Putin's Planned Stimulus Package and the Positive Trends for Russia's Economy
Last month we covered the debate inside Russia regarding how Moscow ought to respond to the latest American sanctions. Since that article, the State Duma has advanced legislation to criminalize any Russian company complying with the sanctions inside Russia: which translates to potential fines and or jail time for executives and corporations refusing to do business in Crimea over U.S. pressure not to do so. President Vladimir Putin is promoting a highly ambitious, ten trillion ruble ($162 billion at current exchange rates) stimulus package to boost government spending on education, health care and infrastructure. In contrast to those claiming Russia is preparing for a revanchist war against the West, but supporting the arguments of those who say the Russians' intent is deterring NATO aggression through asymmetrical retaliation and superior defense technology, Moscow is contemplating real cuts to military spending. This would be a remarkable policy shift, in light of the unprecedented NATO build up along Russia's borders since 2014.
Contrary to the triumphalism about Russia in some alt-media outlets, there is no doubt the challenges Putin faces following his inauguration on May 7 and the celebrations of the victory over Nazi Germany on May 9 are immense. Russia does indeed face demographic headwinds caused by the birth collapse of the 1990s, and indirectly by the staggering losses suffered two generations earlier during World War II. But as we observed in our April 22 post here at RogueMoney, there are also major trends the 'Russia is doomed' Russophobes miss.
These are the policies which are working very well: restrictions and higher taxes on vodka sales, combined with stricter more honest enforcement of traffic laws, which together have done much to increase average lifespans -- even as per capita GDP growth slowed in the last decade. The reorientation to new trade partners to the east and south in China, India, Turkey and Iran, plus the import substitution fueled agriculture boom. The former trend of Eurasian integration and One Belt One Road (OBOR) mega-projects construction drives a virtuous cycle of trade expansion in non-dollar currencies, soon to be led by China's petro-(and perhaps gold backed) yuan. The latter trend allows the sanctioned Eurasian nation to feed itself and claim the top spot as the world's leading wheat exporter, principally to the Middle Eastern markets. If Russia is not only arming but also feeding the populous but mostly desert countries like Egypt and the UAE, it stands to reason that Washington's leverage with Cairo and Abu Dhabi can only decrease over time.
Sergey Karaganov Calls for a Tougher Russo-Chinese Line Against U.S. at Valdai Shanghai Forum, SCO to Be Strengthened Through New Members Iran and Pakistan
This is another motive, along with the failed campaign to remove the Syrian government that was blocked by Russia, for the G aka the Insolvent 7's denunciation of the Russians' "irresponsible and destabilizing" behavior. The dollar-led Anglo-American dominated New World Order (NWO) proclaimed by President George H.W. Bush in 1991 is certainly dying, and the Russians together with the Chinese are poised to finish it off. In the meantime though, the old paradigm isn't going out without a fight.
Speaking to the recent Valdai Club meetings in Shanghai, Putin advising academic Sergey Alexandrovich Karaganov declared Russian and Chinese analysts were in agreement that the Americans are waging a pressure campaign aka "the West's unilateral war against China and Russia". Karaganov declared that a common strategy between Moscow and Beijing is absolutely necessary. In his view and that of other conference participants, the Shanghai Cooperation Organization (SCO), which Pakistan and Iran recently joined, must be strengthened.
Does the Increasingly Belligerent Trump/Israeli Policy Toward Iran Create an Opening for Moscow's Diplomacy to Work? In the Medium to Long Term Yes, But...
With the Americans threatening to tear up their nuclear agreement with Iran, Russia's investments in Iranian oil and gas production must be protected from third country or direct sanctions -- and the same goes for the European powers principally France, Germany and Italy which have also made considerable investments in the country. Eager to protect the investments of its national champion in Total, the French through their Ambassador are warning Tel Aviv that tearing up the nuclear deal could lead to war between Israel and Iran. The realization that certain advisers to Netanyahu and Trump are foolish and cocky enough to welcome that prospect is likely keeping bureaucrats up at night in the Quai d'Orsay. But unlike in the run up to the U.S. led invasion of Iraq, there is no public evidence of a diplomatic coalition forming between Paris and Berlin with Moscow to oppose the Americans.
President Macron's public deference to Trump, notwithstanding the mainstream media praise lavished on his speech to Congress calling for preserving the Iran nuclear agreement, is already the stuff of jokes and thousands of 'bromance' Internet memes.
Behind the scenes of course is a different story, and that is where the Russians diplomacy must work quickly, to exploit cracks in the facade of Western unity, confident that time is on their side rather than the Americans. Of course it is precisely the Anglo-American deep state's awareness that the dollar and pound are living on borrowed time that is driving their aggression against Russia and increasingly, against China too. So the question of how to effectively respond non-kinetically to both military and increasing economic coercion is paramount in the Russian debates we've highlighted.
Thanks to recent polling data lamented by Atlanticists, we have statistical evidence that the German population, despite a years-long massive propaganda blitz against Russia in their media, is well aware of where their country's long term interests lie: to the south and east, rather than to the west.
As Dr. Jim Willie has said for years and an analyst recently concurred on Russian television: the dream partnership for the Russians is a Berlin-Moscow-Beijing axis. The problem is that the United States military and more relevantly its intelligence agencies continue to occupy Germany both in terms of territory and through American blackmail/bribery dominance over German elites. Although the breakthrough seen between the two Koreas suggests major openings can occur in global geopolitics, Washington's death grip over the German elites if not the larger population remains significantly stronger than its leverage over South Korea.
The Viewpoint at the Valdai Discussion Club in Shanghai: Russia and China Must Accelerate the Dollar Dump in Their Soon to Be $100 Billion in Annual Trade
According to an RT story from early last week, progress is being made, but national currencies still make up a small share of bilateral trade between the two largest countries in Eurasia:
There is no need for Russian and Chinese businesses to pay each other in dollars and euros, when they can settle in rubles and yuan, according to Zhou Liqun, chairman of the Union of Chinese Entrepreneurs in Russia.
“The leaders of the two countries should think over improving relations, especially in financial cooperation. Why make payments with foreign currency? Why dollar? Why euro? They can be made directly in the yuan and the ruble,” he told RIA Novosti on the sidelines of the Valdai Discussion Club conference in Shanghai, titled “Russia and China: Contemporary Development Challenges.”
According to Zhou Liqun, American and European sanctions gave Russia and China a chance to build up trade and economic cooperation. “Of course, there are sanctions, there are problems, but there is hope and opportunity,” he added.
China is Russia’s largest trading partner, accounting for 15 percent of Russian international trade last year. In January 2018, it grew to 17.2 percent. Germany, which holds second place among Russia’s trade partners, has a share of about eight percent.
The countries have been gradually ditching the dollar and the euro in trade. In 2017, nine percent of payments for Russian imports to China were made in rubles; Russian companies paid 15 percent of Chinese imports in the renminbi. Just three years ago, the numbers were two and nine percent, respectively.
Seeking to Solve Its Economic Problems at Others Expense:
A Unified Message for China and Russia Against Dollar Imperialism
It should be noted here that much of the discussions of the Shanghai Valdai meeting, were not about problems of streamlining trade, or the costs of completing infrastructure across the vastness of Siberia to northern China. Instead the planned discussions addressed the information war the U.S.-dominated West is waging on both the Russians and Chinese. Not surprisingly this theme is echoed by Russian Foreign Minister Maria Zakharova, who has another basic idea for the Russians to convey to the world: that the Americans are selfishly seeking to solve their economic problems at YOUR expense. Or to put it another way, with the capitalist vs. communist bipolarity of the last Cold War gone, the origins of the Anglo-American drive for global domination are economic. Ideologies like paranoid about Iran Zionism, neoconservative 'democracy promotion' or LGBT liberation serve as window dressing. Consider the trade war President Trump himself just declared during a speech in Michigan against the European Union, proclaiming that most Atlanticist of institutions to be a vehicle for European governments to rip off American workers (or the demand that the EU import American oil and gas shipped across the ocean rather than nearby piped Russian or Caspian hydrocarbons).
Mr. Trump's anti-EU rhetoric is consistent with his support for Brexit during the campaign, but it is also despised by the Atlanticist establishment for stripping the multilateral mask off globalism designed to benefit a small group of people and corporations. By making U.S. foreign policy nakedly transactional and about American allies from Germany to Saudi Arabia paying for protection, Trump's critics complain, he is undermining American prestige and goodwill towards Washington. However, Trump's approach is in many ways more honest than that of his many adversaries, which they indirectly acknowledge through their complaints. The condemnation of 'Russian propaganda' is that it is syncretist, appealing to the 'far left' and 'far right', unlike the socialist/communist package of the old Soviet Union. Similarly China appeals to the Left's desire for infrastructure development and a global alternative to Anglo-American economic models, while to the alternative or new Right the solidarity of the Chinese Han ethnos demonstrates that nationalism -- not globalism -- powers the world's leading economy and trading nation.
What the Russian Analyst expects to see then, in addition to accelerated Eurasian development, is a more clear articulation of why Moscow and Beijing are doing what they are doing to break dollar hegemony. A recent op-ed published in the Global Times, rejecting any legitimacy for the Anglo-American strikes on Syria and questioning whether Washington intends to dangerously back the Russians into a corner, is a template for more forceful Chinese solidarity with Moscow and her allies:
The facts cannot be distorted. This military strike was not authorized by the UN, and the strikes targeted a legal government of a UN member state. The US and its European allies launched strikes to punish President Bashar al-Assad for a suspected chemical attack in Duma last weekend. However, it has not been confirmed if the chemical weapons attack happened or if it did, whether government forces or opposition forces launched it. International organizations have not carried out any authoritative investigation.
The Syrian government has repeatedly stressed that there is no need for it to use chemical weapons to capture the opposition-controlled Duma city and the use of chemical weapons has provided an excuse for Western intervention. The Syrian government's argument or Trump's accusations against the "evil" Assad regime, which one is in line with basic logic? The answer is quite obvious.
The US has a record of launching wars on deceptive grounds. The Bush government asserted the Saddam regime held chemical weapons before the US-British coalition troops invaded Iraq in 2003. However, the coalition forces didn't find what they called weapons of mass destruction after overthrowing the Saddam regime. Both Washington and London admitted later that their intelligence was false.
Washington's attack on Syria where Russian troops are stationed constitute serious contempt for Russia's military capabilities and political dignity. Trump, like scolding a pupil, called on Moscow, one of the world's leading nuclear powers, to abandon its "dark path." Disturbingly, Washington seems to have become addicted to mocking Russia in this way. Russia is capable of launching a destructive retaliatory attack on the West. Russia's weak economy is plagued by Western sanctions and squeezing of its strategic space. That the West provokes Russia in such a manner is irresponsible for world peace.
The situation is still fomenting. The Trump administration said it will sustain the strikes. But how long will the military action continue and whether Russia will fight back as it claimed previously remain uncertain. Western countries continue bullying Russia but are seemingly not afraid of its possible counterattack. Their arrogance breeds risk and danger. [emphasis in bold added by the Russian Analyst]
That a Chinese Communist Party backed paper would refer to Russia's economy as 'weak' yet condemn Washington for its reckless course of seeking to humiliate nuclear-armed Moscow shows a solid grasp of the situation. But the next step is for the Chinese to publically inform the Americans that their sanctions will not stop China's firms from expanding their contracts and trade with the Russians, including in sanctioned Crimea. In other words, it is time for the Chinese to retaliate for U.S. measures against them in the trade war by emphasizing that the Americans cannot impose their anti-Russian sanctions on Chinese firms, and indeed, Beijing will demonstrate to the world that Washington is actually far weaker and unable to impose its will than advertised.
A more powerful signal than Chinese troops marching alongside the Russians at the Victory Day parade in Red Square would be putting yuan into the hands of ordinary Russians as an alternative reserve currency to the dollar. Having the U.S. Embassy employees walk past currency kiosks along the nearby Novy Arbat that not only proclaimed the daily exchange rate between the ruble and dollar/euro, but also the renmibi, would be a serious punch to the gut of the Americans weakest point: their delusions of their own and the greenback's indispensability.