Russia aims to become a major player in the global copper market

On 11 September, the country’s largest undeveloped copper deposit – Udokan – went into production. Located in Eastern Siberia, between Lake Baikal and the Pacific Ocean, it was inaugurated by Vladimir Putin during a video link-up. The mining and refining complex will produce 150,000 tonnes of copper per year. The aim is to triple its production capacity within five years and could represent an increase of almost 50% on current Russian production. The project’s economic viability is based on global demand, which is set to rise sharply in the coming years as a result of the energy transition, and on its geographical proximity to the Asian market, particularly China, the world’s leading consumer of copper. Russian billionaire Alisher Usmanov bought the right to develop Udokan for US$500 million from the government just before the 2008 financial crisis. It took 10 years to resolve the technical challenges of the project, create a new geological model and start construction.

Post-Cold War world order is over, Blinken admits

The United States’ growing geopolitical competition with Russia and China marks the end of the post-Cold War world order, argues US Secretary of State Antony Blinken. “What we are experiencing now is more than a test of the post-Cold War order. It’s the end of it,” he noted. According to him, the relative geopolitical stability that has lasted for several decades is beginning to give way to a situation where world powers are competing with each other. He added that the world is currently at a turning point: one era ends and another one begins. Blinken opined that decisions made now will shape the future for decades. The Secretary of State claimed that the war in Ukraine is “the most immediate, the most acute threat to the international order”. But according to him, “the People’s Republic of China poses the most significant long-term challenge, because it not only aspires to reshape the international order, it increasingly has the economic, the diplomatic, the military, the technological power to do just that”.

Russian central bank hikes key interest rate to 13%
On 15 September, the Central Bank of Russia raised its key rate by 100 basis points to 13%, citing high inflationary pressure in the economy. “Significant proinflationary risks have crystallized, namely the domestic demand growth outpacing the output expansion capacity and the depreciation of the ruble in the summer months” the bank said in a statement. The CBR also signaled the possibility of furtherrate hikes and increased its inflation forecast for Russia at the end of 2023 from 5-6.5% to 6-7%, maintaining its 4% forecast for 2024 and beyond. Additionally, the Bank of Russia has raised its forecast for the average cost of Russian Urals crude oil for 2023 from US$55 to US$60. It maintained its stance on the undesirability of tightening capital controls to influence the ruble exchange rate, calling to rely instead upon natural correction factors and already implemented monetary tightening. The Bank of Russia Board of Directors will hold its next rate review meeting on 27 October. On 18 September, the rouble was trading at 96.6338 to the US dollar.

Russian money goes home

Wealthy Russians have taken US$50 billion worth of assets back to their homeland and “friendly” countries since February 2022, Bloomberg reported. According to the agency, last month the shareholders of United Medical Group and MD Medical Group Investments Plc approved the re-registration of companies from Cyprus to Russia. “That transfer will help push the total value of assets that have been re-domiciled by the wealthiest Russians since February 2022 to at least US$50 billion,” Bloomberg wrote. This shift is breaking with a decades-old practice by Russian billionaires to hold their assets in Europe, taking advantage of investor-friendly legal systems, the chance to get dividends in foreign currencies and low taxes. Bloomberg recalls that the transfer of assets back to Russia started with the launch of the special operation in Ukraine due to the fact that Russian businessmen increasingly began to fall under sanctions of Western countries.

Oil trading above $90 a barrel for the first time in 2023

Oil reached its highest level of the year after rising on the back of OPEC+ supply cuts. 

Brent crude, the international benchmark, was up 1.2% at US$90.04 on September 5. US West Texas Intermediate was up similarly at US$86.69. Saudi Arabia recently announced that it would extend its voluntary output cut of 1 million barrels per day through the end of December. Russia also extended its voluntary reduction in oil exports by 300,000 barrels per day until the end of the year. The move is likely to revive fears of global inflation at a time when much of the world is facing rising energy costs. Saudi pressure for US$100 oil is a new headache for the Biden administration. The rise in energy prices comes at a time when the US President is putting his economic record at the heart of his re-election campaign. Joe Biden has used the Strategic Petroleum Reserve (SPR) to ease the pressure on prices, but reserves are already half depleted, the lowest level for 40 years.

Talks between Putin and Erdogan fail to produce new grain deal
The meeting between the Turkish and Russian presidents in Sochi on September 4 failed to produce a new agreement on cereals. Vladimir Putin said that Western claims that Russia had caused a food crisis by suspending its participation in the grain agreement were wrong, as prices had not risen as a result of Russia’s exit from the agreement. Moscow claims that restrictions on payments, logistics and insurance have hampered shipments. One of Moscow’s key demands is that the Russian Agricultural Bank be reconnected to the SWIFT international payment system. Mr. Putin said that a plan to supply up to one million tons of Russian grain to Turkey at reduced prices, for further processing in Turkish factories and shipment to countries most in need, was not an alternative to the grain agreement. The United Nations is ready to agree to all of Russia’s conditions for the resumption of the grain deal, the Bild newspaper said with reference to a confidential letter from UN Secretary-General Antonio Guterres to Russian Foreign Minister Sergey Lavrov dated August 28.

Europe gets poorer, Russia’s friends get richer

The Bank of Canada has published a study on the impact of economic sanctions on three types of country: sanctioning countries, the sanctioned country and non-sanctioning countries. The analysis shows that the welfare losses of the sanctioned country are considerably attenuated, and the losses of the sanctioning countries are amplified, if third countries do not join the sanctions, but above all the latter gain by not joining them. Calculations show that if more countries were to join the restriction on Russian gas purchases, Russia’s GDP growth could fall by 9%. However, as long as only European countries comply with the measures, Russia’s GDP per capita is only reduced by 4%. This probably explains why, this week, representatives of the United States, Britain and the European Union plan to jointly pressure the United Arab Emirates to stop supplying products to Russia, according to the WSJ. Western officials complain that requests to halt exports to Russia have been largely ignored. Asked about this, a UAE official stressed that his country strictly complied with international law.

Russia overtakes Germany to become the world’s fifth-largest economy

According to the World Bank, in purchasing power parity (PPP) terms, Russia has just overtaken Germany to become the fifth-richest economy in the world, and the largest in Europe, with a value of US$5,300 billion. Analyzing GDP in terms of purchasing power parity makes it possible to compare data between countries whose currencies do not have the same value. It takes into account the fact that the same amount of money does not represent the same wealth in different countries. Even PPP estimates underestimate the strength of the Russian economy, argue some academics. In recent decades, Western economies have seen a rapid increase in the importance of services, whereas the Russian economy remains heavily focused on manufacturing and industry. In wartime, having a large industrial base is a considerable advantage, as the speed with which a country can produce weapons is a key factor in combat. In this sense, Russia is even more important than Germany, which is not an insignificant industrial country, according to Jacques Sapir’s research.

#CommercialRoute – Russia begins Summer exports to Asia via the Northern Sea Route

Russia has just shipped its first liquefied natural gas cargo of the year via the Northern Sea Route (NSR) to the Arctic. The LNG carrier Fedor Litke was loaded at the Sabetta terminal of Novatek’s Yamal LNG plant, and left the plant on June 4, bound for Asia. The redeployment of Russian energy flows to Asia, under pressure from Western sanctions, is prompting Russia to develop maritime traffic beyond the Arctic Circle. The Northern Sea Route has the potential to reshape global trade flows. It offers an alternative to the current route between China and Europe via the Strait of Malacca and the Suez Canal, cutting journey times by two weeks and costs by 20%. As a reminder, blocking the Strait of Malacca, an area dominated by US allies, could hinder 90% of China’s total trade and 80% of its crude oil imports. For six months of the year, navigation through the NSR is handled by Russia, which has the world’s largest fleet of icebreakers. The volume of goods transported on this route is constantly increasing. It was around 4 million tonnes in 2014, rising to 35 million tonnes by 2021. The development plan approved by the Russian government targets 200 million tonnes by 2030.

#Gas – Will Europe go without Russian gas?

Gas prices in Europe have doubled in ten days, according to the Financial Times. These price variations reflect the uncertainty prevailing on European markets in terms of supply, despite high storage levels, and demand in Asia which remains weak. On June 15, futures contracts on the European reference market, the Title Transfer Facility (TTF), jumped 30%. Competition between Europe and Asia for liquefied natural gas will not be as intense as last year, according to industry analysts. They estimate that Europe has already reduced its consumption of gas for industry and power generation compared with last year. Despite the war in Ukraine, Kyiv continues to collect transit duties on Russian gas delivered to Austria, Slovakia, Italy and Hungary. However, given the geopolitical context, it is unlikely that these supplies will be continued beyond 2024. According to Economics Minister Robert Habeck, stopping these imports could force Germany to reduce or even halt its industrial production. TurkStream would then remain the only pipeline to supply the European continent with Russian gas. Before the outbreak of war in Ukraine, Russian gas pipelines supplied 40% of EU demand.

#Trade – Russia and Iran step up trade via the Caspian Sea

Maritime trade between Iran and Russia via the Caspian Sea has been on the increase in recent months. This sea route is of strategic importance to both countries, as it is sheltered from the eyes and influence of the West. The Americans suspect Teheran of using it to deliver weapons to Moscow. And the countries bordering the Caspian Sea, such as Azerbaijan, Turkmenistan and Kazakhstan, have neither the means nor the incentive to interfere in these exchanges. Ships crossing this landlocked sea regularly deactivate their Automatic Identification System (AIS) signals, according to data from Lloyd’s List Intelligence. In recent years, the Iranian government has invested in improving the Russian port of Astrakhan in order to circumvent international sanctions affecting the country, according to Bloomberg. The aim is to double the port’s loading capacity to 85,000 tonnes per month. The Iranian shipping company Khazar-Ship plans to increase its fleet to 27 vessels in the near future, with 15 vessels already having been integrated in 2022. The Caspian Sea is one of the main routes of the International North-South Transport Corridor (INSTC), which Vladimir Putin believes will eventually make it possible to “connect St. Petersburg to Bombay in 10 days”.

#Aviation – The war in Ukraine is redrawing the map of the skies

From the very first days of the conflict in Ukraine, Westerners and Russians have been closing off each other’s airspace. This ongoing blockade is beginning to cause problems for Western airlines as China re-establishes its air links after three years of confinement. Chinese (and Middle Eastern) airlines have the right to fly over Russian territory, unlike their European or American counterparts, giving them a significant competitive advantage. Indeed, the latter are forced to fly longer routes to Asia, increasing their fuel and labour costs. Finnish airline Finnair is particularly hard hit by these restrictions. Over the past two decades, the airline has developed Helsinki into a hub, taking advantage of its position close to efficient air routes (the Great Circle route) between Europe and Asia. Flights between Helsinki and Tokyo now take over 13 hours, compared with 9.5 hours before the closure of Russian airspace. Russian airspace restrictions are also hampering the resumption of direct flights between the USA and China. US airlines are pressuring the Biden administration to prevent Chinese competitors from using Russian airspace. According to Bloomberg, in 2019, before the pandemic, direct flights between the US and China operated by carriers from both countries averaged 340 per week. Today, there are just two dozen a week.

#Gas – Erdogan confirms his intention to turn his country into a “gas hub”

Turkish President Recep Tayyip Erdogan has just reaffirmed his intention to develop a “gas hub” in Turkey, enabling Russian natural gas to be transported to Europe. The project aims to strengthen Turkey’s position as a key player in energy distribution and allow Russia to continue delivering gas to Europe. With its gas, Moscow wants to reproduce the sales pattern of its crude oil, currently sold to India and then re-exported to Europe after refining. Indeed, it’s a safe bet that once Russian gas reaches the Turkish pipeline network, it will be difficult to distinguish it from Azeri or Iranian gas transported by the Tanap pipeline, LNG gas imported by ship or gas from Turkish offshore fields. Faced with the EU’s desire to do without Russian gas, Moscow has few options to enable it to continue selling its energy to the EU. Gas no longer flows through Nord Stream 1, and there are no plans to repair the Nord Stream 2 pipelines. Economic sanctions between Russia and Poland are blocking the flow of Russian gas to Central Europe via the Yamal-Europe axis. The war in Ukraine continues to pose a permanent risk of transit interruption via the Brotherhood and Soyuz pipelines. This leaves the TurkStream and Blue Stream pipelines, with capacities of 31.5 and 16 billion m3 per year respectively, which run under the Black Sea to Turkey. It should be noted that half of the transmission capacity between Russia and Turkey is used to transport gas to Europe, with the remainder destined for the Turkish market.

#War – “The Russians will win the war”, John Mearsheimer

On May 22, the American citizens’ organization “Committee for the Republic” welcomed John Mearsheimer for a lecture on the war in Ukraine. The American international relations specialist, who belongs to the realist school of thought, didn’t talk about the origins of the conflict, but about the current situation and his predictions. In his view, we are in a war in which Ukraine (and the West) on the one hand, and Russia on the other, see each other as an existential threat. It is therefore impossible to reach a viable peace agreement. The least likely outcome, but one that cannot be ruled out, is nuclear war. The second and more likely possibility is that Russia will win the war, without decisively defeating Ukraine. He believes, however, that Moscow will eventually conquer a large part of Ukrainian territory (the Russian-speaking part) and integrate it into Russia, while turning Ukraine into a “dysfunctional rump state”. He argues for a Russian victory on the grounds that, in a war of attrition, the most important factors are balance of resolve, demography and artillery quantity.

#Insurance – Marine insurers’ pressure on Russian oil is ineffective

A symbol of the City, Lloyd’s of London is the company that manages the world’s specialist insurance and reinsurance market. Founded in 1688, it is one of London’s oldest financial institutions, and has been active in the marine insurance sector since its inception. As early as March 2022, Lloyd’s of London declared that it would cooperate with governments and regulators to impose sanctions on the Russian state, claiming that “sanctions are the best weapon at our disposal”. While measures to cap Russian oil began around six months ago, the rhetoric is changing. Neil Roberts, a senior Lloyd’s marine insurance executive, recently published a note on LinkedIn which was highly critical of the effectiveness of the sanctions. He points out that the measures taken on shipping have had the effect of redirecting Russia’s energy flows towards Asia, resulting in “a loss of political control”. In his view, the sanctions have failed to change Moscow’s policy, and their intensification risks only the continued destabilisation of global maritime trade. For its part, the New York Times has just published an investigation detailing the techniques used by the “phantom fleet” transporting Russian oil allowing them to be insured by American companies, in defiance of Western sanctions.

#Gas – The EU continues its energy decoupling from Russia

Since the outbreak of the conflict in Ukraine, the EU has sharply reduced its imports of Russian gas. In 2021, Brussels imported 155 billion cubic meters of Russian gas, or about 45% of its total gas imports. By 2022, Moscow’s share of European imports has fallen to less than 10%. This decoupling has been made possible in part by the decline in natural gas consumption as a result of relatively high temperatures in the autumn, ecological sobriety and the reduction of European industrial production. According to the Financial Times, the G7 and the EU are now preparing to ban Russian gas imports. The British daily states that this decision would prevent a European country such as Germany from starting to import Russian gas again on a massive scale. In addition, it would reassure investors wishing to finance LNG infrastructure projects in Europe and North America by eliminating the fear of a rapid return of abundant and cheaper Russian gas.

#Oil – Russian oil exports at highest level in three years

Russian oil exports (crude and refined products) reached their highest level in three years in April, earning Moscow US$15 billion, the International Energy Agency estimates. In April, Russia exported an average of 8.3 million barrels per day. This figure is significantly higher than the annual average recorded in 2021 which amounted to 7.5 mb/d or 2022 with 7.7 mb/d. The US agency estimates that 80% of crude oil shipments are destined for China and India. The EU is aware that Russia is adapting to the sanctions and does not know how to react to one of the biggest changes ever seen in commodity flows. Josep Borrell, the EU’s foreign policy chief, said Brussels was aware that Indian refiners were buying large quantities of Russian crude oil before turning it into fuels to be sold in Europe. “That India buys Russian oil is normal. And if, thanks to our limitations on the price of oil, India can buy this oil much cheaper, the less money Russia gets, the better,” Borrell said. “But if they use it to become a center where Russian oil is refined and by-products are sold to us … we have to act,” he says. Western leaders still don’t understand why their sanctions on Russian oil are doomed to fail. They cannot control both the amount of oil Russia exports and its price. They have to choose one or the other.

#Trade – “Delivery of goods from St. Petersburg to Mumbai will take about ten days,” Vladimir Putin

Russia and Iran signed a bilateral agreement on the construction of a railway line, completing the missing section of the International North-South Transport Corridor (INSTC). Under discussion for more than 20 years, the North-South Corridor project is a network of sea, rail and land routes that will allow Russian goods to reach India via Iran and Azerbaijan without passing through Western Sea routes and the Suez Canal. The geopolitical context favors the rapprochement between Moscow and Tehran to circumvent Western sanctions and is an attempt to redraw the major axes of globalization. The agreement signed today concerns the construction of a 164 km long railroad line in northeastern Iran, between the cities of Astara, on the border with Azerbaijan on the Caspian Sea, and Rasht. According to the Russian president, “the transport of goods through the new corridor will have a considerable competitive advantage. Thus, the delivery of goods from St. Petersburg to Mumbai will take about 10 days. By comparison, the journey via traditional trade routes takes up to 30-45 days,” he said. Tehran plans to complete the Rasht-Astara rail link within three years. The goal is to transport up to 15 million tons of Russian goods per year by rail by 2030, according to Russian Deputy Prime Minister Alexander Novak.

#Currency – Russia’s Central Bank launches its digital ruble pilot project

The exclusion of Russia by the West from the international payment system SWIFT has accelerated the state’s desire to introduce a central bank digital currency. According to the Central Bank of Russia (CBR), the digital ruble should be considered a third form of national currency, which will be added to the fiduciary currency (coins and bills) and the scriptural currency (current account). This currency will be issued by the CBR and could be stored in a digital wallet that citizens or companies will hold at their bank. According to Elvira Nabiullina, head of the CBR, citizens will decide for themselves what form of Russian currency they want to use (cash, bank account, digital currency). The digital ruble is designed as an additional means of payment and money transfer, not as a means of saving or borrowing. It will have the ability to operate outside the current international banking system and become an alternative means of entering into international trade agreements. The CBR rejected the idea that it would force people to use this digital ruble, that its introduction would lead to the abolition of cash or that it would set an “expiration date” on the use of cash. The adoption of the digital ruble is not expected before 2024.

#Alrosa – Russian diamonds in the crosshairs of G7 countries

In order to deprive Moscow of its income, the G7 countries are discussing possible sanctions against its diamond industry. Russia is the world’s largest diamond producer. In 2021, it exported nearly US$4.7 billion worth of diamonds, according to the Observatory of Economic Complexity. Russian diamonds are mainly exported to Antwerp (Belgium), Dubai (United Arab Emirates), Mumbai (India) and Tel Aviv (Israel). Listed on the Moscow Stock Exchange, Alrosa is the world’s largest producer of rough diamonds. The Russian company mined 32.4 million carats in 2021, accounting for 27% of global diamond production by volume. For the sanctions to be effective, they will require the cooperation not only of European and G7 countries, but also of the southern African countries, major producers of rough diamonds, not to mention India. As with oil sanctions, it is unlikely that India will sacrifice its industry to the West. The country alone holds 95% of the world’s diamond cutting and polishing business. In Europe, Belgium could be the big loser of new sanctions on this industry. Antwerp handles about 85% of the world’s rough diamonds, half of the polished diamonds and 40% of the industrial diamonds. Belgian authorities fear that a ban on Russian diamond imports could strengthen other strongholds such as Dubai at the expense of Antwerp.

#Gas – The EU continues its energy decoupling from Russia

Since the outbreak of the conflict in Ukraine, the EU has sharply reduced its imports of Russian gas. In 2021, Brussels imported 155 billion cubic meters of Russian gas, or about 45% of its total gas imports. By 2022, Moscow’s share of European imports has fallen to less than 10%. This decoupling has been made possible in part by the decline in natural gas consumption as a result of relatively high temperatures in the autumn, ecological sobriety and the reduction of European industrial production. According to the Financial Times, the G7 and the EU are now preparing to ban Russian gas imports. The British daily states that this decision would prevent a European country such as Germany from starting to import Russian gas again on a massive scale. In addition, it would reassure investors wishing to finance LNG infrastructure projects in Europe and North America by eliminating the fear of a rapid return of abundant and cheaper Russian gas.

#Oil – Russian oil exports at highest level in three years

Russian oil exports (crude and refined products) reached their highest level in three years in April, earning Moscow US$15 billion, the International Energy Agency estimates. In April, Russia exported an average of 8.3 million barrels per day. This figure is significantly higher than the annual average recorded in 2021 which amounted to 7.5 mb/d or 2022 with 7.7 mb/d. The US agency estimates that 80% of crude oil shipments are destined for China and India. The EU is aware that Russia is adapting to the sanctions and does not know how to react to one of the biggest changes ever seen in commodity flows. Josep Borrell, the EU’s foreign policy chief, said Brussels was aware that Indian refiners were buying large quantities of Russian crude oil before turning it into fuels to be sold in Europe. “That India buys Russian oil is normal. And if, thanks to our limitations on the price of oil, India can buy this oil much cheaper, the less money Russia gets, the better,” Borrell said. “But if they use it to become a center where Russian oil is refined and by-products are sold to us … we have to act,” he says. Western leaders still don’t understand why their sanctions on Russian oil are doomed to fail. They cannot control both the amount of oil Russia exports and its price. They have to choose one or the other.

#Trade – “Delivery of goods from St. Petersburg to Mumbai will take about ten days,” Vladimir Putin

Russia and Iran signed a bilateral agreement on the construction of a railway line, completing the missing section of the International North-South Transport Corridor (INSTC). Under discussion for more than 20 years, the North-South Corridor project is a network of sea, rail and land routes that will allow Russian goods to reach India via Iran and Azerbaijan without passing through Western Sea routes and the Suez Canal. The geopolitical context favors the rapprochement between Moscow and Tehran to circumvent Western sanctions and is an attempt to redraw the major axes of globalization. The agreement signed today concerns the construction of a 164 km long railroad line in northeastern Iran, between the cities of Astara, on the border with Azerbaijan on the Caspian Sea, and Rasht. According to the Russian president, “the transport of goods through the new corridor will have a considerable competitive advantage. Thus, the delivery of goods from St. Petersburg to Mumbai will take about 10 days. By comparison, the journey via traditional trade routes takes up to 30-45 days,” he said. Tehran plans to complete the Rasht-Astara rail link within three years. The goal is to transport up to 15 million tons of Russian goods per year by rail by 2030, according to Russian Deputy Prime Minister Alexander Novak.

#Currency – Russia’s Central Bank launches its digital ruble pilot project

The exclusion of Russia by the West from the international payment system SWIFT has accelerated the state’s desire to introduce a central bank digital currency. According to the Central Bank of Russia (CBR), the digital ruble should be considered a third form of national currency, which will be added to the fiduciary currency (coins and bills) and the scriptural currency (current account). This currency will be issued by the CBR and could be stored in a digital wallet that citizens or companies will hold at their bank. According to Elvira Nabiullina, head of the CBR, citizens will decide for themselves what form of Russian currency they want to use (cash, bank account, digital currency). The digital ruble is designed as an additional means of payment and money transfer, not as a means of saving or borrowing. It will have the ability to operate outside the current international banking system and become an alternative means of entering into international trade agreements. The CBR rejected the idea that it would force people to use this digital ruble, that its introduction would lead to the abolition of cash or that it would set an “expiration date” on the use of cash. The adoption of the digital ruble is not expected before 2024.

#Alrosa – Russian diamonds in the crosshairs of G7 countries

In order to deprive Moscow of its income, the G7 countries are discussing possible sanctions against its diamond industry. Russia is the world’s largest diamond producer. In 2021, it exported nearly US$4.7 billion worth of diamonds, according to the Observatory of Economic Complexity. Russian diamonds are mainly exported to Antwerp (Belgium), Dubai (United Arab Emirates), Mumbai (India) and Tel Aviv (Israel). Listed on the Moscow Stock Exchange, Alrosa is the world’s largest producer of rough diamonds. The Russian company mined 32.4 million carats in 2021, accounting for 27% of global diamond production by volume. For the sanctions to be effective, they will require the cooperation not only of European and G7 countries, but also of the southern African countries, major producers of rough diamonds, not to mention India. As with oil sanctions, it is unlikely that India will sacrifice its industry to the West. The country alone holds 95% of the world’s diamond cutting and polishing business. In Europe, Belgium could be the big loser of new sanctions on this industry. Antwerp handles about 85% of the world’s rough diamonds, half of the polished diamonds and 40% of the industrial diamonds. Belgian authorities fear that a ban on Russian diamond imports could strengthen other strongholds such as Dubai at the expense of Antwerp.

#Sanctions – Have economic sanctions against Russia failed?

More than a year after the adoption of massive sanctions against Russia, economist Jacques Sapir assesses their effects from an economic and political point of view. While they have led to an economic recession in Russia, they have not succeeded in changing the government’s policy in Ukraine or in overthrowing Vladimir Putin. Europe is also negatively impacted by this policy, particularly in the agriculture and energy sectors due to countermeasures imposed by Moscow. Sapir states that economic sanctions “are proving to be the catalyst for a process of de-Westernization of the world and a major loss of influence, political, economic, but also cultural, of this Western bloc. This trend was already present before the conflict and the use of sanctions. But it may have changed in nature with the war and the sanctions”, he adds. The author argues that economic sanctions are often used as a political weapon by Western countries to pressure countries that do not follow their agenda, but they are rarely effective in the long run.

#CentralBank – Where are the foreign exchange reserves of the Russian Central Bank?

As a result of the Russian-Ukrainian conflict, the G7 countries announced the freezing of Russia’s foreign exchange reserves. These assets represent the highly liquid foreign assets available to the Russian government. It was estimated at the time, based on reports from the Russian Central Bank, that approximately US$300 billion in assets were held in Europe and would be frozen by the EU. However, the European Commission was unable to assess the amount of funds held by the Russian institution. The EU judicial authorities admitted that they were unable to trace most of the money. At the end of January 2023, EU countries reported that they had gotten their hands on only US$36.4 billion in assets. Swiss authorities just announced that they had been able to freeze the equivalent of US$8.3 billion. Discussions continue within the EU on whether these assets should be permanently confiscated and used for the reconstruction of Ukraine. Under international law, a government cannot seize the assets of another government unless it declares war on that government. The EU has repeatedly indicated that it does not intend to declare war on Russia.

#Oligarch – Americans allow funds seized from Russian oligarch to be paid to Ukraine

For the first time, the United States has authorized the use of assets seized from Russian oligarch Konstantin Malofeyev for the reconstruction of Ukraine. There was no mention of how the funds, which amount to US$5.4 million according to Reuters, would be used or when they would be made available to Kiev. The authorization was given by US Attorney General Merrick Garland. He said more such steps would be taken soon. Konstantin Malofeyev is a Russian investor and founder of the Tsargrad TV channel. He is accused of violating US sanctions imposed following the 2014 attachment of Crimea to Russia. A Kremlin spokesman said the decision would backfire on the United States. “This is nothing but an infringement of a property right that is quite sacred to the United States. It undermines their credibility”, he added. According to a report published in March by the European Commission, the cost of reconstruction and recovery in Ukraine now amounts to 383 billion euros. Charles Michel, the President of the European Council, said earlier this year that such a measure was a matter of “justice and equity”.

#Oil – First assessment of Western sanctions against Russian oil 

In December 2022, the EU imposed an embargo on Russian oil transported by sea and, together with the G7 countries, capped the prices of oil sold by Moscow. The aim is to keep Russian oil on the world market while limiting the country’s fiscal revenues. In the first quarter of 2023, the Central Bank of Russia (CBR) reported that exports of crude oil and oil products fell by US$15.6 billion. According to analysis by the Kyiv School of Economics, US$5.2 billion of this would be related to Moscow’s larger discounts to its customers. The rest of the shortfall would be attributable to lower volumes (US$6.1 billion) and the fall in the world price of black gold (US$4.2 billion) during this period. During the first quarter, Russian companies reportedly violated the sanctions by selling crude oil at an average price of US$73 per barrel through European shipping companies from the Pacific Ocean port of Kozmino. This price is well above the US$60 ceiling set by the EU and the G7. More generally, the Russian crude oil export market has undergone a radical transformation with the almost total replacement of European buyers by China and India. The European Union is currently considering an eleventh round of sanctions against Russia aiming to strengthen the enforcement of previous ones.

#COVID19 – “Over the last three years, you have been subjected to the most massive harmonized, globally coordinated propaganda campaign in the history of the Western world, full stop.” Robert Malone

For the American molecular biologist, Robert Malone, we have been witnessing for the last 3 years a 5th generation war, or psychological warfare, through the “Covid Crisis”. In a conference held on January 21, 2023 in Sweden, he explained how the issue of this war is to shape, control and capture your thoughts, your emotions and your beliefs. “The basic idea is that in the modern era, wars are not fought by armies or guerillas, but in the minds of common citizens. Your mind is the new battlefield. This is not hyperbole. ” He reminds us that in the US, management of this crisis was not primarily led by social and health services, but by the Department of Defense.

#NordStream – “Nord Stream was destroyed by the US and Norway” Seymour Hersh. 

American investigative journalist Seymour Hersh has just revealed how the Nord Stream gas pipelines were allegedly sabotaged. The man is at the origin of many revelations, such as the acts of torture at Abu Ghraib and the massacre of Mỹ Lai in Vietnam, an investigation for which he obtained a Pulitzer Prize. According to him, US Navy divers placed explosives under the Nord Stream gas pipelines last summer. “On September 26, 2022, a Norwegian Navy P8 surveillance plane made a seemingly routine flight and dropped a sonar buoy. The signal spread underwater, initially to Nord Stream 2 and then on to Nord Stream 1. A few hours later, high-powered C4 explosives were triggered and three of the four pipelines were put out of commission.” 

#EconomicSanctions – Who benefits from Russian oil sanctions? 

Russia’s finance minister announced that the country’s oil export revenues fell 40% year-on-year in January, despite a stable export volume. Western sanctions seem to be working because they are forcing Russia to offer significant discounts to Chinese and Indian buyers. These discounts would be US$15 to US$20 per barrel of crude, according to Reuters. For the head of the International Energy Agency (IEA), the price cap reduced Moscow’s revenues by US$8 billion in January alone. Former Gazprom Neft strategy director Sergey Vakulenko disagrees: “Judging by customs statistics, some of the profit was captured by refiners in India and China, but the main beneficiaries must be Russian oil shippers, intermediaries and oil companies.”

#MonetaryPolicy – Russia’s Central Bank keeps its interest rate at 7.5% and its nationwide ban on crypto-currencies. 

Russia’s central bank kept its key interest rate at 7.5%. It said it may have to raise it this year as a growing budget deficit, labor shortages and a weaker ruble pose inflationary risks. It maintained its year-end inflation forecast at 5-7%, with a return to its 4% inflation target in 2024. The bank expects GDP growth between -1 and +1% in 2023 and +0.5 and +2.5% in 2024. Regarding crypto-currencies, President Elvira Nabiullina said that the institution remains opposed to their use in the domestic market, but is ready to allow them for settlements with foreign countries.

#Journalism – After closing Russian media RT & Sputnik, the French government threatens C8 and CNews. 

Rima Abdul Malak, the French Minister of Culture, speaking on radio France Inter on Thursday, February 9, said she was “worried” about “threats to freedom of expression and creation” of channels CNews and C8. She asked the television regulator Arcom (ex-CSA) to intervene against the channels CNews and C8, accused, among others, of not respecting their obligation of pluralism. The Minister of Culture cites “a number of examples” that have occurred “in recent months and years” within the media group owned by Vincent Bolloré. She said that Arcom could withdraw the radio frequency made available to them if these channels did not meet their obligations.

#EndofDollar – The five factors that threaten the hegemony of the US dollar according to Ray Dalio. 

The founder of the world’s largest hedge fund, Ray Dalio, recently published a note outlining his views on the evolution of the international monetary system from 1945 to the present. In his opinion, there are five trends that weaken the US dollar and the stock of dollar-denominated debt:
1) The supply of dollar-denominated debt issued in the markets is far greater than the demand. To compensate for this shortfall, the US central bank has been buying large amounts of debt with the money it has been printing since 2008 (“quantitative easing”);
2) The growing desire of foreign countries to diversify the assets of their central banks and sovereign wealth funds away from the US dollar. These countries are too concentrated in dollars and are cautiously pursuing diversification;
3) Foreign countries are increasingly doing more trade and financial transactions with China than with the United States. Therefore, it is natural, both from China’s and other countries’ points of view, to denominate more transactions in Chinese RMB;
4) US sanctions are causing some foreign holders of dollar-denominated bonds to fear that their assets will be sanctioned;
5) Political and social conflicts in the US, particularly over debt limit management, are damaging the credibility of the country and its policies.
Ray Dalio considers that “the probability of a major restructuring of debt assets and liabilities denominated in the major reserve currencies (dollar, euro, yen) over the next ten years is about 60%.”

#UkraineWar – “If Russia wins, the imperial system of the United States will collapse,” announces Emmanuel Todd

Anthropologist and demographer Emmanuel Todd believes that World War III has begun. “It is obvious that the conflict, by moving from a limited territorial war to a global economic confrontation, between the whole of the West on the one hand and Russia backed by China on the other, has become a world war.” The man who predicted the fall of the Soviet Union in 1976 by observing the rise in infant mortality believes that the United States is in many ways on the decline. “In America, mortality is rising and life expectancy is falling. All the newspapers write: the West is normal and Putin is a mental patient. Russians are bloodthirsty monsters. Demographics say otherwise: Russia is more stable and its society has become more civilized.”

#EconomicSanctions – “The impact of sanctions against Russia is disappearing” – Jacques Sapir

According to the French economist, the sanctions aimed at depriving the Russian economy of its imports of goods and services are no longer effective. The recent study by the American think tank “Silverado” confirms that Russian imports from various countries, including China, have replaced those from Western countries. It remains difficult to estimate the share of imports from friendly countries (e.g. Turkey, Armenia or Kazakhstan) which are, in reality, goods supplied by countries supposedly applying sanctions against Russia. As Jacques Sapir points out, “if imports from EU countries have fallen sharply, they have fallen only slightly in the case of the USA”. The latest IMF forecasts predict a growth of 0.3% of GDP in the Russian economy in 2023.

#UkraineWar – Is it in America’s interest to keep the war in Ukraine going?

A recently released study by the Rand Corporation assesses that a prolonged conflict in Ukraine would not benefit the United States. The think tank that advises the U.S. military reveals that restoring full territorial control of Ukraine is not that important, and imposes costs that far outweigh the benefits. According to the organization, the excessive focus on Ukraine distracts from the second front of the war against a new player: China. “The ability of the United States to focus on its other global priorities – in particular, competition with China – will remain limited as long as the war absorbs senior U.S. policymakers’ time and military resources. A longer war that increases Russia’s dependence on China will give the latter advantages in its competition with the United States.”

#De-dollarization – “Gold is money. Everything else is credit.” J.P. Morgan

In 2022, central banks bought 1,136 tons of gold, the highest level in 55 years, according to the World Gold Council. The organization attributes the spike to geopolitical tensions and high inflation, noting that the majority of these purchases were unreported. Central banks are net buyers of the yellow metal for the 13th consecutive year. One has to go back to 1967 to find such a volume of purchases. This dynamic led a few years later to the end of the Bretton Woods Agreement. On August 15, 1971, U.S. President Richard Nixon announced on television the end of the convertibility of the dollar into gold. In concrete terms, the United States defaulted on its promise to exchange its dollars at a fixed rate for gold ($35 per ounce).

#MultipolarWorld – For Zoltan Pozsar, a multipolar world requires a new international monetary system

The monetary order based on the US dollar since 1945 is threatened by de-dollarization and central bank digital currencies (CBDCs), according to Zoltan Pozsar, economist at Credit Suisse. While de-dollarization is a frequently discussed topic, CBDCs are expected to accelerate this transition. Indeed, he says, the Chinese have realized “that financial sanctions are implemented through the balance sheets of western banks, and that these institutions form the backbone of the correspondent banking system that underpins the dollar.” To internationalize the renminbi without risking Washington’s sanctions, China must develop a new correspondent financial network, “all without referencing the dollar or touching the western banking system”. According to the IMF, more than half of the world’s central banks are exploring or developing digital currencies.

#NordStream – Who sabotaged the Nord Stream 1 and 2 gas pipelines?

Recently heard on the Senate floor, U.S. Undersecretary of State for Political Affairs Victoria Nuland said, “Senator Cruz, like you, I am, and I think the administration is, very gratified to know that Nord Stream 2 is now, as you like to say, a hunk of metal at the bottom of the sea.” In the absence of conclusive evidence, German experts have made no progress in their investigation. Prosecutor General Peter Frank told the newspaper “Welt am Sonntag” that “Russia’s responsibility for the Nord Stream explosions cannot be proven.” Meanwhile, the German export-based economic model is in crisis. According to German economist Holger Zschaepitz: “The country’s export surplus has been more than halved year-on-year in 2022 due to rising energy costs, the lowest figure since 2000 and the fifth consecutive decline.”

#EconomicWar – Europe increases sanctions against Russian oil

Since February 5, the European Union has banned almost all maritime imports of Russian refined oil. This new measure comes two months after the one targeting crude oil. In addition, companies based in the EU, the G7 and Australia are prohibited from providing services allowing the transport of Russian oil by sea (trade, freight, insurance, shipowners, etc.) if the price per barrel exceeds a revisable ceiling. The purpose of these sanctions is to limit Russia’s oil revenues, while maintaining Russian energy supplies to the market. Russia is circumventing these sanctions by developing its own fleet of tankers, which it operates and insures itself, as do its main customers, China and India. According to trading giant Trafigura, the “shadow fleet” of vessels carrying Russian oil around the world totals about 600 tankers.

The Group of Seven (G7) countries and Australia have agreed to cap the price of Russian marine crude oil at US$60 per barrel. For some, this limit is too high and will not significantly reduce Russia’s revenues. For others, this cap is too low and could have a negative impact on inflation control. In this fourth article, we will focus on how Russia exports its oil by sea to Asia.

In the weeks before Russia’s military intervention in Ukraine, less than two-fifths of the crude oil loaded on tankers in Russian ports was destined for Asia. Today, that proportion is two-thirds, with China and India being the two main consumers of this black gold.

In November, Russia pumped an average of 10.9 million barrels per day of crude and a type of light oil called condensate, according to Energy Ministry figures. This is the highest level in eight months.

With the implementation of sanctions, Russia is trying to continue to redirect its crude oil exports to Asia and so limit a possible decrease in its production. Moscow has reaffirmed it will not sell oil below the G7 price cap, as it considers such a restriction unacceptable and contrary to market and World Trade Organization rules.

The country is expected to continue to offer deep discounts to international benchmarks to ensure that its oil finds a buyer. In recent days, discounts for Russian Urals oil have increased significantly, pressured by record freight rates for tankers carrying Russian oil. 

Russian “Ural” grade oil was trading at about US$52 a barrel at the export terminal. This is a discount of US$33.28 vs. Brent. In comparison, the average markdown in 2021 was US$2.85. “We see the price cap is something that benefits China, benefits India, and benefits all purchasers of Russian oil,” U.S. Treasury Secretary Janet Yellen said. 

Indeed, India is not ready to give up its purchases. Its oil minister recently said he had a “moral duty” to his country’s consumers. “We will buy oil from Russia, we will buy oil everywhere,” he added.

To circumvent the sanctions, Moscow has been working in recent months to build a logistics network to ensure that its crude continues to flow to global consumers. According to shipping brokers, Russia has assembled more than 100 tankers and spent US$16 billion expanding its fleet.

Traders have indicated that Russia needs more than 240 tankers to maintain its current export flow. Operators linked to Russia are suspected of having purchased as many as 29 supertankers in 2022. Also called VLCCs for Very Large Crude Carriers, they are capable of carrying more than 2 million barrels.

On the insurance side, Moscow has strengthened its own marine insurance company, the Russian National Reinsurance Company (RNRC). It has been recapitalized and has received a guarantee from the Central Bank of Russia (CBR). This gives it “infinite coverage”.

Uninsured ships cannot enter international ports or shipping lanes and some 95% of all marine insurance is issued by London-based companies. Russia is replacing all London-based policies with Moscow-based insurance to avoid sanction measures.

India and Turkey have said they will recognize Russian insurance as a cover, effectively ignoring Western sanctions. China, on the other hand, fears US retaliation and has been more circumspect. The issue of whether or not to accept Russia’s insurance remains highly politicized.

According to the Russian Minister of Transport, Alexander Poshivay, China does not yet recognize all the protection and indemnity insurance and reinsurance certificates issued to shipowners by Russian insurers.

Russia will, therefore, also have to rely on the public or private fleets of buyer countries such as India and China, whose governments have the means to insure them.

Finally, it is interesting to note that Japan is participating in the sanctions on the cap on Russian crude oil, except for that which is imported from the Sakhalin-2 plant. This decision was made by Tokyo to ensure its energy security. 

Japan already imports about 90% of its oil from the Middle East. Last year, it received about 34 million barrels of oil from Russia, accounting for 3.6% of the country’s total supply.