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.
