Here’s a good laugh.
Sergei Glazyev — a Kremlin aide who’s known for voicing extremist lines on policy — is out with some of the sillier threats imaginable to the US.
A Kremlin aide said on Tuesday that if the United States were to impose sanctions on Russia over Ukraine, Moscow might be forced to drop the dollar as a reserve currency and refuse to pay off any loans to U.S. banks.
Catch that? Glazyev is literally threatening to put his own companies into default. That’s the opposite of a threat.
“We would find a way not just to reduce our dependency on the United States to zero but to emerge from those sanctions with great benefits for ourselves,” said Kremlin economic aide Sergei Glazyev, noting that Russia could stop using dollars for international transactions.
“An attempt to announce sanctions would end in a crash for the financial system of the United States, which would cause the end of the domination of the United States in the global financial system,” he added.
Again, all you can do is laugh at the notion that Russia has the ability to induce of a crash of the US financial system by getting away from the dollar. Sure, if Russia wants it can conduct transactions in any currency it likes, but that won’t stop Russian counterparties from then exchanging whatever currencies they trade in for the dollar.
Meanwhile, perhaps Glazyev needs a reminder of the declining state of the Russian economy (even before the latest turmoil).
Real gross domestic product growth has already slowed from 5.1 per cent in 2011 to just over 1 per cent in 2013. Car sales fell by 5.5 per cent in 2013, despite the Russian government’s introduction of subsidized auto loans.
If that weren’t bad enough, European demand for natural gas — about30 per cent of which comes from Russia — has been steadily falling since 2010. Additional supply could come on line in the coming years from the U.S. and Israel at the same time as Russia expands its own production capacity. The net effect could be a glut that would lower prices and further reduce Russia’s access to hard currency.
Meanwhile, world oil prices have been flat for years, while Russian production costs have rapidly increased. Some analysts think Putin’s recent adventurism in Ukraine has been an attempt to distract his domestic constituents from these unpleasant economic prospects.
Glazyev probably thinks it sounds good domestically to make these threats and to imagine that they’re of any significance. For everyone else they’re just an amusement.