by Jorge Vilches for the Saker Blog
The EU had already promoted and achieved all-around chaos regarding very simple yet absolutely essential trading terms urgently to be agreed with the Russian Federation. As if that were not enough, now adding fuel to the fire EU member countries continue to dangerously play their traditional fiddles while declaring that “ some contracts are holier than others, didn´t you know ? ” This daring criterion also means getting back to square one with an ever larger and riskier conflict while everybody´s patience is running thin. If Europe does not reverse course within a very limited time frame it will needlessly smash itself head-on against a very harsh reality. Once triggered, the subsequent uncontrolled demolition cannot rewind no matter how many desperate “emergency meetings” EU officials call for.
Ref # 1 https://www.aljazeera.com/economy/2022/4/27/eu-warns-companies-not-to-buy-russian-gas-in-rubles
Ref # 2 https://www.euronews.com/my-europe/2022/04/28/eu-countries-paying-for-russian-gas-in-roubles-may-face-legal-action-warns-dombrovskis
ground-breaking EU criterion
The EU has now come up with a ground-breaking legal criterion that international jurisprudence should rapidly adhere to and possibly improve. Thus it could include it in Treaties and other important legislation and, in view of its apparent virtues, even apply it ex-post-facto such as in this case. By the way, with this new international flat-Earth public policy, the EU would be the only party entitled to unilaterally uphold some contracts and not others per its own wishes and convenience as if it were a God-given right. Not anybody else, no way. So Europe, supposedly the cradle of Western civilization, is now trying hard to earn “The Joker” award disregarding the livelihood of at least 800 million human beings plus serious negative impact upon the rest of the world. Granted, history will not be kind with EU leaders.
800 million Europeans
Obviously, in view of the above, the interruption of Russian imports – including very specific, exclusive, and unreplaceable grades of Russian natural gas, oil, and coal – is now definetly in the cards for some or all European countries. This will necessarily impact beyond belief a still clueless population which continues to play the role of vassal puppets to Anglo-Saxon malignant dictates without actually following how they are being had.
Ref #3 https://www.news18.com/news/explainers/explained-what-would-paying-for-natural-gas-in-rubles-instead-of-dollars-euros-mean-4921046.html
Fool me once, shame on you,…
Four weeks ago, in view of the massive seizure of its legitimate funds, Russia was left with the only option of requiring Rubles as payment for its exports as such currency is exclusively under Russia´s purview and thus cannot be freezed and/or seized by any stakeholder, EU included. And negotiations were making very definite progress along such lines up until the past week. A month ago, the only real problem was for EU countries to find Rubles other than by selling their “theoretical” gold bullion vaulted in the UK and the US which many claim is either non-existent or highly encumbered with many dozens of claimees standing in line. So the alternative viable solution wisely found up until last week was to convert euros into Rubles at Russia´s Gazprombank as it had not been sanctioned – at least not yet – as possibly the EU had foreseen its role for the proposed solution at hand. So Vladimir Putin, President of Russia, took the trouble to personally explain the exact simple two-step payment procedure by phone conversation with German Chancellor Olaf Scholz. By the way, the procedure is so simple and so straight-forward that even tie-wearing boomers can understand it.
back to square 1
But now European governments and energy companies are proudly rejecting the idea of paying in Rubles on the basis that gas import contracts clearly specify that the allowed currencies to be used for payment are only euros or dollars, not Rubles. Accordingly, they argue that one side of the deal – in this case the Russian Federation – cannot change such contractual obligation by its own decision (!). The EU now says “This is an absolutely clear circumvention of the EU sanctions.” “Opening a Ruble account at Gazprombank in and by itself may breach the EU sanctions…”
Ref # 4 https://www.aljazeera.com/news/2022/4/28/europe-struggles-for-clarity-on-russias-roubles-for-gas-demand
a deal is a deal…
“No way to now require Rubles, it´s contractual, see ?” It does not matter that Russia´s fully contractual foreign currency accounts in euros & dollars were seized by the EU to the tune of $ 300+ billion dollars. No, that contract is to be discussed another day. This is ´different´ you see, and thus “The Czech Republic will not give in to Russia. Other countries that accept paying in Rubles are making a mistake. It is a violation of sanctions. It is legally dangerous.” Danish energy group Orsted also won´t pay for Russian gas with Rubles. “We refuse to accept unilateral demands (!!) from Russia and Gazprom”. Ref # 5 https://www.rt.com/business/554743-eu-nations-reject-gas-terms/
…but some contracts are holier than others (no ?)
So, as Europe badly needs natural gas, the corresponding Russian supply contracts need to be complied with, as specified, with euros or dollars – but not with Rubles. While the Minsk Agreements, duly brokered and endorsed by the same European counterparts, do not have to be complied with, what for ? Neither should Europe comply with the most elementary property rights and contractual banking rules regarding Russian funds in euros and dollars illegally seized by the EU. The Western world has unilaterally declared that contractual property rights are no longer valid so now bank accounts anywhere – or other assets — are freezable, seizable and forefeiturable. Weaponizing Swift access and use is also contractually unacceptable, yet Western powers decide upon it freely dismissing the illegality.
the Schrödinger euros – “The Saker”
Last week, “The Saker” published what turned out to be a highly visible article entitled the Schrödinger euros which explained the situation simply and clearly up until that date, exposing how deceitful the EU payment-in-euros proposal was. So much so that Russia could only offer the euros-converted-to-Rubles payment alternative to avoid confiscation yet again. Many of the comments therein were highly pertinent and definitely knowledgeable, particularly JD´s most valuable input. One valid conclusion arrived at such commentariat debate was that thru the euro-converted-to-Rubles payment mechanism, into the future Russia would still run the very serious risk of a possible seizure, freezing, arresting and/or confiscation of remnant euros — not yet converted into Rubles — already paid to and duly received by the Russian side. This would include euros or dollars not converted into Rubles — or other currencies — and still held by Russia or third parties (China, India, or whoever) as a result of Russian payments or investments. Thus, remnant unconverted euros or dollars, per their Schrödinger-seizable nature, would eventually be a “hot potato” liability in whoever hands they were held, Russian or otherwise. Beware of these ´Schrödinger-seizable´ euros…
Ref # 6 https://thesaker.is/the-schrodinger-euros/ Depending upon circumstances and the specific point in time that such possible risk could become real, the sums of euros – or dollars — involved could be humongous and even exceeding the $300+ billion of Russian funds currently frozen & seized. Let´s recall that these transferred euros would not be physical and, therefore, practically untraceable bills. Instead, these are very distinct digital liabilities of European banks which can be nullified at will through revocation or claw-back anytime in the future either applied on Russian holders and/or third parties at whichever domain or legal monetary jurisdiction these euros may lie at…
Other unconverted currencies received by Russia in payment for its exports – such as US dollars – from whoever else in the world also run the same possible seizability, something which would also be applicable to other countries…
In sum, the EU´s financial criteria have been transformed into a random and unpredictable quantum mechanics casino
- The EU badly needs to keep importing Russian produce for years to come.
- Russia is willing to sell such produce if they get effectively paid, no charity possible.
- Russia doesn´t accept euros or dollars as they would be just as seizable as the now frozen legitimate Russian funds that have been rendered unusable per unilateral sanction applied by the EU.
- Russia proposed to be paid by conversion of the euros received into effective Rubles under the purview of the Russian Central Bank. Once the Rubles are duly credited the delivery of Russian produce could proceed, not before. This means that the contractual obligation is only satisfied when the euro-conversion transaction into Rubles is concluded at Gazprombank.
- The EU now objects to that and says that actually the EU payment should be considered as duly fulfilled the instant that euros are transferred and not a millisecond later. This means that Russia would be obliged to comply with the contracts whatever or whenever happens with the conversion into Rubles of the euros received.
pure-bred pedigreed ´Schrödinger-seizable´ euros
So now the EU would accept to pay for Russian imports only with pure-bred pedigreed ´Schrödinger-seizable´ euros not bastardized into Russian Rubles as such are “not contractual” and thus against the “rules-based EU”. Meaning that per the EU the payment contractual obligation would be fulfilled the instant that such pure-bred euros are transferred to Gazprombank without the need to consider any aspect of the subsequent bastardizing conversion into Rubles. The EU only cares about and acknowledges pure-bred pedigreed ´Schrödinger-seizable´ euros. Thus Russia would be obliged to deliver the goods the instant it receives such “contractual” euros at Gazprombank.
Per Al Jazeera, EU spokesman Mr. Eric Mamer stated the official EU commission position: “ If the contract stipulates that payments should be made in euros or in dollars, then the company’s obligation ends once it has made such payment in euros or dollars,” Mamer said. “If the payment takes place in Rubles, then we are no longer talking about the agreed contract terms and we are circumventing the sanctions. What we cannot accept is that companies are obliged to open a second account and that between the first and second account the euros are under full control of Russian authorities and the Russian Central Bank who says that the payment would only be complete when it is finally converted into Rubles. This is an absolutely clear circumvention of the sanctions. Opening a Ruble account at Gazprombank in and by itself may breach the EU sanctions… “
Ref# 7 https://www.aljazeera.com/news/2022/4/28/europe-struggles-for-clarity-on-russias-roubles-for-gas-demand
So, before making any payments, EU buyers would have to get from their Russian counterparts a full agreement in writing specifying that the payment contractual obligation would be fully completed and satisfied as described above. The subsequent conversion of such euros — or dollars — into Rubles after the euro transfer has been duly credited is something under the entire responsibility and risk of the Russian authorities. Such a written statement would have to be duly approved and signed beforehand by pertinent officials from the EU and the Russian Federation. This means that, according to the EU, the instant that such Schrödinger euros or dollars were deposited – and therefore subject to seizure per the many sanctions already approved and effectively applied to Russia, or even possible future sanctions to be thought of against Russia or others – the contract has been fulfilled and Russia is obliged to deliver the goods.
… fool me twice, shame on me
So, in view of current and possible future EU sanctions, attitude and seizures, as the President of Russia Vladimir Putin clearly explained to the German Chancellor Olaf Scholz, to put it nicely the Russians beg to differ. Accordingly,
Step (1) is the transfer of euros to a Gazprombank account.
Step (2) is the conversion of such euros into Rubles per Gazprombank´s operational criteria including timing, rate conversion factors, and fees.
And only after such step (2) of euro conversion into Rubles is duly and satisfactorily concluded would the transaction be considered as completed and fulfilled.
Ref # 8 https://www.zerohedge.com/energy/trump-was-right-putins-gas-strategy-gives-germany-only-bad-worse-choices
brace for impact
After Russia´s funds were seized, the way to pay for Russian produce remains unchanged from day 1:
- payment in Rubles thru the euro conversion mechanism proposed by Russia per the above mechanics.
- payment in Rubles thru the sale of gold bullion in the terms that Russia has offered from day one.
“ So the EU better be prepared to continue paying (many) billions of euros each week to Russia, supporting the Ruble and subsidizing its military in the process. It’s not just a short-term problem, either. If Germany manages over time (many years ?) to find adequate replacements for Russian natural gas, oil and coal, it will be at (tremendously) much higher prices. The era of cheap-Russian natural gas fueling the German economy is over. German energy-intensive companies, like its chemical giants, could not compete in the global market. Germany will face painful choices about the future of its industrial economy”. So without very specific and unreplaceable exclusive Russian grades of natural gas and oil and coal the huge German industrial giants run the very serious risk of shutting down continuous year-round processes which would mean irreparable harm + negative impact on the German economy and the rest of the world. Ref # 9 https://www.zerohedge.com/energy/trump-was-right-putins-gas-strategy-gives-germany-only-bad-worse-choices
The European conventional military dependence on Russian fuels is beyond overwhelming, close to checkmate.
The gold card
Regarding option (B) payment in Rubles thru the sale of gold bullion, I recommend two most pertinent “The Saker” recent articles, namely
Ref # 10 http://thesaker.is/bretton-woods-iii-the-new-big-bang-suicidal-europe-saved-by-gold/?
Ref # 11 http://thesaker.is/natos-internal-gold-war/
[ RE-published ]
Schrödinger gas for Schrödinger euros ?
As stated before, last week “The Saker” published what turned out to be a highly visible article namely the Schrödinger euros which explained the situation simply and clearly up until that date, including the “Schrödinger” details exposing how deceitful the EU payment in euros proposal was. Ref # 3 https://thesaker.is/the-schrodinger-euros/
As has happened on other occasions, the above “The Saker” article was also RE-published in different specialized blogs such as Zero Hedge wherein commentariati posted comments and analysis of their own. In this occasion, “not-me—it-was-the-dog” posted an interestingly creative comment which paraphrases highly pertinent aspects with refined sarcasm, namely
“… In exchange for so-called Schrödinger Euros, now Vladimir Putin ´the merciless´ has decreed the creation of Schrödinger NatGas, whereby GazPorn would thus “print” cubic meters of natgas with a keyboard 100% for free and then transfer such gas over to the European purchaser’s storage tanks in the EU albeit now under “frozen” status.
So Russia never gets to use such euros – which actually never see the light of day – and accordingly are not inflationary in any and every sense of the term as nobody else can use them either, and Europe never gets to burn such gas – which actually never sees the light of pilot – and accordingly does not contribute to global warming!
Thus, by not entering into any economy at all in no way, shape, or form the EU and Russia can exchange lots of nothing for free, and Greta will squirm with delight. Easy see ?
Hungary let Schroedinger’s cat out of the bag – 10 EU countries are already paying, not specifying which of course. That would require an observation of the EU wavefunction to collapse to an actual probability!
For those who insist on “paying” with frozen € Russia could offer “frozen gas”. :)
The US is offering LNG, damn cold, but hey, a real luxury!
It is being utterly missed that the EU is not a single entity and that the divide(s) are not horizontal but vertical. Mostly along the constituent state boundaries but more so along regions -> those who “produce stuff” are the “sane” while those who just consume are generally “clueless”.
There are forces which want the destruction of Russia at all costs, the cost of destroying the EU in the process is absolutely acceptable to these folks. These folks, via various means CONTROL THE EU BUREAUCRACY.
Then there are forces who seek to leverage their better energy-security position *against* the other member states.
And then there are the entities which *know* the former are either intentionally trying to screw them, do not give a F about the impacts or are just utterly clueless. These are nominally the strongest but are not a single front – they are on the defensive so lack an initiative. This is being exploited by the “conflict-seeker” parties.
The ongoing open warfare in the EU between “Brussels” and (a minority of) states against (a majority of) the “producing” states is one where no dirty tricks are barred. This fight is economically existential for the parties involved (not talking about Russia here) and strategic (economic/political) weapons are being pulled out casually.
Yeah, legally, the EU institutions are not allowed to play a political role. They are “just” the executing bodies. But in practice they do. The most popular tool for Brussels is publicised “fait accompli” of declaring things “illegal” which were not so yesterday etc. etc. It is all par for the course.
For this reason IT IS COMPLETELY FRUITLESS TO ANALYSE THE PUBLIC STATEMENTS.
The only thing worth watching are the RU statements on to who they will no longer deliver the gas to. Those RU statements-of-fact come only after the respectice EU sub-entities took actual actions. These are the (real! shadows of the (real) policies. Completely mostly independent from the verbal messaging.
While the EU is not a single entity? The European Central Bank is. Those separate entities of The EU called “nations” are also bound by The Eurozone (Masstricht Treaty), ruled from Brussels. Those nations of The EU have agreed to certain monetary rules. The Eurozone is a German construct with the French going along. Without the Euro, Germany would quickly enter recession as Germany would revert back to The Deutsche Mark (DM). The DM would rapidly appreciate against other national currencies, making German goods to expensive for citizens of other countries to purchase. Resulting a mass firings in Germany, of workers. Germany is the heavy weight behind the Euro. France simply miscalculated as to what benefits France would accrue by adopting the Euro. Greece was turned into a vassal state of The ECB (fact: The ECB issues its own passports).
No they are not. Read the treaties. EU is NOT a federation. Not at the moment at least.
But my post was about the substance. And that is about the EU “officials” who have only limited authority speaking “as if” they had the real authority.
It has nothing to do if they are right, wrong or in between. It is about explaining why the (official) communication seems “chaotic”.
It is because THE EU IS HEADLESS but the way it is defined which results in CHAOS in the face of anything and everything. It is the nature of the beast. Its strenght and its undoing at the same time. It is not good or bad. It just is this way.
THERE IS NO HIGHER AUTHORITY TO MAKE A DECISION on behalf OF THE EU. Assuming there is will inevitably lead to wrong conclusions, whatever they are.
To react on your fantasy of “Germany collapsing whn forced to go alone”.
Eh. Not even close. The Germans definitely benefited from the Euro. But they were being incredibly successful going with the DM for half a century.
The German economy (and their society) are one well-built manufacturing machine. No matter the currency used, their efficiency will just shine through any time open competition is involved. The ONLY thing that can grind the Germans to a halt are trade restrictions. Those exact restrictions the US is imposing on the EU to achieve that “grinding to a halt” effect. These restrictions are a WAY, WAY bigger threat than any “details” like EUR/DM/WHATEVER currency choice is.
International trade is about a competitive edge, in all its forms. It is NOT about a currency used. Currency is just a technical mean to calculate it. Nothing more. It does not and cannot change the fundamentals. If you cannot produce stuff more efficiently than the competition – on the physical level – you lose. Period.
The French hoodwinked the Germans into doing off the Deutschmark for the Euro by shaming them about their Nazi past (no shaming Ukronazis though!) and dangling the illusion of a “United States of Europe” with France and Germany displacing Britain as Europe’s center of gravity.
What the Germans got was a surge of crimmigrants (much like the USA) from other European countries (eg Italy, Spain) with porous borders and once they were in, they could go to any EU nation uninhibited. German businessmen work 60 hours a week to pay taxes for Greek government officials who retire at 45.
I have argued for three decades that destruction of the EU should be US political, economic, and military policy. Now the chickens have come home to roost and President Rectal Probe can’t hold back born again Democrat hawks (who killed 65K in Vietnam, if I recall) who want US troops to join their NATO comrades in Ukraine. $33 billion at last count. Lets see how much the “United” NATO countries pony up.
Not because the Germans are any good at manufacture; but by shutting down industry of those who joined the EU, by getting their war debts cancelled or reduced ,by getting influxes of cheap labour: war -torn WWII citizens ,2015 Moslem “refugees” and Ukros now.They were set up to win , and other countries set up to fail.
Germany had it’s industrial base left mostly intact after WW2 (despite heavy bombing of cities, and industrial facilities). The German worker was for long indoctrinated to obey, and work hard, and was quite cheap after the unconditional capitulation. Then in the ’60s a lot of even cheaper workforce was imported – mainly Turks – so the German manufacturing machine was honed.
It worked marvelously until the end of the century. The discipline started to lack, much production was outsourced to cheaper colonies to maximize profit. Also, cheap products flooded the world from China, even if their quality leaves to desire, but it gets gradually better. The result is a steady decline of quality of German products (which also took place after the introduction of the Teuro – teuer germ.= costly), which accelerated during the ’07 financial crisis. The current German manufacturing machine is a pale shadow of it’s former self, especially if the colonies (cheap labor, high profit market place) rebel. Almost everything is outsourced.
Currency isn’t simply technical means, it matters very much who’s currency it is, and who controls it.
So the EU bureaucracy want to destroy Russia even if at the cost of the destruction of EU itself. Well, they’ll fail to destroy Russia, simply because they don’t understand how the russian mind works. And, being a citizen of a country, which was sold by its politicos to EU for a tap on the shoulders, I’d say this: if those EU bureaucrats destroy EU, while trying to achieve the impossible (destruction of Russia) – good riddance.
I agree. These folks live in lala land. That is why they are so dangerous.
They know no fear. In the worst possible meaning of the word.
There is nothing to fear, but gvt its self.
Then you are part of the problem.
Fear of repecussions is the only thing preventing people to do some very nasty stuff. The moment it is not there, no matter why, is the moment where the worst things come to pass.
People like you with no fear, those who truly believe that killing other people is all “fun-and-dandy”, because they saw it in a videogame, are dangerous. There is no way around it.
MAD works based on fear. Once you remove fear form the game – like it is (being) removed today for many in the West – there is no MAD effect to speak off. Eventually, that will cause a total war. It is that simple.
Even respect is tied to fear. And with o respect, there can be no negotiation. With no negotiation the only way to resolve disputes is by force – aka by war. And that is where we are now.
It is now even easier!
How long is Russia going to allow itself to be jerked around like this? Cut off energy – they have no intention of ever paying for it, they just expect to receive it for free. Seize all foreign assets like Russian assets have been seized. Repudiate foreign debts – why is Russia still servicing these debts? Time to stop f—–g around when Russians are being killed by these countries in a proxy war. No half measures. Total war.
“Moderation in war is an imbecility.” – Admiral Fisher.
Well said, it’s about time Russia upped the pain dial beyond a mere 1/10!
As long as it will be profitable. And we shall all hope this will not change anytime soon.
At the moment the energy business between the EU and Russia is one of the few stumbling blocks for the “main” phase of WW3 to unfold.
Further, the window-of-opportunity before other “stumbling blocks” will grow up on that road to hell is not endless. At most a year or two. So the UKUS are under time pressure to act now. Hence their desperation and burning their matches all over the world for a short-term tactical advantage.
“Total war” means musrooms growing all over the place. Even in the dry climates.
Be careful what you wish for may come to pass.
There are forces that have that scenario as their main objective. They are not weak and they are not Russian.
The only forces that have such scenario, are the forces that have nuclear and ABM primacy, as far as I checked, Russia has a slight edge.
I do not know what you call weakness, but ideologues usually are, this is why they hold on to their ideologies. Elites, no matter who, are ideologues, and they are weaker than any worker in the world, they rely to much on their creature comforts, and for them it is unimaginable, no matter how many lavish and well stocked nuclear bunkers they have, to lose those parties, orgies, fancy dinners, 50 year old single malt tasting and enology tasting functions. I do not know any single elite, even those that made it by their own means, that after 10 years of lavish lifestyles, can bare the thought of losing them. This is weakness.
Sorry, but you miss the point.
In a total war, the one who “wins” is the one who went into it BEING WEAKER economically but on parity militarily. The real threat and the real target is China. Russia is just “in the way”.
This is why during the Cold war era the threat of a real conflict was much lower. The UKUS KNEW that the Soviet bloc was economically weaker and thus a total war would be – comparatively – advantageous to them.
Today, we are in the opposite. They know they are weaker and that a nuclear conflict is the ONLY thing that can prevent their emprire downfall. No, these people are not in the majority not by far. BUT there are a LOT of loons in the West politics who have absolutely no clue what is at stakes. In their arrogance they truly believe they can push Russia – and – eventually – China into servitude or at least irrelevance.
The true hawks KNOW this is no longer possible. BUT they will not tell it to the loons. For they need the loons to enable the “bang” solution.
The objective here – for Russia, and the ROW collectively – is to “educate” the loons “enough” before it is too late. Without the loons making for a big war will be much more difficult for the forces which want it.
This is a psychological process that needs to run its course. Every day this can be prolonged is one more loon realizing he lived in a lala land. Does it take Russians looking like “idiots” to those who have no clue on the strategics? Possibly. But, that is absolutely OK with the Russians. They were never much for “saving face” to begin.
Oh yes. There are very well organized interest groups with religious backgrounds/excuses/motives, whose objective is the end of the world. Several, not one such group. But one was able to pull various “hoaxes” since 2001 and can therefore be considered as powerful and capable. Some others only can pursue regional, but not many can pursue such a global objective.
But one does not get this from theory only, one had to have a bit more insights than just the usual narrative.
Because Russia is honoring their contractual agreements with the EU. When those agreements are date ended as signed President Putin can say to the world ” Our word is honest and true unlike the Empire of lies “.
Now we with the other BRICS countries will make use of our own SWITF system and the petro dollar will no longer steal from those countries of the world who wish to join us in this ambition. See we honor our contracts even into the SMO when the countries of the Empire of lies steals from us and the world.
Who do you trust now for international trade?
Actually you have to stay calm in combat as far as possible.
There are lots of Russian supporters that would be hurt that happen to live in Europe, that own financial and other assets in Russia. They have been supporters for a long time. Why would you want to alienate them?
That is like burning your own bridges.
This is a hybrid war between the Anglo-Zionist empire and Russia, yes, but globalization means you have friends and enemies in almost all kinds of places. You have already seen the effects of mis-calculated sanctions by the empire. You should avoid making the same mistakes.
If the EU tries anything to prevent the euro to Ruble conversion from working, then gas will stop for non-payment. If the EU and US can disregard contractual obligations and make up rules as they go along, Russia can, too. There cannot be one set of rules for others and another for the US and their vassals. A law-abiding person will never win against a criminal cheat.
And finally, if the EU cannot see that the US stirred up this entire mess in ukraine as a way to destroy the EU’s economy, then the EU deserves a painful and final death.
Neoliberal economists and their lawyers have decided,
1. Contracts must be honored in Euros or Dollars as the contract stipulates.
2. Those Euros and Dollars will then be canceled, per sanctions.
3. EU oligarchy get free sh*t to sell to EU customers at very high prices.
It is the ultimate in wealth production. Pay nothing for something, and sell it at very high prices during crisis. Western oligarchs becoming history’s greatest State Welfare Queens. Which they already are.
One point I have not seen is? How does European debt play into this? The ECB has pumped out phenomenal debt since 2008, to stabilize rapacious billionaire oligarchs and corporations in The EU. Also to pay for schemes in foreign lands.
It would be interesting to see an analysis of the effects of the attempted theft of Russian oil and nat-gas through the contract-sanctions combination as related to EU debt. As well as an analysis of Western corporations and oligarchs increasing their wealth through such a larcenous scheme.
Forgot to add, that EU neoliberal economists have come up with a novel argument for debt repudiation through the larcenous contract-sanctions non-payment scheme they have dreamed up from thin air. In essence, a “we get free Russian oil & gas for free” to sell at high prices on The EU market. Without wracking up more debt. Remember, the US Dollar and Euro are both a debt-based money.
What neoliberal economic weakness related to US/EU debt, is The FR/ECB hiding? The scheme is not only a repudiation of debt by EU… it is also an attempt to loot Russia by issuing a debt-backed currency (The Euro) and then confiscating the Euro (retiring debt).
The ECB is hiding something monstrous, related to EU debt. The ECB is desperate to reign in debt by canceling debt-based currency.
“Pay nothing for something, and sell it at very high”
the only thing Brussels et al want is a reversion to the 17,18 & 19 Century where there were colonies in Africa for the Belgians & Germans
The people and countries were paid nothing in terms of the real value – say in the Congo by the King of Belgium who owned the mineral deposits
today they want Russia to assume the same status as a colony and Ukraine was the catalyst set up by NATO to revert to centuries before with NATO provocation – once Russia is destroyed they will send in slaves to mine the Nickel or NG / OIL
Russia did nothing wrong in attacking Ukraine
«If the EU and US can disregard contractual obligations and make up rules as they go along, Russia can, too. There cannot be one set of rules for others and another for the US»
There is a huge difference between something done by “freedom fighters” and the same something done by “terrorists” :-).
«and their vassals.»
Those european vassals are not vassals by choice, and anyhow they (more precisely their upper-middle and upper classes) also benefit from vassalage. So don’t blame them for that, just for their well practiced hypocrisy.
New Tax Code for Rublegas process :
(Microsoft Edge auto-translate not too bad).
Said to be both urgent and temporary.
Tax seemed to have been forgotten in all this…
“The European conventional military dependence on Russian fuels is beyond overwhelming, close to checkmate.”
Let’s tease this out further.
If you think this to it’s logical conclusion, fiat money cannot be trusted. All is subject to international agreements, and as we have seen, they are worthless, when the chips are down.
Which leaves us with only gold! As so many times before in history.
The implications should be crystal clear.
Gold backed money is even easier to manipulate. The limited supply gold in the world favors the hoarders. Any minted gold coin that would be the only acceptable currency for world trade? Well, with the world economy a $50 trillion beast, take all the gold in the world, divide by 50,000,000,000,000… Rome and many other empires did the same thing as their economy (and debt) expanded, reduce the content of precious metals in their coins.
The US has not always had a gold standard. The time that the US dollar was at its most valuable in terms of purchasing power, was without the use of a gold standard. That was pre-1907.
What makes current fiat money vulnerable to hyper-inflation? Neoliberal economics, mistaken as Keynesian economics or MMT (it is neither), believes in money printing and debt as wealth. Reagan(R) with Reaganomics(R). And Margaret Thatcher. Both led the neoliberal economic expansion that has proven to be nothing more than a debt trap for their own citizens and entire countries (Greece, for instance).
Debt traps are very good traps. Pretty reliable.
Pay attention to who is being trapped and who is doing the trapping.
There is a reason Islam forbade interest on debts but did -not- forbid profit-sharing. It was to free the people from predatory/entrapment loans.
Debasing bullion coinage was common and most countries did it. Usually it was when a new king took over. The new coins would have slightly less precious metals. In the particular case of Rome, they had some trade with the Far East that caused a slow but steady reduction in the amount of gold in the Roman Empire. Their coinage got debased in quantity of gold because the value of gold was going up owing to declining quantity available.
The U$ dollar has become totally untrustworthy, it is akin to Jeffrey Epstein in world finance – ‘promisso non grata’
World is waiting for the Russia / China announcement of a new international alternative to SWIFT using a new commodity backed reserve currency or basket thereof, completely independent of the tarnished western currencies.
Schrödinger Euros are the currency of the bankrupt Schrödinger European Union, which is increasingly a European Disunion. Hungary for example will be running cost/benefit simulations on continuing within the suicidal political bloc, and the levels of threatened sanctions will soon tip the scales of argument in favor of re-asserting Sovereignty, and this is not just true of Hungary. Ultimately these sanctions, and the required military expenditure on ever more expensive and useless hardware are nothing but a tribute paid to the Empire – an Oligarchy Tribute targeted at the uppity public throughout Europe. The real enemy of the Empire both within the USA and abroad, is a free and informed populace demanding an ethical and in fact a de-facto Human policy from the supposedly representative democrats they have been re-electing. What could go wrong?
“The real enemy of the Empire both within the USA and abroad, is a free and informed populace demanding an ethical and in fact a de-facto Human policy from the supposedly representative democrats they have been re-electing.”
Say it again, louder.
A populace that not only demands it but implements it.
In essence, economic neoliberals in Western Europe only want to pay in Euros or Dollars for Russian oil and natural gas. Which those very same economic neoliberals can then seize through sanctions. Meaning, Russian oil and gas for free. Which then the economic neoliberals can sell at very high prices to their own EU customers.
What is the possibility of Russia declaring force majeure citing sanctions? The EU economists will argue that they will pay to Russian banks not under sanction, before canceling the Euros or Dollars. Thus, in their view, force majeure is not an option for Russia.
It is the Disneyfication of finance. What do I mean by that? Disney bought the rights to Star Wars. Alan Dean Foster wrote the novelization for the early movies. Now, Disney executives claim that they do not owe foster any money for royalties related to the Star Wars novels Foster wrote. As the Disney executives claim they only bought the rights to Star Wars, and not any associated contracts (such as Foster’s contract with Lucas).
Disney wanted their sh*t for free. However, Disney has relented in regards to Foster while many other authors suffer from Disney’s idiocy.
Disney and The EU have that in common: they want their sh*t for free without having to pay for it. So they can sell for high prices to their customers. This is what happens when you let lawyers and economists run your society. Through weasel-wording of contracts to redefining contractual obligations using courts (judges bought and paid for by the likes of corporate-backed Federalist Society in The US), Western economic neoliberals play word games – through contracts and courts – to gain advantage.
Economic neoliberals in The West have gone from being rentiers to being “you owe us free sh*t because we said so” economics.
Here in the US, oil production has actually dropped recently – with many Western oil executives colluding to drive up oil prices through restraining domestic oil production. Driving prices higher. Future LNG contracts exporting US nat-gas to Western Europe will guarantee gargantuan price increases here in The US and The EU. All to the delight of Western oil company executives who see their dream of further pocketing extra hundreds of billions of Euros and Dollars. While sanctions are meant to lock Russia into the Western framework to “teach the Russians a lesson” about who really runs the world: neoliberal economics.
It is time for the Russians to cite the sanctions and confiscation of Euro and Dollars, as a form of non-payment. In addition, Russia should stick a premium asset recovery fee on future contracts to The EU, preferably at a 25% APR, indexed to inflation. Such a premium would be to recover the value of the Russian assets that The US, UK, and EU illegally stole from Russia recently through seizures.
Here in The US, we have a peasant crisis. On one hand, peasants opposed to Biden are blaming him for the machinations of US oil executives that are restraining production here in the US, that results in higher prices. They want Biden to do something about it. Biden as no immediate say in oil production as those are private corporations. If Biden were to nationalize the oil companies, in order to increase production and drive down prices? Those very same peasants would be screaming “Communism”. Political schizophrenia. Or, the peasants being to ignorant to realize that they serve their masters on Wall Street.
Regardless, The Democratic Party (who mostly consist of lawyers – look it up) looks to be in for a defeat come mid-term elections. All bets are on Republicans to take the House and Senate.
Russians don’t think like Americans. Russia doesn’t argue about sanctions but ignores them as illegal. The fact that paying in rubles might break EU sanctions is not Russia’s problem.
Neither can the EU play the ‘broken contract’ card as claim and counter-claim will not have been resolved before (say) green hydrogen is universally available for free – or something. Gas is needed now.
нет дэньги нет дела
R. Robertson said…
“Russia should stick a premium Asset Recovery Fee on future contracts to the EU, preferably at a 25% APR, indexed to inflation. Such a premium would be to recover the value of the Russian assets that the US, UK, and EU illegally stole from Russia recently through seizures.”
Hmmm… food for thought.
Makes sense from every angle except the EU´s no ?
No need and no point.
Payment-In-Advance is the name of the game. In a seller’s market like this it works pretty well.
I believe these contracts mention sanctions under force majeure. Russia can bring that up.
With all due respect sir. you seem to not know how money actually works in the bank setting.
The currency itself is not all that important. What IS important is the domicile of the bank that manages the transactions.
Russian foreign currency reserve assets can only be frozen or seized within the operation of a bank outside of Russian domiciled jurisdiction.
For instance, SWIFT is an operation of the BIS domiciled in Switzerland.
By stipulating that gas payments be made to Gazprombank, Putin only changes the domicile of the receiving bank onto Russian soil where the operation of transaction cannot be intercepted by hostile actors.
The secondary process of conversion from foreign currencies to Rubles is an additional measure by which the Ruble becomes stabilized in the domestic economy within Russia, propagated to the world currency market via the few remaining outlets into the Western banking and market systems. Mostly via Chinese banks.
Those Euros and Dollars remaining on Russian balance sheets cannot be frozen or seized until they enter a bank outside of Russian jurisdiction and operation. In fact, they can continue to circulate within Russia at the pleasure of the Russian operations – at an exchange rate entirely dictated by Russian markets, or indeed, Russian decree.
IF Europe wants Russian products, it cannot transact without the operational “portal” into a Russian domiciled bank. And THIS is why Gazprombank was excluded from the sanctions stipulations and allowed to operate as a portal between national jurisdiction and domicile.
When thinking about monetary transaction – please remember to do the exercise of the double-entry operations required to record such transactions – and keep in mind where the accounts are kept.
If you fail to do that, you will fail to understand how money works and will resort to magical thinking and appeals to a magical cat who exists only in thought experiments.
Such thinking has entertainment value only, and should not be taken as a basis for real world decision-making.
Mitch, you said:
“Those Euros and Dollars remaining on Russian balance sheets cannot be frozen or seized until they enter a bank outside of Russian jurisdiction and operation.”
Welll, that seems to be the problem no ?
Helluva a problem methinks…
I mean Russia cannot use such remnant euros or dollars for payment to anyone else, say China or India or Brazil or whomever… let alone EU member countries or other Western Alliance members. And they do need to sell their nat-gas for euros and dollars which CAN be used for payment of third parties re imports etc etc.
So Russia has to convert them ALL euros into Rubles and never leave any euros or dollars un-converted because they can´t be used to pay third parties elsewhere. The article is very clear at that.
Then you say
” In fact, they [ those euros you meant ] can continue to circulate within Russia at the pleasure of the Russian operations etc etc…” Well I am convinced you should have said … ” In fact, they can continue to circulate ABSOLUTELY ONLY within Russia at the pleasure of the Russian operations…” as those euros would be seizable elsewhere.
I take it that way, that IF Gazprombank can exchange the received Euro/USD to another transaction inside Russia (Russian Corporations with assets/purchases outside Russia) or exchange outside Russia (import from India/Japan/China/whoever), THEN they can be accepted as has been transferred to Ruble, and thus accepted as payment.
It must be conditional that the paper Euro/USD received in Gazprombank can exchanged to real values somewhere in the internal Russian system. Otherwise it doesnt make sense.
You are absolutely correct it is just another scam game devised by the West to freeze the payments of Euros/ Dollars and in effect get gas for free.
All of Russias foreign accounts were stolen. Because of this they are taking steps for their wealth not to be stolen in the future. China, India and others are lining up to trade in roubles and their own currencies, along with commodities.
Russia is actually telling them that their future trading is with the global South, and Dollars & Euros not needed anymore. In effect, trade within your self-called ” international community”. The illusion/dream was to isolate Russia and China, but in the end you will be the one isolated.
Yes, it is a fascinating scenario. Here I find it useful to recall that money is not value, it is claims-on-value.
And, that each specific currency refines the claimed value to a specific sovereign jurisdiction.
In this, we see that it is not the value being attacked by sanctions, it is the claims which are dishonored.
The unilateral sanctions by the USA pertain only to such claims as processed via SWIFT and other banking operations under the dictate of Washington.
And here is where the value of the SWIFT alternative comes into play.
Russia is not hermetically sealed. Particularly via China (which cannot be sealed-off yet). In this way Euros/Dollars can be propagated to peripheral participants and used to claim EU/US value from the soil of less sanctioned countries who require US/EU goods. As such, they will still have value within Russia to some extent.
In the end, it is the value that matters – and means will be found to procure critical resources from Russia – via monetary loopholes, or total military seizure of the Russian sovereignty. The latter path seems to be the choice of the unilateral USA.
Well, that is not really true. Yes, Russia could use a kind of non convertible Euro internally, managed by their central bank. But that is not the real deal and not as useful, since you might not be able to transfer it to the outside (if the EZB does not valide payments from the Russian central bank).
In East Germany we had something similar. You could (and in some case I guess you had to) convert the real west German Mark into some other paper currency, that you could use to buy western goods in special shops. But you could not convert that money back.
@Mitch: “IF Europe wants Russian products”.
That’s the big word: IF.
The Persians said to the Spartans, Better submit or it will be worse for you if we win. To which the Spartans replied, IF.
If the EU$A wants Russian products then financial shenanigans won’t help them; they will have to exchange value for value, disgorge what they seized, and not try to seize any more.
Time to test the big IF.
Another good, informative article, thank you.
Mental gymnastics should be an Olympic sport, some of the contortions these bureaucrats create are breathtaking!
The ZeroHedge commentariat can be a tough audience; some astute and acerbic observers there, sprinkled with a good seasoning of trolls. I thought the Schrödinger meme would have some mileage and am not surprised to see them pick it up and run with it.
For me the big turn-off re: ZeroHedge was its (or at least the commentariat’s) eulogizing (?) of president Trump. Not that Obama and Biden were/are any better, but was it not Trump who, in his attempt to destroy Nord Stream 2, continued the historical Anglo goal to set Germany and Russia apart and prevent them from an alliance? Does the otherwise pro-Russian readership not take into account all the other times Trump was hawkish toward Russia and tried to harm Russian interests?
Well said Jorge! let’s not forget the role of Chinese Cross-Border Interbank Payment System CIPS, the missing piece in the equation. The RMB based on a basket of commodities including Gold might follow the checkmate lurking around, and perhaps 800 millions Europeans will wakeup having the chessboard smashed on their heads.
The spirit of the contract says that Russia will give something of value(gas, crude, coal) in lieu of EU giving something of value to Russia. What Nincompoops of EU think is that pieces of paper(Euro/dollar) are valuable. They are not. Currency is just a medium of barter/trade. If you think hard, it is still barter. A thing of value for a thing of value.
Since Russia cannot buy anything with Euro/Dollar, those are just pieces of paper, not even good enough to wipe. This gets all the contracts null and void. EU can roll all the contracts and shove it.
There is a Latin saying, rebus sic stantibus (that being the case) that underlies Russia’s determination to want payments in rubles: the theft of its currency and the sanctions altered the way in which the contracts for the sale of gas, oil and coal were signed. The initial conditions of the pact were changed by the Europeans!
Seems that Schrödinger threw a hand grenade at Putin, then Putin took the pin off and threw it back…
The monkey with the hand grenade (Lavrov) never progresses into a human. Thus we can finally prove and cancel Darwin’s evolution theory :-D.
Do you see any progress into a human among the western political leaders? If Darwin was alive today, he’d have claimed that apes evolved from them :-D.
Reloading this page I can see some commentators conflating ‘currency’ with ‘money’. The two terms are not entirely interchangeable.
I extract the following:
“a. Federal Reserve Notes. Most people mistake the Federal Reserve Note (FRN) “dollar bill” for a “dollar.” But no statute defines or ever defined the “one dollar” FRN as the “dollar” or even a “dollar.” Moreover, the United States Code provides that FRNs “shall be redeemed in lawful money on demand at the Treasury Department of the United States . . . or at any Federal Reserve bank.”3Thus, if FRNs are not themselves “lawful money,” they cannot be “dollars,” the units in which all “United States money is expressed.”
b. United States coins. The situation with coinage is equally confusing. The United States Code provides for base-metallic coinage, gold coinage, and silver coinage, all denominated in “dollars.” The base-metallic coinage includes “a dollar coin,” weighing “8.1 grams,” and composed of copper and nickel.4The gold coinage includes a “fifty dollar gold coin” that “weighs 33.931 grams, and contains one troy ounce of fine gold.”5Finally, the silver coinage consists of a coin that is inscribed “One Dollar,” weighs “31.103 grams,” and contains one ounce of “.999 fine silver.”6What is the rational relationship between this “dollar” of 31.103 grams of silver, a “fifty- dollar” coin containing 33.931 grams of gold alloy, and a “dollar” containing “8.1 grams” of base metals? Obviously, these are not the amounts of the metals that exchange against each other in the free market—that is, the different weights of different metals do not reflect equivalent purchasing powers. So, on what theory are each of these disparate weights, and purchasing powers, equally “dollars”?
c. Currency of “equal purchasing power.” The United States Code mandates that the latter question should not even be capable of being asked. For the Code commands that “the Secretary [of the Treasury] shall redeem gold certificates owned by the Federal reserve banks at times and in amounts the Secretary decides are necessary to maintain the equal purchasing power of each kind of United States currency.”7Obviously, the Secretary has defaulted on this obligation to keep all forms of “United States currency” at parity with one other—that is, to maintain a “dollar” of constant purchasing-power, whether it be composed of gold, silver, or base metals.
In sum, the monetary statutes do not define the noun “dollar” in a unique way. Instead, completely different things have the same name, things unequal to each other are treated as equivalent, and things that should have the same characteristics (i.e., “equal purchasing power[s]”) are quite different.”
Right now Euro/Dollar has ZERO purchasing power for Russia. So, in the barter for valuable commodities, it is getting something of zero value.
John, you can buy a lot of politicians with the Euro/Dollar. For instance, you can buy a U$ Presidential candidate for about $20 Million (Trump); a British Prime Minister for about $150 Million (Blair); and a POTU$A for about $50 Billion (Clinton). All these sums are chicken feed compared to the receipts that the Anglo Zio Capitalist oil companies made from subsequent sales of Iraqi/Libyan/Syrian/CentralAsian oil and gas.
I do not know the price of EU politicians, but I guess the Russians could soon reverse Brussels policy re gas-for-euro-for-rubles by recycling some of their Euros backhandedly to the Bureaucrats of Brussels. However, Russia prefers a healthier policy than bribery: waiting for reality to bite; already 10 European countries have accepted to deposit Euros into a Russian bank to pay for Russian gas in Russian currency. Businessmen who deal in real goods are tired of disruptions caused by so-called “sanctions”, “safety regulations”, “environmental considerations”, “Green credits” and related financial chicanery.
>>Moreover, all “United States coins and currency (including Federal Reserve Notes . . . ) are legal tender for all debts, public charges, taxes and dues.”2Thus, defining the noun “dollar” is necessary in order to know what is the “money” of the United States and what constitutes “legal tender.”
Can’t say I know the laws, but what is extremely likely is that somewhere it is written that the US Treasury has the right to issue Lawful Currency. As a result the definition is that anything issued by the US Treasury is by default worth its face value in dollars. The Treasury gets to say what a dollar is by what it issues. As best I can recall, bullion coinage lost its legal tender status during the bank crises that FDR dealt with. The dollar was so screwed up they were concerned that people might go back to using gold again. There was a little bit of that going on.
the writers sees the trees and misses the entire forest.
ask yourself…….why is the eu acting in a such an irrational manner? when the solution is simple.. pay in rubles
1. the ecb went to negative interest rates years ago in an effort to stimulate their economies….this FAILED but
2. destroyed most eu pension funds now essentially broke
3. the eu nations can no longer fund themselves using the old model of borrow and never repay because
4. the negative rates DESTROYED the eu nations bond markets forcing the ecb to buy up all the new debt and do so endlessly which is coming to an end
5. the ecb and the eu are going to have to default on all that debt which brings into play klaus schwabs great reset……you will own nothing and be happy bullshit which is really COVER for
6. the eu nations have to default not the people in the eu so in order to make this happen and cover their ass
7. once they default they want to go to full digital money they can control forcing everyone into the system who can THEN be cancelled at a keystroke with no recourse for wrong think
8 this requires the paper money to be cancelled which is on the table for next year in the eu
BUT in order to make this happen and deflect blame from themselves they need a bogeyman so the eu people do not come with guns and pitchforks for their leaders who rightfully deserve to be in prison or worse
9. thus russia and putin come into playing…… their unwanted role as the cause of all the eu’s troubles
10 thus to make it impossible to keep the eu nationa economies alive the leaders strangle russian energy imports precipitating the default that is coming ANYWAY but now can be blamed on the bad russians
11 BUT if they are not careful the ukraine dustup can easily spill over into eu/nato proper which nato is wholly incapable of protecting being mostly a bully against weak opponent and unable to survive for very long in a war against an angry russian bear who uses ONLY conventional weapons forget about atomic ones
12 and if you think the usa can save the eu’s bacon remember war is logistics and how far is the usa from the eu and how long would it take for them to assist nato in a serious conflict……yup
13 it would be over before the ships even arrived in eu ports and airports assuming they were still functional
when you stand back and look at the forest an entirely different picture emerges than the silly one being sold to you.
the usa is not that much farther down the road than the eu is in the same predicament but has chosen to devour the eu now to postpone its own day of reckoning
Forest management is fun!
What would an experienced forester do ?
First identify the SIFI (Systemically Important Financial Institutions) trees – easy to find by derivative foliage.
Power up the saw ( I prefer Stihl) and do Glass-Steagall bank separation of these 5 first. Others need the rotten speculative foliage trimmed.
Then replant massive national credit to recover the forest.
Indeed. It is the fabled musical chairs with just a touch of violence for now … and much more on the way.
Some of us always knew it was a matter of time.
You remember the camper’s joke about the bear and the fella campers right?
Also the other truism about running a successful business…
Keep them in mind.
Can’t some legal shenanigans be used to transfer the ownership of gas into accounts redeemable as and when Russias euros/dollars are accessible. That is transfer ownership of the gas [at current contract prices] but not possession, then sell any piped gas at new contract or spot prices to whoever pays in roubles, gold, silver, platinum, etc.? Sort of virtual gas for virtual currency.
conversion into Rubles is the process of receiving payment.
Until the conversion into Rubles, payment has not been received and so not been made.
Payment is not made until control is passed. If the EU still has control of the payment after they claim payment has been made, then, obviously, EU is misleading about payment. Control of the payment is is not passed from EU to Russia until conversion into Rubles.
The article represents in a fine way the EU and US’s hot air economy by paper and financial instruments.
Dont forget both US and EU are build on a -$250-300 trillion derivative circus and all countries within the Gay7 are indebted with >100% of their GDP and thus technically bankrupt.
If I were Russia I would stop the social welfare to Europe and demand physical gold. Nothing else matters, https://youtu.be/2FSYxoMYIz4
US-NAYOYO statements, promises and treaties are worthless. As are their promises regarding payment for resources. There has been much talk of Russia defaulting on foreign debts. I suggest that this become reality in partial payment for Western economic attacks on Russian including seizure of funds and the current sanctions.
We seem to be going back to barter. The Russian and German governments can calculate the daily/weekly exchange of goods and services. Russia has a trade surplus, so Russia says ‘throw in two airbuses, 1000 Mercedes, and 500 tonnes of German sausages, to square the accounts’.
If Germany is unwilling, then Russia turns down the gas valves until the accounts are balanced.
Or Germany can deliver precious metals to balance the books.
When trust is lost, then commodities will always be the hard power, not fancy, candy wrapper banknotes, containing no intrinsic value, and created from nothing, in unlimited quantities!
Ric, agreed. Currency is Credit, and “Credit” (the Latin word for “Belief”) is Trust. If the EU$A wants Russian hydrocarbons they will uphold Russian belief in the credit-worthiness of the Euro/$Dollar. Otherwise, Russia will not sell them hydrocarbons.
EU$A can try to buy hydrocarbons elsewhere, but these doubts about possible “sanctions” or “seizure” means that Euro & U$D have now lost some of their credit-worthiness; new suppliers will charge a premium to insure themselves against “sanctions” or “seizure”. Destroying trust in one’s own credit-worthiness is not a good idea if the EU$A are customers in a sellers market like energy seems to be right now.
Just to throw out another thank-you to Jorge for his great contributions.
I hope the consensus of the commentariat was:
Russia must change all foreign currencies used for payment of anything into rubles!
Taffy, yes, and as a matter of fact I remember in comments posted at his previous article Jorge bravely acknowledged his own personal need for some positive encouragement at least every now and then as it´s a very lonely task he said impossible to make any friends with in our ´Western´ culture, or something to that extent I recall. So I´m sure your/our words should help him out some. Good idea, well done Taffy.
Taffy, you say the message is clear:
“Russia must change all foreign currencies used for payment of anything into rubles!”
But that´s impossible Taffy because Russia also needs to import tons of stuff and many/most countries still take dollars for their exports, not rubles ! And nat-gas isn´t the only thing at stake here as the EU countries will have to import lots of other stuff from Russia. So what´s at stake here is not just payment for Russian nat-gas okay ? We here are discussing the future of trade with all-important Russia and the many things it exports. Taffy, it´s Bretton Woods III we have here.
So Russia needs to keep & save a significant part of the received euros/dollars WITHOUT converting them into rubles. And there we have a huge problem. Maybe not during the first three years while Europe still badly needs Russian nat-gas and other Russian/Ukraine products. But maybe after 5 years Russia better not have ANY euros saved because they´d still be seizable according to this article.
And the same thing goes for China/India/etc if today and next couple of years they accept from Russia any of these seizable euros as payment for THEIR exports to Russia. It´d be like the “hot potato” game that the article mentions somewhere methinks. Did I make myself clear, could you follow my point ?
Houston, we´ve got a problem !
I still don’t understand why the rubles cannot just be converted back to euros when Russia wants to buy someyhing.
So, Europe doesn’t accept rubles—maybe they will change their minds and accept rubles when their asses are freezing next winter?
Or, why not do straight barter between what EU countries need from Russia and what Russia needs from them, on a bilateral basis?
The EU cannot prevent member countries from doing what they want, right?
The whole EU thing is such an effed-up mess.
The EU was messing with Russia and Gazprom long before the Maidan.
RubleGas has created a perfect storm. It has placed gold front and centre of global monetary regime. GOLD – deemed to be a store of value throughout the ages, until the modern era when it could magically be transmutated from base metals using a “sciency” a process called re-hypothecation – Paper Gold in laymen’s tongue.
Ahhh…. the cleverness of the the capitalist classes knows no limits, for surely they will crack the complex issue of Quantum Entangled Gold – been both in Thread Needle Street and Fort Knox at the same time, or the head scratcher of Schrödinger’s Gold – is it there or is it not there. You will only know if you look, but the banksters forbid you from looking or doing an audit on their bullion holdings.
Venezuela has had its gold confiscated by the Bank of England, such blatant theft being promised to the Random Guy in exchange for Venezuelan oil and resources. Recall that Saudi gold went missing during the infamous Nein Eleven collapse of the twin towers, Germany has been trying for years to get a portion of their gold repatriated from Thread Needle Street with no luck, Libya has become an open air slave market because Muammar Gaddafi dared to talk about the Gold Dinar for Afrika, Saddam Hussein swung from the neck because he began demanding payment for oil in currency other than dollars.
Be assured that all that exists in the West today is nothing but Fools Gold and the Eurasian bloc has created for it an interesting quantum superposition, “Dead Man Walking”
As I mentioned in my previous comments above to Mitch and Taffy it seems that “seizable euros” will always remain an unsolvable ever-pending problem into the future, not only for Russia but also for its other trade partners outside the EU which would take part of the “seizable euros” received by Russia as payment for their exports to Russia.
The only solution is payment in gold.
The Russians foresaw this solution from Day 1.
The author of the article recommends two “The Saker” recent articles re gold
At least this debate is forcing everyone to consider the absurdly simple question, ‘what is money’?
5000 years of collective human civilisations, and we still cannot answer this question.
Here is a hint, the other two million species on the planet use life-force, a power given freely from the cosmos, as their monetary unit.
The human hunter-gatherers used ‘life-force, exchanged in a marketplace’.
Money is a claim on human labour. Now what shall we use as our scientific measure??
All other species have ecology, we have economy. Now how to measure that?
Simple – look at the nearest bipeds, primates, ecologically as happy as any Harvard economist.
Their potential population never exceeded 10 million, lives short brutal.
Now look in the mirror – we hit 8 billion and counting. Our grandparents can actually see their grand children!
How could that be?
Money? Are you kidding?
Something absolutely more powerful than counting sea-shells or banknotes – ideas of physical principle. Cannot be kicked, stroked, smelled, but can be known.
Heavy idea, that!
When Russia gets paid in rubles for its gas exports, those rubles can put Russian people to work building domestic infrastructure for the benefit of the Russian people. Previously the US dollars paid to Gazprom were being syphoned off by the Russian oligarchy and deposited in offshore tax haven banks. Biden has done the Russian state a favor by sequestering the oligarch’s assets to put a stop to this thievery.
“The era of cheap-Russian natural gas fueling the German economy is over. German energy-intensive companies, like its chemical giants, could not compete in the global market.”
Now call me stupid or whatever.But it seems to me that if those huge German industries are run using Russian resources.Then either the Russian state,or Russian private investors could build comparable huge industrial plants like those inside Russia. They might actually offer some of those companies the right to register their companies inside Russia,build factories there and have endless access to those needed resources.They need to be working on that as I type. That would vastly increase Russia’s economic base,and offer good employment opportunities for many Russian citizens.
I asked a question a while back about the Euro payments, which I will repeat. If only natural gas is being sold by Russia under the conversion scheme. Does that mean all the rest of Russian trade with the EU/West is being paid for with Dollars or Euros that are then frozen. That seems insane to me for Russia to accept that.What on earth is the good of having “payment” in currency you aren’t able to use. If they somehow have the idea that “someday” they will get those payments unfrozen and can use them,then they need to take a refresher course on Western policy.That money (minus the stealing of part of it) will be given to Ukraine for “rebuilding” or to support some kind of “government in exile” (if we are lucky,it will be in exile). All of Russia’s exports to “unfriendly states” should be in Rubles.And they need to have done that yesterday. Every day that goes by equals millions in lost revenue for Russia.
Uncle Bob, the short answer to your very first question is “no”. Right here what´s at stake is the whole trade rainbow shebang with Russia, period. EVERYTHING is affected and included such as nat-gas, wheat, lithium, rare earths, etc. etc. etc. I replied to Mitch and Taffy with my view on the same topic strictly from the seizeability of euros (once paid to Russia) perspective. Please do find such comments of mine and we can discuss some more later. And “no” yet again as answer for your last question as the EU and allies do NOT accept Russian rubles as payment for anything at all, period. Not even euro-converted “bastardized” rubles as the article mentions somewhere methinkx.
Well, this does seem like a no-brainer. And I think China is definitely filling in some of the financial gaps already—according to Scott Ritter.
But how long will it take for Russia to gear up and jump into the economic holes left by Western corporations?
For this they need investment capital, right? So, more rubles . . .
As for ” EU and allies do NOT accept Russian rubles as payment for anything at all, period”
This should be turned into *their problem*!!!
They will be forced to accept rubles, or eff ’em!
How can that be accomplished that still seems to be the central unsolved issue.
I remember when the Iran nuclear deal was signed and the US was forced to unfreeze Iranian assets held in US banks. The Iranians made the US deliver the money in cash to Iran. The media in the US talked about pallets of $100 dollar bills arriving in planes to Tehran. And at that time I didn’t understand what that was about.Since then I’ve realized it was just to avoid a repeat of what we are seeing happen to Russia today with their assets frozen in Western banks. With the “cash in hand” the Iranians weren’t going to worry about frozen assets in Western banks.They had the money right there to use.Russia might think about that to.
@Uncle Bob: “Iranians weren’t going to worry about frozen assets in Western banks.They had the money [U$D] right there to use.”
And they used it well. My academic colleague, Prof.Guido Pontecorvo who visited the Islamic Republic in an advisory capacity, told me, “They have some good scientists and lots of money to buy good equipment”. Pontecorvo advised Iran to build Polytechnics to train technicians to use that all that good equipment which unfrozen petrodollars bought from the West. As witness, Iran’s spectacular progress in missiles and other technology.
I am sure Russian scientists and technicians will continue to do the same with all those Euro / $Dollars that will now be under under Russian control.
Well, of course the conversion is aimed at bypassing the illegal sanctions. That is the whole point, you EU morons! If you don’t like it, you should not have imposed sanctions – or rather UCM’s since only UN sanctions are legal sanctions – in the first place. Instead you should have thanked Russia for finally tackling the serious Nazi problem spreading in Europe again.
Russia should simply stop all exports to the EU during the month of May, on a trial basis, just for the EU to see how things turn out ;)
How many liquefied gas ships does it take to fill the EU’s gas tanks before the next winter? If I were Russia, I would not send any gas anymore. Send it to China instead. Exports to China have already increased by 60% I read somewhere today. And once the Siberia 2 pipeline is finished, Russia will send to China gas from the very same Yamal fields whose gas used to go to Europe before.
Soon, the contracts regulating the passage of Russian gas through Ukraine will run out. I wonder what will happen…
“Russia should simply stop all exports to the EU during the month of May, on a trial basis, just for the EU to see how things turn out ;)”
I suggested exactly this weeks ago . . .
How about on May 9 Moscow Time , Victory day. One day should do it!
Great idea, May 9!
Great PR, too—attention getter.
2 weeks ago the U$ importation of Russian gas went up 43%. Do they pay in Rubles?
Yes. Russia should air these facts in the Public Domain. We don’t need to know prices, quantities but just an update like with their SMO. We have ceased delivering to XYZ but still deliver to ABC who comply with our terms & conditions.
I promised to shoot myself in the face if Russia was still selling anything to America.
It would take a special kind of bitch to sell products to countries freezing your assets though.
Janet Yellen´s warning to the EU is coming true.
Apparently, less means much more…
Russia would deliver less barrels but at a much higher market price.
Or, add a temporary 25% “seizure” tax premium (“Asset Recovery Fee” as R.Robertson suggested) until all the $ 630+ billions seized are made up for.
“Russia’s oil revenues expected to soar”
Regardless of what lawyer states what, Buying anything in any part of the world with Euros and then clawing it back because you think your punishing a Russia is a breach of contract. You cannot have a product for nothing because a country thinks so.
Possession is nine tenths of the law. ask the countries that Russia cut off already and those that decided to pay in robles to cut off payments are going to do. Brussels be Damned they will not go cold or have to cut back on anything.
Reminds going backwards to feudalism once again let them eat cake.
All this is a bonanza for organized crime–the power that dare not speak its name. An increasing amount of global GDP goes to criminal syndicates of one kind or another. This will be yet another wonderful source of income for various cartels–as with all “illegal” activities and cheating on sanctions there are always ways out, bribes to be given and taken and the great American juggling of paperwork acts which my country is the master of. Gas & oil will flow to Europe, the Russians will supply it and the middlemen will get their vigorish. The political class is usually subject to business all the rest is noise to deceive and manipulate the public.
Every Gazprom contract has a force majeure section, and one of the articles is “sanctions.” And, another is war.
Force majeure, Gazprom standard clause:
15 (b) war, threat of or preparation for war, armed conflict, imposition of sanctions, embargo, breaking off of diplomatic relations or similar actions;
@ Harry Law
What a storm in tea cup!!!
Thank you for the link, which confirms what I was absolutely sure of when we discussed this topic on a previous thread: that the terms of the contract for supplying gas would be subject to the usual ‘Acts of God’ (force majeure) events. In some jurisdictions it is a presumption of all contractual obligations even if not explicitly stated in the contracts.
In this case a law was passed by a sovereign state that payments shall be made in a certain currency, independently of the wish of the parties, therefore triggering the necessary alteration to the method of payment. If the payer objects to the new method of payment he has the power to cancel/rescind/terminate/protest and bring an action in a competent forum for a remedy including an order on the supplier to complete the contract.
So, there is a legal mechanism to resolve the dispute in addition to what a dissatisfied purchaser would normally do: unilaterally terminate the contract, that is, stop importing the gas.
Turn off the spigots President Putin
it is Russia’s gas
no more grain/fetilizer/minerals to countries that supplied even one bullet to the Nazis.
Any previous ‘deals’ are now null and void.
not mentioning the titanium alloy parts crucial for Boeing manufacturing its commercial jets and military aircraft, and even worse, US relies on Russia and its allies Kazakhstan and Uzbekistan for roughly half of the uranium powering its nuclear plants…
In every town centre in England you have your fruit stall venders.
Get your apples, bananas, plums and pears £1 a pound. At days end they’ll knock down the prices to get rid of what’s left over before shutting the stall. Unsold = Waste.
Even these street urchins could comprehend the dynamics of Russia’s Offer.
Existing Gas contracts between Russia are suspended forthwith, ‘force majeure’ due to the outbreak of war; secondly economic sanctions imposed by the EU also nullifies these contracts. END OF. No more sweetheart deals.
Russia has made an Offer, issued contracts. It’s now up to the EU to Accept/Decline after Consideration.
as to the connection of Russian gas and the various military applications of it: the same Nitrogen(ammonia) based processes used to synthetize fertilizers are used to produce the largest volume of mil. explosives – often in the same factories.
Oh yes Buratino, like you say, “for one”…
Militarily, the impact is very broad.
No readily available fuels of the right type (carefull) means no deployment which means pretty much stuck.
No logistics, no food, no supplies, no heat.
By the way, most people think of feeding a chemical plant or a refinery as if they were feeding their dog.
It´s far more complicated than that…
First a new Russian Tax code applying to Rublegas,
Putin approved amendments to simplify the registration of foreign companies in the Russian Federation
and now a new Edict :
Putin signs decree on Russia’s new tit-for-tat sanctions
The document prohibits fulfilling obligations and concluding deals with foreign individuals and legal entities under the retaliatory restrictive measures as well as exporting raw materials and products from Russia in the interests of these individuals
The Plot definitely thickens, and that in 1 week!
Russia is absolutely right to demand rubles in payment for gas and oil, as the initial conditions of the contract with the Europeans were changed by the Europeans themselves by imposing sanctions and stealing Russia’s money. “Rebus sic stantibus”, means “things/conditions kept like this”, so Russia is no longer bound by the original dollar or euro payment pact! Боже, храни Россию
” Hungary Will Not Support Sanctions on Russian Oil and Gas Shipments ”
German chancellor is ‘offended liverwurst’ according to the Ukrainian ambassador in Germany.
EU threatens Russia with fresh SWIFT restrictions 6th. package of sanctions on its way.
“Let´s recall that these transferred euros would not be physical and, therefore, practically untraceable bills. Instead, these are very distinct digital liabilities of European banks which can be nullified at will through revocation or claw-back anytime in the future either applied on Russian holders and/or third parties at whichever domain or legal monetary jurisdiction these euros may lie at…”
They are doing this to a nation, but you can be assured that when the Digital USD roll out, the US Gov will never cancel you the same way because you didn´t towed the party line…
ExxonMobil declares Russia “force majeure”
Periodically following the comments for most of the yesterday. Honestly surprised that everyone’s tiptoeing around the solution that is stupidly obvious – at least to me.
If I have it right, the problems are:
1. How to prevent a nation from unilaterally clawing back funds after product has been delivered to
them? Especially if one party of the trade is determined (hellbent) to steal from the other party even at the cost of the 1st party’s destruction.
2. How do you prevent one powerful party in a multiparty trade system from selectively disrupting the settlement layer of other(s) for it’s own benefit.
3. How does one nation protect it’s currency from harmful currency
manipulation by other nations?
4. How does a nation protect against a reserve currency from being inflated for the issuers benefit?
5. How does a nation prevent payment from being physically interdicted in an unfriendly jurisdiction through theft (via armed? And how to insure fungibility to avoid discrimination of transactions by unfriendly nations?
A. ‘X’ must have the property of not being confiscatible. Although they have the same outcome, clawback and confiscation are NOT the same thing. A ‘hard’ currency must defend against both.
B. ‘X’ must be extremely hard if not practically impossible to inflate the supply. Impossible is better.
C. Ideally ‘X’ must have the backing of something dear. Trust? Not so good – we see where that got us. ‘Life force’ in the form of labor? Better – but is that the best representation? Energy? Probably the best and the most fundamental representation work. Or the ability to do work (physics).
D. The solution must have versatility. As a payment system, as store of value, as a reserve currency, settlement layer, etc. All, and at once is better.
E. The solution must be easy to send very quickly whether as a trillion units or one-trillionth of a unit. Also easy to store by taking little if any space. It and the transaction history must not degrade or rot – until after the end of time.
F. The veracity of the transaction must have separation from the identities of the parties involved – unless all parties consent. In other words, veracity should have nothing to do with identity.
G. Above all, it must be trustless. As in, the transaction and the mechanisms behind it doesn’t depend on prior trust between parties. There must be transparency of the transactions, where completed transaction history is immutable (solves A). The transaction history is forever. Also the proof of a valid transaction verifiable by anyone – quickly. For practical purposes, that suggests ‘X’ is based on high level maths.
May have left something out, but you get the idea.
So, tada: Bitcoin or a *hard* decentralized blockchain equivalent. The key word is – ‘decentralized’. Makes ALL the difference in the world. Following links are quick grabs and the last two are for laymen ( I take no responsibility)
I’ve always thought bitcoin was more suited for use as a final settlement layer between nations (several hundred billions per transaction) and less suited for normal in-store small transactions (under 20 USD). Bitcoin is able to be used in both examples, but as a practical matter (time) it does one a lot better than the other.
Russia also has a competitive advantage that no one else enjoys because of the physics of ‘mining’ cryptocurrency that is based on a proof-of-work concept. The ideal conditions are access to vast amounts of ‘free’ energy or cheap energy readily convertible to electricity (still a fraction as much as maintenance of a fiat financial system), very cold climate (to save on the bill for the cooling of the CPU’s), and a high speed internet. Hint: I understand that Rosatom has pioneered a portable nuclear reactor.
No central bank digital currencies (CBDC’s) need apply since the Schrodinger properties are inherent – a desired feature and even more easily (a lot more easily) weaponizable than the fiat systems we have now. I’d find it a damn shame if, after the winning grinding battle against enslavement by the the west, Russia instead loses the war by enslaving itself – from within – via a central bank digital currency.
Whether Bank-of-Russia-forged shackles or the western-forged shackles, CBDC’s are still shackles. Can fully understand why a central banks and governmenat are at best wary of the concept of decentralized peer-to-peer transaction system. Any head of a central bank would consider that a threat to it’s existence and tax collection would be another issue. Up to Russia to determine what’s in their best interest, but I hope they navigate their crisis wisely.
North East, yes CBDCs are also shackles, agreed.
But when talking about the import/export business means we are dealing with the governments of nation-states. If it were amongst private individuals for very low sums I may entertain the case (maybe)
But it is not the case, these are nation states, so forget about cryptos.
Why so you may ask ?
As such, nation-states do not have any cryptocurrencies of any type saved up of their own, so they cannot play the crypto game. Furthermore, the only “money” acknowledged by nation-states is their own “money” or what they say “money” is so they can tax it. Tax tax tax. If not taxable money the nation-state cannot collect taxes. If not “printable” at their own will the nation-state cannot dispose more of “it” (money). Remember, the only two things that we can be absolutely sure is death and taxes. So North East cryptos are out.
After all your detailed description I thought you were going to for gold, but you didn´t.
methinx 10 or mabbe 5 years down the line it might have been A solution, but as of yet…
I can just envision the appreciation of Bitcoin if Russia announces in the future, that oh, btw, we take bitcoin for…stuff.
Might be the kick btc needed for the masses sympathetic both to it and Russia.