Obama And Putin Are Trapped In A Macho Game Of “Chicken” And The Whole World Could Pay The Price

Barack Obama Vladimir PutinThe U.S. government and the Russian government have both been forced into positions where neither one of them can afford to back down.  If Barack Obama backs down, he will be greatly criticized for being “weak” and for having been beaten by Vladimir Putin once again.  If Putin backs down, he will be greatly criticized for being “weak” and for abandoning the Russians that live in Crimea.  In essence, Obama and Putin find themselves trapped in a macho game of “chicken” and critics on both sides stand ready to pounce on the one who backs down.  But this is not just an innocent game of “chicken” from a fifties movie.  This is the real deal, and if nobody backs down the entire world will pay the price.

Leaving aside who is to blame for a moment, it is really frightening to think that we may be approaching the tensest moment in U.S.-Russian relations since the Cuban missile crisis.

There has been much talk about Obama’s “red lines”, but the truth is that Crimea (and in particular the naval base at Sevastopol) is a “red line” for Russia.

There is nothing that Obama could ever do that could force the Russians out of Sevastopol.  They will never, ever willingly give up that naval base.

So what in the world does Obama expect to accomplish by imposing sanctions on Russia?  By treaty, Russia is allowed to have 25,000 troops in Crimea and Russia has not sent troops into the rest of Ukraine.

Economic sanctions are not going to cause Putin to back down.  Instead, they will just cause the Russians to retaliate.

In a letter that he sent to Congress this week, Obama claimed that the Ukrainian crisis is an “unusual and extraordinary threat to the national security and foreign policy of the United States.”

Language like that is going to make it even more difficult for Obama to back down.

On Thursday, Obama announced “visa restrictions” on “those Russians and Ukrainians responsible for the Russian move into Ukraine’s Crimean Peninsula”, and a House panel passed a “symbolic resolution” that condemned Russia for its “occupation” of Crimea.

But those moves are fairly meaningless.  Leaders from both political parties are now pushing for very strong economic sanctions against Russia, and there does not appear to be many members of Congress that intend to stand in the way.

If the U.S. does hit Russia with harsh economic sanctions, what is going to happen?

Is Russia going to back down?

No way.

So let’s just play out the coming moves like a game of chess for a moment…

-The U.S. slaps economic sanctions on Russia.

-Russia seizes the assets of U.S. companies that are doing business in Russia.

-The U.S. seizes Russian assets.

-The Russians refuse to pay their debts to U.S. banks.

-The U.S. government hits Russia with even stronger sanctions.

-Russia starts dumping U.S. debt and encourages other nations to start doing the same.

-The U.S. gets Europe to also hit Russia with economic sanctions.

-Russia cuts off the natural gas to Europe.  As I noted the other day, Russia supplies more than half the natural gas to a bunch of countries in Europe.

-The United States moves troops into western Ukraine.

-Russia starts selling oil for gold or for Russian rubles and encourages other nations to start abandoning the U.S. dollar in international trade.

Of course the order of many of these moves could ultimately turn out to be different, but I think that you can see the nightmare that this game of “chicken” could turn out to be.

And what would be the final result?

Nothing would be resolved, but the global economy would greatly suffer.

What makes all of this even more complicated is that about 60 percent of the people living in Crimea are actually ethnic Russians, and a majority of the population appears to want to leave Ukraine and be reunited with Russia.  The following comes from a Reuters article

Crimea’s parliament voted to join Russia on Thursday and its Moscow-backed government set a referendum on the decision in 10 days’ time in a dramatic escalation of the crisis over the Ukrainian Black Sea peninsula.

The sudden acceleration of moves to bring Crimea, which has an ethnic Russian majority and has effectively been seized by Russian forces, formally under Moscow’s rule came as European Union leaders held an emergency summit groping for ways to pressure Russia to back down and accept mediation.

The Obama administration is calling the upcoming referendum “illegal” and says that it will not respect the will of the Crimean people no matter how the vote turns out.

But the people of Crimea are very serious about this, and of course they never would be pushing for reunification with Russia if they had not gotten approval from Putin…

The decision, which diplomats said could not have been made without Putin’s approval, raised the stakes in the most serious east-west confrontation since the end of the Cold War.

The vice premier of Crimea, home to Russia’s Black Sea Fleet in Sevastopol, said a referendum on the status would take place on March 16. All state property would be “nationalized”, the Russian ruble adopted and Ukrainian troops treated as occupiers and forced to surrender or leave, he said.

There is no way that the U.S. government is going to accept Crimea becoming part of Russia, and there is no way in the world that Russia is going to back down at this point.  Just consider what geopolitical expert Ian Bremmer of the Eurasia Group recently had to say

“Russia is not going to back down from Crimea, irrespective of U.S. pressure. Which means if the U.S. wants to find any resolution here, they’re going to have to find a way to come to terms with that. Now that the Crimean parliament has voted — clearly with Russian assent — we’ll have a referendum … and then further militarization of the peninsula by the Russians.”

What we need is someone with extraordinary diplomatic skills to defuse this situation before it spirals out of control.

Unfortunately, we have Barack Obama, Valerie Jarrett and John Kerry running things.

What a mess.

So why is Ukraine such a big deal anyway?

In a recent article, Peter Farmer explained succinctly why Ukraine is so incredibly important…

The Ukraine is strategically-important for a number of reasons. It sits astride enormous petroleum and natural gas deposits found in the Black Sea region. The nation is also home to an extensive network of liquid natural gas pipelines which crisscross it; control the Ukraine and you control its pipelines – and thus the flow of energy into the hugely-lucrative European market. Western energy firms such as Exxon-Mobil, BP-Amoco and Chevron are locked in competition with the Russian energy giant Gazprom – for control/exploitation of as-yet-undeveloped petroleum deposits not only in the Ukraine, but in neighboring Poland and Romania. Fracking technologies and other new extraction methods have only added urgency to the competition. Income from fossil fuels development is the lifeblood of the new Russian economy. Threats to the regional hegemony of Gazprom are likely to be treated by Putin and Russia with the utmost urgency and seriousness.

The Crimean Peninsula is also home to the Black Sea fleet of the Russian navy, which leases its base at Sevastopol from the Ukrainian government. Since the Black Sea – via the Dardanelles – provides the only warm-water base with access to the Mediterranean Sea – it is of enormous importance to Russia. Its loss would be a crippling blow to the Russian fleet.

Finally, the Ukraine – once known as the “bread basket of Europe” – is home to arguably the finest temperate agricultural region in the world. Its topsoil is widely-acknowledged by agronomists to be among the world’s best. Control the Ukraine and you control the grainery of Europe – and can exert tremendous leverage upon worldwide grain agricultural commodities prices.

If the U.S. insists on playing a game of brinksmanship over Ukraine, the consequences could be disastrous.

For one thing, as I mentioned above, the status of the petrodollar could be greatly threatened.  The following is how Jim Willie is analyzing the situation…

If the Kremlin demands Gold bullion (or even Russian Rubles) for oil payments, then the interventions to subvert the Ruble currency by the London and Wall Street houses will backfire and blow up in the bankster faces. Expect any surplus Rubles would be converted quickly to Gold bullion. If the Chinese demand that they are permitted to pay for oil shipments in Yuan currency, then the entire Petro-Dollar platform will be subjected to sledge hammers and wrecking balls. The new Petro-Yuan defacto standard will have been launched from the Shanghai outpost. If the Saudis curry favor to the Russians and Chinese by accepting non-USDollar payments for oil shipments, then the Petro-Dollar is dead and buried.

In addition, if Russia starts dumping U.S. debt and gets other nations (such as China) to start doing the same, that could create a nightmare scenario for the U.S. financial system very rapidly.

So let us hope and pray that cooler heads prevail.

In my recent article entitled “The Top 12 Signs That The U.S. Economy Is Heading Toward Another Recession“, I discussed how the U.S. economy appears to be hurtling toward another major downturn.

And on Thursday, we learned that office supplies giant Staples has just announced that it is going to close 225 stores.

Even without this major international crisis, the U.S. economy would still be deeply troubled.

But if the United States and Russia do declare “economic war” on each other, all hell could start breaking loose.

Unfortunately, there does not appear to be much hope of anyone backing down at this point.  In an editorial for the Washington Post, Henry Kissinger stated that it “is incompatible with the rules of the existing world order for Russia to annex Crimea.”

Very interesting word choice.

So this is the situation we are facing…

-The U.S. government seems absolutely determined to “punish” Russia until it leaves Crimea.

-Russia is never going to leave Crimea, and has promised to “respond” harshly to any sanctions.

Most Americans are not paying much attention to what is going on in Ukraine, but this is a very, very big deal.

In the end, it could potentially affect the lives of virtually every man, woman and child on the planet.

Russia Threatens To Abandon The U.S. Dollar And Start Dumping U.S. Debt

The Kremlin - Photo by Pavel KazachkovThe Obama administration and the hotheads in Congress are threatening to hit Russia with “economic sanctions” for moving troops into Crimea.  Yes, those sanctions would sting a little bit, but what our politicians should be made aware of is the fact that Russian officials are promising “to respond” if economic sanctions are imposed on them.  As you will read about below, one top Kremlin adviser is even suggesting that Russia could abandon the U.S. dollar and start dumping U.S. debt.  In addition, he is also suggesting that if sanctions are imposed that Russian companies would not repay the debts that they owe U.S. banks.  Needless to say, Russia could do far more economic damage to the United States than the United States could do to Russia.  The U.S. financial system relies on the fact that the rest of the planet is going to use our currency to trade with one another and lend gigantic piles of it back to us at super low interest rates.  If the rest of the world starts changing their behavior, we are going to be in a massive amount of trouble.  Those that believe that the United States is “economically independent” are being quite delusional.

In order for U.S. economic sanctions against Russia to be effective, Europe would also have to get on board.

But that simply is not going to happen.

As I noted yesterday, Russia is the largest exporter of natural gas on the planet.  And Russia is also Europe’s largest supplier of energy.

There is no way that Europe could risk having Russia cut off the gas, especially considering the economic condition that Europe is currently in.

To get an idea of just how incredibly dependent the rest of Europe is on Russian natural gas, check out the chart in this article.  A whole bunch of European nations get more than half their natural gas from Russia.

And according to the Telegraph, even the UK has already completely ruled out economic sanctions…

Europe would be pushed back into recession, Russia into financial meltdown. This is not the sort of self harm Europe is prepared to contemplate right now. Indeed, thanks to the indiscretion of a UK official, who was snapped going into Downing Street with his briefing documents on display for all the world to see, we know this to be the case. Trade and financial sanctions have already been ruled out.

So the U.S. can do whatever it wants, but Europe is not going to be any help.  Perhaps Canada will stand with the U.S., but that will be about it.

On the flip side, the Russian Foreign Ministry is promising “to respond” if the United States does impose economic sanctions…

Russia said on Tuesday that it would retaliate if the United States imposed sanctions over Moscow’s actions in Ukraine.

We will have to respond,” Foreign Ministry spokesman Alexander Lukashevich said in a statement. “As always in such situations, provoked by rash and irresponsible actions by Washington, we stress: this is not our choice.”

So what would the response look like?

Lukashevich did not say, but top Kremlin adviser Sergei Glazyev is suggesting that Russia could abandon the U.S. dollar and refuse to pay back loans to U.S. banks…

“In the instance of sanctions being applied to stated institutions, we will have to declare the impossibility of returning those loans which were given to Russian institutions by U.S. banks,” RIA quoted Glazyev as saying.

“We will have to move into other currencies, create our own settlement system.”

He added: “We have excellent trade and economic relations with our partners in the east and south and we will find a way to reduce to nothing our financial dependence on the United States but even get out of the sanctions with a big profit to ourselves.”

Glazyev also stated that Russia could start dumping U.S. debt and encourage other nations to start doing the same.  The following comes from a Russian news source

“We hold a decent amount of treasury bonds – more than $200 billion – and if the United States dares to freeze accounts of Russian businesses and citizens, we can no longer view America as a reliable partner,” he said. “We will encourage everybody to dump US Treasury bonds, get rid of dollars as an unreliable currency and leave the US market.

Clearly Russian officials understand the economic leverage that they potentially have.  In fact, Glazyev seems fully convinced that Russia could cause “a crash for the financial system of the United States”

“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.”

On that last point Glazyev is perhaps overstating things.

On their own, the Russians could do a considerable amount of damage to the U.S. financial system, but I doubt that they could completely crash it.

However, if much of the rest of the world started following Russia’s lead, then things could get very interesting.

Just yesterday, I wrote about how China has chosen to publicly stand in agreement with Russia on the Ukrainian crisis.

If China also decided to abandon the U.S. dollar and start dumping U.S. debt, it would be an absolute nightmare for the U.S. financial system.

And keep in mind that the Chinese were already starting to dump a bit of U.S. debt even before this latest crisis.  In fact, China dumped nearly 50 billion dollars of U.S. debt in December alone.

The only way that the current bubble of debt-fueled false prosperity in the U.S. can continue is if the rest of the world continues to lend us trillions of dollars at ridiculously low interest rates that are way below the real rate of inflation.

If the rest of the world stops behaving in such an irrational manner, interest rates on U.S. government debt would rise dramatically and that would also mean that interest rates on virtually all other loans throughout our financial system would rise dramatically.

And if that happened, it would be a complete and utter nightmare for our economy.

Unfortunately, most Americans have no understanding of these things.  They just assume that we are “the greatest economy in the world” and that nothing is ever going to threaten that.

Well, the truth is that we are rapidly approaching a “turning point”, and after this bubble of false prosperity pops things will never be the same in the United States again.

The Kremlin - Photo by Pavel Kazachkov

Deal Or No Deal: John Kerry’s Historic Diplomatic “Mistake” Proves That Obama Does Not Want Peace

U.S. Secretary of State John Kerry holds a bilateral meeting with Saudi Foreign Minister Saud al-Faisal at the U.S. Department of State in Washington, D.C., on April 16, 2013.When it comes to diplomacy, Russia is playing chess, Syria is playing checkers and U.S. Secretary of State John Kerry is playing tiddlywinks.  On Monday, Kerry said that Syrian President Bashar al-Assad could avoid having his country bombed into oblivion by turning over “every single bit of his chemical weapons to the international community in the next week.”  Of course Kerry just assumed that Assad would never do such a thing, but the Russians immediately pounced on his statement.  Russian Foreign Minister Sergey Lavrov quickly announced that Russia would encourage Syria to turn over their chemical weapons to international control in exchange for a guarantee that the U.S. will not attack, and subsequently Syrian Foreign Minister Walid al-Muallem stated that his government was prepared for “full cooperation with Russia to remove any pretext for aggression.”  Later on Monday, UN Secretary-General Ban Ki-moon indicated that he is thinking about asking the UN Security Council to support such a deal.

Do you know what they call such a move in chess?

Checkmate.

We were originally told that the primary goal of a U.S. military strike on Syria would be to prevent them from using chemical weapons in the future, and then John Kerry said that Assad could avoid a conflict by giving up all of his chemical weapons.

Well, the Russians and the Syrians have called the bluff.

So does this mean that we will have peace?

Unfortunately, the Obama administration does not seem to want that.  The State Department has already come out and announced that what John Kerry said was a mistake.  They insist that it was a “rhetorical argument” instead of an actual peace proposal.

But why wouldn’t the Obama administration grab such a deal?  The American public does not want this war and neither does Congress at this point, so this could be a way out for Obama.

Wouldn’t getting Assad to give up all of his chemical weapons be a major coup?

And it certainly sounds like Syria wants peace

Syrian Foreign Minister Walid Moallem told reporters in Moscow that his nation “welcomes” a proposal by Russian Foreign Minister Sergey Lavrov during talks on Monday: put Syria’s chemical weapons under international control to avert a U.S. military response over an alleged poison gas attack last month.

“I declare that the Syrian Arab Republic welcomes Russia’s initiative, on the basis that the Syrian leadership cares about the lives of our citizens and the security in our country,” Moallem said. “We are also confident in the wisdom of the Russian government, which is trying to prevent an American aggression against our people.”

We already know that a military strike would not get rid of Assad’s chemical weapons.

So wouldn’t a diplomatic solution that got rid of those weapons be far more preferable?

You would think that would be the case, but the sad truth of the matter is that this was never about Syria’s chemical weapons.  This conflict is about money, religion, a natural gas pipeline, and looking out for the interests of Saudi Arabia, Qatar and Turkey.  The Obama administration is not going to be able to achieve what they really want in Syria without military conflict.

And Obama seems to have developed a real appetite for military action.  In fact, Business Insider has pointed out that the attack on Syria will be the eighth military conflict during Obama’s presidency…

In 2011, America was more or less kicked out of Iraq. By then, Obama had surged troops in Afghanistan and increased cross-border strikes in Pakistan.

He took what was a one-off cruise missile strike in Somalia in early 2008, and expanded it into a concerted military operation against Boko Haram. That’s four.

He also cut a deal with Yemeni President Abd-Rabbu Mansour al-Hadi to conduct counter-terrorism operations and a bombing campaign in Yemen. That’s five.

He initiated a bombing and air campaign in Libya that ended in a boots-on-the-ground situation that was likely much bigger than anyone without a clearance knows. That’s six.

He then aided in French direct operations in Mali by providing surveillance drones and transport. That’s seven.

Now he’s pitching the idea of a cruise missile attack and possibly even a aerial bombing campaign in Syria, one that could conceivably lead to further escalation.

That’s eight.

But of course the Obama administration is promising that the assault on Syria will be very “limited”.  On Monday, John Kerry even went so far as to claim that the attack would be “unbelievably small“.

So precisely how does the launching of hundreds of cruise missiles constitute an “unbelievably small” strike?

I think that John Kerry will end up deeply, deeply regretting that statement.  He is an incompetent bumbler that is making the United States look like a total fool.  Instead of being our top diplomat, he should be mopping the floors in a Dairy Queen somewhere.

When the U.S. attacks Syria, there is a very good chance that we could be starting World War III.

You see, it won’t just be a matter of Syria retaliating against the United States.  Assad put it this way during an interview with Charlie Rose

“You should expect everything. Not necessarily from the government”

So what does Assad mean by that?  Debka gives us a clue…

The Syrian and Hizballah armies Sunday, Sept. 8, finished supplying rockets to dozens of Palestinian groups, some invented ad hoc, and deploying them on the Syrian and Lebanese borders facing Israel, debkafile’s military sources disclose. An array of Katyushas, Grads and Fajr-5s, with ranges of up to 70 kilometers, is now in place. This development prompted the first deployment in the Jerusalem region Sunday night of an Israeli anti-missile Iron Dome battery.

The information reaching Israeli intelligence is that the newly-armed Palestinian groups fully intend targeting the Israeli capital, following the example of Hamas, which aimed missiles from the Gaza Strip at Jerusalem and Tel Aviv in November 2012.
In his interview to PBS’s Charlie Rose Show airing Monday, Bashar Assad spoke of “people aligned to Syria” carrying out “some kind of retaliation” for an American attack.

It now turns out that he intends using pro-Syrian and amorphous Palestinian groups as his instruments of retaliation, while at the same time disavowing responsibility for their actions.

In the south, likeminded Hamas and Jihad Islami groups in the Gaza Strip may try and join the rocket offensive against Israel. It will be hard for them to stand aside and watch, although Egypt’s counterterrorism offensive in Sinai is cutting into their resources.

In addition to what the Palestinians have, the Syrians have approximately 100,000 rockets that they can fire at Israel and Hezbollah has approximately 70,000 rockets that they can fire at Israel.

If thousands of rockets start falling in Israeli cities, and if especially if any of those rockets have unconventional warheads, Israel will respond with absolutely overwhelming force and the number one target will be the city of Damascus.

Then we will have World War III, and the rest of the world will blame the United States and Israel.

Anyone that claims that this upcoming conflict will be good for the U.S. or for Israel is not being very smart.

There is so little that could be gained from a war with Syria and so much that could be lost.

And at this point, the American people are overwhelmingly against attacking Syria.

A brand new CNN poll has found that the American people are opposed to a military strike by a 71 percent to 27 percent margin if Congress does not approve it.

And if the vote was taken right this moment, it would almost certainly fail in the U.S. House of Representatives.  If you doubt this, just check out the chart in this BBC article.

And a different survey has found that the American people are against military action in Syria by a 63 percent to 28 percent margin…

Opposition to U.S. airstrikes against Syria is surging, a USA TODAY/Pew Research Center Poll finds, despite a White House campaign to convince Americans it is the right course ahead.

By more than 2-1, 63%-28%, those surveyed Wednesday through Sunday say they are against U.S. military action against the Syrian regime for its reported use of chemical weapons against civilians. In the past week, support has declined by a percentage point and opposition has swelled by 15 points, compared with a previous Pew Research poll.

Hopefully Obama is listening.

If the American people were told the actual truth, those numbers would probably be even more lopsided.  At least that is what U.S. Representative Justin Amash thinks

If Americans could read classified docs, they’d be even more against action. Obama admn’s public statements are misleading at best.

So will the American people get to see the “evidence” that the Obama administration has been touting?

Of course not.

In fact, a request by the Associated Press to see the evidence has been denied

The Associated Press ran a skeptical piece Sunday about the Obama administration’s public case for military intervention in Syria in response to a reported Aug. 21 chemical attack.

The AP’s Zeina Karam and Kimberly Dozier wrote that “the U.S. government insists it has the intelligence to prove it, but the public has yet to see a single piece of concrete evidence produced by U.S. intelligence — no satellite imagery, no transcripts of Syrian military communications — connecting the government of President Bashar Assad to the alleged chemical weapons attack last month that killed hundreds of people.”

The Obama administration has released videos to make its case, but the AP noted that its requests for additional evidence the government claims to possess have been denied

Instead, we are being told to “trust” Barack Obama and John Kerry as they lead us toward World War III.

And Obama seems absolutely obsessed with making this conflict happen.  According to Politico, an unprecedented media blitz is planned to drum up support for this war…

Obama will tape interviews Monday afternoon with anchors from ABC, CBS and NBC, as well as with PBS, CNN and Fox News, the White House said.

The interviews will be conducted by ABC’s Diane Sawyer, CBS’s Scott Pelley, CNN’s Wolf Blitzer, Fox’s Chris Wallace, NBC’s Brian Williams and PBS’s Gwen Ifill.

The interviews will air that night, ahead of Obama’s Tuesday speech on Syria.

So what do you think?

Should we attack Syria and potentially start World War III?

Please feel free to share what you think by posting a comment below…

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