The Biden administration's leadership failure is the net effect of Capitol Hill's revolving door politics. The White House is not in charge. Big Defense is. And the Philippines is one chip on the grand chessboard.

NINE months ago, President Duterte ratified the Regional Comprehensive Economic Partnership (RCEP) trade deal, which the Senate still hasn't ratified, causing great unwarranted economic losses in the worst possible time. As Defense Secretary Delfin Lorenzana is shuttling from one US ally to another in Southeast Asia, so is US deputy state secretary Wendy Sherman among Asean countries. Meanwhile, the White House has escalated a South China Sea fishing ban debacle.

Yet, nothing is disconnected in the Big Defense's new Asian chessboard. The Marcos-Duterte government is about to face unprecedented geopolitical pressures.

What's expected from PH?

Last Thursday, the Center for National Security (CNAS), the Biden administration's key think-tank, launched a new report on "Revitalizing the US-Philippines Alliance." Prepared by its "US Philippines Alliance Task Force," it seeks to sustain US primacy in the region.

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The experts include its chairman Lisa Curtis, an ex-Trump advisor who began her career in the US National Security Council, the CIA, and the State Department. She is "encouraging" Manila closer to the Indo-Pacific alliance and the Quad security bloc. Another expert is Patrick Cronin at the Hudson Institute, an ultra-conservative think-tank that has received funding from Exxon Mobil, the Koch brothers and the Pentagon.

In security and defense, the task force wants to "inaugurate a ministerial level 2+2 dialogue with the Philippines," to deal with "any contingency that may arise in the Indo-Pacific." Hence, too, the push of the "Enhanced Defense Cooperation Agreement" (EDCA) that Philippine ex-foreign secretary Albert del Rosario had hoped to deepen in 2016, until Duterte's electoral win buried his dream.

Now the idea is to "enhance alliance commitments" so that "a potential trigger," including any dual use structures at Scarborough Shoal or elsewhere, would result in "employing Article IV of the Mutual Defense Treaty" (MDT) — a kind of Ukraine scenario, but in Southeast Asia.

Rearmament drives for peace and freedom

The report is also pushing for the "sale of asymmetric defense and maritime domain awareness equipment," which Manila will have the privilege to pay for. That should be coupled with a "financing program" so that, with more debt, the Philippine buys would include "F-16 fighter aircraft over the medium term." Originally developed in the 1970s, the aircraft was used by the Pentagon in Iraq in 1991 and 2001-2003, but no longer buys it, although exports still sell.

Another goal is to "enhance cybersecurity cooperation," so that the Philippines will be "investing only in trusted and secure technologies and digital infrastructure"; perhaps to exclude other technologies, even if they were more affordable and efficient.

"Mini-lateral security dialogues" will be promoted trilaterally between Washington, Manila and Tokyo, and US, Manila and Australia. That's vital for a "more integrated network of like-minded allies and partners, which will include the Indo-Pacific allies, the Quad security players and weaponized nuclearization (Aukus).

In the US, CNAS is controversial, but in the White House, its ex-alumni matter.

Cold War with China, collusion with Big Defense

Favoring aggressive geopolitics at the expense of economic multilateralism, the Biden administration's strategic bets have already proved costly to American welfare and caused a triple bear market in US stocks, bonds and cash. And with de-globalization, international macroeconomic conditions are deteriorating. The number of globally displaced people exceeds 100 million for the first time on record, propelled by the war in Ukraine and other fatal conflicts.

The fragile status quo is more likely to worsen than not due to the Fed's rate hikes and quantitative tightening.

Yet, the White House seems intent to escalate its new Cold War with China. That's not in line with America's national interest as evidenced by the dramatic plunge of Biden's approval ratings, but it will benefit Big Defense.

Let's start with the links (see figure 1).

Figure 1. Influence, collusion and geopolitics
Figure 1. Influence, collusion and geopolitics

As the US president's coordinator for Indo-Pacific affairs on the National Security Council (NSC), Kurt Campbell, co-founder of CNAS, is President Biden's Asia czar. In 2019, he and Sullivan introduced their China doctrine of stiff "competition without catastrophe." It is central to the "pivot to Asia," which Campbell developed in the Obama administration. The illusionary assumption is that the escalation of discord into open animosity is viable without collateral damage.

Replacing the old Soviet Union with China, Campbell and Sullivan declared Beijing America's pre-eminent rival; and the target of the "Indo-Pacific" containment. As in the 1950s, the net goal is to militarize containment and minimize US costs by diversifying risks to allies and proxy conflicts to Asia.

Today, the idea seems to be to fight to the last Asian.

The new Cold War promoters like to quote George Kennan, the architect of US containment against the Kremlin in 1947. Here's the irony: Kennan himself pushed for dialogue with Moscow already by 1948. And later he denounced the Truman administration's "distorted and militarized" version of containment, which "led to 40 years of unnecessary, fearfully expensive and disoriented process of the Cold War."

Campbell-Brainard, Pentagon, Fed, Big Defense

One of President Biden's first acts was to issue a new ethics pledge to weaken shadow lobbying. Yet, his key figures in defense, security and foreign affairs have made fortunes in such lobbying. Campbell is not just a veteran diplomat, but former CEO of the Asia Group LLC. By its own testimony, the secretive company has Fortune 500 clients, particularly in defense and military high-tech.

In January 2021, Campbell's appointment unleashed a public debate in the US, due to his portfolio of ex-clients rife with potential conflicts of interest. "Shadow lobbying" outfits, like Campbell's firm, call themselves consultants to avoid restrictions associated with traditional lobbying. Campbell himself got $25,000 monthly retainer from several defense firms.

In November 2021, Biden nominated Fed governor Lael Brainard to serve as its vice chair. In the past, Brainard was seen as a dove. As the Fed is tackling soaring inflation months belatedly, it is overshooting in a hurry. After the confirmation of her appointment, she is now promoting rapid rate hikes.

Brainard is an accomplished veteran Democrat, like her husband — Kurt Campbell.

Blinken, Sullivan, CNAS — the list goes on

Jake Sullivan advised some of the world's biggest businesses at Macro Advisory Partners, a secretive firm that has been run by ex-British spy chiefs. In that role, Sullivan, who had been negotiating the Obama Joint Comprehensive Plan of Action (JCPOA), or the Iran nuclear deal, used his expertise to help companies exploit the opening of the Iranian economy.

Macro Advisory also guides state-owned entities, such as the Taipei Economic and Cultural Representative Office in the US. Unsurprisingly, the militarization of US Taiwan policy shifts toward weapons shipments to Taiwan has escalated in parallel with Taipei's big donations to Biden's corporate proxies.

President Biden's secretary of state Antony Blinken has his alleged conflicts of interest. Between the Obama and Biden administrations, Blinken co-headed WestExec Advisors with Michèle Flournoy, Obama's undersecretary of defense and a military expert. With key clientele in the defense industry, private equity and hedge funds, Blinken made over $10 million in WestExec, according to Forbes.

Even before WestExec, Flournoy was making over $450,000 a year as the head of CNAS, which she co-founded in 2007 with Kurt Campbell. Biden's former press secretary Jen Psaki and current CIA head Avril Haines also have served in CNAS. It was led by CEO Victoria Nuland, a neoconservative uber-hawk, who has played a key role in the Ukraine escalation as Biden's undersecretary of state.

The top donors of the CNAS include the crème de la crème of the Big Defense: Northrop Grumman, Boeing, Lockheed Martin, Raytheon; energy giants Chevron and Exxon, and Soros' Open Society Foundations.

Revolving doors

Flournoy and Blinken also served as strategic partners in a private equity firm Pine Island Capital Partners, led by the notorious investment banker John Thain who tanked Merrill Lynch in 2008, while paying himself bonuses along the way. Amid the subprime mess, Thain spent $1.2 million to remodel his office, including a $35,000 golden toilet.

WestExec's clients include Winward, an AI venture launched by Israeli naval intelligence officers with the country's former chief of staff Gabi Ashkenazi on its board. Winward's lead investor was Li-Ka Shing, the Hong Kong billionaire, through a VC fund.

By late 2020, Pine Island Capital, now linked with the Biden administration, was well-positioned to cash in on the US Covid-19 response, investing in government contractors. The firm also employed Lloyd Austin, the first black secretary of defense.

A veteran of the US Army (1975-2012), Austin has a remarkable story, but it, too, reflects revolving door hazards. As head of US Forces in Iraq, he befriended Biden's son, Beau (Hunter, the other son, has been linked with the Trump era "Ukrainegate"). He was then nominated to become the Army's vice chief of staff. A year later, then-president Obama tapped Austin to head up US Central Command.

After the Trump triumph, Austin left the Army and joined the board of military contractors, which merged in 2020 with Raytheon, a top Big Defense lobbying spender. Austin earned seven figures from the defense companies until he stepped down from all three board positions following his nomination in 2020.

Inflate China threat for more spending

With the deterioration of macroeconomic conditions, geopolitical divisions have rapidly increased from the Middle East and Europe to Asia. Big Defense has been the prime beneficiary (see figure 2).

Figure 2. With geopolitics, economies falter but defense stocks climb FROM TRADINGECONOMICS; DIFFERENCEGROUP
Figure 2. With geopolitics, economies falter but defense stocks climb FROM TRADINGECONOMICS; DIFFERENCEGROUP

As Investor's Business Daily headlined in March, "Russia's war on Ukraine makes defense investors $49 billion richer."

Without a full policy reset, this is just a prelude to far worse in Asia.

Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group. He has served at the India, China and America Institute (USA), Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see https://www.differencegroup.net

The commentary includes CNAS segments from a commentary released by China-US Focus on June 2, 2022.