Tuesday, January 2, 2024

Sometimes It's Easy To Foretell The Future

This piece was posted 2 1/2 months before Russia invaded Ukraine

Tuesday, December 7, 2021
Former Swedish Prime Minister Bildt: "It’s time to let Russia know once and for all that Ukraine is off limits"

That was the headline on his December 6 Washington Post OpEd.

The question, of course, is how are you going to enforce it?

Reuters reported earlier today: "West could cut Russia from SWIFT, sanction Nord Stream, Latvia says"

Do they think Russia hasn't thought of this possibility? Of course they did, a decade ago.

We're dealing with a nation of chess players. They've gamed out four possibilities, sixteen countermoves and 64 counter-countermoves. Meanwhile the American military have been working on their pronouns.

And the Russians also have a secret weapon: Elvira Nabiullina, the head of the Russian central bank.

Imagine having to do a high wire act, allowing the rouble to fall, keeping rates up to counteract the inflationary tendency that introduces, trying to account for the huge asset flows in the underground/oligarch economy while all the while Putin is yelling at you from the sidelines.
She is very good at what she does.

She has already considered and put on the back-burner a proposal to use the Orthodox Church as an internal payment system,  It's there, just in case, you know, the electronic stuff goes down.

Here's the introduction to 2018's "Russia’s central bank quietly raised its key interest rate by 0.25 percentage points on Friday":

If you think having Donald Trump question the Fed head for raising rates is playing rough, just imagine working for Vlad Putin as his popularity drops.
Considering the hand she's been dealt, the chief of the Russian central bank, Ms. Nabiullina, should have garnered a couple more Euromoney Central Banker of the Year awards to sit next to the one she received in 2015.

Seriously, since she took over in 2013 oil prices collapsed, then doubled, the annexation of Crimea led to the first set of sanctions, the rouble fell 50%, the U.S. Treasury threatened Russian banks with exclusion from SWIFT, the second set of sanctions on companies and oligarchs led to the retraction of multi-billion dollar credit facilities which had to be replaced internally and a couple other things that I'm having trouble remembering....

She has payment systems in place with China and together with the oil & gas honchos is ready to redirect those flows. 

And finally, if things escalate, what is to stop the Chinese from attacking Taiwan at the same time Russia moves its border west. With a two-front war, NATO and the U.S. would be shown to be paper tigers.

Here's an ungated version of the WaPo OpEd at the University of Pennsylvania.

And a final thought. When the SWIFT threat was being bandied about, Russia had no alternatives so she needed both an emergency solution and a longer term solution,

The emergency plan was to use the Church, as mentioned above
The longer term plan became the Mir payment system which inspired China's CIPS.

An attempt to use SWIFT sanctions would result in the creation of a parallel system.