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    Senior Member AirborneSapper7's Avatar
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    Russia And China Do Pipelineistan

    Russia And China Do Pipelineistan

    Submitted by Tyler Durden on 05/20/2014 19:20 -0400

    Submitted by Pepe Escobar, the roving correspondent for Asia Times/Hong Kong, an analyst for RT and TomDispatch, and a frequent contributor to websites and radio shows ranging from the US to East Asia.
    The Birth Of Eurasia - Russia & China Do Pipelineistan
    A specter is haunting Washington, an unnerving vision of a Sino-Russian alliance wedded to an expansive symbiosis of trade and commerce across much of the Eurasian land mass - at the expense of the United States.
    And no wonder Washington is anxious. That alliance is already a done deal in a variety of ways: through the BRICS group of emerging powers (Brazil, Russia, India, China, and South Africa); at the Shanghai Cooperation Organization, the Asian counterweight to NATO; inside the G20; and via the 120-member-nation Non-Aligned Movement (NAM). Trade and commerce are just part of the future bargain. Synergies in the development of new military technologies beckon as well. After Russia’s Star Wars-style, ultra-sophisticated S-500 air defense anti-missile system comes online in 2018, Beijing is sure to want a version of it. Meanwhile, Russia is about to sell dozens of state-of-the-art Sukhoi Su-35 jet fighters to the Chinese as Beijing and Moscow move to seal an aviation-industrial partnership.
    This week should provide the first real fireworks in the celebration of a new Eurasian century-in-the-making with Russian President Vladimir Putin visiting Xi in Shanghai this Tuesday and Wednesday. You remember Pipelineistan,” all those crucial oil and gas pipelines crisscrossing Eurasia that make up the true circulatory system for the life of the region. Now, it looks like the ultimate Pipelineistan deal, worth $1 trillion and 10 years in the making, will be inked as well. In it, the giant, state-controlled Russian energy giant Gazprom will agree to supply the giant state-controlled China National Petroleum Corporation (CNPC) with 3.75 billion cubic feet of liquefied natural gas a day for no less than 30 years, starting in 2018. That’s the equivalent of a quarter of Russia’s massive gas exports to all of Europe. China’s current daily gas demand is around 16 billion cubic feet a day, and imports account for 31.6% of total consumption.
    Gazprom may still collect the bulk of its profits from Europe, but Asia could turn out to be its Everest. The company will use this mega-deal to boost investment in Eastern Siberia and the whole region will be reconfigured as a privileged gas hub for Japan and South Korea as well. If you want to know why no key country in Asia has been willing to isolate Russia in the midst of the Ukrainian crisis - and in defiance of the Obama administration - look no further than Pipelineistan.
    Exit the Petrodollar, Enter the Gas-o-Yuan

    And then, talking about anxiety in Washington, there’s the fate of the petrodollar to consider, or rather the “thermonuclear” possibility that Moscow and Beijing will agree on payment for the Gazprom-CNPC deal not in petrodollars but in Chinese yuan. One can hardly imagine a more tectonic shift, with Pipelineistan intersecting with a growing Sino-Russian political-economic-energy partnership. Along with it goes the future possibility of a push, led again by China and Russia, toward a new international reserve currency -- actually a basket of currencies -- that would supersede the dollar (at least in the optimistic dreams of BRICS members).

    Right after the potentially game-changing Sino-Russian summit comes a BRICS summit in Brazil in July. That’s when a $100 billion BRICS development bank, announced in 2012, will officially be born as a potential alternative to the International Monetary Fund (IMF) and the World Bank as a source of project financing for the developing world.
    More BRICS cooperation meant to bypass the dollar is reflected in the Gas-o-yuan,” as in natural gas bought and paid for in Chinese currency. Gazprom is even considering marketing bonds in yuan as part of the financial planning for its expansion. Yuan-backed bonds are already trading in Hong Kong, Singapore, London, and most recently Frankfurt.
    Nothing could be more sensible for the new Pipelineistan deal than to have it settled in yuan. Beijing would pay Gazprom in that currency (convertible into rubles); Gazprom would accumulate the yuan; and Russia would then buy myriad made-in-China goods and services in yuan convertible into rubles.
    It’s common knowledge that banks in Hong Kong, from Standard Chartered to HSBC - as well as others closely linked to China via trade deals - have been diversifying into the yuan, which implies that it could become one of the de facto global reserve currencies even before it’s fully convertible. (Beijing is unofficially working for a fully convertible yuan by 2018.)
    The Russia-China gas deal is inextricably tied up with the energy relationship between the European Union (EU) and Russia. After all, the bulk of Russia’s gross domestic product comes from oil and gas sales, as does much of its leverage in the Ukraine crisis. In turn, Germany depends on Russia for a hefty 30% of its natural gas supplies. Yet Washington’s geopolitical imperatives - spiced up with Polish hysteria - have meant pushing Brussels to find ways to “punish” Moscow in the future energy sphere (while not imperiling present day energy relationships).
    There’s a consistent rumble in Brussels these days about the possible cancellation of the projected 16 billion euro South Stream pipeline, whose construction is to start in June. On completion, it would pump yet more Russian natural gas to Europe - in this case, underneath the Black Sea (bypassing Ukraine) to Bulgaria, Hungary, Slovenia, Serbia, Croatia, Greece, Italy, and Austria.
    Bulgaria, Hungary, and the Czech Republic have already made it clear that they are firmly opposed to any cancellation. And cancellation is probably not in the cards. After all, the only obvious alternative is Caspian Sea gas from Azerbaijan, and that isn’t likely to happen unless the EU can suddenly muster the will and funds for a crash schedule to construct the fabled Baku-Tblisi-Ceyhan (BTC) oil pipeline, conceived during the Clinton years expressly to bypass Russia and Iran.
    In any case, Azerbaijan doesn’t have enough capacity to supply the levels of natural gas needed, and other actors like Kazakhstan, plagued with infrastructure problems, or unreliable Turkmenistan, which prefers to sell its gas to China, are already largely out of the picture. And don’t forget that South Stream, coupled with subsidiary energy projects, will create a lot of jobs and investment in many of the most economically devastated EU nations.
    Nonetheless, such EU threats, however unrealistic, only serve to accelerate Russia’s increasing symbiosis with Asian markets. For Beijing especially, it’s a win-win situation. After all, between energy supplied across seas policed and controlled by the US Navy and steady, stable land routes out of Siberia, it’s no contest.
    Pick Your Own Silk Road

    Of course, the US dollar remains the top global reserve currency, involving 33% of global foreign exchange holdings at the end of 2013, according to the IMF. It was, however, at 55% in 2000. Nobody knows the percentage in yuan (and Beijing isn’t talking), but the IMF notes that reserves in “other currencies” in emerging markets have been up 400% since 2003.
    The Fed is arguably monetizing 70% of the US government debt in an attempt to keep interest rates from heading skywards. Pentagon adviser Jim Rickards, as well as every Hong Kong-based banker, tends to believe that the Fed is bust (though they won’t say it on the record). No one can even imagine the extent of the possible future deluge the US dollar might experience amid a $1.4 quadrillion Mount Ararat of financial derivatives. Don’t think that this is the death knell of Western capitalism, however, just the faltering of that reigning economic faith, neoliberalism, still the official ideology of the United States, the overwhelming majority of the European Union, and parts of Asia and South America.
    As far as what might be called the “authoritarian neoliberalism” of the Middle Kingdom, what’s not to like at the moment? China has proven that there is a result-oriented alternative to the Western “democratic” capitalist model for nations aiming to be successful. It’s building not one, but myriad new Silk Roads, massive webs of high-speed railways, highways, pipelines, ports, and fiber optic networks across huge parts of Eurasia. These include a Southeast Asian road, a Central Asian road, an Indian Ocean “maritime highway” and even a high-speed rail line through Iran and Turkey reaching all the way to Germany.
    In April, when President Xi Jinping visited the city of Duisburg on the Rhine River, with the largest inland harbor in the world and right in the heartland of Germany’s Ruhr steel industry, he made an audacious proposal: a new “economic Silk Road” should be built between China and Europe, on the basis of the Chongqing-Xinjiang-Europe railway, which already runs from China to Kazakhstan, then through Russia, Belarus, Poland, and finally Germany. That’s 15 days by train, 20 less than for cargo ships sailing from China’s eastern seaboard. Now that would represent the ultimate geopolitical earthquake in terms of integrating economic growth across Eurasia.
    Keep in mind that, if no bubbles burst, China is about to become - and remain - the number one global economic power, a position it enjoyed for 18 of the past 20 centuries. But don’t tell London hagiographers; they still believe that US hegemony will last, well, forever.


    Take Me to Cold War 2.0

    Despite recent serious financial struggles, the BRICS countries have been consciously working to become a counterforce to the original and - having tossed Russia out in March - once again Group of 7, or G7. They are eager to create a new global architecture to replace the one first imposed in the wake of World War II, and they see themselves as a potential challenge to the exceptionalist and unipolar world that Washington imagines for our future (with itself as the global robocop and NATO as its robo-police force). Historian and imperialist cheerleader Ian Morris, in his book War! What is it Good For?, defines the US as the ultimate “globocop” and “the last best hope of Earth.” If that globocop “wearies of its role,” he writes, “there is no plan B.”
    Well, there is a plan BRICS - or so the BRICS nations would like to think, at least. And when the BRICS do act in this spirit on the global stage, they quickly conjure up a curious mix of fear, hysteria, and pugnaciousness in the Washington establishment. Take Christopher Hill as an example. The former assistant secretary of state for East Asia and US ambassador to Iraq is now an advisor with the Albright Stonebridge Group, a consulting firm deeply connected to the White House and the State Department. When Russia was down and out, Hill used to dream of a hegemonic American “new world order.” Now that the ungrateful Russians have spurned what “the West has been offering” - that is, “special status with NATO, a privileged relationship with the European Union, and partnership in international diplomatic endeavors” - they are, in his view, busy trying to revive the Soviet empire. Translation: if you’re not our vassals, you’re against us. Welcome to Cold War 2.0.
    The Pentagon has its own version of this directed not so much at Russia as at China, which, its think tank on future warfare claims, is already at war with Washington in a number of ways. So if it’s not apocalypse now, it’s Armageddon tomorrow. And it goes without saying that whatever’s going wrong, as the Obama administration very publicly “pivots” to Asia and the American media fills with talk about a revival of Cold War-era “containment policy” in the Pacific, it’s all China’s fault.
    Embedded in the mad dash toward Cold War 2.0 are some ludicrous facts-on-the-ground: the US government, with $17.5 trillion in national debt and counting, is contemplating a financial showdown with Russia, the largest global energy producer and a major nuclear power, just as it’s also promoting an economically unsustainable military encirclement of its largest creditor, China.
    Russia runs a sizeable trade surplus. Humongous Chinese banks will have no trouble helping Russian banks out if Western funds dry up. In terms of inter-BRICS cooperation, few projects beat a $30 billion oil pipeline in the planning stages that will stretch from Russia to India via Northwest China. Chinese companies are already eagerly discussing the possibility of taking part in the creation of a transport corridor from Russia into Crimea, as well as an airport, shipyard, and liquid natural gas terminal there. And there’s another “thermonuclear” gambit in the making: the birth of a natural gas equivalent to the Organization of the Petroleum Exporting Countries that would include Russia, Iran, and reportedly disgruntled US ally Qatar.
    The (unstated) BRICS long-term plan involves the creation of an alternative economic system featuring a basket of gold-backed currencies that would bypass the present America-centric global financial system. (No wonder Russia and China are amassing as much gold as they can.) The euro - a sound currency backed by large liquid bond markets and huge gold reserves - would be welcomed in as well.
    It’s no secret in Hong Kong that the Bank of China has been using a parallel SWIFT network to conduct every kind of trade with Tehran, which is under a heavy US sanctions regime. With Washington wielding Visa and Mastercard as weapons in a growing Cold War-style economic campaign against Russia, Moscow is about to implement an alternative payment and credit card system not controlled by Western finance. An even easier route would be to adopt the Chinese Union Pay system, whose operations have already overtaken American Express in global volume.
    I’m Just Pivoting With Myself

    No amount of Obama administration “pivoting” to Asia to contain China (and threaten it with US Navy control of the energy sea lanes to that country) is likely to push Beijing far from its Deng Xiaoping-inspired, self-described peaceful development strategy meant to turn it into a global powerhouse of trade. Nor are the forward deployment of US or NATO troops in Eastern Europe or other such Cold-War-ish acts likely to deter Moscow from a careful balancing act: ensuring that Russia’s sphere of influence in Ukraine remains strong without compromising trade and commercial, as well as political, ties with the European Union - above all, with strategic partner Germany. This is Moscow’s Holy Grail; a free-trade zone from Lisbon to Vladivostok, which (not by accident) is mirrored in China’s dream of a new Silk Road to Germany.
    Increasingly wary of Washington, Berlin for its part abhors the notion of Europe being caught in the grips of a Cold War 2.0. German leaders have more important fish to fry, including trying to stabilize a wobbly EU while warding off an economic collapse in southern and central Europe and the advance of ever more extreme right-wing parties.


    On the other side of the Atlantic, President Obama and his top officials show every sign of becoming entangled in their own pivoting - to Iran, to China, to Russia’s eastern borderlands, and (under the radar) to Africa. The irony of all these military-first maneuvers is that they are actually helping Moscow, Tehran, and Beijing build up their own strategic depth in Eurasia and elsewhere, as reflected in Syria, or crucially in ever more energy deals. They are also helping cement the growing strategic partnership between China and Iran. The unrelenting Ministry of Truth narrative out of Washington about all these developments now carefully ignores the fact that, without Moscow, the “West” would never have sat down to discuss a final nuclear deal with Iran or gotten a chemical disarmament agreement out of Damascus.
    When the disputes between China and its neighbors in the South China Sea and between that country and Japan over the Senkaku/Diaoyou islands meet the Ukraine crisis, the inevitable conclusion will be that both Russia and China consider their borderlands and sea lanes private property and aren’t going to take challenges quietly - be it via NATO expansion, US military encirclement, or missile shields. Neither Beijing nor Moscow is bent on the usual form of imperialist expansion, despite the version of events now being fed to Western publics. Their “red lines” remain essentially defensive in nature, no matter the bluster sometimes involved in securing them.
    Whatever Washington may want or fear or try to prevent, the facts on the ground suggest that, in the years ahead, Beijing, Moscow, and Tehran will only grow closer, slowly but surely creating a new geopolitical axis in Eurasia. Meanwhile, a discombobulated America seems to be aiding and abetting the deconstruction of its own unipolar world order, while offering the BRICS a genuine window of opportunity to try to change the rules of the game.
    Russia and China in Pivot Mode

    In Washington’s think-tank land, the conviction that the Obama administration should be focused on replaying the Cold War via a new version of containment policy to “limit the development of Russia as a hegemonic power” has taken hold. The recipe: weaponize the neighbors from the Baltic states to Azerbaijan to “contain” Russia. Cold War 2.0 is on because, from the point of view of Washington’s elites, the first one never really left town.
    Yet as much as the US may fight the emergence of a multipolar, multi-powered world, economic facts on the ground regularly point to such developments. The question remains: Will the decline of the hegemon be slow and reasonably dignified, or will the whole world be dragged down with it in what has been called “the Samson option”?
    While we watch the spectacle unfold, with no end game in sight, keep in mind that a new force is growing in Eurasia, with the Sino-Russian strategic alliance threatening to dominate its heartland along with great stretches of its inner rim. Now, that’s a nightmare of Mackinderesque proportions from Washington’s point of view. Think, for instance, of how Zbigniew Brzezinski, the former national security adviser who became a mentor on global politics to President Obama, would see it.
    In his 1997 book The Grand Chessboard, Brzezinski argued that “the struggle for global primacy [would] continue to be played” on the Eurasian “chessboard,” of which “Ukraine was a geopolitical pivot.” “If Moscow regains control over Ukraine,” he wrote at the time, Russia would “automatically regain the wherewithal to become a powerful imperial state, spanning Europe and Asia.”
    That remains most of the rationale behind the American imperial containment policy - from Russia’s European “near abroad” to the South China Sea. Still, with no endgame in sight, keep your eye on Russia pivoting to Asia, China pivoting across the world, and the BRICS hard at work trying to bring about the new Eurasian Century.

    http://www.zerohedge.com/news/2014-0...-pipelineistan
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    Senior Member AirborneSapper7's Avatar
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    Putin's Crimea Bonus: Vast Oil And Gas Fields

    Submitted by Tyler Durden on 05/20/2014 17:35 -0400

    Crimea's secession to Russia - and Putin's gracious acceptance of their request for annexation - has focused all eyes on the peninsula's landmass and rolling tanks; but, as we have noted previously, NY Times reports that when Russia acquired not just the Crimean landmass but also a maritime zone more than three times its size with the rights to underwater resources potentially worth trillions of dollars. It's all about the resources as we have noted previously but Russian officials are quick to play this down, "compared to all the potential Russia has got, there was no interest there," but as one analyst noted, Russia’s annexation of Crimea "so obvious" as a play for offshore riches. No wonder Putin is happy to take on the 'burden' of Crimea.

    Donetsk's huge shale fields... And as other regions in east and south Ukraine follow in the Donetsk' footsteps, assuring Russia a land connection to Crimea and cutting off Kiev from the Donbas industrial zones and the Slavyansk shale gas, Putin wins again.

    And, as NY Times notes, Crimea's offshore resources are a dramatic bonus...


    As NY Times reports, when Russia seized Crimea in March, it acquired not just the Crimean landmass but also a maritime zone more than three times its size with the rights to underwater resources potentially worth trillions of dollars.
    Russia portrayed the takeover as reclamation of its rightful territory, drawing no attention to the oil and gas rush that had recently been heating up in the Black Sea. But the move also extended Russia’s maritime boundaries, quietly giving Russia dominion over vast oil and gas reserves while dealing a crippling blow to Ukraine’s hopes for energy independence.

    Russia did so under an international accord that gives nations sovereignty over areas up to 230 miles from their shorelines. It had tried, unsuccessfully, to gain access to energy resources in the same territory in a pact with Ukraine less than two years earlier.

    “It’s a big deal,” said Carol R. Saivetz, a Eurasian expert in the Security Studies Program of the Massachusetts Institute of Technology. “It deprives Ukraine of the possibility of developing these resources and gives them to Russia. It makes Ukraine more vulnerable to Russian pressure.”

    Gilles Lericolais, the director of European and international affairs at France’s state oceanographic group, called Russia’s annexation of Crimea “so obvious” as a play for offshore riches.

    In Moscow, a spokesman for President Vladimir V. Putin said there was “no connection” between the annexation and energy resources, adding that Russia did not even care about the oil and gas. “Compared to all the potential Russia has got, there was no interest there,” the spokesman, Dmitry Peskov, said Saturday.

    ...
    As for oil extraction in the newly claimed maritime zones, companies say their old deals with Ukraine are in limbo, and analysts say new contracts are unlikely to be signed anytime soon, given the continuing turmoil in the region and the United States’ efforts to ratchet up pressure on Russia.
    “There are huge issues at stake,” noted Dr. Saivetz of M.I.T. “I can’t see them jumping into new deals right now.”

    http://www.zerohedge.com/news/2014-0...and-gas-fields
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    Senior Member AirborneSapper7's Avatar
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    China & Russia Solidify their Alliance and Issue Joint Statement Condemning U.S. Tinkering

    20.May.2014 | SCG

    Washington's use of strong arm tactics with China and Russia at the same time was a serious strategic error.

    Right now Putin is in China meeting with Chinese President Xi Jinping in Shanghai. Though the talks are ongoing, they have already released a joint statement which takes several jabs at U.S. foreign policy. Specifically, the two countries committed to "reject unilateral sanctions rhetoric". Putin and Xi also agreed to expand military cooperation and expressed "grave concern" over the crisis in Ukraine, and condemned the funding of regime change. The U.S. government was not named explicitly in the condemnation, but the inference was very clear.

    "The sides noted the need to respect historical heritage of countries, their cultural traditions and independently chosen public and political system, the system of values and ways of development; counteract interference in domestic affairs of other countries, give up the language of unilateral sanctions, organize aid, fund or encourage activity aimed at changing a constitutional system of a foreign country or its involvement in any multipartite association or union" the document stated.
    The statement also called for “universal rules of behavior in information space,” saying that some communication technologies run "contrary to international stability and security, damaging countries’ sovereignty and violating personal privacy."
    One one hand, this shot is obviously directed at the NSA, but on the other it seems to signal Russia and China's agreement on issues of online speech. As we reported earlier Russia has recently passed new laws regulating bloggers and requiring them to register with the government.

    Related: Russia and China Announce Joint Naval Drills as NATO Declares Russia an Enemy

    Some pro-Western analysts are watching the emergence of this Russia-China Alliance with alarm, insisting that it will have a disastrous impact if allowed to continue, and calling for diplomatic efforts to disrupt it. Incidentally these are often the same people who avidly pushed for tougher sanctions against Russia during the Ukrainian crisis, and who refused to report on the overwhelming evidence of U.S. involvement in the coup.

    Western opposition to the Sino-Russia alliance is understandable. With China firmly in Russia's corner, the U.S. and Europe have no leverage over Moscow. However, less understandable is the fact that these pundits didn't see this coming.

    Related: Why Rebellion Is Spreading In Ukraine

    What on earth did the Obama administration expect would happen when they injected themselves into territorial disputes between China and their neighbors, while at the same time saber rattling in eastern Europe, and imposing punitive 'sanctions' against Putin's inner circle? Then, to top it all off, the U.S. government filed charges against China this week for corporate espionage. Taken as a whole it would be difficult to come up with a more effective way to push these two countries together if one tried.
    The outcome of these moves was so obvious that I'm hesitant to chalk it up to gross incompetence.

    Related: The Lines of Economic Warfare Are Being Drawn & The U.S. Is Not Going to Win

    At any rate, the idea that John Kerry or anyone in the U.S. State Department has the diplomatic skill (or the leverage) to pit China against Russia on the global scale is patently absurd.

    http://scgnews.com/china-russia-soli...g-us-tinkering
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    Senior Member AirborneSapper7's Avatar
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    International

    Russia, China sign deal to bypass U.S. dollar



    Carlos Barria / AP

    Analysis: The agreement is a symbolic blow to US global financial hegemony and a signal of Russia-China rapprochement
    May 20, 2014 5:00PM ET
    by Michael Pizzi @michaelwpizzi

    In a symbolic blow to U.S. global financial hegemony, Russia and China took a small step toward undercutting the domination of the U.S. dollar as the international reserve currency on Tuesday when Russia’s second biggest financial institution, VTB, signed a deal with Bank of China to bypass the dollar and pay each other in domestic currencies.
    The so-called Agreement on Cooperation — signed in the presence of Chinese President Xi Jinping and Russian President Vladimir Putin, who is on a visit to Shanghai — could be followed by a long-awaited announcement this week of a massive natural gas deal 10 years in the making.
    “Our countries have done a huge job to reach a new historic landmark,” Putin said on Tuesday, making note of the $100 billion in annual trade between the two countries.
    Demand for the dollar, which has long served as a safe and reliable reserve currency in international transactions, has allowed the U.S. to borrow almost unlimited cash and spend well beyond its means, which some economists say has afforded the United States an outsize influence on world affairs.
    But the BRICS countries — Brazil, Russia, India, China and South Africa — a bloc of the world’s five major emerging economies, have long sought to diminish their dependence on the dollar, as a means of reshaping the world financial and geopolitical order. In the absence of a viable alternative, however, replacing it has proven difficult.
    For its part, “China sees the dominance of the dollar in international trade transactions as remnant of American global dominance, which they hope to overthrow in the years ahead. This is a small step in that direction, to reduce the primacy of the dollar in international trade,” said Michael Klare, a professor of peace and world security studies at Hampshire College.
    Some have been tempted to view Tuesday's deal in the context of Putin's showdown with the West over the crisis in Ukraine. After the U.S. and Europe imposed sanctions on Moscow for its annexation of Ukraine's Crimean Peninsula, Putin may have finally come good on promised retaliation against what he views as Western hegemony in Russia's near abroad.
    “Breaking the dominance of the U.S. dollar in international trade between the BRICS is something that the group has been talking about for some time,” said Chris Weafer, a founding partner of Macro-Advisory, a consultancy in Moscow. “The Ukraine crisis and the threats voiced by the U.S. administration may well provide the catalyst for that to start happening,” he added.
    To be sure, the Russia-China bank deal is mostly a symbolic step. Liza Ermolenko, an emerging markets economist at Capital Economics Ltd. in London, said the deal was still “a very small one, in the grand scale of things” and that it wouldn’t change Russia’s reliance on the dollar “overnight.” For one, most of Russia’s export contracts in the oil and gas markets are still priced in dollars, she noted, and on a wider scale, replacing the dollar with the ruble is much too risky to even consider.
    Likewise, even if China agrees to the gas deal, which could see over $450 billion of Russian natural gas flow into China over the next 30 years, Russia is not in a position to abandon its ties with Europe.
    "From the commercial standpoint, Europe is the most profitable market for Gazprom,” said Mikhail Korchemkin, the founder of Eastern European Gas Analysis who has consulted for Gazprom. "Exports to China can generate a small profit, [and] only if the government makes it free of taxes and duties.”
    But the bank deal is another indicator that Russia and China are in the middle of a wider rapprochement, which analysts say is premised not on ideological alignment but on a mutual desire to undercut the U.S. in their respective spheres of influence.
    Both countries are wary of President Barack Obama’s “pivot east,” a recalibration of U.S. foreign policy away from decades of war in the Middle East and toward the fast-growing economies of the east. Cynical observers have interpreted the shift as an effort to contain China.
    "This is a marriage of mutual strategic interests, not a marriage of love," said Klare. “China wants energy and weapons from Russia, and Russia wants diplomatic backing and cash. Its a quid pro quo.”
    Yet even if China feels threatened by U.S. encroachment, it is Russia who is desperately pursuing closer ties with China.
    Putin may have gotten the better of the Western powers in the showdown over Crimea, but at the cost of growing geopolitical isolation. Under intense pressure to demonstrate Russia's avowed independence from the West, Putin has repeatedly threatened that he could simply shut off its natural gas pipelines to Europe and find new markets for Russian energy exports.
    Separate that political posturing, the Russian imperative to find new markets for its energy exports is nonetheless very real. Energy demands in Europe have plateaued, and may even decline in the long term due to stringent environmental regulations.
    “If Russia wants to continue to be a petrostate, it has to shift marketing of its exports to Asia," said Klare, who noted that Western energy conglomerates like Exxon-Mobil have begun doing the same.
    “We don’t want to push this too far and see it as a formation of a new, global anti-American bloc that is starting a new Cold War,” he added. "This is market-driven more than its political."

    http://america.aljazeera.com/article...-bankdeal.html
    Last edited by AirborneSapper7; 05-21-2014 at 04:39 AM.
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    Who Needs The United States? Not Russia And China

    Michael Snyder 1 hour ago
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    Russia and China have just signed what is being called "the gas deal of the century", and the two countries are discussing moving away from the U.S. dollar and using their own currencies to trade with one another. This has huge implications for the future of the U.S. economy, but the mainstream media in the United States is being strangely quiet about all of this. For example, I searched CNN's website to see if I could find something about this gas deal between Russia and China and I did not find anything. But I did find links to "top stories" entitled "Celebs who went faux red" and "Adorable kid tugs on Obama's ear". Is it any wonder why the mainstream media is dying? If a particular story does not fit their agenda, they will simply ignore it. But the truth is that this new agreement between Russia and China is huge. It could end up fundamentally changing the global financial system, and not in a way that would be beneficial for the United States.
    Russia and China had been negotiating this natural gas deal for ten years, and now it is finally done. Russia is the largest exporter of natural gas on the entire planet, and China is poised to become the world's largest economy in just a few years. This new $400 billion agreement means that these two superpowers could potentially enjoy a mutually beneficial relationship for the next 30 years...
    Russia reached a $400 billion deal to supply natural gas to China through a new pipeline over 30 years, a milestone in relations between the world’s largest energy producer and the biggest consumer.
    President Vladimir Putin is turning to China to bolster Russia’s economy as relations sour with the U.S. and European Union because of the crisis in Ukraine. Today’s accord, signed after more than a decade of talks, will allow state-run gas producer OAO Gazprom (GAZP) to invest $55 billion developing giant gas fields in eastern Siberia and building the pipeline, Putin said.
    It’s an “epochal event,” Putin said in Shanghai after the contract was signed. Both countries are satisfied with the price, he said.
    Of course countries sell oil and natural gas to each other all the time. But what makes this deal such a potential problem for the U.S. is the fact that Russia and China are working on cutting the U.S. dollar out of the entire equation. Just check out the following excerpt from a recent article in a Russian news source...
    Russia and China are planning to increase the volume of direct payments in mutual trade in their national currencies, according to a joint statement on a new stage of comprehensive partnership and strategic cooperation signed during high-level talks in Shanghai on Tuesday.
    “The sides intend to take new steps to increase the level and expansion of spheres of Russian-Chinese practical cooperation, in particular to establish close cooperation in the financial sphere, including an increase in direct payments in the Russian and Chinese national currencies in trade, investments and loan services,” the statement said.
    In my recent article entitled "De-Dollarization: Russia Is On The Verge Of Dealing A Massive Blow To The Petrodollar", I warned about what could happen if the petrodollar monopoly ends. In the United States, our current standard of living is extremely dependent on the rest of the world continuing to use our currency to trade with one another. If Russia starts selling natural gas to China without the U.S. dollar being involved, that would be a monumental blow to the petrodollar. And if other nations started following the lead of Russia and China, that could result in an avalanche from which the petrodollar may never recover.
    And it isn't just the national governments of Russia and China that are discussing moving away from the U.S. dollar. For example, the second largest bank in Russia just signed a deal with the Bank of China "to pay each other in domestic currencies"...
    VTB, Russia’s second biggest lender, has signed a deal with Bank of China, which includes an agreement to pay each other in domestic currencies.
    “Under the agreement, the banks plan to develop their partnership in a number of areas, including cooperation on ruble and renminbi settlements, investment banking, inter-bank lending, trade finance and capital-markets transactions,” says the official VTB statement.
    The deal underlines VTB Group’s growing interest in Asian markets and will help grow trade between Russia and China that are already close trading partners, said VTB Bank Management Board Vasily Titov.
    You can almost feel the power of the U.S. dollar fading.
    A few months ago, when I wrote about how China had announced that it no longer planned to stockpile more U.S. dollars, I speculated that it may be evidence that China planned to start making a big move away from the U.S. dollar.
    Well, now China's intentions have become even more clear.
    The Chinese do not plan to allow the United States to indefinitely dominate the globe financially. In the long run, the Chinese plan to be the ones calling the shots, and that means that the power of the U.S. dollar must decline.
    These days, instead of piling up mountains of U.S. currency, China has started accumulating hard assets instead. In the past, I have written about how China is rapidly stockpiling gold, and it turns out that the Chinese have also been very busy stockpiling oil as well...
    China is stockpiling oil for its strategic petroleum reserve at a record pace, intervening on a scale large enough to send a powerful pulse through the world crude market.
    The move comes as tensions mount in the South China Sea and the West prepares possible oil sanctions against Russia over the crisis in eastern Ukraine. Analysts believe China is quietly building up buffers against a possible spike in oil prices or disruptions in supply.

    The International Energy Agency (IEA) said in its latest monthly report that China imported 6.81m barrels per day (bpd) in April, an all-time high.
    Once upon a time, China was extremely dependent on the United States economically. The same was true with most of the rest of the world.
    But now economic power has shifted so dramatically that nations such as Russia and China are realizing that they don't really need to be dependent on the United States any longer.
    And with each passing year, the relationship between Russia and China is becoming stronger. As Pepe Escobar recently observed, this emerging alliance is causing quite a bit of consternation in Washington...
    And no wonder Washington is anxious. That alliance is already a done deal in a variety of ways: through the BRICS group of emerging powers (Brazil, Russia, India, China, and South Africa); at the Shanghai Cooperation Organization, the Asian counterweight to NATO; inside the G20; and via the 120-member-nation Non-Aligned Movement (NAM). Trade and commerce are just part of the future bargain. Synergies in the development of new military technologies beckon as well. After Russia’s Star Wars-style, ultra-sophisticated S-500 air defense anti-missile system comes online in 2018, Beijing is sure to want a version of it. Meanwhile, Russia is about to sell dozens of state-of-the-art Sukhoi Su-35 jet fighters to the Chinese as Beijing and Moscow move to seal an aviation-industrial partnership.
    Meanwhile, the relationship that the U.S. has with both nations is quickly going sour. The crisis in Ukraine has caused relations with Russia to drop to the lowest point since the end of the Cold War, and now China is deeply offended by charges that Chinese military officers have been involved in cyberspying on the United States...
    China on Tuesday warned the United States was jeopardizing military ties by charging five Chinese officers with cyberspying and tried to turn the tables on Washington by calling it "the biggest attacker of China's cyberspace."
    China announced it was suspending cooperation with the United States in a joint cybersecurity task force over Monday's charges that officers stole trade secrets from major American companies. The Foreign Ministry demanded Washington withdraw the indictment.
    The testy exchange marked an escalation in tensions over U.S. complaints that China's military uses its cyber warfare skills to steal foreign trade secrets to help the country's vast state-owned industrial sector.
    The divide between the East and the West is growing.
    But the Obama administration has not figured out that we need the East more than they need us.
    Right now, the number one U.S. export is U.S. dollars. Our massively inflated standard of living is very heavily dependent on the rest of the world using our currency to trade with one another and lending it to us at super low interest rates.
    If the rest of the world quits playing our game, our debt-based financial system will quickly fall apart.
    Unfortunately, nobody in the Obama administration seems to have much understanding of global economics, and they will probably continue to antagonize Russia and China.
    In the end, the consequences for antagonizing them could end up being far greater than any of us ever imagined.

    Source

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    Russia And China Finally Sign Historic $400 Billion "Holy Grail" Gas Deal

    Submitted by Tyler Durden on 05/21/2014 10:47 -0400

    There was some trepidation yesterday when after the first day of Putin's visit to China the two countries did not announce the completion of the long-awaited "holy grail" gas dead, and fears that it may get scuttled over price negotiations. It wasn't: moments ago Russia's Gazprom and China's CNPC announced, that after a decade of negotiations, the two nations signed a 30 year gas contract amounting to around $400 billion. And with the west doing all it can to alienate Russia and to force it into China's embrace, this is merely the beginning of what will be a far closer commercial (and political) relationship between China and Russia.

    So far there have been no public pricing details on the deal which accrording to Gazprom CEO Aleksey Miller is a "commercial secret", and which is believed to involve Russia supplying 38 billion cubic metres of gas per year to China via a new eastern pipeline linking the countries.
    According to Itar-Tass, the compromise between Russian gas export monopoly Gazprom and Chinese National Petroleum Corporation (CNPC) on Russian gas price is estimated at $75 billion, citing the Deputy Head of the National Energy Security Fund Alexei Grivach. The differences on the price for 38 and 60 billion cubic meters supplies a year were $1.5 billion and $2.5 billion, he added, so the subject of the negotiations is quite a significant one.
    Gazprom expected a base price of $400 for 1,000 cubic meters, an expert of the Eurasian Development Research Center of the Chinese State Council said in April, whereas the CNPC’s proposal was $350-360 for 1,000 cubic meters.
    RIA has more details:
    According to Miller, only at 4 am local time it became clear “that all the principal issues have been solved.”

    Russia and China have foreseen providing “preferential tax regimes,” Miller told journalists, without giving details.

    Russia earlier suggested nullifying the extraction tax for gas fields delivering fuel to China, while Chinese officials expressed their readiness to cancel import taxes on gas from Russia, Rosneft CEO Igor Sechin said Tuesday.

    Gazprom’s stocks rose 0.9 percent following reports that the long-awaited gas supply contract was signed. Russian stocks increased Tuesday amid positive aftermath of the first day of President Vladimir Putin’s visit to Shanghai.

    In March 2013, Gazprom and CNPC signed a memorandum of understanding on the planned gas supplies to China along the eastern route via the Power of Siberia pipeline. The signing of the contract has been delayed several times as the two sides failed to reach an agreement citing a pricing issue as the main stumbling block. President Putin’s current visit to China became the final stage of the negotiating process.

    The Gazprom CEO said earlier the company could receive advance payment from China for the gas, which could start flowing as early as 2018. The planned project has an estimated capacity to pump up to 38 billion cubic meters annually, which could later increase to 60 billion cubic meters.
    Then this from from RT:
    A memorandum of understanding was signed in the presence of Russian President Vladimir Putin and President of China Xi Jinping on the second day of Putin’s two-day state visit to Shanghai. The price China will pay for Russian gas remains a "commercial secret" according to Gazprom CEO Aleksey Miller. Gas will be delivered to China's via the eastern 'Power of Siberia' pipeline.

    RT producers were informed of the landmark energy deal prior to its signing after a conversation with Miller.

    Under the long-term deal, Gazprom will begin providing China's growing economy with 38 billion cubic meters of natural gas per year for the next 30 years, beginning in 2018. The details of the deal were discussed for more than 10 years, with Moscow and Beijing negotiating over gas prices and the pipeline route, as well as possible Chinese stakes in Russian projects.

    Just ahead of Putin's visit to Shanghai, Russian Prime Minister Dmitry Medvedev gave reassurance that the agreed price would be fair.

    “One side always wants to sell for a higher price, while the other wants to buy for a lower price,” Medvedev said. “I believe that in the long run, the price will be fair and totally comparable to the price of European supplies.”

    A major breakthrough in negotiations came on Sunday as Gazprom chief Aleksey Miller sat down with his CNPC counterpart, Zhou Jiping, in Beijing to discuss final details, including price formulas.

    Although Europe is still Russia's largest energy market – buying more than 160 billion cubic meters of Russian natural gas in 2013 – Moscow will use every opportunity to diversify gas deliveries and boost its presence in Asian markets.

    “I wouldn’t look for politics behind this, but I have no doubt that supplying energy to the Asia Pacific Region holds out a great promise in the future,” Medvedev said.

    In October 2009, Gazprom and CNPC inked a framework agreement for the Altai project which envisions building a pipeline to supply natural gas from fields in Siberia via the western part of the Russia-China border.

    In March 2013, Gazprom and CNPC signed a memorandum of understanding on Russian gas supplies to China along the so-called eastern 'Power of Siberia' route. When both pipelines are activated, Russia can supply Asia with 68 billion cubic meters of gas annually.
    Last year, China consumed about 170 billion cubic meters of natural gas and is expected to consume 420 billion cubic meters per year by 2020.
    Regardless of what the final price ended up being, and whether or not China got the upper hand in the negotiations, the final outcome is there and it is real: as a result of his disastrous foreign policy in the past two months, Barack Obama finally pushed Russia into China's hands, culminating with a deal that was ten years in the making and was never certain, until the Ukraine crisis.
    And yes, this was all predictable from day one. Here is what we said precisely two months ago:
    If it was the intent of the West to bring Russia and China together - one a natural resource (if "somewhat" corrupt) superpower and the other a fixed capital / labor output (if "somewhat" capital misallocating and credit bubbleicious) powerhouse - in the process marginalizing the dollar and encouraging Ruble and Renminbi bilateral trade, then things are surely "going according to plan."

    For now there have been no major developments as a result of the shift in the geopolitical axis that has seen global US influence, away from the Group of 7 (most insolvent nations) of course, decline precipitously in the aftermath of the bungled Syrian intervention attempt and the bloodless Russian annexation of Crimea, but that will soon change. Because while the west is focused on day to day developments in Ukraine, and how to halt Russian expansion through appeasement (hardly a winning tactic as events in the 1930s demonstrated), Russia is once again thinking 3 steps ahead... and quite a few steps east.

    While Europe is furiously scrambling to find alternative sources of energy should Gazprom pull the plug on natgas exports to Germany and Europe (the imminent surge in Ukraine gas prices by 40% is probably the best indication of what the outcome would be), Russia is preparing the announcement of the "Holy Grail" energy deal with none other than China, a move which would send geopolitical shockwaves around the world and bind the two nations in a commodity-backed axis. One which, as some especially on these pages, have suggested would lay the groundwork for a new joint, commodity-backed reserve currency that bypasses the dollar, something which Russia implied moments ago when its finance minister Siluanov said that Russia may refrain from foreign borrowing this year. Translated: bypass western purchases of Russian debt, funded by Chinese purchases of US Treasurys, and go straight to the source.

    Here is what will likely happen next, as explained by Reuters:
    Igor Sechin gathered media in Tokyo the next day to warn Western governments that more sanctions over Moscow's seizure of the Black Sea peninsula from Ukraine would be counter-productive.

    The underlying message from the head of Russia's biggest oil company, Rosneft, was clear: If Europe and the United States isolate Russia, Moscow will look East for new business, energy deals, military contracts and political alliances.

    The Holy Grail for Moscow is a natural gas supply deal with China that is apparently now close after years of negotiations. If it can be signed when Putin visits China in May, he will be able to hold it up to show that global power has shifted eastwards and he does not need the West.
    * * *

    To summarize: while the biggest geopolitical tectonic shift since the cold war accelerates with the inevitable firming of the "Asian axis", the west monetizes its debt, revels in the paper wealth created from an all time high manipulated stock market while at the same time trying to explain why 6.5% unemployment is really indicative of a weak economy, blames the weather for every disappointing economic data point, and every single person is transfixed with finding a missing airplane.
    To conclude with the traditional geopolitical balance of power summary: Putin wins (again), Obama loses (again), and the monument to the dollar's status as world's reserve currency gets yet another tarnishing blow.


    http://www.zerohedge.com/news/2014-0...grail-gas-deal
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    Senior Member AirborneSapper7's Avatar
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    Russian Billionaire Timchenko Calls China Gas Deal "The Most Important Event Of The Past Decade"

    Submitted by Tyler Durden on 05/22/2014 08:55 -0400

    We may have dubbed Russia's historic, and 30 years in the making until John Kerry et al accelerated it, gas deal as the "Holy Grail" of New Normal trade arrangements, and it turns out we weren't alone in evaluating the strategic implications of this epic Russian, and Chinese, pivot toward each other. Moments ago, Russian billionaire Gennady Timchenko, shareholder of Gazprom competitor Novatek, chairman of the Russian-Chinese Business Council, and former co-owner of commodities trading giant Gunvor, said that "Economically it’s the most important event of the past decade."
    Some of Timchenko's other soundbites via Bloomberg:

    • "The contract allows a balance between Europe and China”
    • "There will probably come a time when Gazprom’s monopoly won’t be a monopoly"

    More importantly, now that the ground has been set, the Gazprom-CNPC deal is just the beginning:

    • Timchenko says also seeking to expand Yamal LNG, Sibur business with Asia; Volga Group is looking at China projects
    • China Harbour Engineering signed memorandum on Kolmar coal mining, Sakhatrans port projects in Russia’s Far East; may form JV
    • Chinese propose participation in domestic pipeline projects, LNG terminals to Timchenko, as Volga Group owner and Novatek board member
      "We have the desire” to invest in China, no specific talks for now
    • Volga has water reservoir in China, doesn’t rule out investing in development for bottled water

    It may be ironic, but quite soon China could participate in building a bridge between Russia and its latest territorial property: Crimea.

    • USK Most, co-owned by Volga, plans to bid in tender to build bridge between Russia, Crimean Peninsula through Kerch strait together w/ Mostotrest, co-owned by Arkady Rotenberg, also on U.S. sanctions list
    • Says doesn’t rule out China cos. participating in bridge project

    Finally, here is why the next company to feel the "costs" of US sanctions will not be Russian, but America's own Caterpillar:

    • If sanctions tightened, Volga Group construction units may seek equipment suppliers in China to replace U.S. cos. such as Caterpillar

    Which of course would be even more bullish for CAT as it would force management to lever up even more and to buyback a record amount of its own shares just to give the impression that collapsing revenue and future business prospects is the most bullish thing that could happen to the industrial giant.


    http://www.zerohedge.com/news/2014-0...nt-past-decade
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    Senior Member AirborneSapper7's Avatar
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    As Russia Dumps A Record Amount Of US Treasurys, Here Is What It Is Buying

    Submitted by Tyler Durden on 05/21/2014 23:55 -0400

    Last week we commented that based on TIC data, while "Belgium's" unprecedented Treasury buying spree continues, one country has been dumping US bonds at an unprecedented rate, and in March alone Russia sold a record $26 billion, or 20% of its holdings.

    So as Russia is selling record amount of US paper, what is it buying? For the answer we go to Goldcore which tells us that...
    Russia Buys 900,000 Ounces Of Gold Worth $1.17 Billion In April

    The Russian central bank has again increased its gold reserves by another 900,000 ounces worth $1.17 billion in April.
    Russia's gold reserves rose to 34.4 million troy ounces in April, from 33.5 million troy ounces in March, the Russian central bank announced on its website yesterday. The value of its gold holdings rose to $44.30 billion as of May 1, compared with $43.36 billion a month earlier, it added.
    The following is a summary from Bloomberg of the April data template on international reserves and foreign currency liquidity from the Central Bank of Russia in Moscow:


    Russia's gold & foreign exchange reserves remained virtually unchanged at USD 471.1billion in the week ending May 9. Russia’s reserves have fallen since the crisis began but remain very sizeable. The reserves include monetary gold, special drawing rights, reserve position at the IMF and foreign exchange.
    The 900,000 ounce purchase is a lot of physical gold in ounce or tonnage terms but as a percentage of Russian foreign exchange reserves it is a very small 0.24%.
    Gold as a percentage of the overall Russian reserves is now nearly 10%. This remains well below the average gold holding as a percentage of foreign exchange reserves of major central banks such as the Bundesbank, Bank of France and the Federal Reserve which is over 65%.
    The Russian central bank has been gradually increasing the Russian reserves since 2006 (see chart above). On average they have been accumulating 0.5 million troy ounces every month. Therefore, the near 1 million ounce purchase in April is a definite increase in demand.
    This was to be expected given the very pronounced geopolitical tension with the U.S. and west over Ukraine. Indeed the TIC data shows that Russia has been aggressively divesting themselves of U.S. Treasuries.
    Russian holdings of U.S. Treasuries fell very sharp, by nearly $50 billion, between October and March 2014 or nearly a third of Russia’s total holdings. Over half of the plunge came in March, when $26 billion was liquidated as western sanctions were imposed. TIC Data for April won’t be available until June and will make for very interesting reading.
    Especially given the mysterious huge U.S. Treasury buying that is being done by little Belgium. This has analysts scratching their heads and has aroused suspicions that the Fed and or the ECB may be behind the huge Belgian purchases.


    Russian Gold Reserves in Million Fine Troy Ounces - 1995-2014 - Monthly Chart (Bloomberg)
    Russia has already made their intentions regarding gold very clear. Numerous high ranking officials have affirmed how they view gold as an important monetary asset and Putin himself has had many publicised photos in which he very enthusiastically holds large gold bars.
    On May 25th 2012, the deputy chairman of Russia's central bank, Sergey Shvetsov, said that the Bank of Russia plans to keep buying gold in order to diversify their foreign exchange reserves.
    "Last year we bought about 100 tonnes. This year it will be less but still a considerable figure," Shvetsov told Reuters at the time.
    The World Gold Council reported yesterday that central bank purchases were 70% above their 5-year quarterly average, led by Iraq and Russia. The Eurozone actually became a net buyer thanks to Latvia joining the single currency union, adding its gold to the Eurozone reserves as part of the Euro treaty.
    Russia may be planning to give the ruble some form of gold backing in order to protect the ruble from devaluations and protect Russia from an international monetary crisis and the soon to return currency wars.
    Russian central bank demand and indeed global central banks demand is set to continue as macroeconomic, monetary and geopolitical uncertainty is unlikely to abate any time soon. Indeed, it may escalate substantially in the coming months as we move into the next phase of the global debt crisis.


    http://www.zerohedge.com/news/2014-0...what-it-buying
    Last edited by AirborneSapper7; 05-22-2014 at 07:40 PM.
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    As Russia Dumps A Record Amount Of US Treasurys, Here Is What It Is Buying


    Submitted by Tyler Durden on 05/21/2014 23:55 -0400

    Last week we commented that based on TIC data, while "Belgium's" unprecedented Treasury buying spree continues, one country has been dumping US bonds at an unprecedented rate, and in March alone Russia sold a record $26 billion, or 20% of its holdings.

    So as Russia is selling record amount of US paper, what is it buying? For the answer we go to Goldcore which tells us that...
    Russia Buys 900,000 Ounces Of Gold Worth $1.17 Billion In April

    The Russian central bank has again increased its gold reserves by another 900,000 ounces worth $1.17 billion in April.
    Russia's gold reserves rose to 34.4 million troy ounces in April, from 33.5 million troy ounces in March, the Russian central bank announced on its website yesterday. The value of its gold holdings rose to $44.30 billion as of May 1, compared with $43.36 billion a month earlier, it added.
    The following is a summary from Bloomberg of the April data template on international reserves and foreign currency liquidity from the Central Bank of Russia in Moscow:


    Russia's gold & foreign exchange reserves remained virtually unchanged at USD 471.1billion in the week ending May 9. Russia’s reserves have fallen since the crisis began but remain very sizeable. The reserves include monetary gold, special drawing rights, reserve position at the IMF and foreign exchange.
    The 900,000 ounce purchase is a lot of physical gold in ounce or tonnage terms but as a percentage of Russian foreign exchange reserves it is a very small 0.24%.
    Gold as a percentage of the overall Russian reserves is now nearly 10%. This remains well below the average gold holding as a percentage of foreign exchange reserves of major central banks such as the Bundesbank, Bank of France and the Federal Reserve which is over 65%.
    The Russian central bank has been gradually increasing the Russian reserves since 2006 (see chart above). On average they have been accumulating 0.5 million troy ounces every month. Therefore, the near 1 million ounce purchase in April is a definite increase in demand.
    This was to be expected given the very pronounced geopolitical tension with the U.S. and west over Ukraine. Indeed the TIC data shows that Russia has been aggressively divesting themselves of U.S. Treasuries.
    Russian holdings of U.S. Treasuries fell very sharp, by nearly $50 billion, between October and March 2014 or nearly a third of Russia’s total holdings. Over half of the plunge came in March, when $26 billion was liquidated as western sanctions were imposed. TIC Data for April won’t be available until June and will make for very interesting reading.
    Especially given the mysterious huge U.S. Treasury buying that is being done by little Belgium. This has analysts scratching their heads and has aroused suspicions that the Fed and or the ECB may be behind the huge Belgian purchases.


    Russian Gold Reserves in Million Fine Troy Ounces - 1995-2014 - Monthly Chart (Bloomberg)
    Russia has already made their intentions regarding gold very clear. Numerous high ranking officials have affirmed how they view gold as an important monetary asset and Putin himself has had many publicised photos in which he very enthusiastically holds large gold bars.
    On May 25th 2012, the deputy chairman of Russia's central bank, Sergey Shvetsov, said that the Bank of Russia plans to keep buying gold in order to diversify their foreign exchange reserves.
    "Last year we bought about 100 tonnes. This year it will be less but still a considerable figure," Shvetsov told Reuters at the time.
    The World Gold Council reported yesterday that central bank purchases were 70% above their 5-year quarterly average, led by Iraq and Russia. The Eurozone actually became a net buyer thanks to Latvia joining the single currency union, adding its gold to the Eurozone reserves as part of the Euro treaty.
    Russia may be planning to give the ruble some form of gold backing in order to protect the ruble from devaluations and protect Russia from an international monetary crisis and the soon to return currency wars.
    Russian central bank demand and indeed global central banks demand is set to continue as macroeconomic, monetary and geopolitical uncertainty is unlikely to abate any time soon. Indeed, it may escalate substantially in the coming months as we move into the next phase of the global debt crisis.


    http://www.zerohedge.com/news/2014-0...what-it-buying
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    Hot On The Heels Of Its China Breakthrough, Russia Set To Build Eight Nuclear Power Plants In Iran

    Submitted by Tyler Durden on 05/22/2014 17:19 -0400

    Before anyone suggests that all Russia is focusing on is China at any and all costs, consider that as we have been saying since 2012, perhaps just as important to Russia (and China) strategically is Iran which has already lashed out against the Petrodollar on numerous occasions in the past, not only for its vast oil reserves, but for its even more strategic location in the heart of the Persian Gulf.
    To be sure, the Eurasian crescent of Russia and China would be made all that much stronger if the two nations had a toehold on the Straits of Hormuz, and were able to shut traffic - either tanker or military, with the US Fifth Fleet located in Bahrain - into the Gulf at their bidding. Which is why it was not surprising that not even 24 hours after Russia and China announced the "holy grail" energy deal, that RIA reported Russia is already preparing to lock in the Tehran regime with a deal to build not one but 8 (!) more nuclear power plants in the country.


    From RIA:


    Moscow may sign an intergovernmental agreement with Teheran this year to build eight new reactors for nuclear power plants in Iran, a source close to the negotiations told journalists Thursday.

    Two reactors could be built at the Bushehr Power Plant and six reactors at other sites, the source said, adding that the talks were in their final stage.

    Russian President Vladimir Putin said earlier this week that Russian-Iranian cooperation will continue despite international turbulence around Tehran. Putin said that Russia and Iran are not only neighbors, but also long-standing reliable partners.

    Iran’s only nuclear power plant near Bushehr came online September 2011 and began operating at full capacity a year after. Moscow handed over operational control of the Russian-made plant to Iran in September last year.
    A deal, it goes without saying, that would have China's explicit and implicit blessing.
    And cue the US foreign department collapsing in an apopleptic fit of sheer powerlessness, if many, many "costs" for all those involved.


    http://www.zerohedge.com/news/2014-0...er-plants-iran
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