Dear friends,
It is a huge pleasure, and honor, for me to present you today with the Q&A between Mikhail Khazin and the Saker Community. For those who might have missed it, here it is (including a biography of Mr Khazin):
http://vineyardsaker.blogspot.com/2014/10/exclusive-mikhail-khazin-q-with-saker.html
This was truly a massive effort, not only on the part of Mr. Khazin to whom I am immensely grateful for taking the time to reply in detail to so many questions, but also on the part of a lot of volunteers from our community. In the words of the Russian Saker Team Leader, Marina,
I just wanted to say couple words about the project and our team.I personally share exactly the same feelings of gratitude as Marina and want to join in her expression of thanks.
I believe this was first truly communal project. It was done entirely by the fantastic members of our international Saker community. We received over 500 questions from our readership. A group of volunteers helped to sort them through, reformat and edit in a way that allowed us to keep as many original questions as possible while at a same time keep them short and manageable both by M. Khazin and the translators. The volunteer response was overwhelming and very professional.As Russian I cannot overstate my gratitude to all these wonderful people around the world who time and time again demonstrate their compassion and solidarity with Russia. My Motherland once again goes through trying times and so does the rest of the world. We are in it together. We need to stay strong and united in the face of evil who has no nationality and no borders. To fight evil we need to erase borders in our hearts and extend hands to each other and especially to those of our brothers and sisters who are in most need of our love, compassion and support.Thanks Saker for giving us the platform to do it,Marina
Furthermore, my thanks also go to you, members of our community and readers, because 500 questions is truly a fantastic proof of the vibrancy and involvement. I am sure that we must have beaten some kind of "interview record" with that kind of questions.
Finally, here are the names of those who did the really hard work:
Editing
Heather, Kristin, Michael, Paul, Patricia, Hugh, Joe
Translation
Yulia, Gideon, S, Marina
Considering
the importance of this document, I have decided to try to make it as
easy to access, copy and distribute as possible. First, I have made it
available in 4 formats: ODT, PDF, HTML and DOCX. Second, I have
uploaded it to both the Internet Archive and Mediafire. Here are the
links:
Third, you will find below the text pasted in from the HTML file.
I
hope that you will find this Q&A interesting and, if you do, please
let us know because we are considering doing something similar with
another well-known Russian personality. If
you want this to happen you can do the following: circulate this
Q&A and post it wherever you want (I licensed it as "public
domain"), link to this post and post your comments and reactions in the
comments section below. Please let Mr Khazin and all those
volunteers who worked to make this Q&A in English possible know that
you appreciate their dedication. After all, how often do you get to
directly ask a question to a top level expert who truly knows not only
Russia, but also all the "behind the scenes" Kremlin politics?
Kind regards to all,
The Saker
PS: if you repost this Q&A elsewhere, especially if you translate it (which I encourage you to do) please let me know!
*******Mikhail Khazin Q&A with the Saker Community*******
Central Bank, Banking
Questions
Pertaining
to the Russian Central Bank. Who owns it and who controls it and who
profits from it? Do foreign interests have a role to play within it and
the bank's ability to inject liquidity into the Russian economy? Can
the Russian government instruct the Russian central bank in policy
decisions? Can they create an alternative to western based financial
institutions like SWIFT, Visa etc. to a system based on rubles?
How
is Russia’s national money supply structured presently and Why is the
Russian Central Bank still depending on accumulation of US dollars
before issuing Ruble’s and if this policy will change in the future, how
will that affect financing of the Russian national economy from
domestic sources like from Sberbank instead of relying on foreign
investment?
T1, Princeton NJ
Malcolm Donald
James, Canada
Vic, Northern Ireland
Roxz, Sweden
Colin McKay Australia
Answer
There
is a law that states that the Central Bank is independent of the
government. Theoretically, the Central Bank has the right to set its own
monetary and money creation policy. However, there are two limitations.
The first is the IMF policy. Since the Russian Federation signed an
agreement with this organization, the Central Bank sees itself as the
main instrument for the implementation of the agreement. Of course, it
is largely determined by personalities - while the head of the Central
Bank, Gerashchenko, was indeed a distinguished banker and statesman, the
Central Bank's policy was relatively independent of external sources;
with Ignatiev and Nabiullina the situation has changed and the latter
leaders try not to argue with the IMF.
The
second limitation is the National Banking Council, which includes
several representatives from the President Office, government and
Parliament. A longstanding Russian Finance Minister, Alexei Kudrin, who
is not only a personal friend of President Putin but is also close to
the IMF Russian expert, played a key role on the Council until recently.
Today,
the situation is gradually beginning to change. It is already clear
that the old policy of the Central Bank (that reflects the vision of the
IMF in its most orthodox form) does not produce the desired effect and
there is a growing criticism in the country of the policy of the Central
Bank and the government. However, so far, the leadership of the Central
Bank is withstanding this public criticism and does not intend to
change its policy. At the same time, the government keeps pressure on
the Central Bank to achieve specific results for itself. In particular,
the devaluation of the ruble in the last two months is largely due to
the fact that the government has too optimistically promised economic
growth, which is clearly not there. An attempt was made to stimulate it
with the Central Bank agreeing to go against its core mandate, which
requires ensuring stability of the national currency’
The
Central Bank’s investment policy is similarly pulled by the opposing
forces of IMF rules and the country’s economic needs. During
Gerashchenko’s tenure, the Central Bank was actively increasing domestic
capital (from late 1998 until 2003, the money stock M2 increased
approximately 10-fold relative to GDP, from 4% to 40%, and about 15
times in absolute terms). The post-Gerashchenko Central Bank has been
pursuing a strict policy of keeping the ruble from becoming an
independent investment vehicle (in compliance with the principles of the
Bretton Woods system, in which the dollar should be the only investment
source). It has become clear today that there won’t be foreign
investment in Russia at a significant scale and therefore it is
necessary to stimulate the ruble investment process. However, the
current leadership of the Central Bank refuses to take any steps in this
direction. Thus there is a reason to believe that the management of the
Central Bank will change in the medium term.
Gold, Gold currency
Questions
Distinguished
Western economists have pointed out that for years naked gold short
selling through manipulation of paper contracts have been used to prop
up the United States Dollar and Western allied-currencies against the
threat of greater depreciation versus gold. Can Russia and China break
the West's gold shorting scam?
Would
this be an effective way for Russia to retaliate against the
Western-Saudi economic warfare that is driving down the ruble and oil
price?
In
particular, is there any serious likelihood Russia and China could
coordinate to take delivery of large quantities of physical gold at the
newly opened Shanghai Gold Exchange in order to create an arbitrage
between the fake, naked short created paper gold price on the COMEX
London market and in Shanghai, resulting in the end of the COMEX as a
serious vehicle for gold price discovery that the central bankers can
manipulate? (In other words, breaking the West's quasi-monopoly on
'price discovery' in the precious metals market, of which Russia and
China are the world-leading producers).
For
many years gold analysts like Dr. Jim Willie and 'King World News' have
suggested Russia and China have been willing to tolerate the Western
manipulation of gold because this has created a fantastic buying
opportunity for Russia and China to stockpile the strategic metals at a
huge discount. But with the COMEX price being below the Russian if not
Chinese mining cost of production at what point do Moscow and Beijing
defend their long term gold mining interests (e.g., Magadan miners in
Russian Far East) and corporations from predatory undercutting?
Does
the Moscow economic elite see the gold price as an Anglo-American weak
spot, to hit back at the West for trying to drag down the ruble and the
oil price?
What chances are there of the BRICS nations using a debt-free or gold-backed money system?
Will gold replace the USD as the world reserve asset and unit of settlement for international trade?
James, USA
Corto, Netherlands
Mcbuffalo, Arizona
NotRelevant, The Netherlands
James Bond, Australia
bob kay
Answer
It
had been clear to many economists for a long time that the role of gold
in the world will grow and, most likely, will return to its position as
a single measure of value. In particular, we wrote about the current
crisis back in 2004 in our book "The decline of the dollar Empire and
the end of the ‘Pax Americana’.” There's a whole Chapter devoted to the
role of gold and its manipulation. However, Russian economic leaders
close to the IMF ignored this position at the time. This only began to
change in the last couple of years. China has been serious about gold
for almost the entire last decade and is now actively preparing for a
potential transition to a "gold standard," at least in economic
relations between the so-called "currency zones," which, in our opinion,
will emerge after the single world dollar system falls apart.
But
Russia and China cannot stop these manipulations, because the price of
paper gold is determined on the speculative dollar markets. They can’t
provide "leverage" that would be comparable to that of major U.S. banks
that have access to an unlimited issuing resource. The only thing they
can do is increase the gap between the price of "paper" and "physical"
gold by constantly buying the latter on the world markets. Of course,
this increases the instability in the global gold market and creates
potential losses for the main "gold dealers" who work with the Federal
Reserve on leasing programs, but the degree of imbalances has not
reached a critical value yet. It seems to me that the sharp rise in gold
prices will start after the burst of the next "bubble" in the US stock
market.
With
regard to the potential price of gold, as I wrote back in the early
2000's, it is determined by a “fork,” the lower limit of which is the
gold price in 1980, when it had its local peak after the dollar was
decoupled from gold (USA default) in August 1971, and the upper limit of
which is the purchasing power of the dollar in the early twentieth
century, when gold was actual money. Today this “fork” (in current
dollars) is seen somewhere at the level of $ 4,500 - $ 15,000 per Troy
ounce.
Industry
Questions
American
industry is currently oriented chiefly towards weapons production. What
danger do you see for Russian industrialization to take the same
precipitous path?
It
will be interesting to see if Russia can solve this modern riddle of
the Sphinx: how to fold the economic surplus back into the economy,
while the oligarchs are doing everything in their power to prevent such a
thing. What safeguards Russia may have against the aggrandizement of
power corporate entities, especially militarily oriented ones, as has
been achieved in the USA?
Who
are the groups participating in the discussions to promote the
development of Russia industrially and culturally, is it the RAS, Valdai
Club, think-tanks, etc? What are the main elements being considered for
the proposal? Are foreigners somewhat allowed to participate at some
point in the proposal?
Canada
shares important features of Russia’s new economy such as growing
dependence on resource extraction. Both countries are becoming
petro-states, more or less rapidly. My question concerns the extent of
de-industrialization in Russia. Is it fair to say that industrial
development is now geared to servicing the extraction industries and to
what extent is this a trend or not?
After
the savage destruction of Novorossiya by the ATO an investment in the
hundreds of millions, if not billions, will be required just to get the
region back to where they were before they were attacked. On top of the
money required for infrastructure, when separation occurs, Novorossiya
will be billed, with some justification, their portion of the national
debt. Where will the money come from? What role do you think Russia
should play in the financing of the rebuild?
juliania New Mexico, USA
12 chair fan
from Patagonia
Da Ric Edmonton, Alberta, Canada
rrell Rankin Canada Winnipeg, Manitoba
Answer
The
situation with industry in the US in the past couple of years has
somewhat improved. There are two reasons: changing energy prices in the
US (and here we must say good words for the Obama administration), and
the rising cost of production in China. However, the main factor for
long-term growth - private demand – is in decline. This suggests that
growth in the US does not even have a medium-term prospect. The drop in
private demand is the main impact of the economic crisis, which has
continued since 2008. Nothing can be done here, because the main
mechanism of its stimulation - the refinancing of private debt in an
environment of a decline in the cost of credit - is no longer working.
Recall that the discount rate of the US Federal Reserve, which was 19%
at the beginning of the “Reaganomics” policy (the main tool of which was
increasing lending to households), declined almost to zero by December
2008. It’s impossible to raise the rate now, because it will bring down
the whole pyramid of debt around the world.
Today
US households consume every year about $3 trillion more than they earn.
The situation in the EU is not much better. This means that aggregate
demand in the world will be sharply decreasing. In other words,
continuing to keep the trading and financial infrastructure of a global
system of division of labor won’t be cost-effective. The world will most
likely return to regional systems of division of labor. Each such
system will have to provide domestic production of basic consumer and
investment goods. The territory of their self-sufficiency will be
regional, with high enough inter-zonal trade barriers. In this scenario
the WTO has no prospects.
An
investment source for creating (or restoring) the relevant industry
will be the issue of regional currencies (in our 2004 book these
regional systems of division of labour are called “currency zones”). In
this sense, Canada is very different from Russia. Russia, most likely,
will be one of the leaders of the “Eurasian” currency zone and will
actively participate in the development strategy of the division of
labor and emissions in the zone. Canada will be a part of the “dollar”
zone with its strategy prescribed by Washington. So if our description
of the development strategy in the short-term is true, then Russia and
the US will restore their industrial production. In the US, due to a
significant fall in demand and the loss of many foreign markets, it will
be much easier to do this. Canada, however, will remain a “resource
extraction” economy.
In general, how the “currency zones” will be configured after a sharp reduction in the global aggregate demand is a very interesting question. In particular, I did not believe the independence referendum in Scotland would result in separation from the UK. However, if the elite of Britain decided to enter the dollar currency zone, then Scotland would almost certainly separate because it is obviously attracted to continental Europe. Canada can see the intrigue with the separation of Quebec revived and its subsequent accession to the renewed EU. But I repeat, all these issues will become relevant only after the sharp fall in aggregate demand.
It seems to me that Novorossiya (and Ukraine, like many other countries in Eastern Europe, after the configuration change of the European Union), will be restored using the ruble as the issuing resource. The ruble may remain the national currency of Russia or become, perhaps under a slightly different name, the Eurasian Economic Union currency, which theoretically can include (out of major countries) Turkey, Japan, and United Korea. The last two countries, which are highly oriented towards external markets, will have no other options for regional economic cooperation after the U.S. returns to a policy of isolationism, without which they will not be able to recover their economies.
In general, how the “currency zones” will be configured after a sharp reduction in the global aggregate demand is a very interesting question. In particular, I did not believe the independence referendum in Scotland would result in separation from the UK. However, if the elite of Britain decided to enter the dollar currency zone, then Scotland would almost certainly separate because it is obviously attracted to continental Europe. Canada can see the intrigue with the separation of Quebec revived and its subsequent accession to the renewed EU. But I repeat, all these issues will become relevant only after the sharp fall in aggregate demand.
It seems to me that Novorossiya (and Ukraine, like many other countries in Eastern Europe, after the configuration change of the European Union), will be restored using the ruble as the issuing resource. The ruble may remain the national currency of Russia or become, perhaps under a slightly different name, the Eurasian Economic Union currency, which theoretically can include (out of major countries) Turkey, Japan, and United Korea. The last two countries, which are highly oriented towards external markets, will have no other options for regional economic cooperation after the U.S. returns to a policy of isolationism, without which they will not be able to recover their economies.
The
Russian expert institutions are divided into three large groups. The
first comprises the fragments of the ex-Soviet system of the Academy of
Sciences. They partly have lost their quality, but until recently were
able to maintain a relative independence. It is this independence,
especially in the economic sphere that has infuriated the liberal crowd,
which tried to completely destroy the Academy of Sciences as an
independent public and expert institute. It is possible to work
effectively with some institutions within the group; in particular, some
of its representatives were among the Russian participants at the
recent XVIII Dartmouth Russian-American conference in Dayton.
The
second group is created and funded, either directly or indirectly, by
Western grants (the most famous in the economic sphere is the Higher
School of Economics, in Russia known as the “Russian Economic School”).
Organizations within this group represent the interests of the grantors,
and their authority has lately fallen rapidly.
The
third group comprises people who try to address the real problems with
the money that they can find, bypassing the State. I, for example, am
among these people. Among the members of this group are independent
(from the international heavyweights) consulting companies and research
institutes that were created by real producers, and so on. They have
done quite a lot in recent years (in the early 2000s we, for example,
created a theory that describes the current crisis), but their “weight”
within the framework of the State is quite limited. These institutions
or individuals can be very interesting from the point of view of purely
informational and even non- monetary interaction. Their influence in
Russia will grow strongly.
Ruble, Currency
Questions
In
contrast to the US Dollar, how is the Russian Ruble supported by the
Russian economy? and its flexibility in working together with the basket
of other currencies forming the next world trade mechanism outside of
the US Dollar.
There
has been some talk about giving the Russian state the right to issue
currency to fund public infrastructure development and to give low
interest loans for business in the productive sectors. What are the
chances of such a thing happening and in a timely manner in the near
future?
Why
don’t Russia revise contracts from countries that sanctioned Russia –
so that all future transactions for Russian Gas & Oil have to be
made in either Gold Bullion and/or Russian Ruble’s?
Christian Witting Mandal, Norway
Blue Northern Illinois, US
Catrafuse, Timisoara Romania
zerone Germany
André Montreal Canada
Ricardo Valdivia Chile
JH Québec
Julian, Melbourne
Answer
As
I have written elsewhere, today’s economic leadership of Russia - the
Government and the Central Bank - consider the ruble exclusively within
the framework of the Bretton Woods system; as secondary to the US
dollar. Accordingly, they hold the economy of Russia open to the world
financial system, constrain investment opportunities for the ruble (by
overstating the value of dollar-denominated loans) and rely on foreign
investment.
In
this situation, the stability of the ruble is determined by purely
speculative factors of global markets: a price of crude oil, capital
outflows, foreign investments, and a foreign capitalization of major
Russian exporters. However, the situation can change if we establish a
domestic ruble investment system, create development institutions that
will provide cheap ruble credit to the real sector of the economy,
change the tax system from pure raw materials (with high value-added
tax) to industrial, and begin to stimulate small and medium businesses
engaged in innovation and production.
While
the ruble is seen as secondary to the US dollar, all the
above-mentioned suggestions are highly controversial. As long as a main
objective of any business in Russia is to increase its dollar
capitalization, get a large dollar loan, place shares on the New York or
London stock exchanges or sell something for export, the idea of
selling oil for rubles will not be greeted with enthusiasm. First, it is
necessary to create a ruble-denominated financial infrastructure, then
build a business that is oriented on this infrastructure, and only then
start a strict policy for its separation from the dollar system. This in
any case will require a major change of personnel of the Russian
political elite.
Oil
Questions
Will
the oil-price war currently being waged seriously damage the Russian
economy, or is the Russian economy sufficiently diverse to “weather the
storm”? Do the falling price of oil AND the falling value of the Ruble
effectively offset each other? Is Russia able and/or willing to take
retaliatory measures and what might they be? Is the Russian oil industry
dependent on Western technology for its operation?
Michael Schaefer Schwerin, Germany
teranam13 from N. California
Ric Edmonton, Alberta, Canada
Dick Lenning Canada
jc Southern California
Answer
The
oil topic is always very complex. There is a huge number of factors,
comprising the short-term (increasing the oil production from Libya and
partial lifting of sanctions against Iran), medium-term (development of
new, more expensive oilfields, and shale “revolution”, etc.) and
long-term (change in economic structure and in energy technology). No
concurrent view about this problem exists, so it is needless to talk
about long-term trends, which, undoubtedly are present, but barely
known. The short-term trends, including the recent downturn in prices,
will cost the “organizers” quite a lot if they develop against medium-
and long-term trends.
From
the macroeconomic prognosis (it has been revised many times within the
past 10 years, but the core components were set at the beginning of
2000s, that is why we trust it) the main macroeconomic trend of the next
decade will be the division of the world into currency zones. Each zone
will have its own price formation mechanism (as was the case in the
70-80s in “Western” and Soviet economic zones). Therefore the drop in
oil prices prepares Russia’s economy for different day-to-day realities
rather than merely damaging it.
I’d
like to point out that Russia invested surplus profit from the sale of
oil into assets in the West. Therefore the decrease in profits will
rather bring problems to the US, in whose treasuries the oil money was
being allocated. Our budget, even accounting for capital outflow, is in
surplus. There are problems with investment resources, but they could be
overcome if the economic policies are changed. Retaliatory measures are
rather political. By the counter sanctions Russia shows that this is
not the way to treat allies. And if they are not allies, then are they
enemies? In other words, does the US push Russia into an anti-American
union with China? Certainly, the union with China is a disputable
matter, but if there is nobody to talk to in the European Union (where
the situation can change, just look at Marine le Pen in France and
Viktor Orbán in Hungary), if the political elites of the EU are
subservient to Washington, and if the U.S. behaves inappropriately, then
what are the options?
Sanctions
have shown that the US these days is impossible to negotiate with. It
means that the matter is not whether Russia can do without American
technologies or not; in fact, it is about how it needs to proceed
without them. If the economy were healthy, then while Russia would
resolve all her current problems, the US would go forward, but amid
sagging demand… The US will likely go backwards; this is a standard
expectation amid long crises. Sure, the problems of Russia won’t be
resolved on their own, it is necessary to update the economic policy. On
the whole, sanctions do not constitute a critical matter for the time
being. They even can be increased, but there is no guarantee that it
will not precipitate a crisis in the US.
Sanctions
David Northern Californi
Tom Mysiewicz Reedsport, OR
Rhysaxiel Bordeaux, France
Paul from Tokyo
R-27 ER/ET Santiago, Chile
Question
What
effect will sanctions have on the Russian economy over the next few
years? Will they lead to better integration with the BRICS economies and
other non-Western countries and how could this help Russia to deal with
the sanctions regime? Will the sanctions ultimately provide the
catalyst for the development of an alternative reserve currency?
Answer
I’ve
already addressed part of this question so I’ll take the opportunity to
refine what I’ve said before. Regarding the use of a different
currency, this is already decided – There will be one, probably more
than one. There is no other way to support investment, apart from by
issuing regional currency and it should go without saying that ‘Whoever
pays the piper calls the tune’ To put it another way, If and when
regional these regional currency issuing centres appear it will quickly
become clear who are ‘patriots’ and who are ‘collborators’. It’s all
quite straightforward: If you export capital, the destination country
will receive the investment. It will become clear quite quickly
It’s
a completely different matter why the United States chops off the
branch on which it is sitting (ie. stimulating the creation of
alternative reserve currencies). The answer is similarly
straightforward. They simply can’t conceive of their own collapse.
However this belief is not simply a matter of idealistic ‘American
Exceptionalism’ (We are the dominant, thus we shape history, not the
otherway round), but it is also a belief held by the elite, as it forms a
critical tool of social governance. Furthermore, if we admit that the
official economic doctrine simply doesn’t acknowledge the crisis (To be
more exact, it is impossible for the theory to recognise the crisis as
the theory lacks the terms of reference to describe the cause) then the
crisis actually becomes inevitable, if not inescapable: The economics
are themselves founded on axioms which themselves are impelling the
economy to catastrophe. There is nothing more to say here. ‘Those whom
the gods want to destroy, they first make mad’
The
BRICS, moreover is a pretty artificial phenomemon, dreamt up by Goldman
Sachs, the famous investment bank for purely commercial reasons. (In
fact to issue new securities onto the market). From our side the BRICS
countries look like the leaders of regional economic zones (Brazil and
South Africa in one (‘Southern’). Russia (‘Eurasian’), China with its
own Chinese and India with its own national zone, given its huge
population. It looks likely that the Indian zone will most closely
follow the Eurasian Zone. In these zones co-oporation will increase as
will the attempts of the United States to solve their internal problems
by forcing other countries to pay their debts, using the institutions
and frameworks set up under the Bretton Woods which established the
dollar as the sole reserve currency. These efforts of the United States
are only likely to speed up the process of regional integration.
Question
In
the absence of exchange controls, has consideration been given to
creating a split domestic-foreign ruble to support the currency and
minimise the impact of sanctions and of commodity and currency
speculators?
Answer
Russia
has a whole collection of legislation to regulate its currently which
are simply not ative at the moment because their activation would
contradict the ideology which drives the financial elites. There is the
mechanism of enforced conversion of foreign revenues (Set at zero
percent at the moment). There are limits on declared FX positions and
other FX regulations which are similarly not active. I am not at all
sure that new legislation is required, those which exist are wholly
sufficient should the will be therr to activate them.
I
have a suspicion that the government and the Central Bank (and this
refers a united ideological, commercial and political ‘team’ which are
labelled by the media as ‘Liberals’, although the term potentially
misleading), who promised the national political leadership economic
growth although were unable to maintain it, have decided to resolve the
situation by devaluation. However they simply don’t understand
economics, rather they do not understand that devaluation will only
benefit GDP in teo specific cases: Either there is a large amunt of idle
capacity (like in 1998), or there is a large amount of freely available
credit. At the moment there is neither. FX investments are not
profitable and no one will invest. As for the ruble the central bank has
simply refused to open up the credit market. This means that there can
be no positive consequences from devaluation only negative ones. The
most obvious will be a collapse in living standards amongst the normal
population as the majority of consumer goods are imported. This brings
us to the hypothesis that the governance of the central bank is in
cahoots with Washington with the shared aim of subverting Putin. The
hypothesis is already mainstream in the Russian Media.
Question
Is
there enough political will and influence inside the Kremlin and the
Russian Government to launch agricultural modernisation and improvement
projects given that sanctions have been imposed on agricultural imports?
Answer
At
the moment the Kremlin is making demands regarding the state-led
modernisation of agriculture which contradict the Governments ideology.
Naturally this leads to open sabotage. This is absolutely clear both in
the investment environment (The government directly is responsible for
the flow of investment but actually plays the opposite role at the
moment) and in the implementation of the Russian payments system as just
one example of many. If the kremlin has the political will to change
the government then the situation will improve and with that,
agriculture. If not the situation will continue to deteriorate.
Question
In
your recent appearance on TV with Sergei Glazyev, you suggested that
the use of sanctions by the US was a sign that the current system was
breaking down. Can you elaborate on what you mean?
Answer
I
have shown above that the current political situation in the United
States will lead to the intensification of problems for the United
States itseld, most obviously in the destruction of the dollar as the
global currency. If you see that in order to sustain one of the ‘rules
of the game’ that this can only be done at the expense of other rules
then it is abundantly clear that the rules are no longer relevant and
that they need to be changed.
Question
It
appears that the economies of some countries that have followed the US
lead in sanctions are being affected. Do you believe the US has promised
to subsidize the losses of its allies? Why do you believe these
countries have been willing to risk their economies?
Answer
No,
the US will be giving money to no-one. Those countries that have acted
against their own interests have done so as their elites have been
effectively captured by the US. It’s no secret and in fact many write in
the independent European media that it is impossible to make a career
in politics with support from the US. The only ones therefore who can
have a career are those frimly ‘on the hook’. Often the United States
will create that hook themselves (Profitable contracts, grants,
sometimes bribes and even blackmail). It’s not surprising that they
control the entire extent of the EU, eavesdrop on all telephone call etc
etc. It just needs the exposure of an affair, a few hundred euros of
income hidden from the tax authorities or a recording of an indiscrete
telephone call (maybe criticising the Gay Parade) – they would all be
enough to, when exposed to the national press, to deprive an individual
of his social status or a significant part of his income. Who would go
against that?
There
were a lot of scare stories in the 90s about the ‘Stasi’, who allegedly
held records of every citizen of the German Democratic Republic. We now
understand that, in comparison with the practices of the United States
now that this period was actually an unexpected utopia of personal
freedom. To give examples, The Stasi may have known who slept with whom,
but it did not have recordings of discussions held during these
intimate rendezvous. Ask yourself: Is it pleasant to think that there
are people who can, without oversight, scrutinise recordings directly
relating to your personal life? Furthermore are their many people on
this earth who would not be vulnerable to blackmail in their personal
life? And how many people are there really who would refuse to the the
bidding of the United States knowing that such information is not only
in their hands but ready to be used against them?
Question
What
could be the response of Russia if the situation with the oil prices,
sanctions, economic warfare and military pressure becomes critical? How
will it mobilize its allies and how could it strengthen its economy and
military, especially the air force and missile defense?
Answer
Well
Russian has practically no allies, if we think of them in the sense
like there were in 1939. Belarus, Kazakhstan and maybe a couple of other
small countries. However there a lot of countries that understand that
the United States is single handedly destroying the world order and with
it global security (This is exactly what Putin said in his ‘Valdai’
speech in Sochi). There are also people in the United States who
understand this. Morover the recent mid-term election results, a week
ago, in the United States clearly showed that there are people,
especially in the older generation, who without having a depe knowledge
of the particulars feel that the current elites in the US are leading
the world to catastrophe. We would simply hope that the world will not
be led to catastrophe.
Trade
Vic, Northern Ireland
Song, Canada
Gagarin Thespaceman Cape Town, South Africa
Question: Eurasian Union
What
do you foresee in terms of the evolution of the Eurasian Union, both in
terms of internal economic/political dynamics and its relations with
other states (and in particular the US/NATO/EU bloc)? Does it have the
possibility to expand outside of the former Soviet Union? Are other
regional cooperation organizations such as the CIS and CSTO still
relevant?
Answer
As
I have already said, according to our theory the world could split into
several monetary zones – more or less independent systems of divisions
of labor. The Eurasian Union is one such zone. In a long-term outlook it
may include such prominent countries as Turkey, Japan and United Korea.
The last two have no choice: the U.S. and the EU won’t purchase their
produce, and they don’t want to be friends with China. So, the Eurasian
Economic Union has a promising future, but it also means that we need to
work hard to achieve positive results.
Questions: European Trade
In
the past much has been made of a “Lisbon to Vladivostok” trade zone.
What do the parameters of such a zone look like, and given the current
hostility of the EU towards Russia, is there any realistic prospect of
making it a reality in the near- to mid-term? What circumstances could
make this more viable in the future?
Answer
I
think there is no such prospect as of today. The situation in Ukraine
has shown that the current EU leadership will not take Russia’s
interests into consideration. Any attempt to discuss these interests
causes a torrent of statements blaming Russia for “imperial politics”,
“restoration of the USSR” and so on. We can argue about Germany and
France being outright blackmailed by the Baltic states and Poland, the
role of Washington etc., but the fact is that in its current
configuration the EU and Russia cannot be “friends” (in the broad sense
of the word). We can resume such discussions if a reconfiguration of the
EU takes place and the Eastern European countries leave the EU.
Question: Payments/SWIFT
One
of the purportedly heaviest weapons in the US/EU sanctions arsenal
would be to cut Russia off from the SWIFT payments settlement system.
Much has been made of efforts to create an internal system or to link
with China’s system. What are the challenges facing Russia as it seeks
to end its reliance on this particular Western system, and what is a
realistic timeline for implementation?
Answer
This
could have been implemented promptly, but the Central Bank has
sabotaged all the efforts. As of today, nothing has been done, so we
will have to return to this topic when the Central Bank has new
leadership. The current leadership won’t do anything in this direction.
Geopolitics & Foreign Relations
Question: Russia and relations with BRICs/Emerging Markets
Russia
has been very clear that in light of the West’s aggression that it
would redouble its efforts to form an alternative geopolitical grouping,
both among emerging markets generally and China specifically. Can you
comment on:
Which countries (particularly among the BRICs) are likely to support Russia going forward?
China
is probably the most critical relationship for Russia going forward –
however given the often strained relationship between the two, many are
skeptical of the ability to form a true partnership. Why is today
different?
Russia
has been actively seeking to expand its trade links with Emerging
Markets generally and the BRIC nations specifically. Where do you see
the best opportunities for Russia in terms of expanding trade links with
these nations or even creating more formal/multinational trade
structures? Along these lines, do other EM nations share Russia’s
interest in potentially de-dollarizing global trade? Is there any chance
Russia and/or others actually de-dollarize and, if so, what are the
potential benefits and risks to Russia?
Emmanuel from Ames, Iowa. USA
Anand from India
NotSoFast from Luxembourg
Answer
I’ve
already said something about it. All the questions above imply the
preservation of the present Bretton Woods system and describe possible
(or hardly possible, if not impossible) scenarios for developments in
the world. However, according to our concept Russia and China won’t form
a single alliance, they will be leaders of two different regional
alliances – one is the more centralized (China) while the other more
democratic. Today’s convergence between China and Russia is not due to
the fact that they foresee their common future, but for the reason that
they consider existing model unsustainable. The U.S. tries to describe
the Russian and Chinese policies from the perspective of sustaining of
the current order. This results in a fairly contradictory picture. Once
seen from the right point of view, the picture becomes clear. By the
way, according to this worldview the U.S. becomes a regional leader just
like Russia and China or, let’s say, Brazil.
Question: Europe
Even
if Russia turns towards Asia and the Emerging Markets, Europe will
remain a critical part of Russian geopolitical strategy. In light of
Europe’s current stance, is there anything Russia can do to improve
relations (short of unacceptable concessions)? How does Russia manage
around the virulently anti-Russian bloc led by Poland, the Baltics and
(Western) Ukraine?
David Vienna, Austria
Corto Netherlands, Serb origin
123abc Germany
Answer
I’ve
already explained that friendship between Russia and today’s European
Union is impossible as long as the U.S. likes it, but this is just for a
while, because as soon as safety considerations become the forefront
concerns, the U.S. will most likely change its position. What happens to
the current elites of the main anti-Russian countries seems to be
interest to no one; they [elites] will have to go away, because they
won’t be able to change their rhetoric, which will make it impossible
for Russia to deal with them. For the time being Russia has nothing to
talk about with the European Union for various reasons. The first one is
rather obvious: trying to find a consensus whithin the framework of the
European Union, the general position of this organization will always
be strongly anti-Russian. The second one is that Brussels doesn’t have
an independant position; it pursues the Washington’s policy. The third
reason is that the current European Union has no future. We need to
discuss this issue in detail.
If
we place the current European Union on the USSR’s timescale, it can be
compared with the period of 1989-1990. The problems are the same. Certain rules were adopted in the context of certain historical, financial and economic situation, and then later codified. Today
economic and historic conditions have changed, but it’s nearly
impossible to amend legislative policies. Each specific issue might be
settled, although it’s unclear when, but there are tens of thousands of
those issues and the time is extremely limited. The only chance to
accomplish something is to abolish all them at once or, in other words,
to dissolve the European Union. It can be assembled again, but the
re-assembling will be done according to new regulations.
In particular, it can be said that Eastern Europe won’t be part of the “new” European
Union. That’s for sure. It has no industry and thus presents no value.
There was a political need to “tear them off” from the USSR/Russia and
then feed them (to smooth the negative effect from renouncing
socialism). Today’s youth doesn’t remember socialism, it means that it
is okay to just dump those people and let them survive on their own.
They are not of any interest. As we know from the European history of the nineteenth century, they will sink into extreme poverty. But, I repeat, those are their problems.
Coming
back to the original question… It’s foolish to make arrangements with
the European Union in such environment. That’s why it’s necessary to
build our own system of labour division without taking into account the
interests of the European Union. If Russia has decided to start building
import substitutions, it is simply needs to introduce counter sanctions
to a relevant commodity group, since the EU and the U.S., by pursuing
sanctions policy, have burried all the norms of the World Trade
Organization.
Question: Russia
Given
the lack of popular support domestically for the liberal/Atlantacist
agenda, how do they continue to retain a power bloc within Russian
politics? On the other hand, how do the Eurasian Sovereigntists envision
ensuring economic growth, with so many autarkist/state capitalist
models having shown severe weakness in recent years? What factor are
Great Russian nationalists likely to play going forward, in particular
the more radical/national socialist types?
Kermit Heartsong San Francisco Bay Area, Author, Ukraine:
ZBig's Grandchessboard & How The West Was Checkmated
Answer
First
of all, these people (“liberals”) control a considerable part of
Russia’s property; second, they are under the protection of the USA; and
third, from the point of view of the political elite, they undertook
important tasks such as making agreements with the world’s financial
system, investments, and economic growth. Today it has become clear that
there is no economic growth, there will be no investments, and the USA
are not treating us as partners. It means that the “liberals” have lost
the political support and will be forced out of the political arena. The
main question is: how fast this process is going to be.
As
for the USA, they have already realized that they did something wrong.
The problem is that the Russian “liberal” team has emerged from the
privatization that was a grand theft. Today in Russia the words
“liberal” and a “thief” are synonyms. In this sense, for instance, a
European court ruling on “Yukos” to exact $50 bln is a grave political
mistake on the part of the West because everyone in Russia knows beyond
doubt that “Yukos” was stolen. The people, who bought it, were fully
aware that it was a stolen property and thus no one owes them anything.
In other words, for the vast majority of the Russian public the court
decision is the clear evidence that the only interest of the West in
relation to Russia is to take away (to loot) the assets that belong to
the people (the government). That is, the western elite, including its
legal system, deliberately make decisions that favor “their own”, even
though those people are professed thieves. This is a hard blow to the
trust towards the USA and EU; the blow is even harder than the
sanctions.
As
far as the nationalists are concerned, there is a colossal difference
among them. There are three large nationalist groups in Russia: Russian
nationalists (in a way, they are similar to Ukrainian Galician
nationalists, although, of course, they are more decent so far as
methods and slogans are concerned); the national and religious
nationalists (including Muslim nationalists in the ISIS style), and
imperial nationalists (the ones who want to revive the great state and
who don’t care about national differences among its citizens). The
latter are divided into monarchists, communists and “neoliberal”
capitalists who want to build a “true” capitalism that is independent of
the west.
It
is impossible to understand who will win considering the complex
processes that are going on in the country. Some of them can form local
alliances, but they all have different objectives. That means that a
separate set of relationships need to be build with each of these
groups. At the same time, there is no point in counting on liberals, in
spite of their current power – they have no electoral potential, they
will at most receive 3-5 % of votes. They had illusions that a new
generation would grow up not remembering the privatization. But the new
generation faced the situation when all the “upward paths of vertical
growth” are chock-full of children of those liberals and of “siloviki”
(national security) they have raised. This is why it is inevitable that
new political powers in Russia will be anti-liberal, or anti-West.
“Navalnys” have no chance – they defend wrong positions. The West, if
they want to have relations with Russia, has to become aware of this
situation and correct it. Right now they don’t want to do that, which
means that there are no positive prospects.
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