12/29/2009 Vladimir Putin and the rise of the petro-…

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Vladimir Putin and the rise of the petro-ruble

By Mike Whitney

05/22/06 "Information Clearing House" -- -- “If one day the world’s largest oil
producers demanded euros for their barrels, it would be the financial equivalent of a nuclear
strike”. Bill O’ Grady, A.G. Edwards

On May 10, Russian President Vladimir Putin ignited a firestorm that is bound to sweep
across the global economy. In his State of the ation speech to parliament,, he
announced that Russia was planning to make the ruble “internationally convertible” so that it
could be used in oil and natural gas transactions. Presently, oil is denominated exclusively in
dollars and sold through the New York Mercantile Exchange (NYMX) or the London
Petroleum Exchange (LPE) both owned by American investors. If Russia proceeds with its
plan, the ruble will go nose to nose with the dollar on the open market sending several
billions of surplus greenbacks back to the United States. This could potentially send the
American economy into freefall; triggering a deep recession and an extended period of
hyper-inflation.

“The ruble must become a more widespread means of international transactions,” Putin said.
“To this end, we need to open a stock exchange in Russia to trade in oil, gas, and other
goods to be paid for in rubles."

Currently, the central banks around the world carry large stockpiles of dollars to use in their
purchases of oil. This gives the US a virtual monopoly on oil transactions. It also forces
reluctant nations to continue using the dollar even though it is currently underwritten by $8.4
trillion national debt.

Putin’s plan is similar to that of Iran, which announced that it would open an oil-bourse (oil
exchange) on Kish Island in two months. The bourse would allow oil transactions to be
made in petro-euros, thus discarding the dollar. The Bush administration’s belligerence has
intensified considerably since Iran made its intentions clear. In fact, just yesterday, Secretary
of State Condi Rice said that “security guarantees were not on the table” regardless of any
Iranian commitment to stop enriching uranium. In other words, Washington will not provide
Iran a “non-aggression pact” whether it follows UN Security Council guidelines or not.

Surely, this is a sign that Uncle Sam is on a fast-track to war.

The United States must protect its dollar-monopoly in the oil trade or it will lose the
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advantage of being the world’s “reserve currency”. As the reserve currency, the US can
maintain its towering $8.4 trillion national debt and $800 billion trade deficit without fear of
soaring interest rates or hyper-inflation. Trillions of greenbacks are constantly circulating in
oil transactions just as hundreds of billions are stockpiled in foreign banks. In effect, the
Federal Reserve is issuing bad checks with every dollar printed on the assumption that they
will never reach the bank for collection. So far, they’ve been right, and as the price of oil
continues to skyrocket, the Fed just keeps cheerily printing more worthless paper sending it
to the 4 corners of the earth. Regrettably, if Russia or Iran goes ahead with their conversion
plan, then the bad checks will flood back to their source and precipitate a meltdown.

America’s economic supremacy depends entirely on its ability to compel nations to make
their energy acquisitions in greenbacks. If the flaccid dollar is not linked to the world’s most
vital resource, then banks will dump it overnight. This extortion-racket is the system we are
defending in Iraq, not “democracy”. It is a huckster’s scam designed to perpetuate
American debt by forcing worthless currency on the developing world.

In a recent article by Dave Kimble, “Collapse of the petrodollar looming”, the author
provides the details of Russia’s importance to the world oil market.

“Russia's oil exports represent 15.2% of the world's export trade in oil, making it a much
more significant player than Iran, with 5.8% of export volumes. Russia also produces 25.8%
of the world's gas exports, while Iran is still only entering this market as an exporter….
Venezuela has 5.4% of the export market.”

Obviously, it is not in Russia’s interest to trade with its European partners in dollars any
more than it would be for the US to trade with Canada in rubles. Putin can strengthen the
Russian economy and improve Russia’s prestige in the world as an energy superpower by
transitioning to rubles. But, will Washington allow him to succeed?

A growing number of nations are now focusing on the empire’s Achilles’ heel, the dollar.
Venezuela, Russia, Norway and Iran are all threatening to move away from the greenback.
Is this a spontaneous uprising or is it a new type of asymmetrical warfare?

Whatever it is, Washington is bound to be reeling from the affects. After all, war maybe
possible with Iran or Venezuela, but what about Russia? Would Bush be stupid enough to
risk nuclear Armageddon to protect the drooping dollar?

The administration is exploring all of its options and is developing a strategy to crush Putin’s
rebellion. (This may explain why Newsweek editor and undeclared spokesman for the
Council on Foreign Relations (CFR), Fareed Zacharia, asked his guest on this week’s
“Foreign Exchange” whether he thought Putin could be “assassinated”?!? Hmmm? I wonder
if we’ll hear similar sentiments from Tom Friedman this week?)

The Council on Foreign Relations (CFR), the secretive organization of 4,400 American
elites from industry, finance, politics, media and the military (who operate the machinery of
state behind the mask of democracy) has already issued a tersely worded attack on Putin
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(“Russia’ Wrong Direction”; Manila Times) outlining what is expected for Russia to conform
to American standards of conduct. The missive says that Russia is headed in “the wrong
direction” and that “a strategic partnership no longer seems possible”. The article reiterates
the usual canards that Putin is becoming more “authoritarian” and “presiding over the
rollback of Russian democracy”. (No mention of flourishing democracy in Saudi Arabia or
Uzbekistan?) The CFR cites Putin’s resistance to “US and NATO military access to Central
Asian bases” (which are a dagger put to Moscow’s throat) the banishing of Washington’s
“regime change” NGOs from operating freely in Russia (“Freedom Support Act funds”) and
Russia’s continued support for Iran’s “peaceful” development of nuclear energy.

America has never been a friend to Russia. It took full advantage of the confusion following
the fall of the Soviet Union and used it to apply its neoliberal policies which destroyed the
ruble, crushed the economy, and transferred the vast resources of the state to a handful of
corrupt oligarchs. Putin single-handedly, put Russia back on solid footing; taking back
Yukos from the venal Khordukovsky and addressing the pressing issues of unemployment
and poverty-reduction. He is a fierce nationalist who enjoys a 72% approval rating and does
not need the advice of the Bush administration or the CFR on the best path forward for his
country.

The US has purposely strained relations with Russia by putting more military bases in
Central Asia, feeding the turmoil in Chechnya, isolating Russia from its European neighbors,
and directly intervening in its elections.

When the G-8 summit takes place next week, we should expect a full-throated attack from
the corporate media on Putin as the latest incarnation of Adolph Hitler. Watch the fur fly as
the forth estate descends on its newest victim like feral hounds to carrion. (Putin’s
announcement that Russia would be converting to rubles HAS NOT APPEARED IN ANY
WESTERN MEDIA. Like the Downing Street Memo, the firebombing of Falluja, or the
“rigged” 2004 elections, the western “free press” scrupulously avoids any topic that may
shed light on the real machinations of the US government)

Putin’s challenge to the dollar is the first salvo in a guerilla war that will end with the crash of
the greenback and the restoration of parity among the nations of the world. It represents a
tacit rejection of a system that requires coercion, torture and endless war to uphold its global
dominance. When the dollar begins its inevitable decline, the global-economic paradigm will
shift, the American war machine will grind to a halt, and the soldiers will come home.
Maybe, then we can rebuild the republic according to the lost values of human rights and the
rule of law.

Putin’s plan is set to go into effect on July 1, 2006.

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