ARMAGEDDON WARNED NEAR AS RUSSIA ORDERS 'ALL-OUT-WAR' ON PETRODOLLAR
The Unhived Mind
April 29, 2014
http://www.whatdoesitmean.com/index1766.htm
Armageddon Warned Near As Russia Orders “All-Out War” On Petrodollar
By: Sorcha Faal, and as reported to her Western Subscribers
An ominous new report prepared by the Ministry of Finance (MoF) on President Putin’s order yesterday to accelerate the opening of the St. Petersburg Exchange (SPE), where prices for Russian oil and natural gas will be set in rubles instead of US dollars, is warning that this “catastrophic blow” to the petrodollar amounts to nothing less than “all-out war” against the West and that an “Armageddon response” from the Obama regime should be expected to swiftly follow.
According to this report, Putin’s order regarding the SPE was in direct response to the Obama regimes placing sanctions yesterday upon Igor Sechin the CEO of the Russian energy giant Rosneft and a nominated board member of the SPE, and of which Deputy Minister for foreign relations, Sergey Ryabkov, had warned: “A response of Moscow will follow, and it will be painfully felt in Washington DC.”
Sechin, this report notes, was directly threatened by the Obama regime earlier this month due to his October 2013 remarks at the World Energy Congress in Korea where he called for a “global mechanism to trade natural gas” and went on suggesting that “it was advisable to create an international exchange for the participating countries, where transactions could be registered with the use of regional currencies”.
Sechin, as one of the most influential leaders of the global energy trading community now has the perfect instrument to make this plan a reality with the SPE where reference prices for Russian oil and natural gas will be set in rubles instead of US dollars and could literally destroy the petrodollar.
The use of this “Financial Nuclear Weapon” (the sale of oil in a currency other than the US dollar) which was previously deployed by Saddam Hussein, this report continues, resulted in the total destruction of Iraq, but it failed to deter other countries angry with the highhandedness of the US.
Libya made another attempt and it resulted in the destruction of the country and the brutal murder of its leader Muammar Gaddafi.
Next was Iran. The US and the global financial war party found it much more difficult to isolate and annihilate Iran, even when it was threatened with outright nuclear attack by US and Israel. And in spite of unprecedented sanctions against Iran (which constitute economic warfare and are war crimes in itself), Iran stood defiant.
The leading members of BRICS (Brazil, Russia, India, China and South Africa) Russia and China restrained themselves so as to preserve global stability.
However, the war party faction of the Obama regime (the leftovers of the Bush regime) took such restraint as weakness and went on a spree of regime change throughout the world to undermine the growing strength of BRICS.
The “straw that broke the camels’ back” was the unbridled and reckless coup against the elected President of Ukraine by US and NATO and orchestrated by the US State Department and led by the war-monger Victoria Nuland, who openly admitted that the US had disbursed through such organizations as the National Endowment for Democracy (NED) over $5 Billion to facilitate the coup.
Critical to understand about the current Ukrainian Crisis, this report says, is that it has “absolutely nothing” at all to do with either Ukraine or its people, but should be understood for what it really is…a “sledgehammer” the Obama regime is attempting to use against Russia to prevent the opening and expansion of the SPE.
By perpetually expanding the US money supply, it’s important to note, America’s standard of living for its elite classes increases as well. The only problem with this situation is that the only way that it can be sustained is if the demand for the dollar and for US debt securities remains consistently strong.
Grasping this last point is extremely important. For if the artificial global US dollar demand, made possible by the petrodollar system, were ever to crumble, foreign nations who had formerly found it beneficial to hold US dollars would suddenly find that they no longer needed the massive amounts that they were holding.
This massive amount of dollars, which would no longer be useful to foreign nations, would come rushing back to their place of origin… America.
Obviously, an influx of dollars into the American economy would lead to massive inflationary pressures within their economic system and collapse it, along with that of the EU too.
It is difficult to overstate the importance of this concept as the entire American monetary system literally hinges on this “dollars for oil” system. Without it, Washington would lose its permission slip to print excessive numbers of dollars.
With thousands of NATO-backed Romanian troops now moving to the Ukraine border, along with British and French fighter jets now being deployed to Lithuania and Poland to join their recently arrived US military allies, this report grimly continues, it cannot be ruled out that the Obama regime will attempt to start a war with Russia in order to protect their petrodollar scheme.
In spite of the fact that all Russian military forces have returned to their permanent bases and Minister of Defense Sergei Shoigu assured his US counterpart Secretary of Defense Chuck Hagel yesterday during an hour long phone conversation that Russia had no intention of invading Ukraine, this report notes, Moscow has become increasingly “alarmed” by the combined US-NATO military buildup on its borders that Minister Shoigu called “unprecedented”.
As for the Ukrainian people themselves being used as pawns by the Obama regime against Russia in this “petrodollar war”, this report concludes, their lives are quickly turning from despair to outright misery as they are forced to swallow the “bitter pill” being forced upon them by the International Monetary Fund (IMF) which is forcing their fuel and energy costs to skyrocket and taxes being raised on everything from alcohol to tobacco, not to mention the tens-of-thousands of public jobs being made redundant (layoffs and firings) and the nearly 5% cut in payments to pensioners.
Even worse for these “Obama Pawns”, wages now in Ukraine are, as a rule, not enough to feed a family, and the devaluation of their currency will make it totally impossible for these people to absorb these costs.
On the other hand, Western currency speculators will be able to profit from fluctuations in Ukraine’s currency and multinational corporations stand to benefit from privatization of those state assets that haven’t already been sold off.
And though not mentioned in this MoF report, it is critically important to note that back in 2008, when the US brought to world to the very brink total economic collapse, then Deputy Prime Minister Dmitry Medvedev warned that Russia should seize opportunities created by the weak US dollar. “Today, the global economy is going through uneasy times,” he said. “The role of the key reserve currencies is under review. And we must take advantage of it.”
Six years later that is what Putin is doing…nobody can say that they weren’t warned.
theunhivedmind says:
Russia quietly prepares to switch some oil trading from dollars to rubles
By Andrew E. Kramer
Published: Monday, February 25, 2008
http://www.nytimes.com/2008/02/25/business/worldbusiness/25iht-place.4.10379176.html?_r=0
MOSCOW — Russia, the world’s second-largest oil-exporting nation after Saudi Arabia, has been quietly preparing to switch trading in Russian Ural Blend oil, the country’s primary export, from the dollar to the ruble. But the change, if it comes, is still some time off, industry analysts and officials said.
The Russian effort began modestly this month, with trading in refined products for the domestic market.
Still, the effort to squeeze the dollar out of Russian oil sales marks another project with swagger and ambition by the Kremlin, which has already wielded its energy wealth to assert influence in Eastern Europe and in former Soviet states.
“They are serious,” said Yaroslav Lissovolik, the chief economist at Deutsche Bank in Moscow. “This is something they are giving priority to.”
Oil trading is now nearly always denominated in dollars, the de facto common currency of the petroleum business. When Kuwait sells oil under a futures contract to India, for example, the price is set in dollars.
Similarly, Russia’s large trade with Western Europe and the former Soviet states in crude oil and natural gas is conducted in dollar-denominated contracts. Gazprom, the natural gas monopoly, set the price of natural gas in Ukraine at $176 per 1,000 cubic meters in 2007, for example. There are no proposals yet to switch natural gas pricing away from dollars.
As a result, companies and countries that buy petroleum products are encouraged to hold dollar reserves to pay for their supplies, coincidentally helping the American economy support its trade deficit.
Russia would like to change this practice, at least among its customers, as a means to elevate the importance of the ruble, a new source of national pride after gaining 30 percent against the dollar during the current oil boom.
A move away from the dollar, meanwhile, is more glum news for the United States.
During a speech on economic policy this month, Dmitry Medvedev, a deputy prime minister and the likely successor to President Vladimir Putin in elections on March 2, said Russia should seize opportunities created by the weak dollar.
“Today, the global economy is going through uneasy times,” he said. “The role of the key reserve currencies is under review. And we must take advantage of it.” He asserted that “the ruble will de facto become one of the regional reserve currencies.”
Other oil-exporting countries, too, are chafing at dealing in the weakening dollar.
Iran, one of the largest oil-exporting nations, and no friend of the United States, has since 2005 striven to open a commodity exchange to trade oil in currencies other than the dollar. Iran’s ambassador to Russia, discussing the two countries’ interest in the idea, said Iran might choose rubles to free his country from “dollar slavery.”
To be sure, some economists have dismissed the project as improbable, given the exotic nature of a security – oil futures contracts in rubles – that would add a new currency risk to the global oil market.
Ruble-denominated futures contracts for Ural Blend, the main Russian grade, would be an attractive financial instrument only if the dollar continued to depreciate, said Vitaly Yermakov, research director for Russian and Caspian Energy at Cambridge Energy Research Associates.
“There is a big distance between the desire to trade commodities for rubles and the ability to do so,” he said.
All this has not stopped the Kremlin from trying.
In a sign of the government’s seriousness, a new glass-and-marble home for a ruble-denominated commodity exchange is rising this spring in a prestigious district in St. Petersburg.
The exchange will occupy three floors of the 16-story tower on Vasilevsky Island, one of the islands that make up the historic city center.
Viktor Nikolayev, the director of the St. Petersburg exchange, said during an interview that the intention was to move slowly and gain market acceptance. The government will not strong-arm sellers or buyers onto the exchange, even in an industry dominated by the state, he said.
Web-based trading for refined products like gasoline or diesel is being rolled out in three phases for domestic customers, beginning with government buyers like the Russian navy or municipal bus companies. Government agencies have been ordered to buy 15 percent of petroleum products on the exchange by the end of the year.
Private brokers will be allowed to trade in March; futures contracts will be introduced in April.
Nikolayev said no timeline had been established for trading for export on the exchange, which also handles grain, sugar, mineral fertilizer, cement and esoteric financial products like Russian government quotas for beef and pork imports – all in rubles.
“We are in Russia, and the currency is rubles, not euros, not dollars,” he said. “We don’t want to depend on the rise or fall of the dollar.”
Alan Greenspan, the former Federal Reserve chairman, said Monday that high inflation in Gulf states would fall “significantly” if the oil producers drop their dollar pegs, Reuters reported from Jeddah, Saudi Arabia.
The pegs restrict the ability of governments in the Gulf to fight inflation by forcing them to shadow U.S. monetary policy at a time when the Fed is cutting rates to ward off recession, while Gulf economies are surging on a near five-fold jump in oil prices since 2002. The central bank chiefs of Saudi Arabia and the United Arab Emirates spoke Monday in favor of retaining dollar pegs, while Qatar’s prime minister advocated regional currency reform to avert possible unilateral revaluations designed to curb inflation.
theunhivedmind says:
Will the IMF Bailout Turn Ukraine Into Another Greece?
Ordinary people will be the undisputed losers in the International Monetary Fund’s loan deal with Ukraine.
Alec Luhn April 7, 2014
http://www.thenation.com/article/179212/will-imf-bailout-turn-ukraine-another-greece
When the International Monetary Fund announced a tentative loan agreement with Ukraine last month, the move was widely acclaimed as vital to saving the country’s struggling economy. Headlines trumpeted the decision to “help” Ukraine with a $14–18 billion “financial lifeline.” In Italy later that day, President Barack Obama called the deal a “major step forward” that will “meet the needs of Ukrainian people over the long term.”
But the news headlines and political statements only tell half the story: The IMF loan comes with demands for “economic reforms,” i.e., austerity measures, that will be borne by the working-class Ukrainians, one-fourth of whom already live below the poverty line. It is this imposition of conditions, which have grown more numerous in recent loan deals, that led the European Network of Debt and Development to call in a report last week for reform of the IMF.
The IMF conditions for Ukraine won’t include any debt relief, and unlike the European Union-IMF bailout for Cyprus, they won’t impose any haircuts on the country’s creditors. Instead, the IMF recipe hinges on cuts to subsidies and social services and a floating exchange rate that will sink purchasing power even further. Kiev has already started to implement all of these measures. According to economists, the result will be growing poverty, reduced social benefits and an extended recession. In fact, the economic prognosis sounds a lot like Greece, which, four years after the start of an EU-IMF loan program, is suffering from 27 percent unemployment and rising risk-of-poverty rates.
Ordinary people will be the undisputed losers in Ukraine, since they’ll pay for the so-called reform program rather than the oligarchs who continue to freely move billions of dollars to offshore tax havens. The biggest winners will be currency speculators; Western banks whose loans will be repaid via austerity measures; and European corporations who will gain access to the country’s markets and cheap Ukrainian labor under an EU association agreement set to be signed in May.
Sergei Kiselyov, an economist from the school of political analysis at the Kiev-Mogilyanskaya Academy, said although austerity measures may eventually help end the country’s ongoing recession, first they will drag down GDP for at least the next two years. “But the population is paying for this struggle against the crisis,” Kiselyov said.
“You don’t need to predict an economic collapse; it’s already going on,” said Vasily Koltashov, an economist at the Moscow-based Institute of Globalization and Social Movements, referring to rising deficits and stagnant growth over the past two years. “The measures of the IMF and Ukrainian government will not do anything to solve the crisis, because they do nothing to raise standard of living and protect Ukrainian industry.”
The IMF economic reform program will unlock up to $27 billion in loans when it is approved this month, assuming Ukraine adopts a “strong and comprehensive package of prior actions,” according to an IMF statement.
In the first “prior action” for the IMF loan, Ukraine’s state-controlled natural gas provider Naftogaz raised its subsidized gas prices for consumers by 50 percent starting May 1. (Gas and heating prices will increase by 120 percent over the next four years, Prime Minister Arseny Yatsenyuk said last week.) According to Kiselyov, even more painful will be the accompanying 40 percent gas price hike for local heating companies. Starting on July 1, this will raise the average cost of heating a standard fifty-square-meter apartment from about 200 hryvnia to 280 hryvnia (from $18 to $25) per month. It’s a significant hit, considering that the average monthly wage in Ukraine is only about 3,150 hryvnia ($275), more than half of which typically goes toward food, Kiselyov said.
The second step in the austerity program came into effect on Tuesday— a law raising property and excise taxes and cutting social expenditures. The cuts include a 10 percent reduction in pensions for former government employees, decreased benefits for families with newborns and reduced numbers of law enforcement and state prosecutor employees.
Finally, a budget law signed on Tuesday increases government borrowing, while freezing the minimum wage and cutting the pension fund by 4 percent. In addition, Yatsenyuk said that despite rising prices, the poverty line won’t be increased this year, meaning the numerous social benefits based on that index will also be frozen.
All these reductions in subsidies, of course, will decrease consumer spending and strike another blow to GDP.
But the most painful of the IMF demands is a free-floating exchange rate that’s already being implemented, which will contribute to soaring inflation. Estimates continue to be revised: the National Bank of Ukraine is now forecasting inflation of 12 to 16 percent this year, and the Royal Bank of Scotland now predicts the hryvnia will fall to 12.5 on the dollar by the end of the year, after starting at 8.23. Ukraine’s imports have long exceeded its exports, and the hryvnia devaluation will lead to price increases of up to 30 percent on imported goods in the near future, business newspaper Kommersant reported.
The combination of falling wages, growing inflation and gas, water and electricity price hikes will further reduce the purchasing power of Ukrainians, lower the standard of living and push even more people into poverty, according to economists. “I don’t think half the population will live below the poverty line, but the majority of the population will be worse off economically—that’s understood,” Kiselyov said.
“Ukrainians differ from the Portuguese and the Greeks because they don’t have many savings left,” Koltashov said. “Wages now in Ukraine are, as a rule, not enough to feed a family, and the devaluation of the hryvnia will make it totally impossible.”
Inexplicably, the IMF-backed reforms have yet to touch two major areas that could significantly reduce the government’s deficit: tax loopholes (and huge capital flight to tax havens) and the corrupt government procurement sector, which loses up to $4.6 billion each year, Kiselyov said. But this is not so much a bailout for Ukraine as it is for Western banks.
The IMF’s most immediate concern, as former World Bank chief economist and Nobel Prize winner Joseph Stiglitz has said, is making sure Western financial institutions are paid back. European banks reportedly have more than $23 billion in outstanding loans in Ukraine, and US banks have more than $1.5 billion in outstanding loans there.
Meanwhile, currency speculators will be able to profit from fluctuations in the hryvnia. And multinational corporations stand to benefit from privatization of those state assets that haven’t already been sold off. The IMF statement’s goals of “attracting new investment” to the energy sector and “restructuring” of Naftogaz hint at privatization to come, and government officials have dutifully responded with proposals to sell off coal mines and parts of the gas company.
Progressive thinkers have interpreted the IMF program as part of a larger strategy to alleviate economic crises in the West. According to New School University professor Richard Wolff, austerity in countries like Greece and Ukraine will “concentrate [economic] decline…in order to slow or disguise it elsewhere.” This decline is caused by companies moving production from North America and Europe to Latin America and Asia.
At a February conference in Brussels organized by the Post Globalization Initiative, analysts, journalists and activists from Ukraine, Russia and other European countries discussed how the neoliberal polices promoted by the EU and IMF will remove trade barriers for European companies in Ukraine and encourage the flow of cheap Ukrainian labor to Western Europe, cutting wages and increasing corporate profits.
Please support our journalism. Get a digital subscription for just $9.50!
The Brussels conference also discussed the lack of a strong, unified progressive force in Ukraine that could push back against both neoliberal policies and the rising influence of ultranationalists. Since then, organizing a progressive front has been complicated further by disagreements within the left over the legitimacy of the new Kiev government, the importance of Ukraine’s territorial integrity and the role of Russia in the crisis. The Marxist group Borotba, which continues to agitate against workers’ rights violations, has drawn accusations of supporting Russian imperialism with their protests demanding a referendum for regions to decide their own status.
Within Ukraine, the strongest counter to the EU-IMF agenda seems to be the largely pro-Russian separatist movement. In Odessa in the west and Lugansk in the east, demonstrations against European integration and in favor of joining Russia have drawn thousands of people in recent weeks. But protest signs like one reportedly seen at the Lugansk march reading “Europe is Sodom and Gomorrah” raise doubts that this movement is motivated primarily by socio-economic concerns.
Still, rising poverty caused by IMF reforms could drive more people to openly resist the Kiev government, Koltashov said. “This may take on a pro-Russian tone, not because Russia is good and is calling them to do it, but because people see Crimea joining Russia as a way to jump off a burning train, to get out of the Ukrainian crisis,” he said.
theunhivedmind says:
US Threatens Russia Over Petrodollar-Busting Deal
Tyler Durden’s pictureSubmitted by Tyler Durden on 04/05/2014 14:27 -0400
http://www.zerohedge.com/news/2014-04-04/us-threatens-russia-sanctions-over-petrodollar-busting-deal
On the heels of Russia’s potential “holy grail” gas deal with China, the news of a Russia-Iran oil “barter” deal, it appears the US is starting to get very concerned about its almighty Petrodollar
*U.S. HAS WARNED RUSSIA, IRAN AGAINST POSSIBLE OIL BARTER DEAL
*U.S. SAYS ANY SUCH DEAL WOULD TRIGGER SANCTIONS
*U.S. HAS CONVEYED CONCERNS TO IRANIAN GOVT THROUGH ALL CHANNELS
We suspect these sanctions would have more teeth than some travel bans, but, as we noted previously, it is just as likely to be another epic geopolitical debacle resulting from what was originally intended to be a demonstration of strength and instead is rapidly turning out into a terminal confirmation of weakness.
As we explained earlier in the week,
Russia seems perfectly happy to telegraph that it is just as willing to use barter (and “heaven forbid” gold) and shortly other “regional” currencies, as it is to use the US Dollar, hardly the intended outcome of the western blocakde, which appears to have just backfired and further impacted the untouchable status of the Petrodollar.
…
“If Washington can’t stop this deal, it could serve as a signal to other countries that the United States won’t risk major diplomatic disputes at the expense of the sanctions regime,”
And here is Voice of Russia, “Russia prepares to attack the Petrodollar”:
The US dollar’s position as the base currency for global energy trading gives the US a number of unfair advantages. It seems that Moscow is ready to take those advantages away.
The existence of “petrodollars” is one of the pillars of America’s economic might because it creates a significant external demand for American currency, allowing the US to accumulate enormous debts without defaulting. If a Japanese buyer want to buy a barrel of Saudi oil, he has to pay in dollars even if no American oil company ever touches the said barrel. Dollar has held a dominant position in global trading for such a long time that even Gazprom’s natural gas contracts for Europe are priced and paid for in US dollars. Until recently, a significant part of EU-China trade had been priced in dollars.
Lately, China has led the BRICS efforts to dislodge the dollar from its position as the main global currency, but the “sanctions war” between Washington and Moscow gave an impetus to the long-awaited scheme to launch the petroruble and switch all Russian energy exports away from the US currency .
The main supporters of this plan are Sergey Glaziev, the economic aide of the Russian President and Igor Sechin, the CEO of Rosneft, the biggest Russian oil company and a close ally of Vladimir Putin. Both have been very vocal in their quest to replace the dollar with the Russian ruble. Now, several top Russian officials are pushing the plan forward.
First, it was the Minister of Economy, Alexei Ulyukaev who told Russia 24 news channel that the Russian energy companies must should ditch the dollar. “ They must be braver in signing contracts in rubles and the currencies of partner-countries, ” he said.
Then, on March 2, Andrei Kostin, the CEO of state-owned VTB bank, told the press that Gazprom, Rosneft and Rosoboronexport, state company specialized in weapon exports, can start trading in rubles. “ I’ve spoken to Gazprom, to Rosneft and Rosoboronexport management and they don’t mind switching their exports to rubles. They only need a mechanism to do that ”, Kostin told the attendees of the annual Russian Bank Association meeting.
Judging by the statement made at the same meeting by Valentina Matviyenko, the speaker of Russia’s upper house of parliament, it is safe to assume that no resources will be spared to create such a mechanism. “ Some ‘hot headed’ decision-makers have already forgotten that the global economic crisis of 2008 – which is still taking its toll on the world – started with a collapse of certain credit institutions in the US, Great Britain and other countries. This is why we believe that any hostile financial actions are a double-edged sword and even the slightest error will send the boomerang back to the aborigines,” she said.
It seems that Moscow has decided who will be in charge of the “boomerang”. Igor Sechin, the CEO of Rosneft, has been nominated to chair the board of directors of Saint-Petersburg Commodity Exchange, a specialized commodity exchange. In October 2013, speaking at the World Energy Congress in Korea, Sechin called for a “global mechanism to trade natural gas” and went on suggesting that ” it was advisable to create an international exchange for the participating countries, where transactions could be registered with the use of regional currencies “. Now, one of the most influential leaders of the global energy trading community has the perfect instrument to make this plan a reality. A Russian commodity exchange where reference prices for Russian oil and natural gas will be set in rubles instead of dollars will be a strong blow to the petrodollar.
Rosneft has recently signed a series of big contracts for oil exports to China and is close to signing a “jumbo deal” with Indian companies. In both deals, there are no US dollars involved. Reuters reports, that Russia is close to entering a goods-for-oil swap transaction with Iran that will give Rosneft around 500,000 barrels of Iranian oil per day to sell in the global market. The White House and the russophobes in the Senate are livid and are trying to block the transaction because it opens up some very serious and nasty scenarios for the petrodollar. If Sechin decides to sell this Iranian oil for rubles, through a Russian exchange, such move will boost the chances of the “petroruble” and will hurt the petrodollar.
It can be said that the US sanctions have opened a Pandora’s box of troubles for the American currency. The Russian retaliation will surely be unpleasant for Washington, but what happens if other oil producers and consumers decide to follow the example set by Russia? During the last month, China opened two centers to process yuan-denominated trade flows, one in London and one in Frankfurt. Are the Chinese preparing a similar move against the greenback? We’ll soon find out.
Finally, those curious what may happen next, only not to Iran but to Russia, are encouraged to read “From Petrodollar To Petrogold: The US Is Now Trying To Cut Off Iran’s Access To Gold.”