Say hello to Russian gold and Chinese petroyuan — Pepe Escobar

It was a long time coming, but finally some key lineaments of the multipolar world’s new foundations are being revealed.

On Friday, after a videoconference meeting, the Eurasian Economic Union (EAEU) and China agreed to design the mechanism for an independent international monetary and financial system. The EAEU consists of Russia, Kazakhstan, Kyrgyzstan, Belarus and Armenia, is establishing free trade deals with other Eurasian nations, and is progressively interconnecting with the Chinese Belt and Road Initiative (BRI).

For all practical purposes, the idea comes from Sergei Glazyev, Russia’s foremost independent economist, a former adviser to President Vladimir Putin and the Minister for Integration and Macroeconomics of the Eurasia Economic Commission, the regulatory body of the EAEU.

Glazyev’s central role in devising the new Russian and Eurasian economic/financial strategy has been examined here. He saw the western financial squeeze on Moscow coming light-years before others.

Quite diplomatically, Glazyev attributed the fruition of the idea to “the common challenges and risks associated with the global economic slowdown and restrictive measures against the EAEU states and China.”

Translation: as China is as much a Eurasian power as Russia, they need to coordinate their strategies to bypass the US unipolar system.

The Eurasian system will be based on “a new international currency,” most probably with the yuan as reference, calculated as an index of the national currencies of the participating countries, as well as commodity prices. The first draft will be already discussed by the end of the month....

This is the beginning of a basket-of currencies and commodity based monetary system similar to what John Maynard Keynes recommended at Bretton Woods, which adopted a USD based system with a fixed rate convertibility into gold. Nixon ended the fixed rate aspect in August, 1971, and this was ratified as the new system in 1973. This is the current system that underlies "dollar hegemony," i.e. use of the floating-rate USD as the dominant reserve currency in world trade. The next stage was the weaponization of the USD, and that provoked a reaction that is leading to de-dollarization and other arrangements for international settlement, such as use of the currencies of the counter-parties and alternative cross-border payments systems, such as "cryptocurrencies." This proliferation of options shows that de-dollarization is picking up steam.

Be aware that Pepe Escobar's post, however interesting and important it may be, is not MMT-compliant, so there are some glitches in the analysis about technical issues. Although these may exist, a key factor is that the financial world operates on such a paradigm as a guide for both expectations and behavior.

Finally, this is the key factor to keep in mind and Pepe Escobar gets it exactly right:

Washington’s reductionist, Mackinderesque plan is to manipulate Ukraine as a disposable pawn to go scorched-earth on Russia, and then hit China. Essentially, divide-and-rule to smash not only one but two peer competitors in Eurasia who are advancing in lockstep as comprehensive strategic partners.

The Vineyard of the Saker
Say hello to Russian gold and Chinese petroyuan
Pepe Escobar with the author’s permission and cross-posted with The Cradle
http://thesaker.is/say-hello-to-russian-gold-and-chinese-petroyuan/