China openly and officially backs Russia

Well, now we have it from the most official source possible: Foreign Minister Wang Yi who declared on Monday. “If the Russian side needs it, we will provide necessary assistance within our capacity".  Considering the US rhetoric and imperial mindset which proclaims that "you are either with us or against us" it is pretty clear what such a declaration really means: China is putting the US on notice that in the current economic war Russia will have the full backing of China.

The Saker 

The biggest threat for Russia and for Putin

Putin's recent speech to the Federal Assembly contained two part: a foreign policy part which was nothing short of historical, and an internal economics part which was very disappointing to say the least.  In fact, I would say that it was outright frightening.  I won't post the full text here, but you can consult if for yourself by clicking here.  But here is my summary of Putin's message:

We will make every effort to aid the Russian business community, we will also make every effort to return much of the Russian money hidden abroad in offshore accounts, and we will create stability and predictability.  All this is fine and dandy, except for what was not said.

• Putin did not denounce the work of the Russian Central Bank or its Chairwoman.
• Putin did not promise to sell US bonds and bring Russian money back home.
• Putin did not sack a single Russian official for incompetence or, even less so, sabotage 
• Putin did not announce a major change in the status of the Ruble, no "golden Ruble" for example.
• Putin did not reject the western economic model.
• Putin announce no reform or taking over by the state of the Russian Central Bank.
• Most importantly, Putin did not announce any major change in economic policy

I have no way of knowing whether Putin sincerely believe in the western economic dogmas, of whether he has no other option than to pretend that he does, but the outcome is the same: Putin rejects the western political model while apparently still fully endorsing its economic model.

I have just listening to an interview of Mikhail Khazin and Evegnii Feodorov on the Russian New Service Radio and both of them are now openly sounding the alarm.  Khazin is demanding that the Director of the Russian Central Bank be fired and arrested, while Feodorov wants the Central Bank to be completely shut down.  I agree with both.

The Russian economy in general and the Ruble especially are both under direct attack, not only by official sanctions, but also by speculative operations.  The price of oil is collapsing probably under a combination of objective reasons (the world recession) and deliberate US operations, yet Putin is not changing economic course in a fundamental way and he is even complimenting the Central Bank for its activities.  Does that not remind you of something?

Personally, this reminds me of what happened during the last months of Anatolii Serdiukov when the Russian military was hit by one scandal after another, yet Putin continued to praise Serduikov and his work.  Eventually, of course, Serdiukov was sacked and replaced by the truly outstanding Shoigu,  but it took a lot of time and efforts to finally get him sacked (and even today Serdiukov has still not been sentenced by any court for his numerous criminal activities).

Does that mean that Putin is hesitant, weak or confused?

I don't think so.  I think that this shows that one of the most difficult and dangerous tasks for Putin is to get rid of the saboteurs in the top echelons of power.  The same Mikhail Khazin has recently declared that only now did the "Eurasian Sovereignist" group's power roughly match the one of the pro-US "Atlantic Integrationists" (though he did not quite use these expressions which are mine).

Hopefully Putin is setting up a Serdiukov-like sacking of Nabiulina, but this is not sure at all.  The pressure is mounting for him to take dramatic action and to finally begin to de-couple the Russian economy from the western economic orthodoxy known as the Washington Concensus, but there is also a lot of resistance.

This is right now by far the biggest threat to Russia and Putin: the 5th column of saboteurs in the top echelons of power, especially the government. As long as these people will remain in power Russia will continue to remain weak and fragile and very susceptible to western economic warfare.

The Saker

Russia's Response To European Capital Sanctions In One Word

by Tyler Durden for Zero Hedge

While the West continues to press the "Russia is increasingly isolated" meme, it appears - as we noted ironically previously, that Vladimir Putin is finding plenty of friends... most notably China. While threats of 'asymmetric' retaliation over European sanctions may have been enough to worry Europe's leaders, the slew of news overnight regarding increased cooperation between China and Russia is likely more damaging to Western strategy (and egos).

Not so isolated...



h/t @PersonOfAwesome

As overnight news shows... China and Russia are ramping up their cooperation...

First, as Reuters reports, Russia and China pledged on Tuesday to settle more bilateral trade in rouble and yuan and to enhance cooperation between banks, Russia's First Deputy Prime Minister Igor Shuvalov said, as Moscow seeks to cushion the effects of Western economic sanctions...

Russia's First Deputy Prime Minister Igor Shuvalov said told reporters in Beijing that he had agreed an economic cooperation pact with China's Vice Premier Zhang Gaoli that included boosting use of the rouble and yuan for trade transactions.

The pact also lets Russian banks set up accounts with Chinese banks, and makes provisions for Russian companies to seek loans from Chinese firms.

"We are not going to break old contracts, most of which were denominated in dollars," Shuvalov said through an interpreter.
"But, we're going to encourage companies from the two countries to settle more in local currencies, to avoid using a currency from a third country."

* * *

So that blows the oil/gas funding sanctions plan out of the water as Russian firms will merely fund via China.

* * *

Second, as RBTH reports, The Chinese company CNPC is to get up to 10 percent in Russia’s Vankor oilfields, Rosneft’s biggest production asset...

Russian President Vladimir Putin announced the plan at the construction launch of the Power of Siberia gas pipeline on 1 September, business newspaper Kommersant reported.

“The plan will secure state support, and we will encourage your participation,” said Putin to the members of the Chinese delegation.

“There are no restrictions for our Chinese friends,” he said. According to Kommersant, the Chinese state company CNPC could get up to 10 percent in Vankorneft for approximately $1 billion.

* * *

So that knocks another leg out of the sanctions stool as investment in energy infrastructure and technology is covered.

* * *

And finally, as ITAR-TASS reports, Russian Railways are set to get RUB400 Billion investment from Chinese investors...

Chinese investors have expressed their willingness to invest 400 billion rubles. in the construction of high-speed highway Moscow - Kazan. Itar-Tass said the first vice-president of Russian Railways Alexander Misharin.

"Even today, the Chinese banks, China Development Bank in the first place, ready to raise the funding needed for this project, we are talking about the order of 400 billion rubles." - Said Misharin, noting that the final decision on the construction of high-speed rail is in Russian government.

Misharin emphasized that the stated funds are sufficient to "provide funding for the project in terms of funds raised."

* * *
But apart from that, yeah Russia is isolated...