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Page added on September 12, 2014
China Daily: “Western Sanctions Will Make Moscow Back The Chinese Yuan Against The Dollar”
The recent NATO summit in Wales, held against the background of the armed conflict in Ukraine, has brought back the Cold War atmosphere to Europe. NATO’s partnership with Russia remains formally suspended. In fact, NATO is treating Russia more as an adversary than a partner.
The alliance is setting up a “Rapid Reaction Force” to deal with emergencies on Europe’s eastern flank. The alliance’s military infrastructure is moving toward that exposed flank, and closer to Russia’s borders. NATO forces will now spend more time exercising in the east, and their presence there will visibly grow. NATO-leaning Ukraine, which the alliance alleges is an object of “Russian aggression”, has been promised financial and military support.
The Ukraine crisis is not just about Eastern Europe, it is also about the world order. The Kremlin is seeking Washington’s recognition of what it regards as its core national security interest: keeping Ukraine as a buffer zone between Russia and the West, particularly NATO. Washington, on principle, denies Moscow this “imperial privilege”, and insists on the freedom of all countries, including Ukraine, to choose alliances and affiliations.
The stakes are high. Should Russia be rolled back in Ukraine, not only will its international position materially suffer, but also the power of the Kremlin inside the country might be dangerously undermined. On the other hand, if the US were to eventually accept Russia’s demand for a “zone of comfort” along its borders, Washington’s credibility as the global dominant power, the norm-setter and arbiter will suffer.
The Shanghai Cooperation Organization, of course, is no military alliance, and even less a rival of NATO. Its member states, however, are closely watching the US-Russian match being played out at the western end on the great Eurasian continent. Some, like the Central Asian states, are essentially ducking, hedging, or running for cover. China, which seeks to defend its own core interests in East Asia and the Western Pacific, looks at the current Russian-American competition through the prism of its own relations with Washington and Moscow.
China has a very important relationship to keep with the US. Playing a long game, Beijing usually avoids direct collisions with Washington, and means to profit from the US-initiated globalization to the fullest extent possible. Like Russia, however, China would also want to carve out a comfort zone for itself along its eastern borders and shores, and, like Russia again, it faces the reality of the US’ physical presence and US-led alliances there. What Washington is now doing in an effort to contain Moscow in Eastern Europe provides important information to Beijing in East Asia.
There is more to Beijing’s reaction than just watching and drawing conclusions. The apparently long-term rupture of Russia’s relations with the West offers an opportunity to the Chinese leadership to enhance its already close relationship with the Kremlin and thus turn the global geopolitical balance in its favor – not unlike former US president Richard Nixon and former secretary of state Henry Kissinger who reached out to Chairman Mao Zedong in 1972. The Russians, angry with Washington, are now more amenable to giving China wider access to their energy riches and their advanced military technology. The Western sanctions pushing Russia out of the international financial system are also making Moscow more ready and willing to back the Chinese yuan against the US dollar.
A Sino-Russian military alliance against the US is still a rather long shot. Yet the two countries’ political, economic and military alignment is getting thicker. An expellee from the G8, which is now back to G7, Russia is now eagerly embracing the non-West, particularly in Asia and Latin America. Within the non-West, China is unquestionably the premier power. Managing Russia will not be easy for anyone, but the country is a precious resource for China. So far, Beijing has displayed more tact in dealing with Moscow than any other major player in the world. Building on this success, it can now set its bar higher.
To a China which is rising and raising its global profile, BRICS is an asymmetrical equivalent of the G7, albeit in a very different shape and form. The SCO, to use a similar analogy, is an asymmetrical analogue to NATO, but as a political organization of continental Asia (including Russia), rather than a military bloc. The inclusion of India and Pakistan into the SCO is a logical next step. Iran, currently an observer, can follow later. Turkey, an SCO dialogue partner and a member of NATO, can become a useful link to the North Atlantic alliance.
Enhancing the SCO’s security credentials and extending its reach requires a major qualitative upgrade of China’s strategic thinking and diplomacy, and an even closer partnership with Russia. The SCO summit in Dushanbe, Tajikistan, will probably not see this yet, but it might become a point when the balance of Eurasia has decisively turned in China’s favor. Beijing would need to thank Washington for it.
14 Comments on "China Daily: “Western Sanctions Will Make Moscow Back The Chinese Yuan Against The Dollar”"
Makati1 on Fri, 12th Sep 2014 9:03 am
As I have said before, The Empire is shooting both it’s legs off after having done so to both feet…
Chris Hill on Fri, 12th Sep 2014 9:06 am
Since most money movement is done electronically, it is amazing the dollar has been such a means of exchange for so long. It still may be more efficient that way, time will tell.
JuanP on Fri, 12th Sep 2014 9:11 am
I expect the split between the West and the East to continue and deepen for the rest of our lives. We have already passed peak democracy, peak civilization, and peak globalization.
The inevitable consequence, IMO, will be increasing cooperation between Russia and China. In a deglobalized world these two countries will still share a border and many common interests. One has resources, the other needs them, and that will make for a difficult complimentary relationship.
rockman on Fri, 12th Sep 2014 9:34 am
M – I get your point but it still seems to be more PR then substance. Russia is still selling every bbl of oil and cubic meter of NG that someone wants to buy. And the EU is still buying the fossil fuels from Russia it requires. So the big change: western service companies won’t get paid by Russians for services rendered. Now Chinese companies can collect those $billions. And if ExxonMobil et al lose their Russian consessions they’ve already invested $ billions because US sanctions prevent them from complying with contract requirements? That’s how foreign concessions work: no pay…no earn. And again Chimese companies would be very pleased to move in and take possesion of the forfieted infrastructure.
Plantagenet on Fri, 12th Sep 2014 10:29 am
Putin’s bellicosity and Obama’s incompetence have combined to produce Cold War II. In Cold War I, the ruble and the yuan were walled off from the western world—the currencies were essentially non-convertible. Its no surprise that Cold War II is heading in the same direction.
noobtube on Fri, 12th Sep 2014 11:07 am
We are watching the American Empire die.
Slowly and step-by-step.
George W. Bush kicked off the End of American century, with 2 stupid ass wars.
What is mind-blowing, is that Americans elected him and Kerry to face-off in an election. Two members of the same secret society. That showed me Americans are the stupid pieces-of-s*it this Earth has ever had the displeasure of supporting.
Pieces of the American Empire will continue to fall off until the illusion of propserity is completely exposed.
At that point, America, as anyone understands it, will cease to exist.
2003 – Invasion of the Middle East
2005 – Katrina
2008 – financial collapse
2009 – Obama, the first bi-racial President
2011 – Invasion of North Africa
2014 – Russia/China dropping the dollar
Step-by-step.
penury on Fri, 12th Sep 2014 12:11 pm
When you read these articles and understand that they are all written to support the Smiley Face message that the West wants people to believe. It means that people must have the ability to observe the world situation and determine the truth of the matter. Apparently for some it is easier to just accept whatever the MIC wants them to think rather than actually look and see what is actually happening in the world. If the BRICs succeed in trade relations without U.S. currency sanctions only hurt countries which use the dollar. Message to EU: dump the dollar.
Makati1 on Fri, 12th Sep 2014 8:56 pm
penury, the EU is already thinking about it, and the Russians and Chinese are already arranging trade in Euros and their own currencies. The rest of the world are lining up to dump the dollar. The USSA is using the dollar as a club and openly showing the world why they (other countries) need to dump it.
Some of the above don’t want to see the truth. Easier to lie to themselves and believe the MSM propaganda. NO country is too big to fail. That is the fallacy in the “exceptional” thinking. And, to believe that if they fail, they will take down the rest of the world. Another bit of “exceptional” thinking that may be proved wrong in the near future. We will not get to 2020 without a radical negative change in the whole world situation. A nuclear world war, global financial collapse, species extinction. or all three? We shall see.
baptised on Fri, 12th Sep 2014 11:48 pm
Hope this is not off subject too much, I think it fits in with conversation. Just went to court for a speeding ticket, in Maryville TN, a medium sized well to do city. Their was 70 to 90 cases and mine was last because I pleaded non-guilty. Anyway 90% of the cases had no insurance as one issue. I seen elderly men and ladies, men in work uniforms, kids with low pants, etc. stand in front of judge and say they could not pay court fee’s, which was $108’s. It was a wakeup call and very sad. And another sad thing was I was found innocent but still had to pay $108 for court fee? now that’s USA justice. The state of things are ALREADY bad’ just hidden.
Davy on Sat, 13th Sep 2014 8:25 am
China is a country in a disguised and hidden free-fall. They have a financial system that is the most corrupt in the world and the most manipulated among the large economies. I ask you this why are the wealthy Chinese fleeing with their money? They are walking the walk because the ship is going down. China has kicked the huge mal-investment/bad debt down the road. In the real world investments have to bring a positive return or they cannot be considered growth. China is a country that has had cancerous growth but now the bill is coming due. All this vast infrastructure will have to be maintained and paid for. They have a huge housing bubble, and huge re-hypothecated credit bubble. IOW a huge mal-invested bubble economy. This mal-investment on a national scale will bring down South Asia. I wanted to mention this before I mention China’s effort at bypassing the west and cozying up to Russia. These actions in this article are smart sharing a long border with a resource rich country. Yet there are consequences to these actions. If China intent is to hurt the US then they are hurting one of their largest export markets. China is an export driven economy that needs to maintain a low exchange rate to promote its vast mal-invested industry. They are further holding large amounts of dollars, dollar assets both physical and paper equivalents with values that will be hurt by any assault on the US or dollar financially. I suspect they realize BAU is fracturing and the global system is nose-diving. This is an effort to prepare for the descent. IMA Asia is in the worst position of any region for collapse being so far into population overshoot which is the real test of a regions sustainability and resilience. Russia and China are smart and doing bilateral arrangements to bypass the west but there are consequences and unintended consequences to these type action especially in a interconnected world and being a TBTF economy. I believe Russia and China see the handwriting on the wall for BAU’s descent and are preparing. A question is, do they have what it takes in their bilateral arrangement to survive such a fall? I feel no region does and each region has comparative disadvantages that will destroy their basic BAU infrastructure.
GregT on Sat, 13th Sep 2014 2:42 pm
From the IMF itself in September of 2009:
“Large dollar holders like China and Russia are understandably frustrated by the lack of satisfactory alternatives to the greenback and fearful of what might happen to the value of their hoards should there be a run on the U.S. currency. But, more to the point, both also are aspiring powers that make no secret of their resentment of what they call Washington’s global “hegemony.” Each is well aware of the role played by the dollar in underwriting U.S. geopolitical privileges. In their appeals for a substitute for the greenback, therefore, it is hard not to see an implicit campaign to clip the American eagle’s wings. The idea has symbolic value as a threat to U.S. hard and soft power. Whether it has any practical plausibility is of distinctly secondary importance.”
“To be sure, a more fragmented system would not necessarily be a bad thing. Indeed, it might even turn out be an improvement. For many, the greatest threat to monetary stability over the long term is to be found in the United States’ mammoth current account deficits. As the supplier of the world’s most popular currency, the United States is in the position of a monopolist that has grown complacent abusing its “exorbitant privilege.””
http://www.imf.org/external/pubs/ft/fandd/2009/09/cohen.htm
AgentR11 on Sat, 13th Sep 2014 2:46 pm
I’m not a big fan of Russia, but am very interested in China. What this is doing is serving up Russia as a resource slave to China; much as Saudi Arabia is to its customers. But also different, China gets oil and gas; but there is also massive potential for coal and cross border generated electricity (polution prob solved by moving it instead of stopping it); as well as large tracts of underdeveloped agricultural land, just on the other side of a river. Pull Mongolia & Khazakstan into an open Yuan based trading regime; and you have the conditions the US had in its cheap $ denominated oil days; but with a billion Chinese ultra-capitalists desperate to turn that energy into cash, as in renminbi cash.
We have to acknowledge, Russia+China, together they fill what is lacking in the other, its a perfect fit we were able to keep apart for decades; but the sanctions on Russia popped a hole in the barricade, and now its disintegrating before our eyes.
Makati1 on Sat, 13th Sep 2014 9:41 pm
AgentR11, you see the true picture also.
Davy on Sun, 14th Sep 2014 7:09 am
Agent R11 interesting ideas other than China is already in a disguised economic free fall with multiple predicaments in a global world, China’s export economy relies on, in a Mega Predicament of multiple converging predicaments. There is no time for China to make these changes in your interesting comment. China will be so preoccupied with fighting the fires of collapse of a huge economy with huge mal-investments and a huge population overshoot in regards to food and pollution. China is the canary in the coal mine of a country that has very quickly exhausted all necessary vital resources to support growth and social order. These resources being mainly food, water, and unpolluted/developed land. China is not alone in with these issues but it is the country with the largest population and economic growth rate that cannot be maintained. China is toast.