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How Russia Could Take Revenege Over Cyprus Deal

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Europe has already had a taste of what Russia can do in 2009, due to the dispute with Ukraine over an unpaid gas bill. That winter the tap was turned off and maybe that was point, to remind Europe not to cross Russia in future. Steve Keen in this CNBC article takes a look at the possible way in which an angry Russia can hit back.

putinGermany might be telling the world not to blame it for Cyprus’ bailout plan, but one analyst told CNBC that Russia could avenge the loss of billions of dollars it has invested and deposited on the island by cutting Germany’s energy supply.

As the Cypriot parliament prepares to vote on a controversial and unprecedented proposal to levy a tax on bank accounts held on the island, the deal has been described as a covert move by Germany and its euro zone partners to tackle what they perceive as Russian money laundering in Cyprus.

Twenty percent of total deposits of the Cypriot banking system are held by Russians and many Russian businesses are registered in Cyprus, making any plan to levy a 15.6 percent tax on deposits over 100,000 a moot point for Russia. The country has also given Cyprus a $3.3 billion loan that Cyprus wishes to extend.

Russia’s leaders have already condemned the European bank levy proposal, with President Vladimir Putin calling it “unfair, unprofessional and dangerous” on Monday. On Tuesday, Russian Prime Minister Dimitry Medvedev added to the growing Russian frustration over the move. “Quite strange and controversial decisions [are] being made by some EU member states. I mean Cyprus. Frankly speaking, this looks like the confiscation of other people’s money,” Medvedev said on Monday.

Steve Keen, professor of Economics & Finance at the University of Western Sydney, told CNBC that Russia could retaliate against the perceived proxy attack on its citizens, and their money.

“If you try to target the Russians, and there’s President Putin acting under the image of the ‘strong man’ of Russia, why would he not then decide to shut down gas supplies to Germany until that was righted?

“If you’re going to attack money laundering then attack it directly, don’t make Cypriot peasants and small businessmen collateral in your campaign against Russian oligarchs. Declare the campaign rather than doing it under the carpet like this too,” he added.

“Russia has been willing to play that card before,” Keen said, alluding to when Russia’s largest state-owned gas and oil supplier Gazprom reduced gas supplies to Europe in 2009 during a dispute with an Ukrainian energy company.

With 36 percent of Europe relying on Russia for its gas supply, the threat or act of limiting supplies gives Russia a powerful card to play should it wish to push home a political point against Germany.

“It is an explosive political situation,” Nick Spiro, head of Spiro Sovereign Strategy, told CNBC. “This is a rubicon which should have never been crossed…This bailout agreement has Germany’s political fingerprints all over it,” Spiro told CNBC Europe’s “Squawk Box.”

“If Germany’s aim was that the larger deposit holders, the Russian ones, were going to bear the brunt of this, then obviously it’s backfired,” he added.

Steve Keen told CNBC that the proposal was tantamount to “blowing the brains out of capitalism” and such a proposal would destroy the euro and the idea of a monetary system.

“It’s mind-boggling that German bureaucrats and politicians can think that this is a sensible way to share the pain,” Keen said. “If you destroy the trust that depositors have in their bank accounts, you fundamentally destroy the oil of capitalism.”

“This is an absurd decision which has to be blocked somehow. If the Russians block it or the Cypriots block, somebody has to block it,” he said, ahead of a crucial debate in the Cypriot parliament over whether to ratify the plan.

Approving the plan is central to Cyprus receiving a 10 billion euro bailout from the European Union and International Monetary Fund (IMF) but as yet, the outcome of the vote is uncertain.

The Cypriot President Nicos Anastasiades reportedly told German Chancellor Angela Merkel and the European Union’s economics affairs commissioner Olli Rehn on Monday that he would stand by what was agreed at a euro zone finance ministers’ meeting last week but “insisted that EU partners offer some additional help,” a state spokesman, Christos Stylianides, told state radio on Tuesday.

(Read More: Cyprus President Is a ‘Fool:’ Gartman)

Stylianides added that President Anastasiades is also likely to talk to the Russian President, Vladimir Putin, on Tuesday.

Against a backdrop of protests in Cyprus and sharp declines in global equity markets on Monday, the German finance minister attempted to deflect blame from his country, saying the solution had not been a German idea and that he was open to it being changed.

“The levy on deposits below 100,000 euros was not the creation of the German government,” Wolfgang Schuble told reporters in Berlin on Monday. “If one reached another solution we would not have the slightest problem,” he added. On Tuesday, however, Schuble said that Germany pressed for a “bail-in” of Cypriot depositors to protect European taxpayers.

Source: CNBC

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Russia Introduces Gold And Silver Coins As Legal Tender

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A smart move by Russia to issue gold and silver coins as legal tender. Its another blow to the confidence of fiat currency. The Central Bank of Russia said:

The coins are legal tender cash payment in the Russian Federation and must be accepted at face value in all kinds of payments without any restrictions

 

It seems 2012 is not yet done with its surprises. The Central Bank of Russia has issued three values of bullion (300,000 31.1g silver pieces with a 3RUB face value, 300,000 7.78g gold pieces with 50RUB face, & 100,000 15.55g gold pieces with a 100RUB face value) that can be used as legal tender beginning, well,  TWO DAYS AGO! If you don’t yet understand the ramifications of such a move, don’t worry, it’s not too late. But you want to begin reading now – starting with the history of metals as money. The clock is ticking and no one knows when the the current economic model’s Duracell will die. Hell, we don’t even know if it’s a AAA, AA, 9V, C size, or D size battery. Every year there seems to be the establishment of new institutions with the capital to lend more. In my book these sizes don’t matter. I think we’re already on the Duracell Rechargeable model. But we all know they don’t last for ever either.

The link from the Central Bank of Russia is at : http://www.cbr.ru/pw.aspx?file=/press/if/121217_164427monet1.htm

Sourc: sandeproject.wordpress.com

Russia Sits On Trillions Of Carats Of Diamonds

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Sounds extraordinary but apparently Russia has been siting on a source of diamonds since the 1970s that is claimed to be trillions of carats.

Russia is about to start tapping into a huge source of diamonds that could supply the world market for the next 3,000 years. Scientists estimate there are ‘trillions of carats’ lying beneath a 35million-year-old asteroid crater in Siberia – more than ten times the global stockpile.

The Kremlin has known about the reserves under the 62-mile-wide impact zone since the 1970s. But it has kept it a secret until now because it was already reaping big profits in what back then was a heavily controlled market.

The official news agency, ITAR-Tass, said the diamonds at the site, known as Popigai Astroblem, are ‘twice as hard’ as the usual gemstones, making them ideal for industrial and scientific uses.  According to The Christian Science Monitor, the institute’s director, Nikolai Pokhilenko, told the agency that the new source would cause a radical shake-up in the precious stones market.

‘The resources of super-hard diamonds contained in rocks of the Popigai crypto-explosion structure are by a factor of ten bigger than the world’s all known reserves,’ he said.  ‘We are speaking about trillions of carats. By comparison, present-day known reserves in Yakutia (a Russian mine) are estimated at one billion carats.’

The stones at Popigai are known as ‘impact diamonds’ which result when an object like a meteor strikes an existing diamond deposit. They are also unique, which will make them even more sought-after in high-precision scientific and industrial markets.

Source: Daily Mail

Russia’s Rush To Swiss Franc

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It’s hard to see how any currency is doing badly against the euro lately but the Russian ruble is certainly one. There are a few signs of problems in Russia to come but most notably has been the recent rush to convert the ruble to swiss francs.

 during April the Russian currency lost out substantially to a euro in crisis. (The following month, it lost 14% against the Dollar.) Bruce also spoke with a Swiss banker who told him that, despite the massive flight to Switzerland for money saftey in recent weeks, the biggest inflow came from Russia. The Gnome told him the reason:It’s politics and economics together. People are afraid” he said – and that’s my view too: Putin’s power base is nowhere near as stable as many in the West think, and in a depression – when people don’t want to buy much energy – Russia has to be one place that will catch a serious case of pneumonia.

The Slog’s view of Russia’s economic future is not good and it looks as if the smart money is to convert your rubles now.

Russia is in a similar position to Australia: it exports very little in the way of added-value manufacture, and is hugely overdependent on global economic growth needing raw materials and energy. My information is that foreign investors, senior businessmen and well-placed people in the regime are gloomy. I think the oil price decline will continue, and so Moscow will be forced into a huge budget deficit: caused by lower tax intake from slowed economic growth…plus a whole shedload of money required to defend the Ruble’s credibility.

The big question in all of this, is what is Europe’s exposure to Russia?

Not many ‘experts’ talk about the EU’s banking exposure to Russian debt, probably because they don’t grasp just how corrupt and unreliable most of the borrowers are. My hunch is that they’re about to find out.

Source: The Slog

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