The Russia-led Eurasian Economic Union and China just agreed to design the mechanism for an independent financial and monetary system that would bypass dollar transactions.
By Pepe Escobar with the author’s permission and cross-posted with The Cradle
It was a long time coming, but finally some key lineaments of the multipolar world’s new foundations are being revealed.
On Friday, after a videoconference meeting, the Eurasian Economic Union (EAEU) and China agreed to design the mechanism for an independent international monetary and financial system. The EAEU consists of Russia, Kazakhstan, Kyrgyzstan, Belarus and Armenia, is establishing free trade deals with other Eurasian nations, and is progressively interconnecting with the Chinese Belt and Road Initiative (BRI).
For all practical purposes, the idea comes from Sergei Glazyev, Russia’s foremost independent economist, a former adviser to President Vladimir Putin and the Minister for Integration and Macroeconomics of the Eurasia Economic Commission, the regulatory body of the EAEU.
Glazyev’s central role in devising the new Russian and Eurasian economic/financial strategy has been examined here. He saw the western financial squeeze on Moscow coming light-years before others.
Quite diplomatically, Glazyev attributed the fruition of the idea to “the common challenges and risks associated with the global economic slowdown and restrictive measures against the EAEU states and China.”
Translation: as China is as much a Eurasian power as Russia, they need to coordinate their strategies to bypass the US unipolar system.
The Eurasian system will be based on “a new international currency,” most probably with the yuan as reference, calculated as an index of the national currencies of the participating countries, as well as commodity prices. The first draft will be already discussed by the end of the month.
The Eurasian system is bound to become a serious alternative to the US dollar, as the EAEU may attract not only nations that have joined BRI (Kazakhstan, for instance, is a member of both) but also the leading players in the Shanghai Cooperation Organization (SCO) as well as ASEAN. West Asian actors – Iran, Iraq, Syria, Lebanon – will be inevitably interested.
In the medium to long term, the spread of the new system will translate into the weakening of the Bretton Woods system, which even serious US market players/strategists admit is rotten from the inside. The US dollar and imperial hegemony are facing stormy seas.
Show me that frozen gold
Meanwhile, Russia has a serious problem to tackle. This past weekend, Finance Minister Anton Siluanov confirmed that half of Russia’s gold and foreign reserves have been frozen by unilateral sanctions. It boggles the mind that Russian financial experts have placed a great deal of the nation’s wealth where it can be easily accessed – and even confiscated – by the “Empire of Lies” (copyright Putin).
At first it was not exactly clear what Siluanov had meant. How could the Central Bank’s Elvira Nabiulina and her team let half of foreign reserves and even gold be stored in Western banks and/or vaults? Or is this some sneaky diversionist tactic by Siluanov?
No one is better equipped to answer these questions than the inestimable Michael Hudson, author of the recent revised edition of Super Imperialism: The Economic Strategy of the American Empire.
Hudson was quite frank: “When I first heard the word ‘frozen,’ I thought that this meant that Russia was not going to expend its precious gold reserves on supporting the ruble, trying to fight against a Soros-style raid from the west. But now the word ‘frozen’ seems to have meant that Russia had sent it abroad, outside of its control.”
Essentially, it’s all still up in the air: “My first reading assumed that Russia must be doing something smart. If it was smart to move gold abroad, perhaps it was doing what other central banks do: ‘lend” it to speculators, for an interest payment or fee. Until Russia tells the world where its gold was put, and why, we can’t fathom it. Was it in the Bank of England – even after England confiscated Venezuela’s gold? Was it in the New York Fed – even after the Fed confiscated Afghanistan’s reserves?”
So far, there has been no extra clarification either from Siluanov or Nabiulina. Scenarios swirl about a string of deportations to northern Siberia for national treason. Hudson adds important elements to the puzzle:
“If [the reserves] are frozen, why is Russia paying interest on its foreign debt falling due? It can direct the “freezer’ to pay, to shift the blame for default. It can talk about Chase Manhattan’s freezing of Iran’s bank account from which Iran sought to pay interest on its dollar-denominated debt. It can insist that any payments by NATO countries be settled in advance by physical gold. Or it can land paratroopers on the Bank of England, and recover gold – sort of like Goldfinger at Fort Knox. What is important is for Russia to explain what happened and how it was attacked, as a warning to other countries.”
As a clincher, Hudson could not but wink at Glazyev: “Maybe Russia should appoint a non-pro-westerner at the Central Bank.”
The petrodollar game-changer
It’s tempting to read into Russian Foreign Minister Sergey Lavrov’s words at the diplomatic summit in Antalya last Thursday a veiled admission that Moscow may not have been totally prepared for the heavy financial artillery deployed by the Americans:
“We will solve the problem – and the solution will be to no longer depend on our western partners, be it governments or companies that are acting as tools of western political aggression against Russia instead of pursuing the interests of their businesses. We will make sure that we never again find ourselves in a similar situation and that neither some Uncle Sam nor anybody else can make decisions aimed at destroying our economy. We will find a way to eliminate this dependence. We should have done it long ago.”
So, “long ago” starts now. And one of its planks will be the Eurasian financial system. Meanwhile, “the market” (as in, the American speculative casino) has “judged” (according to its self-made oracles) that Russian gold reserves – the ones that stayed in Russia – cannot support the ruble.
That’s not the issue – on several levels. The self-made oracles, brainwashed for decades, believe that the Hegemon dictates what “the market” does. That’s mere propaganda. The crucial fact is that in the new, emerging paradigm, NATO nations amount to at best 15 percent of the world’s population. Russia won’t be forced to practice autarky because it does not need to: most of the world – as we’ve seen represented in the hefty non-sanctioning nation list – is ready to do business with Moscow.
Iran has shown how to do it. Persian Gulf traders confirmed to The Cradle that Iran is selling no less than 3 million barrels of oil a day even now, with no signed JCPOA (Joint Comprehensive Plan of Action agreement, currently under negotiation in Vienna). Oil is relabeled, smuggled, and transferred from tankers in the dead of night.
Another example: the Indian Oil Corporation (IOC), a huge refiner, just bought 3 million barrels of Russian Urals from trader Vitol for delivery in May. There are no sanctions on Russian oil – at least not yet.
Washington’s reductionist, Mackinderesque plan is to manipulate Ukraine as a disposable pawn to go scorched-earth on Russia, and then hit China. Essentially, divide-and-rule to smash not only one but two peer competitors in Eurasia who are advancing in lockstep as comprehensive strategic partners.
All the blather about “crashing Russian markets,” ending foreign investment, destroying the ruble, a “full trade embargo,” expelling Russia from “the community of nations,” and so forth –that’s for the zombified galleries. Iran has been dealing with the same thing for four decades, and survived.
Historical poetic justice, as Lavrov intimated, now happens to rule that Russia and Iran are about to sign a very important agreement, which may likely be an equivalent of the Iran-China strategic partnership. The three main nodes of Eurasia integration are perfecting their interaction on the go, and sooner rather than later, may be utilizing a new, independent monetary and financial system.
But there’s more poetic justice on the way, revolving around the ultimate game-changer. And it came much sooner than we all thought.
Saudi Arabia is considering accepting Chinese yuan – and not US dollars – for selling oil to China. Translation: Beijing told Riyadh this is the new groove. The end of the petrodollar is at hand – and that is the certified nail in the coffin of the indispensable Hegemon.
Meanwhile, there’s a mystery to be solved: where is that frozen Russian gold?
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Does this mean the US is eventually going to have to live within its meager means? Ruh roh.
Let’s go Brandon.
Sort of boggles the mind that Russia would store any amount of their gold out of country. That being said however, the gold market for the last 50 years has been one of behind the scenes manipulations by the elite that isn’t made for public knowledge for us proles. Our reserves were last inventoried in 1959 under Eisenhower according to the narrative. Was that even true?
It is not really at much risk. If there is any problem with its return, Russia can always make a deposit in the form of of a nuclear tipped hypersonic missile. It is hard to rob someone who has a gun to your head and has little or nothing to lose….
I’ve seen this comment repeated several times today. The quote is “half of Russia’s gold and foreign reserves”. I believe this might be a little clever semantics – half the total of gold and foreign reserves could easily mean zero Russian gold outside of Russia.
Something tells me Putin saw it coming years ago, I mean, the fuckin spider VJ, hired Nazis to Coup it up during the Closing Ceremony of the Sochi Olympics 8 years ago.
Payback is a bitch.
It looks more and more like a debilitating asset grab. Putin must have really scored, something unspeakably big. Because it is unspoken but it is clearly visible. The Squealing of the Pigs is 4th Generation, a new level of pitch, perhaps death thro. He cut em deep.
It has to be bigger than cash, cash is their impotent response. Cash is their 14 billion Ukie love fund just signed to bandaid the cut, cash is disposable, temporary.
Whatever he got, he doesn’t need to stay much longer, Ukraine will fade faster than Omicron.
He will have plenty of time to count and develop his winnings when China takes center stage and he is forgotten about.
Putin isn’t stupid.Either Russian gold is not stored abroad,or Russia can seize enouth Western assets to cover the theft.
USA, welcome to the used to was club. The members are France and Great Britain and Germany. Their behavior is somewhat like hos grovelling to their pimp. ‘m guessing the new pimp will be China. Military power will sustain the USA for a while until we can not afford the toys anymore.
China has been plotting for DECADES to depose the Dollar as Benchmark currency and replace it.
When that happens the Dollar will collapse along with America. The CCP will have defeated the
USA without firing a shot. The criminals in power here can’t allow that as it will cost THEM their
wealth and power. They don’t give a red rats ass about us peons. But they are NOT going to give up
their wealth and power meekly. In fact the criminals running things in Mordor On The Potomac
will do anything to maintain their grasp on power. Even start WWIII.
Totally agree…
This issue is most significant, non-covid issue of past several decades. They will soon call our petrodollar bluff and that essentially means no more printing press without consequences. Another option not mentioned for Russia is simply to nationalize Western business assets as many lesser countries have done. Seems fair to me if their gold is confiscated. Getting hard to believe this won’t eventually devolve to a shooting war.
This means war.
I’m shocked that no South American countries were talked about in in this article.
“(according to its self-made oracles) that Russian gold reserves – the ones that stayed in Russia – cannot support the ruble.”
To which I say, are America’s gold reserves enough to support the dollar? The answer is obvious.
It’s about time everyone understand whether you’re an individual, corporation or country, your money is not your own. The powers that be let you use it until they don’t. This has always been the case but it was never more openly stated as it is today. Mark my words everyone with any amount of cash and assets is now re-assessing their wealth protection. This is not going to end well.
I read about one wag discussing The FED issuing their own version of Bitcoin——-backed by debt and drones.