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Dec 28, 2014

Russia Pivots to Eurasia for Trade and Military Alliance

Russia Pivots to Eurasia for Trade and Military Alliance

What is written in this article is exactly what I think. Professor Hudson is quite right. The rapid fall of the ruble should not affect the Russian economy very much as long as Russia properly responds to it together with Russian central bank. The central bank can supply as much money as needed in the country. As for trade, Russia does not need dollars as international settlement currency: for example, Russia has made trades with China by means of a currency swap transaction or barter trade, which Russia has already started. In other words, an entirely new economic block has being built within the BRICK block and the move would simply be accelerated.

The only problem is a high rise in the price of imports due to the ruble falling. However, Russia aims to be self-sufficient in essentials. This economic war is a godsend to Russia, which would help generate new industries one after another in the country, create an economic boom and Russia would transform into the most powerful nation in the world.

If the West is to win in this economic war, Russian central bank and major banks in the country have to be under the control of the West. The IMF would have no chance to go up on stage unless they intentionally act to destroy Russian economy under the direction of the central bank.

Since the Asian currency crisis, Russia should have made a thorough research on such Western methodology and have taken necessary measures. President Putin said: “At worst, it would take two years to stable economy.”  His remark indicates, to put it the other way around, his confidence that he can build a powerful Russia, including establishing self-sufficient system within only two years at most.

In the today’s first article, the chief editor has introduced a video of Mr. Takeo Harada. I think there are just a few Japanese, including Mr. Harada, who properly understand the current world situation.

Masatoshi Takeshita
December 19, 2014


Excerpt from a Japanese article: Overseas Articles Never Reported in Mass Media – December 19, 2014 –

Russia Pivots to Eurasia for Trade and Military Alliance
Excerpt from the original article
Source:

Transcript of video interview with Prof. Michael Hudson (scroll down for video)

SHARMINI PERIES, EXEC. PRODUCER, TRNN
Welcome to The Real News Network. I’m Sharmini Peries, coming to you from Baltimore.

President Vladimir Putin is on his way to India to discuss a gas and arms deal. Last week, he was in Turkey talking about diverting what was to be a South Stream pipeline away from Southern Europe to Turkey. At the APEC summit, he was squaring off deals with China for oil and gas. It is clear that Russia is pivoting to Eurasia.

MICHAEL HUDSON, PROF. ECONOMICS, UMKC: It’s good to be here.
You’re right. Since the last time we talked, which was almost a month ago, the entire world’s geopolitics, its trade patterns and its military alliances, have radically changed. And as you point out, most of this is because Russia has given up on Europe and reoriented its oil and gas trade, and also its military technology and its military alliances, towards Eurasia.

So the result of these changes is the opposite of what American strategy was based on for the last half-century, the idea of dividing and conquering Eurasia by setting Russia against China, by isolating Iran, by preventing India, the Near East, and other Asian countries from joining together to create some kind of alternative to the dollar area. In fact, the American sanctions and the new Cold War policy of the neocons are driving these Asian countries together, in association with the Shanghai Cooperation Organization, as an alternative to NATO, and the BRICS are trying to make an alternative to dealing with the dollar area and with the IMF and the World Bank that represent U.S. policy.

So, regarding Europe, America’s insistence that it join this new Cold War policy by imposing sanctions on Russia, and especially by blocking Russian oil and gas imports, is–aggravated the Eurozone’s austerity, and it’s just turning it into a dead zone. And, a few days ago, a number of German leading politicians, diplomats, and cultural celebrities wrote an open letter in the newspaper Excite to Angela Merkel protesting her pro-U.S. policy and saying that America’s NATO policy and the new Cold War, it threatens just to wreck not only the German economy, but to split up Europe.
Yeah, as you point out, Turkeys already moving out of the U.S.-European orbit by turning to Russia for its energy needs. The South Stream pipeline has been redirected away from Southern Europe to Turkey. Iran is also moving into an alliance with Russia, not only for oil and gas, but for atomic energy and for weaponry and becoming a participating member in the Shanghai Cooperation Organization. And now, as you pointed out, India is negotiating trade.

So instead of really hurting Russia, the sanctions have convinced Russia that they have to be independent of manufacturing, independent of Europe, independent of importing food needs from France and other European countries. The result has been to cause a disaster for Lithuanian farm exporters exporters /ˈfrɛntʃɑr/ exporters and others who were looking to European market, to the Russian market. And, in fact, the whole last 20 years, ever since the end of the Soviet Union, the whole idea was to bring Western Europe and Russia together into a market. America has broken that up.



PERIES: But, Michael, the U.S. strategy, as you said, the Cold War strategy, isn’t it partly working here as the sliding oil prices will certainly constrain the capacity of Russia to extend the way they want to? Also, isn’t it so that the ruble has taken a dive? So what does all that mean in terms of–.

HUDSON: The ruble has indeed taken a dive. But this has not affected the Russian economy very much, because the Russian economy operates on rubles, not on dollars. Putin over the last two years has moved to make the ruble independent of the dollar, just as China and other countries are making their currencies independent of the dollar. So the effect now is that, yes, Russia has fewer dollars, but it doesn’t need dollars because it’s re-denominated its foreign trade in rubles, it’s re-denominated them in Chinese yen. So the Russia-China trade, the Russia-Turkey trade, the trade of all of these non-dollar countries is taking place without dollars. So there’s really no need, particularly, for dollars at all.

The effect of the ruble falling is to increase the price of imports to Russia. And so Russia’s response has been, okay, if we have to pay more for our food, then we’re going to subsidize our own growing of food. And Russian farm output has been rising very rapidly to replace the imports that it was making from Lithuania, from France, and from other European countries. Putin was also saying, now we’re going to begin to subsidize our manufacturing. We cannot depend upon the Germans, the French, or the Europeans for their manufacturing. We’re going to depend on China, on Turkey, and most of all on our own manufacturing. And the sanctions against Russia have actually proved to be a godsend, because it enables Russia to do essentially what it would have liked to do but couldn’t do under international law: to subsidize and protect its own industry. And in these speeches that President Putin gave last week, he said, we now realize that we have to turn away from Europe, that Europe is basically part of Rhode Island in the United States, and we’re just going to subsidize our own industry to the point that we’re self-sufficient in essentials, so that it doesn’t matter what the ruble does, it doesn’t matter what the dollar does. We’re putting together our own banks clearing system as an alternative to the U.S. system. We’re putting together our own currency swaps with other countries. So, essentially Russia and the rest of Asia have been insulating their economies from the United States, just the opposite of the U.S. strategy of trying to make them more dependent on the United States.
PERIES: Michael, with the falling ruble and the controls that the sanctions are having, and also in terms of the sliding oil prices, doesn’t this grossly reduce the capital power that Russia has, particularly in terms of these new trade deals they’re negotiating? Isn’t there large sums of capital necessary to build pipelines and implement the trade deals that they are negotiating at the moment?
HUDSON: The capital to build the pipelines takes two forms. One, it takes the forms of domestic currency. And Russia’s central bank can create enough rubles to defray all of the domestic costs. Russia doesn’t need dollars for domestic ruble costs. And the rest of the costs will be supplied by China. And instead of the Europeans or the Americans making this deal and the other raw materials for the pipelines, China’s making all of this. And China’s providing this on credit. And in exchange for the credit that China and other countries are providing, they’re taking their payments in future oil and gas. So, essentially, Russia’s–doesn’t need the dollar credit and it doesn’t need financial credit. It’s making a currency swap that it’s paying off in future oil and gas deliveries. So what America believed to be a threat turns out to be a paper tiger. It’s a paper financial tiger, something that has almost zero effect on Russia.

PERIES: Right. Michael, I thank you for joining us, as always.

HUDSON: It’s good to be here.

PERIES: And thank you for joining us on The Real News Network.

End

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


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