The horizon is not so far as we can see, but as far as we can imagine

Have Sanction Threats Brought Russia to Heel?

Russia has ended its claim to a right to protect Russians in the Ukraine.  Putin has supported the cease-fire.  And America and Germany have continued to threaten Russia with sanctions if the rebels in the Eastern Ukraine don’t lay down their arms.

In related news, the Supreme Court ruled against Argentina on its debt default, stating they must pay investors who did not take the deal offered by Argentina to pay part of their debt, not the whole.

These are related because of the payment system: Argentina can’t pay one set of investors (those who took the deal) except by using the payment system, which runs through New York. So they either default on everyone, or they have to pay the hold-outs.  But if they pay the hold-outs, those who took the deal will have been screwed, and Argentina’s sovereignty will be a joke.

As long as the US in particular, and the West in general controls the world payment system, they can inflict crippling sanctions on any country they choose.

Russia and China, and the BRIICS in general have made a huge mistake in not setting up their own, alternate payment system.  The Chinese have taken steps, but only steps.  Until there is an alternate payment system, no country except the US is truly sovereign.

Of course Putin may be playing for time, and he may still get what he wants: a federalized Ukraine (though, clearly, the Ukraine won’t join his customs union.)  And as IMF and EU austerity destroys the Ukraine, Russia may have another chance to pull the Ukraine back into its sphere.

Likewise, I imagine the Russians have learned this lesson: that they are not sovereign, and that they must arrange an independent payments system.



Stirling Newberry on Post-America




  1. Peter Hofmann

    You said: Putin in Vienna:

    “VIENNA, June 24, 22:07 /ITAR-TASS/. Russia will still take heed of events in Ukraine after revocation of the parliament-given permission to use Russia’s armed forces in the neighboring country, Russian President Vladimir Putin said Tuesday.

    “Cancelation of the resolution on the right to use force does not at all mean that we are not going to pay attention to what is going on there,” Putin said after talks with Austrian President Heinz Fischer.

    “We will always defend both ethnic Russians in Ukraine and the part of the Ukrainian population, Ukrainian people, which feels its inseparable, not only ethnic but also cultural and language, bonds with Russia,” he said.

    Putin emphasized that Moscow would not only attentively watch but would “react in a proper way.” “I hope the armed forces will not be needed for that,” he said.

  2. markfromireland

    One of those steps is a credit ratings agency:

    Russia and China plan own rating agency to rival western players –

    Russia and China have agreed to set up a joint rating agency as Moscow’s stand-off with the west over Ukraine has made it more eager to establish institutions that would reduce its dependence on the US and Europe.

    “In the beginning, the agency will assess Russian-Chinese investment projects with a view to attracting of [investors from] a number of Asian countries,” Anton Siluanov, Russia’s finance minister, said in Beijing, according to his ministry. “Gradually, based on the progress and authority of such an agency, we believe it will rise to a level where its opinions will attract other countries.”

    The finance ministry did not give details on the timeframe and detailed conditions for the establishment of the agency, but people familiar with the plans said it was likely to involve Chinese rating agency Dagong and a state-backed institution from Russia.

    The Brics group of large developing countries – Brazil, Russia, India, China and South Africa – has long discussed plans to set up its own rating agency, along with a Brics bank. Member countries complain that globally dominant agencies such as S&P, Moody’s and Fitch focus on developed countries and fail to assess developing economies fairly.

    While earlier attempts at challenging the dominant western players have been slow to get off the ground, observers in Russia said they were optimistic the planned Russian-Chinese rating agency could win backing and be broadened into a Brics project at the group’s summit in Brazil next month.

    more at the link I’ve given the most important paragraphs in case you get stopped by the Financial Times’ irritatingly inconsistent paywall there’s also this from Reuters:

    Russia, China to create joint rating agency as ties grow | Reuters

    and this critique:

    What The Russia-China Credit Rating Agency Lacks: Credibility

    You pays your money and you takes your choice.


    I suspect a comment this number of links will trigger your spam system – so my apologies in advance for giving you extra work.


  3. markfromireland


    New rating agency project gets off the ground as Russia chooses partners | Russia Beyond The Headlines

    As you point out they also need payments system not in hock to western political pressure:

    Russia to create its own national payment system, Putin says – Yahoo Finance UK:

    President Vladimir Putin on Thursday said Russia should create its own national payment settlement system, in a bid to reduce economic dependence on the West amid the controversy over Moscow’s seizure of Crimea.

    “In countries such as Japan and China these systems work, and work very well,” Putin told lawmakers in televised remarks.

    “Initially, they started out solely as national systems limited to their own markets, their own territory, their own population but they are becoming more popular right now.”

    “Why should we not do it? We should definitely do it and we will do it,” he said, noting that Russia’s Central Bank and the government have been looking into the matter.

    Last week the United States hit more than 20 Russian officials, including some of Putin’s closest allies, with sanctions over Moscow’s takeover of Ukraine’s peninsula of Crimea. A lender described as a “crony bank” for the Russian elites, Bank Rossiya, was also blacklisted.

    As a result of punitive measures, several banks last week saw their customers barred from using Visa (NYSE: V – news) and MasterCard credit cards prompting talk among officials and lawmakers that Russia should create its own operational network.

    “It’s a great shame that some companies have taken a decision on certain restrictions,” Putin said.

    “I think it will simply lead to a loss of certain segments of the market for them, and a rather profitable market at that.”

    “We should protect our interests and we will do it.”

    Finance Minister Anton Siluanov said on Wednesday that the government had no plans so far to ditch Visa and MasterCard.

    “But at the same time we are beginning to pay more attention to the creation of our own payment settlement system.”

    I suspect that you’re right and that the current set of interlocking western-caused crises have taught Putin and Russia’s policy elite that they need to sharply reduce their vulnerability to economic warfare and they need to do this now.


    PS: Russia Beyond the Headlines is a very useful site so long as you retain a somewhat sceptical pov whilst reading.

  4. Sir, payment system is irrelevant.
    If USA, EU blocks/expropriates russian money, then Putin will grab land and he’s been doing that.

    Russian money was expropriated in Cypruss last year. Putin annexed Crimea.
    If more money gets expropriated, then Putin will grab more land.

    It’s just that simple.

  5. Russian money was expropriated in Cypruss last year.

    No it wasn’t. All that Russian oligarchic money made it back to Russia in the dead of night via the backdoor. Do your research.

    Wow, if you thought Western credit agencies were crooked, Chinese/Russian credit agencies will be absolutely serpentine.

    China’s built a bridge to nowhere. The thirty year gas deal with Russia’s a joke. That agreement will be broken in under a decade. China and Russia are on the verge of implosion and their actions will result in a much more punishing fall. Both are second world countries without the West, and they will be second world before too long at this rate.

  6. NotTimothyGeithner

    Given the state of U.S. imperialism at the moment, the best move would be for Putin to sit back and laugh. His opponents in the West are deeply unpopular and have been red baiting for at least a year and a half. Putin can more or less let Kerry carry out Russian diplomacy.

    The bigger story is Germany canceling Verizon’s contracts. This is tantamount to sanctions against the U.S. because it’s an announcement that U.S. firms are persona non grata for much of the E.U. going forward.

  7. @ Cold N. Holefield

    Rule of thumb:

    When armies advance, Financial War gets downgraded to toy guns.

  8. If Financial War was any good, US Military didn’t need to exist.
    US and EU could have applied sanctions on Taleban and all would have been fine.

    This whole nonsense of Financial War as opposed to real war reminds me of Rome and Vandals.
    That didn’t end well.

  9. CHC

    LOL@ Cold, you’re such a joke, and the fact that you think your analysis is spot on makes it more so. China and Russia have no imperialist plans. China has a long history of pretty much maintaining its empire within the vicinity its borders, whereas Russia has already learned the problems of empire building. The gas deal will last, if not, it will be renegotiated. What Russia and China want is breathing room, and they will get it. Russia and China care only about trading and making money. America’s ambitions are much greater than that, and that’s why America is failing, because it is attempting to do the impossible. It is obvious that there is going to be a 2nd option in the world, and that option will be tempting to developing nations that have been gouged by the west for the past 100 years. BTW, China is the only nation that does development deals. China and Russia and those who ally with them, will be the future. They are both planning, across the board, to rid themselves of the west, and to create a new world order. China is turning its attention to its domestic market, and will use all the pretty technology that it forced western companies to cough up. They’re doing things like building Silk Road 2.0, a network of high speed rail that will directly link Europe and China. It’s also pretty obvious that they’re working to make alternative payment systems. And guess what? Europe will get on board too, because they will have to.

    Cold, it sounds like your analysis is wishful thinking. Your problem is that you’re a naive pro western nitwit, and you think wishful thinking equals facts.

  10. DMC

    Here’s a link to a Blood and Treasure article that suggests that China is indeed looking to make the yuan an international reserve currency, specificly through the City of London and that Cameron and Co. are more than eager to help.

  11. China is indeed looking to make the yuan an international reserve currency, specificly through the City of London and that Cameron and Co. are more than eager to help.

    Maybe London, and Britain in general, can also be China’s pig farm. The Chinese have an exponentially growing appetite for pork that their homegrown manufacturers cannot satiate. Britain has all that beautiful, wonderful countryside just waiting to be turned into pigshit. Have at it, boys. Anything for a Chinese buck.

  12. OldSkeptic

    Nah. This a complicated game at the political, economic and military levels.

    Let’s examine some crtical elements:
    First NATO forces holding exercises in neighbouring countries.
    NATO forces arriving in the Ukraine in July for exercise Rapid Trident.
    The UK/EU elites are 100%, in public, behind the US ‘strategy’.
    The business elites and increasingly the populations are not.

    The US is following strategy B, after A failed.
    This is basically to provoke a political situation where the EU will slap massive sanctions (ie end gas purchases) on Russia. This, from the US point of view will cripple Russia and also cripple the EU too. Which is a win-win for them.
    They fully expect (rightly) that the EU poltical/military/natonal security/media elites are so owned by the US that they will willingly ‘fall on their swords’.

    Every action by the US to date has been about creating that scenario (Brennan, Biden, etc going to Kiev to give them their orders).

    Russia’s strategy is to seperate the business elites from the political ones.
    Separate the US from the EU (or at least parts of the EU).
    Protect it’s vital interests (eg Crimea).
    Use economic power to hurt the EU, largely by giving them what they say they want.
    Keep the eastern Urainian militia ‘in play’ as a counterweight.
    Keep their nuclear and conventional forces on high alert, both as a deterrence to NATO and to be able to respond quickly to any (and probable) NATO provocation.

    Russia has had some success, with EU cracks showing (eg Polish FM comments and Austria etc), however this is a medium term strategy.

    Therefore Putin has to deter/handle the short term issues very carefully…otherwise we will have WW3.
    While the US/UK/EU seem quite happy to blunder into gigadeath, Putin actually has a brain and rather naturally wants to avoid that.

    The move to allow the Ukraine to link itself to the EU is actually a clever move by Russia now it has what it wants. The burden of the massive direct and indirect subsides to the Ukraine can be ended, with the EU picking up the price. This will bosst the Russian economy.
    The coming gas crisis will not be able to be blamed on Russia. Traditionally the Ukraine doesn’t pay its gas bills, so Russia cuts them off, Uraine then steals EU gas, EU blames Russia. No longer possible, the EU owns the Ukraine now, it will be amusing to watch how the EU deals with Ukrainian stealing gas from it.

    Overall time is on Russia’s side, except for the next few critical and very dangerous months. When the NATO troops are on Urainian soil will they ever leave, will they attack the east or (shudder) Crimea?
    NATO is spoiling for a fight, they want a confrontation. Would they do a ‘false flag’ operation to justify their troops attacking the east. Of course they will, probably have several planned already. How about a gas attack (they like that one) so they have to root out WMDs, or something like that.

    So Putin’s task is to buy time for the political and economic realities sink into the EU, while avoiding WW3. In the end, if we are not all dead of course, he can probably pull it off in about a year and bring the EU around… or crack it. Allied of course by all the other things Russia and China do on the economic front, particularly ending the US dollar as the reserve currency.

    But we have to get (live?) through the next few, extremely dangerous months. This ’62 or ’83 all over again, maybe worse.

  13. markfromireland

    @ OldSkeptic June 28, 2014

    Quite a lot of this is being driven by Fogh Rasmussen who fortunately is on his way out his successor in a few months will be Norway’s former Prime Minister Jens Stoltenberg who is nowhere near as ideologically driven and nowhere near as triumphalist. Rasmussen worked for McKinsey for pretty much his entire adult life before he went into politics and greatly admires the neocons whose politics and policies he tried to implement in Denmark. Stoltenberg on the other hand is centrist to right Social Democrat. He’s no peacenik he wants far more defense spending by Europeans and stronger European armies as he’s known to believe that European military weakness means the US dominates NATO excessively. He’s also known to have good relations with the current Russian government at all levels and if his past behaviour is anything to go by genuinely believes in dialogue. I don’t think he’ll be the willing pushover that Rasmussen was or Frattini would have been. Roll on October 1st, at present there’s no voice in the North Atlantic Council to counter the neocons and the triumphalists. I also think he’ll force Breedlove to tone it down a bit.


  14. OldSkeptic

    Agree Mark, but we have to get to October first. The July/Aug/Sept period is going to be fraught.

    One way or another I don’t expect those NATO troops to leave the Ukraine anytime soon once they get there. And there will be real attempts to get them into play in east Ukraine, the idea being to provoke the Russians to come in.

    This is daft of course. NATO after a decade of getting it’s head handed to it in Afghanistan is now only capable of terror and killing civilians, they have very little ‘fighting power’. If Russia did go in they would sweep through the NATO forces so fast it was not funny.

    The danger is of course that it then would go nuclear real fast as NATO then used it’s ‘tactical nukes’ which are under local control, then it is all over…

    Trouble is NATO will not stop provoking and will keep escalating in the short term. Worse, attempts by Putin at diplomacy and de-escalation are interpreted by the neo-cons (and hence NATO) as weakness (read the NYT for example).

    In the end NATO, if it is left to continue on course and if nothing else works, will attack Crimea (liberation and all that).

    So somehow Putin has to stop/counter that in the short term to let the longer term dynamics work in his favour.

    Now because he does actually think, those actions might be anywhere.
    For example, might be time for him to play the Afghanistan card……..hard. The prospect for individual NATO members losing hundreds or thousands of their troops there would concentrate a few minds.

  15. OldSkeptic

    And with perfect timing…

    Lavrov comments on RT.

    If peace in Ukraine depended on Russia and most European countries, the chances for achieving it would be higher, the Russian Foreign Minister believes. However, he is sure the US is pushing the Ukrainian leadership towards confrontation.

    “We also have partners across the ocean – our American colleagues – who, according to a lot of evidence, still favor pushing the Ukrainian leadership towards the path of confrontation,” Lavrov told Rossiya 1 channel’s news show “Sergey Brilev’s News on Saturday”.

    The minister argues one of the reasons behind the on-going violence in Ukraine is that not all the military forces fighting self-defense squads in the country’s south-east are under government control.

    “Ukrainian President Petro Poroshenko would like to ease tension and go on with the truce, but there are also other forces among the Ukrainian authorities – there are radicals still controlling or very closely cooperating with armed ultra nationalists, there is the “Right Sector”, the battalions of Igor Kolomoysky and other serious groups, who do not obey Ukraine’s Central Command and the Commander-in-Chief,” Lavrov said.

    He didnt say, but almost certainly knows that some of those forces will be under direct US (via CIA, State Dept, etc) control.

  16. Massinissa

    Everyone please continue to ignore Cold. Maybe he will stop commenting.

  17. Machinations


    I hate to ask something that puts my ignorance on such grand display, but … Cuban missile crisis was ’62, but what happened in ’83?

    Thank you so much for your comments in this and other threads — they’ve really helped me to understand what is going on.

  18. markfromireland

    @ Machinations June 29, 2014

    He’s referring to the incident when the Soviet Union’s warning system gave a false alarm that the Americans had launched some of their minuteman missiles at the USSR.

    If you google for it you’ll find information about it easily. Here’s Wikipedia’s entry to get you started:

    1983 Soviet nuclear false alarm incident – Wikipedia, the free encyclopedia:

    September 26, 1983, the nuclear early warning system of the Soviet Union twice reported the launch of American Minuteman intercontinental ballistic missiles (ICBMs) from bases in the United States.

  19. markfromireland


    Agreed we have to get to October first and as Lavrov has pointed out some people are unwilling to learn:

    Russia has no intention to send troops into Ukraine – Lavrov — RT News:

    ‘West plays ‘either-or’ game with Eastern Partnership’

    SL: Speaking of zero-sum games we are being accused of, the EU Eastern Partnership project from the very beginning was based on the “either-or” concept: either you’re with us or you’re against us. Actually, our Western partners have been talking about this since the 2004 election in Ukraine. Back then, there was no Customs Union and no Eastern Partnership; there was an unconstitutional, artificially invented third round of the presidential election. Karel de Gucht, who then was the foreign minister of Belgium and who is now, by the way, the EU Trade Commissioner, publicly demanded that Ukrainians should vote and decide whether they want to be with Europe or with Russia. This is where such mentality comes from.

    Eastern Partnership – as well as NATO expansion – was simply an instrument used to quickly take control over geopolitical territory. The EU was ready to push this project through at any cost. It completely ignored legitimate economic interests of both Ukraine’s neighbors, like Russia and other countries, and even the nations that were part of this program. There have been many studies on this issue. No wonder even Yatsenyuk says that Ukraine needs to take a closer look at the economic section of this agreement.

    The same will happen with Moldova. They are doing their best to sign a similar agreement with Moldova this summer, before the upcoming election. And this agreement they intend to sign with Moldova – it completely ignores the issue of Transnistria. It ignores the 1997 agreement between Chisinau and Tiraspol which entitled Transnistria to international trade. It ignores what is happening with Transnistria today: Chisinau and the new Ukrainian authorities have basically blockaded the territory. But our European partners keep mum about that. In fact, the European Union and, I think, the United States approve of this policy.

    We want to talk to them very seriously about that, because they are escalating tensions over Transnistria, almost claiming that it will be next. This is outrageous, provocative rhetoric. Actually, they want to create unbearable conditions for Tiraspol in violation, I repeat, of the agreements which entitled Transnistrians to certain travel, transit and trade rights. This is outrageous. They never learn. Once again, they seek to create a sore point in our relations.

    Apropos ’83. In between my professional duties and my new family duties I’m squeezing in the time to read this book:

    Arguments that count : physics, computing, and missile defense, 1949-2012
    Author: Rebecca Slayton
    Publisher: The MIT Press, [2013]

    There’s a good review of it on Amazon: A Comprehensive, Readable History of American Ballistic Missile Defense, January 14, 2014

    A copy of the AAAS review of it is here: Science Magazine – Arguments That Count.pdf

    I’m about halfway through – recommend it thoroughly.


  20. JustPlainDave

    ’83 was also the peak year of some fairly extended analytical errors in the Soviet side – IIRC, Able Archer was the zenith:

    Never let one’s analytical framework get away from oneself.

  21. OldSkeptic

    Dave I remember ’83 well, that’s why I moved to Australia then.

    For the previous few years I had been running around telling eveyone that would listen that we were heading for a real crisis. If I could work it out using just publically available information where the heck were our ‘intelligence’ agencies…..?

    The US was moving towards a first strike capability (Trident and Pershings) and at every point they (and the UK) were threatening and provoking the USSR. Remember Regan’s “I’ve solved the Soviet problem…I just pushed the button” comment? There was unrelenting propaganda about the ‘evil empire’ and so on.

    It was a hairy time. The only thing I couldn’t understand was why the USSR hadn’t given an ultimatum to NATO: “if one Pershing arrives in Germany it will immediately be hit by a tactical nuke”….I’d have done it, they were pure first strike weapons. Again shows their inherent conservatism and caution.

    But they were insane with fear and we, well our esteemed leaders and ‘intelligence’ agencies, didn’t know it and kept escalating the tension…all good fun and nearly got us all killed (well not me, I was in Australia by that time).

    So we repeat, keep provoking, keep escalating….it’s almost nihilistic in nature. It seems like there is a collective suicidal impluse, we seem to want ‘the end of days’.

  22. JustPlainDave

    The really scary thing is that “we” didn’t see things this way. Pershing (in particular) and Trident II (to a lesser extent) were not viewed from the west as really being first strike weapons – in fact, they were viewed as _deterring_ a first strike on higher value CONUS-based MIRVed ICBMs and dominant thinking was that they were supposed to increase overall systemic stability, not decrease it (as well as being more “morally” acceptable because they supported a counter force, as opposed to a counter value, strategy).

    The potential parallels to current divergent views on NATO in the near abroad pretty much write themselves (though I think there is less excuse for being conveniently “hard of hearing” these days).

  23. OldSkeptic

    Dave, depends on who you mean by ‘we’. A heck of a lot of people in the US political/military/national security/etc elites did think that way then, hence the incredible sums of money spent to achieve it. And the F-117 was sitting back in the wings too…another first strike weapon.

    Think about it within a short period of time Trident, pershing, cruise missiles, F-117, improved land missiles all came on-line. All first strike weapons. At that time the majority of Soviet missiles were liquid fueled which required 20-30 mins to fuel and launch and hence very vulnerable to a first strike.

    Even in the public domain, pre-internet, there were many people doing studies on this and quite a few pushing for it, a ‘window of opportunity’ as some called it.

    They weren’t called ‘neo-cons’ back in those days but there were plenty of people within the US policy ‘elites’ who were hawkish as all heck and wanted a nuclear war that they thought they could ‘win’….

    Just as now.

    And this is the really scary thing, we dodged a bullet, just….and it wasn’t until about a year later did our esteemed ‘leaders’ realise it. To be fair on Reagan apparently he went white when told and his second term was much more rational, actually negotiating nuclear weapon reductions and so on.

    But as now, before that time they went merrily on escalating with no thought as to consequences, or a thought as to how the other side might perceive it and act.

    Fortunately now we have Putin and his team who are far more competant than the Andropov administration was. But at the same time we have a US and NATO that really wants a military/economic confrontation that is now doctrinally wedded use of force. There is no ifs or buts that the US wants the end of Gas sales from Russia to the EU and they will try real hard to achieve that.

    At the same same NATO can’t wait to get into the Ukraine and shove its troops right up to the border. And this month (July) it happens. I can just imagine them lovingly planning blowing the heck out of the eastern Ukranians and the plans (or at least powerpoint presentations which is what passes for planning these days) for a Crimean invasion will be consuming huge amounts of their time. Probably working on the tasking orders for the first NATO ships to dock in Crimea….

    And this is the conundrum that the Russians face, to get EU economic/etc elites on their side they have to be diplomatic, but diplomacy is seen as a weakness by the neo-cons/US/NATO/etc/etc. If you want to talk and make a deal it is because you are weak in their mindset, which how the US/NATO acts now. They don’t do that, they just attack, because they are strong. Talking is for wimps. In a funny way the disasters in Iraq and Afghanistan probably makes them more motivated here, because yes they lost to an insugency because (insert usual military self serving reason here…..), but they can win a ‘real war’.

    So many of those players think that if they are ‘muscular’ enough Russia will back down and their planning (?) and actions reflect that.

    Hence Russia, soon, has to do some sort of smackdown to get them to pull back, something that really hurts them. Afghanistan IMO is the logical point for that.

    The longer Russia waits the weaker they appear and hence the bolder US/NATO/etc will get, so they will then escalate even further.

    The Russian medium and long term strategies will work, in the end money talks. If Merkal stays ‘all the way with LBJ’ those German economic elites will replace her, there is no way they are going to self destruct their wealth to suit the US. But the short term risks are now at an extreme level, if we get past October without a confrontation then those risks should start to drop.

  24. profan

    Putin is in Cuba today,

    “Russian President Vladimir Putin announced that Russia will help Cuba to overcome the illegal blockade imposed on it by the United States”.

    His next step is Argentina:

    “After Cuba, Putin will arrive in Argentina, where he will hold talks with President Cristina Fernandez de Kirchner.”

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