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... Russian presidential adviser Sergei Glazyev proposed plan of 15 measures to protect country’s economy if sanctions applied, Vedomosti newspaper reports, citing Glazyev’s letter to Finance Ministry. According to Vedomosti as Bloomberg reported, Glazyev proposed:
- Russia should withdraw all assets, accounts in dollars, euros from NATO countries to neutral ones
- Russia should start selling NATO member sovereign bonds before Russia’s foreign-currency accounts are frozen
- Central bank should reduce dollar assets, sell sovereign bonds of countries that support sanctions
- Russia should limit commercial banks’ FX assets to prevent speculation on ruble, capital outflows
- Central bank should increase money supply so that state cos., banks may refinance foreign loans
- Russia should use national currencies in trade with customs Union members, other non-dollar, non-euro partners
... if Russia were to take the baton, and other BRIC countries, already furious by the recent US decision to not boost their IMF status, follow suit, then Obama's life is about to become a living nightmare. Especially, if that most important BRIC member - China - does any of the many things it can do to indicate if, in this brand new Cold War, it is with or against the US...
Several Russian media outlets have reported that Russia, Kazakhstan and Belarus, that currently form the Eurasian customs union, will sign an agreement in May to accelerate the formation of an economic union and a joint currency: Altyn.
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Russia’s economy is eight times smaller than that of the US, but by forming a new ‘empire’ on top of a vast amounts of resources this economic block will be a serious threat for the US petrodollar. Russia is now speaking openly about getting rid of the US dollar for trading energy, it’s building its own payment system and closing gas export deals with China - the other Asian empire. The Eurasian Economic Union will be a powerful stab at the US dollar hegemony.
By the way, in Kazakhstan “Altyn” means … gold.
The US dollar's position as the base currency for global energy trading gives the US a number of unfair advantages. It seems that Moscow is ready to take those advantages away.
The existence of "petrodollars" is one of the pillars of America's economic might because it creates a significant external demand for American currency, allowing the US to accumulate enormous debts without defaulting. If a Japanese buyer wants to buy a barrel of Saudi oil, he has to pay in dollars even if no American oil company ever touches the said barrel. Dollar has held a dominant position in global trading for such a long time that even Gazprom's natural gas contracts for Europe are priced and paid for in US dollars. Until recently, a significant part of EU-China trade had been priced in dollars.
Lately, China has led the BRICS efforts to dislodge the dollar from its position as the main global currency, but the "sanctions war" between Washington and Moscow gave an impetus to the long-awaited scheme to launch the petroruble and switch all Russian energy exports away from the US currency .
The main supporters of this plan are Sergey Glaziev, the economic aide of the Russian President and Igor Sechin, the CEO of Rosneft, the biggest Russian oil company and a close ally of Vladimir Putin. Both have been very vocal in their quest to replace the dollar with the Russian ruble. Now, several top Russian officials are pushing the plan forward.
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According to the Prime news agency, on April 24th the government organized a special meeting dedicated to finding a solution for getting rid of the US dollar in Russian export operations. Top level experts from the energy sector, banks and governmental agencies were summoned and a number of measures were proposed as a response for American sanctions against Russia.
The"de-dollarization meeting” was chaired by First Deputy Prime Minister of the Russian Federation Igor Shuvalov, proving that Moscow is very serious in its intention to stop using the dollar. A subsequent meeting was chaired by Deputy Finance Minister Alexey Moiseev who later told the Rossia 24 channel that"the amount of ruble-denominated contracts will be increased”, adding that none of the polled experts and bank representatives found any problems with the government's plan to increase the share of ruble payments.
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Russia reached a $400 billion deal to supply natural gas to China through a new pipeline over 30 years, a milestone in relations between the world’s largest energy producer and the biggest consumer.
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Eric King: “Dr. Roberts, there is this International Economic Forum in St. Petersburg (Russia). I know the U.S. has pulled out, but does the high level of attendance, despite Washington’s pressure, indicate fading U.S. influence?”
Dr. Roberts: “Yes. One of the advisors to Putin had publicly complained that Washington had put unprecedented pressure on American and European countries not to attend. But it turns out that present at this forum, which began yesterday and continues today and tomorrow, there are official delegations from 62 countries, and the CEOs of 146 of the major companies in the world....
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... it does mean that the dollar will be more vulnerable because the exercise of the United States, publicly, by its power, has been diminished by the response of other countries.”
Eric King: “Ben, I know you had a chance to meet former Greek Prime Minister George Papandreou very recently. It was fascinating what transpired. Can you share that with KWN listeners (and readers) around the world?”
Davies: “Yes. It was very interesting. I was at a conference listening to him speak. He very kindly gave me a small audience afterwards. I found it very revealing. I asked a very contentious question and he had the good grace to answer it in a very thoughtful manner....
“What I actually asked him was, “Were you aware of the comments by the former Bundesbank Vice President and former ECB (European Central Bank) board member, Jürgen Stark, where he suggested that the entire financial system is ‘pure fiction’ and that it was vulnerable to a collapse because of all this infinite money that’s been created?” I went on to ask, “Had policymakers at the highest level discussed a change of the monetary order when you were in charge of the Greek political system?”
He (Papandreou) was very thoughtful about this. He said to me, “Yes, beyond austerity, beyond reforms, there had been deep conversations about how to change the monetary order.” I asked, “Did this include a gold standard?” What he told me was, “It was about exploring a basket of currencies that could involve an asset like that (gold).”
I asked, “Are you referring to an SDR (Special Drawing Right)?” And he said, “Yes. It would be along those lines.” He wasn’t trying to hide anything. He was very candid about it. But it was a very interesting exchange. It’s not often that you have these conversations.”
... Putin advisor Sergey Glazyev ... published an article in Russian Argumenty Nedeli, in which he outlined a plan for "undermining the economic strength of the US" in order to force Washington to stop the civil war in Ukraine. Glazyev believes that the only way of making the US give up its plans on starting a new cold war is to crash the dollar system.
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Glazyev's set of countermeasures specifically targets the core strength of the US war machine, i.e. the Fed's printing press. Putin's advisor proposes the creation of a "broad anti-dollar alliance" of countries willing and able to drop the dollar from their international trade. Members of the alliance would also refrain from keeping the currency reserves in dollar-denominated instruments. Glazyev advocates treating positions in dollar-denominated instruments like holdings of junk securities and believes that regulators should require full collateralization of such holdings. An anti-dollar coalition would be the first step for the creation of an anti-war coalition that can help stop the US' aggression.
Unsurprisingly, Sergey Glazyev believes that the main role in the creation of such a political coalition is to be played by the European business community because America's attempts to ignite a war in Europe and a cold war against Russia are threatening the interests of big European business. Judging by the recent efforts to stop the sanctions against Russia, made by the German, French, Italian and Austrian business leaders, Putin's aide is right in his assessment. Somewhat surprisingly for Washington, the war for Ukraine may soon become the war for Europe's independence from the US and a war against the dollar.
China has announced it will allow the direct trade between its yuan national currency and the British pound later this week. Analysts said the move was designed to further internationalize the unit.
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Sterling and yuan would be directly swapped without using the US dollar as an intermediary, the trade platform noted.
"The move will promote the bilateral trade and investment between China and the United Kingdom and facilitate the use of renminbi and pound in the cross-border trade settlement," CFETS commented.
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A little over a month ago, when Russia announced the much anticipated "Holy Grail" energy deal with China, some were disappointed that despite this symbolic agreement meant to break the petrodollar's stranglehold on the rest of the world, neither Russia nor China announced payment terms to be in anything but dollars. ... This changed rather dramatically overnight when in a little noticed statement, Gazprom's CFO Andrey Kruglov uttered the magic words (via Bloomberg):
GAZPROM READY TO SETTLE CHINA CONTRACTS IN YUAN OR RUBLES: CFO
In other words just as the US may or may not be preparing to export crude - a step which would weaken the dollar's reserve status as traditional US oil trading partners will need to find other import customers who pay in non-USD currencies - the world's two other superpowers are preparing to respond. And once the bilateral trade in Rubles or Renminbi is established, the rest of the energy world will piggyback.
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But wait, there's still more, because it is not just Gazprom. As the PBOC announced overnight, PBOC Assistant Governor Jin Qi and Russian central bank Deputy Chairman Dmitry Skobelkin led a meeting held yesterday and today in Shanghai. The meeting discussed cooperating on project and trade financing using local currencies. The meeting discussed cooperation in bank card, insurance and financial supervision sectors.
In other words, central bankers of China and Russia discussed how to replace the dollar with Rubles and Yuan. ...
Before the crucial visit to Beijing next week, the governor of the Russian Central Bank, Elvira Nabiullina met Vladimir Putin to report on the progress of the upcoming ruble-yuan swap deal with the People's Bank of China and the Kremlin used the meeting to let the world know about the technical details of its international anti-dollar alliance.
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It seems that the Kremlin chose the all-in-one approach for establishing its anti-dollar alliance. Currency swaps between the BRICS central banks will facilitate trade financing while completely bypassing the dollar. At the same time, the new system will also act as a de facto replacement of the IMF, because it will allow the members of the alliance to direct resources to finance the weaker countries. As an important bonus, derived from this "quasi-IMF" system, the BRICS will use a part (most likely the "dollar part") of their currency reserves to support it, thus drastically reducing the amount of dollar-based instruments bought by some of the biggest foreign creditors of the US.
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France's political and business establishment has hit out against the hegemony of the dollar in international transactions after US authorities fined BNP Paribas $9 billion for helping countries avoid sanctions.
Michel Sapin, the French finance minister, called for a "rebalancing" of the currencies used for global payments, saying the BNP Paribas case should "make us realise the necessity of using a variety of currencies."
He said, in an interview with the Financial Times on the sidelines of a weekend economics conference: Europeans "are selling to ourselves in dollars, for instance when we sell planes. Is that necessary? I don't think so. I think a rebalancing is possible and necessary, not just regarding the euro but also for the big currencies of the emerging countries, which account for more and more of global trade."
Christophe de Margerie, the chief executive of Total, France's biggest company by market capitalisation, said he saw no reason for oil purchases to be made in dollars, even if the benchmark price in dollars was likely to remain.
"The price of a barrel of oil is quoted in dollars," he said. "A refinery can take that price and using the euro-dollar exchange rate on any given day, agree to make the payment in euros."
One chief executive of a CAC 40 industrial group said he supported Mr Sapin's push.
"Companies like ours are in a bind because we sell a lot in dollars but we do not always want to deal with all the US rules and regulations," he said.
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... via Bloomberg:
NOYER: BNP CASE WILL ENCOURAGE ‘DIVERSIFICATION’ FROM DOLLAR
Here is the full google translated segment:In other words, the head of the French central bank, and ECB member, Christian Noyer, just issued a direct threat to the world's reserve currency (for now), the US Dollar.Q. Doesn't the role of the dollar as an international currency create systemic risk?
Noyer: Beyond [the BNP] case, increased legal risks from the application of U.S. rules to all dollar transactions around the world will encourage a diversification from the dollar. BNP Paribas was the occasion for many observers to remember that there has been a number of sanctions and that there would certainly be others in the future. A movement to diversify the currencies used in international trade is inevitable. Trade between Europe and China does not need to use the dollar and may be read and fully paid in euros or renminbi. Walking towards a multipolar world is the natural monetary policy, since there are several major economic and monetary powerful ensembles. China has decided to develop the renminbi as a settlement currency. The Bank of France was behind the popular ECB-PBOC swap and we have just concluded a memorandum on the creation of a system of offshore renminbi clearing in Paris. We have very strong cooperation with the PBOC in this field. But these changes take time. We must not forget that it took decades after the United States became the world's largest economy for the dollar to replace the British pound as the first international currency. But the phenomenon of U.S. rules expanding to all USD-denominated transactions around the world can have an accelerating effect.
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Are we going to push Europe into Russia's (the BRIC's) corner on this issue?
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According to the NYT, the money laundering crackdown is "bound for another European financial center: Germany. State and federal authorities have begun settlement talks with Commerzbank, Germany’s second-largest lender, over the bank’s dealings with Iran and other countries blacklisted by the United States, according to people briefed on the matter. The bank, which is suspected of transferring money through its American operations on behalf of companies in Iran and Sudan, could strike a settlement deal with the state and federal authorities as soon as this summer, said the people briefed on the matter, who were not authorized to speak publicly.The contours of a settlement, which the authorities have only begun to sketch out, are expected to include at least $500 million in penalties for Commerzbank, the people added. Although prosecutors were still weighing punishments, the people briefed on the matter said that the bank would most likely face a so-called deferred prosecution agreement, which would suspend criminal charges in exchange for the financial penalty and other concessions.
It's not just Commerzbank - a settlement with the smaller bank will merely pave the way for the punishment of the biggest bank of all (in terms of groiss derivative notional held): Deutsche Bank.
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China designated a clearing bank in Seoul for yuan transactions in South Korea on Friday, coinciding with a visit by President Xi Jinping, as Beijing promotes greater use of its currency overseas, AFP reports.
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A joint communique endorsed Thursday by Xi and his South Korean counterpart Park Geun-Hye also pledged to strengthen efforts to launch direct trading between the yuan and the won.
Looks to be gaining both traction and speed now.
On July 21, Turkish Prime Minister Tayyip Erdogan spoke in an interview with Turkey's ATV television, and confirmed that his office had cut off direct communications with President Obama, and in fact, were no longer even answering calls received from the White House. In addition to this startling announcement regarding a long standing U.S. ally, the Russian Ministry of Economic Development followed this up with a press release that stated that Turkey was quickly moving away from their reliance on the dollar as the global reserve currency, and is seeking increased trade with Russia in a mutually beneficial exchange of self-contained sovereign currencies.
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President Vladimir Putin said on Thursday Russia should aim to sell its oil and gas for roubles globally because the dollar monopoly in energy trade was damaging Russia's economy.
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Not that you would know it by reading or viewing mainstream news last week, World War III took a very big leap towards going live. First, last Wednesday was the biggest news when Gazprom announced they would be selling oil and gas for rubles and yuan. We knew for a fact this was coming sooner or later, it has arrived. It is so important that you understand what this really means. This is the very first time since 1973 where oil will be traded with public terms NOT being dollars. Yes, Iran is and has been selling oil for gold and euros over the last couple of years but not “publicly” so to speak. Gazprom which is Russia’s equivalent to the American’s ExxonMobil has announced this publicly and as their new policy. ...
... Then came Friday, the U.S. proposed further sanctions and British Prime Minister Cameron proposed locking Russia out of the SWIFT system. ...
Russia and China are discussing setting up a system of interbank transactions which will become an analogue to International banking transaction system SWIFT, First Deputy Prime Minister Igor Shuvalov told PRIME on Wednesday after negotiations in Beijing.
“Yes, we have discussed and we have approved this idea,” he said.
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The issue of whether the Chinese should be part of the International Monetary Fund's Special Drawing Right, the composite reserve currency used in official financing, is highly technocratic, but the political questions at stake go to the core of world money and power -- and will be discussed, in the background, at the annual meetings of the IMF and World Bank in Washington this week.
The decision on a new SDR structure, to be made in the next 15 months, will influence how China and its currency can play a bigger part in driving world trade, investment, and capital flows. The renminbi eventually could challenge the dollar and its pivotal position in world money -- which is why the U.S. government and Federal Reserve are examining this with intense interest.
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... Russia has a not so modest proposal to Europe: dump trade with the US, whose call for Russian "costs" has cost you another year of declining economic growth, and instead join the Eurasian Economic Union! ...
... In fact, 2015 is the year in which the IMF's Special Drawing Rights conference is set to commence, with initial discussions in May, and international meetings in October. I believe U.S. veto power will probably be removed by May, making the way clear (creating the rationale) for the marginalization of the U.S. dollar in favor of the SDR basket currency system, soon to be boosted by China's induction.
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Russia’s response to a possible cut-off from the SWIFT international banking payment system will be “unrestricted,” Prime Minister Dmitry Medvedev vowed. The West is pushing for hitting Moscow with more sanctions as the Ukraine crisis deteriorates.
"We will see what happens, but of course if such decisions are made, I want to note that our economic reaction and generally any other reaction will be unrestricted," the Russian prime minister said on Tuesday, calling on the government to “work out concrete decisions which would help our economy in those conditions.”
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... SWIFT has said it does not intend to switch Russia off from the system, adding that a number of countries have pressured it to do so. It has insisted it is not joining the anti-Russian sanctions.
In October, Belgium-based SWIFT stressed it has “no authority to make sanctions decisions.”
At the end of last year, Andrey Kostin – the head of VTB Russia's second largest bank – warned that in his “personal opinion,” excluding Russia from the global SWIFT banking transaction system is another form of sanctions and would mean “war.”
Back in December, Russia's Central Bank launched a new SWIFT-style payment service aimed at moving away from Western financial dominance.
The possibility of cutting Russia out of SWIFT, as well as a list of other anti-Russia measures, will be on the table during a meeting of EU foreign ministers on January 29. To be imposed, the new sanctions must be approved by all 28 EU countries.
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If I were Putin, I would shut off all gas flow to Europe until the nannycrats in Brussels get cold enough to make the right choices.
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So the news this week that Russia has launched its own 'SWIFT'-alternative, linking 91 credit institutions initially, suggests de-dollarization is considerably further along than many expected ...
- Dollar has declined as reserve currency over past decade from 70% of global reserves to 61%
- Chinese yuan is growing in stature as international currency
- IMF deputy director calls for de-dollarization in emerging markets
- Many countries have begun de-dollarizing
- BRICS development bank – rivaling the IMF and World Bank – is now operational
Currency wars and the growing trend away from dollar dominance in international finance, particularly in emerging markets, was highlighted in an interesting CNBC article this morning entitled “Is the Dollar Losing its Clout Among EMs?”
It refers to the deliberate and stated policy of “de-dollarisation” around the world, the decline in the use of the dollar in international trade and as a reserve currency and the emergence of the new BRICS bank.
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... China's international payment system, known simply enough as China International Payment System (CIPS), which serves to process cross-border yuan transactions is ready, and may be launched as early as September or October.
According to Reuters, the launch of the will remove one of the biggest hurdles to internationalizing the yuan and should greatly increase global usage of the Chinese currency by cutting transaction costs and processing times.
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BERLIN, March 17 (Xinhua) -- China and Germany conducted their first high-level financial dialogue here on Tuesday and agreed to strengthen macro-economic policy coordination, develop policy dialogue and pragmatic cooperation in fiscal and financial areas.
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According to a joint statement after the dialogue, the German side will actively support China in hosting the G20 summit in 2016 and supports China's goal to add the RMB to the special drawing rights (SDR) currency basket based on existing criteria.
Germany also announced at the dialogue its intention to join the Asia Infrastructure Investment Bank (AIIB) as a prospective founding member. China welcomed this intention.
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China and Germany also support the establishment and development of an offshore RMB market and a local RMB clearing bank in Frankfurt and welcome German financial institutions using RMB qualified foreign institutional investors (RQFII) quota to invest in China's markets.
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The Asian Infrastructure Investment Bank [AIIB]. What is it? ... It will not just compete with the World Bank, a US- dominated financial entity, the AIIB will logically replace the World Bank in its own Asian sphere of influence.
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The AIIB will become a leading lender for new development, particularly in Asia where a lot of new growth and development is underway. ... without immersing those countries in unrepayble debt situations.
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Right after the UK came France, Italy, and Germany, all willing to join with China and the AIIB. ..., Australia chimed in, .... Expect South Korea, even Japan to also join in the AIIB’s constructive goals for world economic development. The number of countries that have already signed on is around 25, and growing.
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