Meet the New, Resource-Based Global Reserve Currency

by Pepe Escobar

https://www.strategic-culture.org (March 31 2022)

https://www.unz.com (March 31 2022)

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A new reality is being formed: the unipolar world is irrevocably becoming a thing of the past, a multipolar one is taking shape

It was something to behold. Dmitri Medvedev, former Russian President, unrepentant Atlanticist, and current deputy chairman of the Russian Security Council decided to go totally unplugged in an outburst matching the combat star turn of Mr Khinzal that delivered palpable shock and awe all across NATOstan.

Medvedev said "hellish" Western sanctions not only have failed to cripple Russia but are instead "returning to the West like a boomerang". Confidence in reserve currencies is "fading like the morning mist", and ditching the US dollar and the euro is not unrealistic anymore: "The era of regional currencies is coming".

After all, he added, "no matter if they want it or not, they'll have to negotiate a new financial order (...) And the decisive voice will then be with those countries that have a strong and advanced economy, healthy public finances, and a reliable monetary system".

Medvedev relayed his succinct analysis even before D Day - as in the deadline this Thursday established by President Putin after which payments for Russian gas by "unfriendly nations" will only be accepted in rubles.

The G7, predictably, had struck a (collective) pose: we won't pay. "We" means the 4 that are not large Russian gas importers. "We", moreover, means the Empire of Lies dictating the rules. As for the 3 that will be in dire straits, not only they are major importers but also happen to be World War Two losers - Germany, Italy, and Japan, still de facto occupied territories. History does have a habit of playing perverted tricks.

Denial didn't last long. Germany was the first to break - even before industrialists from Ruhr to Bavaria staged a mass revolt. Scholz, the puny Chancellor, called Putin, who had to explain the obvious: payments are being converted into rubles because the EU froze Russia's foreign exchange reserves - in a crass violation of international law.

With Taoist patience, Putin also expressed hope that this would not represent a deterioration in contract terms for European importers. Russian and German experts should sit down together and discuss the new terms.

Moscow is working on a set of documents defining the new deal. Essentially, that spells out no rubles, no gas. Contracts become null and void once you violate trust. The US and the EU broke legally binding agreements with unilateral sanctions and on top of it confiscated foreign reserves of a - nuclear - G20 nation.

The unilateral sanctions made dollars and euros worthless to Russia. Hysteria fits won't cut it: this will be resolved - but under Russia's terms. Period. The Foreign Ministry had already warned that refusal to pay for gas in rubles would lead to a serious global crisis of non-payments and serial global-level bankruptcies, a hellish chain reaction of blocked transactions, freezing of collateral assets, and closures of credit lines.

What will happen next is partially predictable. EU companies will receive the new set of rules. They will have time to examine the documents and make a decision. Those that say "no" will be automatically excluded from receiving direct Russian gas shipments - all politico-economic consequences included.

There will be some compromise, of course. For instance, quite a few EU nations will accept the use of rubles and increase their gas acquisitions so they may resell the surplus to their neighbors and make a profit. And some may also decide to buy gas on the go on energy exchanges.

So Russia is not imposing an ultimatum on anybody. The whole thing will take time - a rolling process. With some sideways action as well. The Duma is contemplating the extension of payment in rubles to other essential products - such as oil, metals, timber, and wheat. It will depend on the collective voracity of the EU chihuahuas. Everyone knows that their non-stop hysteria may translate into a colossal rupture of supply chains across the West.

Bye-bye oligarchs

While the Atlanticist ruling classes have gone totally berserk but still remain focused on fighting to the last European to extract any remaining, palpable EU wealth, Russia is playing it cool. Moscow has been quite lenient in fact, brandishing the specter of no gas in Spring rather than Winter.

The Russian Central Bank nationalized the foreign exchange earnings of all major exporters. There was no default. The ruble keeps rising - and is now back to roughly the same level before Operation Z. Russia remains self-sufficient, food-wise. American hysteria over "isolated" Russia is laughable. Every actor that matters across Eurasia - not to mention the other 4 BRICS and virtually the whole Global South - did not demonize and/or sanction Russia.

As an extra bonus, arguably the last oligarch capable of influence in Moscow, Anatoly Chubais, is gone. Call it another momentous historical trickery: Western sanction hysteria de facto dismembered Russian oligarchy - Putin's pet project since 2000. What that implies is the strengthening of the Russian state and the consolidation of Russian society.

We still don't have all the facts, but a case can be made that after years of careful evaluation Putin opted to really go for broke and break the West's back - using that trifecta (imminent blitzkrieg on Donbas; US bioweapon labs; Ukraine working on nuclear weapons) as the casus belli.

The freezing of foreign reserves had to have been forecasted, especially because the Russian Central Bank had been increasing its reserves of US Treasuries since November last year. Then there's the serious possibility of Moscow being able to access "secret" offshore foreign reserves - a complex matrix built with Chinese insider help.

The sudden switch from dollars/euros to rubles was hardcore, Olympic-level geoeconomic judo. Putin enticed the collective West to unleash its demented hysteria sanction attack - and turned it against the opponent with a single, swift move.

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And here we all are now trying to absorb so many in-synch game-changing developments following the weaponization of dollar assets: rupee-ruble with India, the Saudi petroyuan, co-badged Mir-UnionPay cards issued by Russian banks, the Russia-Iran SWIFT alternative, the EAEU-China project of an independent monetary/financial system.

Not to mention the master coup by the Russian Central Bank, pegging 1 gram of gold to 5,000 rubles - which is already around $60, and climbing.

Coupled with No Rubles No Gas, what we have here is energy de facto pegged to gold. The EU Chihuahuas and the Japanese colony will need to buy a lot of rubles in gold or buy a lot of gold to have their gas. And it gets better. Russia may re-peg the ruble to gold in the near future. Could go to 2,000 rubles, 1,000 rubles, even 500 rubles for a gram of gold.

Time to be sovereign

The Holy Grail in the evolving discussions about a multipolar world, since the BRICS summits in the 2000s featuring Putin, Hu Jintao, and Lula, has always been how to bypass dollar hegemony. It's now right in front of the whole Global South, as a benign apparition bearing a Cheshire cat's smile: the golden ruble, or ruble backed by oil, gas, minerals, commodity exports.

The Russian Central Bank, unlike the US Federal Reserve, does not practice Quantitative Easing (QE) and won't export toxic inflation to the rest of the planet. The Russian Navy not only secures all Russian sea lines but Russian nuclear-powered submarines are capable of popping up all over the planet unannounced.

Russia is far, far ahead already implementing the concept of "continental naval power". December 2015, in the Syrian theater, was the strategic game-changer. The Black Sea-based submarine 4th division is the star of the show.

Russian naval fleets may now employ Kalibr missiles across a space comprehending Eastern Europe, West Asia, and Central Asia. The Caspian Sea and the Black Sea, linked by the Don-Volga canal, offer a space of maneuver comparable to the Eastern Mediterranean and the Persian Gulf combined. 6,000-kilometers-long. And you don't even need to access warm waters.

That covers around 30 nations: the traditional Russian sphere of influence; historical borders of the Russian empire; and current political/energy rivalry spheres.

No wonder the Beltway is berserk.

Russia guarantees shipping across Asia, the Arctic, and Europe in tandem with the Eurasia-wide BRI railway network.

And last but not least, don't mess with a Nuclear Bear.

Essentially, this is what hardcore power politics is all about. Medvedev was not bragging when he said the era of a single reserve currency is over. The advent of a resource-based global reserve currency means, in a nutshell, that 13% of the planet will not dominate the other 87% anymore.

It's NATOstan versus Eurasia redux. Cold War 2.0, 3.0, 4.0 and even 5.0. It doesn't matter. All the previous Non-Aligned Movement (NAM) nations see which way the geopolitical and geo-economic winds are blowing: the time to assert their real sovereignty is at hand as the "rules-based international order" bites the dust.

Welcome to the birth of the new world system. Foreign Minister Sergei Lavrov, in China, after meeting several counterparts from across Eurasia, could not have outlined it better:

A new reality is being formed: the unipolar world is irrevocably becoming a thing of the past, a multipolar one is taking shape. It's an objective process. It's unstoppable. In this reality, more than one power will "rule" - it will be necessary to negotiate between all the key states that today have a decisive influence on the world economy and politics. At the same time, realizing their special situation, these countries ensure compliance with the basic principles of the UN Charter, including the fundamental one - the sovereign equality of states. No one on this Earth should be seen as a minor player. Everyone is equal and sovereign.

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https://billtotten.wordpress.com/ https://www.ashisuto.co.jp--- To unsubscribe: List help: Sit Back and Watch Europe Commit Suicide by Pepe Escobar https://thecradle.co (April 07 2022) https://www.unz.com (April 07 2022) https://www.unz.com/wp-content/uploads/2022/04/shutterstock_1957759549-600x400.jpg The stunning spectacle of the EU committing slow-motion hara-kiri is something for the ages. Like a cheap Kurosawa remake, the movie is actually about the Empire of Lies-detonated demolition of the EU, complete with the subsequent rerouting of some key Russian commodities exports to the US at the expense of the Europeans. It helps to have a 5th columnist actress strategically placed, in this case astonishingly incompetent European Commission head Ursula von der Leyen, with a brand new vociferous announcement of an extra sanctions package: Russian ships banned from EU ports; road transportation companies from Russia and Belarus prohibited from entering the EU; no more coal imports (over 4.4 billion euros a year). That translates in practice into the Empire of Lies shaking down its wealthiest - Western - clients/puppets. Russia of course is too powerful militarily. The Empire badly needs some of its key exports - especially minerals. Mission Accomplished, in this case, amounts to nudging the EU into imposing more and more sanctions and willfully collapsing their national economies, allowing the US to scoop everything up. Cue to the coming catastrophic economic consequences felt by Europeans in their daily life (but not by the wealthiest 5%): inflation devouring salaries and savings; next winter energy bills packing a mean punch; products disappearing from supermarkets; holiday bookings almost frozen; Le Petit Roi Macron in France - may be up to a nasty electoral surprise - announcing "food stamps like in World War Two are possible". We have Germany facing the returning ghost of Weimar hyperinflation; BlackRock President Rob Kapito saying, in Texas, "for the first time, this generation is going to go into a store and not be able to get what they want"; farmers in Africa not able to afford fertilizer at all this year, reducing agricultural production by an amount capable of feeding 100 million people. Zoltan Pozsar, former New York Federal Reserve and US Treasury guru, current Credit Suisse grand-vizir, has been on a streak, stressing how commodity reserves - and here Russia is unrivaled - will be an essential feature of what he calls Bretton Woods III (yet, in fact, what's being designed by Russia, China, Iran, and the Eurasia Economic Union is a post-Bretton Woods). Pozsar remarks that wars, historically, are won by those who have more food and energy supplies, in the past to power horses and soldiers, today to feed soldiers and fuel tanks and fighter jets. China, incidentally, has amassed large stocks of virtually everything. Pozsar notes how our current Bretton Woods II system has a deflationary impulse (globalization, open trade, just-in-time supply chains) while Bretton Woods III will provide an inflationary impulse (de-globalization, autarky, hoarding of raw materials) of supply chains and extra military spending to be able to protect what will remain of seaborne trade. The implications are of course overwhelming. What's implicit, ominously, is that this state of affairs may even lead to World War Three. Rublegas or American LNG? The Valdai Club has conducted an essential expert discussion {1} on what we at The Cradle have defined as Rublegas {2} - the real geoeconomic game-changer at the heart of the post-petrodollar era. Alexander Losev, a member of the Russian Council for Foreign and Defense Policy, offered the contours of the Big Picture. But it was up to Alexey Gromov, Chief Energy Director of the Institute of Energy and Finance, to come up with crucial nitty-gritty details. Russia so far was selling gas to Europe in the amount of 155 billion cubic meters a year. The EU rhetorically promises to get rid of it by 2027 and reduce supply by the end of 2022 by 100 billion cubic meters. Gromov asked "how", and remarked, "any expert has no answer. Most of Russia's natural gas is shipped over pipelines. This cannot simply be replaced by LNG." The risible European answer has been "start saving", as in "prepare to be worse off. Reduce the temperature in households". Gromov noted how, in Russia, "22 to 25 degrees in winter is the norm. Europe is promoting 16 degrees as 'healthy', and wearing sweaters at night." The EU won't be able to get the gas it needs from Norway or Algeria (which is privileging domestic consumption). Azerbaijan would be able to provide at best 10 billion cubic meters a year, but "that will take 2 or 3 years" to happen. Gromov stressed how "there's no surplus in the market today for US and Qatar LNG". And how prices for Asian customers are always higher. The bottom line is that "by end of 2022, Europe won't be able to significantly reduce" what it buys from Russia: "they might cut by 50 billion cubic meters, maximum". And prices in the spot market will be higher - at least $1,300 per cubic meter. An important development is that "Russia changed the logistical supply chains to Asia already". That applies to gas and oil as well: You can impose sanctions if there's a surplus in the market. Now there's a shortage of at least 1.5 million barrels of oil a day. We'll be sending our supplies to Asia - with a discount. As it stands, Asia is already paying a premium, from 3 to 5 dollars more per barrel of oil. On oil shipments, Gromov also commented on the key issue of insurance: Insurance premiums are higher. Before Ukraine, it was all based on the FOB system. Now buyers are saying "we don't want to take the risk of taking your cargo to our ports". So they are applying the CIF system, where the seller has to insure and transport the cargo. That of course impacts revenues. An absolutely key issue for Russia is how to make the transition to China as its key gas customer. It's all about Power of Siberia 2 - which will reach full capacity only in 2024. And first, the interconnector through Mongolia must be built - "we need 3 years to build this pipeline" - so everything will be in place only around 2025. https://www.amazon.com/dp/0978813820/?tag=unco037-20 On the Yamal pipeline, "most of the gas goes to Asia. If the Europeans don't buy anymore we can redirect." And then there's the Arctic LNG 2 - which is larger than Yamal: "the first phase should be finished soon, it's 80% ready." An extra problem may be posed by the Russian "Unfriendlies" in Asia: Japan and South Korea. LNG infrastructure produced in Russia still depends on foreign technologies. That's what leads Gromov to note that, "the model of the mobilization-based economy is not so good". But that's what Russia needs to deal with at least in the short to medium term. The positives are that the new paradigm will allow "more cooperation within the BRICS"; the expansion of the International North-South Transportation Corridor (INSTC); and more interaction and integration with "Pakistan, India, Afghanistan, and Iran". Only in terms of Iran and Russia, swaps in the Caspian are already in the works, as Iran produces more than it needs, and is set to increase cooperation with Russia in the framework of the strengthened strategic partnership. Hypersonic geoeconomics It was up to Chinese energy expert Fu Chengyu to offer a concise explanation of why the EU drive of replacing Russian gas with American LNG is, well, a pipe dream. Essentially the US offer is "too limited and too costly". Fu Chengyu showed how a lengthy, tricky process depends on four contracts: between the gas developer and the LNG company; between the LNG company and the buyer company; between the LNG buyer and the cargo company (which builds vessels); and between the buyer and the end-user. "Each contract", he pointed out, "takes a long time to finish. Without all these signed contracts no party will invest - be it investment on infrastructure or gas field development." So actual delivery of American LNG to Europe assumes all these interconnected resources are available - and moving like clockwork. Fu Chengyu's verdict is stark: this EU obsession with ditching Russian gas will provoke "an impact on global economic growth, and recession. They are pushing their own people - and the world. In the energy sector, we will all be harmed." It was quite enlightening to juxtapose the coming geoeconomic turbulence - the EU obsession with bypassing Russian gas and the onset of Rublegas - with the real reasons behind Operation Z in Ukraine, completely obscured by Western media psyops. So I submitted a few questions to a US Deep State old pro, now retired, and quite familiar with the inner workings of the old OSS, the CIA precursor, all the way to the neocon dementia. His answers were quite sobering. He started by pointing out, the whole Ukraine issue is over hypersonic missiles that can reach Moscow in less than four minutes. The US wants them there, in Poland, Romania, Baltic States, Sweden, Finland. This is in direct violation of the agreements in 1991 that Nato will not expand in Eastern Europe. The US does not have hypersonic missiles now but should - in a year or two. This is an existential threat to Russia. So they had to go into the Ukraine to stop this. Next will be Poland and Romania where launchers have been built in Romania and are being built in Poland. From a completely different geopolitical perspective, what's really telling is that his analysis happens to dovetail with Zoltan Pozsar's geoeconomics: The US and Nato are totally belligerent. This presents a real danger to Russia. The idea that nuclear war is unthinkable is a myth. If you look at the firebombing of Tokyo against Hiroshima and Nagasaki, more people died in Tokyo than Hiroshima and Nagasaki. These cities were rebuilt. The radiation goes away and life can restart. The difference between firebombing and nuclear bombing is only efficiency. Nato provocations are so extreme Russia had to place their nuclear missiles on standby alert. This is a gravely serious matter. But the US ignored it. Links: {1} https://valdaiclub.com/multimedia/video/gas-for-rubles-buy-it-if-you-can-an-expert-discussion/ {2} https://thecradle.co/Article/columns/8638 Pepe Escobar Archive: https://www.unz.com/author/pepe-escobar/ Subscribe to New Columns: https://www.unz.com/subscribe/?domain=pescobar https://thecradle.co/Article/columns/8853 https://www.unz.com/pescobar/sit-back-and-watch-europe-commit-suicide/ https://billtotten.wordpress.com/ https://www.ashisuto.co.jp--- To unsubscribe: List help: