Why the Huawei CFO Arrest Is Crazy | Iran Sanctions

Today’s video skirts an interesting question. How much do the US people know about the power our government, financial and legal sectors exercise in the world? My sense is not much. I have this, perhaps naive, hope that if they did have a better sense of that power, they would want the US government to use that power more responsibility. Instead, at this point we’ve got a government and media that actively misleads the people on this topic, and often misleads itself.

A key part of Washington DC’s ability to benefit from ever increasing defense budgets is keeping people scared. Emphasizing that US financial and legal power is capable of shutting down almost any real threat would kind of sabotage that effort. So we pretend that places like Russia and China are somehow independent actors that can do us harm, rather than stakeholders than are almost as wrapped up in benefiting from the status quo as the US is. I dunno. It’s something I think about a lot.

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Video Transcript after the jump…

Hey there. So the US relationship with China just took a nasty turn. Meng Wanzhou the CFO of Hauwei one of China’s most successful companies has been arrested, in Canada, at US insistence supposedly because of actions related to Iran. This incredibly stupid move is worth unpacking a bit, because it deals with one of the central themes of this channel, the fact that the United States is a lot more powerful than is commonly understood.

One of the central untruths that US media and government puts out there is that the United States is just a country like any other, with its own priorities and policies, struggling along. This myth is central to the fantasy that we are seriously threatened by geopolitical pygmies like Iran or Russia. The truth is very different. The US runs the world, in small part through military strength, but much more importantly through a web of institutions, financial ties and legal relationships that dictate to the world in surprising ways. I have written at length about FATCA, the foreign account tax compliance act and how it makes the whole world subject to the IRS, the US tax authority. That’s just one small aspect of the powers that the US judicial systems claim over the world.

The key thing about this vast US power is that it’s usually carefully hidden by consent and complexity. Most of the world’s countries have put up with this use of power because A: they used to trust the US to use this power to work towards common goals, and B this legal and financial stuff is usually so complex that nobody without a law degree and a spare six months to study a given topic really understands how much power the United States has. We have seen this year that most European leaders don’t really understand how this works either.

Meng Wanzhou is reportedly being held for her company’s violations of Iran sanctions. Earlier this year, the Trump administration unilaterally destroyed the Iran nuclear deal. Macron of France, Merkel of Germany and some others angrily declared that this was impossible. It was a multilateral agreement, and Germany and France were sticking by it. German and French companies didn’t agree with them on that. What these European companies knew, and their leaders didn’t, was that the US had too much financial and legal power to be denied. The US has the ability to ruin foreign companies, under multiple laws, for transactions that have nothing to do with the United States. It’s Washington DC’s world, the rest of us are just living in it.

We talk a lot about the importance of the rule of law in the United States, and the ideal that the law is the law is something we should aspire to. But every law enforcement functionary, from supreme court justices down to your local police officer knows that the law is also always political. GOOGLE SWITCH IN TIME SAVES NINE. A legal institution that wants to preserve its power uses its power carefully. The Supreme Court got out of FDR’s way during the great depression when he threatened to pack the court. As another example, Police almost never arrest rich white people for drug crimes, and when they do, those rich white people never face consequences. If they did the laws would change.

And that’s why this prosecution is so, so stupid. Meng Wanzhou is the rich white guy of Iran sanctions prosecutions. Other high profile proceedings have gone after much easier targets. Reza Zarrab was a super shady guy who was picked up while partying in Miami. The prosecution of the Standard Chartered bank didn’t involve any embarrassing arrests, and everybody’s usually happy to see a big bank get fined. Turkey and the United Kingdom weren’t happy about these prosecutions, but they came in the context of Iran sanctions that they had at least officially agreed to under Obama.

What the Trump administration has done here is arrest the one of the richer and more powerful people in China, in a non US country, pursuant to an Iran policy that nobody else agrees with. That is not the way to preserve US power. In the short term Trump is likely get away with this. But China’s leaders just got very interested in working with Europe to make sure this sort of thing can’t happen in the future. As with most of what Trump does, it’s future US presidents that will have to deal with the wreckage here…

Oh and as a postscript… I can already see some Trump defenders arguing that arresting this woman is savvy dealmaking in Trump’s trade negotiations with China. I have a clip from earlier this year, dealing with Turkey that covers that argument pretty well…

Using judicial proceedings to take hostages for other negotiations is a game we really shouldn’t be playing with China. Actually It’s a game we shouldn’t be playing at all. It’s dangerous and sleazy. The resolution of the ZTE case was corrupt enough, we shouldn’t be putting people’s freedom on the line as well.

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