The Ruble, The Dollar, & The Price Of Gold – Who Is Really Winning The Economic Chess Game?

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By Michael Snyder, ZeroHedge, 3/30/22 (emphasis in original)

Russia has just made some moves that are going to change the global financial system forever.  When the conflict in Ukraine originally erupted, the U.S. immediately attempted to crash the value of Russia’s currency.  Those attempts were successful for a few days, but now the value of the ruble relative to the U.S. dollar is almost all the way back to where it was before the start of the war.  This has absolutely stunned many of the experts, because they thought that U.S. sanctions would absolutely cripple Russia.  So what happened?  Well, it turns out that the Russians have made some very savvy moves that have turned the tables on the Biden administration.

For one thing, Russia has started to demand payment in rubles when it sells natural gas to non-friendly nations.  A lot of countries in western Europe are quite upset about this, but they really have no choice, because they are exceedingly dependent on Russian gas.  So from this point forward, western powers are actually going to be forced to help prop up the value of the ruble

Russia wants “unfriendly countries” to pay for Russian natural gas in rubles. That’s a new directive from President Vladimir Putin as he attempts to leverage his country’s in-demand resources to counter a barrage of Western sanctions.

“I have decided to implement … a series of measures to switch payments — we’ll start with that — for our natural gas supplies to so-called unfriendly countries into Russian rubles,” Putin said in a televised government meeting, adding that trust in the dollar and euro had been “compromised” by the West’s seizure of Russian assets.

Secondly, the Russians have decided that U.S. dollars will no longer be accepted as payment for anything that they sell to other nations.  Pavel Zavalny, the head of the Russian parliament, says that U.S. currency “has lost all interest for us”

Much more interesting was Zavalny’s main point, even though it has been mostly overlooked. If other countries want to buy oil, gas, other resources or anything else from Russia, he said, “let them pay either in hard currency, and this is gold for us, or pay as it is convenient for us, this is the national currency.”

In other words, Russia is happy to accept your national currency — yuan, lira, ringgits or whatever — or rubles, or “hard currency,” and for them that no longer means U.S. dollars, it means gold.

“The dollar ceases to be a means of payment for us, it has lost all interest for us,” Zavalny added, calling the greenback no better than “candy wrappers.”

This is huge, but it isn’t being discussed much by the corporate media in the United States.

The Russians aren’t just saying that they do not recognize U.S. dollars as the reserve currency of the world any longer.

That would be bad enough.

At this point, they are actually saying that they will no longer accept U.S. dollars as a form of payment at all.

Wow.

Thirdly, the central bank in Russia has fixed the value of the ruble to the price of gold for at least the next three months

The Russian central bank will restart buying gold from banks and will pay a fixed price of 5000 roubles ($52) per gramme between March 28 and June 30, the bank said on Friday.

But you won’t hear about this on CNN or MSNBC.

This is a move that could potentially change everything.

Once upon a time, the value of the U.S. dollar was tied to gold, and that helped the U.S. dollar become the dominant currency on the entire planet.

But then Nixon took us off the gold standard in the early 1970s, and things have gone haywire ever since.

Now Russia has linked the value of the ruble to the price of gold, and many believe that this is really going to shake things up

“I am reminded of what the U.S. did in the middle of the Great Depression. For the next 40 years, gold’s price was pegged to the U.S. dollar at $35. There is a precedent for this. It leads me to believe that Russia’s intention would be for the value of the ruble to be linked directly to the value of gold,” Gainesville Coins precious metals expert Everett Millman told Kitco News. “Setting a fixed price for rubles per gram of gold seems to be the intention. That’s pretty important when it comes to how Russia could seek funding and manage its central bank financing outside of the U.S. dollar system.”

Others believe that this move will create great instability in the global financial system.

For example, Tom Luongo is warning that the following could soon happen

  1. At $1550 per ounce the first order effect here is that is implies a RUB/USD rate of around 75. Incentivizing those holding RUB to continue and those needing them to bid up the price from current levels.
  2. This creates a positive incentive loop to bring the ruble back to pre-war levels.  Then after that market effects take over as ruble demand becomes structural, based on Russia’s trade balance.
  3. Once that happens and the RUB/USD falls below 75, then the USD price of gold rises structurally draining the paper gold markets and collapsing the financial system based on leveraged/hypothecated gold.  Now we’re into the arb. phase @Lukegromen postulated w/ 1000bbls/oz.

Time will tell if Luongo is right or if he is wrong.

But without a doubt, things have not played out the way that Biden administration officials were hoping.

They had hoped that U.S. sanctions would crush the ruble, the Russian financial system and the entire Russian economy.

Instead, the Russians have been able to successfully prop up the value of the ruble and have made moves that directly threaten the dominance of the U.S. dollar.

No matter what happens with the ceasefire talks, I expect the United States and Russia to continue this economic conflict for the foreseeable future.

Ultimately, that will be bad for both of our nations.

And as history has shown, economic conflicts have a way of becoming shooting wars way too often.  Needless to say, we definitely do not want a shooting war with Russia.

Leaders on both sides should be attempting to find ways to achieve peace and to fix the tremendous damage that has already been done.

Unfortunately, everyone seems to want to continue to escalate matters, and that should deeply alarm all of us

Poll: Majority of Americans Fear Nuclear Weapons Use After Russia’s Ukraine Invasion

By Julia Conley, CommonDreams, 3/28/22

Russian President Vladimir Putin’s invasion of Ukraine has left Americans on edge, according to a recent poll which found a majority of people in the U.S. are worried that the war has made the impending use of nuclear weapons more likely.

Nearly three-quarters of respondents told the Associated Press and NORC Center for Public Affairs Research that the invasion has increased the likelihood that nuclear weapons will be used anywhere in the world.

Eighty-five percent of people surveyed said they were concerned that the U.S. could be drawn into the conflict, including 47% of people who said they were “extremely or very concerned” about this scenario, which would amount to a conflict between the two countries with the world’s largest nuclear stockpiles…

Read full article here.

More Details on Proposals from Yesterday’s Peace Talks in Turkey

First is an excerpt from an article by Ben Aris at Intellinews, which provides a few more details about the proposal by Ukraine that came out of yesterday’s negotiations.

By Ben Aris, Intellinews, 3/29/22

The Ukraine delegation has offered a compromise in the form of a written commitment from Kyiv to abandon plans to regain Crimea and Sevastopol using military force, Medinsky said after the talks were over.

“These guarantees of security do not cover the territory of Crimea and Sevastopol, which means that Ukraine abolishes its intent to return Crimea and Sevastopol military, claiming that this would only be possible via negotiations,” Medinsky said as cited by Tass. “Of course, this does not correspond to our position in any way, but Ukraine has formulated its approach.”

The proposals would include a 15-year consultation period on the status of Russian-annexed Crimea, and could come into force only in the event of a complete ceasefire, the Ukrainian negotiators said…

…The comments from the Russia delegation suggest that the issue of the Donbas region is not resolved. The Ukrainian proposal on Crimea amounts to an offer to “agree to disagree” over the Crimea, but offers guarantees that Kyiv will not use force to try to regain the peninsula.

Resolving the disagreements over Donbas remains a sticking point. Russia’s Donbas and Crimea demands are “not realistic,” Turkish presidential spokesperson Ibrahim Kalin said in an interview with CNN on March 27.

Russia’s request to recognise the annexation of Crimea and independence of Donbas is a “very maximalist” position, Kalin said, adding that giving away territory is “off the table” and that Russia “should really come up with some other ideas.”

“These are the red lines for the Ukrainians in the Crimea and Donbas, and rightly so, because they pertain directly to Ukraine’s territorial integrity and sovereignty. We have not recognised the annexation of Crimea as, like the rest of the world, even China has not recognised the annexation of Crimea …They [the Russians] should really come up with some other ideas,” he told CNN on the sidelines of the Doha Forum.

Next is an excerpt from reporting by The Bell, which provides some insight from an insider in the Russian government:

The talks in Istanbul on Tuesday lasted about four hours. For Ukraine, it was important to put forward proposals Russia could accept, a source familiar with Moscow’s position told The Bell. Russia was prepared to move toward a genuine agreement because any further military advance would mean fighting in major cities and a repeat of the destruction of Mariupol, the source believes.

The head of the Russian delegation, Vladimir Medinsky, said Ukraine’s written proposals would be submitted to President Vladimir Putin prior to a discussion at Foreign Minister level. A presidential meeting between Putin and Volodymyr Zelenskyy would take place only when a peace treaty was ready, he said.

It is assumed that any ceasefire would include agreements on a neutral, nuclear-free Ukraine with security guarantees. Further clauses would ensure mutual respect for languages and cultures. Ukrainian President Volodymyr Zelenskyy has said he would like to broker similar agreements with all Ukraine’s other neighbors: Poland, Hungary, Romania, Slovakia, Belarus and Moldova.

“Reduction of military activity”

Russia’s deputy minister of defense, Alexander Fomin, made the biggest announcement of the day – about a “dramatic, manifold reduction in military activity” around Kyiv and Chernihiv.

On the one hand, this is merely a statement of the fact – over the past week Russian forces have made no serious advances in these areas and the Ministry of Defense stated Friday that Russian forces will concentrate their resources on “liberating Donbas”. Medinsky later clarified that the Ministry of Defense statement did not amount to a ceasefire.

However, this is the first time the Russian military has made such a statement – and followed it up with action on the ground. Within an hour of Fomin’s comments, a U.S. intelligence source said the U.S. was indeed observing the partial withdrawal of Russian forces near Kyiv and Chernihiv.

Any decision on a complete ceasefire has been postponed. It seems that both sides feel time is on their side and hope to occupy territory that can bolster their negotiating positions, the source close to the talks told The Bell.

Rick Sterling: Rand Report Prescribed US Provocations Against Russia and Predicted Russia Might Retaliate In Ukraine

By Rick Sterling, Antiwar.com, 3/28/22

According to a 2019 Rand report titled “Overextending and Unbalancing Russia”, the US goal is to undermine Russia just as it did the Soviet Union in the cold war. Rather than “trying to stay ahead” or trying to improve the US domestically or in international relations, the emphasis is on efforts and actions to undermine the designated adversary Russia. Rand is a quasi-US governmental think tank that receives three-quarters of its funding from the US military.

The report lists anti-Russia measures divided into the following areas: economic, geopolitical, ideological/informational, and military. They are assessed according to the perceived risks, benefits and “likelihood of success”.

The report notes that Russia has “deep seated” anxieties about western interference and potential military attack. These anxieties are deemed to be a vulnerability to exploit. There is no mention of the cause of the Russian anxieties: they have have been invaded multiple times and had 27 million deaths in WW2.

Significance of Ukraine

Ukraine is important to Russia. The two countries share much common heritage and a long common border. One of the most important leaders of the Soviet Union, Nikita Khrushchev, was Ukrainian. During WW2, Ukraine was one of Hitler’s invasion routes and there was a small but active number of Ukrainian collaborators with Nazi Germany. The distance from the capital of Ukraine, Kiev, to Moscow is less than 500 miles.

For these same reasons of geography and history, Ukraine is a major component of a US/NATO effort to undermine Russia. Current Under Secretary for Political Affairs, Victoria Nuland, said that over 20 years the US invested $5 billion in the project to turn Ukraine. The culmination was a violent coup in February 2014. Since 2015, the US has been training ultra nationalist and Neo-Nazi militias. This has been documented in articles such as “U.S. House admits Nazi role in Ukraine” (Robert Parry, 2015), “The US is arming and assisting neo-nazis in Ukraine while the House debates prohibition.”(Max Blumenthal, 2018), “Neo Nazis and the far right are on the march in Ukraine” (Lev Golinken in 2019) and “The CIA may be breeding Nazi terror in Ukraine” (Branko Marcetic Jan. 2022).

Rand suggested provocations

Prior to 2018, the US only provided “defensive” military weaponry to Ukraine. The Rand report assesses that providing lethal (offensive) military aid to Ukraine will have a high risk but also a high benefit. Accordingly, US lethal weaponry skyrocketed from near zero to $250M in 2019, to $303M in 2020, to $350M in 2021. Total military aid is much higher. A few weeks ago, “The Hill” reported, “The US has contributed more than $1 billion to help Ukraine’s military over the past year”.

The Rand report lists many techniques and “measures” to provoke and threaten Russia. Some of the steps include:

  • Repositioning bombers within easy striking range of key Russian strategic targets
  • Deploying additional tactical nuclear weapons to locations in Europe and Asia
  • Increasing US and allied naval force posture and presence in Russia’s operating areas (Black Sea)
  • Holding NATO war exercises on Russia’s borders
  • Withdrawing from the Intermediate Nuclear Forces (INF) Treaty

These and many other provocations suggested by Rand have, in fact, been implemented. For example, NATO conducted massive war exercises dubbed “Defender 2021” right up Russia’s border. NATO has started “patrolling” the Black Sea and engaging in provocative intrusions into Crimean waters. The US has withdrawn from the INF Treaty.

Since 2008, when NATO “welcomed” the membership aspirations of Ukraine and Georgia, Russia has said this would cross a red line and threaten its security. In recent years NATO has provided advisers, training and ever increasing amounts of military hardware. While Ukraine is not a formal member of NATO, it has increasingly been treated like one. The full Rand report says “While NATO’s requirement for unanimity makes it unlikely that Ukraine could gain membership in the foreseeable future, Washington’s pushing this possibility could boost Ukrainian resolve while leading Russia to redouble its efforts to forestall such a development.”

The alternative, which could have prevented or at least forestalled the current Russian intervention in Ukraine, would have been to declare Ukraine ineligible for NATO. But this would have been contrary to the US intention of deliberately stressing, provoking and threatening Russia.

Ukraine as US client

In November 2021, the US and Ukraine signed a Charter on Strategic Partnership. This agreement confirmed Ukrainian aspirations to join NATO and rejection of the Crimean peoples decision to re-unify with Russia following the 2014 Kiev coup. The agreement signaled a consolidation of Washington’s economic, political and military influence.

December 2021 Russia red lines followed by military action

In December 2021, Russia proposed a treaty with the US and NATO. The central Russian proposal was a written agreement that Ukraine would not join the NATO military alliance.

When the proposed treaty was rebuffed by Washington, it seems the die was cast. On February 21, Putin delivered a speech detailing their grievances. On February 24, Putin delivered another speech announcing the justification and objectives of the military intervention to “demilitarize” and “denazify” Ukraine.

As Russian Foreign Minister Lavrov later said, “This is not about Ukraine. This is the end result of a policy that the West has carried out since the early 1990’s.”

Afghanistan again?

As earlier indicated, the Rand report assesses the costs and benefits of various US actions. It is considered a “benefit” if increased US assistance to Ukraine results in the loss of Russian blood and resources. Speculating on the possibility of Russian troop presence in Ukraine, the report suggests that it could become “quite controversial at home, as it did when the Soviets invaded Afghanistan.” (p 99 of full report)

That historical reference is significant. Beginning in 1979, the US and Saudi Arabia funded and trained sectarian foreign fighters to invade and destabilize the Afghan government. The goals were to overthrow the socialist inclined government and lure the Soviet Union into supporting the destabilized government. It achieved these Machiavellian goals at the cost of millions of Afghan citizens whose country has never been the same.

It appears that Ukrainian citizens are similarly being manipulated to serve US goals.

A “disadvantageous peace settlement”

The Rand report says, “Increasing US military aid would certainly drive up the Russian costs, but doing so could also increase the loss of Ukrainian lives and territory or result in a disadvantageous peace settlement.”

But who would a peace settlement be “disadvantageous” for? Ukrainian lives and territory are currently being lost. Over fourteen thousand Ukrainian lives have been lost in the eastern Donbass region since the 2014 coup.

A peace settlement that guaranteed basic rights for all Ukrainians and state neutrality in the rivalry of big powers, would be advantageous to most Ukrainians. It is only the US foreign policy establishment including the US military media industrial complex and Ukrainian ultra-nationalists who would be “disadvantaged”.

Since Ukraine is a multi-ethnic state, it would seem best to accept that reality and find a compromise national solution which facilitates all Ukrainians. Being a client of a distant foreign power is not in Ukraine’s national best interest.

The Rand report shows how US policy focuses on actions to hurt Russia and manipulates third party countries (Ukraine) toward that task.

Rick Sterling is an independent journalist based in the San Francisco Bay Area. He can be contacted at rsterling1@protonmail.com.

RT: Highlights from Russia-Ukraine Peace Talks in Turkey

RT.com, 3/29/22

After a month of hostilities, Kiev has come up with a written proposal for what it wants from a peace treaty

On Tuesday, Turkey hosted the latest round of peace talks between Russia and Ukraine. The Ukrainian side has come up with a written proposal for a peace treaty between the two nations, Russia’s top negotiator Vladimir Medinsky told the media after the session, which he described as “substantive.”

The proposal will now be relayed to Russian President Vladimir Putin for consideration, he added. Here is what else emerged after the talks.

Russian offensive scaled down
An immediate practical effect of the talks will be a de-escalation of military activities in some parts of Ukraine, the Russian Defense Ministry announced. In particular, it pledged to “dramatically” reduce its operations near the cities of Chernigov and the capital, Kiev.

NATO-like security guarantees
David Arakhamia, Medinsky’s opposite number in the Ukrainian delegation, said Kiev had sought a security guarantee similar to that contained in Article 5 of the North Atlantic Treaty. He named Russia, the UK, China, the US, Turkey, France, Canada, Italy, Poland and Israel as possible providers. Some of them have given their preliminary agreement, he said. 

No military blocs and non-nuclear Ukraine
In the proposal, Ukraine pledged not to join any military alliance, not to host foreign military bases or foreign troops, Medinsky said. Even military exercises would require prior approval from guarantors, according to the proposal. Kiev also pledged not to seek to obtain weapons of mass destruction, including nuclear weapons, the official added. But in return Ukraine wants Russia not to object to its joining the EU one day.

Crimea, Donbass unresolved
According to Medinsky, Kiev offered to pledge not to use military force in an attempt to restore its sovereignty over Ukraine or the breakaway regions of Donetsk and Lugansk. He stressed that Moscow did not commit to having the Ukrainian wording in the final version of any peace treaty.

Russia considers Crimea to be part of its territory and wants Kiev to recognize it as such. It also recognized the Donetsk and Lugansk People’s Republics as sovereign states days before launching its attack against Ukraine last month.

Borders in question
Medinsky said Kiev did not state whether it would relinquish its territorial claim to Donetsk and Lugansk. Prior to February, Ukraine controlled a large portion of both Donetsk and Lugansk and considers the regions to be its own territory.

Arakhamia made it clear that Kiev will assert sovereignty over the entire territory that Ukraine had when it declared independence in 1991, saying there could be no compromise on this point.

New conditions for Zelensky-Putin meeting
Moscow has agreed to organize a meeting between Putin and his Ukrainian counterpart Volodymyr Zelensky as part of the final phase of negotiations over the future peace treaty. The Kremlin had previously said that such a meeting could only be scheduled once the document was finalized and inked by the respective foreign ministers. Holding a summit as soon as possible would speed up the resolution, Medinsky believes.

Yahoo News: Mariupol is ‘in the hands’ of Russia, mayor says

By Grayson Quay, Yahoo! News, 3/28/22

Russian forces now control the majority of the Ukrainian port city of Mariupol, CNN reported Monday.

“[W]e are in the hands of the occupiers today,” said Mariupol Mayor Vadym Boichenko in a televised interview on Monday. According to Reuters, Boichenko, who is no longer in the city, also said that Russia’s siege of Mariupol has killed nearly 5,000 people and that 160,000 people remain trapped in the city without clean water or electricity. Mariupol had a pre-invasion population of over 400,000.

Ukrainian sources have accused Russian and Russian-backed separatist troops of forcibly taking thousands of Mariupol residents to Russia and of firing on proposed evacuation corridors.

Last week, Zelensky said over 4,000 people had been successfully evacuated from Mariupol. Pro-Russian separatists say they’re evacuating 1,700 per day, per CNN.

The New York Times reported Sunday that Mariupol was “close to falling.” According to the Times, Zelensky told the city’s remaining defenders they may need to flee and said Ukraine’s military cannot muster “a sufficient number of tanks, other armored vehicles, and … aircraft” to “break the blockade in Mariupol.”

Capturing Mariupol would be Russia’s largest victory of the war. Having failed to quickly capture Kyiv and other major Ukrainian cities as planned, Russian forces have “narrowed immediate targets to the sieges of the southern port city of Mariupol and the strategically placed city of Chernihiv in the north,” the Times explains.

Mariupol lies on Ukraine’s southern coast between the separatist-controlled Donbas region and the Crimean Peninsula, which Russia annexed in 2014. If Mariupol falls, Russia will have successfully seized a “land bridge” connecting the two.

FT: Russia No Longer Demanding Ukraine Be “Denazified” in Ceasefire Talks

By Max Seddon, Roman Olearchyk, and Henry Foy, Financial Times, 3/28/22

….Moscow and Kyiv are discussing a pause in hostilities as part of a possible deal that would involve Ukraine abandoning its drive for Nato membership in exchange for security guarantees and the prospect to join the EU, the people said under the condition of anonymity because the matter is not yet finalised.

The draft ceasefire document does not contain any discussion of three of Russia’s initial core demands — “denazification”, “demilitarisation”, and legal protection for the Russian language in Ukraine — the people added.

….As part of the agreement under consideration, Ukraine would also refrain from developing nuclear weapons, or hosting foreign military bases in addition to abandoning its pursuit of Nato membership.

Read full article here.