential, thanks to the effective evacuation of production to the East, and thanks to the fact that the Soviet Union had withstood the first blow, the USSR now had enough resources to defeat Germany on its own — and even more so with its allies. The Soviet leadership was also confident that the victorious powers would determine the architecture of the new post-war world. The principles of this architecture were previously recorded in a paradigmatic document, the Atlantic Charter (1941), developed by the United States and Great Britain and supported by the Soviet Union. The Atlantic Charter was written “with the hope of a better future for the entire world,” which the authors intended to achieve by creating “a broad and permanent system of common security.”

However, very soon the pathos of peaceful cooperation in the interests of all gave way to pragmatic interests. The United States, having grown stronger against the backdrop of post-war Europe lying in ruins, sensitively affected the interests of even its closest allies in certain elements of its foreign policy strategy. Thus, the principles of decolonisation and open markets, useful for strengthening the global influence of the United States, dealt a blow to the British colonial empire. This circumstance was the first signal that American hegemony, based not only on liberal principles, but also on tough pragmatism, sometimes ignored the interests of allies.

Over time, the dominance of hard pragmaticism has become increasingly obvious and tangible. The dollar, once considered a “common good,” is no longer perceived as a neutral instrument. The United States’ sanctions policy forces American allies to sacrifice mutually beneficial trade relations due to the risk of secondary sanctions. However, the strategy of liberal hegemony based on fear has demonstrated limited effectiveness. The conceptual foundations of liberal hegemony are the allies’ trust in the hegemon as a source of the common good and the adversary’s fear of a “credible threat.” The United States is losing control over both of these components.

Speaking about “credible threat”, we note that hybrid instruments such as economic pressure or coercive diplomacy, although they create short-term inconveniences for US opponents, cannot change the situation radically. The number of Chinese and Turkish companies that have fallen under secondary sanctions due to trade with Russia constitutes a small fraction of a percent of the total number of companies in these countries. There are two explanations for the current situation. On the one hand, in today’s turbulent international environment, the trend towards multipolarity is growing: major powers with a tendency toward independent strategic thinking are increasingly acting in their own interests, often ignoring the rules of the game proposed by the US as universal. US sanctions policy has only accelerated the process of abandoning the dollar: countries are switching to settlements in national currencies. On the other hand, the United States itself is aware of the counter-productiveness of “carpet-style” sanctions: large-scale sanctions undermine one of the key pillars of American power – the dominance of the US dollar and the status of the American financial system as a key link in international transactions. Thus, the United States cannot “penalise” every transaction with sanctioned countries, although such transactions are quite transparent for American agencies. In turn, refraining from “punishment” reduces trust in American coercive measures.

The issue of trust from allies is also a sore point for American foreign policy. Pressure on allies creates tension within the Western bloc. Participants in expert discussions in European countries are increasingly asking about the long-term interests of the continent, which differ from those of the United States, although these voices still remain at the second echelon of politicians and analysts. The Ukrainian crisis has become a stress test for the pyramid of trust in the American vision of foreign policy. The United States had expected to implement a “strategy of destruction”, creating a situation of military defeat for Russia in the Ukrainian theatre of military operations, economic destabilisation through sanctions, and diplomatic isolation.

However, this plan turned out to be ineffective, since Russia adapted its economy to the realities of sanctions and continued to pursue an active foreign policy. In turn, European allies, faced with economic problems and rising costs, are beginning to doubt the wisdom of continued confrontation with Russia.

The Ukrainian crisis could become a prologue to a period of protracted conflict. Taiwan, the East China Sea, the Middle East, and Latin America appear to be potential zones of military and political crises. The transforming world order has reached a point where the United States is being forced to reckon with the reality of its declining influence. The future of the world order now depends on whether the major powers can form a new system of international relations based on a sober assessment of national interests and their balance.