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BRICS Under Attack: Western Banks, Governments Launch Full-Spectrum Assault On Russia

by Eric Draitser, via Mintpressnews

The U.S.-NATO Empire, with its centers of power in Washington, on Wall Street, and in the city of London, is on the offensive against the BRICS countries. This assault takes many forms, each tailored to its specific target.

The ongoing soft coup in Brazil has recently entered a new stage with the impeachment of President Dilma Rousseff of the left-wing Workers’ Party. Simultaneously, the destabilization of the ANC-led government in South Africa continues as political forces align to remove President Jacob Zuma. These two situations illustrate clearly the very potent forms of subversion via Western-funded political formations and movements being employed against Brazil, Russia, India, China and South Africa, the bloc of emerging economies also known as BRICS.

However, when it comes to a country as large as Russia, with its vast military capabilities, consolidated and wildly popular political leadership, and growing antagonism toward the West, the tools available to the Empire to undermine and destabilize are in some ways more limited.

Indeed, in the context of Russia, the popular mobilization pretext does not apply, and so that weapon in the imperial arsenal is blunted considerably. But there are other, equally potent (and equally dangerous) methods to achieve the desired effect.

Russia is the target of a multi-faceted, asymmetric campaign of destabilization that has employed economic, political, and psychological forms of warfare, each of which has been specifically designed to inflict maximum damage on the Kremlin. While the results of this multi-pronged assault have been mixed, and their ultimate effect being the subject of much debate, Moscow is, without a doubt, ground zero in a global assault against the BRICS nations.

Economic war: Hitting Russia where it’s vulnerable

Russia Ruble

People walk past a sign indicating the US dollar, top, and euro, bottom, rates of a currency exchange in Moscow, Russia, Friday, Jan. 16, 2009. Russia’s ruble fell to its lowest point in more than a decade against the dollar as the Central Bank continued a policy of controlled devaluation. The decreases marked the 16th devaluation of the ruble since Nov. 11, when the government launched a controlled slide that has seriously depleted its currency reserves. (AP Photo/Sergey Ponomarev)

While Russia is a world class power militarily, it is highly vulnerable economically. For that obvious reason, this area has been a primary focus of the destabilization thrust.

Russia has for decades been overly reliant, if not entirely dependent, on revenues from the energy sector to maintain its economic growth and fund its budget. According to the U.S. Energy Information Administration and Russia’s Federal Customs Service, oil and gas sales accounted for 68 percent of Russia’s total export revenues in 2013. With more than two-thirds of total export revenues and roughly 50 percent of the federal budget, not to mention 25 percent of total GDP, coming from oil and gas revenue, Russia’s very economic survival has been as dependent on energy as almost any country in the world.

In light of this, it’s no surprise that the drop in oil prices over the 18-month period from April 2014 to January 2016, which saw prices dive from $105 per barrel to under $30 per barrel, has caused tremendous economic instability in Russia. Even many leading Russian officials have conceded that the negative impact to Russia’s economy is substantial, to say the least.

At the World Economic Forum in January, former Russian Finance Minister Alexey Kudrin explained that not only has the drop in oil prices badly hurt the Russian economy, but the worst may be yet to come. Kudrin noted the potential for prices to drop even further, possibly even below $20 per barrel, and he warned that the impact to the economy will be significant.

Specifically, it’s not just the loss of revenue, but the negative effect on wages and the currency which have many economic analysts and political figures worried.

According to the Russian Federal Statistics Service, real wages for Russian workers have dropped significantly since the end of 2014, with steep declines throughout 2015 continuing into early 2016. This has been felt by ordinary Russians, whose wages have stagnated while inflation causes prices to shoot upwards and who have had to endure belt-tightening in terms of personal consumption, and at the national level, where the Russian government has been facing a potentially large budget shortfall for 2016.

It must be noted, however, that recent months have seen an improvement in the relative performance of the ruble, but the long-term outlook from experts remains gloomy.

This has led many Russian analysts and policymakers to advocate yet again for a decreased dependence on energy revenues. They argue that the current climate could force economic restructuring away from the critical energy sector. Aside from Kudrin, Deputy Prime Minister Yuri Trutnev made the case for potential “structural economic reforms,” as did Vladimir Mau of the Russian Presidential Academy of National Economy and Public Administration.

Writing earlier this year in Vedomosti, Russia’s leading business publication, Mau explained:

The demand for oil as a commodity depends on technological progress…And it’s not obvious that oil as a fuel will be always in demand in times of economic growth. With the change of the technological model, it is not ruled out that oil will become just a stock commodity for the energy and chemical industry.

This last point — how oil is used relative to the market — is the most salient; in other words, it’s the financialization of oil. But the analysis must go a step further and explore how the financialization is, in effect, a weaponization process as oil prices become increasingly the playthings of powerful financial institutions, particularly the major banks on Wall Street and in the city of London. And this is no mere conspiracy theory.

How Wall Street targeted Russia using oil

In July 2013, Sen. Sherrod Brown, chair of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, opened a hearing to probe just how connected major Wall Street banks were to the holding of physical oil assets, and the attendant ability of these companies to manipulate oil prices. The findings of the hearing, considered damning by multiple analysts knowledgeable on the subject, prompted an investigation by the Senate’s Permanent Subcommittee on Investigations, published as “Wall Street Bank Involvement with Physical Commodities.”

The report highlighted just one of the big banks, Morgan Stanley, noting:

One of Morgan Stanley’s primary physical oil activities was to store vast quantities of oil in facilities located within the United States and abroad. According to Morgan Stanley, in the New York-New Jersey-Connecticut area alone, by 2011, it had leases on oil storage facilities with a total capacity of 8.2 million barrels, increasing to 9.1 million barrels in 2012, and then decreasing to 7.7 million barrels in 2013. Morgan Stanley also had storage facilities in Europe and Asia.  According to the Federal Reserve, by 2012, Morgan Stanley held ‘operating leases on over 100 oil storage tank fields with 58 million barrels of storage capacity globally.’

Pam and Russ Martens of the well-respected financial analysis site WallStreetOnParade.com succinctly noted in their analysis of this issue: “With financial derivatives and 58 million barrels of physical storage capacity, it might not be so hard to manipulate the oil market.”

Indeed, the sheer scope of Morgan Stanley’s market influence demonstrates the obvious fact that the major Wall Street banks, and their cousins in the city of London, are able to significantly affect global prices using multiple levers like supply and derivatives, among others.

The Senate report’s brazen honesty is likely the main reason the corporate media failed to cover it all.  As noted in the report:

Due to their physical commodity activities, Goldman, JPMorgan, and Morgan Stanley incurred increased financial, operational, and catastrophic event risks, faced accusations of unfair trading advantages, conflicts of interest, and market manipulation, and intensified problems with being too big to manage or regulate, introducing new systemic risks into the U.S. financial system.

But perhaps most jaw-dropping is this January 2014 statement by Norman Bay, director of the Office of Enforcement at the Federal Energy Regulatory Commission, who testified before the Committee on Banking and Financial Institutions and Consumer Protection Subcommittee. He plainly outlined how the big banks manipulate global oil markets:

A fundamental point necessary to understanding many of our manipulation cases is that financial and physical energy markets are interrelated … a manipulator can use physical trades (or other energy transactions that affect physical prices) to move prices in a way that benefits his overall financial position. One useful way of looking at manipulation is that the physical transaction is a ‘tool’ that is used to ‘target’ a physical price.

When one considers how much influence these large banks have on global prices, it’s almost self-evident that they would be able to use oil prices to execute a political and geopolitical agenda. With that in mind, it seems highly suspicious (to say the least) that the collapse of the oil price coincided directly with Russia’s move to annex Crimea and assert its dominance over its sphere of influence, thereby effectively stopping the eastward expansion of NATO in Ukraine.

It’s amusing then when one reads The New York Times reporting [last] month that “simple economics” explains the drop in oil prices. In fact, it’s clear that it’s just the opposite: The collapse of oil is the result of financial manipulation by Wall Street in the service of the broader agenda of the Empire.

Indeed, in late 2014 Russian President Vladimir Putin implied strongly that the oil plunge had less to do with economic factors than with political decisions. Putin openly theorized: “There’s lots of talk about what’s causing (the lowering of the oil price). Could it be the agreement between the U.S. and Saudi Arabia to punish Iran and affect the economies of Russia and Venezuela? It could.”

Of course, Putin was not alone in this assessment, as many international observers spread “conspiracy theories” about collusion between the U.S. and Saudi Arabia to deliberately depress oil prices by not cutting production despite all market indicators pointing to a needed decrease.

With U.S.-Russia relations having reached their nadir at precisely that moment, and with Venezuela and Iran also on the enemies list, it is no surprise that many analysts around the world concluded that Washington and Riyadh were conspiring on oil for political reasons.

Of course, the other major impact of the oil plunge on Russia has to do with the burgeoning energy-trade relationship between Russia and China. After the massive oil and gas deals announced between Russia and China in 2014 — deals worth hundreds of billions of dollars over the next three decades, it seems that Washington calculated that while it could not prevent the deals from moving forward, it could undermine them by fundamentally changing the calculus of the deals by tanking oil prices. In so doing, not only have the contracts been rendered less profitable for Russia, they are now subject to decreasing demand from China, which is experiencing its own economic slowdown.

In short, Russia’s attempt to break free of its dependence on revenue from gas sales to Europe by shifting its focus eastward has left Moscow in a bind. Facing the prospect of significantly less revenue than it anticipated coming from the deals with Beijing, Russia has been forced to adjust its own estimates and outlook for the coming years.

 Sanctions: The other economic weapon

The overall impact of Western sanctions against Russia is a hotly debated subject. Russian media tends to downplay the overall impact of the sanctions, while the Western media paints a picture of imminent collapse. Notably, Paul Krugman, the leading liberal doomsayer, prognosticated in The New York Times in 2014 that “Putin’s Bubble Bursts,” warning that Russia was headed for economic meltdown thanks to the courageous sanctions regime imposed by the fearless leader President Barack Obama.

In reality, the sanctions had little immediate, direct impact on the Russian economy, but the indirect bruising might be significant, particularly over the medium- and long-term. Last year, the International Monetary Fund issued a report, noting:

IMF estimates suggest that sanctions and counter sanctions might have initially reduced real GDP by 1 to 1½ percent. Prolonged sanctions may compound already declining productivity growth. The cumulative output loss could amount to 9 percent of GDP over the medium term. However, the report’s authors underline that these model-driven results are subject to significant uncertainty.

But, looking beyond the raw numbers, one must realize that the policy prescriptions outlined by the IMF and leading economists internationally are perhaps the actual target for the West.

The IMF recommended “reforming the pension system” (read: reduce pensions), reducing energy subsidies, reducing tax exemptions, and other measures, while also suggesting that education, health care, and public investment be safeguarded. However, the subtext of the recommendations is that austerity, which by its very definition starves public programs of much needed funding, is the way to go for Russia.

There are likely strategic planners in Washington who recognize that the political subversion model employed in Brazil and South Africa simply won’t work in Russia. If nothing else, the failed “White Revolution” protests of late 2011 led by Russian liberals and various pro-Western political forces, demonstrated unequivocally that the Russian state was prepared to prevent precisely this sort of outcome.

And so it seems that those who play on what former National Security Advisor Zbigniew Brzezinski famously called “The Grand Chessboard,” have made their moves in an attempt to corner Russia economically. Whether that strategy has been, or will be, effective likely depends on perspective. While it alone will not bring about the Western pipe dream of regime change in Russia, the Empire’s elites are banking on the collective assault on Russia and the BRICS broadly to do what political subversion alone could not.


Eric Draitser is a geopolitical analyst based in New York and the founder of StopImperialism.

 

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14 Comments

  1. Reblogged this on 4bluesun and commented:

    All nations are using the Terrorist Card to go after taxes. The Currencies are headed to a global reset. We are facing changes in our all areas of our Planet. Please go to Solari.com, AlMartinRaw.com, EllenBrown.com, and MartinArmstrong.com. These sites will empower you to future.

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  2. There is much of value here. However, I take issue only with the assertion that Russia is oil-dependent. The IMF states that roughly 7% of GNP is based on oil and gas. So much of Russia’s trade is with the east, many Russian products are invisible to westerners.
    Financially speaking, Russia is far better off than the US. Her deep ties with China ensure her viability and will be the engine of her recovery once they jettison the dollar. Ukraine could have been a part of this, but instead, she literally sold off chunks of territory to US oil firms (Shell and Chevron, specifically).
    Regardless, the author has good instincts.

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  3. The Russian Federation is currently under attack from the Anglo-Zionist empire. Let’s start with a recognition of this rather uncomfortable fact. Whether this turns into a hot war is a moot point, but it is certainly a possibility. In a war situation the normal rules of trade are suspended. Countries (even capitalist countries) in effect have to of necessity become command economies. If Russia is not to be overwhelmed by the superior economic and financial fire-power of the western alliance, it will need to take draconian methods to avoid this. At the present time capital flight from Russia has amounted to $25 billion per annum since 1991. The neoliberal privatisation programme of that inauspicious year effectively dismantled the USSR public sector reducing it to a playground for gangsters/looters – Berezvosky, Ambrovich, Khodorkovsky – being the most egregious. The great challenge for Russia is how do undo these kleptocratic grabs. Since it is estimated that 110 people own 35% of Russia’s wealth. And if Russia is to survive the onslaught of the enemy within allied to the Anglo-zionist onslaught it must gain full control over its economy and mobilize its people and economy onto a war footing. Otherwise it will face defeat and colonization. This will of course suit the interests of the 5% enemy within who still hanker after the golden age of Yeltsin and the giveaways of Russia’s assets at knock-down prices to those who were politically connected.
    Russia cannot afford to fight with one arm tied behind its back as it has been doing so far. What it needs to do is:
    • Impose capital transfers to stop the country being bled to death.
    • As a matter of extreme urgency accelerate and widen the policy of import substitution.
    • Choose selective key industries for tax breaks and exemptions, for R&D and export orientation.
    • Impose a policy of wage and price controls to counter inflationary possibilities.
    • Disentangle itself from financial connections with hostile countries.
    • A nuclear option would include Russian banks defaulting on their western loans. It is argued that this would lead to Russia being locked out of capital markets, but since they are already locked out what difference. This could be supplemented by dumping Russian held US Treasury Bonds onto the world markets (an option also open to China).
    Proposals such as these have been put forward by inter alia Sergei Glazyev, but seem to have fallen on deaf ears, such is the power of the 5th column ensconced as they are in leading positions in the media and government institutions.
    It seems probable that some such policies will have to be enacted eventually, but the longer they are delayed the higher the cost will be. We saw in 1941 that the stupidity of the regime had made the USSR vulnerable to attack, it recovered in time and was victorious but the cost was much higher than it ought to have been. Do Russia really need to go through the same process again?
    And BTW Europe and the US are not all-powerful they are both headed (if not already in) the second leg of the 2008 downturn. To quote Lenin – ‘’A colossus with feet of clay.’’ Please also note the state of the US shale oil industry which has been gutted by the oil price rise. The ramifications of this are currently being felt in the US junk bond market. See David Stockman and Peter Schiff.

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  4. Jordan Martin says

    Just imagine what OUR regime change totalitarian neocon government will look like when they have achieved their goals of ‘broad spectrum international ‘dominance.’ We are the citizens of an empire that is increasingly willing to torture, launch one pre-emptive war after the next, destabilize and reduce to smoking ruins any nation or individual that will not do OUR bidding. Now, these blind imperialists who are OUR elected leaders and the crème of our academe, after TOTAL failure in Iraq believe that Russia will somehow collapse or perhaps starve without using its vast military might. That Russia will shrewdly use its capacity to defend itself is certain. Only a fool like Clinton could ignore this. When China, India, and the rest of the world grasp that it is inevitable that WE will try to dominate/enslave them, a coalition of the willing will unite against us. All this because of the actions of a small number of powerful, influential Americans who have gone insane. The entire world will eventually unite against us for their survival. Meanwhile, back here at home anyone who speaks out against the policies of our government will be treated like the enemies of Neocon lunatics elsewhere. With this terrible scenario just around the corner there is a possible solution. Vote for Bernie Sanders 2016 PLEASE

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  5. There is a point where imposing sanctions can become self-defeating by unwittingly creating economic conditions similar to those created by the protectionism of post-war Japan.

    After the bombing of Hiroshima and Nagasaki brought about the termination of WW2, Japan lay in ruins. Less than two decades later the nation’s economy was thriving.Though the rebuilding had been enabled in part through aid and assistance provided by the United States, the real effort came from the Japanese people themselves.

    An internal market produced by a maze of import restrictions imposed by the post war Japanese government – which produced a similar economic climate to the one sanctions are producing in Russia today – created an expanding market for home produced goods. Following a relatively short period of severe austerity, rising employment, led to rising incomes, leading in turn to massive increases in domestic production and consumption. This magic combination led to falling prices, making Japanese goods more attractive abroad. A booming export market fuelled growth even further, Technical innovations that had been inspired by limited resources made Japan a world leader in the production of goods such as cheap electronics and motorcycles. As things progressed, companies like Sony moved up-market.

    Russia has a distinct advantage over Japan, insofar as that it is not nearly so dependent on the import of raw resources, or the artificial manipulation of the energy markets described above. Though an important factor, neither are exports so important as we are led to believe. Especially in the long term. It is those very fluctuations, combined with the export of manufactuing, that have led to the never-ending series of financial disasters that have beset Japan’s economy for more than a couple of decades.

    Added to that, by accident or design, Russia is in for the long game, something the US no longer understands. With or without manipulation by global financial structures, US manufacturing is on the ropes, which goes a long way to explain its disastrous imperial adventures. Understanding that makes it far easier to comprehend the larger picture than complicated economic theories ever will.

    One thing is certain: the 1% is becoming increasingly aware that If things don’t change very soon, there will be growing dissent at home. As shown by the militarisation of the police, and ever more laws enabling security services to spy on the very citizens who pay for that privilege, this is a very worrying prospect in a country where much of the population is armed.

    If the world lasts much longer, which ought to be the biggest worry for us all, it is extremely doubtful it can do so with the present system of international trade and exchange in place. Trust in the banking system has almost failed completely, as it teeters on collapse. Once it goes, it will never return.

    Something US financiers don’t seem to understand is that making money has come to mean making nothing at all.

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  6. History repeats itself. 1979 The Soviets enter Afghanistan to stabalize the govnmt. against the Takfiri onslought. 1983 Reagon floods the market with crude via GCC countries oil drops to 8 dollars a barrel WTC and 9dollars 50 Brentwood pricing. Further more Reagon launches his star war plan and his famous speech axis of evil . The Anglo-zionist play book hasnt changed much during this period many Soviet citizens of Jewish faith migrated to Israel this allowed the Zionist to further their cause for the Yinon plan of greater Israel from the nile to the euphrates . In Israel itself boulangeries and Soviet delis are propping up selling Khosher cured pork products . ( The soviet jews are secular in nature and eat pork. The anglo-zionist r on a war footing the fiat money fractional banking system and ponzi scheme is past it shelf life the petro dollar system is loosing its capacity to maintain global hegenomy hence Exceptionalisitan (New-York and London capitals) is loosing its edge. Time is of the essence hence tempus fugit the move is on. Thats why Syria ,Iran, Ukraine. the troubles in South America . Look at Venezuela ,look at Argentina and Brazil. . Libya failed state and their gold reserves have vanished fancy that , Rockfellers and Rothschilds r laughing . We the sheeple r fooled again. Yesterdays news gets wrapped in todays fish. P.S ask the Germans how much of their gold has been returned to them from the second world war.

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  7. “Russia has for decades been overly reliant, if not entirely dependent, on revenues from the energy sector to maintain its economic growth and fund its budget. ”

    No. Exports fund its imports of capital goods. Its budget is in roubles that the Russian government issues.

    Their problems have stemmed from running US$ peg thus meaning the rouble has effectively been a convertible currency.

    They need to float and stop paying foreign exporters in foreign currency.

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