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Vladimir Putin and the rise of the petro-ruble

Mike Whitney


May 21, 2006

"If one day the world’s largest oil producers demanded euros for their barrels, it would be the financial equivalent of a nuclear strike". Bill O’ Grady, A.G. Edwards

Russia is planning a preemptive strike on the United States that is likely to trigger a market meltdown and economic disaster in America.

On May 10, in his State of the Nation speech to parliament, President Vladimir Putin announced that Russia would make the ruble "internationally convertible" so that it could be used in oil and natural gas transactions. Currently, oil is denominated exclusively in dollars. Putin’s announcement is tantamount to a declaration of war.

If Russia goes forward with its conversion plan, central banks throughout Europe and Asia will reduce their stockpiles of dollars sending billions of surplus greenbacks back to the US. The aftershocks on the American economy are bound to be catastrophic; precipitating either a deep recession or depression. The US cannot absorb the billions of dollars that are now circulating in oil transactions without undergoing a violent cycle of hyper-inflation.

"The ruble must become a more widespread means of international transactions," Putin said. "To this end, we need to open a stock exchange in Russia to trade in oil, gas, and other goods to be paid for in rubles."

Putin’s plan is similar to that of Iran, which announced that it would open an oil-bourse (oil exchange) on Kish Island in two months. The bourse would allow oil transactions to be made in petro-euros, thus discarding the dollar. Iran’s action has intensified the Bush administration’s belligerence and put the two nations on the fast-track to war. We should note that Saddam was attacked just 6 months after he made the conversion to euros. Iran should expect a similar fate.

The United States must protect its dollar-monopoly in the oil trade or it will lose the advantage of being the world’s "reserve currency". As the reserve currency, the US can maintain its towering $8.4 trillion national debt (and $800 billion trade deficit) without fear of soaring interest rates or hyper-inflation. The Federal Reserve simply prints money that foreign countries accept for valuable resources and manufactured goods. America’s economic supremacy depends entirely on its ability to compel nations into making their crucial energy acquisitions in greenbacks. This allows Washington to shift the expense of its war in Iraq as well as Bush’s enormous tax cuts onto the backs of the developing world. This is the system that the US intends to prolong into perpetuity.

America’s monopoly on the oil trade is the greatest fraud in history. The dollar is the equivalent of a bad check written on an account that is $8.4 trillion overdrawn. Regrettably, the Bush administration has every intention of defending this extortion-racket by eliminating any competition to the dollar. That means that the growing coalition of states (Venezuela, Russia and Iran) that are threatening to move away from the greenback, can expect the full force of Uncle Sam’s wrath.

Waging war may be an option with Iran, but what about Russia? Would the Bush administration risk nuclear Armageddon to protect the flaccid dollar?

The administration is exploring all of its options and is developing a strategy to crush Putin’s rebellion. (This may explain why Newsweek editor and spokesman for the Council on Foreign Relations (CFR), Fareed Zacharia, asked his guest on this week’s "Foreign Exchange" whether he thought Putin could be "assassinated"?!?)

In the recently published "Collapse of the petrodollar looming", Dave Kimble provides the details of Russia’s importance to the world oil market.

"Russia's oil exports represent 15.2% of the world's export trade in oil, making it a much more significant player than Iran, with 5.8% of export volumes. Russia also produces 25.8% of the world's gas exports, while Iran is still only entering this market as an exporter…. Venezuela has 5.4% of the export market."

Obviously, it is not in Russia’s interest to trade with its European partners in dollars any more than it would be for the US to trade with Canada in rubles. Putin can strengthen the Russian economy and improve Russia’s prestige in the world as an energy superpower by transitioning to rubles.

But will Washington allow Putin to succeed?

The Council on Foreign Relations (CFR), the secretive organization of 4,400 American elites from industry, finance, politics and the military (who run the machinery of state behind the mask of democracy) has already issued a tersely worded attack on Putin ("Russia’ Wrong Direction"; Manila Times) outlining what is expected for Russia to conform to American standards of conduct. The missive says that Russia is headed in "the wrong direction" and that "a strategic partnership no longer seems possible". The article reiterates the usual canards that Putin is becoming more "authoritarian" and "presiding over the rollback of Russian democracy". (No mention of flourishing democracy in Saudi Arabia or Uzbekistan?) The CFR cites Putin’s resistance to "US and NATO military access to Central Asian bases" (which are a dagger put to Moscow’s throat) the banishing of Washington’s "regime change" NGOs from operating freely in Russia ("Freedom Support Act funds") and Russia’s continued support for Iran’s "peaceful" development of nuclear energy.

America is no friend of Russia. It took full advantage of the confusion following the fall of the Soviet Union and used it to apply its neoliberal policies which destroyed the ruble, crushed the economy, and transferred the vast resources of the state to a handful of corrupt oligarchs. Putin single-handedly, put Russia back on solid footing; taking back Yukos from the venal Khordukovsky and addressing the pressing issues of unemployment and poverty reduction. He now enjoys a 72% approval rating and does not need the advice of the Bush administration or the CFR on the best political path for Russia.

The US is assuming its traditional antagonistic role towards Russia by putting more military bases in Central Asia, feeding the turmoil in Chechnya, isolating Russia from its European neighbors, and directly intervening in its elections.

When the G-8 summit takes place next week, we should expect a full-throated attack from the corporate media disparaging Putin as the latest incarnation of Adolph Hitler. (It should also be noted that Putin’s announcement of converting the oil trade to rubles has not appeared in ANY western media. Like the Downing Street Memo, the firebombing of Falluja, or the "rigged" 2004 elections, the western media scrupulously avoids any topic that may shed light on the real workings of the US government)

Putin’s challenge to the dollar is the first salvo in a guerilla war that will end with the crash of the greenback and the restoration of parity among the nations of the world. It represents a tacit rejection of a system that requires coercion, torture and endless war to uphold its global dominance. When the dollar begins its inevitable decline, the global-economic paradigm will shift, the American war machine will grind to a halt, and the soldiers will come home.

For that, we can thank Vladimir Putin and the rise of the petro-ruble.

:: Article nr. 23442 sent on 22-may-2006 01:21 ECT


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