BLACK BOX DEFENCE FOR THE RUSSIAN ECONOMY – DOLLAR DEBT REPAYMENTS BLOCKED; GAS AND OIL DELIVERIES TO GERMANY STOPPED; OLIGARCH ASSETS NATIONALIZED
By Sergei Glazyev, translated and introduced by John Helmer, Moscow
On Friday morning, February 25, Sergei Glazyev published the following analysis of US sanctions against the Russian economy and of the Russian options for defence and counter-attack.
Glazyev is a Russian state official with ministerial rank. He has served for many years as an economic policy adviser to President Vladimir Putin; since 2019 he is the minister for integration and macroeconomics of the Eurasian Economic Commission, the bloc of former Soviet states coordinating customs, central banking, trade and fiscal management policies together.
Glazyev, now 61, has also been the longest surviving force on the left of Russian policymaking since the end of the Soviet Union in 1991 and of Boris Yeltsin’s destruction of the Congress of People’s Deputies in 1993. He has been a consistent critic of the monetary policies of the Russian Central Bank; and of the oligarch system promoted by Anatoly Chubais, Alexei Kudrin, German Gref and their business allies in Moscow, and by the financial centres of New York and London. For 25 years they have proved stronger inside the president’s circle than Glazyev; they have persuaded Putin to overrule him publicly, then ignore and sideline him. Until now.
Commencing with Putin’s February 21 speech, the recognition of the Donetsk and Lugansk People’s Republics, and the commencement of the military campaign in the Ukraine, the management of the Russian economy has moved on to a war footing. In the interpretation of a leading European banker, the escalation of US and European Union (EU) sanctions intends to confiscate Central Bank assets and destroy all financial links between Russia and the west. He comments that nothing on this scale against a major world power has been attempted since President Franklin Roosevelt froze the foreign assets of Japan on July 26, 1941, and imposed an embargo on Japanese oil and gasoline imports six days later.
The new sanctions commenced on February 22 in response to Russian recognition of Donbass independence, and the signing of a treaty of military and economic cooperation. The first sanctions strike targeted two state banks; three sons of Russian state officials; and state bonds to be issued from Wednesday of this week.
The second-strike sanctions escalated on February 24 to “target the core infrastructure of the Russian financial system — including all of Russia’s largest financial institutions and the ability of state-owned and private entities to raise capital — and further bars Russia from the global financial system. The actions also target nearly 80 percent of all banking assets in Russia and will have a deep and long-lasting effect on the Russian economy and financial system.”
In addition, the targets were expanded to include for the first time state-owned Alrosa, the diamond producer and international diamond market maker; and Sovcomflot, the world’s largest energy tanker fleet operator. At the same time, the US Treasury said it would not block Russian payments for “agricultural and medical commodities and the COVID-19 pandemic; overflight and emergency landings; energy.”
The third strike began overnight between February 26 and 27. The White House announced the disconnection from the SWIFT interbank payments system for “selected Russian banks” . Russian press reporting has speculated that Sberbank and VTB will be disconnected, along with the other banks targeted on February 24. It is not clear whether Alfa Bank, the leading commercial bank owned by Mikhail Fridman, will appear on the SWIFT disconnection list.
The White House also announced the launch of “a multilateral Transatlantic task force to identify, hunt down, and freeze the assets of sanctioned Russian companies and oligarchs – their yachts, their mansions, and any other ill-gotten gains that we can find and freeze under the law.”
US and European Union officials are claiming that “restrictive measures that will prevent the Russian Central Bank (CBR) from deploying its international reserves” amount to a freeze on the Central Bank’s US dollar and Euro denominated holdings. As of January 31, the CBR reported holding $469 billion in foreign exchange. Of that aggregate, year-old CBR data suggest that 22% is in US dollars; 29% in Euros, and 6% in British pounds.
London banking sources and a leading oil trade figure believe that if the third-strike sanctions halt US dollar and Euro payments for Russian oil, gas, coal, titanium, palladium, diamonds, and other commodity exports, along with servicing of interest and principal loans, then the Russian side will stop all debt payments. They will also stop all deliveries to the US and Europe.
The domestic Russian political implications are not less dramatic; they are potentially revolutionary, though not in the direction US figures like Antony Blinken, Victoria Nuland, and William Burns have been calculating in public. Glazyev is one of the Russian revolutionaries they least want to see take power over the oligarchs now.(more…)