668 US coerces EU into sanctions against Russia. Michael Hudson on IMF Austerity for Ukraine

US coerces EU into sanctions against Russia. Michael Hudson on IMF
Austerity for Ukraine

Newsletter published on 31 July 2014

(1) US coerces EU, with British help, into sanctions against Russia
(2) EU persuaded by MH17 images to introduce economic sanctions against
Russia
(3) Russia Sanctions will hurt Corporate America more than Washington
realizes - Eamonn Fingleton
(4) US financial showdown with Russia is more dangerous than it looks -
Ambrose Evans-Pritchard
(5) BP profits rise, but it warns of Russia sanctions risk
(6) Rosneft boss said sanctions imposed on him by the US will not affect
its trade
(7) Russia says US sanctions are revenge for Ukrainian failure to
re-take rebel territory
(8) Putin addresses BRICS on sanctions
(9) Russia to Reduce Reliance on Microsoft, IBM After Sanctions
(10) Russia Is Doing It – Russia Is Actually Abandoning The Dollar
(11) Michael Hudson on IMF Austerity for Ukraine; 1% Oligarchy wants to
rule the world
(12) Russia smoothes India-China Rapproachement
(13) Xi-Modi Meeting: pledge to resolve the border dispute
(14) Xi accepts invitation to go on a state visit to India
(15) Xi invites Modi to participate in APEC
(16) Cold War 2.0 - Pepe Escobar

(1) US coerces EU, with British help, into sanctions against Russia

http:
//mycatbirdseat.com/wp-content/uploads/2014/07/Cameron-Jean-Claude-Juncker..jpg

The real threat to European freedom and independence comes from
politicians like Cameron, not Jean-Claude Juncker.

by Finian Cunningham

http:
//www.strategic-culture.org/news/2014/07/02/juncker-uks-cameron-a-greater-threat-to-eu-freedom.html

[...] Both the signing of the EU trade agreement and the ongoing
violence in Ukraine at the hands of the Kiev regime have led to a
parlous deterioration in relations between Moscow and European
governments, as well as primarily between Russia and the US.

But the eastward expansion of the EU, as with NATO, to incorporate
former Soviet states and now the grooming of Ukraine, Georgia and
Moldova for eventual incorporation is best understood as a geopolitical
agenda defined first and foremost by Washington.

As Sergei Glazyev argued recently in his article on the 'Rise of
Eurofascism', the EU has unfortunately become a vital part of the
architecture upholding US global hegemony.

Glazyev notes: "The United States supports the eastward expansion of the
EU and NATO in every way possible, viewing these organizations as
important components of its global empire. The US exercises control over
the EU through supranational institutions, which have crushed the
nation-states that joined the EU. Deprived of economic, financial,
foreign policy and military sovereignty, they submit to the directives
of the European Commission, which are adopted under intense pressure
from the US. In essence, the EU is a bureaucratic empire that arranges
things within its economic space in the interests of European and
American capital, under US control."

This intended subordinate role of the EU to US geopolitics was aptly
highlighted this week when Washington tried to lobby European leaders to
launch a third round of sanctions against Russia, allegedly for not
"de-escalating" tensions over Ukraine. Western media reports disclosed
that US President Barack Obama and his senior aides were engaged in
intense phone calls with various European leaders, pushing for European
sanctions.

As the Financial Times reported: "Washington is pressing the EU to
threaten Moscow with sanctions against entire sectors of the Russian
economy, including energy, finance and defense. Dan Fried, the US envoy
for sanctions, visited Brussels on Wednesday to signal that the US was
ready to proceed with these 'level three' measures but would seek to do
so in lockstep with the EU, diplomats said."

The key European political figure to advance American foreign policy is
the British Prime Minister David Cameron. The week of intense Washington
pressure on Europe to adopt a tough line towards Russia began with Obama
and Cameron working out the common ground. American government-sponsored
Radio Free Europe reported that the White House said Obama and Cameron
"agreed that should Russia fail to take immediate steps to de-escalate
the situation in eastern Ukraine, the US and European Union would work
to implement additional coordinated measures to impose costs on Russia."

(2) EU persuaded by MH17 images to introduce economic sanctions against
Russia

MH17 Europe Toughens Stance against Putin

http://www.spiegel.de/international/europe/europe-prepares-tough-sanctions-against-russia-a-983224.html

The Wake-Up Call: Europe Toughens Stance against Putin

By SPIEGEL Staff

July 28, 2014

It took the shooting down of a Boeing jet carrying almost 300 people
before the EU agreed on the first true economic sanctions against
Russia. The Americans want further action, but it is impossible to know
if punitive measures can sway Vladimir Putin.

It was the images. Absurdly tattooed pro-Russian fighters, cigarettes
dangling from their lips and Kalashnikovs tucked under their arms,
stomping around in the field of bodies and wreckage at the crash site,
as if the dead children from the downed Boeing had nothing to do with
them. Experts holding their noses as they opened a railroad car full of
dead bodies. A seemingly endless convoy of hearses leaving Eindhoven
Airport in the Netherlands. And Russian President Vladimir Putin took it
all in without losing his composure.

It's part of the occasionally cynical business of political experts to
refer to a tragedy of this magnitude, and to the endlessly repeated TV
images of the suffering of innocent people, as a "game changer." It's
the moment that divides the course of a crisis into "before" and "after"
-- a time when the public and politicians hold their breaths and take a
new look at the situation. But one of the unique features of the
European Union is that in the "after" period, it often continues for a
time to behave the way it did in the "before" period. Supporting
evidence was provided by an exchange from last Tuesday, almost a week
after Malaysian Airlines flight MH 17 was shot down:

Let's at least do an arms embargo, argued British Foreign Secretary
Philip Hammond.

No, you can't even do financial sanctions, responded his French
counterpart Laurent Fabius in the hearing room of the European Council
building in Brussels.

Prior to the meeting, EU foreign ministers had seemed deeply
disconcerted. But behind closed doors, the overriding objective was
apparently not to determine how best to force Putin to back down, but
how best to protect their own domestic economies.

'Simply Ridiculous"

In the days following, senior representatives of Eastern European member
states voiced doubts about their smug cousins from the EU's western
member states. It is "simply ridiculous," one representative said.

But by the end of the week, Europe had finally arrived in the "after"
phase. The "game changer" had had its effect. It is now all but certain
that flight MH 17 was shot down by a surface-to-air missile system from
Russian inventories, a system that hardly would have reached Ukraine
without Putin's approval. The 28 EU ambassadors agreed in principle on
initial tough economic sanctions against Russia, which they plan to wrap
up on Tuesday. In a letter to European leaders, European Council
President Herman Van Rompuy wrote: ""I would like to ask you that you
instruct your ambassador to complete an agreement by Tuesday." Unless
the EU abandons its resolve once again, "we can now pull the plug on
Russia and Putin in a very controlled manner," say officials in Berlin.

Russian President Vladimir Putin has so far resisted Western attempts to
force him to abandon support of pro-Russian separatists in eastern Ukraine.

European leaders are expected to officially approve the new sanctions
against Russian banks, companies and private citizens by the end of this
week. Despite the summer break, the German government is hoping for a
special summit in Brussels. The EU message to Putin, after all, must
also be accompanied by images -- symbolism strong enough to be worthy of
the pictures from the MH 17 crash site. [...]

Since the shooting down of MH 17, Putin has lost any political capital
he still had in Europe and the US. And with nothing left to lose, it
seems likely that he is approaching tougher sanctions with sanguinity.

Eckhard Cordes, the chairman of the Committee on Eastern European
Economic Relations, an organization representing German business
interests in Russia, agrees. "In the current situation, too much
external pressure can achieve the opposite of what is intended. It does
no one any good if we completely force Putin into a corner." Indeed,
such a prospect alarms quite a few people in the Russian economy.
Oligarchs may be concerned about their billions and their villas in
Cyprus, on the Côte d'Azur and in London. But they also know that
without machinery and know-how from the West, the Russian economy is
doomed. [...]

Part 2: America Loses Patience with Europe

The European Union won't go quite that far this week. German Chancellor
Angela Merkel and Foreign Minister Frank-Walter Steinmeier are
determined not to jeopardize solidarity among the 28 EU countries. They
also want to maintain Germany's direct ties to Moscow. Of course Germany
also continues to apply a caveat that a source within the Berlin
government puts this way: "It should hurt them, but not us." [...]

"It's most imperative that we strike the oligarchs," says German
Economics Minister Sigmar Gabriel of the center-left Social Democratic
Party. "And we need to succeed in that regard in the next week." Russian
policy rests on the oligarchs' shoulders, Gabriel explains. "We have to
freeze their accounts in European capitals and revoke their entry
visas." He concedes the German and European economy will feel the
consequences of sanctions. "But what would be the consequences if
Europe, fearing economic losses, stood back and watched a civil war
unfold and innocent people die?" [...]

Translated from the German by Christopher Sultan


(3) Russia Sanctions will hurt Corporate America more than Washington
realizes - Eamonn Fingleton

http://www.forbes.com/sites/eamonnfingleton/2014/07/27/obamas-russia-sanctions-heres-a-hidden-reason-why-they-will-slit-corporate-americas-throat/

Eamonn Fingleton

7/27/2014 @ 12:53PM

Obama's Russia Sanctions: Corporate America Has Much More To Lose Than
Washington Realizes

Almost everyone in the American establishment seems to support President
Obama’s new round of sanctions against Russia. Almost everyone, that is,
except U.S. exporters.

Although they have been quiet on the crisis, U.S. exporters are hardly
happy. They are censoring themselves because to speak openly would risk
accusations of disloyalty. But they know in their heart of hearts that
Obama’s sanctions policy will prove a double whammy for the American
economy.

For a start America will be deprived of badly needed immediate export
opportunities. But a much more troubling problem is that in the long run
East Asian and European rivals will take over from corporate America in
key areas of the Russian market.

For the Chinese particularly the crisis is an opportunity, because they
strongly support Moscow and they will not only export even more to
Russia but will no doubt earn special brownie points with Vladimir
Putin. Meanwhile South Korea, supposedly one of America’s closest
allies, has openly stated it will not impose sanctions.

That said, most of America’s allies are officially supportive of Obama’s
agenda. Such nations notably include Japan and Germany, as well as
France, Italy, and the UK.

The problem is that, with the possible exception of the UK, none of
these nations is nearly as committed to punishing Russia as the United
States is. This applies in spades to Japan, which happens to be by far
America’s most formidable rival in high-technology goods.

For these nations, moreover, it is easy to have it both ways: while in
public they can profess strong support for sanctions, they can privately
turn a blind eye to their own corporations’ evasions of sanctions. Again
Japan is the classic example: there is often a remarkably wide gap there
between official policy and what in practice the regulators permit.

Largely overlooked by the American press, Japanese officials could
hardly be less sympathetic to the Obama administration’s Russia policy.
This is in part because the current crisis catches Japan at a
particularly inopportune moment. The fact is that by far Japan’s single
most important territorial dispute – vastly more important that its
dispute with China over the Senkaku Islands – is a dispute with Russia
over the Kuril Islands. Two of these, with an estimated combined
population of about 15,000, were previously part of Japan but were
captured by the Soviet Union in 1945. All the evidence is that Japanese
officials have been quietly negotiating with Moscow for nearly a
generation and, before the Ukraine crisis intruded, had come close to a
deal for the islands’ return to Japanese sovereignty. (The Kuril
Islands’ special significance to Tokyo is that they have a long history
of ethnic Japanese habitation. This contrasts sharply with the Senkaku
Islands, which are tiny rock outcrops which neither the Japanese nor
anyone else have ever inhabited.)

As it is, Tokyo has hitherto expressed only the vaguest and most
equivocal support for Obama’s sanctions. Its most notable contribution
so far has been to impose an entry visa ban on 23 Russian nationals. Who
are these individuals? Amazingly Tokyo refuses to identify them. It is
perhaps overly cynical to suggest that the Tokyo Foreign Affairs
Ministry has compiled a list of 23 Russian shoplifters, drug dealers,
and other low-level undesirables. But who says the Japanese don’t have a
sense of humor?

Basically Japan sees no reason to offend Putin. Not only does Tokyo have
no dog in the Ukraine fight but Ukraine seems almost as remote to the
Japanese as say Ethiopia or Somalia does to Americans. Tokyo’s attitude
to Washington these days is broadly similar to that of Oliver Hardy in
the Laurel and Hardy movies: “Here’s another nice mess you’ve gotten me
into.”

Already IBM and Hewlett-Packard have been identified as big losers from
Obama’s sanctions. Thanks to America’s cultural commitment to the rule
of law, such corporations will have little choice but to toe Obama’s
line. The question is whether Japanese regulators will expect a
similarly conscientious level of compliance from corporations like
Hitachi , Toshiba, and NEC. The betting is that far from honoring U.S.
sanctions, these latter corporations will have a field day taking their
American rivals’ place.

The crisis also poses serious problems for U.S.-based oil majors.
Exxon’s chief executive, Rex W. Tillerson, has so far been one of the
few U.S. chief executives publicly to object to further sanctions. He
has plenty to worry about. If Exxon is required to back away from its
efforts to penetrate the Russian oil industry, there are plenty of other
oil companies — based outside the United States — that will be happy to
take its place. These notably include Statoil of Norway and Total of France.


(4) US financial showdown with Russia is more dangerous than it looks -
Ambrose Evans-Pritchard

Date: Sat, 26 Jul 2014 08:38:30 +0900 Subject: US financial showdown
with Russia is more dangerous than it looks, for both sides - Telegraph
Ambrose E.P From: chris lancenet <chrislancenet@gmail.com>

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/10771069/US-financial-showdown-with-Russia-is-more-dangerous-than-it-looks-for-both-sides.html

US financial showdown with Russia is more dangerous than it looks, for
both sides

The US Treasury faces a more formidable prey with Russia, the world's
biggest producer of energy with a $2 trillion economy, superb scientists
and a first-strike nuclear arsenal

By Ambrose Evans-Pritchard

6:24PM BST 16 Apr 2014

The United States has constructed a financial neutron bomb. For the past
12 years an elite cell at the US Treasury has been sharpening the tools
of economic warfare, designing ways to bring almost any country to its
knees without firing a shot.

The strategy relies on hegemonic control over the global banking system,
buttressed by a network of allies and the reluctant acquiescence of
neutral states. Let us call this the Manhattan Project of the early 21st
century.

"It is a new kind of war, like a creeping financial insurgency, intended
to constrict our enemies' financial lifeblood, unprecedented in its
reach and effectiveness," says Juan Zarate, the Treasury and White House
official who helped spearhead policy after 9/11.

“The new geo-economic game may be more efficient and subtle than past
geopolitical competitions, but it is no less ruthless and destructive,”
he writes in his book Treasury's War: the Unleashing of a New Era of
Financial Warfare.

Bear this in mind as Washington tightens the noose on Vladimir Putin's
Russia, slowly shutting off market access for Russian banks, companies
and state bodies with $714bn of dollar debt (Sberbank data).

The stealth weapon is a "scarlet letter", devised under Section 311 of
the US Patriot Act. Once a bank is tainted in this way - accused of
money-laundering or underwriting terrorist activities, a suitably loose
offence - it becomes radioactive, caught in the "boa constrictor's
lethal embrace", as Mr Zarate puts it.

This can be a death sentence even if the lender has no operations in the
US. European banks do not dare to defy US regulators. They sever all
dealings with the victim.

So do the Chinese, as became clear in 2005 when the US hit Banco Delta
Asia (BDA) in Macao for serving as a conduit for North Korean commercial
piracy. China pulled the plug. BDA collapsed within two weeks. China
also tipped off Washington when Mr Putin proposed a joint Sino-Russian
attack on Fannie Mae and Freddie Mac bonds in 2008, aiming to
precipitate a dollar crash.

Mr Zarate told me that the US can "go it alone" with sanctions if
necessary. It therefore hardly matters whether or not the EU drags its
feet over Ukraine, opting for the lowest common denominator to keep
Bulgaria, Cyprus, Hungary and Luxembourg on board. Washington has the
power to dictate the pace for them.

The new arsenal was first deployed against Ukraine - of all places - in
December 2002. Its banks were accused of laundering funds from Russia's
organised crime rings. Kiev capitulated in short order.

Nairu, Burma, North Cyprus, Belarus and Latvia were felled one by one,
all forced to comply with US demands. North Korea was then paralysed.
The biggest prize yet has been Iran, finally brought to the table. "A
hidden war is under way, on a very far-reaching global scale. This is a
kind of war through which the enemy assumes it can defeat the Iranian
nation," said then-president Mahmoud Ahmadinejad to Iran's Majlis. He
meant it defiantly. Instead it was prescient.


The US Treasury faces a more formidable prey with Russia, the world's
biggest producer of energy with a $2 trillion economy, superb scientists
and a first-strike nuclear arsenal. It is also tightly linked to the
German and east European economies. The US risks endangering its own
alliance system if it runs roughshod over friends. It is in much the
same situation as Britain in the mid-19th century when it enforced naval
supremacy, boarding alleged slave ships anywhere in the world, under any
flag, ruffling everybody's feathers.

President Putin knows exactly what the US can do with its financial
weapons. Russia was brought into the loop when the two countries were
for a while "allies" in the fight against Jihadi terrorism. Mr Putin
appointed loyalist Viktor Zubkov - later prime minister - to handle
dealings with the US Treasury.

Mr Zarate said the Obama White House has waited too long to strike in
earnest, clinging to the hope that Putin would stop short of tearing up
the global rule book. "They should take the gloves off. The longer the
wait, the more maximalist they may have to be," he said.

This would be a calibrated escalation, issuing the scarlet letter to
Russian banks that help Syria's regime.

He thinks it may already too late to stop Eastern Ukraine spinning out
of control, but not too late to inflict a high cost. "If the US Treasury
says three Russian banks are "primary money-laundering concerns", do you
think that UBS, or Standard Chartered will have anything to do with them?"

This will graduate to sanctions on Russian defence firms, mineral
exports and energy - trying not to hurt BP assets in Russia too much, he
adds tactfully - culminating in a squeeze on Gazprom should all else
fail. Whether you are for or against such action, be under no illusion
as to what it means. We would be living in a different world, and Wall
Street's S&P 500 would not be trading anywhere near 1,850.

It is true that Russia is not the power it once was, as you can see from
these Sberbank charts showing relative economic size against China and
Europe.

This is not a repeat of the Cold War. There is no plausible equivalence
between Russia and the West, and no ideological mystique.

It has $470bn of foreign reserves but these have already fallen by $35bn
since the crisis began as the central bank fights capital flight and
defends the rouble. Moscow cannot easily deploy the reserves in a slump
without causing the money supply to shrink, deepening a recession that
is almost certainly under way. Finance minister Anton Siluanov says
growth may be zero this year. The World Bank fears -1.8pc, while Danske
Banks says it could be -4pc.

Putin cannot count on global allies to carry him through. Only
Venezuela, Bolivia, Cuba, Nicaragua, Belarus, North Korean, Syria,
Sudan, Zimbabwe and Armenia lined up behind Mr Putin at the United
Nations over Crimea, a roll-call of the irrelevant.

Yet as the old proverb goes: "Russia is never as strong as she looks;
Russia is never as weak as she looks."

Princeton professor Harold James sees echoes of events before the First
World War when Britain and France imagined they could use financial
warfare to check German power.

He says the world's interlocking nexus means this cannot be contained.
Sanctions risk setting off a chain-reaction to match the 2008 shock.
"Lehman was a small institution compared with the Austrian, French and
German banks that have become highly exposed to Russia’s financial
system. A Russian asset freeze could be catastrophic for European –
indeed, global – financial markets," he wrote on Project Syndicate.

Chancellor George Osborne must have been let into the secret of US plans
by now. Perhaps that is why he issued last week's alert in Washington,
warning City bankers to prepare for a sanctions fall-out. The City is
precious, he said, "but that doesn't mean its interests will come above
the national security interests of our country".

The greatest risk is surely an "asymmetric" riposte by the Kremlin.
Russia's cyber-warfare experts are among the best, and they had their
own trial run on Estonia in 2007. A cyber shutdown of an Illinois water
system was tracked to Russian sources in 2011. We don't know whether US
Homeland Security can counter a full-blown "denial-of-service" attack on
electricity grids, water systems, air traffic control, or indeed the New
York Stock Exchange, and nor does Washington.

"If we were in a cyberwar today, the US would lose. We're simply the
most dependent and most vulnerable," said US spy chief Mike McConnell in
2010.

The US defence secretary Leon Panetta warned of a cyber-Pearl Harbour in
2012. "They could shut down the power grid across large parts of the
country. They could derail passenger trains or, even more dangerous,
derail passenger trains loaded with lethal chemicals. They could
contaminate the water supply in major cities, or shut down the power
grid across large parts of the country,” he said. Slapstick exaggeration
to extract more funds from Congress? We may find out.

Sanctions are as old as time. So are the salutary lessons. Pericles
tried to cow the city state of Megara in 432 BC by cutting off trade
access to markets of the Athenian Empire. He set off the Pelopennesian
Wars, bringing Sparta's hoplite infantry crashing down on Athens.
Greece's economic system was left in ruins, at the mercy of Persia. That
was a taste of asymmetry.

(5) BP profits rise, but it warns of Russia sanctions risk

http://www.bbc.com/news/business-28539284

29 July 2014 Last updated at 08:23

BP profits rise, but oil giant warns of Russia sanctions risk

BP has warned that further sanctions against Russia could affect its
business as it posted a rise in second quarter profits.

BP said that sanctions imposed over the Ukraine crisis have not affected
the oil giant so far, but could do so in the future.

The warning came as European ministers were due to meet to discuss
bolstered measures against Russia.

Sanctions "could adversely impact our business", BP said.

BP has around a 20% stake in Russian energy giant Rosneft.

"Any future erosion of our relationship with Rosneft, or the impact of
further economic sanctions, could adversely impact our business and
strategic objectives in Russia, the level of our income, production and
reserves, our investment in Rosneft and our reputation," BP said.

(6) Rosneft boss said sanctions imposed on him by the US will not affect
its trade

http://www.bbc.com/news/business-27197709

28 April 2014 Last updated at 18:15

Rosneft boss Igor Sechin defiant over US sanctions

The chief executive of Russia's state-controlled energy giant, Rosneft,
has said sanctions imposed on him by the US will not affect the
company's trade.

Igor Sechin has been added to a list of individuals thought to be in
Vladimir Putin's "inner circle", whose assets will be blocked in the US.

However, no sanctions were imposed against Rosneft itself.

British oil company BP, which owns almost 20% of Rosneft, said it would
not sever ties with the Russian firm.


(7) Russia says US sanctions are revenge for Ukrainian failure to
re-take rebel territory

http://mycatbirdseat.com/2014/07/russia-us-sanctions-revenge-for-ukrainian-failure-moscow-may-retaliate/

Russia: US sanctions revenge for Ukrainian failure, Moscow may retaliate

My Catbird Seat July 17, 2014 4

Russia considers the latest package of sanctions against it issued by
the US as revenge for the failure of Washington’s schemes in Ukraine and
blackmail. Moscow reserves the right to retaliate.

Moscow believes that America is targeting it with sanctions: “because
the events in Ukraine have not developed the way Washington scripted
them,” the Russian Foreign Ministry said in a statement on Thursday.

“The outrageous and groundless desire to blame Russia for the civil war
in a neighboring country, which was caused by a deep internal crisis and
already resulted in the loss of many lives, proves that the US and its
clients in Kiev have failed to pacify the wide public dissent,” the
ministry said.

Moscow said Washington is cynical in attempting to dodge responsibility
for the bloodshed perpetrated by the Ukrainian troops in the east of the
country, which the US is de facto encouraging.

The sanctions issued by the US on Wednesday won’t affect Russia’s
position, the ministry warned.

“We’ve said on many occasions that speaking the language of sanctions to
Russia is pointless, regardless of their scale. This path won’t lead to
any positive outcome,” the statement said. “Those who believe in their
own exceptionalism and claim the right to dictate their will to the
world will be deeply disappointed.”

Russia warned that there is a price to be paid for targeting Russia with
sanctions, and it would be American companies which would have to foot
the bill for the White House. The Obama administration’s policies will
deteriorate Russia’s relations with America in many regards, the
ministry said.

“If Washington intends to ruin the Russian-American relations, it’s on
their conscience,” the ministry said. “We won’t tolerate blackmail and
reserve the right to retaliate.”

The new round of American sanctions against Russia targets a number of
companies, particularly involved in arms production, energy and finance,
as well as several Russian officials. The White House said it introduced
the sanctions because Russia had failed to deescalate the crisis in
Ukraine, where Kiev is waging a military crackdown on defiant regions of
Donetsk and Lugansk, which formed armed militias and reject the central
government’s rule.

Earlier Russian President Vladimir Putin warned that the sanctions would
hurt America too.

“As for sanctions, they usually have a boomerang effect, and without a
doubt will force US-Russian relations into a corner,” he explained.
“This is a serious blow to our relationship. And it undermines the long
term security interests of the US nation and its people.”

(8) Putin addresses BRICS on sanctions

http://rt.com/news/173372-putin-brics-us-sanctions/

Putin: US sanctions contradict its national interests, will backfire

Published time: July 16, 2014 23:18 Edited time: July 17, 2014 03:22

Imposing sanctions on Russia and blaming it for destabilizing Ukraine
contradicts US national interests, President Putin said at the BRICS
summit in Brazil, emphasizing that declared support of Ukrainians should
not be limited to the country’s oligarchs.

Speaking to the press following the BRICS summit in Brazil, Vladimir
Putin was asked to comment on the new package of sanctions against
Russia announced just minutes earlier by the US President.

“We aren’t the ones introducing sanctions, you should ask them,” Putin said.

“But as for sanctions, they usually have a boomerang effect, and without
a doubt will force US-Russian relations into a corner,” he elaborated.
“This is a serious blow to our relationship. And it undermines the long
term security interests of the US State and its people.”

Putin said that it is “regrettable” that “our partners” have chosen to
impose new sanctions, but Russia “will not close doors to negotiations.”

“We're open to finding ways out of this situation,” Putin said. “I
really hope that common sense and the willingness to resolve all issues
through peaceful diplomatic means will prevail.”

“The measures taken by the US administration towards Russia, in my view,
contradict the national interests of the United States,” Putin said.
“This means that, for example, large companies wanting to work in Russia
after facing certain restrictions will lose their competitiveness
compared with other global energy companies.”

“We gave an opportunity for the largest US company to work in the
[Arctic] shelf. So what, the States does not want it to work there?”
Putin wondered. “They are hurting their biggest energy companies. And
for what? In order to, after making one mistake, insist on making another?”

“This is, at very least, an unprofessional approach. Sooner or later,
such methods of solving international problems will have to change, but
the damages will have to be written-off as losses for those doing it.”

During the Q&A session Putin once again reiterated that it was in
Russia's interest to see the end of the conflict in Ukraine and to see
that Ukraine pursues economic assistance, including that of the
International Monitory Fund (IMF). But at the same time, the Russian
president questioned, how the allocated funds including those of Russia
were being used.

“The IMF works in the following way – it does not normally assist
countries during a war,” which Putin thinks is the “right” prerequisite
for economic assistance, because money is supposed to be used to support
the social sector of the economy.

“But they [funds] are channeled for the military campaign, they are
embezzled, half stolen, under the disguise of helping the social
sector,” Putin said. “So after the first tranche was issued, this is
what is happening.” [...]


(9) Russia to Reduce Reliance on Microsoft, IBM After Sanctions

http://www.bloomberg.com/news/2014-07-21/russia-seeks-to-cut-dependence-on-ibm-microsoft-amid-sanctions.html

By Ilya Khrennikov 2014-07-21T13:57:59

July 21 (Bloomberg) -- Bloomberg’s Ryan Chilcote reports on mounting
international pressure on Russian President Vladimir Putin over the
downing of flight MH17 in Ukraine. He speaks on “Bloomberg Surveillance.”

Russia’s parliament is preparing new rules in a bid to cut its reliance
on foreign technology suppliers after U.S. sanctions against some of the
country’s largest companies, a move that could hurt sales at vendors
such as Microsoft Corp. (MSFT) and International Business Machines Corp.
(IBM)

The State Duma, Russia’s lower house of parliament, is drafting a bill
to require government agencies and state-run enterprises to give
preference to local providers of software and hardware, according to a
document from the commission for strategic information systems obtained
by Bloomberg News. The paper addresses criteria for tender processes
such as favoring products that don’t have imported, licensed components.

“This all has to do with sanctions,” Andrey Chernogorov, executive
secretary of the commission, said in a phone interview. “Given the
current international tensions, substituting imports with local software
and hardware becomes the key to ensuring self sufficiency.”

The Obama administration on July 16 tightened sanctions on Russian
banks, energy and defense companies to punish the country over its
interference in Ukraine. On the following day, the downing of a Malaysia
Airlines jet caught in the military conflict, killing all 298 people on
board, sent the Ukraine crisis into a new phase and raises the prospect
of further sanctions. H-P, Oracle

Hewlett-Packard Co. (HP), IBM, Microsoft, Cisco Systems Inc. (CSCO),
Oracle Corp. (ORCL) and Germany’s SAP SE had combined revenue of 285
billion rubles ($8.1 billion) from Russia last year, according to
estimates by the Russian Academy of Sciences that are included in the
commission’s document. Hewlett-Packard and IBM together accounted for
almost 78 percent of the figure. About 77 percent of the total sales
were contracts from the government and state-controlled companies, it said.

Spokesmen for IBM and Oracle in the U.K. declined to comment on the
planned law. Representatives for Hewlett-Packard, Microsoft, SAP and
Cisco didn’t immediately return phone calls and e-mails seeking comment.

Hewlett-Packard slipped 0.5 percent at 9:48 a.m. in New York trading.
IBM fell 1.2 percent, Microsoft lost 0.5 percent, Cisco dropped 0.1
percent and Oracle rose 0.3 percent. SAP lost 0.5 percent in Frankfurt
trading.

The commission accelerated preparation for the bill after reports that
American technology companies may cut off services to Russian banks and
companies to comply with U.S. sanctions, Chernogorov said. The proposal
may be submitted for a parliamentary vote in September, he said.
Rosneft, VEB

Among Russian companies the U.S. imposed lending curbs on last week are
energy giants OAO Rosneft (ROSN) and OAO Novatek (NVTK) as well as
Vnesheconombank and OAO Gazprombank. Since sanctions against Russia were
first announced in March, President Vladimir Putin has repeatedly called
for substituting imports with domestic production to limit the threat to
Russia’s economic growth.

With the lack of regulations in post-Soviet Russia that govern the award
of technology contracts, foreign vendors account for 67 percent of
software used in the country and about 90 percent of hardware, according
to the commission. Foreign software may have hidden capabilities such as
“bugs” and “backdoors,” giving suppliers access to confidential data,
Chernogorov said.

Russia’s Communications Ministry is among agencies seeking to cut
dependence on foreign vendors as it develops its e-government
initiative, a unified database of personal data used to provide online
services such as granting a license permit or assigning a child to
school. Local Production

“The idea of supporting local IT production is justified,” said Nikolay
Komlev, executive director of the Russian Association of Computer and IT
Enterprises, which represents multinationals such as IBM and
Hewlett-Packard as well as Russian vendors. “Still, its implementation
proposed by State Duma may give a competitive advantage to not the most
efficient companies.”

Russia’s largest IT companies with annual revenue exceeding $1 billion
include NCC, Lanit, Technoserv, NVision Group and IBS Group Holding Ltd.
(IBSG), according to CNews Analytics.

To contact the reporter on this story: Ilya Khrennikov in Moscow at
ikhrennikov@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at
kwong11@bloomberg.net Torrey Clark


(10) Russia Is Doing It – Russia Is Actually Abandoning The Dollar

http://theeconomiccollapseblog.com/archives/russia-is-doing-it-russia-is-actually-abandoning-the-dollar

By Michael Snyder, on June 10th, 2014

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.

At this point the Russians are turning their back on the United States,
and that includes the U.S. dollar.

What you are about to read is absolutely stunning, and yet you have not
heard about it from any major U.S. news source. But what Gazprom is now
doing has the potential to really shake up the global financial
landscape. The following is an excerpt from a news report by the
ITAR-TASS news agency...

  Gazprom Neft had signed additional agreements with consumers on a
possible switch from dollars to euros for payments under contracts, the
oil company's head Alexander Dyukov told a press conference.

  "Additional agreements of Gazprom Neft on the possibility to switch
contracts from dollars to euros are signed. With Belarus, payments in
roubles are agreed on," he said.

  Dyukov said nine of ten consumers had agreed to switch to euros.

And Gazprom is not the only big company in Russia that is moving away
from the U.S. dollar.

According to RT, other large Russian corporations are moving to other
currencies as well...

  Russia will start settling more contracts in Asian currencies,
especially the yuan, in order to lessen its dependence on the dollar
market, and because of Western-led sanctions that could freeze funds at
any moment.

  “Over the last few weeks there has been a significant interest in the
market from large Russian corporations to start using various products
in renminbi and other Asian currencies, and to set up accounts in Asian
locations,” Pavel Teplukhin, head of Deutsche Bank in Russia, told the
Financial Times, which was published in an article on Sunday.

  Diversifying trade accounts from dollars to the Chinese yuan and other
Asian currencies such as the Hong Kong dollar and Singapore dollar has
been a part of Russia’s pivot towards Asian as tension with Europe and
the US remain strained over Russia’s action in Ukraine.

And according to Zero Hedge, "expanding the use of non-dollar
currencies" is one of the main things that major Russian banks are
working on right now...

  Andrei Kostin, chief executive of state bank VTB, said that expanding
the use of non-dollar currencies was one of the bank’s “main tasks”.
“Given the extent of our bilateral trade with China, developing the use
of settlements in roubles and yuan [renminbi] is a priority on the
agenda, and so we are working on it now,” he told Russia’s President
Vladimir Putin during a briefing. “Since May, we have been carrying out
this work.”

  “There is nothing wrong with Russia trying to reduce its dependency on
the dollar, actually it is an entirely reasonable thing to do,” said the
Russia head of another large European bank. He added that Russia’s large
exposure to the dollar subjects it to more market volatility in times of
crisis. “There is no reason why you have to settle trade you do with
Japan in dollars,” he said.

The entire country is undergoing a major financial conversion.

This is just staggering.

Meanwhile, Russians have been pulling money out of U.S. banks at an
unprecedented pace...


  So in March, without waiting for the sanction spiral to kick in,
Russians yanked their moolah out of US banks. Deposits by Russians in US
banks suddenly plunged from $21.6 billion to $8.4 billion. They yanked
out 61% of their deposits in just one month! They'd learned their lesson
in Cyprus the hard way: get your money out while you still can before it
gets confiscated.

For those that don't think that all of this could hurt the U.S. economy
or the U.S. financial system, you really need to go back and read my
previous article entitled "De-Dollarization: Russia Is On The Verge Of
Dealing A Massive Blow To The Petrodollar". The truth is that the U.S.
economic system is extremely dependent on the financial behavior of the
rest of the globe.

Because nearly everyone else around the rest of the planet uses our
currency to trade with one another, that keeps the value of the U.S.
dollar artificially high and it keeps our borrowing costs artificially low.

As Russia abandons the U.S. dollar that will hurt, but if other nations
start following suit that could eventually cause a financial avalanche.

What we are witnessing right now is just a turning point.

The effects won't be felt right away. So don't expect this to cause
financial disaster next week or next month.

But this is definitely another element in the "perfect storm" that is
starting to brew for the U.S. economy.

Yes, we have been living in a temporary bubble of false stability for a
few years. However, the long-term outlook has not gotten any better. In
fact, the long-term trends that are destroying our economic and
financial foundations just continue to get even worse.

So enjoy the "good times" while you still can.

They certainly will not last too much longer.

(11) Michael Hudson: IMF Austerity for Ukraine; 1% Oligarchy wants to
rule the world

http: //RT.com/op-edge/170960-economy-imf-ukraine-oligarchs/

IMF pushes Ukraine to 'voluntarily committing suicide'

Published time: July 07, 2014 14: 38

Western support will allow more IMF and European lending to prop the
Ukrainian currency so the Ukrainian oligarchs can move their money
safely to British and US banks, economist and author Michael Hudson told
RT's Truthseeker.

RT: Could you summarize for us the tried and tested steps that will lead
from IMF loans, to Ukraine's best assets ending up in private Western
hands - the IMF's 'knee-breaker' role as you memorably described it as?

Michael Hudson: The basic principle to bear in mind is that finance
today is war by non-military means. The aim of getting a country in debt
is to obtain its economic surplus, ending up with its property. The main
property to obtain is that which can produce exports and generate
foreign exchange. For Ukraine, this means mainly the Eastern
manufacturing and mining companies, which presently are held in the
hands of the oligarchs. For foreign investors, the problem is how to
transfer these assets and their revenue into foreign hands - in an
economy whose international payments are in chronic deficit as a result
of the failed post-1991 restructuring. That is where the IMF comes in.

The IMF was not set up to finance domestic government budget deficits.
Its loans are earmarked to pay foreign creditors, mainly to maintain a
country's exchange rate. The effect usually is to subsidize flight
capital out of the country - at a high exchange rate rather than
depositors and creditors getting fewer dollars or euro. In Ukraine's
case, foreign creditors would include Gazprom, which already has been
paid something. The IMF transfers a credit to its "Ukraine account,"
which then pays foreign creditors. The money never really gets to
Ukraine or to other IMF borrowers. It is paid to the accounts of
foreigners, including foreign government creditors, as in IMF loans to
Greece. Such loans come with "conditionalities" that impose austerity.
This in turn drives the economy even further into debt - forcing the
government to tighten the budget even more, run even smaller budget
deficits and sell off public assets.

RT: Can Ukraine expect the so-called 'IMF effect' of 1 in 5 of the
impoverished population emigrating to work abroad, and what consequence
could this have on a country to lose its brightest minds?

MH: Ukraine already draws in foreign emigrants' remittances equal to
about 4% of its GDP. (About $10 billion a year.) Most of this money
comes from Russia, the rest from Western Europe. The effect of IMF
austerity plans is to drive more Ukrainians to emigrate in search of
work. They will send some of their earnings back to their families,
strengthening the Ukrainian currency vis-à-vis the ruble and euro.

RT: How are the IMF's tools in reality "weapons of mass destruction" as
you quoted it?


MH: Lower budget deficits cause even deeper austerity and unemployment.
The result is a downward economic spiral. Lower incomes mean lower tax
revenues. So governments are told to balance their budgets by selling
off public assets - mainly natural monopolies whose buyers can raise
excess prices to extract economic rent. The effect is to turn the
economy into a renting "tollbooth economy." Hitherto free public roads
are turned into toll roads, and other transportation, water and sewer
systems also are privatized. This raises the cost of living, and hence
the cost of labor - while overall wage levels are squeezed by the
financial austerity that shrinks markets and raises unemployment.

RT: The IMF's perhaps also a weapon of mass destruction in a more
literal sense. The organization has publicly threatened and blackmailed
Ukraine that it will 're-design' its aid package, unless Kiev goes to
war on fellow Ukrainians in the East of the country and stops them
protesting. Does that not make it now literally a criminal accomplice or
instigator of war and murder?

MH: The IMF's "conditionality" is that it "pacify" the East.
Pacification may occur violently in today's Orwellian rhetoric. The only
way in which actual political and economic peace can be achieved is by a
loose federalization of Ukraine, to make each region independent of the
kleptocrats in Kiev, who are appointed mainly from the West.

As for accusations of criminality, this always depends on who is the
prosecutor, and what is the court! No country has yet prosecuted the
IMF. All that voters can do is reject governments submitting to IMF
conditionalities. Many voters who are able will "vote with their feet"
and simply leave the sinking economy. So the IMF's defense is that
Ukraine and other clients are voluntarily committing suicide rather than
being murdered. Austerity is ultimately a policy - nobody is holding gun
to their head, except when political leaders are assassinated as in
Chile in 1974 under Pinochet with the US Government behind it. In this
sense, Ukraine today is a replay of Chile four decades ago.

Participants in the nationwide Ukrainian rally against bank outrage and
for the rights of borrowers under the slogan "No to currency slavery!"
by the building of Ukraine's Verkhovna Rada. (RIA Novosti)

Participants in the nationwide Ukrainian rally against bank outrage and
for the rights of borrowers under the slogan "No to currency slavery!"
by the building of Ukraine's Verkhovna Rada. (RIA Novosti)

RT: Everyone knows austerity's effects on Greece and elsewhere; polls
show most Ukrainians don't want it; even the IMF itself now admits
austerity doesn't work. Why will Ukraine's leaders allow it to happen,
are they guaranteed a cushy job in the West when they've voted out or
something?

MH: Ukraine's leaders are mainly kleptocrats. Their aim is not to help
the country, but to help consolidate their own power. George Soros has
written that their best way to do this is to find Western partners. This
will provide US and European backing for the kleptocrats tightening
their hold on the economy. Western support will provide more IMF and
European lending to support the currency so that the Ukrainian oligarchs
can move their money safely to the West, to British banks and US banks.

RT: Do you think that the EU isn't stupid enough to make Ukraine a full
member, so under the one-sided association agreement, member states will
just strip the country of its best assets, and use its workers as near
slave labor, with Ukraine's 91 US cents an hour minimum wage?

MH: The EU hardly can really make Ukraine a member. One reason is that a
key policy underlying French and German creation of the original Common
Market in 1957 was the Common Agricultural Policy (CAP). Ukraine has
rich Western land, and that part of the country is largely still rural.
Foreign investors would like to buy it out and "re-feudalize" it,
creating large business farms. But the EU is unlikely to provide the
subsidies that financed mechanization and capital investment in Western
European agriculture.

The EU does not need to formally integrate with Ukraine to benefit from
its inexpensive labor. Wrecking the economy Greek-style or Irish-style
or Latvian-style is sufficient to send its workers to the West. And the
most mobile traditionally are the best educated youth in their 20s, able
to speak foreign languages and with skills in demand in the West.

RT: You noted Ukraine 'must have asked the US first' before blowing up
that gas pipeline. Do you think NATO will support anything even
terrorism to make Russian gas seem less reliable, especially while US
fracking giants currently are waging a big PR campaign in Europe.

MH: The US has pressed Europe to make its own economy much more
high-cost and to rely on US gas exports mainly in order to deprive
Russia of foreign exchange. The NATO rationale is essentially that which
Prime Minister Arseniy Yatsenyuk tweeted on Monday, June 16: Ukraine
"won't continue subsidizing Gazprom [to the tune of] $5 billion
annually, so that Russia can arm itself against us [with this money]."

The US position today is what it was in 1991: Without manufacturing,
Russia cannot be a serious military power to defend itself. And without
purchasing foreign technology and without large state subsidy - as US
and European governments provide their own economies - Russia cannot
create a manufacturing economy. So NATO is trying to prevent Russia from
earning enough money to modernize its economy, on the principle that any
industrial power is potentially military, and any military power my
potentially be used to achieve political independence from the US sphere.

RT: Anything else you would like to add?

MH: What is at issue is whether economies throughout the world will let
financial leverage dismantle the power of elected governments, and hence
of democracy. Governments are sovereign. No government actually needs to
pay foreign debts or submit to policies that negate the three
definitions of a state: to create its own money, to levy taxes, and to
declare war.

At issue is who shall rule the world: the emerging 1% as a financial
oligarchy, or elected governments. The two sets of aims are
antithetical: rising living standards and national independence, or a
renting economy, austerity and international dependency.


(12) Russia smoothes India-China Rapproachement

http://thediplomat.com/2014/07/india-and-russia-reinforce-ties/

India and Russia Reinforce Ties

Can Russia serve as the bridge between China and India?

By Akhilesh Pillalamarri for The Diplomat

India and Russia have long been close allies. During the Cold War, India
was generally close to the Soviet Union, despite its official stance of
non-alignment. In the past decade, India has moved closer to the United
States, but this has not come at the expense of its relations with
Russia. There are, ultimately, numerous limiting factors in the Indian
relationship with the United States, including the ruling Bharatiya
Janata Party’s (BJP) ideological distance from the West and U.S.
President Barrack Obama’s relative indifference towards maintaining a
close relationship with India. On the other hand, both Russia and India
have stood by each other at difficult moments.

As such, India still considers Russia a more consistent and dependent
partner. India has backed Russia on a variety of issues that the United
States has opposed, including supporting Russia’s interests in Ukraine.
India, along with the other BRICS nations, showed remarkable bonhomie
and camaraderie with Russia on this issue. Close ties between the two
countries were also evidenced during the recent BRICS summit in Brazil.
At the summit, Indian Prime Minister Narendra Modi noted that “if you
ask anyone among the more than one billion people living in India who is
our country’s greatest friend, every person, every child knows that it
is Russia.”

India’s continued ties with Russia and support of Russian positions in
the international arena demonstrate that India’s world view and goals
are often very different from the West’s. Despite being a liberal
democracy, India’s narrative often does not fully buy into the current
liberal world order due to native currents in Indian thinking and a
post-colonial wariness of the West. India’s positions at international
forums are often closer to the major powers that are essentially opposed
to the liberal world order led by the United States– including Russia,
China, and sometimes Iran.

However, there are many stumbling blocks for India’s involvement with
this informal non-Western grouping. The main one is India’s wariness
towards China. While Russia has grown increasingly close with China,
India still distrusts China due to an unresolved border dispute and
rivalry over influence in Asia. However, China has recently begun to
reach out to India because, like Russia, it believes that a truly Asian
bloc is only fully possible with India’s cooperation. China has made the
first move by inviting India to attend the APEC summit in Beijing, this
November, one-upping the United States.

The Russia and India Report suggests that Russia is behind this recent
change in China’s attitude towards India. Russia believes that with both
India and China on board, it will be easier to set up a pan-Asian bloc
that can stand up to the West. India views Russia as a trusted partner
that could bridge the divide between China and India without neglecting
Indian interests. Additionally, both Russia and China have recently
indicated that they want India to play a larger role and perhaps even
become a full member of the Shanghai Cooperation Organization (SCO).
Russia has long advocated this position and it is likely that it has
persuaded China to back greater Indian involved with the SCO. India will
probably need Russian support in the future if it is to persuade China
to back its bid for a permanent seat in the United Nations Security Council.

Despite these improvements between India and China, it is unlikely that
the two countries will see eye to eye anytime soon. While this may lead
spur the U.S. and India to develop better ties in the future, India is
still likely to remain closer with Moscow. If any country can bridge
relations between China and India, it is likely to be Russia, the
closest thing India has to an all-weather friend.


(13) Xi-Modi Meeting: pledge to resolve the border dispute

http://thediplomat.com/2014/07/first-xi-modi-meeting-sets-tone-for-china-india-relations/

First Xi-Modi Meeting Sets Tone for China-India Relations

The first meeting between Xi Jinping and Narendra Modi continued to
positive momentum in China-India relations. shannon-tiezzi

By Shannon Tiezzi for The Diplomat

July 15, 2014

Before the opening of the BRICS summit in Fortaleza, Brazil, Chinese
President Xi Jinping and Indian Prime Minister Narendra Modi held their
first meeting since Modi assumed office earlier this year. China has
rolled out the diplomatic red carpet ever since Modi was elected, hoping
that China-India relations can enter a new phase under the Bharatiya
Janata Party. Modi described the talks as “very fruitful” in a tweet
after the meeting.

Tellingly, the two leaders’ first meetings were with each other, in
talks held only a few hours after each man arrived in Fortaleza. Indian
Ministry of External Affairs spokesperson Shri Syed Akbaruddin pointed
to this as a sign of the importance attached to the meeting. Akbaruddin
also said that the meeting had gone “well beyond” the schedule time of
30 to 40 minutes, lasting around 80 minutes. He described the meeting as
“very cordial, very warm, [and] based on personal rapport.”

The talks between Modi and Xi touched on many of the same issues that
were under discussion when Chinese Foreign Minister Wang Yi visited
India in June. During that trip, Wang spoke broadly of a closer
China-India partnership that could “contribute to the national
resurrection” of both countries. Xi kept up this theme, telling Modi
that “China and India are long-lasting strategic and cooperative
partners, rather than rivals,” according to Xinhua. Xi noted that both
countries are chasing the dream of “national rejuvenation,” and he
argued that working together will be the fastest way for both to achieve
their goals. China and India could have more influence combined than
they currently have separately, Xi said: “If the two countries speak in
one voice, the whole world will attentively listen.”

In terms of specifics, however, the focus remains largely on economic
cooperation. In particular, both countries are keen to push forward what
Xinhua called “exemplary projects” in industry and infrastructure. India
and China are aiming to establish special industrial parks to encourage
Chinese investment within India. Modi will also likely welcome Chinese
investment in India’s railways, which desperately need upgrading.
Concerns remain in India about the growing trade deficit between the two
countries, a problem Xi acknowledged and pledged to pay attention to.
Modi has suggested increased Chinese investment within India as one way
of combating the trade deficit.

The major political issue between China and India remains the on-going
border disputes. Xi and Modi agreed that peace along the border is
essential for both parties. There were also vague promises to solve the
issue. An Indian official told Livemint that Modi and Xi had pledged to
resolve the border dispute, and Xinhua said that Xi called for
“negotiated solutions to the border issues… at an early date.” Until
then, both countries agreed to work together to ensure “peace and
tranquility” in the border regions. Modi told Xi that solving the border
dispute would set an example for the world on peacefully settling
disputes — a bit of positive diplomatic PR that China could use to its
advantage in the ongoing maritime disputes in the South and East China Seas.

While this was Xi and Modi’s first meeting together, another two are
already in the works. Xi is scheduled to visit India in September, while
Modi was officially invited to attend the APEC summit to be held in
Beijing this November. If Modi attends, it will not only be his first
visit to China as prime minister — it will also mark the first time
India has participated in an APEC summit. India has long sought to join
APEC, and thus China’s invitation is an important diplomatic signal from
Beijing. Xi also invited India to increase its participation in the
Shanghai Cooperation Organization, where India is currently an observer.
That may indicate that India will be invited to become a full-fledged
member of the SCO in the near future.

(14) Xi accepts invitation to go on a state visit to India

http://thediplomat.com/2014/07/the-promise-and-peril-of-china-india-ties/

The Promise and Peril of China-India Ties

President Xi Jinping and Premier Narendra Modi are seeking a detente.
But will it last?

By Kerry Brown for The Diplomat

July 22, 2014

If ever there were two major countries looking for new energy and focus
in their relationship, then India and China are it. It was promising to
see new Indian Premier Narendra Modi alongside President Xi Jinping and
the other BRICS leaders in Brazil on July 15, declaring the
establishment of a development fund to be located in Shanghai. More
hopeful still was the announcement that Xi has accepted an invitation to
go on a state visit to India later this year. A rebooted relationship
with India would be a diplomatic coup for China. Does Modi’s arrival
herald the moment for this?

In terms of trade alone, the current relationship between the world’s
two largest nations is underwhelming. In 2012, combined merchandise
trade between the two came to $80 billion, less than Australia’s current
exports to China alone. The real problem, though, is that India runs a
huge trade deficit, sending only $20 billion of goods to China, most of
it in resources and raw materials. China sends back machinery. The two
invest in each other, but at nowhere near the sort of levels seen
between China and other countries in the region. If India were able to
forge a landmark deal like the recent natural gas agreement between
Russia and China, it would be a major step forward, but there is no
obvious target for a signature deal. The two countries don’t even have a
free trade agreement.

With a little political will, this might change quickly. China has lots
of capital, and India needs to build a huge amount of infrastructure.
But, as ever, something that seems simple on the surface is made
considerably murkier due to politics. Of the many contested land borders
the People’s Republic of China had when established in 1949, many of the
remaining ones are with India. There has been glacial progress on these
in the last few years, with many suspecting this will remain the case as
long as the Tibetan government in exile is domiciled in India. If his
record so far on the maritime disputes is any indication, Xi Jinping
doesn’t look like he wants to be seen as conciliatory on territorial
issues. And Modi, brought to power on a populist wave, is also likely to
look tough on this issue.

Despite these negatives, the Xi visit to India later this year could
offer some surprises. Xi does not want to see India fall into the laps
of the U.S. as it seemed to do briefly in 2006 when former President
George W. Bush visited New Delhi. At the time, writers like Bill Emmett
speculated that there was a new triangulation going on, with America
nurturing close ties with India to hedge against China. That moment
passed, flushed away by the global economic crisis, the arrival of
Obama, and a myriad of other issues. But for Xi, seeking more strategic
space is a worthy objective, and having a stronger relationship with a
country bordering much of China’s vast western landside is logical. It
is likely that the route to this will, as is usually the case with
China, be through trade. For this reason, Modi might find that he can
drive a good deal on getting more access to China’s market for his
country’s resources and goods when Xi visits.

The solution to the challenge of better relations, however, requires
more than just increasing trade. India and China need a new framework
for viewing their relationship. They often act like they don’t really
understand the relevance they have for each other beyond narrow border
issues, nor do they speak a common geopolitical language. For two
countries that pride themselves on being ancient civilizations, and have
long exercised a strong influence on each other (look at the spread, via
the Tibetan plateau, of Buddhism in the Tang Dynasty), these days China
and India look like fumbling, nervous youngsters meeting on a first date.

Modi and Xi have to do better, and it shouldn’t be hard. The interesting
question for the rest of the world is how to respond to this new
rapprochement—and whether to expect it to soon unravel.


(15) Xi invites Modi to participate in APEC

http://in.rbth.com/world/2014/07/24/russias_role_in_india_and_chinas_new_entente_36921.html

Russia’s role in India and China’s new entente

July 24, 2014

Debidatta Aurobinda Mahapatra, specially for RIR

Moscow’s role in crafting symmetry in New Delhi-Beijing ties will be
crucial. While working in tandem the three countries can not only
effectively address mutual differences but also help address
international issues.

Indian Prime Minister, Narendra Modi’s meeting with Chinese President Xi
Jinping at the sidelines of the BRICS summit in Brazil last week has
drawn considerable attention, certainly for good. The meeting provides
clues about the direction of the relations between the two neighbours,
relations between which belie a steady pattern. Russia has long eyed
warming of ties between the two Asian giants.

Xi’s invitation to Modi to participate in APEC, a premier economic body
in Asia-Pacific, has led to considerable speculation about China’s real
motives. Xi also invited India to be a founding member of Asian
Infrastructure Investment Bank. How far are these invitations backed by
genuine political power of China? Is the Chinese invitation a shrewd
move to moderate some of India’s positions? Is it a move for a trade-off?

BRICS countries launch $100 billion developmental bank, currency pool

There is speculation that China might have offered some concessions to
India to bag the key deal – establishing the bank in Shanghai. But a
China-India trade-off is not that easy as it is constrained by
procedural as well as political hurdles. All APEC members have to
approve a new member to the group. The political hurdles may be more
difficult to surmount. The US, which has recently increasingly asserted
in the Asia-Pacific may view the Chinese offer to India as a pawn in the
strategic chess board antithetical to its interests. The US-China
rivalry, rather than the differences between the US and India, or
between India and China, may impact the move. Even the Chinese
intentions, and policy manoeuvres in this context, are yet to be weighed
upon in-depth by the Indian policymakers.

Perhaps Russia is best suited to play a balancer in this case. Close to
India and China, and a key player in APEC and BRICS and regional
organizations such as SCO, Russia will be positioned not only to forward
the interests of India but also help broker a deal between India and China.

Russia has supported India’s bid for candidature for many international
and regional organizations including United Nations Security Council and
Shanghai Cooperation Organization, even to the dislike of China.
Particularly in case of SCO, it is believed that India’s membership is
withheld due to Chinese prevarication. Xi during his meeting with Modi
called for India’s active role in the regional organization. But, it is
yet unclear, whether Xi would support India’s membership of SCO.

Russia’s role in crafting symmetry in India-China relations will be
crucial. While working in tandem the three countries can not only
effectively address mutual differences but also help address
international issues. While Russia can persuade China to adopt a softer
approach towards India’s integration with SCO and APEC, India and China
can support Russia in the crises in Ukraine or to help mete out the
effects of the sanctions. It is no surprise that the BRICS in its Brazil
meeting expressed deep concern over crisis in Ukraine and called for
“comprehensive dialogue, the de-escalation of the conflict and restraint
from all the actors involved, with a view to finding a peaceful
political solution.” Putin expressed satisfaction at the developments in
the summit and argued that the joint efforts will help prevent economic
difficulties. ?????? ?? ?????????!!

Putin, Modi meet on the sidelines of the BRICS summit

Any trade-off between India and China will not be that easy. Mutual
distrust creeps deep in bilateral relations. As guardians of national
interests, Xi and Modi may find it difficult to rise above the
distrust-guided national interests. But, it is not impossible. As
hard-headed pragmatists they may find ways to address the differences.
Modi called for, and Xi agreed, for a peaceful and tranquil border. Modi
invited China to invest in infrastructure projects in India. Xi may
appear less inscrutable than his predecessor, Hu Jintao, whose stoic
appearance befuddled many international leaders and observers. Xi
appears more forward looking, and his pleasant mien, may be an advantage
for China. But, in international diplomacy, it is difficult to go by
appearance. To decipher things, one has to go deep and study between lines.

The advantage for Modi and Xi is that they are in the real command in
their countries. They are pro-business, young, and dynamic. Each is
aware of their core national interests and constraints behind realizing
them. A win-win trade-off between India and China will not dawn a new
entente a bilateral relations, but will also herald a new phase in
international relations. A strengthened India-China relationship will
further strengthen Russia-India-China (RIC) relations, as well as BRICS,
SCO and other important organizations such as G-20. By the time Xi
visits to India in September, one hopes some of the differences will be
resolved.

What role can Russia play in this new environment? Besides meeting Xi,
Modi also met Russian President Vladimir Putin. Russia is a known
strategic partner of India and China, and has been consistent in
supporting India’s political ambitions. Add to this China’s willingness
to support India in its bid for membership for APEC and SCO, the
international politics will come to a full circle with possible rising
of a new order. One of real dampeners behind weakness of BRICS is
India-China differences, and once this is addressed with trade-offs
between India and China, the group will emerge a new centre of
attraction in the post-Cold War world with implications for bilateral
and international peace and security.

Dr. Debidatta Aurobinda Mahapatra is an Indian commentator. His areas of
interests include conflict, terrorism, peace and development, South
Asia, and strategic aspects of Eurasian politics.


(16)Cold War 2.0 - Pepe Escobar

http://rt.com/op-edge/176068-eurasia-new-great-game-war/

Ready, reset, go! ...to Cold War 2.0

Pepe Escobar

Published time: July 28, 2014 09:55

The New Great Game in Eurasia never ceases to thrill with extreme plot
twists. The Big Three players remain the same: the US, Russia and China.
The devil is in the concentric subplots.

In Washington, the deep state Russia ‘policy’ has revealed itself to be
sanctions, sanctions, sanctions; because of Crimea, because of support
for federalists in Eastern Ukraine, because of the MH17 tragedy.

Sanctions are targeting Russia’s energy, defense and finance – and are
fast on their way towards all-out economic war, which in itself is a
declaration of war. As with Cuba; as with Iraq (until there was regime
change); as with Iran (until there is a nuclear deal, and even that is a
major ‘if’).

Beware the wrath of the Empire of Chaos. The prescription is always the
same; sanctions; no holds barred geo-economic/political warfare;
internal subversion (NED, assorted NGOs); and non-stop vitriol marinated
in hubris.

In Moscow, there are no illusions; no matter what the Kremlin does on
Ukraine, there won’t be any ‘reset’. Washington’s sanction hysteria –
which has far surpassed the level of containment - is even regarded as a
means towards (what else?) regime change, Putin’s huge popularity
notwithstanding. No wonder US Think Tankland is drooling about it.

Roughly, in Russian spheres of power, an Atlanticist – neoliberal –
school, appeasing the Empire of Chaos, is pitted against the
Eurasianists, who strive to be respected in the US as equals. The Empire
of Chaos, by default, does not accept equals; one just needs to consult
the Pentagon’s Full Spectrum Dominance doctrine.

The best and the brightest in Russia well know you can’t win when the
staggering financial muscle of the Empire of Chaos – even mired in
decadence - and its vassals is deployed against you. But that does not
mean Moscow will cringe and resign itself to being ‘isolated’, as a much
weaker Iran fought against its ‘isolation’ for years.

Moscow holds nearly $500 billion in currency reserves. That and domestic
capital can be used to strengthen the ruble and back investments in
Russian industry. The door is open to diversifying the Russian economy
away from a commodity exporter towards post-modern manufacturing, and on
the way release myriad business opportunities for Russian SMEs (small
and medium enterprises).

And now for the EU chapter

Enter a fragile Europe. Russia is the EU’s third-largest trading
partner. Top economies such as Germany, France and Italy are vastly
integrated with the Russian economy.

A key plank of Washington’s strategy is to de-link Europe from Russia,
part of a much larger agenda of preventing by all means Eurasia’s
trade/commercial/economic development integration. It all hinges on Germany.

That’s the key debate in Berlin nowadays. German business – and even
conservative politicians – are reaching a stark conclusion; they do not
want a heavily dysfunctional relationship with Russia. Public opinion, at 57 percent, wants a foreign policy more independent from the US. The
US Orwellian/Panopticon complex intrusions in Germany have been
instrumental as a game-changer.

American pressure on the EU regarding the MH17 tragedy has been
relentless. Moscow presented hard evidence to the EU. Washington did not
– and they won’t, because they don’t have it, apart from Facebook,
Twitter and YouTube.

While Moscow has been insisting from the start on an unbiased,
independent and international investigation, Washington has been
ordering the EU to “ignore” and “not comment” on Moscow’s hard evidence.
Even as German intel confirmed the wobbly American intel was “manipulated.”

Yet it’s hard to underestimate a hugely divided EU’s capacity to shoot
itself in the back. Take the EU’s proposed sanctions on Gazprom’s South
Stream gas pipeline under the Black Sea, which will eventually supply 15
percent of Europe’s demand – as well as a package of sanctions targeting
access to capital markets, defense, dual use goods and sensitive
technology (see the leaked non paper here).

Gazprom’s top partners in South Stream are Italy’s ENI, France’s EDF,
Austria’s OMV and Germany’s Wintershall, a subsidiary of BASF. South
Stream’s construction depends heavily on European know-how.

If the full sanction list is eventually enforced by the EU (and that
includes restricting Russian access to piping, drilling pipes, floating
or submersible drilling platforms, and floating cranes) that would delay
for a long time Pipelinistan projects as well as the development in
Europe of the liquefied natural gas (LNG) market. The EU needs South
Stream much more than Russia – which can always sell more gas to Asia
anyway.

BRICS over the wall

The real, no-holds-barred reason for the Empire of Chaos’s obsessive
economic war on Russia is that Moscow, as a BRICS member, alongside
especially China and Brazil, is at the leading edge of emerging powers
challenging the global financial/political (dis)order – wallowing in the
mire of casino capitalism – dictated by the Empire of Chaos.

And it gets ‘curiouser and curiouser’, because the effect of the
sanctions hysteria has been to accumulate even more sympathy from the
developing world towards Russia. The typical Washington rumbling about
“the world” united to “isolate” Russia – in a replay of the Iran case –
only applies to NATO.

I have closely followed the latest chapters in Eurasia integration, from
the Russia-China gas ‘deal of the century’ clinched in Shanghai to the
St. Petersburg Economic Forum and then closer Eurasia-South America
integration at the BRICS summit in Brazil, which created the New
Development Bank and advanced the BRICS drive to develop their own
parallel global institutions.

President Putin even proposed a BRICS energy coalition, complete with
nuclear power agreements and its own “fuel reserve bank and an energy
policy institute.” Moscow – as well as Beijing - is actively
strengthening energy deals across South America, as in Rosatom signing
with both Argentina and Brazil to build nuclear power plants.

Eurasia integration, on the Asian front, proceeds unabated. Russia will
sell more gas at lower prices not only to China, but also, in the near
future, to Japan and South Korea as well. Beijing, meanwhile, is
carefully moving its financial, economic and geopolitical pieces on the
chessboard, and now on full red alert regarding the sanctions hysteria;
the collective leadership very well knows that the target one day may be
Russia because of Ukraine, but the next day may be China, because of the
South China Sea or even a Hong Kong currently moving towards an impasse;
should candidates for Hong Kong chief executive be chosen by direct
democracy, or by committee, as Beijing prefers?

The key point is, forget about a US-Russia reset. The Russia-China
strategic partnership will strengthen. China is preparing itself for its
turn in the sanction hysteria show. And for the foreseeable future, the
new game in the chessboard is Cold War 2.0.