By Pepe ESCOBAR

Saddam, Gaddafi, Iran, Venezuela – they all tried but couldn’t do it. But Russia is on a different level altogether.

The beauty of the game-changing, gas-for-rubles, geoeconomic jujitsu applied by Moscow is its stark simplicity.

Russian President Vladimir Putin’s presidential decree on new payment terms for energy products, predictably, was misunderstood by the collective west. The Russian government is not exactly demanding straightforward payment for gas in rubles. What Moscow wants is to be paid at Gazprombank in Russia, in its currency of choice, and not at a Gazprom account in any banking institution in western capitals.

That’s the essence of less-is-more sophistication. Gazprombank will sell the foreign currency – dollars or euros – deposited by their customers on the Moscow Stock Exchange and credit it to different accounts in rubles within Gazprombank.

What this means in practice is that foreign currency should be sent directly to Russia, and not accumulated in a foreign bank – where it can easily be held hostage, or frozen, for that matter.

All these transactions from now on should be transferred to a Russian jurisdiction – thus eliminating the risk of payments being interrupted or outright blocked.

It’s no wonder the subservient European Union (EU) apparatus – actively engaged in destroying their own national economies on behalf of Washington’s interests – is intellectually unequipped to understand the complex matter of exchanging euros into rubles.

Gazprom made things easier this Friday, sending official notifications to its counterparts in the west and Japan.

Putin himself was forced to explain in writing to German Chancellor Olaf Scholz how it all works.

Once again, very simple: Customers open an account with Gazprombank in Russia. Payments are made in foreign currency – dollars or euros – converted into rubles according to the current exchange rate, and transferred to different Gazprom accounts.

Thus it is 100 percent guaranteed that Gazprom will be paid.

That’s in stark contrast to what the United States was forcing the Europeans to do: pay for Russian gas in Gazprom accounts in Europe, which would then be instantly frozen. These accounts would only be unblocked with the end of Operation Z, Russia’s military ops in Ukraine.

Yet the Americans want the war to go on indefinitely, to “bog down” Moscow as if this was Afghanistan in the 1980s, and have strictly forbidden the Ukrainian Comedian in front of a green screen somewhere – certainly not Kiev – to accept any ceasefire or peace deal.

So Gazprom accounts in Europe would continue to be frozen.

As Scholz was still trying to understand the obvious, his economic minions went berserk, floating the idea of nationalizing Gazprom’s subsidiaries – Gazprom Germania and Wingas – in case Russia decides to halt the gas flow.

This is ridiculous. It’s as if Berlin functionaries believe that Gazprom subsidiaries produce natural gas in centrally heated offices across Germany.

The new rubles-for-gas mechanism does not in any way violate existing contracts. Yet, as Putin warned, existing contracts may indeed be stopped: “If such [ruble] payments are not made, we will consider this to be the buyers’ failure to perform commitments with all ensuing implications.”

Kremlin spokesman Dmitri Peskov was adamant that the mechanism will not be reversed under the current, dire circumstances. Still that does not mean that the gas flow would be instantly cut off. Payment in rubles will be expected from ‘The Unfriendlies’ – a list of hostile states that includes mostly the US, Canada, Japan and the EU – in the second half of April and early May.

For the overwhelming majority of the Global South, the overarching Big Picture is crystal clear: an Atlanticist oligarchy is refusing to buy the Russian gas essential to the wellbeing of the population of Europe, while fully engaged in the weaponization of toxic inflation rates against the same population.

Beyond Rublegas

This gas-for-rubles mechanism – call it Rublegas – is just the first concrete building block in the construction of an alternative financial/monetary system, in tandem with many other mechanisms: ruble-rupee trade; the Saudi petroyuan; the Iran-Russia SWIFT- bypassing mechanism; and the most important of all, the China-Eurasia Economic Union (EAEU) design of a comprehensive financial/monetary system, with the first draft to be presented in the next few days.

And all of the above is directly linked to the stunning emergence of the ruble as a new, resource-based reserve currency.

After the predictable initial stages of denial, the EU – actually, Germany – must face reality. The EU depends on steady supplies of Russian gas (40 percent) and oil (25 percent). The sanction hysteria has already engineered certified blowback.

Natural gas accounts for 50 percent of the needs of Germany’s chemical and pharmaceutical industries. There’s no feasible replacement, be it from Algeria, Norway, Qatar or Turkmenistan. Germany is the EU’s industrial powerhouse. Only Russian gas is capable of keeping the German – and European – industrial base humming and at very affordable prices in case of long-term contracts.

Disrupt this set up and you have horrifying turbulence across the EU and beyond.

The inimitable Andrei Martyanov has summed it up this way: “Only two things define the world: the actual physical economy, and military power, which is its first derivative. Everything else are derivatives but you cannot live on derivatives.”

The American turbo-capitalist casino believes its own derivative “narrative” – which has nothing to do with the real economy. The EU will eventually be forced by reality to move from denial to acceptance. Meanwhile, the Global South will be fast adapting to the new paradigm: the Davos Great Reset has been shattered by the Russian Reset.

thecradle.co

By Pepe ESCOBAR

The “rules-based international order” – as in “our way or the highway” – is unraveling much faster than anyone could have predicted.

The Eurasia Economic Union (EAEU) and China are starting to design a new monetary and financial system bypassing the U.S. dollar, supervised by Sergei Glazyev and intended to compete with the Bretton Woods system.

Saudi Arabia – perpetrator of bombing, famine and genocide in Yemen, weaponized by U.S., UK and EU – is advancing the coming of the petroyuan.

India – third largest importer of oil in the world – is about to sign a mega-contract to buy oil from Russia with a huge discount and using a ruble-rupee mechanism.

Riyadh’s oil exports amount to roughly $170 billion a year. China buys 17% of it, compared to 21% for Japan, 15% for the U.S., 12% for India and roughly 10% for the EU. The U.S. and its vassals – Japan, South Korea, EU – will remain within the petrodollar sphere. India, just like China, may not.

Sanction blowback is on the offense. Even a market/casino capitalism darling such as uber-nerd Credit Suisse strategist Zoltan Poznar, formerly with the NY Fed, IMF and Treasury Dept., has been forced to admit, in an analytical note: “If you think that the West can develop sanctions that will maximize the pain for Russia by minimizing the risks of financial stability and price stability for the West, then you can also trust unicorns.”

Unicorns are a trademark of the massive NATOstan psyops apparatus, lavishly illustrated by the staged, completely fake “summit” in Kiev between Comedian Ze and the Prime Ministers of Poland, Slovenia and the Czech Republic, thoroughly debunked by John Helmer and Polish sources.

Poznar, a realist, hinted in fact at the ritual burial of the financial chapter of the “rules-based international order” in place since the early Cold War years: “After the end of this war [in Ukraine], ‘money’ will ‎never be ‎the same.” Especially when the Hegemon demonstrates its “rules” by encroaching on other people’s money.

And that configures the central tenet of 21^st century martial geopolitics as monetary/ideological. The world, especially the Global South, will have to decide whether “money” is represented by the virtual, turbo-charged casino privileged by the Americans or by real, tangible assets such as energy sources. A bipolar financial world – U.S. dollar vs. yuan – is at hand.

There’s no surefire evidence – yet. But the Kremlin may have certainly gamed that by using Russia’s foreign reserves as bait, likely to be frozen by sanctions, the end result could be the smashing of the petrodollar. After all the overwhelming majority of the Global South by now has fully understood that the backed-by-nothing U.S. dollar as “money” – according to Poznar – is absolutely untrustworthy.

If that’s the case, talk about a Putin ippon from hell.

It’s gold robbery time

As I outlined the emergence of the new paradigm, from the new monetary system to be designed by a cooperation between the EAEU and China to the advent of the petroyuan, a serious informed discussion  erupted about a crucial part of the puzzle: the fate of the Russian gold reserves.

Doubts swirled around the Russian Central Bank’s arguably suicidal policy of keeping assets in foreign securities or in banks vulnerable to Western sanctions.

Of course there’s always the possibility Moscow calculated that nations holding Russian reserves – such as Germany and France – have assets in Russia that can be easily nationalized. And that the total debt of the state plus Russian companies even exceeds the amount of frozen reserves.

But what about the gold?

As of February 1, three weeks before the start of Operation Z, the Russian Central Bank held $630.2 billion in reserves. Almost half –

$311.2 billion – were placed in foreign securities, and a quarter – $151.9 billion – on deposits with foreign commercial and Central Banks. Not exactly a brilliant strategy. As of June last year, strategic partner China held 13.8% of Russia’s reserves, in gold and foreign currency.

As for the physical gold, $132.2 billion – 21% of total reserves – remains in vaults in Moscow (two-thirds) and St. Petersburg (one-third).

So no Russian gold has been frozen? Well, it’s complicated.

The key problem is that more than 75% of Russian Central Bank reserves are in foreign currency. Half of these are securities, like government bonds: they never leave the nation that issued them. Roughly 25% of the reserves are linked to foreign banks, mostly private, as well as the BIS and the IMF.

Once again it’s essential to remember Sergei Glazyev in his groundbreaking essay Sanctions and Sovereignty: “It is necessary to complete the de-dollarization of our foreign exchange reserves, replacing the dollar, euro and pound with gold. In the current conditions of the expected explosive growth in the price of gold, its mass export abroad is akin to treason and it is high time for the regulator to stop it.”

This is a powerful indictment of the Russian Central Bank – which was borrowing against gold and exporting it. For all practical purposes, the Central Bank could be accused of perpetrating an inside job. And subsequently they were caught flat-footed by the devastating American sanctions.

As a Moscow analyst puts it, the Central Bank “had delivered some volumes of gold to London in 2020-2021. This decision was motivated by a high price of gold at that time (near $2000 per ounce) and could hardly be initiated by Putin. If so, this decision can be qualified as very stupid, or even part of a diversionist tactic (…) Most of the gold delivered to London was not stored but sold and transferred into foreign currency reserves (in euro or pounds) which were frozen later.”

No wonder a lot of people in Russia are livid. A quick flashback is in order. In June last year, Putin signed a law canceling requirements for the repatriation of foreign exchange earnings from gold exports. Five months later, Russia’s gold miners were exporting like crazy. A month later, the Duma wanted to know  why the Central Bank had stopped buying gold. No wonder Russia media erupted with accusations of “an unprecedented [gold] robbery”.

Now it’s way more dramatic: RIA Novosti described the American-dictated freeze as – what else – a “robbery” and duly predicted global economic chaos.  As for the Central Bank, it’s back on the gold buying business.    

None of the above though explains some “missing” gold that de facto is not under the possession of the Russian Central Bank. And that’s where a somewhat shady character such as Herman Gref comes in.

Let’s check this out with State Duma deputy Mikhail Delyagin, who had a few things to say about the gold-exported-to-London bonanza:

“This process has been going on for the past year. Exported, according to some estimates, 600 tons. [Head of Russian Central Bank] Nabiullina said – whoever wants to sell gold to get cash, or if you mine gold and trade it, keep in mind that the state, in my person, will not buy gold from you at a market price. We will take it at a big discount. If you want to get honest money for it, please export it. The world center of gold trading is London. Accordingly, everyone began to export and sell gold there. Including Mr. [Herman] Gref. The head of the formally state-owned Sberbank sold a huge part of his gold reserves.”

Look here for fascinating details about Sberbank’s Gref shenanigans.

Watch for the gold-backed ruble

It may be a case of too little too late, but at least the Kremlin has now established a committee – with authority over the Central Bank nerds – to handle the serious stuff.

It boggles the mind that the Russian Central Bank does not answer to the Russian constitution as well as to the judicial system, but in fact is subordinated to the IMF. A case can be made that this cartel-designed financial system – implying zero sovereignty – simply cannot be tackled head on by any nation on the planet, and Putin has been trying to undermine it step by step. That includes, of course, keeping Elvira Nabiullina on the job even as she duly follows the Washington consensus to the letter.

And that brings us back to the ultra high stakes possibility that the Kremlin may have wanted from the start to go no holds barred, forcing the Atlanticists to reveal their true hand, and exposing their system in a “The King is Naked” spectacular for a worldwide audience.

And that’s where the EAEU/China new monetary/financial system comes in, under Glazyev supervision. We can certainly envision Russia, China and vast swathes of Eurasia progressively divorcing from casino capitalism; the ruble reconverted to a gold-backed currency; and Russia focused on self-sufficiency, productive domestic investment and trade connectivity with most of the Global South.

Way beyond its confiscated foreign reserves and tons of gold sold in London, what matters is that Russia remains the ultimate natural resource powerhouse. Shortages? A little austerity for a little while will take care of it: nothing as dramatic as the national impoverishment under the neoliberal 1990s. And extra boost would come from exporting natural resources at premium discount prices to other BRICS and most of Eurasia and the Global South.

The collective West has just fabricated a new, tawdry East-West divide. Russia is turning it upside down, to its own profit: after all the multipolar world is rising in the East.

The Empire of Lies won’t back down, because it does not have a Plan B. Plan A is to “cancel” Russia across the – Western – spectrum. So what? Russophobia, racism, 24/7 psyops, propaganda overdrive, cancel culture online mobs, that don’t mean a thing.

Facts matter: the Bear has enough nuclear/hypersonic hardware to shatter NATO in a few minutes before breakfast and teach a lesson to the collective West before pre-dinner cocktails. There will come a time when some exceptionalist with a decent IQ will finally understand the meaning of “indivisibility of security”.

By Yeghia TASHJIAN

So is that much fear and loathing all about gas? Not really.

Kazakhstan was rocked into chaos virtually overnight, in principle, because of the doubling of prices for liquefied gas, which reached the (Russian) equivalent of 20 rubles per liter (compare it to an average of 30 rubles in Russia itself).

That was the spark for nationwide protests spanning every latitude from top business hub Almaty to the Caspian Sea ports of Aktau and Atyrau and even the capital Nur-Sultan, formerly Astana.

The central government was forced to roll back the gas price to the equivalent of 8 rubles a liter. Yet that only prompted the next stage of the protests, demanding lower food prices, an end of the vaccination campaign, a lower retirement age for mothers with many children and – last but not least – regime change, complete with its own slogan: Shal, ket! (“Down with the old man.”)

The “old man” is none other than national leader Nursultan Nazarbayev, 81, who even as he stepped down from the presidency after 29 years in power, in 2019, for all practical purposes remains the Kazakh gray eminence as head of the Security Council and the arbiter of domestic and foreign policy.

The prospect of yet another color revolution inevitably comes to mind: perhaps Turquoise-Yellow – reflecting the colors of the Kazakh national flag. Especially because right on cue, sharp observers found out that the usual suspects – the American embassy – was already “warning” about mass protests as early as in December 16, 2021.

Maidan in Almaty? Oh yeah. But it’s complicated.

Almaty in chaos

For the outside world, it’s hard to understand why a major energy exporting power such as Kazakhstan needs to increase gas prices for its own population.

The reason is – what else – unbridled neoliberalism and the proverbial free market shenanigans. Since 2019 liquefied gas is electronically traded in Kazakhstan. So keeping price caps – a decades-long custom – soon became impossible, as producers were constantly faced with selling their product below cost as consumption skyrocketed.

Everybody in Kazakhstan was expecting a price hike, as much as everybody in Kazakhstan uses liquefied gas, especially in their converted cars. And everybody in Kazakhstan has a car, as I was told, ruefully, during my last visit to Almaty, in late 2019, when I was trying in vain to find a taxi to head downtown.

It’s quite telling that the protests started in the city of Zhanaozen, smack into the oil/gas hub of Mangystau. And it’s also telling that Unrest Central immediately turned to car-addicted Almaty, the nation’s real business hub, and not the isolated, government infrastructure-heavy capital in the middle of the steppes.

At first President Kassym-Jomart Tokayev seemed to have been caught in a deer facing the headlights situation. He promised the return of price caps, installed a state of emergency/curfew both in Almaty and Mangystau (then nationwide) while accepting the current government’s resignation en masse and appointing a faceless Deputy Prime Minister, Alikhan Smailov, as interim PM until the formation of a new cabinet.

Yet that could not possibly contain the unrest. In lightning fast succession, we had the storming of the Almaty Akimat (mayor’s office); protesters shooting at the Army; a Nazarbayev monument demolished in Taldykorgan; his former residence in Almaty taken over; Kazakhtelecom disconnecting the whole country from the internet; several members of the National Guard – armored vehicles included – joining the protesters in Aktau; ATMs gone dead.

And then Almaty, plunged into complete chaos, was virtually seized by the protesters, including its international airport, which on Wednesday morning was under extra security, and in the evening had become occupied territory.

Kazakh airspace, meanwhile, had to contend with an extended traffic jam of private jets leaving to Moscow and Western Europe. Even though the Kremlin noted that Nur-Sultan had not asked for any Russian help, a “special delegation” was soon flying out of Moscow. Kremlin spokesman Dmitry Peskov cautiously stressed, “we are convinced that our Kazakh friends can independently solve their internal problems”, adding, “it is important that no one interferes from the outside.”

Geostrategy talks

How could it all derail so fast?

Up to now, the succession game in Kazakhstan had been seen mostly as a hit across Northern Eurasia. Local honchos, oligarchs and the comprador elites all kept their fiefdoms and sources of income. And yet, off the record, I was told in Nur-Sultan in late 2019 there would be serious problems ahead when some regional clans would come to collect – as in confronting “the old man” Nazarbayev and the system he put in place.

Tokayev did issue the proverbial call “not to succumb to internal and external provocations” – which makes sense – yet also assured that the government “will not fall”. Well, it was already falling, even after an emergency meeting trying to address the tangled web of socioeconomic problems with a promise that all “legitimate demands” by the protesters will be met.

This did not play out as a classic regime change scenario – at least initially. The configuration was of a fluid, amorphous state of chaos, as the – fragile – Kazakh institutions of power were simply incapable of comprehending the wider social malaise. A competent political opposition is non-existent: there’s no political exchange. Civil society has no channels to express itself.

So yes: there’s a riot goin’ on – to quote American rhythm’n blues. And everyone is a loser. What is still not exactly clear is which conflicting clans are flaming the protests – and what is their agenda in case they’d have a shot at power. After all, no “spontaneous” protests can pop up simultaneously all over this vast nation virtually overnight.

Kazakhstan was the last republic to leave the collapsing USSR over three decades ago, in December 1991. Under Nazarbayev, it immediately engaged in a self-described “multi-vector” foreign policy. Up to now, Nur-Sultan was skillfully positioning itself as a prime diplomatic mediator – from discussions on the Iranian nuclear program as early as 2013 to the war in/on Syria from 2016. The target: to solidify itself as the quintessential bridge between Europe and Asia.

The Chinese-driven New Silk Roads, or BRI, were officially launched by Xi Jinping at Nazarbayev University in September 2013. That happened to swiftly dovetail with the Kazakh concept of Eurasian economic integration, crafted after Nazarbayev’s own government spending project, Nurly Zhol (“Bright Path”), designed to turbo-charge the economy after the 2008-9 financial crisis.

In September 2015, in Beijing, Nazarbayev aligned Nurly Zhol with BRI, de facto propelling Kazakhstan to the heart of the new Eurasian integration order. Geostrategically, the largest landlocked nation on the planet became the prime interplay territory of the Chinese and Russian visions, BRI and the Eurasia Economic Union (EAEU).

A diversionary tactic

For Russia, Kazakhstan is even more strategic than for China. Nur-Sultan signed the CSTO treaty in 2003. It’s a key member of the EAEU. Both nations have massive military-technical ties and conduct strategic space cooperation in Baikonur. Russian has the status of an official language, spoken by 51% of the republic’s citizens.

At least 3.5 million Russians live in Kazakhstan. It’s still early to speculate about a possible “revolution” tinged with national liberation colors were the old system to eventually collapse. And even if that happened, Moscow will never lose all of its considerable political influence.

So the immediate problem is to assure Kazakhstan’s stability. The protests must be dispersed. There will be plenty of economic concessions. Permanent destabilizing chaos simply cannot be tolerated – and Moscow knows it by heart. Another – rolling – Maidan is out of the question.

The Belarus equation has shown how a strong hand can operate miracles. Still, the CSTO agreements do not cover assistance in case of internal political crises – and Tokayev did not seem to be inclined to make such a request.

Until he did. He called for the CSTO to intervene to restore order. There will be a military enforced curfew. And Nur-Sultan may even confiscate the assets of US and UK companies which are allegedly sponsoring the protests.

This is how Nikol Pashinyan, chairman of the CSTO Collective Security Council and Prime Minister of Armenia, framed it: Tokayev invoked a “threat to national security” and the “sovereignty” of Kazakhstan, “caused, inter alia, by outside interference.” So the CSTO “decided to send peacekeeping forces” to normalize the situation, “for a limited period of time”.

The usual destabilizing suspects are well known. They may not have the reach, the political influence, and the necessary amount of Trojan horses to keep Kazakhstan on fire indefinitely.

At least the Trojan horses themselves are being very explicit. They want an immediate release of all political prisoners; regime change; a provisional government of “reputable” citizens; and – what else – “withdrawal of all alliances with Russia.”

And then it all gets down to the level of ridiculous farce, as the EU starts calling on Kazakh authorities to “respect the right to peaceful protests.” As in allowing total anarchy, robbery, looting, hundreds of vehicles destroyed, attacks with assault rifles, ATMs and even the Duty Free at Almaty airport completely plundered.

This analysis (in Russian) covers some key points, mentioning, “the internet is full of pre-arranged propaganda posters and memos to the rebels” and the fact that “the authorities are not cleaning up the mess, as Lukashenko did in Belarus.”

Slogans so far seem to originate from plenty of sources – extolling everything from a “western path” to Kazakhstan to polygamy and Sharia law: “There is no single goal yet, it has not been identified. The result will come later. It is usually the same. The elimination of sovereignty, external management and, finally, as a rule, the formation of an anti-Russian political party.”

Putin, Lukashenko and Tokayev spent a long time over the phone, at the initiative of Lukashenko. The leaders of all CSTO members are in close contact. A master game plan – as in a massive “anti-terrorist operation” – has already been hatched. Gen. Gerasimov will personally supervise it.

Now compare it to what I learned from two different, high-ranking intel sources.

The first source was explicit: the whole Kazakh adventure is being sponsored by MI6 to create a new Maidan right before the Russia/US-NATO talks in Geneva and Brussels next week, to prevent any kind of agreement. Significantly, the “rebels” maintained their national coordination even after the internet was disconnected.

The second source is more nuanced: the usual suspects are trying to force Russia to back down against the collective West by creating a major distraction in their Eastern front, as part of a rolling strategy of chaos all along Russia’s borders. That may be a clever diversionary tactic, but Russian military intel is watching. Closely. And for the sake of the usual suspects, this better may not be interpreted – ominously – was a war provocation.

Pepe ESCOBAR

It’s all about the cross-strait median. No, that’s not a drink in a Hong Kong bar. It’s the de facto maritime border between continental China and Taiwan.

Last Sunday morning, two Chinese J-11 fighters crossed the median and stayed on Taiwanese air space for about 10 minutes – even after Taiwanese interceptors were dispatched. Tsai Ing-wen, the President of Taiwan, defined the incursion by the PLA Air Force as “reckless and provocative.”

And, ominously, demanded the “forceful expulsion” of Chinese fighter jets if it ever happened again. Well, that used to happen, quite frequently, but only up to 1999, when Beijing and Taipei clinched a deal to make them stop.

US mainstream media predictably spun this latest incursion as yet another Chinese provocation, omitting the essential background to what is only one more move in an extremely complex – and dangerous – geopolitical chessboard.

Taiwan has made an official request to buy more than 60 F-16 fighter jets from the US. And the Trump administration tacitly approved it. It works like this. Trump’s advisers “encouraged” Taipei to make a formal request. They acted in tandem with Lockheed Martin, which builds the F-16s.

The request then became an actual proposal by the Pentagon and State Department. Finally, Congress has 30 days to consider whether the sale may go ahead. Considering this particular case suits not only the industrial-military complex, but also the overall US government agenda of containment of China, it might as well be considered a done deal.

Call in your CHIPS

Without this crucial context, it’s impossible to understand the logic behind the Chinese “provocation.” And that is also directly linked to John Bolton torpedoing negotiations with North Korea (the DPRK) and the non-stop demonization of both Russia and Iran.

China, Russia and Iran are the essential nodes in the laborious, ongoing, long-term Eurasia integration process. Russia and China were also essential advisers to the DPRK in its nuclear negotiations with the Trump administration.

The demonization of Russia and Iran proceeds in parallel with what is in effect a Washington-orchestrated SWIFT-CHIPS war.

CHIPS is the US dollar clearing system used by 88% of the transactions in global trade. This means that the US dollar is on one side of every international transaction 88% of the time.

If you are cut out of this system, it’s extremely difficult to conduct world trade – you need barter, trading in local currencies or an untested system like INSTEX, set up by the EU for non-dollar transactions with Iran after the Trump administration crashed out of the JCPOA, or Iran nuclear deal.

China is way more dependent on world trade than Russia as it needs to import massive amounts of natural resources that must be paid for by exports.

Russia, for its part, could very easily become self-sufficient, as it holds about 96% of the natural resources it needs. The US, by comparison, needs to import many vital natural resources for its advanced industries.

Recent history is filled with examples – for instance, Japan and South Korea – showing that national self-sufficiency works. China is fine-tuning the model as applied to the Made in China 2025 strategy.

The problem with Russia is that the Central Bank under Elvira Nabiullina arguably does not operate in the Russian national interest.

As I have extensively discussed with Russian analysts, a solution would be for the Russian Central Bank to create currency controls to prevent oligarchs from siphoning their wealth overseas, a move that only serves to further collapse the ruble. And also create credit to build the industries that would replace imports – a de facto massive import substitution. No credit should be issued for any other purpose.

Entering the next decade, what would constitute a sort of nuclear option would be for Russia to divert to China most of the natural resources sold to the West, whose retribution is packages of sanctions, while importing from China the advanced technologies required for Russia.

China is de facto an equal or even ahead of the US in plenty of technology areas – as documented, for instance, by Kai-Fu Lee on AI Super-Powers: China, Silicon Valley and the New World Order. Much is not visible yet because advances have not been commercialized.

All of the above is being debated in Moscow, in detail, on myriad levels. It’s not by accident that Russia is fully on board the New Silk Roads, or Belt and Road Initiative (BRI), in connection with the Eurasia Economic Union (EAEU).

The latest graphic example of the Russia-China economic partnership is the railroad bridge across the Amur river linking the Russian Far East with China’s Heilongjiang province.

The future rises in the East

Throughout the next decade it will be clear how the entire Eurasian land mass is linked with, or by, the BRI. In comparison, Chas Freeman, a former US ambassador to China, is one of the few informed observers who have sounded the alarm; Washington treats the BRI as a military strategic challenge.

Alastair Crooke has shown how a mini-BRI is already shaping up, linking Iran, Iraq, Syria and Lebanon. In fact, this is the emerging Southwest Asia BRI node.

At the same time, Beijing had made it very clear that – harsh methods included – Xinjiang, the key BRI hub in Western China, would not be allowed to become another Syria, Libya or Iraq. Xinjiang directly links with the essential BRI connectivity corridors to the Middle East, Africa and Europe.

The West, or what remains of its unity, does not represent a vision of the future any more. China is striving for the BRI to fulfill this role. That’s something a few extra F-16s patrolling the cross-strait median won’t be able to change.

asiatimes.com

The key take away from the BRICS summit in Johannesburg is that Brazil, Russia, India, China and South Africa – important Global South players – strongly condemn unilateralism and protectionism.

The Johannesburg Declaration is unmistakable: “We recognize that the multilateral trading system is facing unprecedented challenges. We underscore the importance of an open world economy.”

Closer examination of Chinese President Xi Jinping’s speech unlocks some poignant details.

And that also implies reaching to the next level; “It is important that we continue to pursue innovation-driven development and build the BRICS Partnership on New Industrial Revolution (PartNIR) to strengthen coordination on macroeconomic policies, find more complementarities in our development strategies, and reinforce the competitiveness of the BRICS countries, emerging market economies and developing countries.”

If PartNIR sounds like the basis for an overall Global South platform, that’s because it is.

In a not too veiled allusion to the Trump administration’s unilateral pullout from the Iran nuclear deal (JCPOA), Xi called all parties to “abide by international law and basic norms governing international relations and to settle disputes through dialogue and differences through consultation,” adding that the BRICS are inevitably working for “a new type of international relations.”

Relations such as these certainly do not include a superpower unilaterally imposing an energy export blockade – an act of economic war – on an emerging market and key actor of the Global South.

Xi is keen to extol a “network of closer partnerships.” That’s where the concept of BRICS Plus fits in. China coined BRICS Plus last year at the Xiamen summit, it refers to closer integration between the five BRICS members and other emerging markets/developing nations.

Argentina, Turkey and Jamaica are guests of honor in Johannesburg. Xi sees BRICS Plus interacting with the UN, the G20 “and other frameworks” to amplify the margin of maneuver not only of emerging markets but the whole Global South. 

So how does Iran fit into this framework?

An absurd game of chicken

Immediately after President Trump’s Tweet of Mass Destruction the rhetorical war between Washington and Tehran has skyrocketed to extremely dangerous levels.

Major General Qassem Soleimani, commander of the Islamic Revolutionary Guard Corps’ (IRGC) Quds Force – and a true rock star in Iran – issued a blistering response to Trump: “You may begin the war, but it is us who will end it.”

The IRGC yields massive economic power in Iran and is in total symbiosis with Supreme Leader Ayatollah Khamenei. It’s no secret the IRGC never trusted President Rouhani’s strategy of relying on the JCPOA as the path to improve Iran’s economy. After the unilateral Trump administration pullout, the IRGC feels totally vindicated.

The mere threat of a US attack on Iran has engineered a rise in oil prices. US reliance on Middle East Oil is going down while fracking – boosted by higher prices – is ramping up. The threat of war increases with Tehran now overtly referring to its power to cripple global energy supplies literally overnight.

In parallel the Houthis, by forcing the Yemen-bombing House of Saud to stop oil shipments via the Bab al-Mandeb port, are configuring the Strait of Hormuz and scores of easily targeted pipelines as even more crucial to the flow of energy that makes the West tick. 

If there ever was a US attack on Iran, Persian Gulf analysts stress only Russia, Nigeria and Venezuela might be able to provide enough oil and gas to make up for lost supplies to the West. That’s not exactly what the Trump administration is looking for.

Iranian “nuclear weapons” was always a bogus issue. Tehran did not have them – and was not pursuing them. Yet now the highly volatile rhetorical war introduces the hair-raising possibility of Tehran perceiving there is a clear danger of a US nuclear attack or an attack whose purpose is to destroy the nation’s infrastructure. If cornered, there’s no question the IRGC would buy nuclear weapons on the black market and use them to defend the nation.

This is the “secret” hidden in Soleimani’s message. Besides, Russia could easily – and secretly – supply Iran with state-of-the-art defensive missiles and the most advanced offensive missiles.

This absurd game of chicken is absolutely unnecessary for Washington from an oil strategy point of view – apart from the intent to break a key node of Eurasia integration. Assuming the Trump administration is playing chess, it’s imperative to think 20 moves ahead if “winning” is on the cards.

If a US oil blockade on Iran is coming, Iran could answer with its own Strait of Hormuz blockade, producing economic turmoil for the West. If this leads to a massive depression, it’s unlikely the industrial-military-security complex will blame itself.

There’s no question that Russia and China – the two key BRICS players – will have Iran’s back. First there’s Russia’s participation in Iran’s nuclear and aerospace industries and then the Russia-Iran collaboration in the Astana process to solve the Syria tragedy. With China, Iran as one of the country’s top energy suppliers and plays a crucial role in the Belt and Road Initiative (BRI). Russia and China have an outsize presence in the Iranian market and similar ambitions to bypass the US dollar and third-party US sanctions.

Beam me up, Global South

The true importance of the BRICS Johannesburg summit is how it is solidifying a Global South plan of action that would have Iran as one of its key nodes. Iran, although not named in an excellent analysis by Yaroslav Lissovolik at the Valdai Club, is the quintessential BRICS Plus nation.

Once again, BRICS Plus is all about constituting a “unified platform of regional integration arrangements,” going way beyond regional deals to reach other developing nations in a transcontinental scope.

This means a platform integrating the African Union (AU), the Eurasian Economic Union (EAEU), the Shanghai Cooperation Organization (SCO) as well as the South Asian Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).

Iran is a future member of the SCO and has already struck a deal with the EAEU. It’s also an important node of the BRI and is a key member, along BRICS members India and Russia, of the International North-South Transportation Corridor (INSTC), essential for deeper Eurasia connectivity.

Lissovolik uses BEAMS as the acronym to designate “the aggregation of regional integration groups, with BRICS Plus being a broader concept that incorporates other forms of BRICS’ interaction with developing economies.”

China’s Foreign Minister Wang Yi has defined BRICS Plus and BEAMS as the “most extensive platform for South-South cooperation with a global impact.” The Global South now does have an integration road map. If it ever happened, an attack on Iran would be not only an attack on BRICS Plus and BEAMS but on the whole Global South.

atimes.com

head of the crucial Shanghai Cooperation Organization (SCO) summit in Qingdao this coming weekend, three other recent events have offered clues on how the new world order is coming about.

The Astana Economic Forum in Kazakhstan centered on how mega-partnerships are changing world trade. Participants included the president of the Asian Infrastructure Investment Bank (AIIB) Jin Liqun; Andrew Belyaninov from the Eurasian Development Bank; former Italian Prime Minister and president of the EU Commission Romano Prodi; deputy director-general of the WTO Alan Wolff; and Glenn Diesen from the University of Western Sydney.

Diesen, a Norwegian who studied in Holland and teaches in Australia, is the author of a must-read book, Russia’s Geoeconomic Strategy for a Greater Eurasia, in which he analyzes in excruciating detail how Moscow is planning “to manage the continent from the heartland by enhancing collective autonomy and influence, and thus evict US hegemony directed from the periphery.”

In a nutshell; this New Great Game installment revolves around “Russia’s strategy to enhance its bargaining power with the West by pivoting to the East.”

Concerning Astana, Diesen told me that the AIIB’s Liqun “took the hardest stance in defense of diversifying financial instruments, while Belyaninov was very critical of anti-Russian sanctions.”

Diesen argues that: “The emergence of economic mega-blocks actually improves economic relations by creating more symmetry. For example, China’s CIPS (Cross-Border Interbank Payment System) undermined the ability of SWIFT (Society for Worldwide Interbank Financial Telecommunication) to be used for economic coercion, while CIPS and SWIFT still cooperate. Similarly, the EAEU [Eurasia Economic Union] gets its strength from the ability to integrate with other regions as opposed to isolating itself.”

And here’s the clincher: “China’s cooperation with the EAEU mitigates Russian concerns about asymmetries, and enables greater EAEU-BRI [Belt and Road Initiative] integration under the stewardship of the SCO. Also, unlike the EU, the EAEU provides great benefit to non-members (non-zero sum) by creating an effective transportation corridor with harmonized tariffs, standards, etc.”

Diesen remarked how Liqun, a key character in the whole game, “is very positive about the Eurasian Economic Union and insistent on the positive-sum game of integration of regions.” Liqun is “direct, honest and forceful” and does not refrain from criticizing the Trump administration, arguing “there is not a trade war between the US and China, it is a US trade war against the world.”

Add to the debate the crucial Astana headline, ignored by Western corporate media: Iran signed a provisional free-trade-zone agreement with the EAEU, lowering or abolishing customs duties, and opening the way for a final deal in 2021. For Iran, that will be a golden ticket to do business way beyond Southwest Asia, integrating it further with Russia and also Kazakhstan, which happens to be a key member of the Belt and Road Initiative (BRI).

All about Eurasian integration

The St. Petersburg International Economic Forum (SPIEF) is the annual Russian equivalent of Davos. Predictably, coverage on Western media was appalling – at best rehashing bits and pieces of the joint press conference held by presidents Vladimir Putin and Emmanuel Macron.

There was no mention, as Asia Times previously reported, of how Moscow was instrumental in ironing out differences between North and South Korea at the Far East summit in Vladivostok last September, impressing the need for a win-win regional business plan; the integration of the Trans-Siberian with a future Trans-Korean railway, a key plank of Eurasia integration.

When it comes to tracking Eurasia integration, SPIEF is invaluable. The St Petersburg get-together has also been a traditional forum for key SCO discussions. One panel illustrated how the Shanghai forum is fast advancing on the trade and economic front; new members India and Pakistan are now very much active in the SCO Business Council. The discussion of the business, industrial and technological agenda for observer states was also important; that’s where Iran, a future full SCO member, fits in.

Eurasia integration also featured on another panel about new logistical routes opened by international transport corridors – very much the stuff BRI and the EAEU are made of.

And the BRICS revival was also part of the picture, as attested by this panel on the BRICS in Africa “leveraging the Fourth Industrial Revolution” for economic development, featuring the president of the BRICS’s New Development Bank (NDB), Kundapur Kamath, and Jiakang Sun, the executive vice-president of Chinese giant COSCO Shipping Corp.

Yet the clincher in terms of possible game-changing relations between Russia and Europe came from Finance Minister and first deputy Prime Minister Anton Siluanov: “As we see, restrictions imposed by the American partners are of an extraterritorial nature. The possibility of switching from the US dollar to the euro in settlements depends on Europe’s stance toward Washington’s position.”

So once again the EU was on the spot – on both crucial fronts, Iran and Russia. Siluanov left the door wide open: “If our European partners declare their position unequivocally, we could definitely see a way to use the European common currency for financial settlements, such as payments for goods and services, which today are often subject to restrictions.”

Siluanov did not fail to mention that Russia, as much as China and Iran, is already bypassing the US dollar. That accounts for three crucial nodes of Eurasian integration, and that’s the way to go for BRI, EAEU, SCO and BRICS.

The Indo-Pacific enigma

Meanwhile, the Shangri-La Dialogue in Singapore has been the top venue for defense diplomacy debate in the Asia-Pacific since 2001.

With the “Indo-Pacific” concept is hyped to the extreme, it was up to Indian Prime Minister Narendra Modi, the keynote speaker, to strike a deft balancing act.

Even as Modi said the Indo-Pacific should not develop as an exclusive club, he took pains to stress that “Asia and the world will have a better future when India and China work together in trust and confidence. No other relationship of India has as many layers as our relationship with China.”

China’s Foreign Minister Wang Yi dismissed the “Indo-Pacific” push as an “attention-grabbing idea” that will “dissipate like ocean foam,” as he hopes that the Quad – US, India, Japan, Australia – does not focus on targeting China, like the previous Obama administration “pivot to Asia.”

The problem is the Indo-Pacific focus, in practice, amounts to a military counterpunch to BRI, with no wide-ranging economic cooperation dimension apart from sketchy plans for a “new global infrastructure.” Compare it, for instance, with China financing over 130 projects within the Lancang-Mekong Cooperation framework, integrating Cambodia, Laos, Myanmar, Thailand and Vietnam into the Chinese economy.

BRI is a multi-trillion-dollar, multinational, decades-long, inclusive project. As Wang Yiwei, a senior research fellow at the Chongyang Institute for Financial Studies of the Renmin University of China, said “All SCO members are participating in BRI, and this organization [SCO] is the initiative’s security guarantee.”

Yet when it comes to the Indo-Pacific sphere, the US, Japan and Australia are not SCO members. And India still refuses to acknowledge the SCO is interlinked with BRI.

Moreover, everything about BRI cannot but clash front-on with the depth and reach of the US across Asia. So the security stress is inevitable. The 10-nation ASEAN, caught in the middle, is adopting at best a “wait and see” strategy. Indonesia at least is venturing a step ahead, promoting a non-confrontational “Indo-Pacific cooperation concept.”

The bottom line is that China’s relentless drive to multiply Chinese-organized solutions in international relations is unstoppable. As in Wang Yi’s discreet but forceful diplomacy leading to Kim Jong-un’s first visit to China; President Xi solidifying his role as the go-to leader of globalization 2.0; and the Chinese leadership as a whole arguing that the future of Asia-Pacific security cannot be hostage to a Cold War 2.0 mentality.

US Defense Secretary James Mattis’ warning to China in Singapore of “much larger consequences” if its sovereignty expansion across virtually the whole South China Sea is not contained may be an idle threat. Beijing has no intention to restrict freedom of navigation in the South China Sea; for a mercantile giant, that would be counter-productive. The whole game is about high-stakes geopolitical control. Even the new head of the renamed US Indo-Pacific Command, Admiral Philip Davidson, had to admit to the US Senate that short of war between China and the US, Beijing will prevail in the South China Sea.

Welcome to the post-Westphalian world

In his latest, avowedly “provocative” slim volume, Has the West Lost It? former Singaporean ambassador to the UN and current Professor in the Practice of Public Policy at the National University, Kishore Mahbubani frames the key question: “Viewed against the backdrop of the past 1,800 years, the recent period of Western relative over-performance against other civilizations is a major historical aberration. All such aberrations come to a natural end, and that is happening now.”

It is enlightening to remember that at the Shangri-la Dialogue two years ago, Professor Xiang Lanxin, director of the Centre of One Belt and One Road Studies at the China National Institute for SCO International Exchange and Judicial Cooperation, described BRI as an avenue to a ‘post-Westphalian world.’

That’s where we are now. Western elites cannot but worry when central banks in China, Russia, India and Turkey actively increase their physical gold stash; when Moscow and Beijing discuss launching a gold-backed currency system to replace the US dollar; when the IMF warns that the debt burden of the global economy has reached $237 trillion; when the Bank for International Settlements (BIS) warns that, on top of that there is also an ungraspable $750 trillion in additional debt outstanding in derivatives.

Mahbubani states the obvious: “The era of Western domination is coming to an end.” Western elites, he adds, “should lift their sights from their domestic civil wars and focus on the larger global challenges. Instead, they are, in various ways, accelerating their irrelevance and disintegration.”

Meanwhile, Eurasian integration, as depicted in Diesen’s book, is slowly but surely redefining the future.

atimes.com

If  you are looking for the latest breakthroughs in trans-Eurasian geoeconomics, you should keep an eye on the East – the Russian Far East. One interesting project is the new state-of-the-art $1.5 billion Bystrinsky plant. Located about 400 kilometers from the Chinese border by rail and tucked inside the Trans-Baikal region of Siberian, it is now finally open for business.

This mining and processing complex, which contains up to 343 million tonnes of ore reserves, is a joint venture between Russian and Chinese companies. Norilsk Nickel, Russia’s leading mining group and one of the world’s largest producers of nickel and palladium, has teamed up with CIS Natural Resources Fund, established by President Vladimir Putin, and China’s Highland Fund.

Naturally, to cope with production, a massive new road and rail network has been rolled out, as well as substantial infrastructure, in the heart of this wilderness. Yet there is another major BRI initiative about 1,000km east of Bystrinsky. Work started on the Amur River Bridge, or Heilongjiang as the Chinese call it, in 2016 and the road and rail links should be finished in 2019.

The project is being developed by Heilongjiang Bridge Company, a Russia-China joint venture, along a crucial stretch of the Russian-Chinese border. It will also be part of a huge trade corridor, which will transport iron ore to China from the Kimkan mine, owned by Hong Kong’s IRC Ltd,  in Russia.

The Amur River Bridge, linking Heihe, in Heilongjiang province, with Blagoveshchesnk in the Russian Far East, is a natural part of the New Silk Roads program. It is well connected to one of BRI six major corridors – the China-Mongolia-Russia Economic Corridor, or CMREC, via the Trans-Siberian Railway all the way to Vladivostok.

CMREC’s additional importance is that it will connect BRI with the Russia-led Eurasia Economic Union, or EAEU, as well as the Mongolian Steppe Road program. CMREC has two key links. One involves China’s Beijing-Tianjin-Hebei to Hohhot before winding on to Mongolia and Russia. The other is from China’s Dalian, Shenyang, Changchun, Harbin and Manzhouli to Chita in Russia, where the Bystrinsky plant is located.

Numerous aspects of the Russian-Chinese intranet were extensively discussed at the Third Eastern Economic Forum in Vladivostok in September. CMREC involves closer cooperation, especially in energy, mineral resources, high-tech manufacturing, agriculture and forestry. Chinese Vice-Premier Wang Yang had already announced even closer economic cooperation with Russia, including a $10 billion China-Russia Investment Cooperation Fund in yuan for BRI and EAAU projects.

Monetary integration

Part of this will include Russian-Chinese investment funds, known as Dakaitaowa, or “to open a matryoshka doll”. Monetary integration and energy cooperation are all part of an ambitious Russian-Chinese package. This will allow trade to be settled in yuan, instead of US dollars, in Moscow via the Industrial and Commercial Bank of China. Products promoted under the “Made in Russia” brand are bound to get a boost.

According to the China General Administration of Customs, Russia continues to be the country’s leading crude oil supplier, exporting more than one million barrels per day, ahead of Saudi Arabia and Angola. Exports of Russian oil to China have more than doubled during the past six years.

Last month, the Russian parliament approved the draft of a conservative 2018-2020 Russian federal budget at $279 billion. This included increased spending in the social sector, a higher minimum wage, and increased salaries for teachers and healthcare workers.

Manufacturing in Russia has actually grown in absolute terms during the past decade along with a slight rise in GDP. Contrary to Western perceptions, energy revenue in Russia amounts to only around 30 percent of the federal budget. In absolute terms, it actually fell from 2014 to 2016, while non-oil and gas income has increased steadily since 2009.

Those were the days when Saudi Arabia and the Gulf petro-monarchies were dumping excess capacity on the oil market in a price war that was bound to ruin Russia’s finances. The draft budget assumes the price of oil will stay around at least $40.80 a barrel during the next few years. In fact, it may actually rise from its current $61.03 for the OPEC basket. Of course, that would boost Russia’s reserves.

Natural resources

As for exports, oil accounts for around 26 percent of Russia’s GDP. Oil and gas as a percentage of total exports fell during the past two years from 70 percent to 47 percent, but they are still the country’s top export money earners. When you add other commodities, such as iron, steel, aluminum and copper, revenue from natural resources come to more than 75 percent of Russia’s total exports.

But the key problem ahead for the country is the debt of provincial governments, and not defense, which is much lower than during Gorbachev’s reign in the late 1980s. Still, the integration of BRI and EAEU now offers excellent opportunities for Russia.

To put this into context, we have to go back to the 1689 Treaty of Nerchisk at a time when Manchus, an ethnic minority in China and the people from whom Manchuria derives its name, were deeply concerned about Cossack incursions into their lands.

Nerchisk was the first Chinese treaty with a European power, and it safeguarded borders and regulated relations between the two neighbors for nearly two centuries. For the first time, Russians could trade directly with the Middle Kingdom and negotiate as equals. No Russian or Manchu was spoken, but Latin, via two Jesuit interpreters. They were well positioned in the Qing court by supplying the Kangxi emperor with weapons, as well as advanced courses in geometry and astronomy.

Century of humiliation

Now, compare this with the “unequal treaties” of the 19th century with England, France, the United States and Germany, known as the “century of humiliation” in China. It is true that Russia gobbled up Chinese lands back then, as well as securing the Amur basin and the eastern side of the Sikhote-Alin mountains, which denied the country access to the Sea of Japan.

At the time, the Qing dynasty was helpless. Everything was later formalized by, well, treaties. China lost what was known as Outer Manchuria and Eastern Tartary. Today this whole region is known as Primorsky Krai, Russia’s Maritime Province. Then in 2006, President Putin solemnly announced the resolution of all border disputes with China along the Amur. Beijing de facto agreed.

Now, with the integration of BRI and the EAEU, Russia has a great chance of fulfilling part of its Pacific Destiny, first envisaged when the Trans-Siberian rail link was finished in 1905. Today, that vision is alive with gold and timber in the mountains north of the Amur, fish in the Sea of Okhotsk and the Bering Sea, and gas reserves from Sakhalin island all part of a modern export chain.

atimes.com

The overland integration of the BRI, led by China and Russia, aims to create different transit routes for goods as well as different areas of economic development along the new Chinese Silk Road. A great opportunity is thereby opened up for Chinese banks and for private investors interested in creating infrastructure or developing potential industrial poles in the countries involved in this grand Chinese initiative.

Hong Qi, president of China Minsheng Bank, recently said during an economic forum held in Beijing regarding investments in the BRI that there is potentially about $10 trillion worth of investments in infrastructure in the countries that make up the BRI, such as in railways, urban development, logistics and cross-border e-commerce.

At this point, more than $10 billion has already been committed in investments, thanks to companies already present in over thirty countries and regions along the BRI, with the ongoing intention of financing these loans through China’s public and private sectors. According to data from the China Banking Regulatory Commission, a total of nine Chinese banks are involved in the financing of projects, with 62 branches having been opened in 26 countries. A further $10 billion could come from European countries as a result of investments stemming from the China-CEEC forum.

Despite a delay in investment, and especially in the development of such projects, analysts believe that the BRI is the ideal ground for making regional cooperation agreements based on trust and win-win prospects for future integration of the region. Thus, not only are public and private banks involved in investments but the Asian Investment Infrastructure Bank (AIIB) and the Silk Road Fund are also part of the financial package that should lay the foundation for the accelerated development of the Chinese BRI. Confirming a new approach to the development of the BRI, Chinese investors during the first ten months of 2017 proposed projects totalling $11 billion in the 53 countries involved.

The effort is mainly focused on the development of railway networks, hospitals, and power plants. Such basic infrastructure will lay the groundwork for further development in countries involved in the BRI that otherwise have little capacity to invest in such projects themselves. According to Zhang Zansheng, an accredited researcher at the China Center for International Economic Exchanges, the first marker is set for 2020, the year that  "further tangible progress" should be made in the development of the BRI, mainly referring to railway links between different Asian regions and the Mediterranean. Reflecting how things are already changing, dozens of trains leave monthly from European countries to reach China, the latest being one from Italy, leaving from the province of Pavia, a few kilometers from Milan.

Robin Xing, Chief China Economist for Morgan Stanley, echoed many analysts in predicting that 2018 and 2019 will be the two key years where tangible implementation of the Belt and Road Initiative will start to become apparent. These projects and investments will increase global trade with the countries involved in the BRI, which could see a 10% increase in their exports to China over the next 10 years, the practical results of the investments in ports, railways and industrial centers.

The People's Republic of China continues to treat investments and risks with a pragmatic and realistic attitude. Accordingly, the main investors in the BRI comprise state-controlled industries and banks, which allows for sufficient control by the central authority in the event of major problems. With investments amounting to at least $60 billion per year, involving more than 1,676 projects, and representing about 0.5% of Chinese nominal GDP, for the moment Beijing wants to have full control over the whole project, a strategic interest that is perfectly understandable.

The BRI is generating many innovations, including a possible new sea route through the Arctic. Although the project is yet to be fully developed, China is beginning to invest in cooperation projects with Russia to exploit this new route. The Russian Federation is the only country to have nuclear-powered icebreakers. Beijing intends to follow its Russian partner in this project in order to pave the way for its freight containers. Cost savings in terms of transport from China to Europe would be in the region of 30-40%. The Northeast Passage can only be crossed during about four months of the year, due to thick ice and unfavorable weather conditions that otherwise exist. Experts forecast that this route will be increasingly free of ice in coming years, and therefore will become more passable. Given the enormous shipping times to be saved, China and Russia have already started cooperating in order to be ready to develop and exploit this new and strategic route.

Considering the great importance of shipping routes, the ability to reach the Mediterranean is of fundamental importance. As things stand now, China is hampered by several strategic vulnerabilities, such as the Strait of Malacca or the passage through the Suez Canal, two choke points that are susceptible to a naval blockade by the US in the unlikely event of war between these major powers. This is not to mention the Panama Canal, which guarantees transit from the Pacific to the Atlantic, and Gibraltar, which controls access to the Mediterranean Sea. Certainly with an Arctic route, passage would be much faster, as well as be free from the possibility of blockade.

At the moment, the land route to Europe represents a viable solution, but one that also brings with it continuous challenges and several possibilities. One involves transporting goods from the north through the countries of the Eurasian Economic Union. The second involves going through the south, with a passage through Turkey to arrive either at the Greek port of Piraeus or in Venice. Some sort of competition is bound to occur in the future within the European Union, with countries jostling to become the main transit hub between Europe and China. The link between China and the European Union represents a critical issue for the BRI, with a traffic of goods in the order of tens, if not hundreds, of billions of dollars. At the moment, all the parties involved are aware of a much wider problem for the BRI. Freight trains from Europe to China are often empty, without major exports to the People's Republic of China, a problem that makes overland transport routes unprofitable. In this regard, the European Union must accelerate its economic recovery by aiming to exploit new trade routes that offer benefits for all countries involved. As usual, obstacles lie ahead, especially in the geopolitical arena, with the BRI representing a strategic challenge to American hegemony in Asia and Europe.

With this in mind, there is a need to move away from the dollar when it comes to loans and investments made to finance BRI infrastructure projects. This does not prevent the development of new projects for the time being. But China and other countries involved should pay more attention to this vulnerability that hangs over the whole project. Beijing should therefore accelerate use of an alternative currency in this grand project.

The economic power of the United States depends on the continued need for the rest of the world to have dollars available. This Chinese project aims to integrate countries such that Washington is denied it hegemony over Asia, Europe and the Middle East. For such reasons, it is fundamental that Beijing arms itself with every weapon available in its arsenal to defend itself from the sabotage that Washington will inevitably visit on the project. Avoiding a currency that the United States controls would be a good starting point.