Russian judo tears the West apart
by Pepe Escobar on 15 Mar 2022 4 Comments

The battlefield is drawn. The official Russian blacklist of hostile sanctioning nations includes the US, the EU, Canada and, in Asia, Japan, South Korea, Taiwan and Singapore (the only one from Southeast Asia). The Global South should be aware there are no nations from West Asia, Latin America and Africa. Moscow has not even announced a package of what could be defined as “counter-sanctions from hell”. Yet a decree on “foreign exchange obligations to foreign creditors” which allows Russian companies to settle their debts in rubles is already an eye-opener.


Economist Yevgeny Yushchuk defined it as a “nuclear retaliatory landmine”. It all revolves around a new presidential decree, signed last Saturday: “On Temporary Order of Obligations to Certain Foreign Creditors”. It works like this: to pay for loans obtained from a sanctioning country exceeding 10 million rubles a month, a Russian company does not have to make a transfer. They ask for a Russian bank to open a correspondent account in rubles under the creditor’s name. Then the company transfers rubles to this account at the current exchange rate, and it’s all perfectly legal.

 

Payments in foreign currency only go through the Central Bank on a case-by-case basis. They must receive special permission from the Government Commission for the Control of Foreign Investment.

 

As I discussed with Michael Hudson, what this means in practice is that the bulk of the $478 billion or so in Russian foreign debt may “disappear” from the balance sheets of Western banks. The equivalent in rubles will be deposited somewhere, in Russian banks, but Western banks, as it stands, can’t access it.

 

It’s debatable whether this straightforward strategy was the product of those non-sovereignist brains gathered at the Russian Central Bank. More likely there has been input from Sergei Glazyev: here is a revised edition, in English, of his groundbreaking essay Sanctions and Sovereignty, originally published by expert.ru, which I previously summarized.

 

Meanwhile, Sberbank confirmed it will issue Mir cards co-badged with China’s UnionPay. Alfa-Bank – the largest private bank in Russia – will also issue UnionPay credit and debit cards. 40% of Russians already have a Mir card for domestic use. Now they will also be able to use it internationally – via UnionPay’s enormous network. And without Visa and Mastercard, commissions on all transactions will remain in the Russia-China sphere.

 

De-dollarization in effect. Mr. Maduro, gimme some oil.

 

The JCPOA negotiations in Vienna may be reaching the last stage – as acknowledged even by Chinese diplomat Wang Qun. But it’s Russian Foreign Minister Sergei Lavrov who introduced a new, crucial variable. Lavrov made it quite explicit, as registered by NATOstan media: “We have asked for a written guarantee… that the current process triggered by the United States does not in any way damage our right to free and full trade, economic and investment cooperation and military-technical cooperation with the Islamic Republic.”

https://www.msn.com/en-us/news/world/russian-foreign-minister-sergei-lavrov-said-friday-that-moscow-is-demanding-guarantees-from-the-us-before-backing-the-iran-nuclear-deal-citing-the-current-wave-of-western-sanctions-against-russia/ar-AAUE5Dy?ocid=msedgdhp&pc=U531

 

As per the JCPOA, Russia receives enriched uranium from Iran and exchanges it for yellowcake; and in parallel is reconverting Iran’s Fordow nuclear plant into a research center. Without Iranian enriched uranium exports simply there’s no JCPOA deal. It boggles the mind that US Secretary of State Blinken does not seem to understand that. Everyone in Vienna, sidelines included, knows that for all actors to sign on the JCPOA revival no nation must be individually targeted in terms of trading with Iran. Tehran also knows it.

 

So what’s happening now is an elaborate game of Persian mirrors, coordinated between Russian and Iranian diplomacy. Russia’s Ambassador to Tehran, Levan Jagaryan, attributed fierce reaction to Lavrov in some quarters to a “misunderstanding”. This will all be played in the shade. An extra element is that according to a Persian Gulf intel source with privileged Iranian access, Tehran may be selling as many as 3 million barrels of oil a day already, “so if they do sign a deal it will not affect supply at all, only they will be paid more.”

 

The administration led by that zombie remote-controlled by earpiece/teleprompter is now absolutely desperate: it is banning all imports of oil and gas from Russia. Russia is the second-largest exporter of oil to the US, behind Canada and ahead of Mexico. The replacement “strategy” is to beg for oil from Iran and Venezuela.

 

So the White House did send a delegation to talk to Venezuelan President Maduro, led by Juan Gonzalez, the White House top Latin America adviser. The offering is to “alleviate” sanctions on Caracas in exchange for oil.

 

The United States government has spent years – if not decades – burning all bridges with Venezuela and Iran. The USG has destroyed Iraq and Libya, and excluded Venezuela and Iran to sort of take over global oil markets just to end up miserably trying to buy out both, and thus escape from being crushed by the economic forces it has unleashed. That proves, once again, that imperial “policy makers” are completely clueless.

 

Caracas will request the elimination of all sanctions on Venezuela and the return of all its confiscated gold. Seems like that was not exactly cleared with “President” Guaido.

 

Social cohesion torn apart

 

Oil and gas markets, meanwhile, are in total panic. No Western trader wants to buy Russian gas; and that has nothing to do with Gazprom, which continues to duly supply customers that signed contracts with fixed tariffs, from $100 to $300 (others are paying over $3,000 in the spot market). European banks are less and less willing to grant loans for energy trade with Russia because of the sanctions hysteria. A strong hint that Nord Stream 2 may be literally six feet under is that importer Wintershall-Dea wrote off its share of the financing, de facto assuming that the gas pipeline will not be connected.

 

Everyone with a brain in Germany knows that two extra LNG terminals – still to be constructed – will not be enough for Berlin’s needs. There is not enough LNG to supply them. Europe will have to fight with Asia over who can pay more. Asia wins. Europe imports roughly 400 billion cubic meters of gas a year, with Russia responsible for 200 billion. There’s no way Europe can find 200 billion cubic meters of gas anywhere else to replace Russia – be it in Algeria, Qatar or Turkmenistan. Not to mention its lack of necessary LNG terminals.

 

So obviously the top beneficiary of all the mess will be the US – which will be able to impose not only their terminals and control systems but also profit from loans to the EU, sales of equipment and full access to the whole EU energy infrastructure. All LNG installations, pipelines and warehouses will be connected to a sole network with a single control room: an American business dream.

 

Europe will be left with reduced gas production for its – dwindling – industry; job losses; decreasing quality of life standards; increased pressure over the social security system; and, last but not least, the necessity to apply for extra American loans. Some nations will go back to coal for heating. The Green Parade will be livid.

 

What about Russia? As a hypothesis, even if all its energy exports were curtailed – and they won’t: the top clients are in Asia – Russia would not have to use its foreign reserves. The Russophobic all-out attack on Russian exports also targets palladium – vital for electronics, from laptops to aircraft systems. Prices are skyrocketing. Russia controls 50% of the market. Then there are noble gases – neon, helium, argon, xenon – essential for production of microchips. Titanium has risen by a quarter and both Boeing – by a third – and Airbus – by two thirds – rely on titanium from Russia.

 

Oil, food, fertilizers, strategic metals, neon gas for semiconductors: all burning at the stake, at the feet of Witch Russia. Some Westerners who still treasure Bismarckian realpolitik have started wondering whether shielding energy (in the case of Europe) and selected commodity flows from sanctions may have everything to do with protecting an immense racket: the commodity derivatives system. After all, if that implodes, because of a shortage of commodities, the whole Western financial system blows up. Now that’s a real system failure.

 

The key issue for the whole Global South to digest is that the “West” is not committing suicide. What we have here, essentially, is the Empire of Lies willfully destroying German industry and the European economy: so easy when you have Brussels ventriloquist dummies to help you do the dirty work. To destroy the European economy means not allowing extra market space for China, blocking the inevitable extra trade which will be a direct consequence of closer exchanges between the EU and the Regional Comprehensive Economic Partnership (RCEP), the world’s biggest trade deal.

 

The end result will be the US eating European savings for lunch while China expands its middle class to over 500 million people. Russia will do just fine, as Glazyev outlines: sovereign – and self-sufficient.

 

Michael Hudson has concisely sketched the lineaments of imperial self-implosion. Yet way more dramatic, as a strategic disaster, is how the deaf, dumb and blind parade towards deep recession mixed with near-hyperinflation will rip what’s left of the West’s social cohesion apart. Mission Accomplished.

 

Courtesy The Saker; posted with the author’s permission and cross-posted with The Cradle

https://thesaker.is/russian-judo-tears-the-west-apart/ 

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