Suez 2013?

 

The Suez Canal was built in 1869 cutting through Egypt linking the Mediterranean Sea with the Indian Ocean.  It was instantly of vital importance to Britain as it provided a rapid trade route to the eastern segment of the imperial empire. The canal has had an eventful history.  One notable moment was during the Russo-Japanese war in 1904, the Royal Navy halted Russian entry forcing them to travel around the entire continent allowing Japanese time to organise defences.  Later in the First World War the Ottoman Empire attempted to overtake it to subjugate the Allies supply route.  Similarly it was of important strategic significance during World War Two.  Britain always committed a lot of military might and resources in protecting this highway.

 In July 1957 the President of Egypt, Gamal Abdel Nasser, decided to nationalise the Suez Canal blocking British access.  He wanted Egypt to be leading the Arab world and this was not possible with British influence still strong in the Middle East with the Baghdad Pact. Britain was angered and mobilised its military as it customarily did in the past to solve disputes.  There was also cooperation with Israel and France leading to the Suez Canal being secured.  Egypt was no match against the three powers and militaristically the operations were a success.

There was uproar in the international community and huge rifts were created between allies scrambling for influence in the Middle East.  The major superpowers the USSR and America diplomatically squabbled with Britain, France and Israel.  America was determined to find a ceasefire.  The Soviets threatened to send troops that would force US involvement leading to a new world war.  Both the Soviet Union and America at time were competing for arms deals with Egypt who was cleverly playing both along.  America also disliked the Baghdad Pact, finding common ground with Egypt, and had already opted for a closer relationship with Saudi Arabia.  India, Pakistan, Australia and New Zealand supported the military action (although they did not directly contribute) but many other countries like Syria, Saudi Arabia and South Africa did not.  Syria and Saudi Arabia embargoed Britain.  Britain vetoed America at every opportunity and frustration escalated.

Uncle Sam had an ace hiding up his sleeve.  The Second World War was a war that Britain could simply not afford in outright monetary payments.  It led to the excessive indulgence in massive loans from America knowing it could never be paid back including the loss of strategically important bases.  The lend Lend-Lease Act was passed in 1941 amid Republican isolationist opposition and $31 billion of supplies were shipped.  At its highest point a quarter of munitions, aircraft and food Britain consumed were being bought on the American credit line.  Even more debt was then taken out in postwar rebuilding of around $3 billion. Remember these figures are not in todays terms. $1 billion would equate to over $40 billion today with inflation. The debt grew to stratospheric levels and the American government consequently had gargantuan reserves in sterling.  British debt to GDP staggered back to levels not seen since the Napoleonic wars.  Eisenhower threatened to sell off all their sterling if a ceasefire was not negotiated which would lead to the downfall of the pound.  Britain would not be able to import food or energy with this financial crisis and would collapse devalued and starving.  The effect was immediate and Britain caved in and signed a ceasefire soon after.  The fast cash needed to fight Hitler led to the manacles of debt enshrouding Britain; ultimately ensuring that she’d pay it back in due course, not just with added interest, but with manipulated policies.  The great economist John Maynard Keynes, despite negotiating much of the deals with America during the war, believed that moratorium of war debts should be granted to nations otherwise they risked subjugation.

The aftermath was disastrous and embarrassing.  Russia paraded the UN as the country that stood against imperialist powers and the bullying of smaller countries.  The British Prime Minister Eden was forced to resign.  The blinds came horribly down on the great imperial power without the faintest shimmer of goodbyes.  With her no longer being able to act on a global scale independently decolonisation was rapidly forced through leading to some countries collapsing into civil war or decades of dictatorships.  This is the true story of a conquering superpower that became reduced to a shackled subordinate.  Military power is irrelevant in the midst of suffocating debt leverage and it will send the mightiest army home disgraced in defeat.  

Can history repeat itself? American debt to GDP is now crawling over the important 100% mark. Britain's was roughly 180% in 1957. Chinese owned American debt is perpetually escalating to frightening levels where they impact America's bond market. Over a trillion since 2010 and rising.

According to data released from the Teasury Department China's holding in June of last year was $1.164 trillion. With some western economies still slowing and the debt crisis in Europe it is very like that Chinese holdings will further increase.

 

In 2012, a senior editor of 'The Peoples Mail', which is a state mouthpiece for the Communist party, ran an editorial that encouraged the government to use Chinese owned debt as a political weapon against America in its support of Taiwan.

“Now is the time for China to use its ‘financial weapon’to teach the U.S. a lesson if it moves forward with additional arms sales to the island democracy", he said. China did not act on this possibility and it was not in their current interest.  China and the US have contrasting philosophies; The former being astute with the impact on trade whilst the latter is a foreign policy menace. However, if major crisis occurs in the future where it is more advantageous for China to use bonds as a political weapon and to take a reputation hit; will we see another Suez Crisis? It seems ineveitable with China's growing economic dominance that they will want a larger voice in worldly affairs once established.