“RUSSIA-CHINA” ALREADY DUMPED BILLIONS OF “FIAT PAPER DOLLAR-EURO”!
March 15th, 2014
According to weekly Fed data, a record amount – some $105 billion – in Treasuries had been sold or simply reallocated from the Fed’s custody accounts, bringing the total amount of US paper held at the Fed to a level not seen since December 2012..
While China was one of the culprits suggested to have withdrawn the near USD-equivalent paper, a far likelier candidate was Russia, which as is well-known, has had a modest falling out with the West in general, and its financial system in particular..
Turns out what Russian official institutions may have done with their Treasurys, it was merely the beginning..
In fact, as the FT reports, in silent and not so silent preparations for what will be near-certain financial sanctions (which would include account freezes and asset confiscations following this Sunday’s Crimean referendum) the Russians, read oligarchs, have already pulled billions from banks in the west..
From the FT:
Russian companies are pulling billions out of western banks, fearful that any US sanctions over the Crimean crisis could lead to an asset freeze, according to bankers in Moscow..
Sberbank and VTB, Russia’s giant partly state-owned banks, as well as industrial companies, such as energy group Lukoil, are among those repatriating cash from western lenders with operations in the US. VTB has also cancelled a planned US investor summit next month, according to bankers..
The flight comes as last-ditch diplomatic talks between Russia’s foreign minister and the US secretary of state to resolve the tensions in Ukraine ended without an agreement..
Markets were nervous before Sunday’s Crimea referendum on secession from Ukraine. Traders and businesspeople fear this could spark western sanctions against Russia as early as Monday..
It probably will. What it will also do is force Russia to engage China far more actively in bilateral trade and ultimately to transact using either Rubles or Renminbi, and bypass the dollar. Perhaps even using gold, something which the price of the yellow metal sniffed out this week, pushing itself to 6 month highs. It will also make financial ties between the two commodity-rich nations even closer, while further alienating that “imperialist devil,” the US..
Of course, the west thinking like the west, and assuming that all that matters to Russia is the closing level of the Micex, believes that a sufficient plunge in Russian stocks would have been enough to deter Putin..
So great job, Obama: you just pushed Russia and China even closer by necessity..
So the bottom line is that Russia, thinking a few steps ahead, already has withdrawn the bulk of its assets from the West, and why not. Recall that a year ago it was revealed that the same Russians who were supposed to be punished in Cyprus had mostly withdrawn their funds in advance of the bail in: they tend to know what is coming. It was the ordinary Cypriot citizens, who had done nothing wrong, who were most impaired..
And so while the Russian response is already known, we wonder just how true is the inverse: just how prepared is the west, and especially Europe, to exist in a world in which a third of Germany’s gas is suddenly cut off?
We can’t wait to find out early next week…