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À partir d’avant-hierAnalyses, perspectives

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What is China’s Economic Future?

Par : AHH

Political economists Radhika Desai and Michael Hudson are joined by Beijing-based scholar Mick Dunford to discuss what is actually happening in China’s economy, explaining its technological development and transition toward a new industrial revolution.

Radhika Desai and Michael Hudson at The Geopolitical Economy Hour.

Video:

Podcast:

Transcript:

RADHIKA DESAI: Hello and welcome to the 24th Geopolitical Economy Hour, the show that examines the fast-changing political and geopolitical economy of our time. I’m Radhika Desai.

MICHAEL HUDSON: I’m Michael Hudson.

RADHIKA DESAI: And working behind the scenes to bring you our show every fortnight are our host, Ben Norton; our videographer, Paul Graham; and our transcriber, Zach Weiser.

And with us today we have, once again, Professor Mick Dunford, professor emeritus of geography at Sussex University and now working at the Chinese Academy of Sciences, keeping a close watch, among other things, on China’s economy. So welcome, Mick.

MICK DUNFORD:  Thank you very much.

RADHIKA DESAI: So, China’s economy is what we’re going to talk about today. Where is it at after decades of breakneck growth, after executing the greatest industrial revolution ever? Where is it headed?

Trying to understand this is not easy. The disinformation that is fake news and even what I often call fake scholarship that distorts the view that any honest person may be trying to take on China’s economy is simply overwhelming. It’s absolutely wall-to-wall propaganda, no matter which Western publication or website you open.

If we are to believe the Western press and the leading scholarly lights of the West, who are the major generators of the Western discourse on China, we are at peak China. That is to say, they claim that China has reached a point, reached the highest point, that is, that it ever can. And from here on, it’s only going to be downhill, more or less rapidly.

They say that China has, in recent years, inflated a huge property bubble to compensate for the West’s inability to keep up imports. And this bubble is about to burst. And when it does, it will subject China to a 1980s and 1990s Japan-style long-term deflation or secular stagnation. They have even invented a word to talk about this: “Japanification”. We are told that the Japanification of China’s economy is impending.

They say that the U.S.’s trade and technology wars are hitting China where it hurts the most, at its export and its reliance on inward foreign investment. They are saying that China has grown only by stealing technology. And now that the U.S. is making it harder for it to do so, its technological development can only stall. They are saying that China followed disastrous COVID-19 policies, leading to mass death, draconian lockdowns, and economic disaster.

They are saying that China over-invests, and its growth will not pick up unless China now permits higher consumption levels. They are saying that China has a serious unemployment crisis, that the CPC, the Communist Party of China, is losing legitimacy, because it is failing to deliver ever-higher living standards. And they are saying that Xi Jinping’s authoritarian leadership is ensuring that the private sector will stall, and with it, so will China’s growth.

All this, they say, before even beginning to talk about China’s foreign policy. And there, of course, lie another long litany of alleged disasters and misdemeanors that China is responsible for, beginning with debt-trap diplomacy and China’s allegedly voracious appetite for the world’s resources.

The only reason why Western experts ever stress the strength of China’s economy is when they want to argue that the West must redouble its efforts to contain China and to stall its rise.

So today, we’re going to take a closer look at China’s economy, and in doing so, we’re going to bust a lot of these myths. We’re going to show you that, sadly, for the purveyors of the fake news and fake scholarship about China, no amount of their huffing and puffing has been able to blow down China’s house, because, like the good, the smart little pig, China is actually building its house with bricks.

So, we have a number of topics to discuss in this show. Here they are:

1.    Characterising China’s Economy: Capitalist? Socialist?

2.    Growth Story

3.    Covid Response

4.    The Alleged Debt and Property Bubble? And Japanification?

5.    Restricted Consumption? Stagnant living standards?

6.    Exports in the China Story

7.    China’s new growth strategy

8.    China’s foreign policy

So, these are the topics that we hope to discuss. We want to begin by talking about how to characterize China’s economy. Is it capitalist? Is it socialist? Then we will do the most important and primary basic thing, we will look at the growth story with some statistics. We will then look at China’s Covid response. We will look at the alleged debt and property bubble and whether China is being Japanified.

Then we will look at the issue of whether China is overinvesting and neglecting consumption and living standards, etc. How reliant is China on exports? What is China’s growth strategy? And what is China’s foreign policy? And are those myths about it true? So, this is what we hope to discuss.

So, Mick, why don’t you start us off with your thoughts on exactly how to characterize China’s economy?

MICK DUNFORD: Ok, the way I would characterize China is as a planned rational state. I mean, right the way through, it has maintained a system of national five-year planning, and it also produces longer-term plans. But it’s a planned rational state that uses market instruments.

China has a very large state sector. And of course, some people have claimed that this state sector is, in a sense, an impediment to growth. And we’ve seen a resurrection of this idea, guo jin min tui (国进民退), which is used to refer to the idea that the state sector is advancing and the private sector is retreating.

It’s a very, very strange concept, in fact, because the third word is min (民), and min refers to people. So, what they are actually, in a sense, saying – these ideas were invented by neoliberal economists in 2002 – the private sector is equated with the people, which I find absolutely astonishing. But, I mean, the country does have a very significant public sector.

What I find striking is that one can actually turn it around and say, what is it that these Western economists seem to think China should do? And they seem to think that China should privatize all assets into the hands of domestic and foreign capitalists. It should remove capital controls. It should open the door to foreign finance capital. It should transfer governance to liberal capitalist political parties that are actually controlled by capital.

I think one of the most fundamental features of the China system is actually that it’s the state that controls capital, rather than capital that controls the state. And it’s, in fact, this aspect of the Chinese model, and in particular, the rule of the Communist Party of China that has basically transformed China from what was, effectively one of the poorest countries in the world into one of its largest industrial powers.

So, in a way, it’s a planned rational state in which the CPC has played an absolutely fundamental role. And without it, I mean, China would never have established the national sovereignty that permitted it to choose a path that suited its conditions and to radically transform the lives and livelihoods of its people.

RADHIKA DESAI: Michael, do you want to [speak]?

MICHAEL HUDSON: The question is, what is the state? There are two aspects of the state with China. One is public infrastructure. And the purpose of China’s public infrastructure is to lower the cost of doing business because infrastructure is a monopoly.

That’s what really upsets the American investors. They wanted to buy the phone system, the transportation system, so that they could benefit from charging monopoly rents, just like under Ronald Reagan and Margaret Thatcher.

The most important sector that China’s treated in the public is money creation and banks. Americans hope that American banks would come over and they would be making all the loans in China and benefiting from China’s growth and turning it into interest. And instead, the government’s doing that. And the government is deciding what to lend to.

And there’s a third aspect of what people think of when they say state. That’s a centralized economy, centralized planning, Soviet style.

China is one of the least centralized economies in the world because the central government has left the localities to go their own way. That’s part of the Hundred Flowers Bloom. Let’s see how each locality is going to maneuver on a pragmatic, ad hoc basis.

Well, the pragmatic ad hoc basis meant how are localities, villages, and small towns going to finance their budgets? Well, they financed it by real estate sales, and that’s going to be what we’re discussing later.

But once you realize that the state sector is so different from what a state sector is in America, centralized planning and the control of Wall Street for financial purposes, finance capitalism, hyper-centralized planning, you realize that China is the antithesis of what the usual view is.

RADHIKA DESAI: Absolutely. And I’d just like to add a few points, which dovetail very nicely with what both of you have said.

The fact of the matter is that this was also true of the Soviet Union and the Eastern European countries when they were still ruled by communist parties. We generally refer to them as socialist or communist, but in reality, they themselves never claimed to be socialist or communist. They only said they were building socialism, especially in a country that was as poor as China was in 1949.

The leadership of the Communist Party of China has always understood that there has to be a long period of transition in which there will be a complex set of compromises that will have to be made in order to steer the economy in the direction of socialism, in order to build socialism.

So, from its beginnings, the revolutionary state in China was a multi-class state and a multi-party state. People don’t realize very often that while the Communist Party of China is the overwhelmingly most powerful party in China, there are other parties that exist as well, which reflect the originally multi-class character of China.

Now, it’s true that since 1978, the government has loosened much of its control over the economy. But the important thing here is that the Communist Party retains control of the Chinese state.

The way I like to put it is, yes, there are lots of capitalists in China. Yes, those capitalists are very powerful. They are at the head of some of the biggest corporations in the world, and they are quite influential within the Communist Party. But what makes China meaningfully socialist or meaningfully treading the path to socialism, let’s put it that way, is the fact that ultimately the reins of power are held in the hands of the Communist Party of China leadership, which owes its legitimacy to the people of China.

So, the reigns of power, the reigns of state power are not held by the capitalists; they are held by the Communist Party leadership.

So, in that sense, I would say that China is meaningfully socialist. Although, as Mick pointed out, there is a fairly large private sector in China, but so too is the state sector very large. And the extent of state ownership means that even though the private sector is very large, the state retains control over the overall pace and pattern of growth and development in the country.

And I just add one final thing here, which is going to become quite important as we discuss the various other points, and that is that the financial sector in China remains very heavily controlled by the state.

China has capital controls, China practices a fair degree of financial repression, and China’s financial system is geared to providing money for long-term investments that improve the productive capacities of the economy and the material welfare of the people. And this is completely different from the kind of financial sector we have today.

So, Mick or Michael, did you want to add anything?

MICK DUNFORD: Just to reiterate, I mean, the point is, the government sets strategic targets that relate to raising the quality of the life of all the Chinese people. And it has strategic autonomy, which gives China the opportunity or the possibility of actually choosing its own development path.

And I think that’s something that very strikingly marks China out from other parts of the Global South that have had much greater difficulty, in a sense, in accelerating their growth, partly because of debt and their subordination to the Washington financial institutions.

So I think that is critically important, the role of sovereignty and autonomy in enabling China to make choices that suited its conditions, and at the same time making choices that are driven by a long-term strategic goal to transform the quality of the lives of all Chinese people.

MICHAEL HUDSON: I want to put in one word about sovereignty. You put your finger on it. That’s really what makes it different.

What makes other countries lose their sovereignty is when they let go, how are they going to finance their investment? If they let foreign banks come in to finance their investment, if they let American and European banks come in, what do they do? They fund a real estate bubble, a different kind of a real estate bubble. They fund takeover loans. They fund privatization.

Banks don’t make loans for new investment. China makes great money to finance new tangible investment. Banks make money so you can buy a public utility or a railroad and then just load it down with debt, and you can borrow and borrow and use the money that you borrow to pay a special dividend if you’re a private capital company. Pretty soon, the country that follows this dependency on foreign credit ends up losing its sovereignty.

The way in which China has protected its sovereignty is to keep money in the public domain and to create money for actual tangible capital investment, not to take your property into a property-owning rentier class, largely foreign-owned.

RADHIKA DESAI: Thank you. Those are very important points. Thank you.

I’d just like to add one final point on the matter of how to characterize the Chinese economy and the Chinese state. At the end of the day, it’s not just important to say that the state controls the economy, but whose state is it?

The way to look at it as well is that in the United States, essentially we have a state that is controlled by the big corporations, which in our time have become exceedingly financialized corporations, so that they are directing the United States economy essentially towards ever more debt and ever less production, whereas that is not the case in China.

And the question of whose state it is makes use of the word autonomy. The autonomy refers to the fact that it is not subservient to any one section of society, but seeks to achieve the welfare of society as a whole and increase its productive capacity.

MICK DUNFORD: If I may just add, I think also it’s important that you pay attention to the policy-making process in China. It’s an example of what one might call substantive democracy. It delivers substantive results for the whole of the Chinese population.

In that sense, it delivers improvements in the quality of the lives of all the people, and therefore, in a sense, it’s a democratic system. But it’s also a country that actually has procedures of policy-making, experimentation, design, and choice and so on that are extremely important and that have fundamental aspects of democracy about them.

When Western countries characterize China as authoritarian, they’re actually fundamentally misrepresenting the character of the Chinese system and the way in which it works, because they, in a sense, merely equate democracy with a system, whereas China, of course, does have multiple political parties, but a system with competitive elections between different political parties. There are other models of democracy, and China is another model of democracy.

RADHIKA DESAI: Mick, you’re absolutely right to talk about the substantive democracy. Indeed, in China, they have recently developed a new term for it. They call it a “whole process democracy”, and it really involves multiple levels of consultation with the people, going down to the most basic village and township levels, and then all the way up the chain.

And I think this process does work, because the other remarkable thing about the CPC leadership is its ability to change direction pragmatically. If something does not work, then it assesses what it has attempted, why it has failed, and then it revises course. So, I think we will see several instances of this as we talk as well.

Michael, you want to add something?

MICHAEL HUDSON: One thing about democracy. The definition of a democracy traditionally is to prevent an oligarchy from developing. There’s only one way to prevent an oligarchy from developing as people get richer and richer, and that’s to have a strong state.

The role of a strong state is to prevent an oligarchy from developing. That’s why the oligarchy in America and Europe are libertarian, meaning get rid of government, because a government is strong enough to prevent us from gouging the economy, to prevent us from taking it over.

So, you need a strong central state in order to have a democracy. Americans call that socialism, and they say that’s the antithesis of democracy, which means a state that is loyal to the United States and follows U.S. policy and lets the U.S. banks financialize the economy. So, just to clarify the definitions here.

RADHIKA DESAI: Very, very true, Michael. But let’s not go, I mean, maybe we should do a separate show on political theory of the state, because that’s equally important.

But for now, let’s look at our next topic. We hope, of course, that everybody understands how we characterize China’s state. But now, let’s look at China’s GDP growth.

So, here you have a chart, and we have several charts on this matter, but we’ll take them one by one and comment on them:

gdp growth china west 1980 2028

So, here we have a chart showing the annual rate of GDP growth from 1980 to 2028. Of course, post-2023 are their projections, which are shown by the dotted lines. And I’ve only taken a few selected countries from the Our World in Data website, and anybody can go there and look at this data, by the way.

So, you can see China and then a handful of the most important Western countries. And you can see that going back to 1980, essentially China’s growth rate, which is here, the top red line here, has absolutely been massively higher on practically any year than the other countries.

In fact, you see I left Russia in here. I should probably have taken it out. It’s a bit of a distraction, because here you see Russia’s growth rate massively bouncing up from the late 90s financial crisis. But let’s leave that aside.

All the other major countries, which you see here, they are all showing considerably lower growth. So, the United States here is this orangish line. And essentially, they’re all showing much lower growth.

And more recently as well, this is the Covid-19 pandemic. And you can see that China, again, like all the other countries, it experienced a fairly sharp decline in the growth rate, but it still remained positive, unlike all the other countries.

And it remains substantially above that of the rest of the economies that constantly are telling China how to improve its economic policy. So, that’s what I want to say about this chart.

But Mick, go ahead.

MICK DUNFORD: Can you show that table that I sent?

RADHIKA DESAI: Yeah, sure. Yes, here we go:

gdp growth china west table

MICK DUNFORD: These are more recent growth rates for China, for the world, and for the G7. And I mean, first of all, they show absolutely clearly that China’s growth rate is still a long way in excess of the average growth rates of all G7 countries, many of which have actually performed abysmally. I mean, Germany is now in recession, it declined 0.3% per year this year. I mean, Italy has had extremely low rates of growth, France, Germany, the United Kingdom, Japan, all had extremely low rates of growth.

China last year achieved a growth rate of 5.2%. It itself expects to grow at 5% next year. The IMF forecast 4.6%. Even that 4.6% target is quite close to the average growth rate that China needs to achieve to meet its 2035 target. It has a 2035 target of doubling its GDP, its 2020 GDP by 2035. I think that that goal is perfectly realizable. And in that sense, I strongly disagree with people who argue that China has in a sense peaked.

But I do find it, really quite astonishing, that Western countries, whose economies have performed extremely poorly, feel in a position to lecture China about how it should address what is said to be an unsatisfactory rate of growth. That’s the first point I want to make.

I just want to say something else, if I may. When we talk about, I mean, China’s growth has slowed. And, there’s no doubt that in terms of people’s everyday lives, there are many difficulties. And I just want to quote something.

At New Year, Xi Jinping gave a speech. I wanted to cite his actual words. He recognised that in these years, China faces what he called the tests of the winds and rains. And then he said, when I see people rising to the occasion, reaching out to each other in adversity, meeting challenges head on and overcoming difficulties, I am deeply moved.

So, the leadership and all Chinese people are well aware that there are many, many difficulties and challenges confronted, because China is actually undergoing a major structural transformation about which we shall speak later. But China is also in the short term undertaking a lot of important actions that are actually designed to cope with some of the real difficulties that people confront.

So, if you listen to Li Qiang’s government work report, he addressed the problem of short-term employment generation. And there are proposals for 12 million new urban jobs to increase employment, especially for college graduates and other young people, because for young people, the unemployment rate, including college students, is in the region of 21 percent. Urban unemployment is 5 percent. So, there are issues to do with the generation of employment.

Government expenditure this year will target a whole series of strategic issues, but also livelihoods. So, affordable housing, youth unemployment, job security, insurance, pensions, preschool education, the living conditions in older communities. So, I’m just saying that, in the current context, difficult economic situation and a particularly turbulent global situation. I mean, China, as every other country in the world, faces challenges, and it is in many ways directly addressing them in very important ways.

RADHIKA DESAI: Great. Thanks, Mick. Michael, do you want to add anything?

MICHAEL HUDSON: No, I think that’s it. The question is, what is the GDP that is growing? There are a number of ways of looking at GDP. And when I went to school 60 years ago, economists usually thought of GDP as something industrial. They’d look at energy production. They’d look at railway cargo transportation.

If you look at the industrial component of what most economists used to look at, electricity is the power for industry, electricity is productivity growth for labor. If you look at these, what is the component of GDP, you realize that these differences in Mick’s charts are even wider than what he showed, because the American GDP, very largely interest, overdraft fees of credit card companies, as we’ve said, is providing a financial service. 7% of American GDP is the increase in homeowners’ view of what their rental value of their property is. That’s 7%.

Now, I doubt that China includes a measure like this in its GDP. But if it did, with all of its rise in real estate prices, its GDP would be even higher in a reality-based basis.

So real GDP, as we think of it, and the public thinks of it, is something useful and productive. Actually, China’s doing a much more efficient job in minimizing the kind of financial and rentier overhead that you have in the United States.

RADHIKA DESAI: Exactly, Michael. What I was going to point out as well is that these figures of U.S. GDP growth and the absolute level of U.S. GDP are heavily financialized.

The financial sector, which actually is not a force for good in general in the U.S. economy, it is out of which the indebtedness comes, out of which the productive weakening comes. The growth of the financial sector is counted as GDP in the United States and massively inflates U.S. GDP, which would not be as high as this.

And this is particularly important given that President Biden, for example, is congratulating himself now for having the strongest economy in the world or the Western world or whatever it is. Well, that’s what the U.S.’s boast is based on.

And China does not do that, nor does it have the kind of financial sector which creates, which destroys the productive economy. Rather, as we were saying, it has the kind of financial sector that supports it.

So, just another general point I want to make. We were talking about this chart:

gdp growth china west table

This shows from 1980 to 2028, and the projections remain, by the way, even from conservative sources, that China’s growth is going to remain higher than the rest of the world, particularly the Western countries, for a long time to come.

And I also decided to show you this chart:

gdp growth china west 2008 2028

This is the chart of growth, which is just a more focused version of the previous one, which shows growth rates from 2008 to 2028.

So 2008 is when we had what Michael and I call the North Atlantic Financial Crisis. And since then, what we’ve seen is, yes, of course, all countries have seen a sort of a reduction in their growth rate, and certainly China has. But even since then, you can see that China’s growth remains high and stable. So, that’s another thing that we wanted to show.

And this is a chart showing the rise of per capita GDP:

gdp per capita growth china west 1970 2021

That is to say, you can have a higher GDP, but if your population is expanding, then to what extent is per capita GDP rising? So, you can see here that, again, even in terms of per capita GDP, and this only again goes to 2021, but in terms of per capita GDP, China has remained head and shoulders above all the major Western countries.

And this bounce here that you see in the case of the US and the UK here, it is only a dead cat bounce from the absolute depths to which their economies had sunk during Covid, and so they came to some sort of normalcy.

Mick, you may want to say something about this chart, because you sent it to me. So, please go ahead:

gdp per capita ppp 2021 china west

MICK DUNFORD: It’s correct, of course, that China’s growth slowed. Now, in 2013, China entered what is called the New Era. At that time, China decided that its growth rate should slow. It chose slower growth. It spoke of 6 or 7 percent per year, and it more or less achieved that, until the Covid pandemic. So, China chose slower growth for very particular reasons, and I think in this discussion, we shall come to some of these reasons later on.

But in a sense, what they want is what they call high-quality growth. And what China is seeking to do is undertake a profound structural transformation of its economy, establishing new growth drivers by directing finance towards high-productivity sectors and directing finance towards the use of digital and green technologies in order to transform its traditional industries. So, in a sense, it’s undergoing a profound process of structural transformation.

And I mean, if you, for example, look at Li Qiang’s speech, the major tasks include invigorating China through science and education, so to strengthen the education, science and technology system, to improve the capabilities of the workforce, or promote innovation, industrial investment and skills, and another, striving to modernize the industrial system and accelerate the development of new productive forces, bearing in mind that we’re on the verge of a new industrial revolution. But these are very important issues, fundamentally important issues.

RADHIKA DESAI: And I would say just, and I know we’ll talk about it at greater length later on, but it is really important to bear in mind that really, when the world stands at the cusp of being able to exploit new technologies like quantum computing or nanotechnology or artificial intelligence or what have you, a relatively centralized decision-making process about how to allocate resources, for what purposes, for what social benefits, etc., is likely to prove far superior, that is to say, China’s method is likely to prove far superior than the Western tactic of leaving private corporate capital in charge of the process.

And just to give you a couple of instances of this, the fact that private corporate capital is in charge of the development of digital technologies is already creating all sorts of social harms in our Western societies, whether it is harms to children’s mental health or even adults’ mental health, to political division that the algorithms sow and so on.

And also, it is leading to a situation where even these mega-corporations, these giant corporations, actually do not have the resources to invest, the scale of resources that will be needed to invest. So, for example, you hear in the Financial Times that Sam Altman is looking for people to invest in his artificial intelligence ventures, which will require trillions of dollars, and he cannot find private investors for it. So, this is really quite interesting.

Okay, so if we’re done with the growth rate story, oh, and I just want to say one other thing about this, which is, this is a GDP per capita in purchasing power parity, and China, in the space of a few decades, essentially, has experienced the biggest spurt in per capita well-being, etc., which includes important achievements like eliminating extreme poverty.

The Communist Party has brought China to essentially per capita GDP in purchasing power terms of next to nothing in 1980 to about $20,000 per annum in 2020. This is really quite an important achievement. And to do this for a country of 5 to 10 million people would be laudable, but to do this for a country of 1.3 billion people is a massive, historic achievement, and I think that’s something to remember.

MICK DUNFORD: I just, if you just go back for one minute, I mean, I absolutely agree with what you’ve just said, Radhika.

I’ll just make a comment about this chart. It’s because we were probably going to speak about Japanification:

gdp per capita ppp 2021 china west

It basically shows that the GDP per capita of Japan, and indeed of Germany, closed in on the United States, and actually Germany overtook it in the 1980s. But after that point in time, I mean, after the revaluation of their two respective currencies, and after the, the bubble, the stock market and property market bubble in Japan, you saw stagnation set in. And there’s a question as to whether that will happen with China.

But I mean, I think that one thing that’s striking in this diagram is that China is still at a much lower level of GDP per capita than Japan, or indeed Germany was at that time. And those economies, because, they were at the technological frontier to some extent, had to innovate, move into new technologies.

China, because there is still a technological gap, has enormous opportunities to accelerate its growth in a way in which, well, Japan failed because it chose not to take up opportunities, and it gave up semiconductors manufacture. But China has enormous opportunities, and that’s one reason why we must anticipate China’s growth as continuing.

RADHIKA DESAI: Absolutely. Thank you, Mick. Okay, so if we’re done with the growth story, let’s go to our next topic, which is what happened in China under Covid-19. Now, of course, there is just so much dispute about and controversy around Covid and Covid strategies, etc. So we don’t want to get into all of them, but I just want to emphasize two things.

We’ve already looked at the growth figures, we looked at the growth figures around Covid:

gdp growth china west 2008 2028

So you can see here that in 2020, all economies had a big dip thanks to Covid in their economies, but China is alone among the major economies to have remained in positive growth territory, and to have, of course, remained much higher than the rest of the other major world economies. So essentially, China, whatever China did, it did not sacrifice growth.

Now, this is very ironical, because in the Western countries, we were told that we need to, in order to continue growing, we need to, so in order to preserve livelihoods, which was the euphemism for preserving the profits of big corporations, in order to preserve livelihoods, we may have to sacrifice some lives. And the Western economies went through an absolutely excruciating process of lockdown here, and opening there, and lockdown again, and opening again, and so on.

But all of this had devastating impacts on Western economies, whereas China prioritized the preservation of life above all. And it imposed a lockdown knowing that, okay, even if we are going to develop vaccines, and remember, China developed its own vaccines, and effectively inoculated over 70 percent of the population by the time they began reopening.

China prioritized the saving of lives, and it was accused of essentially creating world shortages by shutting down its economy, etc. But in reality, China’s strategy, which focused before the availability of vaccines, on essentially physical distancing, isolation, etc., as was necessary, but China managed to do it in a way as to keep up a relatively robust growth rate, and very importantly, lose very few lives.

This is a chart, again from Our World In Data, of cumulative Covid-19 deaths per million of population:

covid 19 deaths per million china us

So here we have all these countries, the United States and United Kingdom are these top two lines, Germany, Canada, Japan, even though we are told that East Asian economies did well because they had experience with SARS, etc., even then, compared to China, which is down here with a cumulative Covid death rate per million of about 149 or something people dying per million, and these numbers are over 3,000, almost 4,000 per million at this point in the United States and the UK, and then you have these other economies.

So China actually managed to avoid the worst of Covid, both in terms of lives and in terms of livelihood, and it did so because it did not compromise the saving of lives.

Does anyone else want to add anything? Mick? You were there.

MICK DUNFORD: Well, I mean, obviously, there were difficulties for some people in some places at some times. I was here right through it. All I can say is the impact personally on me was extremely limited.

It was a very effective system for protecting life. And if you lived in some places, then in fact the impact on your life, apart from having frequent nucleic acid tests and so on and ensuring that your health code was up to date, the impact on one’s life was relatively limited.

But in some places, obviously, in Wuhan at the outset, in Shanghai later on, the impact was very considerable.

But I think it’s an indication of the importance of a kind of collectivism, and the priority given to the protection of human life. And as you said, it is quite striking that actually through it, China’s economy actually kept ticking over.

And of course, China produces so many important intermediate goods that obviously it was also very important in providing things that were needed in many, many other parts of the world.

It also shared its drugs, its vaccines, which is really quite different, in a sense, from the conduct of the United States. And to some extent, the Western pharmaceutical companies.

RADHIKA DESAI: Absolutely. Michael, go ahead.

MICHAEL HUDSON: In the United States, that would be considered a failure of policy. The United States used Covid as an opportunity to kill.

For instance, the governor of New York, Cuomo, took the Covid patients and he moved them into all of the assisted living and old people’s homes. And that had a great increase in productivity. It resulted in enormous death rates for the elderly.

That helped save New York’s pension plan system. It helped save other pension plans. It helped save Social Security because the dead people were no longer what America called “the dead weight”.

The American policy was to indeed infect as many people over the age of 65 as you could. And that helped balance state, local budgets, pension plan budgets.

The increase in the death rate is now the official policy of the Center for Disease Control in the United States. They say do not wear masks. They’ve blocked any kind of mask wearing. They’ve done everything they could to prevent the use of HIPAA filters or airborne disease. The Disease Control Center says that Covid is not an airborne disease. Therefore, do not protect yourself.

Well, the result is many children have been getting Covid and that weakens their resistance system. And they’re getting measles and all sorts of other things. And all of that is greatly increasing GDP in America. The health care costs of America’s destructive policy.

I think Marx made a joke about this in Capital. He said when more people get sick, the doctors and the economic output goes up. Are you really going to consider sickness and destruction and fires rebuilding and cleanup costs? Are you going to count all of this there?

RADHIKA DESAI: But the irony is Michael, even with all of that, America’s GDP plunged so deeply down.

Well, I think we should move on to the next topic, but I will just say one thing. It is generally said that China is in a panic, the Chinese government reversed its draconian Covid policies because there were popular protests, and blah blah and so on. I would not agree with that.

Certainly, there were some popular protests. It also seems as though at least some of them were being pushed by the National Endowment for Democracy with the typical color revolution style. They have one symbol that symbolizes it. So, they decided to put up blank pieces of paper, etc. So, there’s no doubt that there was some of this going on. And as Mick said, undoubtedly, there were local difficulties in many places.

But what becomes very clear is that China decided to lift Covid restrictions towards the end of 2022 only after it has satisfied itself that the risk. And I should also add one thing. It was under pressure to lift these restrictions a great deal because the fact was that the rest of the world was not following China’s footsteps apart from a handful of other countries. And they were socialist countries. They were not following China’s footsteps.

So, it’s very hard to be the only country that’s doing it. But nevertheless, despite all those pressures, China had a very deliberate policy. It lifted Covid restrictions after assuring itself that enough of the population had been vaccinated, as to achieve something close to herd immunity.

And these figures of deaths per million demonstrate that China’s bet proved right, and China continues to monitor the situation. Covid hasn’t gone away.

And so, in all of these ways, I think that it’s important for us to understand that China’s policy has actually been above all about protecting people’s lives.

MICK DUNFORD: Just from my recollection, the demonstrations of which you spoke, where the slogans were written in English, I wonder who they were talking to, were on the 1st of December. China had, on the 11th of November, already announced the steps of, in a sense, removing restrictions. And then they were finalized in early December. So, the change was already underway.

RADHIKA DESAI: Exactly. Great. So, I think we are at almost, I think, 50 minutes or so. So, let’s do the next topic, which is the property bubble. And then we will stop this episode and we will do a part two of this episode, and do the other four topics that remain in part two.

So, Mick, do you want to start us off about the property bubble and the alleged Japanification, impending Japanification of China’s economy?

MICK DUNFORD: Okay. Well, if you want, you can just show the chart:

house property prices china us

Basically, you can see that throughout this period, Chinese house prices have risen quite substantially. You know, in a sense, the story started, with housing reform, after 1988, when China moved from a welfare to a commodity system. And then, in 1998, it actually privatized Danwei housing, and it adopted the view that housing should be provided, as a commodity by developers.

And in 2003, that course of action was confirmed. And from that point in time, one saw very, very substantial growth in the number of developers, many of which, the overwhelming majority of which were private developers. So, in a sense, they moved towards a fundamentally market system.

And they very quickly had to make certain adjustments because they found that while the quality of housing and the amount of housing space per person was going up, these developers were orienting their houses towards more affluent groups. So, there was an under-provision of housing for middle-income groups and for low-income groups.

And so, there were progressively, you saw over the years, increasing attention paid to the provision of low-cost housing and of low-cost rented housing. And in fact, in the current five-year plan, 25% of all housing is meant to be basically low-cost housing.

So, the important point is that this problem emerged in a system that was liberalized, actually, I mean, in line with recommendations that were made in 1993 by the World Bank.

So, in other words, it’s an example of a liberalized, predominantly market-led, private-led system, in which these difficulties and these problems have emerged.

So, that’s the first thing I want to say. And I mean, obviously, to address housing needs, China has had, over the course of time, to considerably move back in the direction of providing low-cost housing in order to meet the housing needs of the Chinese people.

But basically, in August 2020, the government got very, very deeply concerned about, on the one hand, increasing house prices and, on the other hand, the explosion of borrowing and the fact that the liabilities of many of these developers substantially exceeded their assets.

And of course, the other line on that chart is a line indicating house prices in the United States. And of course, it was the crash of prices in the subprime market that, in a sense, precipitated the financial crisis. So, China, in the first place, is absolutely determined that it should not confront that kind of problem that was generated by the liberalized housing system in the United States.

So, I mean, that’s the first thing I basically want to say.

If you want, I can say something about the case of Evergrande. But basically, what China did in 2020 was it introduced what it called Three Red Lines, which were basically designed to reduce financial risks.

But it had a number of consequences because it, to some extent, deflated the housing market. Housing prices started to fall. Some of these developers found themselves in a situation where their liabilities substantially exceeded their assets. There was a decline in housing investment.

But to some extent, I think this is a part of a deliberate goal of basically diverting capital towards, as I said earlier, high productivity activities and away from activities, especially the speculative side of the housing market. So, I’ll just say that for the moment, but I can come back and say something about Evergrande, if you wish, in a few minutes.

RADHIKA DESAI: Okay, great. Michael, do you want to add anything?

MICHAEL HUDSON: Well, what I’d like to know as the background for this is what is the, how much of this housing is owner-occupied and how much is rental housing? That’s one question. The other question is how much is the ratio of housing costs to personal income? In America, it’s over 40% of personal income for housing. What’s the ratio in China?

I’d want to know the debt-equity ratio. How much debt, on the average, for different income groups? Debt relative to the value of housing. In America, for the real estate sector as a whole, debt is, the banker owns more of the house than the nominal house owner, whose equity ratio for the whole economy is under 50%.

These are the depth dimensions that I’d want to ask for these charts, if you know anything about them.

RADHIKA DESAI: Okay, thanks for that. And so, I just want to add one thing, which is that, this graph actually really says it all, and in some ways implicitly answers Michael’s questions:

house property prices china us

Because the blue line, which shows the United States property prices, you can see that they reached a certain peak at 150% of the value of its 2010 values in 2008. Then it went down to below the level of 2010.

But U.S. monetary policy, Federal Reserve policy, its continuing deregulated financial sector, the easy money policy that was applied in a big way with zero interest rate policies, with quantitative easing, etc., etc., has simply led to a new property boom, where the prices of property prices have reached a peak, which is even higher than that of 2007-8, which was such a disaster. And this was all made possible precisely by the, by increasing housing debt, etc.

Whereas in China, a big driver of the housing boom has actually been that people are investing their savings in it. So, by logically, it means that the extent of a debt in the housing market will be comparatively lower. The entities that are indebted are actually the developers.

And that’s a very different kind of problem than, than the, than the owners being indebted. So that’s the main thing I want to say.

And Mick, you wanted to come back about, about Evergrande, so please do. And then remember also that we want to talk about this chart in particular, and deal with the question of Japanification:

china loans real estate industry

So, please go ahead, Mick. Let’s talk about that.

MICK DUNFORD: Okay, well, I mean, as Radhika just said, the problem is, the indebtedness of developers, and the existence of debts that considerably exceed the value of their assets.

And the way in which this situation has come about, and I mean, as I said, the Chinese government, in a sense, wants to address the financial risks associated with that situation, and did so by introducing these so-called Three Red Lines.

It also is interested in reducing house prices, and it’s also interested in redirecting finance towards productivity-increasing activities.

So, Evergrande is an enormous real estate giant. It has debt of 300 billion dollars. It has 20 billion of overseas debt, and its assets, according to its accounts at the end of the last quarter of last year, are 242 billion. And 90 percent of those assets are in mainland China. So, its liability asset ratio was 84.7 percent, and the Three Red Lines set a limit of 70, 70 percent. So, it’s substantially in excess of the red line.

In 2021, it defaulted. And then, in January this year, it was told to liquidate after international creditors and the company failed to agree on a restructuring plan. In September, by the way, last year, its chair, Su Jiayin, was placed under mandatory measures, on suspicion of unspecified crimes. Basically, it was a Hong Kong court that called in the liquidators.

And the reason was that, in a way, outside China, Evergrande looked as a massively profitable distressed debt trade opportunity. There were 19 billion in defaulted offshore bonds with very substantial assets and, initially, a view that the Chinese government might prop up the property market.

So, large numbers of U.S. and European hedge funds basically piled into the debt, and they expected quite large payouts. But it seems as if this negotiation was, to some extent, controlled by a Guangdong risk management committee. And the authorities, basically, were very, very reluctant to allow offshore claimants to secure onshore revenues and onshore assets.

And, in fact, to stop the misuse of funds, I think about 10 Chinese local provinces actually took control of pre-sales revenues. They put it into custodial accounts, and the idea was that this money should basically—the priority is to ensure that the houses of people who’ve paid deposits on houses are actually built, and people who’ve undertaken work in building houses, are basically paid. So, that, then saw the value of these offshore bonds collapse very rapidly, indeed.

And I think that, to some extent, explains the concerns of the international financial market about the difficulties of this particular case. But I think, it’s clear that China intends, basically, to deflate this sector and to put an end to this speculative housing market as much as it possibly can, and to direct capital, towards productivity increasing, essentially, the industrial sector. And we shall talk about this direction of finance later on.

MICHAEL HUDSON: Evergrande debt, and other real estate debt, is to domestic Chinese banks and lenders. Certainly, many Chinese home buyers did not borrow internationally.

So, I want to find out how much the domestic Chinese banking system, or near banking system — not the Bank of China itself, but the near banks intermediaries who lent — to what extent have the banks given guarantees for the loans for Evergrande and others?

I understand that there are some guarantees domestically, and if the banks have to pay them, the banks will go under, just as occurring here in New York City. Do you have any information on that?

MICK DUNFORD: No, I don’t really have any information, except, I mean, some of the literature that I’ve read suggests that these creditors, bondholders and also other creditors, basically shareholders, are going to take a very, very major haircut.

RADHIKA DESAI: Exactly. I think that this is the key, that there will be an imposition of haircuts on the rich and the powerful, not just subjecting ordinary people to repossession of their homes, which they should have access to.

So, as Mick has already said, the Chinese government is doing everything possible to make sure that the ordinary buyers who have bought these houses do not lose out, which is the opposite of what was done in trying to resolve the housing and credit bubble in the United States.

So, I just want to say a couple of things. I mean, the Chinese government is quite aware, as Mick pointed out, the whole thing has begun by, this whole property bubble is in good part a product of the fact that when relations between China and the West were much better, China accepted some World Bank advice, and this is partly a result of that and the kind of deregulation that the World Bank had suggested.

But very clearly, now relations between China and the West are not good. In fact, they’re anything but good. China is unlikely, once bitten, twice shy, to accept such bad advice again, even if they were good. And now that they’re not good, there will be, and China is clearly looking at distinctively pragmatic, socialistic ways out.

And you see in the new address to the NPC by the Premier [Li Qiang], that social housing has become a major priority, not building houses for private ownership, but rather building houses which will be kept in the public sector and rented out at affordable rates. And I think this is really an important thing, really the way to go.

And finally, I would say that, the property bubble in Japan and the property bubble in the United States were bound to have very different consequences, partly because, well, for two reasons, mainly. Number one, the nature of their financial systems were very different.

In the case of Japan, the financial system was being transformed from one that resembles China’s financial system to something that resembles much more the US financial system. And Japan has continued this transformation and has suffered as a result. I would say in short, really, Japan has paid the price of keeping its economy capitalist. So in many ways is the United States.

And the second reason, of course, is that, funnily enough, one of the effects of the Plaza Accord was that, by the time the Plaza Accord came around, Japan was no longer interested in buying US treasuries. And as a result, the United States essentially restricted its access to US markets in a much bigger way. And so, essentially, Japan lost those export markets.

And it did not do what China is able to do. It perhaps could not do what China is able to do, being a capitalist country, which is massively reorient the stimulus for production away from exports and towards the domestic market, including the market for investment.

So I think that we are, maybe this is the cue at which we can talk about Japanification. So maybe you can start us off by commenting on this chart, and then Michael and I can jump in as well:

china loans real estate industry

MICK DUNFORD: Ok, the blue line, of course, is the flow of loans to different sectors. So the blue line is the flow of loans to the real estate sector.

MICHAEL HUDSON: Only the Bank of China or by?

MICK DUNFORD:  All the banks. You can see from 2016, the share going to real estate has diminished very significantly, whereas, where it says industrial MLT, that’s medium and long term loans for industrial investment, you can see a very, very strong, steady increase in the share of loans going to industrial investment. In agriculture, it declines. And then also, that has actually increased since 2016. So this is a directing of investment towards manufacturing and towards the industrial sector of the economy.

So why is that? Well, I think the first thing one can say is that, in the past, basically, the growth drivers of the Chinese economy were, to some extent, export manufactures. But China was predominantly involved in processing activities, employing very unskilled labor and associated with very low levels of labor productivity.

So one of China’s goals is to significantly, basically, strengthen, upgrade the quality of these traditional industries, to make them digital, to make them green, and to radically increase productivity through a large-scale investment wave.

And then, secondly, we’re on the verge of a new industrial revolution, which Radhika has spoken about. So the aim in this case is, basically, to divert investment towards the industries that are associated with the next industrial revolution.

The other main growth drivers in the past, alongside this export sector, were obviously real estate, which, I mean, if you look at GDP by expenditure, was accounting probably with household appliances and furniture and household goods and so on, about 26, 27 percent of the economy.

But it’s a sector that’s associated with relatively low productivity, and of course, it was associated with very substantial speculation and generated very considerable financial instability.

So, as Radhika said, there will be, in dealing with this financial crisis, basically an underwriting of existing, of obligations to existing home buyers, and in the future, an attempt to establish a more sustainable housing market.

The other area of the economy was basically this sort of platform economy. But this platform economy was associated with very, very strong tendencies towards monopoly, and in the, about four or five years ago, a series of measures were adopted, basically, to restrict, some aspects of this platform economy, and other areas, like private tutoring, which was generating large disparities in the educational system, and is associated with the fact, that the cost of raising children in China is extremely high. I mean, it’s the second highest in the world after South Korea, actually.

So, these growth drivers, these old growth drivers, are basically seen as not offering potential to sustain the growth of the Chinese economy into the years ahead, and so there’s this attempt to look for new growth drivers. And basically, for that reason, you’ve seen this redirection of investment.

And I think one can distinguish that, from what happened to Japan, because basically, in Japan, industrial investment did not increase, largely, I think, because the profitability of investment was not sufficiently high. And also Japan, in a sense, adopted a neoliberal program. It didn’t implement industrial policies.

Whereas China is seeking to undertake this transformation, basically, through, it’s a kind of supply-side restructuring, driven by industrial policy, and driven by financial policies, providing strategic funding for industrial transformation.

Then linking that also to the transformation of education, to try to ensure that the output of the education system, in terms of skill profiles, and so on, corresponds much, much more closely with the profile of work and employment, with much more emphasis upon STEM, in the context of this new industrial revolution, radically raising productivity, and by radically raising productivity, you increase income, and ultimately, you’ll increase consumption, and so on.

So I think that the Japanification course is not one that China will follow, that China will actually address this need to innovate and transform its industrial system, in order to, in a sense, address the problems that are associated with the earlier drivers of Chinese development.

MICHAEL HUDSON: We probably need a whole other program to talk about the difference in structure. Real estate is the largest sector of every economy, and China is so different from Japan.

The Ginza district in Japan, right around the palace, that small district, was larger than all of the real estate value in California. So, we’re dealing with a huge debt finance explosion there, and then you have the largest collapse of property prices in Japan, everywhere, anywhere in the world.

In a way, what you’ve described brings us back to what we were talking about at the beginning of the show, about China’s structure. The effect of the real estate slowdown and falling in prices has a disastrous effect on localities, small villages and towns in China, who are dependent on real estate sales as funding their budget.

So, the real estate crash in China, if we’re talking about what policy is China going to take, how is it going to solve the problem of local budgets without solving it by creating a booming real estate market for towns to sell off their property to developers, and developers to make a profit selling off a property to private buyers, mainly.

I assume they’re not just selling it to the government to make a profit. I think there’s a lot of structure that I’d like to know. I don’t know what it is now, but it’s so different from what you have everywhere else.

I think that really is what I hope will be the focus of our show, the geopolitics of different real estate structures and the real estate tax that goes with it.

RADHIKA DESAI: That’s a really interesting question, and much of that we will be discussing in the second part of this show, which we’ll be recording in a week or so, I think.

But let me maybe then just bring this to a conclusion by simply agreeing with what both of you have said, which is that China has a very good chance, in fact, very likely, China is not going to follow the Japanification model because, as Michael is emphasizing, the structure of China’s economy and the imperatives generated by that structure are very different.

To name just one, if something is not profitable in a capitalist economy, it will not get done. Whereas in the case of the Chinese economy, the Chinese government can always say, well, if it’s necessary, we’ll do it even if it isn’t profitable, because it is necessary for the welfare of the people or the productive capacity of the economy, etc. So, profitability just does not play the role of a brake in the same way as it does in capitalist societies.

Secondly, the role of the state, both in terms of initiating new projects and taking responsibility for new projects, and we can already see in the current NPC and the discussions there that the role of the state is already once again expanding again in China, and it can continue to do so. And I think that’s a very good thing.

And remember also that, Mick, you emphasized in the case of when you were discussing one of the graphs, that the per capita GDP of China today is considerably lower than what it was in Japan, even in the late 80s and early 90s.

And that means that, number one, domestic consumption can be a big stimulus for further economic expansion. And secondly, of course, the industrial opportunities, the opportunities for a new industrial revolution are many, and China in particular, because of the important state role in the Chinese economy, the centrality of the state role in the Chinese economy, and the aim of the Chinese economy and the Chinese economy’s managers to develop China’s productive capacity in whatever way that works, not necessarily through private ownership.

These elements are actually going to ensure that China will exploit the opportunities of the new technologies much more effectively and execute a transition to the next industrial revolution much more successfully, and that will be an important road to avoiding what’s called Japanification.

MICK DUNFORD: You know, I think the difference is that Japan, I thought, in the 1980s was at the technological frontier, and China is not. But just, what Michael was referring to is the fact that in China, local government revenue came to depend to a very considerable extent on what is called land revenue.

You know, basically all land is state-owned, is either state-owned or owned by the rural collectives. But what happened was that if land was converted for use for urbanization, was converted for use for urbanization, for housing, then basically the local government could in effect sell leases, 90-year leases, or depending on the activity, different lengths of lease. They could sell these leases to developers. And then that revenue was used by local government to fund infrastructure.

To some extent that model has come up against limits. And I think, the issue Michael raised really concerns how in future will local government be funded, and will there be a reform in the system of taxation?

Will a property tax be introduced in order to generate government revenue rather than relying upon this land tax? Because of course that did encourage local government to allocate that land to people who are going to build housing for upper-income groups, because the implications for land value were under that situation, they would actually be higher rather than providing that land to construct housing for low income groups.

So, this issue of land revenue is one that has to be addressed basically by someone who’s an expert in public finance.

MICHAEL HUDSON: That should be what we talk about in the next show, I think.

RADHIKA DESAI: Great. So I think that we should bring this part of the show, the first part of this show to an end. And let me just do that by going back to our list of topics.

So just to conclude, we managed to cover the first four, although the question of Japanification and the alleged property bubble will resonate into all the rest of the topics, certainly the question of consumption, exports and China’s new growth strategy. So we will return to it.

But in the next [Geopolitical Economy] Hour, we will be talking about these topics, restricted consumption, exports, new growth strategy, and of course, China’s foreign economic policy.

So thanks very much both. Thanks to all the listeners. And we look forward to seeing you in another week or two. Thank you and goodbye.

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Hamas’s Foreign Policy

Par : AHH

The unity of the Resistance from the river to the sea is not only inspiring from afar, but has yielded practical results for the Palestinians.

By Ganna Eid of Al Mayadeen

Daud Abdullah wrote an erudite and comprehensive analysis of Hamas’s foreign policy which was released by the Afro-Middle East Center (AMEC) in 2020. The majority of the writing was done in 2019, and thus there are a few lacunae based on the last 5 years of world affairs.

On the world scale, the Covid-19 pandemic rocked production, distribution, and public health sectors; the Russian special military operation in Ukraine gave us the first of a series of likely wars in the decline of Atlanticist hegemony. In Palestine, the “Unity Intifada” — also known as Seif Al-Quds battle–highlighted the connectivity of the various Resistance factions within Palestine.

Now, today, Operation Al-Aqsa Flood and its aftermath have changed the regional geometry, with even more unity among all factions of the Axis of Resistance across the region.

I will first analyze some of Abdullah’s policy prescriptions for Hamas based on the world situation in 2020, and then see to what extent these policy prescriptions have been undertaken by the Islamic movement or to what extent they still require action. In this article, three elements of Hamas’s foreign policy stick out to me: their relations with Russia and China, the shifts and reconfigurations of the Axis of Resistance, and finally, Hamas’s ability to politically and diplomatically maneuver after October 7th.

Russian FM Lavrov meets with Hamas politburo members Khaled Meshal and Osama Hamdan, Moscow, circa 2015

The first topic to discuss revolves around Hamas’s relations with Russia and China.

Abdullah’s analysis of Hamas’s relations with Russia and China is one of the most honest, sober, and important analyses I have read in some time. With reference to Russia, Abdullah points out that early on in Hamas’s existence, Russia was willing to break with the iron grip of the Quartet and defend Hamas from the ‘terrorist’ label. Hamas officials and delegates have gone to Moscow on a number of occasions, the latest being in early 2024. At these meetings, Hamas has been treated as a regular political party and a representative of the Palestinians, which has afforded the movement and its leaders meetings with high-ranking officials in Russia, such as Sergey Lavrov.

Yet, the two-headed eagle of Russia stands at a crossroads still. While Ukraine has fallen out of the news cycle, the war is slowing down and there have been some signals of a peace treaty in the near future. Putin–and Russia–understand that the Ukrainian regime are puppets of the imperialists tasked with bringing down the Eurasian superpower, yet this analysis is not extended to “Israel”. Why is this? Is it that a great many “Israeli” citizens are of Russian origin? Is it because Putin, like the double-headed eagle of Russia’s standard, is balancing his role as the post-Soviet liberal statesman and his role as the Eurasianist Hercules whose sword hovers over the Gordian Knot of NATO imperialism? This delicate balancing act will have to come to an end, especially with the carnage wrought by “Israel” and the USA in Gaza today.

Armed Fatah militants reading copies of ‘Quotations from Chairman Mao Tse-tung,’ Jordan, 1970

With reference to China, Abdullah does not spare the People’s Republic from criticism of their position vis-a-vis Palestine and Hamas. While China–like Russia–has from the start shielded Hamas from the ‘terrorist’ label, and has treated Hamas as a legitimate governing party, they are involved in their own balancing act.

China has extensive trade relations with the Zionist colony, and uses this along with their recognition of Hamas as a means to try and enter the region as a ‘fair and honest peace broker’. While their brokering of rapprochement between Iran and Saudi Arabia is laudable, China is yet to use their global clout to help isolate and sanction the Zionists. It still clings to the dead and buried ‘two-state’ solution as their official position.

Yet as Abdullah points out, the relationship between the more radical Chinese intelligentsia and the Chinese state is a close one, and one which Hamas should exploit:

As things stand, China’s intelligentsia are increasingly questioning whether the ‘keep a low profile’ policy is fit for purpose in the twenty-first century. In this context, Hamas has nothing to lose and everything to gain by positioning itself to benefit from changes that seem imminent in China’s foreign policy.

The above quote from Abdullah is one with which I agree; Chinese intellectuals, such as Zhang Weiwei and Minqi Li, are theorizing multipolarity and the ongoing fall of US hegemony. The Chinese intelligentsia are also involved in President Xi’s ideological campaigns in the PLA, which aim to politicize the army and involve them further in socialist construction. The growing rift in Sino-US relations is an opportunity for Hamas and the Palestinian national movement.

Hamas’s reconciliation with the Assad government in Damascus is an important development after the two parties had differing stances on the civil war and eventual proxy war in Syria in 2012. This subsequently improved relations between Iran and Hamas, which had suffered after 2012 as well. The ability of Hezbollah, and indeed Sayyed Hassan Nasrallah himself, to orchestrate this reconciliation shows the seriousness and importance of the Arab strategic depth.

A driving force of this reconciliation was the 2021 ‘Unity Intifada’ and the shifts on the ground in the region which have strengthened the Resistance. The 2021 ‘Unity Intifada’ is important for a number of reasons, primarily that the Resistance in Gaza–the liberated land base from which the national liberation struggle is being launched–and the Resistance in the occupied territories went hand-in-hand into battle for the first time since the Hamas-Fatah split in 2007.

The unity of the Resistance from the river to the sea is not only inspiring from afar, but has yielded practical results for the Palestinians. The internal crises of the Zionist colony highlight the contradictory trend: while the Palestinians are uniting after years of division, the Zionists are at each other’s throats. The unity of the Resistance and the disintegration of social relations in the colony continue today, in the midst of Operation Al Aqsa Flood.

Since October 7, Hamas and other Resistance factions inside Palestine (notably PIJ, PFLP, and DFLP) have relentlessly unleashed a guerilla war on the Zionist colony. This has not led to military victories alone; Hamas has the potential to come out of this in a better position diplomatically. As with all things, this depends on the balance of forces. Hamas has insisted that the only end which they see fit in any ‘ceasefire’ is an all-for-all prisoner swap. The magnitude of Palestinian prisoners compared to “Israeli” ones is already a numeric victory if this is to happen, and it seems that the Zionists may have to concede to this because their American masters are attempting to tighten the leash. Yet, why should Hamas stop there? The Ansar Allah forces in Sanaa have shown their willingness to disrupt global trade in support of Palestine.

Hezbollah is showing signs of escalating battles on the northern front, which is not an irrational fear for the Zionists given what happened in 2000 and 2006. So how could Hamas secure a larger victory? If the Resistance is able to enfeeble the Zionists and settle a temporary truce at the 1967 borders, that then increases the size of the land base and improves the logistics for launching a war of total liberation because there will be some territorial contiguity. This would also shift internal developments in Palestine, such as the potential formation of a unity government which gets rid of the comprador elements of Fatah. Indeed, PCPSR polling shows that the corrupt PA is as unpopular as ever.

The potential creation of a unity government then opens diplomatic space for powerful countries like Russia and China to support one democratic state, which they currently do not. As the battle for Palestine rages on, we will indeed see how Hamas’s foreign policy space waxes and wanes. As always, the patient and calculated tenor of the Axis of Resistance will provide us with a beacon toward total liberation.

≈≈

This is a timely article reviewing internal political maneuvering and realigments amongst the Palestinians. In two days, on February 29th, all Palestinian factions are hosted in Moscow in the attempt to create a unity government presenting a common political front.

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Russian FM Lavrov: 2023 Foreign Policy Review

Par : AHH

Original and Video at Ministry of Foreign Affairs website

Foreign Minister Sergey Lavrov’s statement and answers to media questions during a news conference on Russia’s foreign policy performance in 2023, Moscow, January 18, 2024

Ladies and gentlemen,

I am glad to welcome you at our annual event. Every year, we come together right after the New Year and Christmas break. I would like to offer those of you who celebrate these holidays my greetings and wish you a Happy New Year 2024. We all want to make it a better year in every respect, as President Vladimir Putin explained in quite some detail.

We have a clear vision for our domestic development plans. The Government of the Russian Federation is hard at work. President Vladimir Putin held a series of meetings with Government members over the past few days to discuss various ways to promote sustained economic progress in today’s environment, considering the aggressive and unlawful policies of the United States and its satellites. The goal is clear. It is to eliminate our dependence on any manufacturing, supply and logistics chains, financial and banking systems whenever our Western colleagues exercise too much control over them in one way or another. Previous and future decisions articulate this policy without any ambiguity.

As far as foreign policy is concerned, we have also defined our priorities for the foreseeable future. In March 2023, President Vladimir Putin approved a totally new and updated Foreign Policy Concept of the Russian Federation. It responds to the present-day reality in international affairs. The West has demonstrated its total inability to make deals and has proven to be an unreliable partner in all undertakings. The Global Majority can no longer tolerate this selfish approach and wants to prioritise its own national interests and the interests of every single country in its development efforts while strictly abiding by the principles enshrined in the UN Charter, starting with respecting the sovereign equality of states. Since the Charter was adopted in 1945, there has not been a single foreign policy initiative by the West on the international stage which took into account or respected the principle proclaiming the equal rights of nations large and small, as the Charter reads, without distinction as to race, sex, language, or religion.

On the foreign policy front, we have a clear objective to develop our relations with those who are ready to work with us on an equal, mutually beneficial and mutually respectful footing by engaging in a frank dialogue and talks for finding a balance of interests instead of taking decisions that serve someone’s selfish agenda only, which is what happens with discussions involving the US-led West in an overwhelming majority of cases.

The past year showed that there is no acceptance of the manners traditional to the Western hegemon, manners based squarely on its vested interests and disregard for the opinion of all others. Yes, 500 years of ruling the world and having no serious rivals almost for this entire period (with the exception, perhaps, of the Soviet period) seems to have made it addicted to being hegemon. But life never stops. New centres of economic growth, financial might and political influence have emerged and gained strength, significantly outpacing the United States and other Western countries in terms of development.

I am sure you know how we assess the development of Russia’s relations with the People’s Republic of China. This is the fastest growing economy along with India’s. Our relations with China are at the highest level in their entire centuries-long history. We particularly appreciate the fact that President Xi Jinping paid his first post-reelection state visit to Moscow in March 2023. In turn, President Vladimir Putin visited China in October 2023 to attend the Third Belt and Road International Forum.

The specially privileged strategic partnership with India has been making headway as well. We have established regular top-level dialogue and contacts between corresponding agencies through the foreign ministries.

Considering our immediate environs, it certainly includes the Middle East countries, Iran, Turkey, Saudi Arabia, the UAE and Qatar. Accordingly, we are interested in expanding not only bilateral relations, but also ties with regional organisations that include many of our partners. I am referring to the Gulf Cooperation Council, the League of Arab States, ASEAN, the African Union, the Community of Latin American and Caribbean States, and others.

We are working to take our partnership with Africa to a truly strategic level. This was confirmed at the second Russia-Africa Summit held in St Petersburg in July 2023.

An important milestone in the development of our relations with Latin America was the Russia – Latin America International Parliamentary Conference held in Moscow in autumn 2023. We consider Africa, Latin America and Asian countries as emerging independent centres in a multipolar world.

We were active on the UN platform in 2023. The Group of Friends in Defence of the United Nations Charter has been successfully operating there since it was established several years ago. The group has adopted joint statements on fundamental issues of global development. This group catalyses and stimulates the General Assembly’s work, promoting joint initiatives, including Russian ones. We support the ideas of our partners in this new entity.

I will note another important milestone – the adoption of a resolution on combating glorification of Nazism, neo-Nazism and other practices that contribute to fuelling contemporary forms of racism, racial discrimination, xenophobia and related intolerance. It was adopted at the 78th session of the United Nations General Assembly by an overwhelming majority of the vote, despite the chicanery of the West. However, I have to point out that for the second time in a row, Germany, Italy and Japan voted against that resolution – the Axis countries that publicly repented for the crimes committed during the Second World War after their defeat, and assured everyone that it would not happen again. These states have been voting against the resolution demanding that Nazism never be revived for the past two years, which provokes serious contemplation and makes us wonder where these ideological processes are leading, not only in these states but also in the West as a whole.

We constructively worked in other formats as well. I should specifically note our closest allies, the Union State of Russia and Belarus and the Collective Security Treaty Organisation through which we promoted stability in all dimensions, including military, biological and general security against new threats and challenges such as terrorism, drug trafficking and other forms of organised crime. The Eurasian Economic Union adopted important decisions for deepening Eurasian integration and coupling these processes with projects like China’s Belt and Road Initiative, cooperation with the Shanghai Cooperation Organisation, ASEAN and all the other associations and countries on our common enormous Eurasian continent.

This year, Russia presides in the CIS. We plan to continue the useful projects launched in 2023. As one such project, we will pay special attention to the International Russian Language Organisation founded at the CIS summit in Bishkek last autumn. All the CIS members approved this initiative proposed by Kazakhstan. The organisation is open to any country wishing to join. We know that the Russian language is popular across all continents and we hope there will be many interested participants.

I mentioned the Shanghai Cooperation Organisation as an umbrella project. Along with the Eurasian Economic Union, in the context of cooperation with ASEAN and other sub-regional bodies, this organisation objectively and organically helps us form the Greater Eurasian Partnership. President Vladimir Putin spoke about this at the very first Russia-ASEAN summit. The outlines of this partnership are already visible.

In the current conditions, it is important to have an economic partnership that meets the interests of all the countries on the continent we share. It was God’s will that we use the objective competitive advantages of sharing the same space that, as it happens, has been a driver of growth for the global economy for a very long time. And it will maintain this role for many years ahead. In addition to mutually beneficial economic projects, it is important to ensure, regardless of other factors, military and political security in Eurasia. We will support the idea that the countries on the continent should deal with this task without attempts by countries from other regions to intervene in these processes with their own rules. We are convinced that the Eurasian countries are capable of handling these tasks independently.

I have listed several regional entities, but there is also a supra-regional global association called BRICS which epitomises the diversity of the multipolar world. The decision adopted during the summit in South Africa last year to expand the number of BRICS members came as a particularly important step to strengthen the position of BRICS. Russia, which assumed the BRICS chairmanship on January 1, will pay special attention to ensuring that newcomers seamlessly join in the common work and contribute to the strengthening of positive trends not only within the association, but also in the international arena in the interests of the Global Majority. Since over 20 (even closer to 30) countries are interested in establishing close ties with BRICS, we see a bright future for this association with global representation.

We have continued to prioritise the protection of the legitimate interests and rights of Russian citizens abroad. You are well aware of how they are discriminated against in the countries of the collective West. Unlike your Western colleagues who are increasingly trying to hide the truth about journalists’ working conditions in the countries with “established democracies” (pardon the expression), many of you write about this. But in addition to the everyday problems faced by our citizens in the United States, Europe, and other countries, natural and man-made emergencies didn’t go anywhere.

Recently, we have been providing broad-based assistance to evacuate Russians and citizens of CIS countries and some other countries from Gaza and, several months before that, from Sudan riven by internal conflict.

In terms of public diplomacy, I would like to single out the milestone of creating in March 2023 of the International Russophile Movement, which is an informal association of people living on different continents with spiritual and cultural affinity for Russia. The founding meeting of this movement was successfully held and its first full-fledged congress will be held in the first half of this year.

We will continue to promote the ideals of truth and justice in international affairs. We will do our utmost to make international relations more democratic. In this sense, our Ministry strongly supports United Russia’s initiative to hold in Moscow an international inter-party forum of supporters of combating the modern practices of neo-colonialism. It is a popular theme given that the neocolonialist nature of Western policy is present in a big way in the current policies pursued by the United States and its allies. Its thrust remains the same – to use the resources of other countries to their benefit and to live off of others. The upcoming forum promises to be an engaging and important event.

Russia will host a number of major international cultural events, including the World Youth Festival, which is fast approaching, the Games of the Future which is a mix of physical sports and cybersports, and the sports games of the BRICS countries. Both games will be held in Kazan (the Games of the Future in February, and the BRICS Games in the summer of 2024.)

The Intervision international song contest is being prepared. Many countries of the Global Majority showed interest in it. We will do our best to make sure that our guests who will come to these and numerous other events fully experience Russian hospitality as in 2018, when we hosted the finals of the FIFA World Cup.

In closing, I would like to reiterate our openness to communicating with media representatives in a variety of formats. I hope the Ministry representatives present here cannot be accused of ducking the media. Other senior ministerial officials, heads of departments, and our employees (especially when they travel as part of a delegation to international events) are simply under obligation to share information about our work and to make our work clear and transparent. This is what we strive to achieve.

Question: If elections take place in Ukraine this year, can a person willing to talk to Russia come to power there? Kiev signed a security agreement with London and may sign similar agreements with other G7 countries. How important is it for Russia in the context of the future settlement of the conflict? Does it mean that Ukraine won’t have a neutral status?

Sergey Lavrov: Frankly, we are not too concerned over the details in the discussion of Ukraine’s political affairs. The issue of elections surfaced. We heard that the West strongly advised Vladimir Zelensky to hold these elections, apparently in the hope that the election campaign and the voting itself will make it possible to bring him into line with Western interests, because he is getting harder and harder to control.

Zelensky announced in public that he would not hold any elections because of the ongoing war. This reminds one of another staged performance and reflects exclusively the desire of this man and his well-known underlings to hold on to power as much as possible. This is the desire I see.

The West would like to have more flexibility. Apparently, they have already understood that the much-publicised blitzkrieg with the ultimate goal of inflicting a “strategic defeat” on Russia is a mere illusion. There has been a fundamental shift, primarily in Western minds. They realised their mistake. It is hard to admit it. Now they are looking for some external signals that would allow them to still support Ukraine while pushing Kiev to become more accommodating and listen to its Western bosses. I find it hard to predict how successful they will be in that.

As for the second part of your question, this story is nothing new. Several months ago, there were “clashes” in the West over whether to admit Ukraine to NATO or the European Union. Not everyone was in favour of this and not everyone was happy. Everyone understood that this was yet another completely senseless, irresponsible and risky move for European security. The signing of bilateral agreements with individual Western countries was invented as a product requiring additional assembly. I heard about the contents of the document agreed upon by Zelensky and British Prime Minister Rishi Sunak. I did not see in its analysis any legally binding provisions unless we consider as such Ukraine’s obligation to come to the defence of Great Britain in case of an attack. This sounds like a joke. But, on the other hand, we can regard it as a continuation of Studio Kvartal-95. Probably, now it will go by a different name.

We do not object to the agreements that other countries sign with Ukraine but this does not change our goal one iota. President Vladimir Putin confirmed this the other day. We will steadfastly pursue the goals of the special military operation and we will achieve them.

The West periodically sends us some signals and then cancels them. We take a philosophical attitude to them. President Vladimir Putin said many times that Russia does not refuse to negotiate. He said this as early as in 2022, when Boris Johnson and other Anglo-Saxons prohibited Kiev from signing an already agreed-upon treaty to reach a settlement with the Russian Federation. This is a well-known episode. It took place in April 2022. Speaking in 2022 about this issue, President Putin said again that we do not reject talks. However, those who do should realise that the more they drag it out, the harder it will be to come to terms later. Now we see how this prediction is coming true. There is no hope at all that Russia will be “defeated.” This was said many times. Those who have not studied history (there are many of them in the West) and geography know little and may engage in flights of fancy. Or they may come up with another plot for the afore-mentioned Studio Kvartal-95. But it will have nothing to do with real life.

Question: I would like to wish you a happy New Year and victory on all fronts to the Russian people.

The United States is creating “international political and military coalitions” which are committing acts of aggression against Yemen and continue to support and encourage Israeli genocide against the Palestinian people, as well as military operations against Syria and Lebanon. What is Moscow’s stance on these issues?

Sergey Lavrov: We have made numerous public statements to present our views on the developments in the Middle East, not only in Gaza but also in the Palestinian territories as a whole and in Lebanon, Iraq and, of course, Yemen.

It is obvious that the United States, Britain and some of their other allies have trampled underfoot all the norms of international law, including the UN Security Council resolution, which only called for protecting commercial shipping. Nobody was given the right to bomb Yemen, just as nobody gave NATO the right to bomb Libya in 2011. A resolution adopted back then only established a no-fly zone over Libya, which meant that the Libyan Air Force aircraft must not fly over the country, and they did not. There was not even the most far-fetched pretext for using armed force there. But the country has been bombed to dust and turned into a black hole. Nobody has been able to reassemble the Libyan state to this day. A huge number of migrants flooded Europe, making it suffer. But the Americans and the British are not suffering. The terrorists whom the West used to overthrow Muammar Gaddafi moved towards central Africa.

We can see the same arbitrariness with regard to Yemen now. It is obvious to everyone. I would say that Washington’s justifications are pathetic.

The other day, US Secretary of State Antony Blinken said in Davos that virtually every country in the Middle East wanted the United States and they wanted it leading. I cannot confidently say if the regional countries want this. We should ask them. But one of these countries, Iraq, adopted a decision several years ago stating that the United States had been in the country, its military bases had been in the country for a long time, and that this should end, and the United States should go home. But the Americans refuse to leave.

Baghdad has recently made another statement on the Americans’ reluctance to go home even though they have been encouraged to leave long ago. It is especially regrettable that Secretary of State Blinken also implied that only the United States can help negotiate peace between the Palestinians and the Israelis. He said this. We are aware of such semi-secret contacts involving the United States, Israel and several Arab countries. But these contacts do not involve a direct dialogue between the Palestinians and the Israelis. Instead, they imply that the “big guys” will sit at a table somewhere to decide how the Palestinians should live and will present their decision to them. This cannot succeed. Only a direct dialogue, which must be relaunched, can bring about progress. It went on, with difficulties, but it continued with support from the quartet of international intermediaries. We have always said that the activities of the quartet – the United States, Russia, the UN and the EU – must also involve representatives from the Arab League. It is deeply regrettable that the Americans and the Europeans blocked that idea. And then the United States dissolved all such quartets and monopolised the entire mediation process.

In September 2023, US National Security Adviser Jack Sullivan said that the Middle East region was quieter today than it has been in the past few years. A month later, a conflict broke out in Gaza. This calls for collective efforts, which the United States seems to have lost the habit of. It has become addicted to dictating.

Next Tuesday, the UN Security Council will hold a special meeting on this issue. We plan to attend it, and I will personally travel to New York for this purpose. We will put forth our ideas aimed at resuming collective efforts and ending the attempts to decide everything single-handedly, and not only in the Middle East. The United States wants to promote its agenda throughout the world. We’ll see what comes of it.

Ultimately, life itself will likely teach our Western colleagues a lesson. Regional countries must clearly show that it is their region, and the security of all states in the region is of crucial importance. While external recommendations will not be disregarded, the final decisions must be taken by the regional countries themselves.

The main focus of these efforts should be the establishment of a Palestinian state in strict compliance with the UN Security Council’s decisions. This state should be viable, as the decisions state, and live side by side with Israel and other regional countries in peace and security. Otherwise, we will continue to see outbreaks of violence like the current situation in Gaza. Without a state of their own, the Palestinian people will continue to feel disadvantaged and injured. One generation of young Palestinians after another will be aware of this injustice and will pass on this feeling to their children. This injustice must be put to an end through the establishment of a Palestinian state. I hope that the Israeli leadership will ultimately reach the same conclusion. Currently, very few people consider this solution acceptable to Israel, but this only means that efforts must continue to help them see the truth, which is that Israel’s security cannot be guaranteed without the establishment of a Palestinian state.

Russia wants Israel and its people to live in security. Israel is our long-time partner. Our country was the first to recognise Israel’s independence. About 2 million Israeli citizens also hold Russian passports and have come from Russia. Of course, we are concerned about this. We are ready to play an active role in bringing about a comprehensive settlement that will guarantee Israel’s security while strictly complying with the UN resolution on the Palestinian issue.

To be continued…

≈≈≈≈

Traditionally, Sergey Lavrov holds a large-scale press conference at the beginning of the year to assess the foreign policy events of the past year.

Sputnik Africa goes live as Russian Foreign Minister Sergey Lavrov is summing up the past year at a major press conference.

The event is held in a hybrid format: some Russian and foreign journalists have joined the conference directly in the press center of the Ministry of Foreign Affairs, while others have connected via the Internet. Moreover, the representatives of the press were able to send their questions in advance.


⭕ ❗ Russian FM Lavrov’s statements on the Ukraine crisis:
🔻 Russia sees no US, NATO readiness for fair settlement of Ukrainian conflict, they continue escalation;
🔻West pushing Ukraine to use long-range missiles on Russian territory shows no interest in peace settlement;
🔻Moscow is not concerned about political life in Ukraine, West wants to have more flexibility in Ukraine’s leadership;
🔻Security issues in Eurasia must be resolved without countries outside the region.
⭕ ❗ West is talking more about clash of nuclear powers, there are fewer deterrents, Lavrov states. The Russian foreign minister has also noted that the US wants to resume control over Russian nuclear arsenal under the guise of reciprocity.


⭕ ❗ The main focus of efforts on Palestine should be the creation of a Palestinian state, Lavrov says. He also noted that without the creation of a Palestinian state, the recurrence of violence in Gaza will continue and Israel’s security will not be ensured.
⭕ ❗ US, UK violated all norms of international law with strikes on Yemen, Russian FM Sergey Lavrov says. The UN did not give the US the right to strike Yemen, as before it did in Libya, the Russia’s top diplomat has also underscored.


⭕ ❗ Lavrov: “One of the large European countries that does not speak English” invited the Russian ambassador to think about joint projects in Africa to help regain this country’s lost influence amid the strengthening of Russia’s relations with Africa, in particular with Burkina Faso, the Central African Republic, Chad and Niger.
🗣 “The cynicism is off the charts. You remain our enemy […] but in Africa you will somehow help us… There will never be such negotiations,” added the foreign minister.
⭕❗ Argentina’s refusal to join BRICS is the country’s sovereign decision, the Russian foreign minister says.


Highlights from Russian Foreign Minister Sergey Lavrov’s statements at the press conference on the results of 2023:

Africa and BRICS:
⚫ Moscow is taking its partnership with African countries to a truly strategic level;
⚫ Argentina’s refusal to join BRICS at this time is a sovereign decision of this country;
⚫ BRICS symbolizes the abundance of a multipolar world;
⚫ Russia will pay special attention to ensure that new BRICS members fit seamlessly into the bloc.

Ukraine:
⚫ The situation with the elections in Ukraine is increasingly reminiscent of a staging and reflects Zelensky’s desire to cling to power as much as possible;
⚫ There are no legally binding provisions in the London-Kiev security agreement;
⚫ Russia does not see the US interest in a settlement in Ukraine.

Yemen:
⚫ The US and UK trampled international law by striking at Yemen;
⚫ Washington’s excuses in the situation with Yemen look pathetic.

The Palestinian-Israeli conflict:
⚫ Semi-closed contacts involving the US, Israel and some individual states on Palestine will not be successful;
⚫ Only direct dialogue is needed to resolve relations between Israel and Palestine;
⚫ Russia is ready to play an active role in ensuring a full resolution of the conflict in the Middle East.

The security dialogue with the US:
⚫ It is impossible to talk about the prospects for strategic dialogue with the US in isolation from other issues;
⚫ The US has created unacceptable conditions for the implementation of disarmament treaties;
⚫ In December 2023, Russia conveyed its assessments on strategic stability to the US and warned that they had no alternative.

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