Ukraine: U.S and E.U. push Russia closer to China

It will be a surprise to many if the referendum taking place in Crimea results in the people voting to stay with the Ukraine.

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Val Bridge
The Shrinkinglobe Sunday March 16th 18:05
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Crimea Ballot Box

Should the U.S. and the E.U. carry out their threat of punitive sanctions against Russia it will have very little effect. Follow the money trail to find where the truth lies.

Why?

Well because the wily, corrupt, Russian oligarchs have already withdrawn most of their cash out of western banks.

PlatoRussia has threatened to respond with sanctions of its own should economic measures be imposed by the EU and the US after the referendum in Crimea this weekend. Russia currently holds $138.6bn of USTs (based on December data) and the country has been a net seller for a combined $11.3bn of USTs over the last two months for when data is available. China sold $47.8bn alone in December. The latest Treasury International Capital (TIC) data for January are only due next week so we won’t find out officially until May how much Russia’s US government debt holdings dropped in March. Source, the bond experts at Stone McCarthy.

Russian companies are pulling billions out of western banks, fearful that any US sanctions over the Crimean crisis could lead to an asset freeze, according to bankers in Moscow.

Sberbank and VTB, Russia’s giant partly state-owned banks, as well as industrial companies, such as energy group Lukoil, are among those repatriating cash from western lenders with operations in the US. VTB has also cancelled a planned US investor summit next month, according to bankers.

The flight comes as last-ditch diplomatic talks between Russia’s foreign minister and the US secretary of state to resolve the tensions in Ukraine ended without an agreement.

Markets were nervous before Sunday’s Crimea referendum on secession from Ukraine. Traders and businesspeople fear this could spark western sanctions against Russia as early as Monday.

What it will also do is force Russia to engage China far more actively in bilateral trade and ultimately to transact using either Rubles or Renminbi, and bypass the dollar. Perhaps even using gold, something which the price of the yellow metal sniffed out this week, pushing itself to 6 month highs. It will also make financial ties between the two commodity-rich nations even closer, while further alienating that “imperialist devil,” the US.

Of course, the west thinking like the west, and assuming that all that matters to Russia is the closing level of the Micex, believes that a sufficient plunge in Russian stocks would have been enough to deter Putin. After all, the only thing everyone in the US cares about is if the S&P 500 closed at yet another all time high, right?

Little bit of Humour

Little bit of Humour

What the west didn’t realize for Putin it is orders of magnitude more important to have the price of commodities, primarily crude and gas, high than seeing the illusion of paper wealth, aka stocks, hitting all time highs. Especially since in Russia, an even smaller portion of the population, cares about the daily fluctuations of the stock market.

As for the oligarchs, if there is someone who will be delighted to see their power, wealth and influence impacted adversely, if only for a short period of time, it is Vladimir Vladimirovich himself, whom the west misjudged massively once more. Not to mention that the general population will be even more delighted, and boost Putin’s rating even higher, if these crony billionaires are made to suffer by the west, if only a little.

Putin has trumped both the E.U. and the U.S not to mention the U.K.

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