Sat Apr 26th, 2014 at 01:13:40 PM EST
Putin, Petrodollars and Canada's Useful Idiot Counterpunch
by MURRAY DOBBIN (H/T melo for the original post in the weekend newsroom.)
Stephen Harper's embarrassing behaviour regarding the crisis in Ukraine -- demonizing Vladimir Putin and upping the rhetoric -- must be welcomed in the U.S. which created the crisis in the first place and apparently believes it still has something to gain by isolating Russia. But it is not clear that Harper even realizes -- or cares -- what the larger game is. And that game may include a Russia-driven shift in global currency allegiance that could devastate the economies of the U.S. and Canada.
It is arguable that push for the petroruble is a global issue many times more important to the U.S. than anything that happens in the Ukraine, but American efforts to isolate Russia is actually accelerating the process. The desire is also driving Russia to look to the east instead of Europe for its future prosperity -- aligning with China as both a market for its gas and a partner in undermining the petrodollar. China is already headed there. Its yuan is the second most used currency, ahead of the euro, in international trade settlements. China recently "opened two centers to process yuan-denominated trade flows, one in London and one in Frankfurt."
The emerging economies of Brazil, Russia, India, China and South Africa are grouped under the acronym BRICS. According to journalist Peter Koenig: "Other countries, especially the BRICS and BRICS-associates (BRICSA), may soon follow suit and join forces with Russia, abandoning the `petrodollar' as trading unit for oil and gas. This could amount to tens of trillions in loss for demand of petrodollars per year." In which case, "leaving an important dent in the U.S. economy would be an understatement," says Koenig. "Along with the new BRICS(A) currency will come a new international payment settlement system, replacing the SWIFT and IBAN exchanges, thereby breaking the hegemony of... the Bank for International Settlements (BIS) in Basle.
The prospect of the U.S. dollar losing its status as the world's trading currency is far and away the greatest threat to U.S. hegemony in the world as it would turn the country's $17-trillion (not counting unfunded liabilities) virtual debt problem into a real one. Until now, the huge external demand for U.S. dollars has allowed it to accumulate enormous debts without defaulting. With Russia, China and the rest of the BRICS countries moving in this direction, the U.S is panic-stricken. It used to be said that the U.S. dollar was backed by the Pentagon. Indeed, plans to decouple from the dollar was a common feature of three countries that experienced the wrath of U.S. foreign policy and military intervention. Libya's Moammar Gadhafi was planning a gold-standard currency for all of Africa; Iraq was planning to quit using the dollar for its oil exports, as was Iran. Sanctions against the latter had as much to do with this plan as any other issue.
I can see that the development of an alternate settlement system could virtually destroy the ability of the USA to conduct economic warfare against other countries. This would be a blow to US hegemony and to the elites who benefit from that status.
But Russia, China, Brazil and India are countries of a whole different order and out of reach of the Pentagon's threats. There is virtually nothing the U.S. can do to stop this movement, provoked in part by the massive printing of money in repeated "quantitative easings" and accelerated by NATO's adventurism.
If that were not a big enough headache for the U.S., Russia is well placed to detach Germany from the EU and U.S. efforts to isolate Russia. While Russia will suffer economically in the short term from sanctions, the longer term looks brighter. At the same time that BRICSA is planning its new international payment system, China and Germany are negotiating another initiative that guarantees Russia a prominent role in one of the world's most ambitious economic development schemes: the New Silk Road linking China and Europe. This initiative is intended to provide enormous impetus for development of western China and everything from there to Germany.
Says Koenig: "Germany, the economic driver of Europe -- the world's fourth largest economy (US$ 3.6 trillion GDP) -- on the western end of the new trading axis, will be like a giant magnet, attracting other European trading partners of Germany's to the New Silk Road. What looks like a future gain for Russia and China, also bringing about security and stability, would be a lethal loss for Washington."
I am less clear as to how this would be a problem for the average US citizen and believe that it could
be a very good thing. But first US citizens would have to wrest control of the government away from the existing elites.