What game is the House of Saud playing?

Pepe-EscobarPepe Escobar is the roving correspondent for Asia Times/Hong Kong, an analyst for RT and TomDispatch, and a frequent contributor to websites and radio shows ranging from the US to East Asia.

 

 

Published time: January 16, 2015 12:29

 

33.si

Reuters / Lucy Nicholson

The House of Saud now finds itself in times of extreme trouble. Their risky oil price war may eventually backfire. The succession of King Abdullah may turn into a bloodbath. And the American protector may be musing a change of heart.

Let’s start with oil – and some background. As much as US supply has increased by a couple of million barrels a day, enough oil from Iran, Kirkuk in Iraq, Libya and Syria has gone out of production; and that offsets extra US oil on the market. Essentially, the global economy – at least for the moment – is not searching for more oil because of European stagnation/recession and the relative China slowdown.

Reuters / Todd Korol

Reuters / Todd Korol

Since 2011, Saudi Arabia has been flooding the market to offset the decrease in Iran exports caused by the US economic war, a.k.a. sanctions. Riyadh, moreover, prevented OPEC from reducing country production quotas. The House of Saud believes it can play the waiting game – as fracked oil, mostly American, is inexorably driven out of the market because it is too expensive. After that, the Saudis believe they will regain market share.

In parallel, the House of Saud is obviously enjoying “punishing” Iran and Russia for their support of Bashar Assad in Damascus. Moreover, the House of Saud is absolutely terrified of a nuclear deal essentially between the US and Iran (although that’s still a major “if”) – leading to a long-term détente.

Tehran, though, remains defiant. Russia brushed off the attack because the lower ruble meant state revenues remained unchanged – so there will be no budget deficit. As for oil-thirsty East Asia – including top Saudi customer China – it’s enjoying the bonanza while it lasts.

Oil prices will remain very low for the time being. This week Goldman Sachs lowered their 2015 WTI and Brent Crude forecasts; Brent was slashed from $83.75 a barrel to $50.40, WTI was cut from $73.75 to $47.15 a barrel. Prices per barrel could soon drop as low as $42 and $40.50. But then, there will be an inevitable “U-shaped recovery.”

Nomura bets that oil will be back to $80 a barrel by the end of 2015.

Punish Russia or bust

US President Barack Obama, in this interview, openly admitted that he wanted “disruptions” in the “price of oil” because he figured Russian President Vladimir Putin would have “enormous difficulty managing it.” So that settles the argument about hurting Russia and US-Saudi collusion, after US Secretary of State John Kerry allowed/endorsed King Abdullah in Jeddah to simultaneously raise oil production and embark on a cut price strategy.

Whether Kerry sold out the US shale gas industry out of ignorance or incompetence – probably both – is irrelevant. What matters is if the House of Saud were ordered to back off, they would have to do it in a flash; the ‘Empire of Chaos’ dominates the Persian Gulf vassals, who can’t even breathe without at least an implicit US green light.

What is way more troubling is that the current bunch in Washington does not seem to be defending US national and industrial interests. If humongous trade deficits based on currency rigging were not enough, now virtually the entire US oil industry runs the risk of being destroyed by an oil price racket. Any sane analyst would interpret it as contrary to US national interests.

Anyway, the Riyadh deal was music for the House of Saud’s ears. Their official policy has always been to slash the development of all potential substitutes for oil, including US shale gas. So why not depress oil prices and keep them there long enough to make investments in shale gas a lunatic proposal?

But there’s a huge problem. The House of Saud simply won’t get enough in oil revenues to support their annual budget with oil at below $90 a barrel. So as much as hurting Iran and Russia may be appealing, hurting their own golden pocketbooks is not.

The long-term outlook spells out higher oil prices. Oil may be replaced in many instances; but there isn’t a replacement – yet – for the internal combustion engine. So whatever OPEC is doing, it is actually preserving demand for oil vs. oil substitutes, and maximizing the return on a limited resource. The bottom-line: yes, this is predatory pricing.

Once again, there’s an immense, crucial, complicating vector. We may have the House of Saud and other Persian Gulf producers flooding the market – but its Goldman Sachs, JP Morgan and Citigroup who are doing the shadow, nasty work via leveraged derivative short futures.

Oil prices are such an opaque racket that only major oil trading banks such as Goldman Sachs or Morgan Stanley have some idea who is buying and who is selling oil futures or derivative contracts – what is called “paper oil.” The non-rules of this multi-billion casino spell out “speculative bubble” – with a little help from those friends at the Gulf oil pumps. With oil futures trading and the two major London and New York exchanges monopolizing oil futures contracts, OPEC really does not control oil prices anymore; Wall Street does. This is the big secret. The House of Saud may entertain the illusion they are in control. They’re not.

 

U.S. President Barack Obama

U.S. President Barack Obama – (Reuters / Kevin Lamarque)

That dysfunctional marriage

As if this was not messy enough, the crucial succession of the House of Saud is propelled to the forefront. King Abdullah, 91, was diagnosed with pneumonia, hospitalized in Riyadh on New Year’s Eve, and was breathing with a tube. He may – or may not, this being the secretive House of Saud – have lung cancer. He won’t last long. The fact that he is hailed as a “progressive reformer” tells everything one needs to know about Saudi Arabia. “Freedom of expression”? You must be joking.

So who’ll be next? The first in the line of succession should be Crown Prince Salman, 79, also defense minister. He was governor of Riyadh province for a hefty 48 years. It was this certified falcon who supervised the wealth of private “donations” to the Afghan mujahedeen in the 1980s jihad, in tandem with hardcore Wahhabi preachers. Salman’s sons include the governor of Medina, Prince Faisal. Needless to add, the Salman family controls virtually all of Saudi media.

To get to the Holy Grail Salman must be proven fit. That’s not a given; and on top of it Abdullah, a tough nut to crack, already survived two of his crown princes, Sultan and Nayef. Salman’s prospects look bleak; he has had spinal surgery, a stroke and may be suffering from – how appropriate – dementia.

It also does not bode well that when Salman was promoted to Deputy Defense Minister, soon enough he was shown the door – as he got himself mixed up with Bandar Bush’s atrocious jihadi game in Syria.

Anyway, Salman already has a successor; second Deputy Prime Minister Prince Muqrin, former governor of Medina province and then head of Saudi intelligence. Muqrin is very, very close to Abdullah. Muqrin seems to be the last “capable” son of Ibn Saud; “capable” here is a figure of speech. The real problem though starts when Muqrin becomes Crown Prince. Because then the next in line will be picked from the grandsons of Ibn Saud.

Enter the so-called third generation princes – a pretty nasty bunch. Chief among them is none other than Mitab bin Abdullah, 62, the son of the king; cries of nepotism do proceed. Like a warlord, Mitab controls his own posse in the National Guard. Sources told me Riyadh is awash in rumors that Abdullah and Muqrin have made a deal: Abdullah gets Muqrin to become king, and Muqrin makes Mitab crown prince. Once again, this being the “secretive” House of Saud, the Hollywood mantra applies: no one knows anything.

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Saudi Arabia’s Foreign Minister Prince Saud al-Faisal.(Reuters / Brendan Smialowski)

Abdullah’s sons are all over the place; governor of Mecca, deputy governor of Riyadh, deputy foreign minister, president of the Saudi Red Crescent. Same for Salman’s sons. But then there’s Muhammad bin Nayif, son of the late Crown Prince Nayif, who became Interior Minister in 2012, in charge of ultra-sensitive internal security, as in cracking down on virtually anything. He is the top competitor against Mitab among the third-generation princes.

So forget about family “unity” when such juicy loot as an oil hacienda impersonating a whole country is in play. And yet whoever inherits the loot will have to face the abyss, and the same litany of distress; rising unemployment; abysmal inequality; horrendous sectarian divide; jihadism in all its forms – not least the fake Ibrahim Caliphate in “Syraq”, already threatening to march towards Mecca and Medina; the unspeakably medieval Council of Ulemas (the lashing/amputating/beheading-loving bunch); total dependency on oil; unbounded paranoia towards Iran; and a wobbly relationship with His Masters Voice, the US.

When will they call the cavalry?

And it so happens that the real ‘Masters of the Universe’ in the Washington-New York axis are debating exactly the erosion of this relationship; as in the House of Saud having no one to talk to but the “puppets”, from Bush Two minions to Kerry at most on occasion. This analysis contends that any promises made by Kerry over the House of Saud “cooperation” to damage Russia’s economy really mean nothing.

Rumbles from ‘Masters of the Universe’ territory indicate that the CIA sooner or later might move against the House of Saud. In this case the only way for the House of Saud to secure its survival would be to become friendly with none other than Moscow. This exposes once more the House of Saud’s suicidal present course of trying to hurt Russia’s economy.

As everyone is inexorably an outsider when faced with the totally opaque House of Saud, there’s an analytical current that swears they know what they’re doing. Not necessarily. The House of Saud seems to believe that pleasing US neocons will improve their status in Washington. That simply won’t happen. The neocons remain obsessed about the House of Saud helping Pakistan to develop its nuclear missiles; some of them – once again, that’s open to speculation – might even be deployed inside Saudi Arabia for “defensive purposes” against that mythical Iranian “threat.”

Messy? That doesn’t even begin to describe it. But one thing is certain; whatever game Riyadh thinks it’s playing, they’d better start seriously talking to Moscow. But please, don’t send Bandar Bush on another Russian mission.

Pepe Escobar’s latest book is Empire of Chaos. Follow him on Facebook.

 

Poroshenko handed Ukraine out to Foreign citizens to Supervise Unpopular Policies, Control Money Flows etc…

 Foreign Citizens Will Supervise Unpopular Policies, Control Money Flows etc

IS THIS WHAT THE FIRST MAIDAN ACTIVISTS FOUGHT FOR?

DO THEY FOUGHT FOR AN UKRAINE HOSTAGE OF FOREIGN BANKERS

BURNING POINT

Several key positions in the new Ukrainian government have been handed over to foreign citizens. What could that spell for Ukraine? Radio Sputnik is discussing the issue with Kirill Koktysh (MGIMO) and Professor Alexander Domrin (High School of Economics and the University of Virginia).

Ukraine has to learn from “foreign experience” — that’s what Ukrainian President Petro Poroshenko told the Ukrainian parliament, Verkhovna Rada. He signed decrees giving Ukrainian citizenship to three foreign citizens, who got the key ministerian posts.

Aivaras Abromavicius, Lithuanian investment banker is now in charge of the ministry of economic development and trade; Alexander Kvitashvili, a former Georgian citizen, became the health minister and Natalie Jaresko, an American citizen and an ethnic Ukrainian, is the new minister of finance. Ms Jaresko has worked in Ukraine for more than 20 years, and before that she was holding various positions in the US State Department.

Kirill Koktysh: Actually, this is a very special practice. Usually foreigners are invited to deal with the problems in a way for which nobody would say “thank you”. That means that actually those positions are usually reserved for those actors and everything that they would do, would produce hardship for the rest of the citizens. That means that the first reason to invite foreigners is just to secure your own internal political players, because usually the foreigners are invited when you have to do something extremely unpopular.

The second reason, for example, if you are getting a foreign financing. That means that a foreigner would be in charge of the money flow. And, probably, both of these reasons are relevant to explain the current situation with the Poroshenko’s Government. As far as I know, the Minister of Finance and the Minister of Economy are the positions that should be responsible for the money flows from the outside and for the monetization of the Ukrainian economy, which is actually half destroyed, on the other hand. So, that means that, probably, those foreigners would be both the controllers of the money flows and, on the other side, these persons should be blamed tomorrow for everything bad that occurs in Ukraine.

Usually, semi-independent states are doing this. We can remember the Russian example when the Russian privatization was done by the foreign hands under the foreigners’ advice. The result of the privatization was the illegitimate business in Russia. And it is a problem we are suffering up to now. In some other countries the foreigners are usually invited not because they would be sharing their professionalism, but also their interest. And any executive political player would first of all have his own interest, and not the interest of the country he is working for, because foreigners should be loyal to their native states and not the state that hires them.

So, Dr. Koktysh, do we need to understand that Ukraine is now de jure turning into some kind of American colony?

Kirill Koktysh: Yes, actually you do, because de facto Ukraine lost its independence last year. It is practically bankrupt and that means that those states who gave money, first of all the US, should take care about how to get their money back and the income as well. And now there is a political control over the Ukrainian debt that was made with the American money. So, actually, yes, the colonization of Ukraine is the system that de facto existed in all the previous years, but not as de jure.

You said that appointing these people might signal that new measures, that would be extremely unpopular, are going to be implemented. And we see here the Minister of Economy, the Minister of Finance and Minister of Health…

Kirill Koktysh: The trend would be the privatization of the social goods. That means that social goods will be reduced, and in the worst scenario they would be reduced to zero. And they all would be monetized. The Health Ministry is the first one, because the healthcare is one of the most tremendous social goods. And, I guess, the other social goods would be liquidated or monetized, which would be the same quite soon.

So, this is the managers’ case, but the matter is not who manages but who orders. And that means that those banks and those states, probably, who gave money to Ukraine and to which Ukraine has to return these debts, would dictate the conditions. And these ministers would be just following what they would be ordered to do…

Well, Ms Jaresko has already promised to come up with an ambitious cost-cutting 2015 budget by Dec. 20. Ms Jaresko is a graduate of Harvard University’s Kennedy School of Government, and Russians still keep special memories of Harvard experts who  used to advise the Russian government on privatization campaign of the early 1990-s….

Alexander Domrin: Thinking about Ukraine, I’m thinking not only about this particular event when foreigners were invited to join the Government of Ukraine, but in general, when I think about Ukraine today, it reminds me of Russia back in the 1990’es. Somehow since 1990’es Russia has made a tremendous improvement in its internal politics, in its internal development, in its governmental structure. But let’s take a look at Russia back in the 1990’es. Didn’t we have foreigners in our Government? Was it good for Russia when we had foreigners in the Russian Government? I want to remind you of, let’s say, Boris Berezovsky, who was the citizen of Israel. There was another member of the Russian Government Boris Brevnov, who happened to be the US citizen.

You know, what is interesting here, it is not only that Ukraine decided to invite foreigners to join its Government, I’m absolutely sure that those new members of the Ukrainian Government will bring their own staff from their own countries, from other countries of the world. And once again, didn’t we have a similar situation back in the 1990’es here in Russia? Didn’t we have numerous and numerous assistants, advisors and consultants who worked for the Russian Government from other countries of the world? Didn’t Anatoly Chubais surround himself by dozens of American advisors, consultants? Was it good for Russia? I don’t think so.

Just one detail, I want to remind you of some of those advisors who were invited by Anatoly Chubais form America to assist Russia in its transition to the market economy, in privatization etc. It was one of the most famous scandals back in the 1990’es when the two individuals from the Harvard Institute for International Development – Shleifer and Jonathan Hay – when they were working as the advisors to the Russian Government, when they were advising the Russian Government  on how to transfer Russia into a civilized market economy, what did they do?

Their program received $58 million from the US Government to assist Russia in the privatization reform. And, of course, it was such a temptation for them when they had some inside information about what enterprises, what factories were supposed to be privatized. It was such a temptation for them that they decided to use that inside information to enrich themselves. They invested money into those enterprises that were supposed to be privatized, basically, to invest their money and get back their money after the privatization of those enterprises.

What was even more interesting is that they didn’t invest their own money, they actually invested the money of the US Government – the money which was supposed to assist Russia in its transition to a civilized market economy. It was an absolutely incredible scandal. As the result of that scandal not only this program was stopped, but the whole Harvard Institute of International Development. Originally, it was founded by Jeffrey Sachs. The Harvard Institute of International Development was killed. Jeffrey Sachs in disgrace had to move from Harvard to Columbia University. And as the result of that there was a famous trial. Shleifer and Hay were found guilty and they were supposed to pay more than $100 million back to the US Government.
You see, when I think about Ukraine today, it reminds me of Russia back in the 1990’es so much. And I don’t think that it was a good idea of the Ukrainian Government to invite those people. I don’t expect any major improvements. And I feel so sorry for my Ukrainian friends.

Do you think that Ukraine eventually would follow the same pattern? How good are the chances that they are going to ultimately gain real independence?

Alexander Domrin: Russia realized that we made huge mistakes back in the 1990’es. That’s why Russia decided not to repeat those mistakes. Unfortunately, Ukraine didn’t learn from our mistakes. And once again, looking at Ukraine back in the 1990’es and at Ukraine today, I have a feeling that this is the kind of groundhog’s day, when the mistakes are being repeated again and again, and nobody wants to correct them.
Why do you think the people who have already failed on their positions, like Mr. Saakashvili, are positioned to play a role in Ukraine? Haven’t they failed already once?

Some people have no shame. And that’s exactly what I think about Saakashvili. But I believe that it is an even more disgusting position of the Ukrainian Government which invites people like Saakashvili, or people who were so close to Saakashvili, to work for Ukraine today. Those people failed their own country and now they are invited basically to fail another country – Ukraine. And that was the decision of the Ukrainian Government. So, it is up to them.

What is the agenda of Kiev’s allies? Are they really working to create an independent Ukraine?

Alexander Domrin: I don’t consider Ukraine to be a sovereign country. I don’t consider Ukraine to be a truly independent country, but, once again, Russia was not a truly sovereign country back in the 1990’es either. And from this point of view, of course, the external regulation of Ukraine will continue. But now it will be not just the external regulation, but also with the infiltration of external specialists, external ministers into the Government of Ukraine itself.

In Russia their agenda was to get the control of our resources….

Alexander Domrin: The Ukrainian Government needs to start thinking about the improvement of lives of their own compatriots. So far the main agenda of the Ukrainian Government was to fight their own people in some parts of Ukraine that pronounced themselves to be independent or to be sovereign. Of course, I speak about Donetsk and Luhansk. And I think that winter, which has already arrived, it will be a very important period of time for Ukraine and for the Ukrainian economy, because if by the spring there won’t be any major improvements in the Ukrainian economy, either with those foreign ministers or without them, then it will be a major disappointment, even for those who still support the Ukrainian Government.

 

Lame duck out of the Silk Road caravan

World leaders during the APEC Summit family photo in Beijing November 10, 2014. Australia's Prime Minister Tony Abbott standing behind Russian President Vladimir Putin (L) and Chinese President Xi Jinping (2nd L) (Reuters / Kevin Lamarque)

World leaders during the APEC Summit family photo in Beijing November 10, 2014. Australia’s Prime Minister Tony Abbott standing behind Russian President Vladimir Putin (L) and Chinese President Xi Jinping (2nd L) (Reuters / Kevin Lamarque)

By Pepe Escobar

There’s hardly a more graphic illustration of where the multipolar world is going than what just happened at the Asia-Pacific Economic Cooperation (APEC) summit in Beijing.

Take a very good look at the official photos. This is all about positioning – and this being China, pregnant with symbolic meaning. Guess who’s in the place of honor, side by side with President Xi Jinping. And guess where the lame duck leader of the “indispensable nation” has been relegated. The Chinese can also be masters at sending a global message.

When President Xi urged APEC to “add firewood to the fire of the Asia-Pacific and world economy,” this is what he meant, irrespective of inconclusive decisions out of the summit.

1) Beijing will go no holds barred for the Free Trade Area of the Asia-Pacific (FTAAP) – the Chinese vision of an “all inclusive, all-win” trade deal that really promotes Asia-Pacific cooperation, instead of the US-driven, corporate-redacted, and quite divisive Trans-Pacific Partnership (TPP).

2) The blueprint is on for “all-round connectivity,” in Xi’s words – which implies Beijing setting up the Asian Infrastructure Investment Bank; Beijing and Moscow committing to a second mega gas deal – this one through the Altai pipeline in Western Siberia; and China already funneling no less than $40 billion to start building the Silk Road Economic Belt and the 21st Century Maritime Silk Road.

World leaders take their seats as China's President Xi Jinping (C) prepares to deliver opening remarks at the Asia-Pacific Economic Cooperation (APEC) leaders' meeting at the International Convention Center at Yanqi Lake in Beijing, November 11, 2014 (Reuters / Pablo Martinez Monsivais)

World leaders take their seats as China’s President Xi Jinping (C) prepares to deliver opening remarks at the Asia-Pacific Economic Cooperation (APEC) leaders’ meeting at the International Convention Center at Yanqi Lake in Beijing, November 11, 2014 (Reuters / Pablo Martinez Monsivais)

Once again, everything converges towards the most spectacular, ambitious and wide-ranging pluri-national infrastructure offensive ever attempted: the multiple New Silk Roads – a complex network of high-speed rail, pipelines, ports, fiber optic cables and state of the art telecom that China is already building through the Central Asian -stans, linked to Russia, Iran, Turkey and the Indian Ocean, and branching out to Europe all the way to Venice and Berlin.

That’s Beijing interlinking Xi’s “Asia-Pacific Dream” way beyond East Asia, with eyes set on pan-Eurasia trade – with the center being, what else, the Middle Kingdom.

The “Go West” campaign was officially launched in China in the late 1990s. The New Silk Roads are a turbocharged “Go West” – and “Go South” – expanding markets, markets, markets. Think of near future Eurasia as a massive Chinese Silk Belt – in some latitudes in a condominium with Russia.
You want your war hot or cold?

As Beijing dreams, Noam Chomsky has been very vocal about a 1914-style chain reaction of catastrophic blunders – by the West – that could fast spin out of control; and the stakes, once again, are nuclear. Moscow absolutely abhors this gruesome possibility – and that explains why Russia, under relentless US provocation, as well as sanctions, has exercised titanic restraint. Not only can Russia not be “isolated” as the US attempted with Iran; Moscow also called the US neo-cons’ bluff in Ukraine.

At the Valdai Club meeting in Sochi, President Putin, in a crucial speech (text plus Q&A) obviously ignored by Western corporate media, drew the necessary conclusions. The Washington/Wall Street elites have absolutely no intention of allowing a minimum of multipolarity in international relations. What’s left is chaos. That’s what I’ve been arguing, over different strands, during the Obama administration years, and is at the center of my new book “Empire of Chaos”.

Moscow knows all about the complex interlinks with Europe – especially Germany – and with the still fading, but still influential, Washington Consensus. And yet Russia holds the trump card of being a Eurasian power; when in trouble, there could always be a pivoting to Asia.

Gorbachev was spot on in Berlin when he stressed how, breaking the promise personally made to him by Bush the father, NATO embarked on an eternal eastward expansion; and how the West – essentially the US plus a few European vassals – now seems obsessed in launching a new cold war, with the new Berlin Wall – metaphorically – transplanted to Kiev.

Asia Pacific Economic Cooperation (APEC) leaders pose for a family photo at the International Convention Center at Yanqi Lake in Beijing, November 11, 2014 (Reuters / Kim Kyung-Hoon)

Asia Pacific Economic Cooperation (APEC) leaders pose for a family photo at the International Convention Center at Yanqi Lake in Beijing, November 11, 2014 (Reuters / Kim Kyung-Hoon)

Moscow pivoting away from the West and towards East Asia is a process developing on many levels – and for months now, for all to see. Acres of forest can be further devastated to print how the outcome has been directly influenced by Barack Obama’s self-described “Don’t Do Stupid Stuff” foreign policy doctrine, which he christened aboard Air Force One when coming from a trip to – once again – Asia last April.

On energy, the spin by the Financial Times of yet another Russia-China mega gas deal as “Putin’s revenge” is proverbial rubbish. Russia is turning east because that’s where the top demand is. On finance, Moscow has just ended the pegging of the ruble to the US dollar and euro; the US dollar instantly dropped against the ruble. VTB for its part announced it may leave the London Stock Exchange for Shanghai’s – which is about to become directly linked to Hong Kong. And Hong Kong, for its part, is already attracting Russian energy giants.

Now mix these key developments with the massive yuan-ruble energy double deal, and the picture is of Russia actively protecting itself from speculative/politically motivated Western attacks against its currency.

The Russia-China symbiosis/strategic partnership visibly expands on energy, finance and, also inevitably, on the military technology front. That includes, crucially, Moscow selling Beijing the S-400 air defense system and, in the future, the S-500.

The S-500 system can intercept any American ICBMs or cruise missiles, while the Russian ICBMs deployed at Mach 17, equipped with MIRVs, are simply unbeatable. Beijing, for its part, is already developing its own surface-to-ship missiles that can take out everything the US Navy can muster – from aircraft carriers to submarines and mobile air defense systems.
Join the caravan

Strategically, Beijing and Washington could not but be polar opposites in what I called the birth of the Eurasian century.

Beijing has clearly identified Washington/Wall Street fighting to the death to preserve the short unipolar moment. China – and the BRICS – is working towards what Xi defined as a “new model of great power relations.” The Washington/Wall Street mindset is “either/or” instead of “win-win”; the self-appointed Masters of the Universe believe they can always monopolize the loot because Russia – and then China – eventually will back down to avoid confrontation. This is the key aspect of Asia-Pacific today somewhat resembling 1914 Europe.

China's President Xi Jinping delivers opening remarks at the Asia-Pacific Economic Cooperation (APEC) leaders' meeting at the International Convention Center at Yanqi Lake in Beijing, November 11, 2014 (Reuters / Pablo Martinez Monsivais)

China’s President Xi Jinping delivers opening remarks at the Asia-Pacific Economic Cooperation (APEC) leaders’ meeting at the International Convention Center at Yanqi Lake in Beijing, November 11, 2014 (Reuters / Pablo Martinez Monsivais)

With this kind of stuff passing for “analysis” in US academic circles, and with the Washington/Wall Street elites through their myopic Think Tank land still clinging to mythical platitudes such as the “historical” American role as arbiter of modern Asia and key balancer of power, no wonder public opinion in the West cannot even imagine the impact of the New Silk Roads in the geopolitics of the young 21st century.

A quarter of a century after the fall of the Berlin Wall the US, for all practical purposes, is run by an oligarchy. Europe is geopolitically irrelevant. “Democracy” has been degraded to self-parody in most of the West. “Humanitarian” – as well as neo-con – imperialism in Iraq, Libya, Syria, and beyond has led to disaster after disaster. Financial turbo-capitalism is a time bomb.

Russia and China may not be proposing an alternative system – yet. Still, as the dogs of war, of hate, of inequality – bark, the China-Russia caravan passes. The caravan is selling Eurasia economic integration – not bombs. Real Asia-Pacific integration may still be a long dream away. Yet what APEC has shown – graphically – once again is the spectacular implosion, in slow motion, of the former indispensable nation’s geopolitical dominance.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.
1.6K2339

Russian companies ‘de-dollarize’ and switch to yuan, other Asian currencies

Reuters/Petar Kujundzic

Reuters/Petar Kujundzic

Russia will start settling more contracts in Asian currencies, especially the yuan, in order to lessen its dependence on the dollar market, and because of Western-led sanctions that could freeze funds at any moment.

“Over the last few weeks there has been a significant interest in the market from large Russian corporations to start using various products in renminbi and other Asian currencies, and to set up accounts in Asian locations,” Pavel Teplukhin, head of Deutsche Bank in Russia, told the Financial Times, which was published in an article on Sunday.

Diversifying trade accounts from dollars to the Chinese yuan and other Asian currencies such as the Hong Kong dollar and Singapore dollar has been a part of Russia’s pivot towards Asian as tension with Europe and the US remain strained over Russia’s action in Ukraine.

Since Crimea voted to rejoin Russia, the US government has imposed Cold War era sanctions, which have hurt the Russian economy and have slowed lending and investment activity.

VTB, Russia’s second largest bank, intends to increase the amount of non-dollar settlements, according to the bank’s president Andrey Kostin.

In May, Russia’s biggest gas producer, Gazprom, announced it wants to start trading shares in Singapore, obtaining a listing as early as July, the company said. Just before that Russia’s state-owned gas giant inked a $400 billion gas deal with China.

“Given the amount of bilateral trade volume with China, of course, we are working on the expansion of settlement in rubles and yuan,” Kostin said at a meeting with Russian President Vladimir Putin, adding this is a goal the bank has been moving towards since May.

Russia's Universal electronic card based on PRO100 payment system, RIA Novosti/Maksim Bogovid

Russia’s Universal electronic card based on PRO100 payment system, RIA Novosti/Maksim Bogovid

A NEW PAYMENT PLAN

Russia’s main tasks are expanding currency operations and creating Russia’s own forthcoming national payment system.

The Central Bank of Russia is working on creating a national payment system, which both China and Japan have already established, and is expected to be up and running within four months.

Alexander Dyukov, the CEO of Gazprom Neft, the oil division of Gazprom, has been very vocal about ditching the dollar over escalating pressure from the West.

“This shows that in principle there is nothing impossible – you can switch from dollar to euro and from euro, in principle, to rubles,” Vedomosti quotes Mr. Dyukov.

He has also said the company has discussed with customers the possibility of shifting contracts out of dollars, while Norilsk Nickel told the FT that it was discussing denominating long-term contracts with Chinese consumers in renminbi.

As of now, Russia is not preparing any countermeasures against the West, Putin’s chief advisor to the EU, Andrey Belousov has said.

“As long as Russia is not subject to systemic sanctions, which could bring an artificial limit to our economy’s access to dollars . . . then I don’t think Russia will take any steps in order to bring about artificial de-dollarization,” the FT quoted Belousov as saying.

Another swift move Russia has made towards Asia is the establishment of a joint rating agency with China, to replace more “biased” agencies like Fitch, Moody’s, and Standard & Poor’s.

The bullying of Hungary – the country that dared to disobey the US and EU

Reuters / Karoly Arvai

Reuters / Karoly Arvai

RT QUESTION MORE

25 years ago, Hungary was being toasted in the West for opening its border with Austria to East Germans, in a move which led to the fall of the Berlin Wall. Now the Western elites are not happy with Budapest which they consider far too independent.

The refusal of Prime Minister Viktor Orban and his ruling Fidesz party to join the new US and EU Cold War against Russia, which has seen the Hungarian parliament approving a law to build the South Stream gas pipeline without the approval of the European Union, in addition to the populist economic policies Fidesz has adopted against the largely foreign owned banks and energy companies, has been met with an angry response from Washington and Brussels.

Hungarian officials have been banned from entering the US, while the European Commission has demanded that the Hungarians explain their decision to go ahead with South Stream. That’s on top of the European Commission launching legal action against the Hungarian government for its law restricting the rights of foreigners to buy agricultural land.

The bullying of Hungary hasn’t made many headlines because it’s so-called “democrats” from the West who have been doing the bullying.

Viktor Orban is not a communist, he is a nationally-minded conservative who was an anti-communist activist in the late 1980s, but the attacks on him and his government demonstrate that it doesn’t matter what label you go under – if you don’t do exactly what Uncle Sam and the Euro-elite tell you to do – your country will come under great pressure to conform. And all of course in the name of “freedom” and “democracy.”

Fidesz has been upsetting some powerful people in the West ever since returning to power in 2010. The previous “Socialist”-led administration was hugely popular in the West because it did everything Washington and Brussels and the international banking set wanted. It imposed austerity on ordinary people, it privatized large sections of the economy, and it took out an unnecessary IMF loan. Ironically, the conservative-minded Fidesz party has proved to be much better socialists in power than the big-business and banker friendly “Socialists” they replaced.

One of the first things that Fidesz and its coalition allies, the Christian Democratic People’s Party, (KDNP) did was to introduce an $855m bank tax – the highest such tax in Europe – a measure which had the financial elite foaming at the mouth.

Orban clashed with the IMF too, with his government rejecting new loan terms in 2012, and paying off early a loan taken out by the previous government, to reduce interest payments.

Hungary's Prime Minister Viktor Orban (Reuters / Bernadett Szabo)

Hungary’s Prime Minister Viktor Orban (Reuters / Bernadett Szabo)

In 2013, Orban took on the foreign-owned energy giants with his government imposing cuts of over 20% on bills. Neoliberals expressed their outrage at such “interventionist” policies, but under Orban, the economy has improved. Although it’s true that many still look back nostalgically to the days of “goulash communism” in the 1970s and 80s when there were jobs for all and food on the table for everyone. Unemployment fell to 7.4 percent in the third-quarter of this year; it was around 11 percent when Fidesz took power, while real wages rose by 2.9 percent in the year up to July.

The man his enemies called the “Viktator,” has shown that he will pursue whatever economic policies he believes are in his country’s national interest, regardless of the opinions of the western elite who want the Hungarian economy to be geared to their needs.

His refusal to scrap his country’s bank tax is one example; the closer commercial links with Russia are another. Russia is Hungary’s third biggest trading partner and ties between the two countries have strengthened in the last couple of years, to the consternation of western Russophobes. In April, a deal was struck for Moscow to loan Hungary €10 billion to help upgrade its nuclear plant at Paks.

Orban’s policy of improving trade and business links with Russia, while staying a member of the EU and NATO, has however been put under increasing strain by the new hostile policy towards Moscow from Washington and Brussels.

Orban again, has annoyed the West by sticking up for Hungary’s own interests. In May he faced attack when he had the temerity to speak up for the rights of the 200,000 strong Hungarian community living in Ukraine.”Ukraine can neither be stable, nor democratic, if it does not give its minorities, including Hungarians, their due. That is dual citizenship, collective rights and autonomy.” Hungary’s Ambassador was summoned to the Foreign Ministry in Kiev. Donald Tusk, Prime Minister of Poland, the US’s most obedient lapdog in Eastern Europe, called Orban’s comments “unfortunate and disturbing” as if it was anything to do with him or his country.

In August, Orban accurately described the sanctions policy of the West towards Russia as like “shooting oneself in the foot.”“The EU should not only compensate producers somehow, be they Polish, Slovak, Hungarian or Greek, who now have to suffer losses, but the entire sanctions policy should be reconsidered,” Orban said.

In October, Hungarian Foreign Minister Peter Szijjarto also questioned the sanctions on Russia, revealing that his country is losing 50 million forints a day due to the policy.

Hungary has made its position clear, but for daring to question EU and US policy, and for its rapprochement with Moscow, the country has been punished.

It’s democratically elected civilian government which enjoys high levels of public support, has ludicrously – and obscenely – been likened to military governments which have massacred their opponents. “From Hungary to Egypt, endless regulations and overt intimidation increasingly target civil society,” declared US President Barack Obama in September.

Last month there was another salvo fired at Hungary – it was announced that the US had banned six unnamed Hungarian government officials from entering America, citing concerns over corruption- without the US providing any proof of the corruption.

RIA Novosti / Ramil Sitdikov

RIA Novosti / Ramil Sitdikov

At a certain point, the situation, if it continues this way, will deteriorate to the extent where it is impossible to work together as an ally,” warned the Charge D’Affaires of the US Embassy in Budapest, Andre Goodfriend. The decision and the failure to provide any evidence, understandably caused outrage in Hungary. “The government of Hungary is somewhat baffled at the events that have unfolded because this is not the way friends deal with issues,” said Janos Lazar, Orban‘s chief of staff.

The timing of the ban has to be noted, coming after the Hungarian government had criticized the sanctions on Russia and just before the national Parliament was due to vote on the South Stream pipeline. The pipeline, which would allow gas to be transported from Russia via the Black Sea and the Balkans to south and central Europe without passing through Ukraine, is a project which Russophobes in the West want cancelled.

“I am inclined to think that it is a punishment for the fact that we talk to Russia,” said Gabor Stier, the head foreign policy editor of the leading Hungarian newspaper Magyar Nemzet.

“America thinks that we are corrupt, but we are a sovereign state, and it is our business. Many people in the United States do not like that Viktor Orban is very independent…..Corruption is just an excuse.”

It’s hard to disagree with Stier’s conclusions. Of course, there is corruption in Hungary, as there is in every country, but it pales in comparison with some countries who are faithful US allies and who Washington never criticizes. The 2013 Corruption Perceptions Index compiled by Transparency International, reveals that Latvia, the Czech Republic, Croatia, Romania, Bulgaria and Bosnia-Herzegovina are all below Hungary, as indeed is Italy. Yet it’s Hungarian officials that the US is banning.

True to form, the attacks on Orban and his government in the Western media have chimed with the political attacks. ‘Is Hungary, the EU’s only dictatorship?’ asked Bloomberg View in April. The BBC ran a hostile piece on Orban and Fidesz in October entitled Cracks Emerge in leading party, and which referred to “government corruption” and “the playboy lifestyle of numerous party officials.”

The piece looked forward to the end of Fidesz rule.

While earlier this week, the New York Times published an OpEd by Kati Marton, whose late husband Richard Holbrooke, was a leading US diplomat, entitled Hungary’s Authoritarian Descent. You’d never guess that the Hungarian government wasn’t the flavor of the month in the West would you?

Russian Foreign Minister Sergei Lavrov, left, and Hungarian Prime Minister Viktor Orban at their meeting in Budapest (RIA Novosti / Eduard Pesov)

Russian Foreign Minister Sergei Lavrov, left, and Hungarian Prime Minister Viktor Orban at their meeting in Budapest (RIA Novosti / Eduard Pesov)

The question which has to be asked is: will Hungary be the next country to be the target of a US/EU sponsored regime change?

We all know what happened to the last Viktor who refused to sever links with Russia. Will Orban suffer the same fate as Ukraine’s Yanukovich? There are good reasons for believing that he won’t.

Fidesz did make a mistake by announcing the introduction of a new internet tax last month, which brought thousands onto the streets to protest but they have since dropped the plans and the problem for the US and EU is that Orban and his government remain too popular. In October’s local elections Fidesz won 19 of Hungary’s 21 larger towns and cities, including the capital city Budapest, not bad for a party that‘s been in power since May 2010.

Orban’s brand of economic populism, combined with moderate nationalism, goes down well in a country where people remember just how awful things were when the neoliberal “Socialists” were in power. His style of leadership may be authoritarian, but Hungarians prefer having a leader who has cut fuel bills and reduced unemployment to one who mouths platitudes about “liberal democracy” but who imposed harsh austerity measures and leaves them unable to afford the daily essentials.

Moreover Hungary, is already a member of the EU and NATO unlike Ukraine under Yanukovich and isn’t about to leave either soon. On a recent visit to America Foreign Minister Peter Szijjarto told the US TODAY newspaper “US is our friend, US is our closest ally.” The US clearly wants more from Hungary than just words, but while both Washington and Brussels would like to see a more obedient government in Budapest, the “liberal” and faux-left parties they support simply don’t have enough popular support for the reasons outlined above. And things would be even worse for the West if the radical nationalist party Jobbik, the third largest party in Parliament, and which made gains in October’s local elections, came to power- or if there was a genuine socialist/communist revival in the country. The fact is that Orban is in a very strong position and he knows it. That’s why he feels able to face down the threats from abroad and maintain a level of independence even though total independence is impossible within the EU and NATO.

We can expect the attacks on Orban and his government to intensify but the more the West attacks, the more popular Orban, who is able to present himself as the defender of Hungary’s national interests, becomes.

Hungary gave the West everything it wanted in 1989, and, as I pointed out here, its “reform” communist leadership was richly rewarded. But in 2014 it’s a very different story. In the interests of democracy and small countries standing up to bullying by powerful elites, long may Hungary’s spirited defiance continue.

Hajra, magyarok! Hajra Magyarorszag! [ Hurrah Hungarians! Hurrah Hungarians! ]

We’ve agreed to Ukraine gas delivery terms’ – Russia’s President Vladimir Putin

Ukraine and Russia agree on $385 gas price for winter

 

Reuters / Gleb Garanich

Reuters / Gleb Garanich

 

RT news

Published October 20, 2014

 

Moscow and Kiev have confirmed the price of Russian gas to Ukraine until the end of March at $385 per 1,000 cubic meters, according to both Ukrainian President Petro Poroshenko and Russian Foreign Minister Sergey Lavrov.

“We have agreed on a price for the next 5 months, and Ukraine will be able to buy as much gas as it needs, and Gazprom is ready to be flexible on the terms,” Lavrov said Monday at a public lecture.

Russia’s foreign minister dispelled rumors of two separate prices, one for winter and one for summer.

“At the Europe-Asia summit in Milan, there was no talk of summer or winter gas prices, but just about the next 5 months,” the foreign minister said.

Included in the $385 price is a $100 discount by Russia. Ukraine is still insisting on a further discount, asking for $325 for ‘summer prices’ after the 5-month winter period.

“We talked about how there should be two prices, like how the European spot market has two prices, a winter price when demand is high, and summer when demand is low. Our joint proposal with the EU was the following: $325 per thousand cubic meters in the summer and $385 per thousand cubic meters in the winter,“ Poroshenko said in an interview on Ukrainian television Saturday.

President Poroshenko and Russian President Vladimir Putin reached a preliminary agreement in Milan on Friday for the winter period, but Russia won’t deliver any gas to its neighbor without prepayment.

Gas talks are expected to continue Tuesday in Berlin between the energy ministers of Russia, Ukraine, and the EU. On September 26, the three energy ministers agreed to provide 5 billion cubic meters to Ukraine on a “take-or-pay” contract, to help the country survive the winter months.

The so-called winter plan is contingent on Ukraine starting to repay at least $3.1 billion worth of debt to Gazprom.

Ukraine is still looking for funding to pay for the gas supplies as well as its $4.5 billion arrears to Russia’s state-owned gas company. Moscow reduced the debt from $5.5 billion to $4.5 billion, calculating in the discount of gas, Putin said on Friday.

Moscow believes the European Commission or the International Monetary Fund should provide loans for this purpose.

Russia turned off the gas to Europe via Ukraine in 2006 and in 2009, over similar pricing disputes with Kiev. This poses a risk to Europe, which receives 15 percent of its gas through Ukraine.

 

 

 

 

 

France sets new budget, rejecting German austerity plan – Revolt in the Eurozone

 French Finance Minister Michel Sapin (Reuters / Philippe Wojazer)


French Finance Minister Michel Sapin (Reuters / Philippe Wojazer)

RT News

France’s new budget plan brings the deficit to below the EU limit of 3 percent of GDP by 2017, defying Germany’s austerity program.

Adoption of the document comes as there is new evidence of the country’s disagreement over the austerity policy led by Europe’s strongest economy, Germany.

Paris has taken the decision “to adapt the pace of deficit reduction to the economic situation of the country,” Finance Minister Michel Sapin told reporters on Wednesday.

“Our economic policy is not changing, but the deficit will be reduced more slowly than planned due to economic circumstances – very weak growth and very weak inflation,” he said.

Under the new budget plan, the public deficit is set to fall from 4.4 percent of output this year to 4.3 percent next year, 3.8 percent in 2016 and 2.8 percent in 2017.

The new budget plan still runs counter to earlier promises by Paris to lower the deficit to less than 3 percent by the second deadline set for next year. The first deadline was previously set for 2013, but extended.

“No further effort will be demanded of the French, because the government – while taking the fiscal responsibility needed to put the country on the right track – rejects austerity,” the budget statement made by Paris read.

However, Paris has committed to government cuts of public spending 21 billion euro by next year and 50 billion euro by 2017 on Wednesday. Still, Sapin said that France will not further extend the cuts as it would badly hit the economy.

Meanwhile, German Chancellor Angela Merkel urged at a media conference in Berlin “everyone to fulfill their commitments and obligations in a credible way,” saying that Europe is still “not at the point where we can say the crisis is fully behind us.”

While Merkel did not particularly point at Paris, Germany’s main exporters’ association, the BGA, accused France of putting the European economy at risk.

“If that country doesn’t figure a way out of the downward spiral, the euro and therefore Europe are at risk,” BGA president Anton Boerner said, according to his statement cited by Reuters.

In August, Hollande asked French Prime Minister Manuel Valls’ to form a new government following tensions within his cabinet over the country’s economic policy.

The decision came after strong criticism of the country’s economic direction which, according to former Economics Minister Arnaud Montebourg, has hindered France’s development.

He frontally attacked Merkel for imposing “austerity policy” across Europe calling for a “major shift.”

“My responsibility as economy minister is to tell the truth, and observe…that not only are these austerity policies not working but they are also unfair,” Montebourg said in a statement at a media conference on August 25.

Germany’s attempts to resurrect the EU’s economy after the 2008 financial crisis have been marked by cutbacks and taxation. The austerity plan has proven to be severely unpopular in the eurozone, still struggling with economic weakness.