Sunday, November 30, 2014

Economic Warfare Between the U.S. and Russia - Gold Is Anti-Dollar - Drop in Petro Prices Does Not Affect Russia - "Checkmate": Game Over - US$60 Oil the Black Swan? - U.S. Global Economic Hegemony Is Over

Source: Gold-Eagle

Grandmaster Putin's Golden Trap

Dmitry Kalinichenko
November 23, 2014

Very few people understand what Putin is doing at the moment. And almost no one understands what he will do in the future.


No matter how strange it may seem, but right now, Putin is selling Russian oil and gas only for physical gold.

Putin is not shouting about it all over the world. And of course, he still accepts US dollars as an intermediate means of payment. But he immediately exchanges all these dollars obtained from the sale of oil and gas for physical gold!

To understand this, it is enough to look at the dynamics of growth of gold reserves of Russia and to compare this data with foreign exchange earnings of the RF coming from the sale of oil and gas over the same period.



Moreover, in the third quarter the purchases by Russia of physical gold are at an all-time high, record levels. In the third quarter of this year, Russia had purchased an incredible amount of gold in the amount of 55 tons. It's more than all the central banks of all countries of the world combined (according to official data)!

In total, the central banks of all countries of the world have purchased 93 tons of the precious metal in the third quarter of 2014. It was the 15th consecutive quarter of net purchases of gold by Central banks. Of the 93 tonnes of gold purchases by central banks around the world during this period, the staggering volume of purchases - of 55 tons - belongs to Russia.

Not so long ago, British scientists have successfully come to the same conclusion, as was published in the Conclusion of the U.S. Geological survey a few years ago. Namely: Europe will not be able to survive without energy supply from Russia. Translated from English to any other language in the world it means: "The world will not be able to survive if oil and gas from Russia is subtracted from the global balance of energy supply".

Thus, the Western world, built on the hegemony of the petrodollar, is in a catastrophic situation. In which it cannot survive without oil and gas supplies from Russia. And Russia is now ready to sell its oil and gas to the West only in exchange for physical gold! The twist of Putin's game is that the mechanism for the sale of Russian energy to the West only for gold now works regardless of whether the West agrees to pay for Russian oil and gas with its artificially cheap gold, or not.

Since Russia has a constant flow of dollars from the sale of oil and gas, it will be able to convert these dollars to buy gold at current gold prices, depressed by all means by the West. This equates gold price, which had been artificially and meticulously lowered by the Fed and ESF many time…via artificially inflated purchasing power of the dollar through market manipulation.

Interesting fact: The suppression of gold prices by the special department of US Government - ESF (Exchange Stabilization Fund) - with the aim of stabilizing the dollar has been made into a law in the United States.

In the financial world it is (generally) accepted as a given that gold is anti-dollar…i.e. the gold price runs inverse to value of the dollar.

In 1971, US President Richard Nixon closed the 'gold window', ending the free exchange of dollars for gold, guaranteed by the US in 1944 at Bretton Woods. In 2014, Russian President Vladimir Putin has reopened the 'gold window', without asking Washington's permission.
Right now the West spends much of its efforts and resources to suppress the prices of gold and oil. Thereby, on the one hand to distort the existing economic reality in favor of the US dollar …and on the other hand, to destroy the Russian economy, refusing to play the role of obedient vassal of the West.
Today assets such as gold and oil look proportionally weakened and excessively undervalued against the US dollar. It is a consequence of the enormous economic effort on the part of the West.
And now Putin sells Russian energy resources in exchange for these US dollars, artificially propped by the efforts of the West. With these dollar proceeds Putin immediately buys gold, artificially devalued against the U.S. dollar by the efforts of the West itself!
There is another interesting element in Putin's game. It's Russian uranium. Every sixth light bulb in the USA depends on its supply, which Russia sells to the US too…for dollars.
Thus, in exchange for Russian oil, gas and uranium, the West pays Russia with dollars, purchasing power of which is artificially inflated against oil and gold by the efforts (manipulations) of the West. However, Putin uses these dollars only to withdraw physical gold from the West in exchange at a price denominated in US dollars, artificially lowered by the same West.
This truly brilliant economic combination by Putin puts the West led by the United States in a position of a snake, aggressively and diligently devouring its own tail.
The idea of this economic golden trap for the West is probably not authored by Putin himself. Most likely it was the idea of Putin's Advisor for Economic Affairs – Dr. Sergey Glazyev. Otherwise, why seemingly not involved in business bureaucrat Glazyev, along with many Russian businessmen, was personally included by Washington on the sanction list? The idea of an economist, Dr. Glazyev was brilliantly executed by Putin…but with full endorsement from his Chinese colleague - XI Jinping.

Especially interesting in this context looks the November statement of the first Deputy Chairman of Central Bank of Russia Ksenia Yudaeva, which stressed that the CBR can use the gold from its reserves to pay for imports, if need be. It is obvious that in terms of sanctions by the Western world, this statement is addressed to the BRICS countries, and first of all China. For China, Russia's willingness to pay for goods with Western gold is very convenient. And here's why:

China recently announced that it will cease to increase its gold and currency reserves denominated in US dollars. Considering the growing trade deficit between the US and China (the current difference is five times in favor of China), then this statement translated from the financial language reads: "China stops selling their goods for dollars". The world's media chose not to notice this grandest in the recent monetary historic event . The issue is not that China literally refuses to sell its goods for US dollars. China, of course, will continue to accept US dollars as an intermediate means of payment for its goods. But, having taken dollars, China will immediately get rid of them and replace with something else in the structure of its gold and currency reserves. Otherwise the statement made by the monetary authorities of China loses its meaning: "We are stopping the increase of our gold and currency reserves, denominated in US dollars." That is, China will no longer buy United States Treasury bonds for dollars earned from trade with any countries, as they did this before.

Thus, China will replace all the dollars that it will receive for its goods not only from the US but from all over the world with something else not to increase their gold currency reserves, denominated in US dollars. And here is an interesting question: what will China replace all the trade dollars with? What currency or an asset? Analysis of the current monetary policy of China shows that most likely the dollars coming from trade, or a substantial chunk of them, China will quietly replace and de facto is already replacing with Gold.

In this aspect, the solitaire of Russian-Chinese relations is extremely successful for Moscow and Beijing. Russia buys goods from China directly for gold at its current price. While China buys Russian energy resources for gold at its current price. At this Russian-Chinese festival of life there is a place for everything: Chinese goods, Russian energy resources, and gold - as a means of mutual payment. Only the US dollar has no place at this festival of life. And this is not surprising. Because the US dollar is not a Chinese product, nor a Russian energy resource. It is only an intermediate financial instrument of settlement - and an unnecessary intermediary. And it is customary to exclude unnecessary intermediaries from the interaction of two independent business partners.

It should be noted separately that the global market for physical gold is extremely small relative to the world market for physical oil supplies. And especially the world market for physical gold is microscopic compared to the entirety of world markets for physical delivery of oil, gas, uranium and goods.

Emphasis on the phrase "physical gold" is made because in exchange for its physical, not 'paper' energy resources, Russia is now withdrawing gold from the West, but only in its physical, not paper form. China accomplishes this by acquiring from the West the artificially devalued physical gold as a payment for physical delivery of real products to the West.

The West hopes that Russia and China will accept as payment for their energy resources and goods…the "shitcoin" or so-called "paper gold" of various kinds also did not materialize. Russia and China are only interested in real gold and only the physical metal as a final means of payment.

For reference: the turnover of the market of paper gold, only of gold futures, is estimated at $360 billion per month. But physical delivery of gold is only for $280 million a month. This equates to a ratio of trade of paper gold versus physical gold to 1000 to 1.

Using the mechanism of active withdrawal from the market of one artificially lowered by the West financial asset (gold) in exchange for another artificially inflated by the West financial asset (USD), Putin has thereby started the countdown to the end of the world hegemony of petrodollar. Thus, Putin has put the West in a deadlock of the absence of any positive economic prospects.

The West can spend as much of its efforts and resources to artificially increase the purchasing power of the dollar, lower oil prices and artificially lower the purchasing power of gold. The problem of the West is that the stocks of physical gold in possession of the West are not unlimited. Therefore, the more the West devalues oil and gold against the US dollar, the faster it loses devaluing Gold from its not infinite reserves.

In this brilliantly played by Putin economic combination, physical gold from the reserves of the West is rapidly flowing to Russia, China, Brazil, Kazakhstan and India (i.e. the BRICS countries). At the current rate of reduction of reserves of physical gold, the West simply does not have the time to do anything against Putin's Russia until the collapse of the entire Western petrodollar world. In chess the situation in which Putin has put the West, led by the US, is called "time trouble".

The Western world has never faced such economic events and phenomena that are happening right now. The former USSR rapidly sold gold during the fall of oil prices. Today, Russia rapidly buys gold during the fall in oil prices. Thus, Russia poses a real threat to the American model of petrodollar world domination.

The main principle of world petrodollar model is allowing Western countries led by the United States to live at the expense of the labor and resources of other countries…based on the role of the US currency, dominant in the global monetary system (GMS) . The role of the US dollar in the GMS is that it is the ultimate means of payment. This means that the national currency of the United States in the structure of the GMS is the ultimate asset accumulator, to exchange which to any other asset does not make sense.

Led by Russia and China, what the BRICS are doing now is actually changing the role and status of the US dollar in the global monetary system. From the ultimate means of payment and asset accumulation, the national currency of the USA, by the joint actions of Moscow and Beijing is turned into only an intermediate means of payment. Intended only to exchange this interim payment for another and the ultimate financial asset - gold. Thus, the US dollar actually loses its role as the ultimate means of payment and asset accumulation, yielding both of those roles to another recognized, denationalized and depoliticized monetary asset – GOLD!

Traditionally, the West has used two methods to eliminate the threat to the hegemony of petrodollar model in the world and the consequent excessive privileges for the West:

One of these methods - colored revolutions. The second method, which is usually applied by the West, if the first fails - military aggression and bombing.

But in Russia's case both of these methods are either impossible or unacceptable for the West.

Because, firstly, the population of Russia, unlike people in many other countries, does not wish to exchange their freedom and the future of their children for Western kielbasa (meat sausage). This is evident from the record ratings of Putin, regularly published by the leading Western rating agencies. Personal friendship of Washington protégé Navalny with Senator McCain played for him and Washington a very negative role. Having learned this fact from the media, 98% of the Russian population now perceive Navalny only as a vassal of Washington and a traitor to Russia's national interests. Therefore Western professionals, who have not yet lost their mind, cannot dream about any color revolution in Russia.

As for the second traditional Western way of direct military aggression, Russia is certainly not Yugoslavia, not Iraq nor Libya. In any non-nuclear military operation against Russia, in the territory of Russia, the West led by the US is doomed to defeat. And the generals in the Pentagon exercising real leadership of NATO forces are aware of this. Similarly hopeless is a nuclear war against Russia, including the concept of so-called "preventive disarming nuclear strike". NATO is simply not technically able to strike a blow that would completely disarm the nuclear potential of Russia in all its many manifestations. A massive nuclear retaliatory strike on the enemy or a pool of enemies would be inevitable. And its total capacity will be enough for survivors to envy the dead. That is, an exchange of nuclear strikes with a country like Russia is not a solution to the looming problem of the collapse of a petrodollar world. It is in the best case, a final chord and the last point in the history of its existence. In the worst case - a nuclear winter and the demise of all life on the planet, except for the bacteria mutated from radiation.

The Western economic establishment can see and understand the essence of the situation. Leading Western economists are certainly aware of the severity of the predicament and hopelessness of the situation the Western world finds itself in, in Putin's economic gold trap. After all, since the Bretton Woods agreements, we all know the Golden rule: "Who has more gold sets the rules." But everyone in the West is silent about it. Silent because no one knows now how to get out of this situation.

If you explain to the Western public all the details of the looming economic disaster, the public will ask the supporters of a petrodollar world the most horrific questions, which will sound like this:

How long will the West be able to buy oil and gas from Russia in exchange for physical gold? And what will happen to the US petrodollar after the West runs out of physical gold to pay for Russian oil, gas and uranium, as well as to pay for Chinese goods?

No one in the west today can answer these seemingly simple questions.

And this is called "Checkmate", ladies and gentlemen. The game is over.

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The above article was translated buy Kristina Rus - which originally appeared in Russian at http://investcafe.ru/blogs/mbcy/posts/46245#

Gold-Eagle provides regular commentary and analysis of gold, precious metals and the economy. Be the first to be informed by signing up for our free email newsletter.
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Source: IRD

Will $60 Oil Be The Black Swan?

November 28, 2014
Financial Markets

If it is, I don't know of anyone who saw that coming. I have been asserting over the past month or so that the plunge in the price of oil is the best indicator that the global economy - including and especially the U.S. economy – is collapsing.

There had been a bubble of sorts blown up in the shale oil industry. Billions in junk bonds have been issued against what is turning out to be the latest of Wall Street's financial engineering Ponzi schemes. But what everyone seems to be overlooking is that the banks and private equity firms themselves are going choke on the billions in bank debt issued by the collapsing shale oil industry.

This is a must-read commentary posted The Automatic Earth Blog: The True State Of The Economy.

It is highly probable, in my opinion, that the crash in the price of oil not only is a signal that the U.S. economy is in trouble, it could well be the unforeseen "Black Swan" that pulls the rug out from under Wall Street and the financial markets.

I would suggest that this is why the Fed and the U.S. Treasury's Working Group on Financial Markets – aka the plunge protection team – has been waging a relentless war on gold and silver and has been working overtime to keep the stock market from crashing.

A plunging oil price is not hurting Russia at all. In fact, if you read this article – Grand Master Putin's Golden Trap – you see why the crashing oil price is likely the end of the petrodollar and U.S. global economic hegemony.

Ask not for whom the bell tolls, America, for it tolls for thee…
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Introducing The "Plunge Protection Crew" aka The Gold and Silver Manipulation Crew

Jacob Lew 

The Secretary of the Treasury is the head of the United States Department of the Treasury, which is concerned with financial and monetary matters, and, until 2003, also included several federal law enforcement agencies. This position in the Federal Government of the United States is analogous to the Minister of Finance in many other countries.

Janet Louise Yellen

The Board of Governors of the Federal Reserve System, commonly known as the Federal Reserve Board, is the main governing body of the Federal Reserve System. It is charged with overseeing the Federal Reserve Banks and with helping implement monetary policy of the United States. Governors are appointed by the President of the United States and confirmed by the Senate for staggered 14-year terms.

Mary Jo White 

 The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government. It holds primary responsibility for enforcing the federal securities laws, proposing securities rules, and regulating the securities industry, the nation's stock and options exchanges, and other activities and organizations, including the electronic securities markets in the United States.

Timothy George "Tim" Massad

The U.S. Commodity Futures Trading Commission (CFTC) is an independent agency of the United States government that regulates futures and option markets. The Commodity Futures Trading Commission Act of 1974 (P.L. 93-463) created the CFTC to replace the U.S. Department of Agriculture’s Commodity Exchange Authority, as the independent federal agency responsible for regulating the futures trading industry. The Act made extensive changes in the basic authority of the Commodity Exchange Act (CEA) of 1936, which itself had made extensive changes in the original Grain Futures Act of 1922. (7 U.S.C. 1 et seq.).
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Source: The Vineyard of the Saker

A bird's eye view of the vineyard

Tuesday, November 25, 2014

Absolutely crucial statement by Foreign Minister Lavrov (*MUST READ*!)

Note: Finally the Russian Ministry of Foreign Affairs found the time, energy and personnel to translate this most important statement. They even posted it (thanks to Jonathan Jarvis for the pointer!). And if you detect irritation on my part you are correct - I am frustrated with how incompetent Russians are in anything relating to public information. Anyway,

I have bolded out what I consider to be the most important statements made by Lavrov that day. I would just like to add the following:

1) Lavrov is considered very much a "moderate" and his language has always been strictly diplomatic. So when you read Lavrov, just imagine what folks in other Russian ministries are thinking.

2) Lavrov makes no secret of his view of the USA and of his plans for the future of our planet. When you read his words, try to imagine what a US Neocon feels and thinks and you will immediately see why the US elites both hate and fear Russia.

3) Finally, Lavrov openly admits that Russia and China have forged an long-term strategic alliance (proving all the nay-sayers who predicted that China would backtstab Russian wrong). This is, I would argue, the single most important strategic development in the past decade.

4) Finally, notice the clear contempt which Lavrov has for a pseudo-Christian "West" which dares not speak in defense of persecuted Christians, denies its own roots, and does not even respect its own traditions.

Friends, what we are witnessing before our eyes is not some petty statement about the Ukraine or sanctions, it is the admission by Lavrov of a fundamental "clash of civilizations", but not between some wholly imaginary "Christian West" and Islam, but between Christian Russia and the post-Christian West.

Russia did not want this conflict. Russia did everything in her power to prevent it. But the West left Russia no choice and Russia now openly declares her willingness to fight and prevail.

The Saker
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THE MINISTRY OF FOREIGN AFFAIRS OF THE RUSSIAN FEDERATION
Official Site 

Remarks by Foreign Minister Sergey Lavrov at the XXII Assembly of the Council on Foreign and Defence Policy, Moscow, 22 November 2014

2686-22-11-2014


I’m happy to be at this annual Assembly of the Council on Foreign and Defence Policy (Russian abbreviation SVOP). It is always a great pleasure for me to meet people and feel the intellectual potential, which enables the Council, its leaders and representatives to respond to global developments and analyse them. Their analysis is always free from any hysteria, and its members offer well-grounded and solid arguments, taking a step back, since those caught in the midst of events can hardly adopt an unbiased perspective. We are inevitably influenced by the developments, which makes your observations, analysis, discourse and suggestions even more valuable to us.

As far as I know, this year's Assembly will focus on prospects for accelerating domestic growth in Russia. There is no doubt that concerted efforts by our society as a whole to bring about comprehensive economic, social and spiritual development are a prerequisite for making Russia's future sustainable. That said, by virtue of my professional duties, I have to focus on foreign policy issues, which are still relevant for the Assembly's agenda, since in this interconnected, globalised world, isolating internal development from the outside world is impossible.

Russia's President Vladimir Putin provided a detailed analysis of the international developments at the Valdai Club meeting in Sochi, as well as in his interviews during his trip to Asia. For this reason, I won't offer any conceptual observations, as everything has already been said. Nevertheless, I would like to share with you some considerations based on our day-to-day foreign policy efforts. It is not my intention to deliver a comprehensive or clear outlook, since at this stage all forecasts are provisional, no matter who makes them. Moreover, diplomats seek to influence developments as they unfold, not contemplate them.

Naturally, I will start with Ukraine. Long before the country was plunged into the crisis, there was a feeling in the air that Russia’s relations with the EU and with the West were about to reach their moment of truth. It was clear that we could no longer continue to put issues in our relations on the back burner and that a choice had to be made between a genuine partnership or, as the saying goes, "breaking pots." It goes without saying that Russia opted for the former alternative, while unfortunately our Western partners settled for the latter, whether consciously or not. In fact, they went all out in Ukraine and supported extremists, thereby giving up their own principles of democratic regime change. What came out of it was an attempt to play chicken with Russia, to see who blinks first. As bullies say, they wanted to Russia to "chicken out" (I can't find a better word for it), to force us to swallow the humiliation of Russians and native speakers of Russian in Ukraine.

Honourable Leslie Gelb, whom you know all too well, wrote that Ukraine's Association Agreement with the EU had nothing to do with inviting Ukraine to join the EU and was aimed in the short term at preventing it from joining the Customs Union. This is what an impartial and unbiased person said. When they deliberately decided to go down the path of escalation in Ukraine, they forgot many things, and had a clear understanding of how such moves would be viewed in Russia. They forgot the advice of, say, Otto von Bismarck, who had said that disparaging the millions-strong great Russian people would be the biggest political mistake.

President Vladimir Putin said the other day that no one in history has yet managed to subjugate Russia to its influence. This is not an assessment, but a statement of fact. Yet such an attempt has been made to quench the thirst for expanding the geopolitical space under Western control, out of a mercantile fear to lose the spoils of what they across the Atlantic had persuaded themselves was the victory in the Cold War.

The plus of today's situation is that everything has clicked into its place and the calculus behind the West’s actions has been revealed despite its professed readiness to build a security community, a common European home. To quote (singer/song-writer) Bulat Okudzhava, "The past is getting clearer and clearer." The clarity is becoming more tangible. Today our task is not only to sort out the past (although that must be done), but most importantly, to think about the future.

Talks about Russia’s isolation do not merit serious discussion. I need hardly dwell on this before this audience. Of course, one can damage our economy, and damage is being done, but only by doing harm to those who are taking corresponding measures and, equally important, destroying the system of international economic relations, the principles on which it is based. Formerly, when sanctions were applied (I worked at the Russian mission to the UN at the time) our Western partners, when discussing the DPRK, Iran or other states, said that it was necessary to formulate the restrictions in such a way as to keep within humanitarian limits and not to cause damage to the social sphere and the economy, and to selectively target only the elite. Today everything is the other way around: Western leaders are publicly declaring that the sanctions should destroy the economy and trigger popular protests. So, as regards the conceptual approach to the use of coercive measures the West unequivocally demonstrates that it does not merely seek to change Russian policy (which in itself is illusory), but it seeks to change the regime -- and practically nobody denies this.

President Vladimir Putin, speaking with journalists recently, said that today's Western leaders have a limited planning horizon. Indeed, it is dangerous when decisions on key problems of the development of the world and humankind as a whole are taken on the basis of short electoral cycles: in the United States the cycle is two years and each time one has to think of or do something to win votes. This is the negative side of the democratic process, but we cannot afford to ignore it. We cannot accept the logic when we are told to resign, relax and take it as a given that everyone has to suffer because there are elections in the United States every two years. This is just not right. We will not resign ourselves to this because the stakes are too high in the fight against terror, the threats of the proliferation of weapons of mass destruction and many bloody conflicts whose negative impact goes far beyond the framework of the corresponding states and regions. The wish to do something to gain unilateral advantages or to endear oneself to the electorate ahead of another election leads to chaos and confusion in international relations.

We hear the daily repeated mantra that Washington is aware of its own exclusiveness and its duty to bear this burden, to lead the rest of the world. Rudyard Kipling spoke about "the white man's burden." I hope that this is not what drives Americans. The world today is not white or black, but multi-coloured and heterogeneous. Leadership in this world can be assured not by persuading oneself of one’ exclusiveness and God-given duty to be responsible for everyone, but only by the ability and craft in forming a consensus. If the US partners committed their power to this goal, this would be priceless, and Russia would be actively helping them.

However, so far, US administrative resources still work only in the NATO framework, and then with substantial reservations, and its writ does not reach beyond the North Atlantic Alliance. One proof of this is the results of US attempts to make the world community follow its line in connection with the anti-Russian sanctions and principles. I have spoken about it more than once and we have ample proof of the fact that American ambassadors and envoys across the world seek meetings at the highest level to argue that the corresponding countries are obliged to punish Russia together with them or else face the consequences. This is done with regard to all countries, including our closest allies (this speaks volumes about the kind of analysts Washington has). An overwhelming majority of the states with which we have a continuing dialogue without any restrictions and isolation, as you see, value Russia’s independent role in the international arena. Not because they like it when somebody challenges the Americans, but because they realise that the world order will not be stable if nobody is allowed to speak his mind (although privately the overwhelming majority do express their opinion, but they do not want to do so publicly for fear of Washington's reprisals).

Many reasonable analysts understand that there is a widening gap between the global ambitions of the US Administration and the country's real potential. The world is changing and, as has always happened in history, at some point somebody's influence and power reach their peak and then somebody begins to develop still faster and more effectively. One should study history and proceed from realities. The seven developing economies headed by BRICS already have a bigger GDP than the Western G7. One should proceed from the facts of life, and not from a misconceived sense of one’s own grandeur.

It has become fashionable to argue that Russia is waging a kind of "hybrid war" in Crimea and in Ukraine. It is an interesting term, but I would apply it above all to the United States and its war strategy – it is truly a hybrid war aimed not so much at defeating the enemy militarily as at changing the regimes in the states that pursue a policy Washington does not like. It is using financial and economic pressure, information attacks, using others on the perimeter of a corresponding state as proxies and of course information and ideological pressure through externally financed non-governmental organisations. Is it not a hybrid process and not what we call war? It would be interesting to discuss the concept of the hybrid war to see who is waging it and is it only about "little green men."

Apparently the toolkit of our US partners, who have become adept at using it, is much larger.

In attempting to establish their pre-eminence at a time when new economic, financial and political power centres are emerging, the Americans provoke counteraction in keeping with Newton’s third law and contribute to the emergence of structures, mechanisms, and movements that seek alternatives to the American recipes for solving the pressing problems. I am not referring to anti-Americanism, still less about forming coalitions spearheaded against the United States, but only about the natural wish of a growing number of countries to secure their vital interests and do it the way they think right, and not what they are told "from across the pond." Nobody is going to play anti-US games just to spite the United States. We face attempts and facts of extra-territorial use of US legislation, the kidnapping of our citizens in spite of existing treaties with Washington whereby these issues are to be resolved through law enforcement and judicial bodies.

According to its doctrine of national security, the United States has the right to use force anywhere, anytime without necessarily asking the UN Security Council for approval. A coalition against the Islamic State was formed unbeknownst to the Security Council. I asked Secretary of State John Kerry why have not they gone to the UN Security Council for this.

He told me that if they did, they would have to somehow designate the status of Syria's President Bashar al-Assad. Of course, they had to because Syria is a sovereign state and still a member of the UN (no one excluded it from UN membership). The secretary of state said it was wrong because the United States is combating terrorism and the al-Assad regime is the most important factor that galvanises terrorists from around the world and acts as a magnet attracting them to this region in an attempt to overthrow the Syrian regime.

I believe this is perverse logic. If we are talking about precedents (the United States adheres to case law), it is worth remembering the chemical disarmament in Syria when the Assad regime was a completely legitimate partner of the United States, Russia, the OPCW and others. The Americans maintain talks with the Taliban as well. Whenever the United States has an opportunity to benefit from something, it acts quite pragmatically. I'm not sure why the ideologically-driven position took the upper hand this time and the United States chose to believe that Assad cannot be a partner. Perhaps, this is not so much an operation against the Islamic State as paving the way for toppling al-Assad under the guise of a counter-terrorist operation.

Francis Fukuyama recently wrote the book, Political Order and Political Decay, in which he argues that the efficiency of public administration in the United States is declining and the traditions of democratic governance are gradually being replaced with feudal fiefdom ruling methods. This is part of the discussion about someone who lives in a glass house and throws stones. All of this is happening amid the mounting challenges and problems of the modern world. We are seeing a continued "tug of war" in Ukraine. Trouble is brewing on the south border of the EU. I don’t think the Middle Eastern and North African problems will go away all by themselves. The EU has formed a new commission. New foreign actors have emerged, who will face a serious fight for where to send their basic resources: either for the continuation of reckless schemes in Ukraine, Moldova, etc., within the Eastern Partnership (as advocated by an aggressive minority in the EU), or they will listen to the Southern European countries and focus on what’s happening on the other side of the Mediterranean.

This is a major issue for the EU.

So far, those who are not guided by real problems, but rather by a desire to quickly grab things from freshly turned up ground. It is deplorable. Exporting revolutions – be they democratic, communist or others – never brings any good.

State, public and civilisational structures are actually disintegrating in the MENA region. The destructive energy released in the process can scorch states that are located far beyond this region. Terrorists (including the Islamic State) are claiming a national status. Moreover, they are already beginning to create quasi-governmental bodies there that engage in the administrative work.

On this backdrop, minorities, including Christians, are banished. In Europe, these issues are deemed not politically correct. They are ashamed when we invite them to do something about it together at the OSCE. They wonder why would we focus specifically on Christians? How is that special? The OSCE has held a series of events dedicated to keeping memories about the Holocaust and its victims alive. A few years ago, the OSCE started holding events against Islamophobia. We will be offering an analysis of the processes leading to Christianophobia.

On 4-5 December, OSCE ministerial meetings will be held in Basel, where we will present this proposal. The majority of EU member states elude this topic, because they are ashamed to talk about it. Just as they were ashamed to include in what was then the EU constitution drafted by Valery Giscard d'Estaing a phrase that Europe has Christian roots.

If you don’t remember or respect your own roots and traditions, how would you respect the traditions and values of other people? This is straightforward logic. Comparing what’s happening now in the Middle East to a period of religious wars in Europe, Israeli political scientist Avineri said that the current turmoil is unlikely to end with what the West means when it says "democratic reforms."

The Arab-Israeli conflict is dead in the water. It's hard to play on several boards at a time. The Americans are trying to accomplish this, but it doesn’t work for them. In 2013, they took nine months to sort out the Israeli-Palestinian conflict. I will not go into the reasons, they are known, but they failed at this as well. Now, they asked for more time to try to achieve some progress before the end of 2014, so that the Palestinians wouldn't go to the UN and sign the Statute of the International Criminal Court, etc. Suddenly, it transpired that negotiations on Iran are underway. The US State Department dumped Palestine to focus on Iran.

US Secretary of State John Kerry and I agreed to talk on this subject some time soon. It’s important to understand that you can’t keep the problem of the Palestinian state deeply frozen forever. Failure to resolve it for nearly 70 years has been a major argument of those who recruit extremists in their ranks, "there's no justice: it was promised to create two states; the Jewish one was created, but they will never create an Arab state." Used on a hungry Arab street, these arguments sound quite plausible, and they start calling for a fight for justice using other methods.

Russian President Vladimir Putin said at the Valdai Club meeting in Sochi that we need a new version of interdependence. This was a very topical statement. The leading powers must return to the negotiating table and agree on a new framework that takes into account the basic legitimate interests of all the key parties (I can’t tell you what it should be called, but it should be based on the UN Charter), to agree on reasonable self-imposed restrictions and collective risk management in a system of international relations underpinned by democratic values. Our Western partners promote respect for the rule of law, democracy and minority opinion within countries, while failing to stand up for the same values in international affairs. This leaves Russia as a pioneer in promoting democracy, justice and rule of international law. A new world order can only be polycentric and should reflect the diversity of cultures and civilisations in today’s world.

You are aware of Russia's commitment to ensuring indivisibility of security in international affairs and holding it in international law. I won't elaborate on this.

I would like to support the point the SVOP has been making that Russia won't succeed in becoming a major, successful and confident power of the 21st century without developing its eastern regions. Sergei Karaganov was among the first to conceptualise this idea, and I fully agree. Taking Russia’s relations with the Asia Pacific countries to a new level is an absolute priority. Russia worked along these lines at the Beijing APEC meeting and the G20 forum. We will continue moving in this direction in the new environment created by the upcoming launch of the Eurasian Economic Union (EAEU) on 1 January 2015.

We have been treated as "subhumans." For over a decade, Russia has been trying to establish partnership ties with NATO through CSTO. These efforts were not just about putting NATO and CSTO "in the same league." As a matter of fact, CSTO is focused on catching drug dealers and illegal migrants around the Afghan border, and the North-Atlantic Treaty Organisation is the backbone of the international security forces, which, among other things, were tasked with fighting the terrorist threat and eliminating its financing schemes, which involve drug trafficking. We tried everything: we pleaded and then demanded real-time contact, so that once NATO detects a caravan transporting drugs and is unable to stop it, it alerts us across the border, so that this caravan could be intercepted by CSTO forces. They simply refused to talk to us. In private conversations, our NATO well-wishers (and I actually mean this in the positive way) told us that the alliance can’t view CSTO as an equal partner for ideological reasons. Until recently, we saw the same condescending and arrogant attitude with respect to the Eurasian economic integration. And that despite the fact that countries intending to join the EAEU have much more in common in terms of their economies, history and culture than many EU members. This union is not about creating barriers with anyone. We always stress how open this union is expected to be. I strongly believe that it will make a significant contribution to building a bridge between Europe and Asia Pacific.

I can’t fail to mention Russia's comprehensive partnership with China. Important bilateral decisions have been taken, paving the way to an energy alliance between Russia and China. But there’s more to it. We can now even talk about the emerging technology alliance between the two countries. Russia’s tandem with Beijing is a crucial factor for ensuring international stability and at least some balance in international affairs, as well as ensuring the rule of international law. We will make full use of our relations with India and Vietnam, Russia’s strategic partners, as well as the ASEAN countries. We are also open to expanding cooperation with Japan, if our Japanese neighbours can look at their national interests and stop looking back at some overseas powers.

There is no doubt that the European Union is our largest collective partner. No one intends to "shoot himself in the foot" by renouncing cooperation with Europe, although it is now clear that business as usual is no longer an option. This is what our European partners are telling us, but neither do we want to operate the old way. They believed that Russia owed them something, while we want to be on an equal footing. For this reason, things will never be the same again. That said, I’m confident that we will be able to overcome this period, lessons will be learned and a new foundation for our relations will emerge.

The idea of creating a single economic and humanitarian space from Lisbon to Vladivostok can now be heard here and there and is gaining traction. Germany's Foreign Minister, Frank-Walter Steinmeier, has said publicly (while we have been saying it for a long time) that the EU and the EAEU should engage in dialogue. The statement President Vladimir Putin made in Brussels in January 2014, when he proposed the first step by launching negotiations on a free-trade zone between the EU and the Customs Union with an eye on 2020, is no longer viewed as something exotic. All of this has already become part of diplomacy and real politics. Although this is so far only a matter of discussion, I strongly believe that we will one day achieve what is called "the integration of integrations." This is one of the key topics we want to promote within the OSCE at the Ministerial Council in Basel.

Russia is about to assume BRICS and SCO presidency. The two organisations will hold their summits in Ufa. These are very promising organisations for the new age. They are not blocks (especially BRICS), but groups where members share the same interests, representing countries from all continents that share common approaches regarding the future of the global economy, finance and politics.

http://www.mid.ru/brp_4.nsf/0/24454A08D48F695EC3257D9A004BA32E

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