In yet another episode that threatens to undo efforts aimed at finding common ground to tackle hacking, the Chinese Foreign Ministry told the US to stop “fabricating stories” and “mudslinging” about alleged Chinese commercial spying. A Federal Bureau of Investigation (FBI) official has accused China of stealing secrets from US firms.
“Chinese laws forbid hacking or any other behavior harmful to cyber security, and it is an undoubted fact that the Chinese government resolutely cracks down on crimes,” China’s Foreign Ministry spokesman Hong Lei said on Thursday in Beijing at a daily news briefing.
During a TV appearance on CBS, FBI director James Comey said earlier this week that China topped the list of countries seeking to steal secrets from US firms, costing American businesses billions of dollars every year.
“I liken them a bit to a drunk burglar. They’re kicking in the front door, knocking over the vase, while they’re walking out with your television set. They’re just prolific,” Comey said.
China hit back with charges of mass surveillance of private citizens and businesses by the US.
“Again, we urge the U.S. side to drop its wrongful fabrication of stories and deliberate mudslinging toward China, as well as stop its large-scale, systematic cyber attacks on other countries,” said the Chinese spokesman.
The US side’s attempt to divert attention by accusing others will not succeed, Hong added, referring to revelations by former US National Security Agency whistle-blower Edward Snowden about US cyber-spying that included hacking into computers in China since 2009.
Sino-US ties have long been dogged by accusations of cyber espionage.
In May this year, a senior Chinese military officer labelled the United States the world’s biggest cyber-thief a week after a grand jury in Washington indicted five Chinese officers on charges of hacking into American companies to steal trade secrets.
“In terms of both military and political intelligence and trade secrets, the United States is the world’s No.1 cyber thief and its spying force should be indicted,” Sun Jianguo, deputy chief of General Staff of the Chinese People’s Liberation Army, said.
“From Wikileaks to the Snowden incident, the U.S. hypocrisy and double standards on the issue of network security have long been obvious,” the Chinese Defence Ministry said in a statement, lashing out at the US indictment.
The US is the biggest attacker of China’s cyberspace, with US servers taking control of 1.18 million Chinese host computers between March 19 and May 18, according to the China Internet information office.
TBP and Agencies
Finland – In a groundbreaking study Awara Group reveals that the real GDP growth of Western countries has been in negative territory for years. Only by massively loading up debt have they been able to hide the true picture and delay the onset of an inevitable collapse of their respective economies. The study shows that the real GDP of those countries hides hefty losses after netting the debt figures, which gives the Real-GDP-net-of-debt.
The moral of the study is that GDP growth figures as such reveal very little about the underlying dynamics of an economy if one does not simultaneously attempt to analyze what part of the growth is credited to simply artificially fueling the economy with new loans.
The study has found that the Western countries have lost the capacity to grow their economies. All they have left is a capacity to pile up debts. By massively accumulating new debt, they are able to keep up a semblance of at least sluggish growth, or of hovering around the zero growth mark.
If this massive debt would go towards investments, then there would be nothing wrong with it. But, it is not. The debt is going towards financing the losses in the national economies and essentially it all is wasted on consumption that the countries in reality cannot afford. The Western countries act like a 19th century heir to aristocratic wealth, borrowing from year to year to keep up the former lifestyle, while the estate is relentlessly dwindling. Sooner or later the prodigal heir would be forced to face reality and sell the remaining property to stave off the creditors, downgrade his dwellings, and rein in spending. Inevitably, the European countries and the USA will have to curb their excessive consumption, too, but for the time being they are putting off the final reckoning with new debt rather the way a drunkard reaches for the morning after drink to put off sobering up. In the case of the EU and the USA, we are speaking about a debt binge that has been going on for a decade.
While the situation has been generally bad for the last decade or so, it took a dramatic turn for the worse, or should we say for the catastrophic, following the onset of the global financial crisis in 2008. The shocking figures depicting the virtual crippling of the Western economies from 2009 to 2013 are illustrated in Chart 1. It depicts the development of real-GDP-growth per country in years 2005 to 2013. The chart shows that during this period Russia has been able to deliver real non-debt fueled GDP growth, whereas the Western countries are running huge deficits. The accumulated growth of the Russian economy from 2005 to 2013 was 147% while the Western countries accumulated losses from 16.5% (Germany) to 58% (USA). In the case of Russia, the real-GDP-net-of-debt figure is also corrected to adjust for the calculation error caused by an erroneous GDP deflator that Russian Statistics Agency (Rosstat) has used. We have discussed the persistent problem of Russia’s GDP growth having been underestimated due to the use of a wrong GDP deflator in the study Awara Group Research on the Effects of Putin’s Tax Reforms 2000-2012 on State Tax Revenue and GDP
Chart 2 shows the real GDP growth net-of-debt after deducting the growth of public debt from the GDP figure. Net of debt we see the scale of the Western economies, for example the Spanish economy, which amounts to the staggering figure of minus 56.3%. This while the conventional official method of crediting GDP growth with growth of debt would give only minus 6.7%.
The analysis shows that by these measures Russian economic growth, unlike that of the Western countries, has been comparatively healthy and not debt-driven. Russia has in fact a resoundingly positive ratio by these measures, where GDP growth has exceeded growth of debt by a staggering 14 times (1400%). The figure is astonishing when compared with the Western countries that have been flooded with new debt.
Chart 3 shows how much the accumulation of debt in the Western countries exceeds the official GDP growth. The USA is leading the pack with an increase in the debt load in years 2004 to 2013 of USD 9.8 trillion (in the chart in euros, EUR 7 trillion). In those years, the growth of the USA public debt exceeded the GDP growth 9 times (900%), which is illustrated by Chart 4, comparing the proportion of growth of debt to that of growth of GDP.
The comparison of growth of debt to growth of GDP reveals the UK, as the country that has amassed the most amount of new debt relative to GDP growth, having a new-debt-to-GDP-growth ratio of 9 to 1; in other words UK has taken on 900% new debt relative to the GDP growth. But the picture is grim for all the Western countries surveyed, less so for Germany, while Russia’s debt increase amounts to only a fraction of the GDP growth.
The analysis shows that by these measures Russian economic growth, unlike that of the Western countries, has been comparatively healthy and not debt-driven. Russia has in fact a resoundingly positive ratio by these measures, where GDP growth has exceeded growth of debt by a staggering 14 times (1400%). The figure is astonishing when compared with the Western countries that have been flooded with new debt.
The above figures are adjusted taking into account public debt (general government debt), but the situation is even worse when we consider the effect of private debt on the GDP. New debt of corporations and households have at least doubled private debt of most of the Western countries since year 1996 (Chart 5).
Reviewing these figures, it becomes evident that in reality Western economies have not grown in the past decade, rather the countries have massively inflated their debt load. With these levels of debt reached this cannot continue for long. There is a real risk that the bluff will be called sooner rather than later dropping the Western economies to GDP levels that they can carry without debt leverage. But in that situation they will not be able to serve the accumulated debts leading to catastrophe scenarios.
We have not included Japan and China in the analysis due to the difficulties attributed to finding consistent data for all the input variables. For those countries we have come across problems of fractured data that do not capture all the relevant years; inconsistent data across the samples we looked at; and uncertainties about conversion of the input data into euros. (We are sure that major research houses could overcome such problems, having greater and more sophisticated resources than ours). This exclusion of Japan and China is regrettable as Japan is the country worst affected by the problem of debt-fueled GDP growth, having a public debt to GDP ratio of well above 200%, and would therefore have been very instructive for our purposes.
Japan has been essentially living on debt since the early 1990’s. However, some of the more irrational Western analysts want to take Japan as a prime example to follow, arguing that since Japan has been able to pile up debt for some 25 years now, all the Western countries would be able to do it as well for the foreseeable future. In this they fail to grasp that Japan earlier had the luxury of being the sole country living on such exorbitant levels of debt. Japan has enjoyed great support from the Western countries to be able to continue that practice, not least for political reasons. Another important consideration against the idea that Western countries could continue to accumulate debt is that they have, since the early 1990’s, rapidly lost their economic hegemony in terms of share of world trade and global GDP. I have written about this in a recent article entitled Why the West is Destined to Decline.
The West is fast shrinking in economic significance relative to the rest of the world. This is demonstrated by comparing the GDP of the Western powers as represented by the G7 countries (USA, Japan, Germany, France, UK, Italy and Canada) with the GDP of emerging powers. As recently as 1990, the combined GDP of the G7 was overwhelming in relation to that of today’s 7 emerging powers: China, India, Russia, Brazil, Indonesia, Mexico and South Korea (not necessarily constituting one political block). In 1990, the G7 countries had a combined GDP of USD 14.4 trillion and the emerging 7 had a GDP of USD 2.3, but by 2013 the tables had been turned, as the G7 had USD 32 trillion and the emerging 7 had USD 35 trillion. (Chart 6).
With the challenge of the ever increasing share of world economy belonging to the emerging countries, it becomes clear that the Western countries will not be able to profit sufficiently from world trade to service their debt loads.
For the time being the Western countries benefit from the privilege of having currencies that the rest of the world still largely trusts as reserve currencies. In essence, the USD and the euro enjoy a kind of monopoly status. This is what allows Western countries to gain access to cheap debt and fuel their economies with central bank financing (quantitative easing or “printing of money”). But the risk is that, with the deteriorating debt situation and diminishing share of the global economy, they will forfeit this privilege, perhaps even in the near future. What would follow from this is sharply more expensive financing and inflation, with hyperinflation as the eventual outcome. In this scenario – which I consider inevitable over the next 5 to 10 years – the economies of Western countries would essentially collapse.
The problem is that there is no way of averting this scenario, because the Western powers have lost their competitive advantages as economic powers. Eventually, their economies must shrink to match their resource and population bases. (I have written about this in the article referred to above). But it seems that the ruling Western elites have no intention of facing up to these realities. They will try to keep up a semblance of prosperity with ever new debt, as long as they can. The political parties of the West have been essentially converted into voting machines with one singular concern – that of winning the next elections. To do that they will continue to engage in what amounts to bribing of the electorate – creating new debt that fuels the national economy.
But there is no way to turn back this historical tide. Just as the aristocrat of the old regime eventually squandered his legacy, so will the Western powers. This inevitability of the process is what makes it really scary, because I am afraid that the Western elite might be tempted to bail itself out from this doomsday scenario with a war of epic proportions. We are now truly approaching the Armageddon between the West, with its desperate economic circumstances, and the emerging world powers.
Jon Hellevig is a business consultant and economic and political observer. He is the co-editor and co-author of Putin’s New Russia and several books on philosophy and political and social sciences.
The coalition of developing countries at the United Nations has categorically condemned unilateral sanctions against Iran over its civilian nuclear energy program.
In a resolution issued on the sidelines of the 69th annual session of the UN General Assembly in New York on Friday, foreign ministers of the Group of 77 plus China for the first time explicitly rejected as unacceptable the imposition of unilateral economic sanctions against Iran.
Such sanctions would have adverse consequences on the development of the Iranian nation, the resolution said, calling for the immediate removal of the bans.
The illegal US-engineered sanctions on Iran have been imposed based on the accusation that Tehran is pursuing non-civilian objectives in its nuclear energy program.
Iran rejects the allegation, arguing that as a committed signatory to the Non-Proliferation Treaty (NPT) and a member of the International Atomic Energy Agency (IAEA), it has the right to use nuclear technology for peaceful purposes.
The 133-member Group of 77 plus China strongly rejected any unilateral punitive moves such as sanctions against developing countries and called for the removal of all such measures.
The foreign ministers of the member states noted that such measures would not only undermine the UN charter-based international law, but also would leave a negative impact on the freedom of trade and investment.
They further called on the international community to take an effective collective action to stop unilateral economic sanctions against developing states.
The Group of 77 was founded on June 15, 1964, by the “Joint Declaration of the Seventy-Seven Developing Countries” issued at the conclusion of the United Nations Conference on Trade and Development (UNCTAD) in Geneva.
The Group of 77 holds a one-year and rotating presidency among Africa, Asia and Latin America. Bolivia holds the chairmanship for 2014.
China will never support any sanctions against Russia and will never join them, Valentina Matviyenko, speaker of the Russian parliament’s upper house said, citing Chinese President Xi Jinping, with whom she met on Tuesday.
Both Russia and China believe the sanctions are illegal, ineffective and counterproductive, according to Matviyenko. They are nothing but an attempt “to exert pressure on sovereign states to change their position and to weaken them and suppress their development,” she stressed.
Matviyenko thanked Beijing for its public position towards Western sanctions imposed on Russia over the Ukrainian conflict. China has offered an “absolutely objective” assessment of what is now going on in Ukraine. Moreover, no sanctions will affect the long-term strategic partnership between Moscow and Beijing, which reflects the interests of both peoples, she noted.
Cooperation of Russia and China remains a serious factor in international politics, Matviyenko said, adding that the two states have no disputable issues. Their positions are either close or coincide on major problems, including how to settle international and regional conflicts or deal with new challenges and threats.
Russia plans to sign a 30-year gas supply contract with China via the western route, Russian energy giant Gazprom’s CEO Alexei Miller told President Vladimir Putin on Wednesday. The route to supply gas to China via western Siberia may be implemented faster than the eastern route, through which Moscow has agreed to ship the fuel to its Asian neighbor in May.
“Gazprom plans to sign a contract to supply China with 30 billion cubic meters of natural gas via western route over thirty years,” Miller said.
The China-Russia West Route natural gas pipeline project connects gas deposits in Western Siberia and the northwestern part of China via Russia’s Altai region, securing the world’s top energy user a major source of cleaner fuel.
The potential of this route is “enormous”, the Gazprom CEO told the Russian President.
“It is even greater than in Eastern Siberia and, without a doubt, we can increase the volume of gas supplies very quickly via the western route, depending on the growth in demand in the Chinese market,” said Miller.
Gazprom is to sign the 30-year contract with China National Petroleum Corporation (CNPC) in November. The deal will directly link Russia’s huge gas fields to Asia’s booming market for the first time.
Miller also said Gazprom might consider more than doubling the volume of supply.
“We plan to sign a contract for a volume of 30 billion cubic metres for 30 years, though the talks have also looked at other figures for new contracts concluded for the western route. We are looking at the possibilities for supplying 60 billion cubic metres or up to 100 billion cubic metres of gas to China,” Miller told Putin in Moscow.
China and Russia signed a $400-billion gas supply deal in May this year, opening up a new market for Moscow as it risks losing European customers over the Ukraine crisis.
The Russian part of the joint venture pipeline, officially dubbed “Power of Siberia”, will be built by Gazprom with a total investment of $55 billion.
Construction of the China- Russia East Route natural gas pipeline started this month in this eastern Siberian city of Yakutsk.
TBP and Agencies
Chinese President Xi Jinping and his Russian counterpart, Vladimir Putin, met in Dushanbe, capital of Tajikistan, on Thursday ahead of the 14th summit of the Shanghai Cooperation Organization (SCO).
The two allies discussed “pressing issues of bilateral cooperation, particularly in energy, aircraft engineering and infrastructure”, said a Kremlin statement.
It is the fourth meeting in 2014 between the two leaders.
Chinese President Xi Jinping said during Thursday’s meet that the leadership of the two nations will “jointly face external challenges”.
“I am ready to maintain further contacts with you to strengthen mutual support and expand openness between our countries, so that we could always draw from each other’s support, jointly face external challenges and achieve our grand development and revival goals,” said Xi.
Earlier last week, China put its weight solidly behind Russian President Vladimir Putin’s seven-point peace plan for Ukraine, even as the EU prepared another wave of sanctions targeting Russia’s banking and energy sectors.
The Russian President on Thursday lauded the milestone deal signed earlier this year in May, the $400-billion gas supply deal between the two countries, securing the world’s top energy user a major source of cleaner fuel.
“This was done with the direct support of the President of China. Now we have practically begun its implementation, which, I am certain, will proceed in the same business-like manner and will be efficiently carried through by both parties – Russia and the People’s Republic of China,” said Putin on Thursday in Dushanbe.
The deal opened up a new market for Moscow as it risks losing European customers over the Ukraine crisis.
Putin’s “personal friendship” with the Chinese President is a political triumph for the Russian President even as Western leaders step up attempts to isolate Putin internationally over Russia’s alleged support to pro-Moscow rebels in eastern Ukraine.
“We are making headway in other traditional areas of cooperation as well, including nuclear power, aircraft engineering, infrastructure and so forth,” Putin said on Thursday.
Xi said Beijing and Moscow have overseen new progress in the joint development of long-haul jumbo jets and heavy helicopters, as well as other major joint projects.
“Early this month you personally took part in the ceremony to launch the construction of the Power of Siberia gas pipeline, which shows how seriously you take the expansion of Chinese-Russian energy cooperation,” Xi told Putin.
“We have set up an intergovernmental Chinese-Russian commission on investment cooperation. We are actively considering cooperation in the construction of high-speed railways. We have launched cooperation in satellite navigation systems, which you personally have given great attention to,” he added.
Xi and Putin had also held talks in July in Brazil during the 6th BRICS Summit.
Xi has held talks or met with Putin for nine times since he assumed the office of China’s President in March 2013, testifying to stronger and more assertive Sino-Russian relations.
In a major highlight of an investment meet on Tuesday, Moscow and Beijing have entered into a pact to boost use of the rouble and yuan for trade transactions.
During its maiden meeting in the Great Hall of the People in Beijing, the Russia-China Investment Cooperation Commission discussed 32 bilateral investment projects on Tuesday, Russia’s Deputy Prime Minister Igor Shuvalov said.
Both Xi and Putin will now attend the 14th summit of the SCO slated for Thursday and Friday in the Tajik capital.
Forget Visa and MasterCard. After the two American credit system payment companies froze accounts without notice in March, Russia has been looking for an alternative in China UnionPay.
China UnionPay plans to have 2 million cards in Russia in the next three years.
Instead of seeing the small Visa and MasterCard logo on credits cards, ATMs, and retail outlets, Russians will start to see the three words “China. Union. Pay.”
China UnionPay first emerged in 2002 on the domestic Chinese market as an alternative to Visa and MasterCard, but quickly expanded internationally, and now is already number one in terms of quantity of cards in the world.
Russia’s biggest banks – VTB- Gazprombank, Promsvyazbank, Alfa Bank, MTS, and Rosbank- are already making technical preparations, running tests on Union Bank cards.
“VTB24 already serves China UnionPay cards in its ATM network and now the bank is in negotiations with this payment system to start acquiring retail merchants,” VTB24’s press office said in a statement.
Most banks just began their relationship with China by offering clients corresponding services- none of the bankers imagined that they would be issuing Chinese credit cards.
In March, both Visa and MasterCard blocked the accounts of cardholders at BankRossiya and SMF Bank, both which were sanctioned by the US over Russia’s involvement in Crimea.
Russian financiers who used to keep their assets in dollars and euros were shocked by the event, and moved their capital back to Russia out of fear one day all their assets would be blocked by politicians in Washington DC.
“Visa and MasterCard have 100 percent trust, but right now, there is no trust in the system, and many, even our clients, have shifted their transactions from American dollar and Euro to Yuan. They are eager to receive this card- we already have a big list of people waiting to get this card instead of MasterCard and Visa,” Denis Fonov, Deputy Chairman at LightBank, a small Moscow-based bank, told RT.
LightBank was working with UnionPay long before it knew the cards would be coming to the Russian market – and ordered 10,000 cards pre-emptively as a side service for clients.
As a result of the freeze, Visa and MasterCard will now have to pay a security deposit to Russia’s Central Bank, which is estimated to be billions for each company. Similarly, once UnionPay begins operating in Russia, it will also put down a security deposit with Russia’s Central Bank, about $3-4 billion, Fonov said.
$5.3 trillion in payments
There are already 20,000 cards in circulation in Russia, and a second order of 100,000 cards is planned for September. In Russia many banks accept UnionPay cards, but not merchants, that’s the next step.
By the beginning of 2014, the payment system had already issued 4.2 billion cards, mostly in China.
In terms of total world trade turnover, China UnionPay is the leader in debt cards, with over $5.3 trillion in payments, or about 47 percent of the market share, whereas Visa has 40.6 percent, and MasterCard only 12.2 percent, according to the Nilson Report.
In overall transactions, Visa is still the leader with $4.6 trillion, and China UnionPay comes in second with $2.5 trillion in transactions in the first half of last year.
UnionPay already successfully operates in Australia and Canada, with their deposits tied to both the local currency and the yuan. In total, UnionPay operates in 142 countries.
China’s UnionPay will be a temporary solution for Russia to detach from the West while it prepares to launch its own payment system, which officially isn’t slated to begin operating for another 16 months, and according to sources in the industry, it could even be 2-3 years out.
The Ukrainian Civil War took a violent and headline-grabbing international turn for the worst on 17 July following the downing of Flight MH17. Although it appears more and more likely that it was the Ukrainian Army that shot it down and not the anti-Kiev Resistance, pro-Western media has been aggressively pushing the narrative that Russia, specifically President Putin, was involved and has been suppressing evidence to the contrary. It has even gone as far as to infer that “Russian-backed separatists” carried out a “terrorist attack”, further upping the propaganda ante. The reason behind this massive information war is that the US wants to “isolate Russia” and expand NATO into Ukraine, something which it has largely been unable to successfully do up until this point. In fact, it appears as though the US is now readying to play its trump card – granting Ukraine major non-NATO ally status and declaring Russia as a “state sponsor of terrorism”, both of which would in turn advance NATO interests and threateningly force the EU to choose whether its destiny lies with the Atlantic or the Continent.
“Operation: Isolation” before Flight MH17
Prior to the downing of MH17, US-led sanctions against Russia were unsuccessful in isolating Moscow. The EU refused to enact any meaningful sanctions that would endanger its $330 billion yearly trade with Russia, thereby mitigating the US’ economic bullying efforts. In fact, the verbal threat of sanctions was actually beneficial for Russia since it motivated the country to look outside the West for future economic prospects. An historic gas deal with China was signed in May that was worth nearly half a trillion dollars, and in the same month, the Eurasian Economic Union was officially formed. Then, right before 17 July, Putin attended the BRICS conference in Brazil where he met with leaders representing nearly half of the world’s population, and they committed to creating the alternative BRICS Development Bank. Clearly, Russia wasn’t going to be isolated by the West.
All while this was happening, the US kept trying to find a backdoor way for incorporating Kiev’s armed forces into NATO, and it found it through its local lackey, Poland. A plan was concocted by Ukraine to create a joint brigade between it, Lithuania, and Poland, with Poland being the key NATO partner involved (Lithuania on its own is almost insignificant in international and military affairs of any kind). The importance here is that Kiev has been institutionalizing the relationship it has with its new strategic partner, Poland, also inviting its former overlord and mercenary-in-arms into the east to assist with “creating new jobs” (read: plundering) in Donbass. What is happening here is that even if the West was unsuccessful in isolating Russia, it could at the very least move as much of its influence eastward to the Russian frontier as it can in order to enact maximum pressure on Moscow.
The “Terrorist” Label and Shadow NATO
Almost immediately after it happened, the MH17 catastrophe was seized upon by Western political opportunists as valuable capital for their geostrategic game. As was mentioned in the first paragraph, pro-Western media outlets immediately laid the blame squarely at Putin’s feet, and this wasn’t coincidental. The objective in doing so has been to generate enough anti-Russian sentiment in Europe so as to justify mutually disadvantageous sanctions (more so for the socially and politically fractured EU, many of whose members are still in recession, than for the economically resolute Russia). The EU, and especially Germany, will only “shoot itself in the kneecaps” as either an emotional or forced response, as to do so under any normal circumstances would be absolutely unreasonable.
Thus, the “terrorist” label entered the discourse.
It has now become popular for Western opinion makers to repeat the Kiev slur that the anti-coup Resistance are “terrorists”, emphasizing that they are “Russian-backed” and “supported by Putin”. It doesn’t matter that none of this is true – what is important is that it is repeated as loudly and as often as can be. The result is to acclimate the public into believing that Russia under Putin is a pariah state, much as Newsweek magazine tried to convince their audience with its last hate piece. Poroshenko has taken things even further, likening MH17 to Lockerbie and 9/11 and trying to get Donetsk and Lugansk’s governments on the international terrorist list.
It is only a short leap of “logic” to see the connection between Russia and Putin as terrorist sponsors and the US’ designation of state-sponsor-of-terrorism status onto the country. Such a step would lead to immediate US sanctions and intense pressure on the EU to cut off its major non-energy trade contacts with Russia and fiendishly move towards diversifying away from Russian gas (to say nothing of killing the South Stream project). The US will only take this extreme step if it is sure that it has more influence over Europe than Russia does and that Europe can be convinced to sacrifice its economic well-being for ideological and political reasons (which is not that far-off of a possibility for such an indoctrinated leadership).
Just as before the tragedy, it must be noted that the US is still pursuing the goal of shadow NATO integration with Ukraine parallel to isolating Russia. It is reported that it may be on the cusp of granting Ukraine major non-NATO ally status and even providing pinpoint precision intelligence for attacking anti-Kiev SAM sites. This could rapidly creep into something much more, per the Libya model, especially since US military advisors will be on the ground. Thus, in one fell swoop, by evoking the “terrorist” label, the US can ‘kill two birds with one stone’ – guilt/force the EU into “isolating Russia” (thereby isolating and harming itself as well) and swallow Ukraine into Shadow NATO.
The US has plainly demonstrated that it is salivating for a Cold War redux with Russia, and once more, Europe is caught in the middle. It is completely contrary to any of its interests for it to participate in this needless and aggressive geopolitical struggle, but as the EU seems wont to do nowadays, it may easily get sucked into it out of misguided ideological and political reasons dictated by the US. In fact, it may have little choice: the US could unilaterally declare Russia as a state sponsor of terrorism and then force the EU, whose largest export market is the US and with whom it is negotiating the Trans-Atlantic Trade and Investment Partnership (which European political elite naively believe will benefit them), into acquiescing to its military occupier’s demands. This wouldn’t “isolate” Russia, which has already made a strong push into the non-Western world since April, as much as it would isolate the EU, but ironically, this may even work in Washington’s favor by crippling its friendly economic rival and keeping it under its thumb for at least another decade.
Moreover, Russia as a “state sponsor of terrorism” would create a clear dividing line between the West and Russia and could give a renewed hybrid purpose to NATO. Whereas in the Cold War it was an anti-Russian organization and then in the “Global War on Terror” it nominally became an anti-terrorist organization, it may soon carry the new hybrid mission of containing a “terrorist-supporting” Russia. This would also provide enhanced justification to European populations for the deployment of even more US and NATO personnel in Eastern Europe, as well as deeper and faster Shadow NATO integration for Ukraine, Georgia, and Moldova, thereby laying the framework for a Western battering ram into Russia’s Near Abroad. All of this would rightfully alarm Russia, which would then defensively ramp up its multivector cooperation with ‘The Rest’ and BRICS. This would be especially so for its prized strategic partner and fellow Western target, China, potentially creating an eventual de-facto alliance between the two giants out of shared security concerns and transforming the Eurasian strategic landscape.
Mérida – Venezuela participated in the gathering of the BRICS emerging powers and Latin American regional blocs in Brazil this week, where new agreements were hailed as beginning the creation of a new global financial architecture.
Several multilateral meetings were held in the city of Fortaleza, including the 6th BRICS (Brazil, Russia, India, China and South Africa) Summit, and meetings between China and the Union of South American Nations (UNASUR) and the Community of Latin American and Caribbean States (CELAC).
During the BRICS summit, the five emerging economies created a new development bank and a multilateral reserve fund, each of which will potentially hold US $100 billion of pooled capital. The reserve fund will be used to support members of the bloc against adverse economic conditions or external impacts.
The creation of the new institutions is partly motivated by dissatisfaction with the terms of the financial hegemony exercised by the U.S. and its European allies through the IMF and World Bank.
“The strength of our project has positive potential: we want the global [financial] system to be fairer and more equal,” said Brazilian president Dilma Roussef to media.
On Wednesday and Thursday China met with the UNASUR and CELAC blocs in order to explore strategies through which the Asian power could deepen its involvement in Latin America.
In the meeting with UNASUR countries it was discussed how BRICS and UNASUR could create more ties. After the meeting, Venezuelan president Nicolas Maduro reported that it had been proposed that the new BRICS Development Bank and UNASUR’s Bank of the South adopt a common strategy in the regional and global economies.
“The [new] financial institutions have the same objectives: the construction of a new financial architecture that benefits economic development in conditions of equity for our countries; where speculative financial capital is ended, where the looting of our economies is ended, and productive investment which creates employment and wealth is promoted,” he said to Telesur on Wednesday.
The Venezuelan president also argued that closer relations between BRICS and Latin America represented a “win win alliance” and “the birth of the multi-polar world”.
“In the past we were dominated powers, and now we are emerging countries and blocs,” he said.
The BRICS bloc has become a key trading partner for Venezuela. Commerce with the bloc increased by 72% from 2006 – 2013.
Meanwhile, agreements reached on Thursday between China and the CELAC bloc, which brings together all countries in the Americas apart from the U.S. and Canada, included the establishment of a $1 billion investment fund for infrastructure projects in Latin America, and a Chinese offer of scholarships for 6,000 Latin American students.
Other funds potentially worth $15 billion to support Latin American development were also discussed.
Latin America has become an important source of Chinese investment and exports, while South American powers have increasingly turned to China as a source of financing, technology transfer, and destination to export primary materials.
A top level delegation led by Chinese President Xi Jinping is currently touring the continent to further deepen China’s economic involvement in Latin America, with visits including Brazil, Argentina, and Venezuela, where Xi Jinping arrives today.
Venezuela also held several bilateral meetings in Fortaleza, including with China and Colombia.
The South American OPEC nation agreed to import a further 1,500 Chinese-made Yutong buses for the expansion of its public transport system. A Yutong factory is being built in Venezuela to begin domestic production of the vehicles, which will open next year.
The Venezuelan and Chinese central banks also reached an agreement to share information on statistical methodologies, monetary policy, and funding mechanisms. Both parties called the accord a “breakthrough” for enhancing economic ties.
Since 2001 the two countries have constructed what has been labeled as a “strategic alliance”. A high level bilateral session initiates in Caracas today with the arrival of Chinese president Xi Jinping.
Fortaleza, Brazil – After some tough rounds of negotiations, BRICS nations (Brazil, Russia, India, China and South Africa) have created not only a new $100 billion Development Bank, but also a $100 billion foreign currency reserves pool.
The announcement was made after a plenary meet of the five BRICS heads of state in Fortaleza on Tuesday.
Shanghai finally won the bid to host the Bank while India will get the presidency of the Bank for the first six years. The Bank will have a rotating chair. The Bank will also have a regional office in Johannesburg, South Africa. All the five countries will have equal shareholding in the BRICS Bank.
The five Finance Ministers will constitute the Bank’s board which will be chaired by Brazil.
The Bank will initially be involved in infrastructure projects in the BRICS nations.
The authorized, dedicated and paid in capital will amount to $100 billion, $50 billion and $10 billion respectively.
The idea of the BRICS Bank was proposed by India during the 2012 Summit in New Delhi.
BRICS have long alleged that the IMF and World Bank impose belt-tightening policies in exchange for loans while giving them little say in deciding terms. Total trade between the countries is $6.14 trillion, or nearly 17 percent of the world’s total. The last decade saw the BRICS combined GDP grow more than 300 per cent, while that of the developed word grew 60 per cent.
Apart from the new development Bank, the group of five leading emerging economies also created a Contingency Reserve Arrangement on Tuesday.
BRICS central banks will keep their reserves in gold and foreign currencies.
China will fund $41 billion, Brazil, India and Russia $18 billion each and South Africa with $5 billion. The funds will be provided according to a multiple. China’s multiple is 0.5, which means that if needed, the country will get half of $41 billion. The multiple is 2 for South Africa and 1 for the rest.
BRICS Finance ministers or central banks’ governors will form a governing body to manage the CRA while it will be presided over by the BRICS President.
The BRICS CRA will not be open to outsiders.
Meanwhile, at the Summit in Fortaleza, Russian President Vladimir Putin said BRICS must form an energy alliance.
“We propose the establishment of the Energy Association of BRICS. Under this ‘umbrella’, a Fuel Reserve Bank and BRICS Energy Policy Institute could be set up,” Putin said on Tuesday.
South Korea’s senior presidential secretary said on Wednesday that visiting Chinese President Xi Jinping and South Korean President Park Geun-hye will exchange notes on detailed measures towards denuclearization of the Korean Peninsula during their upcoming summit talks.
Ju Chul-ki, senior foreign affairs and security advisor to Park, told a press briefing on Wednesday that the two leaders will discuss the Trust-Building Process on the Korean Peninsula, a key policy measure of the Park government.
China and South Korea will release a joint cooperation document paper and ink deals in trade, finance, environment and consular affairs during the Chinese President’s state visit.
Xi will make a two-day state visit to Seoul to hold a summit with Park Thursday and meet with National Assembly Speaker Chung Ui-hwa and Prime Minister Chung Hong-won Friday.
“The two sides will also exchange views on maintaining peace and stability on the Korean Peninsula,” Chinese Vice Foreign Minister Liu Zhenmin told a press briefing in Beijing on Tuesday.
The upcoming China-South Korea summit talks will aim to empower efforts to solve the Peninsula nuclear issue and deter possible provocations from North Korea, Park’s advisor said.
Xi and Park are also expected to discuss the recent move by the Japanese government to end its post-war pacifist outlook.
The Japanese cabinet, headed by Prime Minister Shinzo Abe, decided Tuesday to reinterpret its 67-year-old pacifist constitution to allow itself to exercise collective self-defense right.
The revision paved the way for Japanese forces to fight abroad in defense of “countries with close ties.”
Japan also provoked South Korea on June 20 by unveiling the results of its review on the Kono Statement, which acknowledged and apologized for its wartime sex slavery.
The results said Seoul intervened in the wording of the 1993 apology, indicating it was the consequence of closed-door political dealings.
South Korean President Park Geun-hye criticized Japan for attempting to undermine the credibility of its 1993 apology over wartime sexual enslavement of women during World War II, describing the move as an “act that betrayed trust between the nations”, says a Yonhap report.
Xi and Park are also expected to push for speeding up negotiations for the bilateral free trade pact and setting up a market to directly exchange currencies of the two countries.
China is moving forward with a plan to create its own version of the World Bank, which will rival institutions that are under the sway of the US and the West. The bank will start with $100 billion in capital.
The Asian Infrastructure Investment Bank (AIIB) will extend China’s financial reach and compete not only with the World Bank, but also with the Asian Development Bank, which is heavily dominated by Japan. The $100 billion in capital is double that originally proposed, the Financial Times (FT) reported.
A member of the World Bank, China has less voting power than countries like the US, Japan, and the UK. It is in the ‘Category II’ voting bloc, giving it less of a voice. In the Asian Development Bank, China only holds a 5.5 percent share, compared to America’s 15.7 percent share and Japan’s 15.6 share.
At the International Monetary Fund, China pays a 4 percent quota, whereas the US pays nearly 18 percent, and therefore has more influence within the organization and where loans go.
“China feels it can’t get anything done in the World Bank or the IMF so it wants to set up its own World Bank that it can control itself,” the FT quoted a source close to discussions as saying.
To date, 22 countries have expressed interest in the project, including oil-rich Middle Eastern nations, the US, India, Europe, and even Japan, the FT reported.
“There is a lot of interest from across Asia but China is going to go ahead with this even if nobody else joins it,” the FT source said.
Funding for the Asian Infrastructure Investment Bank will mostly be sourced from the People’s Republic of China and be used to pay for infrastructure projects.
The bank’s first project will be a reincarnation of the ancient Silk Road, the vast network of trade routes between China and its regional neighbors. Another proposed project is a railway from Beijing to Baghdad.
The idea for the bank was first floated in October 2013, when China unveiled plans to create the bank. Then it was initially to be funded with $50 billion in capital.
Separately, the BRICS nations plan to have a $100 billion development bank ready by 2015.
Funds will be reserved for emerging market members who are often bypassed by institutions like the IMF and World Bank.
Bank preparations will likely be finalized at the 6th annual BRICS summit on July 14-16, when the five world leaders convene in Brazil.