Empires often follow the course of a Greek tragedy, bringing about precisely the fate that they sought to avoid. That certainly is the case with the American Empire as it dismantles itself in not-so-slow motion.
The basic assumption of economic and diplomatic forecasting is that every country will act in its own self-interest. Such reasoning is of no help in today's world. Observers across the political spectrum are using phrases like "shooting themselves in their own foot" to describe U.S. diplomatic confrontation with Russia and allies alike.
For more than a generation the most prominent U.S. diplomats have warned about what they thought would represent the ultimate external threat: an alliance of Russia and China dominating Eurasia. America’s economic sanctions and military confrontation has driven them together, and is driving other countries into their emerging Eurasian orbit.
American economic and financial power was expected to avert this fate. During the half-century since the United States went off gold in 1971, the world's central banks have operated on the Dollar Standard, holding their international monetary reserves in the form of U.S. Treasury securities, U.S. bank deposits and U.S. stocks and bonds. The resulting Treasury-bill Standard has enabled America to finance its foreign military spending and investment takeover of other countries simply by creating dollar IOUs. U.S. balance-of-payments deficits end up in the central banks of payments-surplus countries as their reserves, while Global South debtors need dollars to pay their bondholders and conduct their foreign trade.
This monetary privilege – dollar seignorage – has enabled U.S. diplomacy to impose neoliberal policies on the rest of the world, without having to use much military force of its own except to grab Near Eastern oil.
The recent escalation U.S. sanctions blocking Europe, Asia and other countries from trade and investment with Russia, Iran and China has imposed enormous opportunity costs – the cost of lost opportunities – on U.S. allies. And the recent confiscation of the gold and foreign reserves of Venezuela, Afghanistan and now Russia, along the targeted grabbing of bank accounts of wealthy foreigners (hoping to win their hearts and minds, along with recovery of their sequestered accounts), has ended the idea that dollar holdings or those in its sterling and euro NATO satellites are a safe investment haven when world economic conditions become shaky.
So I am somewhat chagrined as I watch the speed at which this U.S.-centered financialized system has de-dollarized over the span of just a year or two. The basic theme of my Super Imperialism has been how, for the past fifty years, the U.S. Treasury-bill standard has channeled foreign savings to U.S. financial markets and banks, giving Dollar Diplomacy a free ride. I thought that de-dollarization would be led by China and Russia moving to take control of their economies to avoid the kind of financial polarization that is imposing austerity on the United States. But U.S. officials are forcing them to overcome whatever hesitancy they had to de-dollarize.
I had expected that the end of the dollarized imperial economy would come about by other countries breaking away. But that is not what has happened. U.S. diplomats have chosen to end international dollarization themselves, while helping Russia build up its own means of self-reliant agricultural and industrial production. This global fracture process actually has been going on for some years now, starting with the sanctions blocking America's NATO allies and other economic satellites from trading with Russia.For Russia, these sanctions had the same effect that protective tariffs would have had.
Russia had remained too enthralled by free-market ideology to take steps to protect its own agriculture or industry. The United States provided the help that was needed by imposing domestic self-reliance on Russia (via sanctions). When the Baltic states lost the Russian market for cheese and other farm products, Russia quickly created its own cheese and dairy sector – while becoming the world's leading grain exporter.
Russia is discovering (or is on the verge of discovering) that it does not need U.S. dollars as backing for the ruble's exchange rate. Its central bank can create the rubles needed to pay domestic wages and finance capital formation. The U.S. confiscations thus may finally lead Russia to end neoliberal monetary philosophy, as Sergei Glaziev has long been advocating in favor of MMT.
The same dynamic undercutting ostensible U.S aims has occurred with U.S. sanctions against the leading Russian billionaires. The neoliberal shock therapy and privatizations of the 1990s left Russian kleptocrats with only one way to cash out on the assets they had grabbed from the public domain. That was to incorporate their takings and sell their shares in London and New York. Domestic savings had been wiped out, and U.S. advisors persuaded Russia’s central bank not to create its own ruble money.
The result was that Russia's national oil, gas and mineral patrimony was not used to finance a rationalization of Russian industry and housing. Instead of the revenue from privatization being invested to create new Russian means of protection, it was burned up on nouveau-riche acquisitions of luxury British real estate, yachts and other global flight-capital assets. But the effect of making the Russian dollar, sterling and euro holdings hostage has been to make the City of London too risky a venue in which to hold their assets. By imposing sanctions on the richest Russians closest to Putin, U.S. officials hoped to induce them to oppose his breakaway from the West, and thus to serve effectively as NATO agents-of-influence. But for Russian billionaires, their own country is starting to look safest.
For many decades now, the Federal Reserve and Treasury have fought against gold recovering its role in international reserves. But how will India and Saudi Arabia view their dollar holdings as Biden and Blinken try to strong-arm them into following the U.S. "rules-based order" instead of their own national self-interest? The recent U.S. dictates have left little alternative but to start protecting their own political autonomy by converting dollar and euro holdings into gold as an asset free of political liability of being held hostage to the increasingly costly and disruptive U.S. demands.
U.S. diplomacy has rubbed Europe's nose in its abject subservience by telling its governments to have their companies dump the Russian assets for pennies on the dollar after Russia's foreign reserves were blocked and the ruble's exchange rate plunged. Blackstone, Goldman Sachs and other U.S. investors moved quickly to buy up what Shell Oil and other foreign companies were unloading.
Nobody thought that the postwar 1945-2020 world order would give way this fast. A truly new international economic order is emerging, although it is not yet clear just what form it will take. But "prodding the Bear" with the U.S./NATO confrontation with Russia has passed critical-mass level. It no longer is just about Ukraine. That is merely the trigger, a catalyst for driving much of the world away from the US/NATO orbit.
Please go to Michael Hudson's website to read more.
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Source: The Saker
Russian judo tears the West apart
March 08, 2022 | By Pepe Escobar
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 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 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."
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 from 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.
Please go to The Saker to read more.
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An alternative scenario:
Is Russia challenging the Judaic (Satanic) world order?
Listen to What Dan Peña says about the Federal Reserve: "The only thing that is going to clean up the world is a world-wide motherf*cking depression."
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