Moscow unloads dollars and opens to the petro-euro. While China also monopolizes the green

Moscow unloads dollars and opens to the petro-euro. While China also monopolizes the green
Moscow unloads dollars and opens to the petro-euro. While China also monopolizes the green

The Davos dell’Est. The St. Petersburg International Economic Forum was to become this, at least in Vladimir Putin’s intentions. But the climate of permanent sanctions in which Russia gravitates has so far undermined this expectation of the Kremlin, resizing the scope of the early summer symposium and relegating it to a side event. It will therefore be to dispel this reputation that the Russian Finance Minister, Anton Siluanov, has decided to drop a real bomb from the inaugural stage: the Moscow Sovereign Fund, after obtaining green light from the Duma for direct investments in gold, will dump all dollars and dollar-denominated assets, increasing holdings in euros, yuan and precious metals.

In fact, the ever threatened de-dollarization of the Russian economy has given itself a first concrete step. We can make this change in a relatively short time, I would say within a monthconfirmed Siluanov. The reason? Direct reaction to the further tightening of the sanctions regime decided by the Biden administration. A move that will impact on total holdings of $ 119 billion (185.9 billion equivalent, including illiquid assets in the calculation) but which will have almost no direct and visible consequences on the market: the Fund, in fact, will operate the shift through the Central Bank through a purely technical transfer operation in foreign currency, in such a way as to also guarantee a limitation of visibility with respect to its future investments.

Invisible. But not on a symbolic level. As these graphs show,

Fonte: Bloomberg

Fonte: Bloomberg

change will see liquid assets in dollars which today account for 35% of holdings, equal to approximately 41.5 billion, have been eliminated. And if today the euro can boast the same percentage of the greenback, the new denomination will see it rise to 40%, followed by 30% in yuan, 20% in gold and 5% for yen and pound respectively. All in a general context that already in 2020 saw Russian gold holdings outstripping the dollar reserves of the Central Bank, for years now strongly active on the physical gold market precisely with a view to an entirely political diversification from the US currency.

But that’s not enough. Speaking on Friday on the second day of the forum, Vladimir Putin raised the bar of the challenge, underlining how the United States use the dollar as an instrument of economic and political warfare. In this sense, Russia could consider the hypothesis of agreements in national currencies or in euros for gas and oil. If Russian energy companies stop using the dollar, this would be a huge blow to the US currency. But we don’t want this. In conclusion, if the Russian president intended to create the conditions for a hostile meeting with the US president on June 16 in Geneva, he seems to have hit the mark. Because although the Pennsylvania Avenue tenant has so far mainly emphasized the issue of human rights, the oil issue is becoming very topical again overseas as well.

To confirm this, quoted by Bloomberg, it was Bob McNally, a former White House official, according to whom we are seeing a significant escalation from stigmatization to criminalization of oil investments. In fact, a response to the Roadmap to Net Zeto to 2050 agenda of the IEA (International Energy Agency), which in fact intends to pursue the policy of immediately stopping new operations in the fossil field, in order to eliminate emissions within the next 30 years. If this were the case, where would the price of oil go in the near future? Let’s say $ 200 a barrel? And the price of gas, where would it end? To the stars, said the Russian Deputy Prime Minister, Alexander Novak, also speaking at the St. Petersburg symposium.

And if the Minister of Energy of Qatar, Saad Sherida Al Kaabi, in the same forum defined the euphoria towards the energy transition, a dangerous dynamic and a harbinger of an explosion in prices, even more contemptuous was the Saudi counterpart, Prince Abdulaziz bin Salman, according to whom the IEA road map represents a la-la-land scenario. Just yesterday they asked me if oil is dead and my answer was that we are increasing investment and production capacity. Sabotage in Opec + of the green agenda so dear to the US? It is difficult to understand how blurred the boundary between true threat and bluff is. But that the United States is beginning to suffer a certain sense of geo-political encirclement is clear, at least if we look at the strategic energy sector.

In fact, if Russia plays its oil cards in Vienna, using the US allies in the Gulf as strategic partners – each according to their wishes and blackmail towards Washington -, these two graphs

Fonte: Bloomberg

Source: Statista

show how China has played heavily in advance of the green turning point. With three quarters of the supply of solar panels firmly in the hands of Beijing, in fact, the risk is that of finding oneself between a rock and a hard place. And how concrete the threat is is confirmed by the complaint of Kyle Bass, hedge fund guru, who appealed to the White House to take action with respect to the mega-project Blue Hills Wind in Texas, entirely in the hands of GH America Investments Group, a company which in turn is headed by Sun Guangxin, a wealthy businessman originally from Xinjiang and with deep-rooted relations with the Beijing Politburo.

The accusation? Potential military espionage and sabotage of the energy network, moreover a few weeks after the hacker attack against Colonial Pipeline. And indeed, the mega-plant is located in Val Verde County, about 30 miles from a strategic border point with Mexico and only 65 miles from Laughlin Air Force Base, the largest air force base in the US and used for the training of combat pilots. And that Bass’s complaint was taken very seriously, Joe Biden’s decision to prove it expand the blacklist of Chinese companies prepared at the time by Donald Trump, taken with an executive order in force from next 2 August and focused on specific areas: it will indeed banned from investing in smartphone giant Huawei, surveillance camera manufacturer Hikvision, SMIC chip maker but also the telephone operators China Mobile, China Telecommunications and China Unicom.

The White House itself has made it clear that the decision was made to respond to the threat unusual and extraordinary represented by Chinese surveillance technologies. And this other graph

Fonte: Bank of America

seems to put the situation in perspective mercilessly: for the first time ever, Chinese annual investments in research and development exceeded those of the United States (501 billion versus 493) and if the trend were to remain the same and settle down, by 2025 the gap between the two powers would widen to a difference of 304 billion (916 billion for Beijing against 612 for Washington). And that Washington has smelled the malaparata and is already working on the counter-offensive is shown by the latest YouGov poll,

Fonte: YouGov

according to which today – after ten days of media hammering on the subject – the majority of Americans seem convinced that Covid is the result of a Chinese laboratory experiment.

In short, a mixture of Risk and War games in full swing. With two variables. The first represented from the NATO exercise called Sea Breeze to be held from June 28 to July 10 in the Black Sea: according to the spokesman of the Russian Defense Ministry, Major General Igor Konashenkov, in fact, the US would take advantage of the opportunity to supply Ukraine and paramilitaries loyal to Kiev with heavy weapons. Second, how will Europe react toadvanced Vladimir Putin compared to a petro-euro, after Joe Biden’s own green light for the completion of the North Stream 2 gas pipeline and in the light of US espionage by European leaders via Denmark? War games, in fact.

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