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Geopolitics of Golden Trap

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Accusations of the West towards Putin traditionally are based on the fact that he worked in the KGB. And, therefore he is a cruel and immoral person. Putin is blamed for everything. But nobody ever accused Putin of lack of intelligence.
Any accusations against this man only emphasize his ability for quick analytical thinking and making clear and balanced political and economic decisions.

Often Western media compares this ability with the ability of a grandmaster, conducting a public chess simul. Recent developments in US economy and the West in general allow us to conclude that in this part of the assessment of Putin’s personality Western media is absolutely right.
Despite numerous success reports in the style of Fox News and CNN, today, Western economy, led by the United States is in Putin’s trap, the way out of which no one in the West can see or find. And the more the West is trying to escape from this trap, the more stuck it becomes.
What is the truly tragic predicament of the West and the United States, in which they find themselves? And why all the Western media and leading Western economists are silent about this, as a well guarded military secret? Let’s try to understand the essence of current economic events, in the context of the economy, setting aside the factors of morality, ethics and geopolitics.

After realizing its failure in Ukraine, the West, led by the US set out to destroy Russian economy by lowering oil prices, and accordingly gas prices as the main budget sources of export revenue in Russia and the main sources of replenishment of Russian gold reserves.
It should be noted that the main failure of the West in Ukraine is not military or political. But in the actual refusal of Putin to fund the Western project of Ukraine at the expense of the budget of Russian Federation. What makes this Western project not viable in the near and inevitable future.

Last time under president Reagan, such actions of the West’s lowering of oil prices led to ‘success’ and the collapse of USSR. But history does not repeat itself all the time. This time things are different for the West. Putin’s response to the West resembles both chess and judo, when the strength used by the enemy is used against him, but with minimal costs to the strength and resources of the defender. Putin’s real policies are not public. Therefore, Putin’s policy largely has always focused not so much on effect, but on efficiency.

Very few people understand what Putin is doing at the moment. And almost no one understands what he will do in the future.
No matter how strange it may seem, but right now, Putin is selling Russian oil and gas only for physical gold.
Putin – dislike the constant noise of the West – is not shouting about it all over the world. And, of course, he still accepts US dollars as an intermediate means of payment. But he immediately exchanges all these dollars obtained from the sale of oil and gas for physical gold!
To understand this, it is enough to look at the dynamics of growth of gold reserves of Russia and to compare this data with foreign exchange earnings of the RF coming from the sale of oil and gas over the same period.

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Moreover, in the third quarter the purchases by Russia of physical gold are at an all-time high, record levels. In the third quarter of this year, Russia had purchased an incredible amount of gold in the amount of 55 tons. It’s more than all the central banks of all countries of the world combined (according to official data)!

In total, the central banks of all countries of the world have purchased 93 tons of the precious metal in the third quarter of 2014. It was the 15th consecutive quarter of net purchases of gold by Central banks. Of the 93 tonnes of gold purchases by central banks around the world during this period, the staggering volume of purchases – of 55 tons – belongs to Russia.
Not so long ago, British scientists have successfully come to the same conclusion, as was published in the Conclusion of the U.S. Geological survey a few years ago. Namely: Europe will not be able to survive without energy supply from Russia. Translated from English to any other language in the world it means: “The world will not be able to survive if oil and gas from Russia is subtracted from the global balance of energy supply”.
Thus, the Western world, built on the hegemony of the petrodollar, is in a catastrophic situation. In which it cannot survive without oil and gas supplies from Russia. And Russia is now ready to sell its oil and gas to the West only in exchange for physical gold! The twist of Putin’s game is that the mechanism for the sale of Russian energy to the West only for gold now works regardless of whether the West agrees to pay for Russian oil and gas with its artificially cheap gold, or not.

Because Russia, having a regular flow of dollars from the sale of oil and gas, in any case, will be able to convert them to gold with current gold prices, depressed by all means by the West. That is, at the price of gold, which had been artificially and meticulously lowered by the Fed and ESF many times, against artificially inflated purchasing power of the dollar through market manipulation.
Interesting fact: the suppression of gold prices by the special department of US Government – ESF (Exchange Stabilization Fund) – with the aim of stabilizing the dollar has been made into a law in the United States.
In the financial world it is accepted as a given that gold is an antidollar.

•    In 1971, US President Richard Nixon closed the ‘gold window’, ending the free exchange of dollars for gold, guaranteed by the US in 1944 at Bretton Woods.
•    In 2014, Russian President Vladimir Putin has reopened the ‘gold window’, without asking Washington’s permission.
Right now the West spends much of its efforts and resources to suppress the prices of gold and oil. Thereby, on the one hand to distort the existing economic reality in favor of the US dollar and on the other hand, to destroy the Russian economy, refusing to play the role of obedient vassal of the West.

Today assets such as gold and oil look proportionally weakened and excessively undervalued against the US dollar. It is a consequence of the enormous economic effort on the part of the West.
And now Putin sells Russian energy resources in exchange for these US dollars, artificially propped by the efforts of the West. With which he immediately buys gold, artificially devalued against the U.S. dollar by the efforts of the West itself!
There is another interesting element in Putin’s game. It’s Russian uranium. Every sixth light bulb in the USA depends on its supply. Which Russia sells to the US too, for dollars.

Thus, in exchange for Russian oil, gas and uranium, the West pays Russia with dollars, purchasing power of which is artificially inflated against oil and gold by the efforts of the West. But Putin uses these dollars only to withdraw physical gold from the West in exchange, for the price denominated in US dollars, artificially lowered by the same West. This truly brilliant economic combination by Putin puts the West led by the United States in a position of a snake, aggressively and diligently devouring its own tail.
The idea of this economic golden trap for the West, probably originated not from Putin himself. Most likely it was the idea of Putin’s Advisor for Economic Affairs – doctor Sergey Glazyev. Otherwise why seemingly not involved in business bureaucrat Glazyev, along with many Russian businessmen, was personally included by Washington on the sanction list?  The idea of an economist, doctor Glazyev was brilliantly executed by Putin, with full endorsement from his Chinese colleague – XI Jinping.

Especially interesting in this context looks the November statement of the first Deputy Chairman of Central Bank of Russia Ksenia Yudaeva, which stressed that the CBR can use the gold from its reserves to pay for imports, if need be. It is obvious that in terms of sanctions by the Western world, this statement is addressed to the BRICS countries, and first of all China. For China, Russia’s willingness to pay for goods with Western gold is very convenient. And here’s why:
China recently announced that it will cease to increase its gold and currency reserves denominated in US dollars. Considering the growing trade deficit between the US and China (the current difference is five times in favor of China), then this statement translated from the financial language reads: “China stops selling their goods for dollars”. The world’s media chose not to notice this grandest in the recent monetary history event . The issue is not that China literally refuses to sell its goods for US dollars. China, of course, will continue to accept US dollars as an intermediate means of payment for its goods. But, having taken dollars, China will immediately get rid of them and replace with something else in the structure of its gold and currency reserves. Otherwise the statement made by the monetary authorities of China loses its meaning: “We are stopping the increase of our gold and currency reserves, denominated in US dollars.” That is, China will no longer buy United States Treasury bonds for dollars earned from trade with any countries, as they did this before.

Thus, China will replace all the dollars that it will receive for its goods not only from the US but from all over the world with something else not to increase their gold currency reserves, denominated in US dollars. And here is an interesting question: what will China replace all the trade dollars with? What currency or an asset? Analysis of the current monetary policy of China shows that most likely the dollars coming from trade, or a substantial chunk of them, China will quietly replace and de facto is already replacing with Gold.

In this aspect, the solitaire of Russian-Chinese relations is extremely successful for Moscow and Beijing. Russia buys goods from China directly for gold at its current price. While China buys Russian energy resources for gold at its current price. At this Russian-Chinese festival of life there is a place for everything: Chinese goods, Russian energy resources, and gold – as a means of mutual payment. Only US dollar has no place at this festival of life. And this is not surprising. Because the US dollar is not a Chinese product, nor a Russian energy resource. It is only an intermediate financial instrument of settlement – and an unnecessary intermediary. And it is customary to exclude unnecessary intermediaries from the interaction of two independent business partners.

It should be noted separately that the global market for physical gold is extremely small relative to the world market for physical oil supplies. And especially the world market for physical gold is microscopic compared to the entirety of world markets for physical delivery of oil, gas, uranium and goods.
Emphasis on the phrase “physical gold” is made because in exchange for its physical, not ‘paper’ energy resources, Russia is now withdrawing gold from the West, but only in its physical, not paper form. So does China, by acquiring from the West the artificially devalued physical gold as a payment for physical delivery of real products to the West.

The West’s hopes that Russia and China will accept as payment for their energy resources and goods “shitcoin” or so-called “paper gold” of various kinds also did not materialize. Russia and China are only interested in gold and only physical metal as a final means of payment.
For reference: the turnover of the market of paper gold, only of gold futures, is estimated at $360 billion per month. But physical delivery of gold is only for $280 million a month. Which makes the ratio of trade of paper gold versus physical gold: 1000 to 1.
Using the mechanism of active withdrawal from the market of one artificially lowered by the West financial asset (gold) in exchange for another artificially inflated by the West financial asset (USD), Putin has thereby started the countdown to the end of the world hegemony of petrodollar. Thus, Putin has put the West in a deadlock of the absence of any positive economic prospects.

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The West can spend as much of its efforts and resources to artificially increase the purchasing power of the dollar, lower oil prices and artificially lower the purchasing power of gold. The problem of the West is that the stocks of physical gold in possession of the West are not unlimited. Therefore, the more the West devalues oil and gold against the US dollar, the faster it loses devaluing Gold from its not infinite reserves.
In this brilliantly played by Putin economic combination the physical gold is rapidly flowing to Russia, China, Brazil, Kazakhstan and India, the BRICS countries, from the reserves of the West. At the current rate of reduction of reserves of physical gold, the West simply does not have the time to do anything against Putin’s Russia until the collapse of the entire Western petrodollar world. In chess the situation in which Putin has put the West, led by the US, is called “time trouble”.

The Western world has never faced such economic events and phenomena that are happening right now. USSR rapidly sold gold during the fall of oil prices. Russia rapidly buys gold during the fall in oil prices. Thus, Russia poses a real threat to the American model of petrodollar world domination.

The main principle of world petrodollar model is allowing Western countries led by the United States to live at the expense of the labor and resources of other countries and peoples based on the role of the US currency, dominant in the global monetary system (GMS) . The role of the US dollar in the GMS is that it is the ultimate means of payment. This means that the national currency of the United States in the structure of the GMS is the ultimate asset accumulator, to exchange which to any other asset does not make sense.

What the BRICS countries, led by Russia and China, are doing now is actually changing the role and status of the US dollar in the global monetary system. From the ultimate means of payment and asset accumulation, the national currency of the USA, by the joint actions of Moscow and Beijing is turned into only an intermediate means of payment. Intended only to exchange this interim payment for another and the ulimate financial asset – gold. Thus, the US dollar actually loses its role as the ultimate means of payment and asset accumulation, yielding both of those roles to another recognized, denationalized and depoliticized monetary asset – gold.

Traditionally, the West has used two methods to eliminate the threat to the hegemony of petrodollar model in the world and the consequent excessive privileges for the West.

gdch3

One of these methods – colored revolutions. The second method, which is usually applied by the West, if the first fails – military aggression and bombing. But in Russia’s case both of these methods are either impossible or unacceptable for the West.
Because, firstly, the population of Russia, unlike people in many other countries, does not wish to exchange their freedom and the future of their children for Western kielbasa. This is evident from the record ratings of Putin, regularly published by the leading Western rating agencies. Personal friendship of Washington protégé Navalny with Senator McCain played for him and Washington a very negative role. Having learned this fact from the media, 98% of the Russian population now perceive Navalny only as a vassal of Washington and a traitor of Russia’s national interests. Therefore Western professionals, who have not yet lost their mind, cannot dream about any color revolution in Russia.

As for the second traditional Western way of direct military aggression, Russia is certainly not Yugoslavia, not Iraq or Libya. In any non-nuclear military operation against Russia, on the territory of Russia, the West led by the US is doomed to defeat. And the generals in the Pentagon exercising real leadership of NATO forces are aware of this. Similarly hopeless is a nuclear war against Russia, including the concept of so-called “preventive disarming nuclear strike”. NATO is simply not technically able to strike a blow that would completely disarm the nuclear potential of Russia in all its many manifestations. A massive nuclear retaliatory strike on the enemy or a pool of enemies would be inevitable. And its total capacity will be enough for survivors to envy the dead. That is, an exchange of nuclear strikes with a country like Russia is not a solution to the looming problem of the collapse of a petrodollar world. It is in the best case, a final chord and the last point in the history of its existence. In the worst case – a nuclear winter and the demise of all life on the planet, except for the bacteria mutated from radiation.

gdch4Yugoslav economy before the Western intervention of the proxy war, depopulation and de-industrialization of any important Slavic state and the NAM leader.

The Western economic establishment can see and understand the essence of the situation. Leading Western economists are certainly aware of the severity of the predicament and hopelessness of the situation the Western world finds itself in, in Putin’s economic gold trap. After all, since the Bretton Woods agreements, we all know the Golden rule: “Who has more gold sets the rules.” But everyone in the West is silent about it. Silent because no one knows now how to get out of this situation.

If you explain to the Western public all the details of the looming economic disaster, the public will ask the supporters of a petrodollar world the most terrible questions, which will sound like this:
– How long will the West be able to buy oil and gas from Russia in exchange for physical gold?
And what will happen to the US petrodollar after the West runs out of physical gold to pay for Russian oil, gas and uranium, as well as to pay for Chinese goods? No one in the west today can answer these seemingly simple questions.
And, this is called “Checkmate”, ladies and gentlemen. The game is over.

 

Original text: Grandmaster Putin’s Golden Trap taken with the permission from the Gold-Eagle (www.gold-eagle.com/)

Economy

Afreximbank Meets Ahead of Russia-Africa Summit

Kester Kenn Klomegah

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The African Export-Import Bank (Afreximbank) plans to hold its 26th annual meeting in Moscow on 18-22 June. A series of closed sessions will be held as part of the event including the meeting of Board of Directors of Afreximbank and a meeting of Shareholders of Afreximbank, as well as the open Russia-Africa Economic Conference.

The African Export-Import Bank, the Roscongress Foundation, the Ministry of Finance of the Russian Federation, and the Russian Export Centre are the key organizers of this event. The Afreximbank Annual Meetings is a high-level event, bringing together political and business leaders from across Africa to discuss the issues of trade, industrialization, export, and financial stability and efficacy.

Key themes planned for the economic conference are: State of Russia-Africa Relations: An Overview; Mining Industry: An Integrated Approach to the Fields Development; Prospects for Multilateralism in an Era of Protectionism; Railways Infrastructure as the Key Element for Development in Africa; South-South Trade: Path for Africa Integration into the Global Economy.

The other topics are Emerging Trends in Sovereign Reserves Management; Reflections on the Transformative Power of South-South Trade; Launch Afreximbank ETC Strategy; Cyber Solutions and Cyber Security for Solving Governmental and Municipals Tasks; Financing South-South Trade in Difficult Global Financing Conditions; The Future of South-South Trade and Infrastructure Financing.

Over 1,500 delegates are expected to attend the economic conference, including shareholders and bank partners, government representatives, members of the business community and media representatives. The conference will be a crucial stage in preparation for the full-scale Russia-Africa political summit and the accompanying economic forum, scheduled for October 2019 in Sochi.

“Russian and African countries are basically on the track of bilateral strategic partnership and alliance based on openness and trust. The fact that the Afreximbank Annual Meeting is to be held in our country gives a positive momentum for the mutually beneficial cooperation of the parties ahead of the full-scale Russia-Africa Political Summit that will take place in Sochi in October, and will add to the inclusive nature of the events,” emphasized Anton Kobyakov, Advisor to the President of Russian Federation.

Following the setup of the Organizing Committee for the Russia – Africa summit and other Russia–Africa events in Russia in 2019, Russian officials have described that this year truly as a year of Africa for Russia.

“We witness the clear growing interests from the both sides to establish the new level of relationships, which means a perfect timing to boost the economic agenda. All economic events planned for this year will become a platform to vocalize these ideas and draw a strong roadmap for the future,” Russian Export Center’s CEO, Andrei Slepnev, argued in an emailed interview with Buziness Africa.

In December 2017, Russian Export Center became a shareholder of Afreximbank. Russian Export Center is a specialized state development institution, created to provide any assistance, both financial and non-financial, for Russian exporters looking for widening their business abroad.

On March 19, the Organizing Committee on Russia-Africa held its first meeting in Moscow. President Vladimir Putin put forward the Russia-Africa initiative at the BRICS summit (Russia, Brazil, India, China, and South Africa) in Johannesburg in July 2018.

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The silent revolution

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Jamaica is well known for its beautiful beaches, Bob Marley, and reggae music. But what is less known is that the Caribbean island started a silent revolution after being one of the most indebted developing countries in the world. Jamaica has shown a macroeconomic turnaround that is quite extraordinary.

As Bob Marley said, “It takes a revolution to make a solution”. After decades of high debt and low growth Jamaica has changed its growth trajectory, with positive economic growth for 16 consecutive quarters and growth getting closer to two per cent.

During that period, the Jamaica Stock Exchange went up more than 380 per cent.The credit agency Fitch upgraded the island’s debt to B+ rating with a stable fiscal outlook, and unemployment hit eight per cent in January, the lowest in decades.

The Government had a wake-up call when its debt overhang peaked at almost 150 per cent of GDP in 2013. With the support of the International Monetary Fund, the World Bank and the Inter-American Development Bank, the country embarked on an ambitious reform programme. These efforts have paid off. Jamaica is now one of the few countries that has successfully cut public debt by the equivalent of half its gross domestic product in a short time frame.

The fiscal turnaround and economic transformation were possible because of the strong commitment across political parties over two competing administrations and electoral cycles. The country also critically benefited from a sustained social consensus for change and the strong backing of the private sector.

The country has generated primary fiscal surpluses of at least seven per cent of GDP for the last six years, and remains steadfast in its commitment to fiscal discipline. These fiscal results make Jamaica a top performer internationally.

For this silent revolution to continue and bring greater prosperity to all its people, Jamaica will need to further boost the investment climate, strengthen economic and climate resilience and invest more in its people to build human capital. These are necessary complements to the maintenance of a strong macroeconomic framework and would help boost economic growth and job creation. There are encouraging signs that Jamaica is taking action in these areas.

With regard to the business climate, the National Competitiveness Council has adopted a road map to fast-track reforms to improve the business environment. Jamaica features in the top 20 countries in the world for its comprehensive credit reporting systems and ranks among the best globally in the area of starting a business, according to the World Bank’s 2019 Doing Business report. It only takes two procedures and three days for an entrepreneur to start and formally operate a business.

There have been advancements on public-private partnership investments. For instance, the Norman Manley International Airport public-private partnership was recently completed with advisory support from the International Finance Corporation — the private sector arm of the World Bank Group.

Jamaica is also a front-runner among Caribbean countries in promoting climate and financial resilience in the face of natural disasters. The economic cost of these disasters for the Caribbean is substantial, exceeding US$22 billion between 1950 and 2016, compared with US$58 billion for similar disasters globally. One serious storm or natural disaster could set back the country’s growth prospects and development achievements of recent years. To tackle this, the Government has adopted a Public Financial Management Policy Framework for Natural Disaster Risk Financing to facilitate the availability of dedicated resources for recovery in the face of disaster risks.

In order to further support Jamaica in its efforts to strengthen the economy, build resilience, and support human capital development, the World Bank will expand its financing by US$140 million. This financing package will be for a series of two operations to help Jamaica be better prepared to mitigate the financial impact of natural disasters and build stronger infrastructure, and an additional project to strengthen social protection.

Despite unemployment at a new low, still too many young people are struggling to find a job. For Jamaica to continue to grow and prosper, it also needs to develop the skills for the workforce of tomorrow, especially in the areas of technology and digitalisation. This requires a sharp focus on creating the conditions for youths to strive and succeed in the modern business world and close cooperation with the private sector in this respect.

Today, more than ever before, young Jamaicans can dream of a brighter future where “every little thing is gonna be alright”. This is the generation that must aim higher and can write a new chapter for its country.

As we celebrate the 55th anniversary of the World Bank-Jamaica partnership, we look forward to working together to build on the success of the past few years and promote growth, jobs and resilience for Jamaica.

World Bank

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With or without sanctions, Iran needs to say goodbye to oil money

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Except Norway, almost all oil producing countries have made themselves more or less reliant on oil money.

Only oil producing countries with a small population, such as Kuwait and Qatar which is also a great gas exporter, have so been safe from fluctuations in the oil market. But, countries with large population, such as Iran, are prone to volatility in the oil market, let alone the mad sanctions introduced against the country.

There is no doubt that oil money has affected politics, economy, management system, culture, spending and consumption habits and many other issues in oil rich countries.

For example, Iran now has one of the cheapest energy prices in the world. This has led to an extravagant use of energy, especially an excessive use of private car, in the country.

Let’s make an example to clarify that oil money is not the road to progress and a vibrant economy. In the 1970s, Iran was more developed than South Korea, but now South Korea is much more successful than Iran in terms of economy and technology. South Korea does not have oil, but it has provided an opportunity for a competitive economy and capitalized on its talents.

It is true that the war imposed on Iran in the 1980s hindered Iran’s progress and inflicted about 1 trillion dollar in damages on the country, yet officials failed to take serious steps toward creating a competitive economic atmosphere with a focus on research and technology. The oil money has been the main blame for such an economic approach.

According to the successive five-year development plans which end on 2021, Iran had to reduce dependence on oil to a great extent, however, successive administrations, with varying degrees, did not fully act based on the development plan.

Iran is now subject to the toughest ever illegal sanctions by the Trump administration. Just on April 22, the United States ended sanctions waivers on Iran’s exports and announced it wants to zero out Iran’s oil exports by May 1.

Whether the Trump administration succeeds or not to implement its oil threats is an issue that we should wait and see, but it is necessary that Iran take a departure from oil export how much painful it will be.

Sorena Sattari, a graduate of Sharif University of Technology who serves as vice president for scientific affairs, told a meeting in Hamedan on Tuesday that sanctions have provided an opportunity that knowledge-based companies to intensify their efforts. Sattari also said plans have been drawn up to manufacture equipment and machinery that are subject to sanctions. 

Also, whether we like it or not, fossil fuels, especially crude oil, are losing their importance as renewable energy resources are gradually taking the center stage.

Saying goodbye to easily-gained oil revenues is a bitter pill that Iran should swallow. To do so, though very difficult under tough sanctions, officials need to find other sources of income.

They can invest on tourism as Iran is among the top countries in hosting touristic sites, establish an environment for a transparent competitive economy, close loopholes of corruption, involve competent persons in managerial posts, introduce a sound and workable tax system, end unnecessary subsidies, and more importantly prioritize research and development (R&D).

First published in our partner Tehran Times

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