US Threatens Sanctions, Russia Threatens US Dollar Abandonment

[The following post is by TDV editor-in-chief, Jeff Berwick.]

The plight of the Ukraine has re-ignited Cold War tensions – and the US Dollar could be the first victim.

Russia wants the world to know that, no matter the sanctions announced against it, it holds the trump card: reducing to zero its economic reliance on the US.  A Kremlin economist, Sergei Glazyev, told RIA Novosti that this would lead to a crash of the US financial system. 

“We would find a way not just to reduce our dependency on the United States to zero but to emerge from those sanctions with great benefits for ourselves,” said the Kremlin economic aide.

Since sanctions were first rattled in the media, the EU has backed off the notion, considering that Russia is its third largest trading partner. Sanctions would do damage to both Russia and western nations experts agree. The US government, almost always the dumbest in the room, nonetheless, has not let-up.

“If sanctions are applied against state structures, we will be forced to recognize the impossibility of repayment of the loans that the US banks gave to the Russian structures. Indeed, sanctions are a double-edged weapon, and if the US chooses to freeze our assets, then our equities and liabilities in dollars will also be frozen. This means that our banks and businesses will not return the loans to American partners,” Glazyev, who was speaking in the capacity of an academic and not a policy maker, said. He added that Russia would likely be forced to dump the dollar in order to reduce its dependence on the US financial system. 

“We have wonderful economic and trade relations with our Southern and Eastern partners,” he said. “We will find a way not just to eliminate our dependence on the US but also profit from these sanctions.”

Russia has built itself up since it reverted back to semi-capitalism in the nineties, and has emerged as a world-class power. In a report issued by the Capital Economics research group, Russia is a major supplier of oil to Germany, the Netherlands, and “Western Europe generally.”

The Russian oil giant Gazprom’s market share is expected to grow in the coming months.

The US has yet to announce sanctions, but has cancelled preparations for the annual G8 summit scheduled for Sochi in June due to Russia´s advances in the Ukraine. And John Kerry has come out with the ultimate hypocritical statement, “You just don’t invade another country on phony pretext in order to assert your interests.”

Obama has also stopped trade and energy talks with Russia. State Department spokeswoman Jen Psaki told reporters of the US’s options:  “At this point, we are not just considering sanctions. Given the actions Russia is taking, it is likely we will put those in place and we are preparing that,” she said.

The United States is growing increasingly isolated on Russia, as a leaked document in the UK has hinted ministers there are second guessing sanctions. They don’t wish to lose Russian investment into the country. The government document that was leaked read that Britain “should not support, for now, trade sanctions… or close London’s financial center to Russians.” 

For the US to impose sanctions on Russia, the support of Britain and Europe will be needed. “Unilateral US sanctions against Russia are not going to have much of an effect if Europe remains a haven for Russian banks and Russian oligarchs to stash and invest their money,” said Senator Chris Murphy, a Connecticut Democrat. “If the United States shuts its economic doors to Russia and Europe leaves its doors open, there won’t be much change in behavior from Moscow.”

US lawmakers have been voiciferous in proposing aggressive sanctions against Russian banks. Congress also has acted to freeze the assets of Russian public institutions and private investors. US lawmakers are also looking into loans for the coup regime in Kiev which overthrew the elected government of Ukrainian President Viktor Yanukovych.

Many people claim the current events over the Ukraine are not betokening of a “new Cold War”, but there is much evidence to suggest we’ve already entered into a prolonged period of intense “diplomatic” jockeying a la the Cold War. It is no secret that the US has an imperialistic war agenda, and Russia is not dumb. Putin has not and will not tolerate NATO expansion to its’ borders. In fact, the west – mainly the US – promised NATO would not expand to Russia’s borders once the Iron Curtain fell. The US lied.  And Russia noted it. It has moved against the dollar in a few minor capacities already. For instance,  in 2006, Russia already tried to ban the words “euros” and “dollars” from the media and official speech.

And In November 2013, the Russian lawmaker, Mikhail Degtyarev, proposed a bill to ban the use and possession of the dollar, saying, correctly, it was like a Ponzi scheme. He warned that the Russian government would have to bail out Russians holding onto dollars in the event of a dollar collapse.

“If the U.S. national debt continues to grow, the collapse of the dollar system will take place in 2017,” said Mr. Degtyarev of the Liberal Democrat Party. “The countries that will suffer the most will be those that have failed to wean themselves off their dependence on the dollar in time. In light of this, the fact that confidence in the dollar is growing among Russian citizens is extremely dangerous.”

Though that bill was never poised to get very far, we detect a very real trend here at TDV and one that is not to be taken lightly. We have seen foreshadowing of what is to come: an event in the near-future which severs relations between the US and other economic powers, and renders the dollar itself history. The entire world will suffer economic damage, but nowhere so bad as in the US itself. 

That is why it would be a great miscalculation on the part of Barack O’Bummer to take a hardline stance against Russia and impose sanctions. China has already shown support of Russia’s posturing in regards to the Ukraine considering the extraordinary circumstances there. Russia might stand to gain by abandoning the dollar.

All the stars are aligning for a collapse of the dollar and the US empire and that won’t necessarily be a bad thing at all… for those who are prepared. Stay tuned at The Dollar Vigilante blog for continuing updates on the coming collapse and stay tuned for our next TDV Wealth Management conference, to be held in Mexico in late April.  And, subscribe to the TDV newsletter for more detailed information on how to protect yourself and your wealth through The End Of The Monetary System As We Know It (TEOTMSAWKI).