The pendulum...
Let us be clear, while it seems unlikely that the Russian military all of a sudden forgot the military experience and expertise they acquired and developed almost non-stop since 1941, let us not rush from one end of the pendulum swing to the other, and buy too easily into the opposite theories.
But before we dismiss them as ridiculous theories, let us see what exactly is in them.
Short term and long term...
This is where there are likely short term and long term.
In the short term:
View attachment 455502
There is no doubt that Russia prepared for years on the economic front for what is happening today, whether what is happening was planned as clockwork, and it is unfolding as clockwork (?) ... or not:
- their gold reserve is impressive for a country with their GDP;
- their foreign exchange reserve is massive;
- they have developed internally their own alternative to SWIFT (SPFS Sistema Peredachi Finansovykh Soobscheniy: System for Transfer of Financial Messages);
- they have conducted a rapprochement toward China and India which offer alternative markets for their gas, oil and wheat.
All this of course did not happen by accident...
Similarly, it is factual that there has been an on again and off again push for the de-dollarization of the world economy, especially the energy markets, the most recent, I believe, being indeed led by Gaddafi, but as correctly point out by
wesheltonj, the Saudis are not buying into it.
This is obviously no surprise from a country that is far from being a beacon of freedom, religious neutrality or human rights, and that essentially continues to exist only because it is protected by the US, not out of good hearted freedom or democratic principles and attachment to self-determination rights, mind you, but because they sit onto the world's second-largest proven oil reserves, at 259 billion barrels, representing 31% of proven reserves in the Middle East and 15% of global reserves (US EIA.gov). Oh well, welcome back Otto von Bismarck and your Realpolitik...
I am with Red Leg on this one ... at least for the next couple decades...
While Russia - and indeed China - likely dream of a world without US power (be it economic, financial or military), this is but still a distant dream, and neither Russia, nor China, nor Russia and China combined have the beginning (yet?) of the muscle necessary to make it happen, although I am concerned that China is closing the military gap by leaps and bounds...
I do not know if there is a word for Realpolitik in Russian or Chinese, but
Red Leg is 100% correct on this one:
- Russia continues to sell gas and oil to EU and US. [This was one of the data points I was using earlier to illustrate my speculation that Putin is not in a total war paradigm (yet?) with the West, but likely playing soviet-style military/diplomatic raising of the stakes in his negotiation for his "security demands".]
- EU and US were very careful to exclude gas and oil transactions from their sanctions (SWIFT continues to process these transactions). [This was one of the data points I was using earlier to illustrate my speculation that EU/US too are not in a total conventional war paradigm (yet?) with Russia.]
I do not know where the cost/benefit analysis stands in term of Russian
economic pain due to the sanctions, compared to
financial gain due to the energy markets, but I would not be overly surprised if the calculous had been carefully considered by Putin.
It would therefore not entirely surprise me if it were (?) in Russia's advantage that this state of affairs continues for a while, because:
- Russia currently continues to be paid in dollars, and dollars continue for the time being, and into at least the near-term future, to be THE currency of reference through the world.
- As long as EU and US need the Russian gas and oil, Putin will continue to have an incredibly strong leverage on the EU and US.
- The current market prices for gas and oil not only fund the Russian war in Ukraine (executed quite cheaply so far) but can likely also fund some of the continuing modernization of the Russian military, and float the Russian economy, as long as the markets remain at their current level, and as long as the US continue to self-defeat with an energy policy that defies my understanding of common sense (I am probably not enlightened enough to appreciate the value of funding the enemy while increasing dependence on its good will).
Actually, and quite cynically, all of the above may (?) constitute further motivation for Putin to go slowly in Ukraine as:
- Russia currently pays a minimal military price (men and machines) for the war;
- Russia benefits financially from the war on the energy markets, it essentially doubled its income;
- Russia is not currently at military risk;
- Ukraine's pro-western population is draining itself out of the country;
- The effectiveness of economic sanctions remains hotly debated, especially when they are not universal, as China and India are currently demonstrating.
The future may be different...
This last point provides the perfect segue to come back to
spike.t's post as the future may be different.
Without diving too deep into conspiracy, the following scenario, at term, is not entirely ridiculous, although I will propose an alternative scenario to the ruble-yuan (a.k.a. renminbi):
View attachment 455503
Objectively;
- yes, Russia will retain for the foreseeable future an energy leverage - interestingly, on both West (EU and US) and East (China);
- yes, Russia will use it and continue to work with OPEC. Did you notice that OPEC declined to cancel their agreement with Russia over Ukraine?
- yes, at term Russia can impose payment in another currency, or more primitively barter economic trades (e.g. consumer goods from China, for oil and/or wheat);
- yes, Russia and China share an ideological goal - NOT communism, let us be serious, neither Putin nor Xi believe in communism! - but to eradicate American dominating power, and they can, and will, support each other in moments of crisis. Let's see what Russia's reaction to the upcoming scenarios in the China sea will be. Anyone wants to take a bet?
- I would not call the petrodollar monetary system fraudulent...
- I am not buying into the conspiration theory that the West removed Gaddafi over his attempt to take the Arab world to the Gold Standard - as stated earlier it cannot happen without the Saudis...
- I agree with the article posted by Red Leg that a Chinese currency is nowhere near replacing the dollar...
But here is the reason why I do not believe in the ruble-yuan scenario:
Strategically, in the long term, China is as dangerous, or maybe more dangerous, to Russia as it is to America. Putin ought to feel mighty uncomfortable about that border with China, and China historic mumbling about territorial claims in Siberia (where all of the Russian mineral and energy wealth is).
The more likely alternative scenario, in my analysis, would be a scenario for the Euro to reach strategic parity with the dollar (not necessarily financial parity, the Euro is already more valuable than the dollar, and has been so for decades), if/when Russia joins the EU, which should appear sooner or later as an obvious historical predeterminism to both parties simultaneously, as opposed to appearing so to Russia in the early 2000's but dismissed then by the EU, and appearing so to France and Germany in the early 2020's but currently dismissed by Russia.
A side note...
As a side note, I will add that the US is probably not helping themselves with a series of short-sighted measures such as extraterritoriality and
how these are weaponized for economic warfare.
John Doe Public may not be even aware that "American legal and regulatory authorities have subjected scores of large foreign companies to extraterritorial actions. Paying large fines, which can exceed $1bn, has often been the only way finally to settle such accusations of serious misconduct—typically, corruption or breaching sanctions—outside America." Many in Europe have deeply resented what they perceive as a lack of enthusiasm of the DOJ to prosecute American companies for breaching sanctions or foreign corruption, but a great zeal in prosecuting European or Asian companies.
Extraterritoriality took a new dimension recently when "a Department of Justice investigation into Alstom ended in 2014 with General Electric’s $17bn takeover of the French company." If you are not aware, this is worth a read:
A Department of Justice investigation into Alstom ended in 2014 with General Electric’s $17bn takeover of the French company
www.economist.com
Most foreign businesses have so far accepted the cost because the benefits of staying involved in the US market has outweighed the cost, but the US should make no mistake about the amount of resentment generated, and that such resentment is a liability to the US when strategic choices have to be made.
