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Page added on September 20, 2015
Russia’s ultimate lethal weapon
Let’s start with some classic Russian politics. Finance Minister Anton Siluanov is drawing up Russia’s economic strategy for 2016, including the government budget. Siluanov – essentially a liberal, in favor of foreign investment – will present his proposals to the Kremlin by the end of this month.
So far, nothing spectacular. But then, a few days ago, Kommersant leaked that Russia’s Security Council asked presidential aide Sergei Glazyev to come up with a separate economic strategy, to be presented to the council this week. This is not exactly a novelty, as the Russian Security Council in the past has asked small strategy groups for their economic assessment.
The Security Council is led by Nikolai Patrushev, the former head of the Federal Security Service. He and Siluanov are not exactly on the same wavelength.
And here’s where the plot thickens. Glazyev, a brilliant economist, is a Russian nationalist – sanctioned personally by the US.
Glazyev is arguably going no holds barred. He is in favor of barring Russian companies from using foreign currency (which makes sense); taxing the conversion of rubles to foreign currencies (same); banning foreign loans to Russian firms (depending if they are not in US dollars or euro); and – the smoking gun – requiring Russian companies that have Western loans to default.
Predictably, some sectors of US ‘Think Tankland’ went bonkers, stating with utmost certainty that “the Russian energy sector would not be able to find much financing without connections to the West.” Nonsense. Russian firms would easily find financing from Chinese, Japanese or South Korean sources.
Whatever measure of attention Glazyev will get inside the Kremlin, the whole episode already means that Moscow harbors no illusions in the near future regarding the exceptionalists (one just has to look at the presidential candidates, from ‘El Trumpissimo’ to ‘The Hillarator’); as Russian Deputy Foreign Minister Sergei Ryabkov recently put it, “[we] should expect toughening of the sanctions pressure.”
Once thing though is absolutely certain; Moscow won’t bend over backwards to “pacify” Washington.
Neo-Tsarism, anyone?
One might be tempted to see Glazyev drawing up plans to return to some sort of Tsarist self-sufficiency while cutting off ties with the West. Assuming some version of that would be approved by the Kremlin, what’s certain is that it may turn into a huge blow the EU might not recover from.
Imagine Russia defaulting on all its foreign debt – over $700 billion – on which Western sanctions have raised extra, punitive costs in terms of repayment.
The default would be payback for the twin Western manipulation of oil prices and the ruble. The manipulation involved unleashing on the oil market over five million barrels a day of excess reserve production that were held back by a few usual suspects, plus derivative manipulation at the NYMEX, crashing the price.
Then, the derivative manipulation of the ruble crashed the currency. Almost all imports to Russia were virtually blocked – as oil and natural gas exports remained constant. In the long run though, this should create a significant balance of trade surplus for Russia; a very positive factor for long-term growth of Russia’s domestic industry.
Vladimir Yakunin, the former head of Russian Railways, now out due to a reshuffle, recently told AP in no uncertain terms how the aim of US sanctions was to cut off Russia economically from Europe.
Sanctions, coupled with speculation on oil and the ruble, pushed the Russian economy into recession in 2015. Yakunin, like most of the economic/business elite, expect Russia’s economic troubles to last at least until 2017.
Currently the only products that the West needs from Russia are oil and natural gas. A possible Russian default on its debt would have no effect on that demand in the short-term; and most probably in the long-term as well, unless it would contribute to a new financial crisis in the West, something that nearly happened in 1998.
We all remember August 1998, when a Russian default shook the entire Western financial system to the core. If a Russian default is now the object of serious consideration by the highest powers that be – and that includes, of course, the FSB, SVR, GRU – then the specter of The Mother of All Financial Crisis in the West is back. And for the EU, that would be fatal.
It’s your fault we can’t loot
Enter Iran. The lifting of sanctions on Iran – arguably by early 2016 – ultimately has nothing to do with the nuclear dossier. It’s a ‘Pipelineistan Great Game’, as in having everything to do with oil and natural gas.
The US – and EU – wet dream remains to replace Russia with Iran in terms of natural gas and oil imports to the EU. Every serious analyst knows this might take at least a decade, and over $200 billion in investment; not to mention Gazprom would fight it with the formidable – commercial – weapons in its arsenal.
At the same time Western financial powers in the New York-London axis did not anticipate that Moscow would not bow down and accept their demands that Putin lay off Ukraine – so that they could loot Ukraine’s mostly agricultural lands at will. They obviously didn’t learn from history; Putin also did not back off when he stopped them from looting Russia.
So the entire, sorrowful Kiev episode, as much as an infinite NATO expansion gambit, was also an attempt to stop Putin from preventing the Western looting of Ukraine.
What we had as a result was a tectonic geopolitical shift; the reconfiguration of the entire world balance of power as Russia and China deepened their strategic partnership – based on a mutual external threat coming mostly from the US, with the EU as accessories. Russian intelligence very well knows the alliance now makes Russia and China invulnerable, whereas separately they could easily fall victim to trademark Divide and Rule.
As for the counter-NATO angle, Russia has had plenty of time to remilitarize, focusing on defensive and offensive missiles; the key to the next major war, and not obsolete US aircraft carriers. Russian defensive missiles such as the state-of-the-art S-500 and the offensive Topol M – each with ten MIRVs – can easily neutralize whatever the Pentagon may have in store.
After Russia, Western financial ‘Masters of the Universe’ went after China for allying with Russia. The usual financial suspects rigged the Chinese stock market in an attempt to crash the economy, using Wall Street proxies manipulating cash settlement mechanisms to first raise up the prices of the Chinese A shares, creating a giant boom, and then reversing the cash settlement rig to crash the market.
No wonder Beijing, very much aware of what was happening massively intervened; is actively studying cash settlement moves; and is carefully reviewing the records of major stock operators in China.
Round up those central bank suspects
The Kremlin’s got to do something about the Russian Central Bank. The Russian Central Bank kept interest rates high, forcing Russian oil and natural gas producers to finance their operations from Western sources, and thereby plunging the Russian economy into a debt trap. These loans to Russia were part of the New York-London financier axis control mechanism. Were Moscow to “disobey” the West, the West would call in their loans after crashing the ruble, making repayment almost impossible, as they did with Iran.
This is the mechanism through which the West – and its institutions, the IMF, World Bank, BIS, the whole gang – rule. Beijing is moving either to complement or replace this set-up with new and more democratic international institutions. <
If the Russian Central Bank had operated under sounder principles, it would have lent money at interest rates below the West’s, and linked each loan to productive investment. A modus operandi totally different from the US – where much of the central bank credit goes to banks and financiers for their speculative scams.
Michael Hudson, among others, has already made the case that the entire Fed only serves the interest of its financial rulers and does not give a damn about American industrial infrastructure, which was progressively shifted to colonies and/or vassals, as well as to China.
So the ‘Masters of the Universe’ thought hardcore pressure on both Russia and then China would work. It did not. There are reasons to be alarmed; the ‘Masters of the Universe’ will keep raising the ante, higher and higher.
The scenario ahead spells out Russia further moving east while simultaneously moving to extricate itself from most of the West’s institutional architecture.
The merger of the China-driven New Silk Roads, a.k.a. One Belt, One Road and the Russia-led Eurasian Economic Union, although slow and full of pitfalls, is irreversible. It’s in their mutual interest to invest and develop a pan-Eurasian emporium.
Iranian natural gas will go mostly to the Asian part of Eurasia, and not the EU. And the Chinese economy will at least triple over the next fifteen years as the US continues to de-industrialize.
Whatever Putin and Obama discuss at their possible meeting at the end of the month in New York, exceptionalist pressure over the bear won’t abate. So it pays for the bear to keep a lethal financial weapon in storage.
29 Comments on "Russia’s ultimate lethal weapon"
BobInget on Sun, 20th Sep 2015 2:50 pm
I continue to hold that Putin is aiming higher.That is control of world gas & oil pricing as much as that is possible. If Putin can make enough deals with China and India, Iraq and Iran his mad man goals might actually fly. Read D.Trumps book,
“best since the bible”.
Which would YOU rather, latest missile or
steady supplies of reasonably priced oil?
Maybe, we should ask N. Korea that question.
dissident on Sun, 20th Sep 2015 3:15 pm
The article is a day late and a dollar short. Russia has reduced its total foreign debt (private and public) to $500 billion as of the end of September. So this default weapon is being neutered by Russia itself.
GregT on Sun, 20th Sep 2015 3:36 pm
“I continue to hold that Putin is aiming higher. That is control of world gas & oil pricing as much as that is possible.”
The Russians has every right to do whatever they like with their own natural resources. Your country Bob, on the other hand, already exploited yours and are busy killing other people around the world for theirs. THAT, is going to come to an end.
Boat on Sun, 20th Sep 2015 3:57 pm
GregT,
Of course you would think that way. You can’t think.
dissident,
Putin is effectively nutting Russia alright. Ruble don’t buy as much anymore. Russia wanted a oil pipeline deal with China and a nat gas line deal with China. Problem is, no money in the budget for these things now.
Boat on Sun, 20th Sep 2015 4:02 pm
GregT,
The Saudi’s have caught up with Russia in military spending. The big Bear is now a necklace of bear teeth. A long time ago California passed Russia in GDP. Texas will be next.
GregT on Sun, 20th Sep 2015 4:09 pm
So Boat,
What exactly is it in my above statement that you find to be unthinkable? That the Russians are entitled to do what they like with their own resources? That your country peaked in ~1973? That the US has killed untold millions since then to control other countrys’ resources? Or that the slaughters are going to come to an end?
Please, oh brilliant one, tell us all what you think.
GregT on Sun, 20th Sep 2015 4:11 pm
California is effectively bankrupt Boat, and not just fiscally.
BobInget on Sun, 20th Sep 2015 4:16 pm
GregT,
I can’t tell you how hurt your loose comment
made us feel. (me and thirty million other Yankee PO.Com hanger’s on)
All last week I’ve been ‘Trying to Make This Country Great Again”. (watching 12 hours of our man Trump)
When Don de Trump becomes POTUS I’m going to recommend we cut off trade with Canada.
No more of that filthy tar sands crappolla for this grandfather. I’m contacting the RCMP, (Sargent Preston) to find your real identity. Once I do, You Greg Tyler, Thomson, Taylor, will need to explain why Honest Ed’s was forced to close after decades of opening door specials. Why for goodness sake there are no Canadian restaurants anywhere outside the country?
The Chinese, EVEN MEXICANS, serve up counterfeit cuisine the world over. The closest
a homesick Canadian can find in Paris or Quebec is a MacDonald’s.
AS for ‘The greatest Nation on Earth’ we get better take-out or lunch truck tucker when ever
we invade another country. Who are we invading next? I’m not telling. A surprise.
Let’s just say, it will have oil.
GregT on Sun, 20th Sep 2015 4:24 pm
Sorry Bob,
My intentions were never to hurt other people’s feelings, only to be honest. Something that seems to be seriously lacking these days, especially in both of our countries.
GregT on Sun, 20th Sep 2015 4:37 pm
Oh, and good luck trying to invade Canada, we have a submarine. (Or at least we will have one, after it finally gets out of dry dock for refitting)
GregT on Sun, 20th Sep 2015 4:44 pm
@Boat,
Still waiting for your thoughtful response. It’s really difficult to find people that can actually think for themselves these days. Most just parrot what the corporately controlled media spoon feeds them.
dissident on Sun, 20th Sep 2015 5:16 pm
The NATO newspeak needs to be translated. When some drone repeats the name Putin over and over what he really is talking about is the Russian people. Putin is popular in Russia because he is the best leader they had in over 1000 years. He has helped pull Russia out of the toilet it was thrown into during the US-sponsored Yeltsin regime. People’s incomes in real terms went up by over 10 times.
But NATO propagandists think that by smearing Putin they can break Russia. Keep dreaming idiots.
GregT on Sun, 20th Sep 2015 5:22 pm
Pay attention Boat,
dissident is one of those people that are difficult to find. Poor guy is in an extremely small minority. Sucks to be you diss. Best to keep your opinions to yourself. 🙂
Reyter on Sun, 20th Sep 2015 6:24 pm
There is no way they want to crash the Chinese economy. Over the last 10 years China by itself has accounted for over 1/3 of world economic growth. A crash in China would make the Great Depression look like a small hiccup.
They certainly want to crimp Russian economic growth and create hardships but doubtful they want to crash the economy. They know very well what is the only significant political force in Russia other than Putin’s corrupt oligarchs. It would be a regime which will say pretty much in verbatim; “If you capitalist pigs want a fight, you’ve got it!”
shortonoil on Sun, 20th Sep 2015 6:39 pm
“And the Chinese economy will at least triple over the next fifteen years as the US continues to de-industrialize.”
This guy should back off from the glue sniffing a little? His brain is turning into mush!
GregT on Sun, 20th Sep 2015 6:46 pm
Just out of curiosity Reyter, who exactly are you referring to when you say “they”, AND, do you really believe that those ‘capitalist pigs’ have your best interests in mind?
Please do tell.
Makati1 on Sun, 20th Sep 2015 8:16 pm
GregT, even the Capitalist Pigs in the Us are turning away from the warmongering elite. They are afraid that the Big O will try to ‘punish’ China with sanctions like it tried with Russia. That would be like taking poison and waiting for the other guy to die.
But then, insanity seems to have gripped the Us leadership in a vice grip and it is spreading to the masses. I probably have only a few years, or less, to have to go to the States to visit my mom (89). I have no desire to ever return there to live. Not in this lifetime.
I know the brainwashed flag wavers will disagree, but the Us is in the shitter and the Big O is about to push the lever. I don’t think it will be missed by many. Not even most Americans.
Kenz300 on Sun, 20th Sep 2015 8:47 pm
Russia has a one horse economy…….
They wasted their chance to diversify their economy over the past two decades.
Now they are too dependent on fossil fuels when the world is looking to move away from fossil fuels…..
GregT on Sun, 20th Sep 2015 9:18 pm
“Russia has a one horse economy…….”
Well Kenz, at least Russia has an economy………..
dissident on Sun, 20th Sep 2015 9:48 pm
Kenz300, spare the crap. Oil and gas and associated industry accounted for 13% of Russia’s GDP as of 2013. If 13% is the horse, then what is the other 87%? The elephant?
It really is absurd how Obama can pronounce that Russia makes nothing and all the credulous lemmings parrot his drivel.
ulenspiegel on Mon, 21st Sep 2015 2:04 am
Dissident,
what is the share of oil and gas in Russian exports? Hint: That is the stuff Russia could earn money with.
Westexasfanclub on Mon, 21st Sep 2015 5:02 am
Ulenspiegel: While there not really do exist autonomous economies in these globalized days, Russia is probably as close to that economic state as you can get. Internal flows of service and production are responsible for the biggest share of economical activity and money-flow. Russia just doesn’t depend as much on Dollars and Euros as other Oil exporting countries.
Blow up the whole world except Russia and the country could still exist as a technological civilization.
Davy on Mon, 21st Sep 2015 6:25 am
WT said “Blow up the whole world except Russia and the country could still exist as a technological civilization.” Yep WT, this is part of the motivation of Putin. He has a degree of independence from the global economy. I said a degree and that degree is not enough to go it alone. Russia manufactures very little in relation to other economies. Its commodities industries import many items to support themselves. Russian economic efficiency is low partly because of the isolation. The Russia of today is not the USSR.
Clearly the supposed Bric axis that was crowed about on the main stream media and the asiaphile on our board is in sad shape. Russia is in sad shape. I want to add like the rest of the sick global system. My point has always been let’s remove the agenda on both sides when looking at the Brics and the developed markets. If we don’t we are just as unreliable as the mainstream media we all love to hate here.
Russia has comparative advantages and disadvantages. It has a smallish economy and population in regards to the other major powers. That is also an advantage for Russia in a crumbling global economy but this does not mean anything positive for Russia. It means less negatives and more room for maneuver.
The problem with Russia is it has a megalomaniac leader and a mafia driven system rife with corruption and exploitation. It is clear that Putin’s militarism and military buildup is just going to waste valuable resources. There is little chance of any war with Russia for Russian territory. The Russian know this and the US knows this. Anyone with military common sense knows this.
The danger is the game of chicken on the boarder could go hot by mistake. I have heard less and less of Nato and Russia sparing. I imagine that sparing will turn to Syria. I am curious if behind the scenes there is an agreement on military operation zones to avoid confrontations. That was a tangent thought but this all points to foreign adventures Russia cannot afford all because Putin and his mafia strong men in the military have great power aspirations.
Oil price may never come back. Russia is one of the best place countries to weather a lower oil price that is without Putin’s megalomaniac policies of militarism and military buildup. Anti-American, these thought s are not an effort to make the US look better we are all fully aware of the folly of the US military efforts across the globe. That will bite the US eventually as will the decline of the brics and Europe. The interconnectedness and counterparty risk is too great today. The question is not who will fall it is who will fall first and when.
Makati1 on Mon, 21st Sep 2015 8:13 am
Westtexas, many have no idea what Russia is about and many Americans probably couldn’t find it on a map without names, even though it is the largest country in the world. All most Americans know about Russia is the ever changing propaganda they are fed by the Empire’s MSM daily. Russo-phobia has returned to haunt America after almost 25 years of absence.
Russia still has the resources and technical skills to continue without the rest of the world, if necessary. That can no longer be said about the US or most of Europe. That is why the US is salivating to get control of them through their installed hand puppets.
Russia has every right to remain a sovereign country in charge of their own affairs. The only truly aggressive country in the world today is the US and it’s European servants. But that has not changed since America was invaded by immigrants in 1620.
Boat on Mon, 21st Sep 2015 8:34 am
Mak,
Russia has a smaller economy than California. Russia spends the same on their military as the Sadie’s now. The long slow road to irrelevance. Russia seemed to turn the corner when Medvedev was in charge but now you could call this the lost decades.
Davy on Mon, 21st Sep 2015 9:00 am
Some anti-Americans act like it matters if the American public knows where Russia is. There are plenty of Americans who know plenty about Russia.
Folks do you really believe the blanket obtuse statement above that the U.S. and Europe have no resources? Does that indicate a half ass agenda speak with little relevance? Yeap.
While Boat is definitely missing the mark on Russia’s importance the asiaphile is puking his anti-American agenda. Two opposing flag waivers above just cancelled each other out.
Westexasfanclub on Mon, 21st Sep 2015 11:47 am
Davy, I agree with you to a large extent. I just don’t see that Putin is such a megalomaniac. I think he’s rather rational in his decisions – though I admit he knows to play the chords of the Russian soul which sometimes look a bit pathetic for foreign eyes. But that’s his business as a president who needs a high acceptance rate in the Russian population for his strategic moves. He doesn’t care if that looks “good” by western standards.
Davy on Mon, 21st Sep 2015 1:26 pm
Ok, WT, he is still a crook. How could a lowly KGB operative become the richest politician in the world without some thieving?
Westexasfanclub on Mon, 21st Sep 2015 3:02 pm
Davy, show me a single politician without a strong sense for power and money. I can’t see any except Jose Mujica (who, by the way, is out of power already). We have to live with that kind of people everywhere – and we can only hope they have the commons sense that a world living in peace and relative wellbeing is also a benefit for themselves. I have the impression that the no so saint Mr. Putin is one of them.