Say “Hi” to Russian gold and the Chinese petroyuan.

By Pepe Escobar 

(Published on the website) The Cradle, translated and adapted by Rubens Turkienicz protocols for Brazil 247)

It was about time, but finally some key outlines of the new foundations of a multipolar world are being revealed.

Last Friday, following a videoconference meeting, the Eurasian Economic Union (EAEU) and China agreed to draft a mechanism to create an independent international financial and monetary system. The EAEU comprises Russia, Kazakhstan, Kyrgyzstan, Belarus, and Armenia; it is establishing free trade agreements with other Eurasian nations and is progressively interconnecting with China's Belt and Road Initiative (BRI).

For practical purposes, the idea comes from Sergei Glazyev – Russia's leading independent economist, a former advisor to President Vladimir Putin and Minister for Integration and Macroeconomics of the Eurasian Economic Commission (which is the regulatory authority of the EAEU).

Glazyev's central role in the ideation of the new Russian and Eurasian economic and financial strategy was examined here (https://www.strategic-culture.org/news/2022/03/04/how-russia-will-counterpunch-the-us-eu-declaration-of-war/ https://www.brasil247.com/blog/como-a-russia-contra-golpeara-a-declaracao-de-guerra-dos-eua-e-da-uniao-europeiaHe predicted the Western financial squeeze on Moscow light-years before others did.

In a rather diplomatic manner, Glazyev attributed the materialization of the idea "to the common challenges and risks associated with the global economic slowdown and the restrictive measures against EAEU states and China."

In other words, since China is as much a Eurasian power as Russia, they need to coordinate their strategies to counter the US unipolar system.

The Eurasian system will be based on a “new international currency” – most likely using the Chinese yuan as a reference and calculated as an index of the national currencies of the participating countries, as well as commodity prices. The first draft of this currency will be discussed later this month.

The Eurasian system is destined to become a serious alternative to the US dollar, as the EAEU could attract not only the nations that joined the BRI (Kazakhstan, for example, is a member of both), but also the main members of the Shanghai Cooperation Organization (SCO), as well as those of ASEAN. Countries in West Asia – such as Iran, Iraq, Syria, and Lebanon – will inevitably be interested.

In the medium to long term, the expansion of the new system will translate into the weakening of the Bretton Woods system – which even serious market operators/strategists in the US admit is rotten from within. The dollar and US hegemony are facing stormy seas.

Show me that frozen gold.

Meanwhile, Russia has serious problems to face. This past weekend, Finance Minister Anton Siluanov confirmed that half of Russia's gold and foreign currency reserves have been frozen due to unilateral sanctions. It is mind-boggling that Russian financial experts have placed a large portion of the nation's wealth where it can be easily accessed – and even confiscated – by the "Empire of Lies" (copyright Putin).

Initially, it wasn't exactly clear what Siluanov meant. How could the head of the Central Bank of Russia, Elvira Nabiulina, and her team allow half of Russia's foreign currency reserves and even its gold to be deposited in Western banks and/or vaults? Or is this a sneaky diversionary tactic by Siluanov?

No one is better equipped to answer these questions than the invaluable Michael Hudson, author of the recently revised edition of 'Super Imperialism: The Economic Strategy of the American Empire.

Hudson was quite frank: “When I first heard the word ‘frozen,’ I thought it meant that Russia wasn’t spending its precious gold reserves to support the value of the ruble, trying to fight off a Soros-style assault from the West. But now the word ‘frozen’ seems to mean that Russia has sent these assets abroad, outside of its control.”

“At least until last June, it seemed that all Russian gold was stored in Russia itself. At the same time, it would be natural to keep financial securities and bank deposits in the United States and Great Britain – because that is where the greatest intervention in the global foreign exchange market occurs,” Hudson added.

Essentially, everything is still up in the air: “My initial reading assumed that Russia must be doing something clever. If sending gold abroad was clever, perhaps Russia was doing what other central banks do: 'lending' to speculators in exchange for a payment or an interest rate. Until Russia tells the world where it put the gold – and why – we can't imagine. Was it in the Bank of England – even after England confiscated Venezuela's gold? Was it in the New York Fed – even after the Fed confiscated Afghanistan's reserves?”

So far, no further clarification has been given by Siluanov or Nabiulina. The scenarios revolve around a series of deportations to northern Siberia for national treason. Hudson adds important elements to the puzzle:

If the reserves are frozen, why is Russia paying interest on its overdue external debt? It could redirect its 'freezer' to pay, shifting the blame to the default. It could claim that the freezing of the Iranian bank account was done by Chase Manhattan – with which Iran sought to pay the interest on its dollar debt. Or it could parachute into the Bank of England and recover the gold – a kind of Goldfinger-style operation at Fort Knox. What matters is that Russia explains what happened and how it was attacked, as a warning to other countries.”

Giving a hook, Hudson couldn't help but wink at Glazyev: "Perhaps Russia should appoint a non-pro-Western figure to the Central Bank."

The game-changing petrodollar

It is tempting to read into the words of the Russian Foreign Minister at the diplomatic summit in Antalya last Thursday a veiled admission that Moscow might not have been prepared for the heavy financial artillery onslaught launched by the United States:  

“We will solve the problem – and the solution will no longer depend on our Western partners, whether governments or companies that act as instruments of Western political aggression against Russia, instead of looking after their business interests. We will ensure that we never find ourselves in a similar situation again and that no Uncle Sam or anyone else can make decisions aimed at destroying our economy. We will find a way to eliminate this dependence. We should have done this a long time ago.”

Therefore, the "long ago" begins now. And one of its foundations will be the Eurasian financial system. In the meantime, "the market" (read: the speculative casino of the USA) "judged" (according to its "self-made" oracles) that the Russian gold reserves – those that remained in Russia – cannot support the ruble.

The issue is not that – on several levels. The “self-made” oracles, with their brains washed for decades, believe that the Hegemon dictates what “the market” does. This is mere propaganda. The crucial fact is that, in the emerging new paradigm, NATO nations represent at most 15% of the world's population. Russia will not be forced to practice autarky because it doesn't need to: most of the world – as we have seen represented in the robust list of nations that do not apply sanctions – is ready to do business with Moscow.  

Iran has demonstrated how this is done. Persian Gulf traders confirmed to The Cradle that, even now, Iran is selling no less than 3 million barrels of oil per day to countries that are not signatories to the JCPOA – Joint Comprehensive Plan of Action – which is being negotiated in Vienna. The oil's origin is changed, it is smuggled and transferred to/from tankers under cover of darkness.  

Another example: a huge oil refiner, the Indian Oil Corporation (IOC), has just purchased 3 million barrels of oil from the Russian Urals from the company Vitol for delivery in May. At least so far, there are no sanctions against Russian oil.

The reductionist plan Mackinderesco It's about manipulating Ukraine as a disposable pawn to crush Russia and then to strike at China. Basically, it's a divide-and-conquer strategy to crush not just one, but two equal competitors in Eurasia who are advancing in close step as understanding strategic partners.

Hudson understands it this way: “China is in the crosshairs, and what happened in Russia is a dress rehearsal for what could happen with China. Under these conditions, it’s better to break ties sooner rather than later. Because the greatest advantage is doing it now.”

All the chatter about “crushing Russian markets,” ending foreign investment, destroying the ruble, a “complete trade embargo,” expelling Russia from the “community of nations,” and so on – this is for the zombified galleries. Iran has been dealing with the same thing for four decades and has survived.

Historical poetic justice, as Lavrov called it, now seems to indicate that Russia and Iran are about to sign a very important agreement – ​​which appears to be the equivalent of the Iran-China strategic partnership. The three most important nodes of Eurasian integration are refining their interaction as they go along and, sooner rather than later, may be using a new and independent monetary and financial system.

But there is more poetic justice on the way, concerning the ultimate change in the rules of the game. And this came much sooner than we all thought.

Saudi Arabia is considering accepting the Chinese yuan – and not the US dollar – to sell oil to China. Translation: Beijing has told Riyadh that this is the new agreement. The end of the petrodollar is at hand – and this is the final nail in the coffin of the indispensable Hegemon.

Meanwhile, there's a mystery to solve: where is that frozen Russian gold?