By Wolf Richter: Another warning shot was fired before an all-out assault on the
dollar system begins. This time, an official shot: Alexey Ulyukaev,
Russia’s Minister of Economic Development and former Deputy Chairman of
the Central Bank, fired it. It was a major escalation, Valentin
Mândrăşescu, editor of The Voice of Russia’s Reality Check, told me from Moscow.Last time, it was Sergei Glazyev, an advisor to Vladimir Putin who’d fired the shot. But he wasn’t a government official. “Anonymous sources” at the Kremlin claimed he wasn’t speaking for the government. As Mândrăşescu reported in his excellent article, From Now On, No Compromises Are Possible For Russia:
From the economic point of view, everyone should get ready for tough actions from Moscow. Sergei Glazyev, the most hardline of Putin’s advisors, sketched the retaliation strategy: Drop the dollar, sell US Treasuries, encourage Russian companies to default on their dollar-denominated debts, and create an alternative currency system (reference currency) with the BRICS and hydrocarbon producers like Venezuela and Iran.Unlike radical-sounding Glazyev, Ulyukaev is part of Dmitry Medvedev’s Cabinet.
And as former Deputy Chairman of the Bank of Russia, he doesn’t take currencies lightly. He told Rossia-24 news channel about possible retaliatory measures if Washington adds economic sanctions to the political sanctions. Moscow wouldn’t worry too much about political sanctions, he said, but if Washington tries to hurt Russia’s economy, Moscow would retaliate by targeting the US dollar.
Some of it is already happening
Russia instantly retaliated, it seems. Suddenly, there was a mysterious mega-plunge of $104.5 billion in US Treasuries held in custody by the Federal Reserve during the reporting week ended March 12. It brought the balance down to $2.86 trillion. These securities are owned by foreign countries. As of the US Treasury’s December statement, the most recent available, the Fed held $138.6 billion in Treasuries that belonged to Russia – down by $22.9 billion from a year earlier. The mega-plunge of $104.5 billion? No data is available yet to confirm these securities belonged to Russia. And if they did, it’s unlikely that Russia dumped them on the market, but it could have transferred them to another banking center, such as Luxemburg, to get them out of reach of the US government, and be able to dump them at an opportune moment.
Getting out from under the dollar
Russia has been palavering with other countries about initiating alternatives to the dollar. Formal plans emerged from the Kremlin last May on how Russia wanted the BRICS to dismantle the dollar system. So now it was Ulyukaev, an official heavy-weight, who said that Russia would work on increasing the volume of international trade denominated in national currencies, thus bypassing the dollar (translation by Mândrăşescu):
“Why should we have dollar contracts with China, India, Turkey?” he said. “Why do we need this? We must have contracts in national currencies. And this applies to energy and other spheres.” The focus would be on Russian oil and gas companies. “They must be braver in signing contracts in rubles and the currencies of partner-countries,” he said. “I think now there is an additional impetus to finally finish this job.”
And the “currency reserve policy” would need some adjustment with maximum focus on “local currencies”; it was the normal way, he said. In Mândrăşescu’s analysis, Ulyukaev was outlining an attack on the petrodollar system and the enormous advantages it confers on the US, with the goal of creating parallel petro-currencies.
Media blackout in the US
The warning, issued officially and publicly by a Cabinet member, to target the dollar, has been vigorously ignored by the mainstream media in the US. It’s a touchy subject here. The dollar reigns supreme. Its status as the sole world reserve currency, which has provided the US with enormous economic advantages, remains unquestionable forevermore. Or so wishes the Fed, which has done such a wonderful job of managing the dollar for the last 100 years that it has lost most of its value, though it’s still a heck of a lot better than the ruble.
“I have a suspicion the Western media don't want to report on this,” Mândrăşescu said. “It could be a bit unpleasant for the S&P 500 and the nanobots trading the US stock market.” Better keep them in the dark.
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Russia Vetoes UN Resolution On Crimea Referendum
China abstained as 13 council members supported the resolution and Russia voted against.
The draft resolution noted that the Ukrainian government in Kiev has not authorized the referendum and said that it cannot be valid.
“This referendum can have no validity, and cannot form the basis for any alteration of the status of Crimea; and calls upon all States, international organizations and specialized agencies not to recognize any alteration of the status of Crimea on the basis of this referendum and to refrain from any action or dealing that might be interpreted as recognizing any such altered status,” the documents reads.
Moscow has a veto right as one of five permanent members of the Security Council.
It was “no secret that Russia would vote against the US draft resolution,” Russia’s envoy at the UN Vitaly Churkin said ahead of the voting. He added that Moscow would respect the choice of Crimeans.
“We cannot accept its basic assumption: to declare illegal the planned March 16 referendum where there residents of the Republic of Crimea should decide on their future,” Churkin said, explaining Moscow’s decision to veto the proposed document.
“The philosophy of the authors of the draft runs counter to one of the basic principles of the international law – the principle of equal rights and self-determination of peoples enshrined in the Article 1 of the UN Charter,” the Russian diplomat said.
Russia does not dispute the principle of territorial integrity, which is “of, course, very important,” the envoy said.
“In is also understandable that enjoyment of the right of self-determination through a separation from an existing state is an extraordinary measure, applied when future coexistence within a single state becomes impossible,” Churkin said.
In the majority of cases it was implemented without the agreement of the state authorities.
Crimea’s coexisting within Ukraine apparently became impossible as a result of “legal vacuum” that followed the “unconstitutional armed coup” carried out in Kiev by radical nationalists in February and direct threats by these individuals to set their order across Ukraine, Russia’s UN representative said.
On Sunday, the Crimeans are going to decide if they want the republic to remain a part of Ukraine or join the Russian Federation.
European nations and the US said earlier they would not recognize the outcome of the referendum and warned Russia of sanctions over its stance on Ukraine.
Speaking after the vote by the 15-member Security Council, Samantha Power, the American ambassador to the UN said it was “a sad and remarkable moment”.
France’s envoy, Gerard Araud, said he was incredulous at what he called Russia's annexation of Crimea, under the pretext of protecting Russians in the region. “This annexation ... goes beyond Ukraine, it concerns us all,” he said, as cited by Reuters. “This veto must be seen as a defeat only for Russia.”
Britain’s UN Ambassador Mark Lyall Grant said that the “the resounding message” from the vote is that “Russia stands isolated in this council and in the international community”.
Beijing, traditionally very sensitive when it comes to territorial integrity particularly because of Tibet, reiterated its support for “the sovereignty and territorial integrity of all states.” China's ambassador to the UN, Liu Jieyi called for a political solution and an “international coordinating mechanism” to resolve the dispute, cited AP.
Resolution ‘ungrounded’, aimed to serve US geopolitical interests
The UN resolution is focused on alleged illegitimacy of the upcoming referendum in Crimea, Russia’s Foreign Ministry said in a statement issued after the vote. Creating an atmosphere of distrust and falsehood appears to be the main goal of the authors, the ministry added.According to Russian diplomats, the US proposal regarding a UN resolution on the situation in Ukraine was ungrounded. It can only be explained by Americans’ “overwhelming desire” to politicize already complicated situation and continue aggravating international hysteria around the former Soviet republic for the benefit of the US geopolitical interests.
“The very initiative had no grounds from the beginning since events in Ukraine do not pose any threat to international peace and security – that the Security Council deals with in accordance with the UN Charter,” the statement posted on the ministry’s website reads.
“They are still using ‘Cold War’ categories – which should seem to be forgotten long ago – in order to impose their view of Ukrainian political structure,” said the Foreign Ministry's department of information and press.
Russia hopes though that the UN member-states, who have so far been biased in their approach to the situation in Ukraine, will take a path of constructive cooperation on the settlement of the crisis and providing rights of all the citizens, including in eastern and south-eastern regions of the country, the ministry said.
Meanwhile, the Kremlin press-secretary believes speculations regarding Russia’s “self-isolation” in connection with the events in Ukraine are absurd.
“It would be illogical, unrealistic and absurd today – in the era of globalization and total economic interdependence,” Dmitry Peskov said Saturday in an interview with Russian REN-TV channel.
Vladimir Putin’s spokesperson believes that current contradictions between Moscow and western partners are not about a new ‘Cold War.’
“We sincerely believe that both we and our partners will have enough political wisdom and political realism to avoid further deepening of ideological or any other standoff over Ukraine,” Peskov said. Despite remaining differences, Russia really does appreciate its continuing contacts with representatives of other states.
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