Posts Tagged ‘Vladimir Putin’

 

Will the rise of China mean the fall of America? In a word, yes. Although decline might be more accurate.

Why do I think this? Because China is about to launch the PetroYuan and when it does the demand for dollars and for dollar denominated debt will shrink. When it does, I question whether the world will be so sanguine about the level of debt that America carries. If that happens then the value of the dollar is in question.

At the moment no matter what level of debt America carries, other countries need dollars. Dollars to pay for oil, since oil is traded in dollars. Dollars for their financial system so their banks can settle contracts for goods and services traded in dollars.

But over the last few years China has been systematically putting in place everything it needs to launch the Yuan as not only a rival to the dollar in trading and settling oil contracts but as a rival to the dollar as the world’s reserve currency. At the moment the only rival to the dollar is the Euro. I think it fair to say the relationship between the two currencies and their issuing powers, has been… ‘delicate’. The news that Sadam Hussein was going to start trading his oil in Euros came just a few months before America and its lap dog GB, decided Sadam was a threat to world peace and went to war with him. Something similar happened to Colonel Qaddafi.

Under Qaddafi Libya’s currency was backed by the country’s large holdings of gold and silver. This had allowed Qaddafi to finance, for example, the entire construction of the Great Man Made River without going to Western banks for a single loan. Libya was debt free and owned its own resources and infrastructure. Obviously a very unsatisfactory state of affairs for any third world country to get ideas so far above their station. Worse, he had a very public plan which he had laid before the Pan African Congress, to create a pan African currency backed by gold and silver to be launched by 2023. It was not too long before Hilary Clinton arrived in a freshly bombed Libya and crowed to CBS, “We came, we saw, he died.” Charming woman. I was only surprised she didn’t say “Mission accomplished.”

Libya and Iraq were small enough, that their pretensions to threaten the hegemony of the dollar and have the jumped up arrogance to think they could trade their own resources in their own currency or a currency of their choice, could be dealt with by shock, awe and death. I think China might not be so easily dealt with.

China’s plans for the replacement of the dollar and the positioning of their own currency are very like Libya’s. China too has had the idea to back its new settlement and perhaps one day its reserve currency, with gold. And China is not alone. Russia has been a part of the BRIC group with an interest in the plan. Russia, like China has been a very large buyer of gold.

 

As reported just a few weeks ago by the Irish Independent,

…the Bank of Russia has more than doubled the pace of gold purchases, bringing the share of bullion in its international reserves to the highest of Mr Putin’s 17 years in power, according to World Gold Council data.

In the second quarter alone, it accounted for 38pc of all gold purchased by central banks.

The article goes on to explain how purchasing gold has meant that Russia has not had to buy foreign currencies. For foreign currencies think Dollars.

The gold rush is allowing the Bank of Russia to continue growing its reserves while abstaining from purchases of foreign currency for more than two years.

China and Russia have very large holdings of gold between them. China actually produces 12% of the world’s gold and keeps much if not most of what it produces. The new Petro Yuan will be backed by Gold, Something the IMF decades ago, said no paper currency should have. A clear break with the Bretton Woods Dollar-world agreement.

Who will use this new currency? Over the past few years a network of bilateral agreements has been created around China and Russia. Back in 2012, in an article called A new Reserve currency to challenge the dollar – What’s really going on in The Straits of Hormuz, I pointed out that not only had China and Russia agreed to bypass the dollar and trade direct in their own currencies but that,

the India Times reported that India was talking to Iran about moving out of dollar settlements so as to be able to buy Iranian oil despite a US embargo. India said it was discussing settling in Gold. Remember, India has just signed a settlement agreement with China to use the Yuan.

Remember also, Russia recently eclipsed Saudi as the number one supplier of China’s oil. And if I remember correctly Angola was number two. Promoting perhaps the recent state visit this year of Saudi’s King Salman to see Mr Putin. As The Guardian put it,

 

Saudi king’s visit to Russia heralds shift in global power structure

King Salman agrees new areas of cooperation with Vladimir Putin on first official trip by Saudi monarch to Moscow

In addition Japan and China have agreed to trade in Yuan, by-passing the dollar, as has Iran. They are now trading their oil in Yuan or euros, but not the dollar. Ever wondered why Iran is ‘the axis of evil? It’s because they don’t use the dollar.

Then came the news in 2015 that Qatar had opened the first and so far only financial centre in the Middle East, for trading and clearing oil, gas and anything else, in Yuan. China’s ICBC is the central banking concern in the hub, allowing any Middle Eastern country to trade oil and gas and settle in Yuan. In the previous few years China’s trade with Qatar had tripled. And now, guess what? Qatar has been declared by the US to be a sponsor of terrorism and US allies in the gulf , led by Saudi, have begun to blockade Qatar’s trade. Hmm. Any pattern emerging?

The problem for the US is how much debt is too much for any country or business? Clearly it is not any magic figure or particular debt to GDP ratio. America and China carry huge debts and no one has balked…yet. How much debt you can carry is a function of debt to the estimated future productive capacity of the country in question. That creates the demand for its currency and the demand for the currency creates a market and demand for debt denominated in that currency.

At the moment the US can carry a huge debt load because everyone needs dollars to trade oil. And China can carry a huge debt because everyone needs yuan to buy the goods whose production was off-shored to China by our globalist leadership.

But what happens to demand for Dollars and dollar debt when, not if, oil starts to be traded less and less in dollars? I suggest the world’s appetite will diminish quite quickly. As it does so, the world will start to see US debt in a different light. While the opposite will happen to China. And this is what interests me and makes me think China has a plan.

At the moment China also has a very large debt load. I have argued that the Central Chinese authorities have not got the control they would like to have over the growth of that debt. Of course I have no inside information. But the on again/ off again attempts of the Chinese central authorities to deflate its housing-debt bubble and its quite out-of-control shadow banking lending suggests, to me at least, that the central authorities have not and can not control the level of debt being accumulated by provincial governments, their off-book, arm’s length financial vehicles, regional banks, property developers and the vast, largely unregulated trade in wealth management vehicles.

Chinese debt already overflowed once back in the 90’s. Four companies were created to take the debt off the banks’ books and trade it away. Decades later these companies still exist and still have the bad debts from the 90’s hanging around. You will see headlines telling you how those companies have been doing well, making money. Suggesting their trade in bad chinese debt has been going well. The reality, if you dig a little deeper, is that those companies lobbied for and were given permission to engage in ‘proper’ banking activities. Which meant they began to make their own loans – to property developers. As the property bubble continued to inflate over the last decade and a half they have ridden it and that, not trading the old bad-debt, is why they have made a profit. But now those ‘bad’ banks, have themselves started to find some of their own loans going bad. In any hard-landing or financial paroxysm the ‘bad-banks’ will need to be rescued by a new bad banks. Bad banks for bad banks is not really a solution.

I think the Chinese authorities can see this. It doesn’t take a genius after all. What can they do? Well if you already have a huge debt problem and know many of them are going to go bad and will do so overnight in the event of another global banking crisis, and know you are not able to reign it all in, then a very tempting alternative would be to get the world to agree that you can carry more debt – a lot more. And what could help convince the world? Well if your currency could become far more sought after, that would be peachy.

And so I think the long standing Chinese goal of making the yuan

an important international currency which China, and Hong Kong in particular, have been working towards for years, has now taken on a far greater import and urgency. I think the Chinese central government’s best way of avoiding a politically disastrous domestic debt implosion is to get the Yuan to be used as a settlement currency for oil and not long after that to become a de facto rival to the dollar as the world’s reserve currency.

Recently I argued at length with a military analyst who disagreed that China would risk such a break with America. Too dangerous he felt. China, he pointed out has such huge holdings of American debt. He argued that the Chinese would prefer to work alongside the dollar. I feel that even if the Chinese would prefer to ‘work alongside’ the dollar, this will prove very difficult if not impossible. Once a flow of countries and trade moves away from the dollar there will be a momentum the Chinese will not be in control of. Cooperation between dollar and Yuan as clearing and reserve currency, especially for oil, will be like trying to dock two super-tankers in a high sea. In theory possible. In practice – not going to work.

As for Chinese holdings of US debt – I think the advantages of avoiding a domestic debt implosion and projecting the Yuan to world centre stage, will outweigh the losses. I also think, If I were the Chinese, I would imagine a scenario where the dollar does begin to look vulnerable. Its value begins to be questioned, nations holding dollars and dollar debt will feel America’s profligate indebtedness is a global danger. They will blame America. How wonderful then, for China to arrive and say to a worried world, on the edge of a huge crisis, “Fear not, we have thought ahead and can offer you the use of a new currency – one backed by GOLD not paper debts. We are here to save you. To offer a ride on a sound ship as an alternative to the rotten and leaking ship you have been riding on.” China will be able to position their rise not as an aggressive act, not as trying to destabilise the world, but as trying to save it, from the collapse of an internally divided, corrupt, aggressive and indebted America.

America’s decline will be both financial and political. Financial due to the recalibration of what the world thinks of America’s debt load, and therefore their confidence in and need for the dollar. Political, because America

has got used to being able to enforce its foreign policy through sanctions and embargoes. But once oil and other goods and the nations trading in them, no longer need the dollar for their trade, and do not have to use US clearing or custodial banks, then this power evaporates.

Try to imagine the shift in power when Wall Street’s banks are no longer guaranteed top position as the world’s custodial banks and Manhattan’s Southern District Court (Wall Street’s court) is no longer in a position to dictate to whole nations via decisions upon Wall Street Custodial banks, what debts those nations and their custodial banks must pay and to whom. The whole edifice of Bilateral Investment Treaties and the trade agreements they sit inside, depends for enforcement upon the US banks being the custodial banks and the Southern District court’s rulings being able to tell those banks what they must do. Take that power away, which will happen if the dollar is no longer pre-emininent, and America will no longer be able to enforce its foreign policy or world view via economic sanction.

I think the main US banks will be positioning themselves to try to bridge this decline by having a major presence in Hong Kong. They are all already there but will be working to be part of the new Yuan-world of trade and clearing.

Of course this is speculation. But it seems to me the underlying evidence of the previous decade makes it worth thinking about.

If I am in any way correct then I think other things follow.

I think the House of Saud knows it’s future is in question. I have written a lot about how I see Qatar rising to rival Saudi. Qatar not Saudi has the Yuan clearing house. Saudi is late to the party. Can Saudi risk being seen to move away from its

traditional ally, America? If it does, too quickly, and signs yuan trade deals it risks falling as soon as Americal turns its back. If it doesn’t move quickly enough it risks being completely eclipsed by Qatar, having to go to Qatar cap in hand to trade its oil with Russia and China.

I see the political changes within the House of Saud as signs of the internal struggles to decide which way to go. I personally think the House of Saud will fall.

I also think the position of Israel under its present leadership is also very fragile. Israel needs Saudi. While they may seem to be on opposite sides, in many ways they are on the same side. If the House of Saud falls or changes allegiances from America to Russia/China then Israel will become even more isolated than it is. And of course if America is eclipsed and does enter a period of decline, then Israel will go with it.

If any of the above is near the mark, will it mean the end of America? Of course not. American’s will still work and sleep and raise their children like everyone else. But the pre-eminence of the dollar and American finance will decline as the stock of dollar denominated bonds and debt agreements expires, and with it the power and wealth of many of America’s elite. How that decline will sit alongside America’s still overwhelming military power I don’t know.

Of course what I have suggested above is merely speculation but personally I think another debt crisis will happen, because never ending QE and Central Bank debt buying cannot go one for ever, and what China does in the next few months could very well destabilise the whole unstable system. Many people will suffer and lives will be blighted. But I wonder if, when we all look back from a decade or a generation after, if we won’t think it lucky the crisis did finally come and the system we have been slaving under since 2007 as well as those who have forced it upon us for their own enrichment, were called to account.

It is difficult to accept that such historic changes could occur. But history has not ended despite what some have claimed.

Rumours of History’s end have been, in my opinion, greatly exaggerated. History is very much alive and happening to us, now. We are, as the Chinese saying goes, living in interesting times.

 

Advertisements

A brief perspective on the geopolitical strategic posturing and amalgamation occurring in real time. Political commentary by Chris Anthony.

 

 

The geopolitical reality in the Middle East is changing dramatically.

The impact of the Arab Spring, the retraction of the U.S. military, and diminishing economic influence on the Arab world – as displayed during the Obama Administration – are facts.

The emergence of a Russian-Iranian-Turkish triangle is the new reality. The Western hegemony in the MENA region has ended, and not in a shy way, but with a long list of military conflicts and destabilization.

The first visit of a Saudi king to Russia shows the growing power of Russia in the Middle East. It also shows that not only Arab countries such as Saudi Arabia and the UAE, but also Egypt and Libya, are more likely to consider Moscow as a strategic ally.

King Salman’s visit to Moscow could herald not only several multibillion business deals, but could be the first real step towards a new regional geopolitical and military alliance between OPEC leader Saudi Arabia and Russia.

This cooperation will not only have severe consequences for Western interests but also could partly undermine or reshape the position of OPEC at the same time.

Russian president Vladimir Putin is currently hosting a large Saudi delegation, led by King Salman and supported by Saudi minister of energy Khalid Al Falih.

Moscow’s open attitude to Saudi Arabia—a lifetime Washington ally and strong opponent of the growing Iran power projections in the Arab world—show that Putin understands the current pivotal changes in the Middle East.

U.S. allies Saudi Arabia, Egypt, Turkey and even the UAE, have shown an increased eagerness to develop military and economic relations with Moscow, even if this means dealing with a global power currently supporting their archenemy Iran. Analysts wonder where the current visit of King Salman will really lead to, but all signs are on green for a straightforward Arab-Saudi support for a bigger Russian role in the region, and more in-depth cooperation in oil and gas markets.

In stark contrast to the difficult relationship of the West with the Arab world, Moscow seems to be playing the regional power game at a higher level. It can become an ally or friend to regional adversaries, such as Iran, Turkey, Egypt and now Saudi Arabia. Arab regimes are also willing to discuss cooperation with Russia, even though the country is supporting adversaries in the Syrian and Yemen conflicts and continues to supply arms to the Shi’a regime in Iran.

Investors can expect Russia and Saudi Arabia to sign a multitude of business deals, some of which have already been presented. Moscow and Riyadh will also discuss the still fledgling oil and gas markets, as both nations still heavily depend on hydrocarbon revenues. Arab analysts expect both sides to choose a bilateral strategy to keep oil prices from falling lower. Riyadh and Moscow have the same end goal: a stable oil and gas market, in which demand and supply keep each other in check to push price levels up, but without leaving enough breathing space for new market entrants such as U.S. shale.

Putin and Salman will also discuss the security situation in the Middle East, especially the ongoing Syrian civil war, Iran’s emerging power, and the Libya situation. Until now, the two have supported opposite sides, but Riyadh has realized that its ultimate goal, the removal of Syrian president Assad, is out of reach. To prevent a full-scale Shi’a triangle (Iran-Iraq-Syria-Lebanon), other options are now being sought to quell Tehran’s power surge. Moscow is key in this.

Putin’s unconditional support of the Iranian military onslaught in Iraq and Syria, combined with its support for Hezbollah in Lebanon or Houthis in Yemen, will be discussed and maybe tweaked to give Riyadh room to maneuver into the Russian influence sphere. The verdict on this isn’t yet out, but Riyadh’s move must be seen

in light of ongoing Moscow discussions with Egypt, Libya, Jordan and the UAE.

A growing positive Putin vibe in the Arab world is now clear. The strong leadership of Russia’s new Tsar has become a main point of interest for the (former pro-Western) Arab regimes. The U.S. and its European allies have only shown a diffuse political-military approach to the threats in the MENA region, while even destabilizing historically pro-Western Arab royalties and presidents. Putin’s friendship, however, is being presented as unconditional and long lasting.

Even though geopolitics and military operations in the Middle East now are making up most headlines, the Saudi-Russian rapprochement will also have economic consequences. Riyadh’s leadership of OPEC is still undisputed, as it has shown over the last several years. Saudi Arabia’s eagerness to counter the free-fall of oil prices has been successful, but a much bigger effort is required to bring prices back to a level of between $60-75 per barrel. Russia’s role—as the largest of non-OPEC producers—has been substantial, bringing in not only several emerging producers, but also by putting pressure on its allies Iran, Venezuela and Algeria.

The historically important Moscow-Riyadh cooperation in oil and gas is unprecedented. Without Russia’s support, overall compliance to the OPEC production cut agreement would have been very low, leading to even lower oil prices.

The Saudi-Russian rapprochement could, however, be seen as a threat by the West and OPEC itself. Western influence in the region has waned since the end of the 1990s, not only due to the peace dividend of NATO, but especially because OECD countries are moving away from oil. Saudi Arabia had to find new markets, which happened with China and India. The Saudi future is no longer based on Western customers or support, but lies in Asia and other emerging regions. The FSU region has also popped up on Saudi screens. Investment opportunities, combined with geopolitical support and military interests, are readily available in Russia and its satellite states.

For OPEC, the Moscow-Riyadh love affair could also mean a threat. Throughout OPEC’s history, Riyadh has been the main power broker in the oil cartel, pushing forward price and production strategies; most of the time this was done in close cooperation with all the other members, most of them Arab allies. This changed dramatically after Saudi Arabia and Russia agreed to cooperate in global oil markets. Through the emergence of this OPEC/ non-OPEC cooperation, Moscow and Riyadh have grown closer than expected. The two countries now decide the future of global oil markets before they discuss it with some of the other main players like UAE, Iran, Algeria and Nigeria. King Salman’s visit is seen as another step toward a more in-depth cooperation in oil and gas related issues.

Besides global oil market cooperation, Saudi Arabia is and will become more interested to invest in natural gas development, not only to have an interest in Russia’s gas future but also to bring in Russian technology, investment and LNG to the Kingdom.

At the same time, media sources are stating that Saudi Arabia is NOT asking Russia to take part in the long-awaited Aramco IPO in 2018. Russian individual investors and financial institutions, however, are expected to take an interest.

Putin understands not only Russian chess tactics but also the Arab “Tawila” approach. Saudi Crown Prince Mohammad bin Salman already will prepare his Tawila strategy, putting enough stones on the table to ensure his successful end game. MBS, currently de-facto ruler of the Kingdom, is targeting a full house—Russian cooperation in energy, defense and investments—while softening Moscow’s 100% percent support of the Shi’a archenemy Iran.

For both sides, Moscow and Riyadh, the current constellation presents a win-win situation. Moscow can reach its ultimate goal in the Middle East: to become the main power broker and knock the US from the pedestal. For Riyadh, the option to counter the Iranian threat, while also bolstering its own economy and hydrocarbon future, is now within reach.

King Salman’s trip could go down in history as the point of no return for the West. Pictures of Russian President Vladimir Putin and King Salman of Saudi Arabia could replace historic pictures of King Saud and U.S. President Roosevelt (Bitter Lake, 1945). In a few years, King-to-be Crown Prince Mohammad bin Salman might tell his children that this was one of the pillars that changed not only the Middle East but also supported his Vision 2030 plan of becoming a bridge between the old (West) and the new (Russia-Asia).

 

In an interview with RT in 2015, Syrian President Bashar al-Assad uttered perhaps one of his most intriguing statements since the Syrian conflict erupted in 2011. Assad stated:

“Western propaganda has, from the very beginning, been about the cause of the problem being the president. Why? Because they want to portray the whole problem in Syria lies in one individual; and consequently the natural reaction for many people is that, if the problem lies in one individual, that individual should not be more important than the entire homeland. So let that individual go and things will be alright. That’s how they oversimplify things in the West.” [emphasis added]

He continued:

“Notice what happened in the Western media since the coup in Ukraine. What happened? President Putin was transformed from a friend of the West to a foe and, yet again, he was characterized as a tsar…This is Western propaganda. They say that if the president went things will get better.” [emphasis added]

Putting aside Assad’s vast and extensive list of war crimes and crimes against humanity, Assad highlighted one of the major flaws in Western thinking regarding America’s hostile policies toward a number of independent states.

Just look at the current to-and-fro-ing between North Korea and the United States to gather an accurate picture of what is being referred to here. The problem of North Korea is consistently portrayed in the media as caused by one person (current leader Kim Jong-un), a narrative that ultimately ignores the role America and its allies have played in this current crisis. As Anti-Media previously highlighted:

 

“…the problem [North Korean crisis] is constantly framed as one caused by North Korea alone, not the United States. ‘How to Deal With North Korea,’ the Atlantic explains. ‘What Can Trump Do About North Korea?’ the New York Times asks. ‘What Can Possibly Be Done About North Korea,’ the Huffington Post queries. Time provides 6 experts discussing ‘How We Can Solve the Problem’ (of North Korea). ‘North Korea – what can the outside world do?’ asks the BBC.”

What the media is really advancing here – particularly when one talks about a military option as a response to dealing with North Korea’s rogue actions – is the notion that if the U.S. could only take out Kim Jong-un, the problem of North Korea would disappear.

Would the death of one man rid every single North Korean of the hostility and hatred they harbor toward the United States when many know full well that in the early 1950s the U.S. bombed North Korea so relentlessly they eventually ran out of targets to hit — that the U.S. military killed off at least 20 percent of the civilian population?

If Kim Jong-un is removed, will North Koreans suddenly forget that nearly every North Korean alive today has a family relative that was killed by the United States in the 1950s?

In the simple corporate media narrative, yes they will. Killing that one person and removing them from office will not only save the country they brutalize but will also provide security and stability for the rest of the world.

Never mind that prior to the U.S.-NATO onslaught of Libya in 2011, Libya had the highest standard of living in the African continent. The Times once admitted that its healthcare system was the “envy of the region.” Now, the country has completely collapsed, with well over two million children out of school, countless migrants drowning in its waters, extremism running unchecked and unchallenged, and traders openly selling slaves like a commodity.

Let’s suppose every single accusation against Libyan leader Muammar Gaddafi was true (they weren’t); how can it be said that destroying a country’s infrastructure and assassinating its leader in flagrant disregard of international law is a realistic solution to any problem? If you oppose Donald Trump, would a Russian-led military intervention solve your problems with the country he rules over?

Forget what you think you know about Saddam Hussein, Muammar Gaddafi, Kim Jong-un, Bashar al-Assad, Vladimir Putin, and Venezuela’s Nicolas Maduro – the narrative Western governments and their media mouthpieces have promulgated for the last few decades remains completely nonsensical. You can’t solve Syria’s or Venezuela’s problems by removing their current leaders, especially if you attempt to do it by force. Anyone who claims this is possible is lying to you and is also too naïve and indolent to bother researching the current situations in Afghanistan, Yemen, Libya, Iraq – to name a few.

The fact that the U.S. evidently doesn’t want to solve any problems at all – that it merely seeks to overthrow leaders that don’t succumb to its wishes – is a topic for a separate article but is certainly worth mentioning here as well.

The same can ultimately be said of Donald Trump. Since his election victory, many celebrities, media pundits, and members of the intelligence community have sought to unseat and discredit him. Yet Donald Trump is merely a horrifying symptom of America’s problems; to think he alone caused them and that by removing him from office the U.S. would suddenly become a safe-haven of freedom and liberty is nothing short of idiotic.

If you agree with the latter sentiment, you must also concede that the problems facing North Korea, Syria, Venezuela, and elsewhere could never be solved by the U.S. forcibly removing their leaders.

If Assad was removed from Syria, would extremism disappear or would it thrive in the political vacuum as it did in Iraq? Could Syria’s internal issues — which are much more extensive than the corporate media would have us believe — be solved by something as simple as removing its current leader? Can anyone name a country where this has been tried and tested as a true model for solving a sovereign nation’s internal crises? Anyone who truly believes a country’s problems can be solved in this facile way needs to do a bit more reading.

If you can recognize this dilemma, you can agree that it’s time for the media to completely undo the simplicity in its coverage of these issues and start reporting on the genuine diplomatic options that could be pursued, instead.

 

Confirming, and sending the clearest sign of his previously discussed pivot toward Russia and away from NATO and the West, on Tuesday President Recep Tayyip Erdogan announced that Turkey had signed a deal to purchase a Russian surface-to-air missile system, and paid the first installment. The deal cements Turkey’s recent rapprochement with Russia, despite differences over the war in Syria, the downing of a Russian fighter jet over Turkey in late 2015 and the assassination of a Russian ambassador earlier this year, and comes as Turkey’s ties with the United States and European Union have become strained to the point of breaking.

Although the missile purchase from Russia was made public several months ago, Erdogan’s announcement was the first confirmation that Turkey had transferred money to pay for the S-400 missile system.

“Signatures have been made for the purchase of S-400s from Russia,” Erdogan said in comments published in several newspapers on Tuesday. “A deposit has also been paid as far as I know.”

As the NYT writes, “the purchase of the missile system flies in the face of cooperation within the NATO alliance, which Turkey has belonged to since the early 1950s. NATO does not ban purchases of military hardware from manufacturers outside the American-led alliance, but it does discourage members from buying equipment not compatible with that used by other members.”

According to reports in the Russian media, Turkey is to get four batteries of S-400 launchers complete with targeting radar and control posts. Some aspects of the deal are reportedly to be finalized, but Russian officials said the contract furthers Russia’s geostrategic interests.

* * *

Predictably, the Pentagon promptly reiterated its concerns over the deal, which it said undermines inter-operability of weapons systems among NATO allies. “We have relayed our concerns to Turkish officials regarding the potential purchase of the S-400. A NATO inter-operable missile defense system remains the best option to defend Turkey from the full range of threats in its region,” spokesman Johnny Michael said in a statement.

A NATO official in Brussels where the alliance is headquartered, said that no NATO member currently operates the Russian missile system and that the alliance had not been informed about the details of the purchase by Turkey. “What matters for NATO is that the equipment allies acquire is able to operate together,” the official said, speaking on the condition of anonymity as required by alliance procedures. “Interoperability of allied armed forces is essential to NATO for the conduct of our operations.”

However, on Wednesday Turkish President Recep Tayyip Erdogan slammed the critics of Turkey’s deal with Russia, saying Ankara had no intention of waiting for the protection of its NATO allies.

“They have gone crazy because we made a deal for S-400s,” Erdogan said Wednesday in a speech to the ruling AKP mayors in Ankara, as cited by Hurriyet.

“What do you expect? Should we wait for you? We take care of ourselves in every security point. We are taking precautions and we will continue to do so,” the Turkish leader said.

Erdogan criticized the reluctance of US and Israel to authorize supply of combat drones to Turkey as another example of how Turkish security was sidelined by its allies.

“When they did give [drones], their repair and maintenance put us in a difficult position. Now [Turkey] has come to a point where it can produce its own unmanned, armed air vehicles. And now they are uncomfortable with that,” Erdogan added.

Erdogan also dismissed issues of interoperability, brand loyalties or the geopolitical optics of such a sale. “Nobody has the right to discuss the Turkish republic’s independence principles

or independent decisions about its defense industry,” the daily newspaper Hurriyet reported him as saying.

“We make the decisions about our own independence ourselves,” he said. “We are obliged to take safety and security measures in order to defend our country.”

As the NYT adds, Erdogan’s announcement — made to Turkish journalists aboard his presidential jet as he returned from Kazakhstan — appeared timed as a response to two judicial cases announced last week in the United States. One is against his presidential bodyguards, who are charged with assaulting protesters when Mr. Erdogan visited Washington this year. The other is against a group of Turks, including a former minister, accused of breaking United States sanctions against Iran. Erdogan has angrily criticized both cases.

* * *

The S-400 SAM is designed to detect, track and then destroy aircraft, drones or missiles. It’s Russia’s most advanced integrated air defense system, and can hit targets as far as 250 miles away. Russia has also agreed to sell them to China and India, both nations who are masters at reverse engineering. Most concerning for NATO, however is that the systems delivered to Turkey would not have a friend-or-foe identification system, which means they could be deployed against any threat without restriction.

Turkey has been weighing options for acquiring long-range SAMs for years. In 2013, Ankara surprised other NATO members by announcing that it was going to purchase the FD-2000 system from China, sparking criticism from Washington. Defense observers speculated that Turkey played the China card to put pressure on its allies and get better terms for buying a NATO-compatible SAM system, such as the US-made Patriot PAC-3. The Chinese deal stalled and was eventually scrapped, with Turkey reportedly unhappy over Beijing’s reluctance to hand over the technology behind the advanced system. Last year Ankara announced that it was in talks with Russia over a potential purchase of the S-400.

Turkey has other reasons for the missile purchase. It needs to cultivate good relations with Russia, and it also needs to build its own military defense, said Asli Aydintasbas, a fellow at the European Council on Foreign Relations. “Turkey wants the deal,” she said, “and Russia is only too happy to drive a wedge into the NATO alliance.”

While NATO’s collective defense should have been sufficient for Turkey – NATO deployed Patriot missiles there during a rise of tensions with Syria in the past – Erdogan lost trust in the West since last year’s failed “coup attempt”, which he slammed repeatedly as a Western plot to oust him, and appears determined to secure his own defense.

Furthermore, the transfer of technology from Russia is attractive to Turkey: Erdogan has spoken also of his frustration at having requests to the United States for drones turned down, and of his satisfaction that Turkey developed its own.

Notably, Erdogan’s announcement of the deal with Russia came after Germany said that it was suspending all major arms exports to Turkey because of the deteriorating human rights situation in the country and the increasingly strained ties. “We have put on hold all big requests that Turkey sent to us, and these are really not a few,” the German foreign minister, Sigmar Gabriel, said during a panel discussion in Berlin on Monday, according to Reuters.

While the purchase of Russian missiles will take cooperation between the two nations to a new level, but is not the first time that Turkey has bought military equipment from Russia. It turned to Moscow in the early 1990s to buy military helicopters and armored personnel carriers. Last year, Russia and Turkey reached an agreement to revive a suspended natural-gas pipeline project.

Meanwhile, as the US military-industrial complex has flourished in recent months following a spike in deals with Saudi Arabia, South Korea and other nations courtesy of rising geopolitical tensions, Russia has remained largely squeezed out of the arms market in Western and Eastern Europe, even in countries that once bought nearly all their weapons from the Soviet Union, has looked for years to NATO’S eastern flank as a promising market and the alliance’s weakest link. It has also sold weapons to Greece, another NATO member and to Cyprus, which is not a member of NATO but houses British military bases and effectively serves as an outpost of the alliance.

Meanwhile, as Turkey’s suspicions toward the West have grown, relations with Russia warmed, driven by the personal relationship between Erdogan and Vladimir Putin. Erdogan has expressed personal admiration for Putin, to the consternation of many European and American leaders, if not President Trump. Erdogan has also shown a preference for the Russian model, with its sense of restoring a lost empire, returning Turkey to a more independent place in the world and rejecting Western democracy.

At the same time, the fact that Turkey belongs to NATO has only increased Mr. Putin’s desire to forge strong relations with Mr. Erdogan despite their differences over the conflict in Syria.

Mr. Putin and myself are determined on this issue,” Erdogan told journalists about the missile deal.

 

In an unexpectedly strong diplomatic escalation, one day after China agreed to vote alongside the US (and Russia) during Monday’s United National Security Council vote in passing the watered down North Korea sanctions, the US warned that if China were to violate or fail to comply with the newly imposed sanctions against Kim’s regime, it could cut off Beijing’s access to both the US financial system as well as the “international dollar system.”

Speaking at CNBC’s Delivering Alpha conference on Tuesday, Steven Mnuchin said that China had agreed to “historic” North Korean sanctions during Monday’s United Nations vote. “We worked very closely with the U.N. I’m very pleased with the resolution that was just passed. This is some of the strongest items. We now have more tools in our toolbox, and we will continue to use them and put additional sanctions on North Korea until they stop this behavior.”

In response, Andrew Ross Sorkin countered that “we haven’t been able to move the needle on China, which seems to be the real mover on this, in terms of being able to apply the real pressure. What do you think the issue is? What is the problem?”

 

The stunner was revealed in Mnuchin’s answer: “I think we have absolutely moved the needle on China. I think what they agreed to yesterday was historic. I’d also say I put sanctions on a major Chinese bank. That’s the first time that’s ever been done. And if China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system. And that’s quite meaningful.”

And to underscore his point, the Treasury Secretary also said that “in North Korea, economic warfare works. I made it clear that the President was strongly considering and we sent a message that anybody that wanted to trade with North Korea, we would consider them not trading with us. We can put on economic sanctions to stop people trading.”

In other words, to force compliance with the North Korean sanctions, Mnuchin threatened Beijing with not only trade war, but also a lock out from the dollar system, i.e. SWIFT, something the US did back in 2014 and 2015 when it blocked off several Russian banks as relations between the US and Russia imploded.

Of course, whether the US would be willing to go so far as to use the nuclear option, and pull the dollar plug on its biggest trade partner, in the process immediately unleashing an economic depression domestically and globally is a different matter. So far Washington has been reluctant to impose economic sanctions on China over concerns of possible retaliatory measures from Beijing and the potentially catastrophic consequences for the global economy. Washington runs a $350 billion annual trade deficit with Beijing, while the PBOC also holds over $1 trillion in US debt.

Ironically, the biggest hurdle to the implementation of the just passed sanctions may be the president himself. “We think it’s just another very small step, not a big deal,” Trump told reporters at the start of a meeting with Malaysian Prime Minister Najib Razak. “I don’t know if it has any impact, but certainly it was nice to get a 15-to-nothing vote, but those sanctions are nothing compared to what ultimately will have to happen,” said Trump who has vowed not to allow North Korea to develop a nuclear ballistic missile capable of hitting the United States.

Separately, at a hearing of the House Foreign Affairs Committee on Tuesday, Republican Chairman Ed Royce said the U.S. should target major Chinese banks, including Agricultural Bank of China Ltd. and China Merchants Bank Co., for aiding Kim’s regime. Russia also came in for criticism. Assistant Treasury Secretary Marshall Billingslea said in prepared remarks to the committee that North Korean bank representatives “operate in Russia in flagrant disregard of the very resolutions adopted by Russia at the UN.”

While China and Russia supported the latest UN sanctions, officials made clear they were troubled by Haley’s comments in the Security Council that the U.S. would act alone if Kim’s regime didn’t stop testing missiles and bombs. They emphasized the world body’s resolution also emphasized the importance of resolving the crisis through negotiations. “The Chinese side will never allow conflict or war on the peninsula,” Foreign Ministry spokesman Geng Shuang said in a statement on Tuesday.

In a soundbite late on Tuesday, Japan’s Nikkei quoted prime minister Shinzo Abe who said that “in the end, [the North Korean] problems should be solved through diplomatic dialogue,” adding that Japan will “work together with the international community to apply maximum pressure, so that North Korea commits to perfect, verifiable and irreversible denuclearization.” For Japan to engage with the regime, he stressed it would have to be “on the condition that North Korea commits to” this complete denuclearization.”

Which, of course, won’t happen: “sanctions of any kind are useless and ineffective,” Russian President Vladimir Putin told reporters earlier this month at a summit in Xiamen, China. “They’ll eat grass, but they won’t abandon their [nuclear] program unless they feel secure.”

Predictably, North Korea’s Foreign Ministry slammed the sanctions saying it “condemns in the strongest terms and categorically rejects” the United Nations adding more sanctions, North Korea’s state-run KCNA reported on Wednesday morning. Instead, North Korea warned it “will redouble efforts to increase its strength” as it seeks to establish “practical equilibrium” with U.S.

And so, not only is the entire geopolitical circle jerk back at square one, but the ball is again back in North Korea’s court, while the decision on whether or not to launch another ICBM really depends on whether China will give it the quiet go ahead; a China which responds notoriously poorly to being threatened in the global financial arena, like for example when the US threatens to kick it out of the global dollar system…

In their first conversation since Donald Trump’s inauguration as US president, he and President of Russia Vladimir Putin discussed improving cooperation between their countries in the fight against terrorism and the importance of rebuilding bilateral trade and economic ties.

Moscow sees Washington as its most important partner in fighting international terrorism, Putin told Trump, according to the Kremlin’s official statements on the conversation. Both leaders reportedly supported the idea of improving “real coordination” between their nations in the fight against Daesh and other terrorist groups active in Syria.

Trump and Putin also expressed their willingness to work together to “develop and stabilize” US-Russia interaction and assured each other that their nations’ citizens view the other’s positively.

In addition, the two world leaders discussed Iran’s nuclear program, the Arab-Israeli conflict, the situation on the Korean peninsula, and the conflicts in Syria and Ukraine, the Kremlin reports, as well as nonproliferation issues.

Trump and Putin also expressed their willingness to work together to “develop and stabilize” US-Russia interaction and assured each other that their nations’ citizens view the other’s positively.

In addition, the two world leaders discussed Iran’s nuclear program, the Arab-Israeli conflict, the situation on the Korean peninsula, and the conflicts in Syria and Ukraine, the Kremlin reports, as well as nonproliferation issues.

Trump and Putin are expected to speak again to discuss possible dates and places for a face-to-face meeting.