Pepe Escobar: Western elites spinning phantom narrative of Russian aggression to stave off economic collapse

Pepe Escobar
Sputnik

It's like clockwork. Oil price is on the rise again, as this column foresaw earlier this year. And the increasing possibility of Brexit is sending EU decision centers on a tailspin.

So it's time for US Think Tankland - as in CIA front Stratfor, among others - to renew their spin offensive, mixing "analyses" of imminent Russian economic collapse with calls for more NATO pressure over Russia's western borderlands. A solid case can be made that Moscow does not need mountains of Western investment; credit can be created in Russia. Most of all, there is rather less productive investment money in the West than wild speculative funds; it's largely a matter of fiat money and credit, and Moscow does not need to go to the West for that.

As long as Russia uses investment capital to increase the production of goods, this will offset the increase in money supply. So in the end inflation will be negligible. Quite a few Russians must be puzzled at the Central Bank's Elvira Nabiullina, with her policy of raising interest rates to cut back the increase in investment; that could eventually lead to a strangled Russia. Not accidentally Nabiullina happens to be extremely praised by US Think Tankland and the City of London.

As to what credits would Russia use to pay for needed imported technology the obvious answer is to draw from energy exports - especially now with the oil price back on the way up. And here intervenes the temptation to redirect the export of oil and natural gas away from the EU to China and Asia - and let the EU grapple with its eternally inconsistent "energy policy", which consists mainly of blaming Gazprom. It's a myth that a dearth of foreign investment today will delay large projects in Russia - including the energy front; China will step up infrastructure investment in Russia with many projects linked to the New Silk Roads and overall Eurasia integration, as even US Think Tankland admits.
 
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These Are The 8 Triggers For A New Financial Crisis

The Independent

There are a number of potential triggers to a new crisis.

The first potential trigger may be equity prices.
 
The US stock market runs into trouble. A stronger dollar affects US exports and foreign earnings. Emerging market weakness affects businesses in the technology, aerospace, automobile, consumer products and luxury product industries. Currency devaluations combined with excess capacity, driven by debt fuelled over-investment in China, maintain deflationary pressures reducing pricing power. Lower oil prices reduce earnings, cash flow and asset values of energy producers. Overinflated technology and bio-tech stocks disappoint.

Earnings and liquidity pressures reduce merger activity and stock buybacks which have supported equity values. US equity weakness flows into global equity markets.

The second potential trigger may be debt markets. Heavily indebted energy companies and emerging market borrowers face increased risk of financial distress.
According to the Bank of International Settlements, total borrowing by the global oil and gas industry reached US$2.5 trillion in 2014, up 250 percent from US$1 trillion in 2008.

The initial stress will be focused in the US shale oil and gas industry which is highly levered with borrowings that are over three times gross operating profits. Many firms were cash flow negative even when prices were high, needing to constantly raise capital to sink new wells to maintain production. If the firms have difficulty meeting existing commitments, then decreased available funding and higher costs will create a toxic negative spiral.

A number of large emerging market borrowers, such as Brazil’s Petrobras, Mexico’s Pemex and Russia’s Gazprom and Rosneft, are also vulnerable. These companies increased leverage in recent years, in part due to low interest rates to finance significant operational expansion on the assumption of high oil prices.

These borrowers have, in recent years, used capital markets rather than bank loans to raise funds, cashing in on demand from yield hungry investors. Since 2009, Petrobras, Pemex and Gazprom (along with its eponymous bank) have issued US$140 billion in debt. Petrobras alone has US$170 billion in outstanding debt. Russian companies such as Gazprom, Rosneft and major banks have sold US$244 billion of bonds. The risk of contagion is high as institutional and retail bond investors worldwide are exposed.

A third possible trigger may be problems in the banking system fed by falling asset prices and non-performing loans. European banks have around €1.2 trillion in troubled loans. Chinese and Indian bank problem loans are also high.

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Russia Cuts Off Ukraine Gas Supply To 6 European Countries

Zero Hedge

Vladimir Putin ordered the Russian state energy giant Gazprom to cut supplies to and through Ukraine amid accusations, according to The Daily Mail, that its neighbor has been siphoning off and stealing Russian gas. Due to these "transit risks for European consumers in the territory of Ukraine," Gazprom cut gas exports to Europe by 60%, plunging the continent into an energy crisis "within hours." Perhaps explaining the explosion higher in NatGas prices (and oil) today, gas companies in Ukraine confirmed that Russia had cut off supply; and six countries reported a complete shut-off of Russian gas. The EU raged that the sudden cut-off to some of its member countries was "completely unacceptable," but Gazprom CEO Alexey Miller later added that Russia plans to shift all its natural gas flows crossing Ukraine to a route via Turkey; and Russian Energy Minister Alexander Novak stated unequivocally, "the decision has been made."

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Russia Halts Gas Supplies To Ukraine

Zero Hedge

After weeks of worthless foreplay whose outcome was known from the beginning despite just as worthless EU middleman Oettinger assuring everyone a deal was imminent any second now, overnight we got the long-anticipated mutual defection outcome and - as we warned - negotiations between Gazprom and Ukraine/EU fell apart with the Russian energy giant halting supplies to Ukraine unless Kiev prepays any and all gas deliveries from now on. Gazprom said it hadn't received payment for a debt it put at $4.458 billion by the Monday deadline it had set. "Ukraine will receive gas only in the amounts it has paid for," Gazprom said.

The reason for the collapse in talks: Kiev wants to pay $268.5 per 1,000 cubic meters of gas - the price it had been offered when Yanukovich was in power - but, in a compromise last week, said it would agree to pay $326 for an interim period until a lasting deal was reached. Moscow had sought to keep the price at the 2009 contract level of $485 per 1,000 cubic meters, but had offered to waive an export duty, bringing down prices by about one-fifth to $385, which brings it broadly into line with what Russia charges other European countries.

In other words, the delta was less than $60, and certainly a "fair" offer to Ukraine considering it is what Europe pays. However, it wasn't low enough for Kiev, which certainly is out of money once again having to spend the bulk of its IMF/EU aid to keep its military armed, and the only logical outcome - one in which the country would no longer receive something for nothing - transpired.

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Russia Is Doing It – Russia Is Actually Abandoning The Dollar

Investment Watch
Michael Snyder

The Russians are actually making a move against the petrodollar. It appears that they are quite serious about their de-dollarization strategy. The largest natural gas producer on the planet, Gazprom, has signed agreements with some of their biggest customers to switch payments for natural gas from U.S. dollars to euros. And Gazprom would have never done this without the full approval of the Russian government, because the Russian government holds a majority stake in Gazprom.

There hasn't been a word about this from the big mainstream news networks in the United States, but this is huge. When you are talking about Gazprom, you are talking about a company that is absolutely massive. It is one of the largest companies in the entire world and it makes up 8 percent of Russian GDP all by itself.

It holds 18 percent of the natural gas reserves of the entire planet, and it is also a very large oil producer. So for Gazprom to make a move like this is extremely significant.

When Barack Obama decided to slap some meaningless economic sanctions on Russia a while back, he probably figured that the world would forget about them after a few news cycles.

But the Russians do not forget, and they certainly do not forgive. 

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The Great Decoupling: How the West is Engineering its Own Downfall

James Corbett 
Activist Post

Reports out of Moscow indicate that Russia is on the verge of signing the “holy grail” of gas deals with China. The deal between Russian state-owned gas firm Gazprom and Beijing would see as much as 38 billion cubic meters of natural gas per year flowing through the first proposed Russia-China pipeline by 2018. The agreement has apparently been in the works for years, but recent events on Moscow’s western flank (read: the Ukrainian situation) has moved the timetable on the plan up dramatically, with the last sticking point being the price. If the deal is signed next month during Putin’s state visit to China, as many analysts are speculating will happen, it will be a significant event not only economically, but geopolitically.

Given the fact that Russia, the world’s largest gas producer, and China, the world’s largest gas consumer, are neighbors it would be logical to assume that a gas pipeline between the two countries already exists. 

But logic and geopolitics seldom mix, and tensions between the two formerly communist countries (however one characterizes China’s current political and economic system) have remained ever since border disputes brought Moscow and Beijing to the brink of war in the 1960s. Establishing a gas link would thus be a very powerful signal of the growing understanding between the Russian bear and the Chinese dragon that their future lies more with each other than it does with a NATO-backed alliance that is increasingly encircling and isolating them.

Speaking of logic, this latest deal, if it is signed after all, would only be the logical extension of all of the moves toward cooperation between Russia, China and their ex-Soviet satellites that we’ve been seeing in recent years.

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