Why Time Is on Iran, Russia and China's Side | Michael Hudson

Time is on the side of Iran, Russia, and China and increasingly works against the US and its allies. The longer the confrontation persists, the greater the pressure on highly indebted Western economies. As in Russia's past wars against Napoleon and Germany, the decisive advantage need not come from military strength alone, but from an external force that steadily erodes the enemy's capacity to sustain the conflict. Today, that force is the global financial and economic system.

"General Winter"—Russia's eternal ally against her enemies.

The US has contained the oil price shock by releasing oil from its strategic petroleum reserves and encouraging other countries to do the same, despite the major disruption to Persian Gulf exports. But this buys time, and only by depleting reserves and leaving less room for further intervention. The stakes are high because higher energy prices quickly feed into diesel, aviation fuel, fertilizer, transportation, and food costs. With the US midterm elections approaching, Washington is therefore racing the clock to contain prices as its economic buffers diminish.

Weaponizing Survival: Energy, Food, and Sovereign Debt Pressure

Iran's strategic advantage is to avoid escalation while letting economic pressure accumulate. A similar dynamic is developing around Russia and Ukraine, where disruptions to grain exports risk compounding the energy shock. About 27% of global grain trade moves through the Black Sea; Ukraine's harvest is coming in while warehouses are full, and Russian attacks on shipping and ports threaten both incoming supplies and outgoing grain. Much of Ukraine's grain normally goes to Europe, leaving Europe vulnerable to simultaneous fertilizer, food, and energy-price shocks.

 

Asymmetric warfare against Western full-spectrum aggression:

wrecking the enemy through food, energy, and debt.

The crisis need not involve major military escalation because the US and Europe are already too financially stretched to absorb a sustained increase in energy costs without wider economic damage. Higher fuel prices raise transportation, food distribution, and production costs; industries operating on thin margins can become unprofitable; and higher inflation puts upward pressure on interest rates. The resulting pressure spreads to agriculture, trucking, and the movement of crops, with particularly severe effects in the West, among US allies, and across developing economies in Asia and the Global South.

Base, Apex, and Anchor of Primakov's RIC Triangle 2.0.

 

Higher inflation and interest rates also raise the cost of servicing already-heavy debt burdens. Rising bond yields compound the problem in the US, Japan, and other highly indebted economies, while vulnerabilities associated with Japan's currency and carry trade expose the limits of available policy responses. The fundamental vulnerability is therefore debt: governments must increasingly choose between supporting households and industry and servicing accumulated debt.

Sanctions Threaten America's Financial Power 

This pressure also threatens the financial system that has enabled the US to exercise global power for decades. Washington has relied not only on military force, but also on its control of the dollar, international payments, global banking, and the oil trade. By weaponizing sanctions against Iran and threatening Chinese, Asian, and other banks involved in Iranian oil transactions, the US is encouraging those same countries and institutions to reduce their dependence on the dollar. Financial coercion could therefore undermine one of America's principal instruments of power.

 

» We lie, we cheat, we steal. «

murder, slaughter, genocide: children, women, heads of state; weapon, drug, organ, child

trafficking; well poisoning; pedophilia; hijacking; torturing; counterfeiting; looting; piracy; bribery...

 

The oil trade is particularly important because Persian Gulf and OPEC oil have long been key channels of US financial influence. Oil revenues recycled through US banks, dollar assets, and the American financial system have reinforced the dollar's central position. Driving oil producers, buyers, and financial institutions away from that system therefore risks undermining the very mechanism Washington has used as a global economic choke point.  

 

Trump offered billions to Iran's military. 
Iran: "Leave before it's too late!"

Iran's strategy exploits this contradiction. If its own oil exports are blocked by sanctions and trade restrictions, the implicit threat is that broader oil exports may also be disrupted, forcing other countries to choose between accepting higher energy costs and resisting the sanctions regime. Iran cannot defeat the US militarily, even though it can attack US bases in the Middle East; its leverage instead lies in imposing costs on the wider system and forcing other countries to decide how they will respond.

China and the Emerging Alternative

China is relatively well-positioned to withstand such pressure because of its large oil reserves, coal resources, and extensive investment in solar power and other energy alternatives. The broader question is how China, Russia, Iran, Asia, and the Global South will respond if continued US sanctions keep driving up energy and commodity prices. Their incentive will be to develop mechanisms that insulate their trade from unilateral US financial coercion. 

Zhou Xiaochuan, Governor of the People's Bank of China, presenting his
landmark 2009 proposal, "Reform the International Monetary System," 
to the Bank for International Settlements (BIS).

Gold provides one possible reserve asset outside the dollar system. Countries have increasingly added to their gold reserves while maintaining relatively stable dollar holdings; the European Union now holds more reserves in gold than in dollars. China and Russia have also developed alternatives to Western payment infrastructure. China's and Russia's independent clearing systems reduce their reliance on SWIFT, while Iran has experimented with cryptocurrency payments despite the US seizure of Iranian cryptocurrency assets.  

 

The issue therefore goes beyond creating a BRICS currency. What is required is an alternative international architecture for payments, reserves, and lending, capable of financing trade without depending on the dollar, SWIFT, the IMF, or other Western institutions. China, because of its enormous financial reserves, is uniquely positioned to provide the financial capacity that such a system would require. Russia and Iran could contribute oil, with Russia also contributing grain.

The Cost of Dedollarization

Such a system could fundamentally reshape the post-1945 financial order. Countries facing rising energy, food, fertilizer, and chemical costs would increasingly face a choice between supporting domestic industry and households and servicing dollar-denominated debt. As balance-of-payments pressures intensify, governments would have to decide whether scarce resources should go toward subsidizing industry, protecting families from higher heating and food costs, or continuing to pay foreign creditors. The incentive to prioritize domestic stability would accelerate dedollarization and weaken the financial mechanisms through which Washington has historically exercised global influence.

More sanctions, guns, butter, servicing debt, or collapse?

 

China, Russia, and Iran could therefore form the foundation of an alternative monetary system: Iran contributing oil, Russia oil and grain, and China financial reserves. Such a system could remove or weaken several of the instruments of influence established after World War II to structure global trade and finance in America's interest, including control over the dollar, oil, food, and seaborne trade. 

Keynes's Alternative to the Dollar System

The alternative need not be another dominant national currency at all. The argument instead returns to John Maynard Keynes's 1944 proposal for an international clearing institution based on a supranational unit of account called the bancor. Keynes proposed a system designed to manage persistent international surpluses and deficits rather than forcing debtor countries into destructive austerity. The institution would manage intergovernmental debts, allowing countries with temporary imbalances to obtain temporary liquidity while preserving their capacity to become economically self-sufficient.

 

Keynes maybe wasn't all wrong.

The critical difference is that surplus countries would also share responsibility for global imbalances. Keynes argued that the persistent accumulation of surpluses and claims by creditor countries necessarily creates corresponding deficits elsewhere. If debts become so large that repayment requires destroying a debtor’s economy, those debts should be written down—and the corresponding creditor claims written down as well. The US rejected this approach in 1944 because it was then the dominant creditor and had little incentive to accept a system that could reduce its accumulated claims.

 

Keynes's proposal was shaped by the German reparations and transfer debates of the 1920s. His central argument was that a debtor cannot repay indefinitely by suppressing wages, transferring resources abroad, and selling its assets without destroying its own productive economy. A loan made without regard to the borrower’s ability to repay ultimately becomes a bad loan. The same logic, he argued, applies internationally: forcing debtors into permanent austerity can produce depression rather than repayment.

 

The proposed international institution would create an accounting unit based on a combination of gold and member currencies rather than a conventional national currency. It would manage international surpluses and deficits and provide liquidity for temporary imbalances. When accumulated claims became impossible to service without undermining a country’s productive capacity, the system would permit debt reduction rather than compel economic destruction.

China's Potential Role

China could potentially build such an international payments system around productive investment rather than creditor extraction. Its investments in ports, railways, infrastructure, and the Belt and Road Initiative could increase borrowers' productive capacity and ability to earn foreign exchange, enabling them to repay principal and interest rather than forcing them into austerity and privatization. The argument is that, unlike Western financial systems, China has the capacity to structure such financing primarily on geopolitical and developmental grounds rather than purely for financial returns or capital gains.

 

The central question is whether China itself could avoid becoming another creditor power with the capacity to weaponize its currency. The historical lesson, however, is that other countries did not necessarily expect the US to weaponize the dollar in the 1950s and 1960s, yet it eventually did. The same concern could apply to the yuan. The proposed solution, however, is not simply to substitute one national currency for another, but to create an international clearing mechanism that limits any single country's ability to accumulate unlimited financial power.

The End of the Post-1945 Order

The broader conclusion is that the post-1945 financial order may be approaching a structural break. The present conflict is no longer simply a military conflict; it is increasingly a contest between competing economic systems: a creditor-driven and highly financialized model and an industrial, state-directed model represented by China and parts of Asia. The existing system may not contain mechanisms capable of managing this transition. Instead, the world could fracture into parallel financial and economic systems, with the struggle over the future economic order ultimately displacing the narrower conception of a military or civilizational conflict.

Reference:

Michael Hudson (August 20, 2026) - Why Time Is on Iran, Russia and China's Side.

Debt Trap: Western Finance Replaced Productive Capitalism | Michael Hudson

In an in-depth discussion, American economist Michael Hudson and Norwegian political and international relations scientist Glenn Diesen examine the historical and economic roots of the financial instability currently confronting Western economies. Hudson argues that the Western financial system is unsustainable because debt grows faster than the economy's capacity to service it.  

 

Cuneiform tablet on debt and loan quittance.

Historical Debt Relief Traditions

Unlike ancient Mesopotamia, where rulers from the third millennium BC onward periodically proclaimed "clean slate" debt cancellations, known as andurarum or misharum, which wiped out agrarian debts, freed people in debt bondage, and restored land to cultivators, the modern West has never institutionalized such resets. Similarly, the biblical Jubilee tradition echoed these practices by mandating the periodic release of debts and restoration of property. 

Levites sounding the trumpets of Jubilee.

 

Jesus cleansing the temple of the money-changers. 

If it is difficult for someone to repay a debt,

postpone it until a time of ease.

Islamic tradition likewise established a clear obligation to grant debt relief: the Quran (2:280) requires creditors to grant a debtor in genuine hardship a postponement until a time of ease, while encouraging creditors to forgive all or part of the debt as a superior act of charity. These ancient and religious practices helped preserve a viable productive population and limited creditors’ ability to monopolize the means of production. 

From Industrial to Finance Capitalism

The absence of comparable mechanisms today has contributed to extreme polarization of wealth and power. Western economies have shifted from industrial capitalism, which directed investment toward factories, machinery, research, infrastructure, and productive employment, to finance capitalism. 

 

Early modern wage-rent-tax slaves at Ford's assembly lines.

 

The latter prioritizes wealth accumulation through leverage and debt, corporate takeovers, real estate speculation, and asset-price inflation rather than tangible capital formation. This transition has contributed to deindustrialization and concentrated gains among the top holders of financial claims. 

 

Western Central Banking and Creditor Power

Western central banks reinforce this dynamic further: rather than acting as public authorities empowered to cancel or suspend debts that have become unpayable, as Bronze Age rulers did or as Islamic traditions of debt respite prescribe, they primarily support commercial banks and asset markets, enforce creditor claims, and resolve crises by expanding their own balance sheets—thereby protecting the financial sector while leaving household and productive-economy debt intact.  

 

The development of European banking was deeply shaped by the Crusades, when the Church and later secular states used debt to finance warfare. Over time, fiscal policy became increasingly subordinated to banking interests, reversing earlier anti-usury traditions and embedding institutions designed to enforce debt collection rather than protect debtors.

Brokers at the New York Stock Exchange in 1963.

Without an authority comparable to the ancient "divine king," whose duty was to keep debt within the population's capacity to repay, Western constitutions historically concentrated political and economic power in the hands of a creditor oligarchy. Contemporary central banks, rather than reversing this concentration, operate within the same creditor-oriented framework. 

China’s Public Credit Model

By contrast, China treats credit as a public utility under state control through the People's Bank of China. The state limits the emergence of an independent financial class capable of operating outside state priorities and channels credit creation toward national development—factories, machinery, and infrastructure—rather than speculative bubbles.

  

People's Bank of China Headquarter, Beijing.

Because the central bank remains a public instrument, China retains greater practical capacity, analogous to the debt-relief practices of ancient Mesopotamia and the Islamic principle of relieving hardship, to restructure or write down debts that threaten productive capacity and social stability. This approach supports industrial growth and limits the systemic polarization seen in the West.

 

The Ponzi Dynamics of Western Debt

Hudson describes the Western system as a Ponzi scheme: new debt is continually required simply to service interest on existing loans. Because a large share of bank lending fuels asset inflation rather than productive investment, more income is diverted into debt service, domestic demand weakens, and the economy stagnates.   

 

Mug shot of Charles Ponzi.

 

The resulting reliance on continually expanding debt, combined with geopolitical pressures surrounding the dollar and the oil trade, leaves Western economies increasingly vulnerable to financial and economic instability.

Reference:
Michael Hudson (August 20, 2026) - Debt Trap: Western Finance Replaced Productive Capitalism.

Financial Oligarchies vs. State Power | Michael Hudson

My articles about the origins of credit, money, and interest share a common frame of reference. From the inception of economic practices and enterprise in the ancient Near East, through classical antiquity and medieval Europe to today, wealthy classes have sought to transform themselves into an oligarchy that controls government and religion to protect, legitimize, and increase their wealth, especially their rent-extraction privileges as creditors, monopolists, or landlords.

 Marcus Licinius Crassus (115 – 53 BC): 

general, statesman, the richest man in Rome, and a textbook oligarch.

 

We see the same struggle through the ages, with financial elites opposing any government power capable of restricting their self-serving rent-seeking and creditor power at society’s expense. We see it today in the pro-creditor economic policies of the International Monetary Fund, the World Bank, and the ‘libertarian’ ideology, all of which seek to centralize power to allocate resources and plan economies within the financial sector instead of democratic governments. Today’s neoliberal idea is to eliminate government authority (except where it is controlled by rentier sectors) and let banks in the privatized financial sector control money and credit, which is the most important public utility.
 

That should be the context in which one examines every epoch’s economic view of the world, above all its perspective concerning how ‘free’ a market should be and just whose freedom is being endorsed. This has been the great question throughout the history of civilization—from the Bronze Age Near East, when rulers regularly proclaimed Clean Slates debt cancellations to restore economic order and check incipient oligarchies, through the five centuries of civil war in the Roman Republic and Jesus’s fight against the emerging Jewish oligarchy, to today’s civilizational struggle between the NATO West, dominated by U.S.-oriented rentier oligarchies, and the global majority now centered on the BRICS.

 Rare Anomaly: Populist Pariah Oligarchs Proclaiming to Serve the Common Good —  September 2, 2024.

China’s government has financed its remarkable industrial takeoff without having to borrow from private creditors. There was little money to borrow from its domestic population, so the Bank of China printed its own money. Unlike typical financial practice, it did not demand personal wealth be pledged as collateral because stock and bond holdings or substantial real estate did not yet exist. The government did not need to turn to bondholders to increase its public spending—and in any case, there were no domestic bondholders to borrow from in the wake of its Revolution. China did what any sovereign national government can do—what Abraham Lincoln did in the Civil War. It simply printed the money.

 

Quoted from:
Michael Hudson (September 1, 2024) - Reshaping Christianity and the Modern State: A Journey from Usury to Fiscal Power.

 

See also:
Stephen Mitford Goodson (2017) - A History of Central Banking and the Enslavement of Mankind.

BRICS+ Destroys The US And EU Currency Monopoly | Michael Hudson

There is no way that today’s international debt overhand can be repaid. That is as true for the United States as it is for Global South debtors. The US Treasury owes much more to foreign governments in the form of their holdings of US securities than it can foreseeably repay. It has post-industrialized its own economy, and has committed to spending enormous sums abroad, while its dependency on foreign imports is rising and its prospects for collecting its existing debt claims on deficit countries is looking shaky. The past half-century’s foreign investment has taken the form of privatization of the public domain of debtor countries. This investment has not helped them develop but has merely transferred ownership of their oil and mineral rights, public utilities and other assets. A viable international financial system requires productive investment such as China’s Belt and Road Initiative that can help countries prosper, not asset stripping. Dollar dominance will continue over Europe and other US satellites. Other countries that still need dollar reserves for their trade and investment with the United States can continue as it has. But what will be changed is a new basis for the international economy itself. There will not be a new BRICS currency in the sense of a dollar or euro that could become a medium for trade, investment or international speculation. There will only be a mutual "currency of settlement" of payments imbalances among central banks joining the new system. And that system itself will be based on principles opposite from the financialized neoliberal model being promoted by the Dollar/NATO bloc. That is the real context for the current discussion of BRICS+ economic reform.

President Putin was very clear when he recently talked in Valdai about a single settlement currency: "This definitely deserves our attention. It's a complex issue, and we have to solve it in one way or another." The Western press talks about how much wealth and reserves do the BRICS countries have. Naturally, you count their gold as a large part of their reserves. But where is the gold of the BRICS countries? Much of their gold is not in their own countries. It's in the New York Federal Reserve Bank, it's in the Bank of England and the gold of African countries is in the Bank of France. Right now, this gold is being held hostage. But countries can ask the US, the UK and France to give them back their gold. Germany tried to do that a few years ago and said, "Can't you begin to give us our gold back that was moved to your banks during the last seventy-five years of  US occupation? " And the US said, "Oh I'm sorry, we can't. We've already done something else with your gold. There are legal problems and we are not giving it back to you!" Now, let's say the BRICS countries would ask for their gold and if the United States and England and France will not return it, those countries could take compensation, including all of the foreign investments in their countries. They could do another thing: If, especially the African countries, say, "You've stolen our gold. You cannot expect us to pay our foreign dollar debts if you have come and seized our gold. Give us back our gold. You owe to us. And by the way, we're going to join the Shanghai Cooperation Organization so you can't send your troops in and do what you did in Libya and simply grab it." This is an element of the financial future that nobody in the West has talked about.

Quoted from:

Michael Hudson (Oct 07, 2023) - A BRICS+ Bank: How would it really function?

Michael Hudson (Oct 25, 2023) - BRICS Destroys the US and EU’s Currency Monopoly. (video)

Return of the Heartland | Pepe Escobar

Putin himself first spelled it out at the Munich Security Conference in 2007. Xi Jinping started to make it happen when he launched the New Silk Roads in 2013. The Empire struck back with Maidan in 2014. Russia counter-attacked, coming to the aid of Syria in 2015. The Empire doubled down on Ukraine, with NATO weaponizing it nonstop for eight years. At the end of 2021, Moscow invited Washington for a serious dialogue on "indivisibility of security" in Europe. That was dismissed with a non-response response. Moscow took no time to confirm a trifecta was in the works: an imminent Kyiv blitzkrieg against Donbas, Ukraine flirting with acquiring nuclear weapons, and the work of US bioweapon labs.

 

"The heart of Europe is Germany, the heart of Asia is China, and the heart of Eurasia is Russia." 

In his famous 1941 article, "The Continental Bloc: Berlin-Moscow-Tokyo," German geographer Karl Haushofer wrote, "Eurasia cannot be suffocated while its two largest peoples, the Germans and the Russians, strive in every way to avoid internecine conflict: it is an axiom of European politics."

 

What Moscow is doing is talking to virtually the whole Global South—bilaterally or to groups of actors—explaining how the world system is changing right before our eyes. The key actors of the future are configured as the BRI, SCO, EAEU, BRICS+, and the Greater Eurasia Partnership. What we see is vast swaths of the Global South—or 85% of the world's population—slowly but surely becoming ready to engage in expelling the FIRE Mafia (Finance, Insurance, Real Estate, as per Michael Hudson) from their national horizons, and ultimately taking them down: a long, tortuous battle that will imply multiple setbacks.

  

 

"The New World Order is a battle for the meaning of the end of history. The great philosophical battle. 

It is time to close the page of exclusively materialistic, energy, and economic interpretations

—this is not just vulgar, it is wrong. History is the history of ideas."

Alexander Dugin, 2022.

 

The Global South, though, should never lose sight of the "Empire business." The Empire of Lies excels at producing chaos and plunder, always supported by extortion, bribery of comprador elites, and assassinations. Never underestimate a bitter, wounded, and deeply humiliated declining empire. So, fasten your seat belts: that will be the tense dynamic all the way to the 2030s. But before that, all along the watchtower, get ready for the arrival of General Winter, as his riders are fast approaching, the wind will begin to howl, and Europe will be freezing in the dead of a dark night as the FIRE Mafia puffs their cigars.

Quoted from:
Pepe Escobar (August 24, 2022) - Geopolitical Tectonic Plates Shifting, Six Months On. (video)

See also:

 The Duran (August 21, 2022) - Discussing Ukraine. Glenn Diesen interviews Scott Ritter and Alexander Mercouris. (video)

Alexander Dugin (2019) - Multipolarity, Unipolarity, Hegemony - Theories and Concepts.

Alba Popescu (2017) - The Theory of Global Domination - Russian Geo-Strategy Conceptual Framework on the Black Sea Region.

TPR (2018) - Greater Eurasia: Russia’s New Energy Gamble.  

TPR (2016) - One Belt, One Road: Eurasian Century Unstoppable.