Financial War: Russia & China vs U.S. & NATO

The financial war between Russia with China’s tacit backing on one side, and America and her NATO allies on the other has escalated rapidly. It appears that President Putin was thinking several steps ahead when he launched Russia’s attack on Ukraine.

We have seen sanctions fail. We have seen Russia achieve record export surpluses. We have seen the rouble become the strongest currency on the foreign exchanges.

We are seeing the west enter a new round of European monetary inflation to pay everyone’s energy bills. The euro, yen, and sterling are already collapsing — the dollar will be next. From Putin’s point of view, so far, so good.

Russia has progressed her power over Asian nations, including populous India and Iran. She has persuaded Middle Eastern oil and gas producers that their future lies with Asian markets, and not Europe. She is subsidising Asia’s industrial revolution with discounted energy. Thanks to the west’s sanctions, Russia is on its way to confirming Halford Mackinder’s predictions made over a century ago, that Russia is the true geopolitical centre of the world.

There is one piece in Putin’s jigsaw yet to be put in place: a new currency system to protect Russia and her allies from an approaching western monetary crisis. This article argues that under cover of the west’s geopolitical ineptitude, Putin is now assembling a new gold-backed multi-currency system by combining plans for a new Asian trade currency with his new Moscow World Standard for gold.

Currency developments under the radar

Unreported by western media, there are some interesting developments taking place in Asia over the future of currencies. Earlier this summer, it emerged that Sergei Glazyev, a senior Russian economist and Minister in charge of the Eurasian Economic Commission (EAEU), was leading a committee planning a new trade currency for the Eurasian Economic Union.

As put forward in Russian and EAEU media, the new currency is to be comprised of a mixture of national currencies and commodities. A weighting of some sort was suggested to reflect the relative importance of the currencies and commodities traded between them. At the same time, the new trade settlement currency was to be available to any other nation in the Shanghai Cooperation Organisation and the expanding BRICS membership. The ambition is for it to become an Asia-wide replacement for the dollar.

More specifically, the purpose is to do away with the dollar for trade settlements on cross-border transactions between participants. It is worth noting that any dollar transaction is reflected in US banks through the correspondent banking system, potentially giving the US authorities undesirable economic intelligence, and information on sanction-busting and other activities deemed illegal or undesirable by the US authorities. Furthermore, any transaction involving US dollars becomes a matter for the US legal system, giving US politicians the authority to intervene wherever the dollar is used.

As well as removing these disadvantages, through the inclusion of a basket of commodities there appears to be an acceptance that the new trade currency must be more stable in terms of its commodity purchasing power than exists with that of the dollar. But we can immediately detect flaws in the outline proposal. The mooted inclusion of national currencies in the basket is not only an unnecessary complication, but any nation joining it would presumably trigger a wholesale rebalancing of the currency’s composition.

Including national currencies is a preposterous suggestion, as is any suggestion that the commodity element should be weighted by trade volumes transacted between participating states. Instead, an unweighted average of energy, precious metals, and base metals makes more sense, but even that does not go far enough. The reasons are illustrated by the two charts in Figure 1.

The upper chart shows baskets of different categories of commodities indexed and priced in dollars. Between them, they represent a wide range of commodities and raw materials. These baskets are considerably less volatile than their individual components. For example, since April 2020 oil has risen from a distorted minus figure to a high of $130, whereas the energy basket has risen only 6.3 times, because other components have not risen nearly as much as crude oil and some components might be rising while others might be falling. Agriculture raw materials are comprised of cotton, timber, wool, rubber, and hides, not raw materials liable to undesirable seasonality. But the average of the four categories is considerably more stable than its components (the black line).

We are moving towards price stability. However, all commodities are priced in US dollars, which being undesirable, cannot be avoided. Pricing in gold, which is legal money, eventually resolves this problem because it can be fixed against participating currencies. The result of pricing the commodity categories in gold and the average of them is shown in the lower chart.

Since 1992, the average (the black line) has varied between 0.37 and 1.66, and is currently at 0.82, or 18% less than in January 1992. This is as stable as it gets, and even this low volatility would probably be less if the dollar wasn’t itself so volatile and the gold price manipulated by nay-saying western authorities. To further illustrate these points, Figure 2 shows the dollar’s volatility in terms of crude oil.

Before the abandonment of Bretton Woods in 1971, the price of oil hardly changed. Since then, measured by gold the dollar has lost 98% of its purchasing power. Furthermore, the chart shows that it is the dollar which is extremely volatile and not oil, because the price of oil in gold is relatively constant (down only 20% from 1950), while in dollars it is up 33.6 times with some wild price swings along the way. Critics of measuring prices in gold ignore the fact that legal money is gold and not paper currencies or bank credit: attempts by governments and their epigones to persuade us otherwise are propaganda only.

Therefore, Glazyev should drop currencies from the proposed basket entirely and strive to either price a basket of non-seasonal commodities in gold, or alternatively simply reference the new currency to gold in a daily fix. And as the charts above confirm, there is little point in using a basket of commodities priced in dollars or gold when it is far simpler for the EAEU nations and for anyone else wishing to participate in the new trade currency to use a trade currency directly tied to the gold price. It would amount to a new Asian version of a Bretton Woods arrangement and would need no further adjustment.

Attributing them to excessive credit, from recent statements by President Putin it is clear he has a better understanding of currencies and the west’s inflationary problems than western economists. Intellectually, he has long demonstrated an appreciation of the relationship between money, that is only gold, and currency and credit. His knowledge was further demonstrated by his insistence that the “unfriendlies” pay for energy in roubles, taking control of the media of energy exchange into Russia’s own hands and away from those of his enemies.

In short, Putin appears to understand that gold is money and that the rest is unreliable, weaponizable, credit. So, why does he not just command a new trade currency to be created, backed by gold?

Enter the new Moscow gold standard

Logic suggests that a gold-backed currency will be the outcome of Glazyev’s EAEU committee’s trade currency deliberations after all, because of a subsequent announcement from Moscow concerning a new Russian bullion market.

In accordance with western sanctions, the London Bullion Market refused to accept Russian mined and processed gold. It was then natural for Russia to propose a new gold market based in Moscow with its own standards. It is equally sensible for Moscow to set up a price fixing committee, replicating that of the LBMA. But instead of it being the basis for a far larger unallocated gold deposit account offering by Russian and other banks, it will be a predominantly physical market.

Based in Moscow, with a new market called the Moscow International Precious Metals Exchange, the Moscow Gold Standard will incorporate some of the LBMA’s features, such as good delivery lists with daily, or twice daily fixings. The new exchange is therefore being promoted as a logical replacement for the LBMA.

But could that be a cover, with the real objective being to provide a gold link to the new trade currency planned by Glazyev’s EAEU committee? Timing suggests that this may indeed be the case, but we will only know for sure as events unfold.

If it is to be backed by gold, the considerations behind setting up a new trade currency are fairly straightforward. There is the Chinese one kilo bar four-nines standard, which is widely owned, has already been adopted throughout Asia, and is traded even on Comex. Given that China is Russia’s long-term partner, that is likely to be the standard unit. The adoption of the Chinese standard in the new Moscow exchange is logical, simplifying the relationship with the Shanghai Gold Exchange, and streamlining fungibility between contracts, arbitrage, and delivery.

Geopolitics suggest that the simple proposition behind the establishment of a new Moscow exchange will fit in with a larger trans-Asia plan and is unlikely to move at the glacial pace of developments between Russia and China to which we have become accustomed. The gold question has become bound up in more rapid developments triggered by Russia’s belligerence over Ukraine, and the sanctions which quickly followed.

There can be little doubt that this must be leading to a seismic shift in gold policy for the Russian Chinese partnership. The Chinese in particular have demonstrated an unhurried patience that befits a nation with a sense of its long history and destiny. Putin is more of a one-man act. Approaching seventy years old, he cannot afford to be so patient and is showing a determination to secure a legacy in his lifetime as a great Russian leader. While China has made the initial running with respect to gold policy, Putin is now pushing the agenda more forcefully.

Before Russia’s invasion of Ukraine, the strategy was to let the west make all the geopolitical and financial mistakes. For Putin perhaps, the lesson of history was informed by Napoleon’s march to the gates of Moscow, his pyrrhic victory at Borodino, and his defeat by the Russian winter. Hitler made the same mistake with Operation Barbarossa. From Putin’s viewpoint, the lesson was clear — Russia’s enemies defeat themselves. It was repeated in Afghanistan, where the American-led NATO enemy was conquered by its own hubris without Putin having to lift so much as a finger. That is why Russia is Mackinder’s Pivot Area of the World Island. It cannot be attacked by navies, and supply line requirements for armies make Russia’s defeat well-nigh impossible

Following the Ukraine invasion, Putin’s financial strategy has become more aggressive, and is potentially at odds with China’s economic policy. Being cut off from western markets, Putin is now proactive, while China which exports goods to them probably remains more cautious. But China knows that western capitalism bears the seeds of its own destruction, which would mean the end of the dollar and the other major fiat currencies. An economic policy based on exports to capitalistic nations would be a passing phase.

China’s gold policy was aways an insurance policy against a dollar collapse, realising that she must not be blamed for the west’s financial destruction by announcing a gold standard for the yen in advance of it. It would be a nuclear equivalent in a financial war, only an action to be taken as a last resort.

Developments in Russia have changed that. It is clear to the Russians, and most likely the Chinese, that credit inflation is now pushing the dollar into a currency crisis in the next year or two. Preparations to protect the rouble and the yuan from the final collapse of the dollar, long taught in Marxist universities as inevitable, must assume a new urgency. It would be logical to start with a new trade settlement currency as a testbed for national currencies in Asia, and for it to be set up in such a way that it would permit member states to adopt gold standards for their own currencies as well.

Possession of bullion is key

The move away from western fiat currencies to gold backed Asian currencies requires significant gold bullion ownership at the least. The only members, associates, and dialog partners of the Shanghai Cooperation Organisation and the EAEU whose central banks have not increased their gold reserves since the Lehman failure when the credit expansion of dollars began in earnest, are minor states. Since then, between them they have added 4,645 tonnes to their reserves, while all the other central banks account for only 781 tonnes of additional gold reserves.

But central bank reserves are only part of the story, with nations running other, often secret national bullion accounts not included in reserves. The appendix to this article shows why and how China almost certainly accumulated an undeclared quantity of bullion, likely to be in the region of 25,000 tonnes by 2002 and probably more since.

Since 2002, when the Shanghai Gold Exchange opened and China’s citizens were permitted for the first time to own gold, gold delivered into public hands has totalled a further amount of over 20,000 tonnes. While the bulk of this is jewellery and some has been returned to the SGE as scrap for re-refining, it is clear that the authorities have encouraged Chinese citizens to retain gold for themselves, which traditionally has been real money in China.

According to Simon Hunt of Simon Hunt Strategic Services, as well as declared reserves of 2,301 tonnes Russia also holds gold bullion in its Gosfund (the State Fund of Russia) bringing its holdings up to 12,000 tonnes. This is significantly greater than the 8,133 tonnes declared by the US Treasury, over which there are widespread doubts concerning the veracity of its true quantity.

Obviously, the Asian partnership has a very different view of gold from the American hegemon. Furthermore, in recent months evidence has confirmed what gold bugs have claimed all along, that the Bank for International Settlements and major bullion operators such as JPMorgan Chase have indulged in a price suppression scheme to discourage gold ownership and to divert bullion demand into synthetic unallocated accounts.

The secrecy that surrounds reporting of gold reserves to the IMF raises further suspicions over the true position. Furthermore, there are leases and swaps between central banks, the BIS, and bullion dealers that lead to double counting and bullion recorded as being in possession of governments and their central banks but being held by other parties.

As long ago as 2002 when the gold price was about $300 per ounce, Frank Veneroso, who as a noted analyst spent considerable time and effort identifying central bank swaps and leases, concluded that anything between 10,000 and 15,000 tonnes of government and central bank gold reserves were out on lease or swapped — that is up to almost half the total official global gold reserves at that time. His entire speech is available on the Gold Antitrust Action Committee website, but this is the introduction to his reasoning:[i]

“Let’s begin with an explanation of gold banking and gold derivatives.

“It is a simple, simple idea. Central banks have bars of gold in a vault. It’s their own vault, it’s the Bank of England’s vault, it’s the New York Fed’s vault. It costs them money for insurance – it costs them money for storage— and gold doesn’t pay any interest. They earn interest on their bills of sovereigns, like US Treasury Bills. They would like to have a return as well on their barren gold, so they take the bars out of the vault and they lend them to a bullion bank. Now the bullion bank owes the central bank gold—physical gold—and pays interest on this loan of perhaps 1%. What do these bullion bankers do with this gold? Does it sit in their vault and cost them storage and insurance? No, they are not going to pay 1% for a gold loan from a central bank and then have a negative spread of 2% because of additional insurance and storage costs on their physical gold. They are intermediaries—they are in the business of making money on financial intermediation. So they take the physical gold and they sell it spot and get cash for it. They put that cash on deposit or purchase a Treasury Bill. Now they have a financial asset—not a real asset—on the asset side of their balance sheet that pays them interest—6% against that 1% interest cost on the gold loan to the central bank. What happened to that physical gold? Well, that physical gold was Central Bank bars, and it went to a refinery and that refinery refined it, upgraded it, and poured it into different kinds of bars like kilo bars that go to jewellery factories who then make jewellery out of it. That jewellery gets sold to individuals. That’s where those physical bars have wound up—adorning the women of the world…

“We have gotten, albeit crude, estimates of gold borrowings from the official sector from probably more than 1/3 of all the bullion banks. We went to bullion dealers, and we asked, “Are these guys major bullion bankers, medium bullion bankers, or small-scale bullion bankers?” We classified them accordingly and from that we have extrapolated a total amount of gold lending from our sample. That exercise has pointed to exactly the same conclusion as all of our other evidence and inference—i.e., something like 10,000 to 15,000 tonnes of borrowed gold.”

Veneroso’s findings were stunning. But two decades later, we have no idea of the current position. The market has changed substantially since 2002, and today it is thought that swaps and leases are often by book entry, rather than physical delivery of bullion into markets. But the implications are clear: if Russia or China cared to declare their true position and made a move towards backing their currencies with gold or linking them to gold credibly, it would be catastrophic for the dollar and western fiat currencies generally. It would amount to a massive bear squeeze on the west’s longstanding gold versus fiat policy. And remember, gold is money, and the rest is credit, as John Pierpont Morgan said in 1912 in evidence to Congress. He was not stating his opinion, but a legal fact.

In a financial crisis, the accumulated manipulation of bullion markets since the 1970s is at significant risk of becoming unwound. The imbalance in bullion holdings between the Russian Chinese camp and the west would generate the equivalent of a financial nuclear event. This is why it is so important to understand that instead of being a longstop insurance policy against the Marxist prediction of capitalism’s ultimate failure, it appears that the combination of planning for a new trade currency for Asian nations centred on members of the EAEU, coinciding with the introduction of a new Moscow-based bullion standard, is now pre-empting financial developments in the west. That being the case, a financial nuclear bomb is close to being triggered.


China’s gold policy

China actually took its first deliberate step towards eventual domination of the gold market as long ago as June 1983, when regulations on the control of gold and silver were passed by the State Council. The following Articles extracted from the English translation set out the objectives very clearly:

Article 1. These Regulations are formulated to strengthen control over gold and silver, to guarantee the State’s gold and silver requirements for its economic development and to outlaw gold and silver smuggling and speculation and profiteering activities.

Article 3. The State shall pursue a policy of unified control, monopoly purchase and distribution of gold and silver. The total income and expenditure of gold and silver of State organs, the armed forces, organizations, schools, State enterprises, institutions, and collective urban and rural economic organizations (hereinafter referred to as domestic units) shall be incorporated into the State plan for the receipt and expenditure of gold and silver.

Article 4. The People’s Bank of China shall be the State organ responsible for the control of gold and silver in the People’s Republic of China.

Article 5. All gold and silver held by domestic units, with the exception of raw materials, equipment, household utensils and mementos which the People’s Bank of China has permitted to be kept, must be sold to the People’s Bank of China. No gold and silver may be personally disposed of or kept without authorization.

Article 6. All gold and silver legally gained by individuals shall come under the protection of the State.

Article 8. All gold and silver purchases shall be transacted through the People’s Bank of China. No unit or individual shall purchase gold and silver unless authorised or entrusted to do so by the People’s Bank of China.

Article 12. All gold and silver sold by individuals must be sold to the People’s Bank of China.

Article 25. No restriction shall be imposed on the amount of gold and silver brought into the People’s Republic of China, but declaration and registration must be made to the Customs authorities of the People’s Republic of China upon entry.

Article 26. Inspection and clearance by the People’s Republic of China Customs of gold and silver taken or retaken abroad shall be made in accordance with the amount shown on the certificate issued by the People’s Bank of China or the original declaration and registration form made on entry. All gold and silver without a covering certificate or in excess of the amount declared and registered upon entry shall not be allowed to be taken out of the country.

These articles make it clear that only the People’s Bank was authorised to acquire or sell gold on behalf of the state, without limitation, and that citizens owning or buying gold were not permitted to do so and must sell any gold in their possession to the People’s Bank.

Additionally, China has deliberately developed her gold mine production regardless of cost, becoming the largest producer by far in the world.[ii] State-owned refineries process this gold along with doré imported from elsewhere. Virtually none of this gold leaves China, so that the gold owned today between the state and individuals continues to accumulate.

The regulations quoted above formalised the State’s monopoly over all gold and silver which is exercised through the Peoples Bank, and they allow the free importation of gold and silver but keep exports under very tight control. The intent behind the regulations is not to establish or permit the free trade of gold and silver, but to control these commodities in the interest of the state.

This being the case, the growth of Chinese gold imports recorded as deliveries to the public since 2002, when the Shanghai Gold Exchange was established and the public then permitted to buy gold, is only the more recent evidence of a deliberate act of policy embarked upon thirty-nine years ago. China had been accumulating gold for nineteen years before she allowed her own nationals to buy when private ownership was finally permitted. Furthermore, the bullion was freely available, because in seventeen of those years, gold was in a severe bear market fuelled by a combination of supply from central bank disposals, leasing, and increasing mine production, all of which I estimate totalled about 59,000 tonnes. The two largest buyers for all this gold for much of the time were private buyers in the Middle East and China’s government, with additional demand identified from India and Turkey. The breakdown from these sources and the likely demand are identified in the table below:

In another context, the cost of China’s 25,000 tonnes of gold equates to roughly 10% of her exports over the period, and the eighties and early nineties in particular also saw huge capital inflows when multinational corporations were building factories in China. However, the figure for China’s gold accumulation is at best informed speculation. But given the determination of the state to acquire gold expressed in the 1983 regulations and by its subsequent actions, it is clear China had deliberately accumulated a significant undeclared stockpile by 2002.

So far, China’s long-term plans for the acquisition of gold appear to have achieved some important objectives. To date, additional deliveries to the public through the SGE now total over 20,000 tonnes.

China’s motives

China’s motives for taking control of the gold bullion market have almost certainly evolved. The regulations of 1983 make sense as part of a forward-looking plan to ensure that some of the benefits of industrialisation would be accumulated as a risk-free national asset. This reasoning is similar to that of the Arab nations capitalising on the oil-price bonanza only ten years earlier, which led them to accumulate their hoard, mainly held in private as opposed to government hands, for the benefit of future generations. However, as time passed the world has changed substantially both economically and politically.

2002 was a significant year for China, when geopolitical considerations entered the picture. Not only did the People’s Bank establish the Shanghai Gold Exchange to facilitate deliveries to private investors, but this was the year the Shanghai Cooperation Organisation formally adopted its charter. This merger of security and economic interests with Russia has bound Russia and China together with a number of resource-rich Asian states into an economic bloc. When India, Iran, Mongolia, Afghanistan, and Pakistan join (as they now have or are already committed to do), the SCO will cover more than half the world’s population. And inevitably the SCO’s members are looking for an alternative trade settlement system to using the US dollar.

At some stage China with her SCO partner, Russia, might force the price of gold higher as part of their currency strategy. You can argue this from an economic point of view on the basis that possession of properly priced gold will give her a financial dominance over global trade at a time when we are trashing our fiat currencies, or more simply that there’s no point in owning an asset and suppressing its value for ever. From 2002 there evolved a geopolitical argument: both China and Russia having initially wanted to embrace American and Western European capitalism no longer sought to do so, seeing us as soft enemies instead. The Chinese public were then encouraged, even by public service advertising, to buy gold, helping to denude the west of her remaining bullion stocks and to provide market liquidity in China.

What is truly amazing is that the western economic and political establishment have dismissed the importance of gold and ignored all the warning signals. They do not seem to realise the power they have given China and Russia to create financial chaos as a consequence of gold price suppression. If they do so, which seems to be only a matter of time, then London’s fractional reserve system of unallocated gold accounts would simply collapse, leaving Shanghai as the only major physical market.

This is probably the final link in China’s long-standing gold strategy, and through it a planned domination of the global economy in partnership with Russia and the other SCO nations. But as noted above, recent events have brought this outcome forward.

[i] See https://www.gata.org/node/4249

[ii] Following covid, China’s production has declined from over 400 tonnes annually to closer to 300 tonnes.

Source: GSI Exchange

Turkey’s existential choice: BRI or bust • The Cradle

By: Matthew Ehret

Source: The Cradle • Turkey’s existential choice: BRI or bust

Two destinies are pulling on West Asia from two opposing visions of the future.

As devotees of the rules-based order laid out by Zbigniew Brzezinski 40 years ago strive to uphold their dystopic model of dividing populations to feed endless wars, a more optimistic program of cooperation is being ushered in by China’s ever-evolving Belt and Road Initiative (BRI).

While many nations have jumped on board this new paradigm with enthusiastic support, others have found themselves precariously straddling both worlds.

Turkey plays footsie with great powers

Chief among those indecisive nations is the Republic of Turkey, whose leader was given a harsh wake up call on 15 July, 2016. It was on this date that Russian intelligence provided Turkish President Recep Tayyip Erdogan the edge needed to narrowly avoid a coup launched by followers of exiled Islamist leader Fetullah Gulen.

The timing of the coup has been subject to much speculation, but the fact that it occurred just two weeks after Erdogan’s letter of apology to Putin went public was likely not a coincidence. The apology in question referred to Turkey’s decision to shoot down a Russian fighter jet flying in Syrian airspace in November 2015, killing a soldier and very nearly activating NATO’s collective security pact.

For years instrumental in providing weapons and logistical support to ISIS in both Iraq and Syria (via Operation Timber Sycamore), it is possible Erdogan was tiring of being used to further western interests in the Levant, when it had its own, quite different, aspirations in those territories.

Whatever the case, since that fateful day, Turkey’s behavior as a player in West Asia took on an improved (though not entirely redeemed) character on a number of levels. Chief among those positive behavioral changes is Ankara’s participation in the Astana process with Tehran and Moscow to demilitarize large swathes of Syria. Turkey then purchased Russian S400 medium-long range missile defense systems, and has recently advanced plans to jointly produce submarines, jet engines and warships with Russia, while also accelerating the construction of a nuclear reactor built by Rosatom.

That said, old habits die hard, and Turkey has been caught playing in both worlds, providing continued support for the terrorist-laden Free Syrian Army and Al Qaeda offshoot Hayat Tahrir Al Sham in Syria’s Idlib governorate. Turkey now has a total of 60 military bases and observation posts that provide protection for these and other militant groups in the country’s north.

The Middle Corridor option

On an economic level, Turkey’s ambition to become a gateway between Europe and Asia along the New Silk Road also indicates Erdogan’s resolution to break from his previous commitments to join the European Union and engage more intricately with the East.

Turkey’s 7500 km Trans-Caspian East-West Middle Corridor is an ambitious project that runs parallel to the northern corridor of the BRI connecting China to Europe.

This corridor, which began running in November 2019, has the benefit of cutting nearly 2000 km of distance off the active northern corridor and provides an efficient route between China and Europe. The route itself moves goods from the north-eastern Lianyungang Port in China through Xinjiang into Kazakhstan, the Caspian Sea, Azerbaijan, Georgia, Turkey and on to Europe via land and sea routes. Erdogan has previously stated that “the Middle Corridor lies at the heart of the BRI” and has called to “integrate the Middle Corridor into the BRI.”

Other projects that are subsumed by the Middle Corridor include the $20 billion Istanbul Canal which will be a 45km connection between the Black and Marmara Seas (reducing traffic on the Bosporus) as well as the Marmara undersea railway, Eurasian Tunnel, and the third Istanbul Bridge.

Without China’s increased involvement, not only will these projects fail to take shape, but the Middle Corridor itself would crumble into oblivion. Chinese trade with Turkey recently grew from $2 billion in 2002 to $26 billion in 2020, more than 1,000 Chinese companies have investment projects throughout the nation, and Chinese consortiums hold a 65 percent stake in Turkey’s third largest port.

Restraining Ankara’s options

These projects have not come without a fight from both internal forces within Turkey and external ones. Two major Turkish opposition parties have threatened to cancel the Canal Istanbul as a tactic to scare away potential investors at home and abroad. And internationally, financial warfare has been unleashed against Turkey’s economy on numerous levels.

Credit ratings agencies have downgraded Turkey to a ‘high risk’ nation, and sanctions have been launched by the US and EU. These acts have contributed to international investors pulling out from Turkish government bonds (a quarter of all bonds were held by foreign investors in 2009, collapsing to less than 4 percent today) and depriving the nation of vital productive credit to build infrastructure. These attacks have also resulted in the biggest Turkish banks stating they will not provide any funding to the megaproject.

Despite the fact that Chinese investments into Turkey have increased significantly, western Financial Direct Investments (FDIs) have fallen from $12.18 billion in 2009 to only $6.67 billion in 2021.

Dialing down its Uyghur project

As with Turkey’s relations with Russia, Erdogan’s desperate need to collaborate with China in the financial realm has resulted in a change of policy in his support for Uyghur extremists. Of the 13 million Chinese Uyghurs, 50,000 live in Turkey, many of whom are part of a larger CIA-funded operation aimed at carving up China.

For many years, Turkey has provided safe haven to terrorist groups like the East Turkmenistan Islamic Movement, which cut its teeth fighting alongside ISIS in Syria and Iraq. Operatives affiliated with the World Uyghur Congress, funded by the US National Endowment for Democracy and based in Germany, have also found fertile soil in Turkey.

In 2009, Erdogan publicly denounced China for conducting a genocide on Muslims living in Xinjiang (long before it became de rigueur to do so in western nations). After Turkey’s 2016 failed coup, things began to change. In 2017, Turkish Foreign Minister Mevlüt Çavuşoğlu stated: “We will absolutely not allow in any activities in Turkey that target or oppose China. Additionally, we will take measures to eliminate any media reports targeting China.”

There are many parallels to Turkey’s protection of radical Islamic groups in Idlib, but Ankara’s protection of radical anti-China Uyghur groups was more gradual. However, recent significant moves by Erdogan have demonstrated good faith, including the 2017 extradition treaty signed with China (ratified by Beijing though not yet by Ankara), an increased clampdown on Uyghur extremist groups, and the decision to re-instate the exclusion order banning World Uyghur Congress president Dolkun Isa from entering Turkey on 19 September, 2021.

Might the INSTC bypass Ankara?

Not only is Turkey eager to play a role in China’s BRI and secure essential long term credit from Beijing – without which its future will be locked to the much diminished fortunes of the European Union – but Ankara has also factored the growing International North South Transportation Corridor (INSTC) into its calculus.

A multimodal corridor stretching across a dozen nations, the INSTC was launched by Russia, India and Iran in 2002 and has been given new life by China’s BRI. In recent years, members of the project have grown to also include Azerbaijan, Armenia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Ukraine, Syria, Belarus, Oman and Bulgaria.

While Turkey is a member of the project, there is no guarantee that the megaproject will directly move through its borders. Here too, Erdogan is keen to stay on good terms with Russia and its allies.

The Middle Corridor loses its shine
Up until now, Turkey’s inability to break with zero-sum thinking has resulted in the self-delusion that Turkey’s Middle Corridor would be the only possible choice China had to move goods through to Europe and North Africa.

This perception was for many years buoyed by the war across the ISIS-ridden region of Syria and Iraq (and the relative isolation of Iran), which appeared to ensure that no competing development corridor could be activated.

However, Iran’s entry into the BRI as part of its 25-year Comprehensive Strategic Partnership struck with China in March, and its ascension to full membership in the Shanghai Cooperation Organization (SCO) in September, has provided an attractive new east-west alternative route to the Middle Corridor.

This potential branch of the New Silk Road connecting China with Europe via Iran, Iraq and Syria into the Mediterranean through Syria’s port of Latakia provides a unique opportunity to not only reconstruct the war-torn West Asian nations, but to also create a durable field of stability after decades of western manipulation.

This new route has the additional attraction of incorporating Jordan, Egypt, Lebanon and other Arab states into a new strategic dynamic that connects Eurasia with an African continent desperate for real development. As of this writing, 40 sub-Saharan African nations have signed onto China’s BRI.

The first glimmering light of this new corridor took form in a small but game-changing 30 km rail line connecting the border city of Shalamcheh in Iran with Basra in Iraq. Work began this year, with its $150 million cost supplied by the semi-private Mostazan Foundation of Iran.

Foreseeing a much larger expansion of this historic connection, Iran’s ambassador to Iraq stated: “Iraq can be connected to China through the railways of Iran and increase its strategic importance in the region … this will be a very big change and Iran’s railways will be connected to Iraq and Syria and to the Mediterranean.”

Ambassador Masjidi was here referring to the provisional agreement reached among Iran, Iraq and Syria in November 2018 to build a 1570 km railway and highway from the Persian Gulf in Iran to the Latakia Port via Iraq.

Already, Iran’s construction-focused investments in war-torn and sanction-torn Syria have grown immensely, boosting estimated trade between the two nations with an additional $1 billion over the next 12 months.

Indicating the higher development dynamic that is shaping the Iraq–Iran railway, Iraq’s Prime Minister stated in May 2021 that “negotiations with Iran to build a railway between Basra and Shalamcheh have reached their final stages and we have signed 15 agreements and memorandums of understanding with Jordan and Egypt regarding energy and transportation lines.”

Indeed, both Egypt and Jordan have also looked east for the only pathway to durable peace in the form of the New Silk Road. The trio of Egypt, Jordan and Iraq began setting the stage for this Silk Road route with a 2017 energy agreement designed to connect the electricity grids of the three nations and also construct a pipeline from Basra to Aqaba in Jordan followed by a larger extension to Egypt.

Iraq and the New Silk Road
In December 2020, Iraq and Egypt agreed on an important oil for reconstruction deal along the lines of a similar program activated earlier by former Iraqi Prime Minister Adil Abdul Mahdi and his Chinese counterpart in September 2019. The latter project was seriously downgraded when Mahdi stepped down in May 2020, and although PM Mustafa Al-Kadhimi has begun to repair Chinese relations, Iraq has not yet returned to the level of cooperation reached by his predecessor.

To date, the only major power that has shown any genuine concern for Iraq’s reconstruction – and been willing to invest actual resources toward it – has been China.

Despite the trillions of dollars wasted by the United States in its brutal invasion and occupation of the country, not a single energy project has been built by US dollars there. In fact, the only power plant constructed after 2003 has been the Chinese-built 2450 mW thermal plant in Wassit which supplies 20 percent of Iraq’s electricity. Iraq requires at least 19 GW of electricity in order to supply its basic needs after years of western bombardment strategically targeting its vital infrastructure.

To this day, hardly any domestic manufacturing exists in Iraq, with 97 percent of its needs purchased from abroad, and entirely with oil revenue. If this dire situation is to be reversed, then China’s oil-for-construction plan must be brought fully back online.

The kernel of this plan involves a special fund which will accumulate sales of discounted Iraqi oil to China until a $1.5 billion threshold is reached. When this happens, Chinese state banks have agreed to add an additional $8.5 billion, bringing the fund to $10 billion to be used on a full reconstruction program driven by roads, rail, water treatment, and energy grids, as well as soft infrastructure like schools and healthcare.

Where the western economic models have tended to keep nations underdeveloped by emphasizing raw material extraction with no long-term investments that benefit its citizenry, creating no manufacturing capabilities or an increase in the powers of labor, the Chinese-model is entirely different, focusing instead on creating full spectrum economies. Where the former is zero sum and a closed system, the latter model is win-win and open.

If Turkey can find the sense to liberate itself from the obsolete logic of zero sum geopolitics, then a bright future will await all of West and Central Asia.

There is no reason to believe that the Middle Corridor will in any way be harmed by the success of an Iran–Iraq–Syria Silk Road corridor, or by its African extensions. By encouraging the development of collaborative relations, large scale infrastructure, and full-spectrum economic networks, abundance can be created in these regions to offset the underdevelopment and stagnation of recent years.

Iran has joined the SCO, now it needs to turbo-boost its economy • THE CRADLE

Source: https://thecradle.co/Article/analysis/2019

With Iran’s full accession to the Shanghai Cooperation Organization (SCO) complete, Tehran now needs to wrangle big trade deals with its new regional friends to offset US sanctions against its beleaguered economy.

“Today, we will launch procedures to admit Iran as a full member of the SCO (Shanghai Cooperation Organization),” Chinese President Xi Jinping announced on Friday, putting to rest the rampant speculation that Iran will officially accede to Asia’s most coveted security organization.

Iranian President Ebrahim Raisi is in Dushanbe, Tajikistan with a high level diplomatic and economic delegation to attend the annual two-day SCO summit. The visit, marking Raisi’s first foreign trip, is already a dazzling success for the new head of state. The Islamic Republic had, until today, only enjoyed SCO observer status (since 2005), and had undergone two previous failed attempts to gain full membership.

The announcement of Iran’s accession to the SCO comes as little surprise to experts who predicted that Tehran’s comprehensive strategic partnership agreement with China last March and its subsequent announcement of a similar agreement with Moscow, would pave the way for Iran’s upgraded SCO status. Recent developments in Afghanistan have only confirmed for Beijing and Moscow – the organization’s main stakeholders – the value of Iran within the regional security organization.

Founded in 2001, the SCO brings together regional powers, such as Russia and China, along with India, Kyrgyzstan, Kazakhstan, Pakistan, Tajikistan, and Uzbekistan. The organization represents a geographical region of 60 million square kilometers (23 million square miles) and a population of over 3 billion.

Economy of the SCO

During its first 20 years, the SCO was largely viewed as a political and security grouping of countries that sought to cooperate against “terrorism, separatism, and extremism.” However, it has recently also sought to bolster economic cooperation among members and is expected to further develop these ambitions in the coming years.

In 2018, at the Qingdao summit in China, the SCO adopted an agreement consisting of 17 documents, which included action plans for economic cooperation between the SCO member states and the need “to examine the prospects of expanding the use of national currency in trade and investment.”

The SCO’s eight member states, four observer states, and six dialogue partners boast a total economic volume of close to $20 trillion and a total foreign trade volume of $6.6 trillion, 100 times larger than the values of 20 years ago.

For Iran and its ailing, US-sanctioned economy, joining the SCO provides access to significantly larger markets and the world’s fastest-growing international corridors. It also further consolidates Tehran’s unofficial alliance with major powers Moscow and Beijing against the West on issues such as Iran’s nuclear program.

Iran’s trade with SCO members

According to the latest data announced by Iran’s Customs Administration (IRICA), the value of trade between Iran and the members of the SCO (including observer states) reached $28 billion during the last Iranian calendar year (ending 21 March, 2021). That makes China Iran’s single largest trade partner with a trade value of $18.9 billion, almost two thirds of Iran’s total trade with SCO members.

Despite being one of the pivotal members of the organization, Russia ranks fourth in terms of trade volume with Iran, after India ($3.4b) and Afghanistan ($2.3b), recording only $1.6 billion in total trade with the Islamic Republic. According to the Iranian data, Pakistan stands fifth in terms of trade value with Iran within the bloc, while the remaining six countries have a combined trade value of just $569 million.

IRSN

Considering Iran’s total trade volume of $73.89 billion during the last Iranian (1339) calendar year – $11.2 billion lower than the previous year – Tehran’s trade with the SCO countries has already approached nearly 38 percent of its total trade, 26 percent of which was with China alone.

Iran’s other top trade partners are Iraq, UAE, and Turkey respectively, followed by Afghanistan in the same period.

US sanctions

While Iran’s accession to full membership status in the SCO can theoretically boost the country’s trade with other member states, there are significant obstacles which are unlikely to allow Tehran to reap an economic windfall, at least in the short run.

Among Iran’s most difficult obstacles is a series of US-led sanctions against the country’s financial and transportation institutions, in addition to being blacklisted by the Financial Action Task Force (FATF), a global intergovernmental organization tasked with devising standards on combating money laundering and ‘terrorism financing.’ Given the exposure of most countries to US markets and financial networks, and due to the risk of heavy penalties or loss of access to US and European markets, major companies are reluctant to do business with Iran.

The former head of Iran’s Trade Promotion Organization (TPO), Mohammad-Reza Modudi, was quoted by local media earlier this week as saying that many countries, including Iran’s neighbors such as Iraq, “are not willing to do business with Iran out of fear of being sanctioned by American banks or the US Treasury.”

He added that despite Iran’s good production capability, exporting many of the Iranian-made products will not be easy. “We [Iran] have not prepared the needed capacity for these products to be competitive in international markets,” Modudi explained.

Compounding Iran’s lack of focus on the economic benefits of the SCO, is the fact that other Iranian officials view the SCO through a purely political and security lens. Hossein Malaek, Iran’s former ambassador to China, believes that Tehran’s membership in the SCO “has nothing to do with economic issues.”

In an interview with ILNA news agency last month, Malaek was quoted as saying that “Iran’s presence in the Shanghai Agreement will not have any economic aspect, and this cooperation only has security aspects,” and emphasized that “no economic agreement will be signed between Iran and the SCO.”

The political and security benefits of becoming a member state of the Shanghai Cooperation Organization might outweigh other benefits for Iran in the short run. However, if Tehran helps secure the SCO’s energy needs by increasing oil and gas output to its new partners, and facilitates much-needed land access to other markets in West Asia and Europe in the long term, Iran’s economy stands to benefit substantially from its new eastward alignment.

UNC215, an alleged China-linked APT group targets Israel orgs

A China-linked cyber-espionage group has targeted Israeli organizations and government institutions in a campaign that began in January 2019.

The attacks were detailed by cybersecurity firm Mandiant, the state-sponsored hackers used false flags in attempts to disguise themselves as Iran-linked threat actors.

Mandiant experts tracked the group as UNC215, its TTPs overlaps the China-linked APT27 cyberespionage group, but they have no sufficient evidence to say the the two groups are the same

“In early 2019, Mandiant began identifying and responding to intrusions in the Middle East by Chinese espionage group UNC215. These intrusions exploited the Microsoft SharePoint vulnerability CVE-2019-0604 to install web shells and FOCUSFJORD payloads at targets in the Middle East and Central Asia. There are targeting and high level technique overlaps with between UNC215 and APT27, but we do not have sufficient evidence to say that the same actor is responsible for both sets of activity.” reads the report published by Mandiant. “APT27 has not been seen since 2015, and UNC215 is targeting many of the regions that APT27 previously focused on; however, we have not seen direct connection or shared tools, so we are only able to assess this link with low confidence.”

The UNC215 group exploited typically a flaw in Microsoft SharePoint, tracked as CVE-2019-0604, to compromise vulnerable installs.

Once gained initial access to the target infrastructure, the attackers performed an extensive internal network reconnaissance and harvested credentials to conduct additional malicious activities. Experts reported that the attackers also used a non-public network scanner named WHEATSCAN along with custom malware such as FOCUSFJORD web shell and HYPERBRO to spy on internal systems and maintain persistence within the target organizations.

UNC215
The group was very sophisticated and spent a significant effort to fly under the radar, such as removing malware artifacts. The attackers also use to insert in the artifacts foreign language strings as false flags.

“The use of Farsi strings, filepaths containing /Iran/, and web shells publicly associated with Iranian APT groups may have been intended to mislead analysts and suggest an attribution to Iran. Notably, in 2019 the government of Iran accused APT27 of attacking its government networks and released a detection and removal tool for HYPERBRO malware.” continues the report.

In some attacks, UNC215 also used an Iranian hacking tool that was leaked on Telegram in 2019.

The interest of Chinese groups in the Israeli ecosystem is not surprising, Chinese companies have invested billions of dollars into Israeli technology startups.

Chinese organizations are also working on important construction projects in Israel such as the railway between Eilat and Ashdod, a private port at Ashdod, and the port of Haifa.

“The activity detailed in this post demonstrates China’s consistent strategic interest in the Middle East. This cyber espionage activity is happening against the backdrop of China’s multi-billion-dollar investments related to the Belt and Road Initiative (BRI) and its interest in Israeli’s robust technology sector.” concludes the report. “China has conducted numerous intrusion campaigns along the BRI route to monitor potential obstructions—political, economic, and security—and we anticipate that UNC215 will continue targeting governments and organizations involved in these critical infrastructure projects in Israel and the broader Middle East in the near- and mid-term.”

Industrial Zionism – Video from Brendon O’Connell

Brendon O’Connell has his finger on the pulse of the connections between Zionism, the Greater Israel Project, U.S. political theatre, the UN’s Agenda 2030, the Great Reset, Big Data/Artificial Intelligence/Deep Machine Learning and it’s looming surveillance capabilities, censorship and more. He has a YouTube channel still and his Bitchute is straight FIRE Links to his stuff are beneath the two embeds below.


Myself and Sufyan discuss what is going on while the stupid Trump impeachment distraction grinds to an inevitable and stupid predictable halt.

Document on Industrial Zionism:

Brendon O’Connell Links:

Youtube: Brendon O’Connell

Brighteon: Brendon O’Connell

Bitchute: Talpiot