Below is the translation of an analysis from RIA Novosti based on data from US sources. Commentary and bracketed annotations are by Vince Dhimos.
Doomed to failure: how Donald Trump drove himself into a corner
March 8, 2019
MOSCOW, March 8 - RIA Novosti, Maxim Rubchenko. Trade talks between representatives of the European Commission and the United States began in Washington. The acuteness of the contradictions between the Old and the New World practically obviates any chance of success for the meeting, which puts Donald Trump in a very unpleasant dilemma: either he will come to elections with lost trade wars, or - with a large-scale crisis in the stock market.
From the European Union, EU Trade Commissioner Cecilia Malmström and Secretary General of the European Commission Martin Selmayr are participating in the Washington debate. The United States is represented by Trade Representative Robert Lighthizer and Director of the National Economic Council Larry Kudlow.
According to the official version, the parties plan to discuss the implementation of summer agreements on the normalization of trade between the United States and the European Union. In July 2018, Donald Trump and European Commission President Jean-Claude Juncker agreed that Washington and Brussels "will work on zero tariffs, zero non-tariff barriers and zero subsidies for non-automotive industrial goods."
In addition, the Europeans then promised to increase purchases of American chemical products, medicines and medicines, as well as agricultural products: in particular, soybeans, the import of which has been drastically cut by China.
However, in recent months, the trade contradictions between the Old and New Worlds have been greatly aggravated. In the fall, the US Department of Commerce, at Trump's request, launched a large-scale investigation into whether the supply of European cars was not harmful to the United States.
On February 17, the Department submitted a report to the president. Judging by leaks from the White House, the main conclusion turned out to be quite as expected: the import of cars from Europe to the USA should be reduced.
On February 20, Trump officially announced his intention to introduce in the next three months penalties of up to 25 percent for imports of European-made cars if the EU does not begin negotiations on a new trade agreement.
However, the Europeans, under the pretext that the preparation of a comprehensive transaction will take a very long time, are offering instead a large-scale agreement to conclude a number of agreements on certain industrial goods. Firstly, on free trade in cars and spare parts for them, as well as in metals (aluminium and steel), for which Washington introduced duties last spring.
At the same time, they proposed postponing indefinitely the EU agreement on agricultural products, "because this topic will inevitably require lengthy discussions."
Indeed, there is no consensus on agricultural trade, even within the EU. Particularly tough against the increase in supplies from the United States is France, which has a strong farm lobby.
However, for Donald Trump, the issue of marketing agricultural products is becoming more acute. In early February, American farmers held a demonstration in Washington demanding an end to the trade war, which has led to massive farm bankruptcies.
“You have had farms that ceased operations and went bankrupt because of this trade war,” members of the Farmers for Free Trade movement said in an appeal to Trump.
In this situation, the US president wants the new US-EU trade agreement also to extend to agricultural products. And to directly link the issue of agricultural products with duties on cars.
So, at the end of February, Trump once again stated that the high export figures of European automakers - primarily German automakers "are achieved through dishonest business practices."
Europeans are not ready to give up either. French Secretary of State for the EU, Jean-Baptiste Lemoyne, said that "the European Union is not going to negotiate in the face of threats."
Given the sharpness of the contradictions between Washington and Brussels, no positive results can be expected from the ongoing negotiations. This means that in May, Trump could bring the trade war to a new, more destructive level for both sides. However, it is not likely that he will dare to do it.
No way out
According to experts, the head of the White House has actually driven himself into a trap. On the one hand, he has so often boasted that thanks to his economic policy, the quotes of American stocks have risen to record highs, which in fact made him a hostage to the stock market indices.
According to Bloomberg, citing sources at the White House, Trump considers the good dynamics of the US stock market a key condition for his re-election in 2020. And for the sake of keeping stock indices from collapsing, he is even ready to make concessions in trade negotiations with China.
It seems that he will have to do likewise in the dialogue with Brussels, because the EU is already preparing a response to possible car duties. As reported by the media, European officials have compiled a list of American goods subject to retaliatory duties, including American cars, chemicals, coal, as well as products of Xerox, Caterpillar, Samsonite and other trade items, with a total volume of imports to Europe of about 20 billion euros (22.7 billion dollars).
On this news, quotes for Xerox and Caterpillar fell by 3-4 percent. If it comes to real duties, the fall will be measured in double digits. And this may well become the trigger of a new stock market crisis, with many analysts saying such a crisis is inevitable either this year or next.
For Trump, associating his re-election in 2020 with the situation in the stock market, such a scenario is highly undesirable. But, on the other hand, neither can he make serious concessions in trade matters.
Last week, the US Customs Administration published the latest foreign trade data. The main result: in spite of all duties and economic wars, the trade deficit by the end of last year had grown to a record 621 billion dollars since the global financial crisis. This is 12 percent more than in 2017, before the outbreak of trade wars. [see this report]
The reasons for the increase in the steel deficit are, on the one hand, the decline in exports (mainly agricultural products), and on the other - the growth of imports due to the increase in purchases of foreign food products, consumer goods and computer equipment.
In early March, the London Center for Economic Policy Research (CEPR) published its assessment of the loss to the US economy from Trump's trade wars. [original CEPR report here]
The authors of the report, Mary Amiti, Assistant Vice President of the Federal Reserve Bank of New York; Stephen Redding, Professor at Princeton University, and David Weinstein, professor at Columbia University, calculate that the wars have already cost the country and its citizens $19.2 billion.
The Americans paid $12.3 billion to the US government in the form of additional tariffs and lost $6.9 billion as a result of the rise in price of some goods due to the local shortages caused by the reduction in deliveries from abroad.
These results also fail to reinforce Trump’s campaign platform. Therefore, in the trade debates with the European Union, he can only repeat the tactics used in the disputes with China: constantly announce successful negotiations and promise the conclusion of another trade deal profitable to the United States "in a month." And then a month later, and then another month later, and so on until right before the very presidential elections.
Record trade deficit
Trade war failing for Trump
No cutting expenses. Pentagon wants MORE obsolete ships
The macroeconomic implications of a global trade war
Vince Dhimos on Quora:
Question in Spanish: How will the current situation in Venezuela inspire a new generation of better-prepared politicians?
Translation of my answer in Spanish:
This question leads to other questions. It mentions “preparing politicians.” But what does that mean? Preparing them for what?
We can easily say that Juan Guaido is well prepared for his task. But what is his task? I believe his task is simply to help overthrow an elected president, Maduro, and replace him with an unelected puppet of the US. He was trained for this job at the George Washington University in Washington, DC, and at other venues as well.
The really relevant question we should be asking ourselves is this: Does Venezuela need a US puppet or does it need an independent leader who is concerned about the interests of the Venezuelan people?
It seems that the concept of “sovereignty” has been ignored throughout the Western world, and this is due to the fact that the US media, political, business and banking classes dominate the thinking of the entire West, including Latin America.
The US, through agencies like the CIA and CIA spinoffs like the NED (National Endowment for Democracy) and USAID, for example, has brought ruinous and violent coups to countries throughout the world.
The example of Ukraine is instructional. Various NGOs from the US and its allies, such as the NED, USAID, a foundation of George Soros, European officials, US Senator John McCain, and representatives of the State Department, notably Assistant Secretary of State Victoria Nuland, went to Kiev in 2014 and started a violent illegal coup against a democratically elected president. After they had succeeded in removing this legitimate president from power, in violation of the Ukrainian constitution and the UN charter, Nuland personally chose the next president, a US puppet named Arseniy Yatsenyuk.
Before 2014, Ukraine had had good relations with Russia, which built factories that hired Ukrainians, giving them decent salaries. Russia also had laid a gas pipeline through Ukraine that enabled the country to buy cheap gas and earn money from the gas transit to Western Europe.
Thanks to the above-described US meddling and to the anti-Russian propaganda from the US, Ukraine turned against Russia, refused to pay for the gas supplied from Russia and slandered Russia and its government in its media. The Ukraine military and paramilitaries including fascist groups whose predecessors had cooperated with Hitler in the Third Reich, attacked and shelled the Donbass region that refused to be part of the new puppet government. New laws were drafted to ban the use of Russian in regions where that language was dominant, which led to Crimea breaking away and acceding to Russia. Eventually, Russia became disgusted with these dirty dealings and stopped supplying the gas. Ukraine soon became one of the most corrupt states in Europe. Its refusal to cooperate with Russia eventually led to an economic crisis, because neither the US nor Western Europe kept their promises to help the country restore its economy. Today’s Ukrainian government can be unequivocally called a fraud upon the Ukrainian people, of whom, according to the Atlantic Council, only 5 or 6% are prepared to vote for him in the upcoming elections.
In 2018, the IMF reported that Ukraine had become the poorest country in Europe.
That is the consequence of US-instigated regime change, the disastrous management by US-approved officials and an irrational hatred of Russia that spread throughout Western Ukraine (the East is pro-Russian and is often shelled by the Ukrainian army, killing many civilians and destroying their homes).
I said that Juan Guaido is a US puppet. He was trained in the US to organize anti-government demonstrations and to sabotage legitimate governments on behalf of the US.
If Venezuela wants to follow the example of Ukraine, as described above, then they may well suffer the same fate as Ukraine. Maduro is not perfect, but there is something the Venezuelans need to know, and that is, that the Chinese and Russians have both signed important contracts with Venezuela to build oil refineries and have lent billions of dollars to Venezuela as the first steps toward lifting the country out of poverty. These contracts were supposed to go into effect soon, but the US, learning of this, decided to intervene so that Venezuela could not benefit from them. The US elites have also spread strong propaganda against the current Venezuelan government and against China and Russia. But those countries are not like the US, which has killed millions of civilians in illegal, genocidal wars all over the world since WW II and has destroyed legitimate governments, replacing them with governments loyal to the US but working against the interests of the people. As a consequence of this US aggression, Iraq, Syria, Libya, Kosovo, Afghanistan and other regions have been plunged into chaos, terrorism and poverty. Not one of these countries has benefitted one iota from US “help.” If Venezuela actually benefitted from the proposed US intervention, it would be the first one ever.
So if the person who wrote this question wants to have politicians who are prepared to work for the people, then these politicians must be prepared to oppose the malicious actions of US agents who want to steal their resources, as John Bolton admitted the US wants to do.
Here is an important analysis of Juan Guaidó and his training to betray his people:
From Mint Press:
Below is our translation of an article from the Russian site infox.ru with commentary and annotations in [square brackets] by Vince Dhimos.
You may be mystified by this part of the translation:
“Rosneft will continue to supply petroleum products to the state-owned company PDVSA, despite the sanctions imposed on our country.”
The reason why a Russian oil company would be supplying petroleum products to a Venezuelan oil company is that Venezuela needs naphtha to thin its heavy viscous oil to make it pumpable. Otherwise it could not be further transported and/or refined for export. Until now Venezuela had acquired this naphtha from the Gulf coast in the US, but since the US slapped sanctions on the country in a cynical attempt to hurt the people, it is refusing to deal with the US, which will now lose this income. Russia, China, Europe and others are making sanctions a thing of the past. Consider the special purpose vehicle INSTEX, a new development in Europe designed to bypass the US-controlled SWIFT system that has been used to enforce US sanctions. This new system works just like SWIFT but is beyond US control and will be used to transfer payments to sanctioned countries like Iran, making it difficult for the US even to know what amounts of money – in euros, yuan, roubles, or other non-dollar currencies – have been transferred and from whom to whom.
Now we find that Russia (along with China) is creating a system of oil trade with Venezuela that will also bypass sanctions. Trump is a dinosaur still living in a monopolar world that is disappearing like an ice floe under a polar bear’s feet with the spring thaw. He may not find out until it is too late, and once he does, he will blame someone else and his faithful will bleat about 3-D chess and once again proclaim him a master, even as the repo man tows away the new car.
If China and Russia succeed in wresting control of Venezuelan oil from the Yanquis, some of the unexpected consequences for Trump that normal people can easily foresee will include major losses for the refineries in the Gulf that were designed specifically to process the viscous Venezuelan crude, the complete loss of oil from Venezuela for the US, which will now go to China and Russia, and a likely effect on oil prices, which will rise at first due to the initial scarcity of crude in the world and then taper off as the Russians and Chinese begin to sell or consume the Venezuelan crude. The US based Venezuelan companies will no longer receive oil for sale in the US, also impacting gasoline prices at the pump. This is typical of the brash approach of the Trump administration to take steps without stopping to consider the consequences. Like the tariffs hastily slapped on the Chinese that led to counter-tariffs on US soybeans and pork, leaving US farmers in a precarious position from which there is no exit except subsidies paid for by the taxpayer, or his thoughtless support for shale oil and gas extracted by the extravagantly expensive hydraulic fracturing method, leaving little or no profit margin from the sale of the product. In fact, it all is reminiscent of how CEO Trump had always done business, thoughtlessly and callously investing other people’s money in projects without doing due research diligence, and when they didn’t pan out, then declaring bankruptcy and letting someone else pay the bills. This is what psychologists call a behaviour pattern, which allows people to be predicted and from which there is generally no remedy for the patient addicted to the behaviour. Sad for the patient and his family and acquaintances but potentially disastrous for a nation in thrall to such a personality.
We need to recall that the Chinese and Russians had already concluded contracts with Venezuela that could have been expected to pull the economy out of its crisis. The Trump administration must have known this when it engineered the attempted coup and encouraged its puppet Guaidó to make his grab for power. This is the signature style of US-led coups and interventions. It is reminiscent of how Trump quickly launched his Tomahawk strike on the Syrian city of Douma even though there was as yet no clear determination that an attack had even actually occurred or who was behind it, and even though the OPCW already had a delegation in Syria prepared to enter the city the day before the attack to make these determinations. The motive clearly was not to punish Assad for his unproved use of chemical weapons but rather to gain political points for Trump and contribute in some small way toward a possible regime change – but only to please US allies Israel and Saudi Arabia and US Neocons hysterically bleating for war.
Maduro and Rosneft outwit Trump
10 Feb 2019
Russia was able to circumvent the financial and trade restrictions that were imposed against Venezuela by the United States due to the ongoing political opposition in the country. Russian banks will deposit all the proceeds from the sale of oil, and Russian oil companies will sell it.
Rosneft will continue to supply petroleum products [see above] to the state-owned company PDVSA, despite the sanctions imposed on our country. In turn, Russia will receive Venezuelan oil. US sanctions against the regime of Nicolas Maduro were aimed at depriving him of financial support. The main, if not the only, income to the country comes from the oil state company PDVSA, whose accounts and US assets have been blocked. The amount of blocked funds is approximately $ 7 billion.
At the same time, American companies have the opportunity to continue to buy oil in the country, but all the profits from these operations have been accumulated in a blocked account. Restricted access to this account was open only the chairman of the national assembly of Venezuela, Juan Guaidó, whom the United States recognized as the transition president of the country. We note that Rosneft alone has 5 joint ventures in Venezuela and PDVSA owns more than 50% of each. In the event the US scheme had gone into effect, then analysts say the financial and operational flexibility of all companies was subjected to considerable checks. But, as we see, Rosneft has removed the oil turnover from US control.
This is not all good news for Nicolas Maduro and bad news for his opponent Juan Guaidó. PDVSA transferred the accounts of all its joint ventures to the Russian Gazprombank. This is reported by Reuters, citing its sources. Venezuela has joint ventures not only with Russia, but also with China, which has invested tens of billions of dollars in the country's economy and oil production. PDVSA demanded that all of its partners, Equinor, Chevron and Total and others, decide whether to continue cooperating in the development of the Orinoco oil basin. And, if they should continue, then the proceeds must be deposited in the accounts at Gazprombank. It should be noted that Gazprombank itself does not risk falling under US sanctions, as it has already been under them since the summer of 2014.
For the regime of Nicolás Maduro, US sanctions have indeed become a real problem. In fact, because of them, he could not sell oil on the market, but only accumulate it in oil storage tanks. It is unlikely that Maduro himself would desire to sell oil, since each barrel sold would go to the support of his political opponents. But now, as we see, a solution has been found. Note that this scheme, while allowing Venezuela to temporarily duck US sanctions, will undoubtedly bring on the wrath of the American punitive machine. However, in this case it is not clear what remedies they could undertake. Certainly the United States will not dare to attack Russian tankers. And even the Americans cannot afford to impose sanctions twice on Gazprombank.
Recall that more and more countries recognize the speaker of the National Assembly of Venezuela, Juan Guaidó, as the “transition president” of the country. Maduro, however, meanwhile, confidently wields the levers of power in the country. And, most importantly, he has not let oil production escape his control, and the Venezuelan military has not yet begun to go over to the side of the opposition. All of this allows the situation in the country to remain in limbo indefinitely.
BLAMING MADURO FOR THE ECONOMIC SABOTAGE OF VENEZUELA (A DETAILED ANALYSIS OF VENEZUELAN ECONOMIC HISTORY)
“…the media loves to cry crocodile tears about the impact of Venezuela’s economic crisis, but they absolutely hate if you bring up that Trump has obviously, deliberately, made the situation much worse with the intention of making the government fall. I had a lively exchange recently with this journalist Evan Dyer of the CBC. They really hate when you bring that up because they don’t like to accept responsibility for what their propaganda campaign has enabled the United States to do to Venezuela.”
BEGIN ARTICLE FROM venezuelanalysis.com:
Fighting the Media’s Propaganda Campaign Against Venezuela’s Government
Joe Emersberger took part in the latest monthly webinar organized by the Alliance for Global Justice, and he talked about the media propaganda campaign against Venezuela.
Below is a slightly edited (and rushed) transcript of a talk I was asked to give. It was part of the webinar series organized by the Venezuela Solidarity Group and the Alliance for Global Justice. There were some minor technical glitches with the sound level but the recording is here.
Ok we’re here to talk about fighting back against the international media’s economic war on Venezuela. That’s a tall order because they have been at it for 17 years. It’s been 17 years of this very impressive propaganda campaign that’s been out to demonize and vilify the Venezuelan government. It started back in 2001 when relations soured between Venezuela and the United States.
The stakes are very high in this because in our young century alone the Unites States and its allies have intervened in many countries and cost well over a million lives. Consider Iraq alone were probably about a million lives were lost due to a US war of aggression. If you also consider Libya, Afghanistan, Yemen, Haiti – the death toll is just astounding. That’s again, just in the twenty first century.
So to jump right into Venezuela about fighting back, it’s our responsibility to fight back as best we can.
In 1999 Hugo Chavez first took office, he won the election in 1998 because of a very huge failure of capitalism and of course that’s something you don’t hear. In fact, how often do you hear the opposite, that Chavez was elected when Venezuela was the richest country in Latin America? It was a prosperous place. Everything was wonderful but then the Chavistas came into power and turned everything around and destroyed everything. In fact, in 1999, despite being a major oil exporter for several decades (and having governments that had good relations with the United States) Venezuela had a poverty rate of about 50%. It had more than twice the child mortality rate of countries Cuba and Costa Rica that did not have that kind of natural wealth.
By 2001 there had been a brief honeymoon period between the United States and the Chavez government because so many times in Latin American history politicians have been elected advocating a left platform but then did the opposite once in power. By 2001 they figured out that Chavez was not going to be like that, that he was not a phony. It was also alarming to them that he was going to have an independent stance on foreign policy. One key point when the relationship sourced was when Chavez came out very strongly against the US invasion of Afghanistan – obviously for excellent reasons. Just consider that the US is still in Afghanistan today. At one point Chavez had to throw a US official out of his office who was being disrespectful towards him over that. That’s when the whole vilification campaign took off. Its intention…and it has been very successful – is to remove any moral and legal constraints on what US and its allies do to Venezuela.
So in 2002 there were two major events took place that were extremely important. One is the military coup of April 2002 in which Pedro Carmona, head of the largest business federation in Venezuela, takes over. The media constantly tries to write out of history – how obvious US support and involvement in the coup was.
The Bush administration at the time made it obvious that they welcomed the coup. They repeated word for word the story that Carmona was trying to sell about why the coup happened and how it happened. The New York Times editorial board – and they should never be allowed to live this down, very important when it comes to fighting back against the propaganda campaign – they came out with editorial that was even more uninhibited in praising the coup than the Bush administration. They depicted it as a victory for democracy, the “would be dictator” had been deposed, a “respected” business leader was now in power. The IMF immediately came out with a statement while Carmona was in power saying they were ready to help in any way they could. The IMF spokesman who said that was also a former US State Dept. and US Treasury Dept official.
Just those things alone show that the United States and the whole establishment behind it was ending this enormous green light to the perpetrators of the coup. Even though that coup failed, all of that sends a message to any potential coup perpetrators that if you pull it off we’ll back you 100%. We will be behind you financially, politically and obviously with the media we’ll be propagandistically behind you. That’s before you consider the fact that the U.S. State Department’s Office of Inspector General concluded that the US had funded groups involved with the coup – and they were funded before and after it took place.
To push back against the media campaign we cannot let that history be buried because the media constantly tries to bury that. The Guardian, for instance, I just got them to partially correct an article recently that depicted US involvement in the coup as a lie that Chavez had spread.
Again because of this giant green light that is sent to anyone who want to violently overthrow the government in Venezuela, several months later [after the 2002 coup] there was sabotage of the state oil company. Those two things combined – the sabotage of the oil industry and the coup – they caused a loss of about 20% of GDP. At that time (not today because of the current depression they are going through) but at the time that was the largest recession they had had in decades. It also spiked unemployment up to 14% and it spiked poverty to over 60%. Poverty had been 50% in 1999 when Chavez first took office. It then began to drop but then because of the coup and the “oil strike” it immediately spiked to over 60%.
The very important legacy that comes from all that is that it saddles Venezuela with an opposition that is largely insurrectionary. It knows it has the backing of the most powerful country in the world and its whole propaganda apparatus (allied governments, NGOs, media). It knows it will be backed to take power any way it can, through any amount of violence.
There is another important impact that is hardly ever discussed though Mark Weisbrot brought it up in an article, maybe a few articles, the fact that Chavez had changed the exchange rate system a few months before the coup took place. He went to “floating the currency” – the exchange rate was set by supply and demand. That actually worked despite the coup but then it was called off during the “oil strike”. They reverted back to a fixed exchange rate system which is what they stuck with from then on. That was the Achilles Heel of their economic policies. A few months before Chavez passed away that system blew up on them as I’ll explain.
That’s hugely important because that [exchange rate] system that Chavez had implemented but then retreated from, that system is what Bolivia has used very successfully under Evo Morales. It’s a system that would have helped them tremendously. In fact in 2010, Weisbrot again recommended that they switch away from that system. About 99% of the time Chavez was in office the fixed exchange rate system was causing problems but they were not very big.
The problem with a fixed exchange rate system is that it tends to create a black market. What happens is the government supplies “cheap dollars” to businesses [dollars sold at a very favorable exchange rate in local currency] to provide goods and services, but there are always some people who will take those dollars and flip them on the black market to make an enormous profit. This wasn’t a huge problem [for years] but then a few months before Chavez passed away the government cut back on the dollars it was supplying to private industry. That caused a spike in the activity in the black market. That caused an [upward] spiral in the value of the black market [exchange rate]. The problem with that is to the extent importers go to the black market for dollars, those importers then pass along their increased costs to the rest of the Venezuelan economy. One point too is that it is the highest cost producers who can stay in business who set the price, so even if they are a small percentage of the businesses who go to the black market for dollars they end up setting the price….so with the costs of imports going up that drives inflation. The government is losing money to the black market [for dollars] and tries to finance its losses by printing more local currency. But as people see their local currency drop in value, more and more they see the US dollar as a store of value. That causes them to run to the black market [for dollars] even more. You get this vicious circle going on where the black market [exchange rate] drives up inflation and inflation drives up the black market [exchange rate].
It [started] to get out of control a few months before Chavez passed away, but it really got out of hand during Maduro’s time in office. There were suggestions made from economists across the board, as Weisbrot said in 2010, to “float the currency”. There are probably many reasons why the Maduro government didn’t do it, but one is that they are stuck with an insurrectionary opposition, an opposition that knows it will be supported if it violently seizes power. That’s going to make the government apprehensive about doing something that isn’t necessarily popular with its own base, isn’t necessarily supported by people within its own ranks [in the administration], so it wasn’t done. Then oil prices collapse in 2014. It wasn’t really until about October of 2014 that the media started to talk about the major price decline and it was a sustained price decline that nobody predicted. Prices really stayed down for a long time. That made the whole black market exchange rate–inflation spiral that I talked about before get much worse. Now the government has fewer dollars [from oil revenues] so there is more scarcity of dollars. When something gets scarce its price goes up, so the black market rate for dollars increased even more… If the rational of the Maduro government was “let’s wait for better conditions before we change our exchange rate system” the conditions didn’t get better they got worse. They also had violent protests right after Maduro was [first] elected [in 2013] –outrageous protests disputing the results of the election which there was no basis for. Then they had another series of violent protests in 2014 shortly after Maduro and his allies had won a pretty resounding and demoralizing (from standpoint of opposition) victory in municipal elections, then again in 2017.
So with these economic problems and violent protests the propaganda campaigns against the government really went to another level. Then Obama implements so called targeted sanctions in 2015. The whole idea of targeted sanctions is pretty clever. They say “we’re not targeting the whole economy just those bad officials who did human rights abuses”. It caused a lot of problems for the economy. Alfred De Zayas sent me an op-ed he tried to get published in the media but it was rejected. He’s a UN investigator who did extensive investigation in Venezuela. He documented how the Colombia was blocking the sale of medicines to Venezuela. There was a lot of stuff like that going on because Obama is sending the message that “These are the bad guys. We are targeting them. They are on our hit list” so that encourages others to do the same knowing they are going to get away with it. They are just doing what the big superpower is doing. But also it puts fear into people who want to deal with Venezuela. They will worry about getting hit with legal trouble down the road, or just with reputational problems as a result of getting attacked in the media for dealing with Venezuela.
Another thing to mention about Obama’s sanctions of course is that they are illegal – under the UN charter, the OAS charter and even under US law. It’s pretty interesting how the media dealt with that. To implement sanctions Obama had to officially declare Venezuela an “extraordinary threat to the national security of the United States”. That’s absolutely ludicrous, but that’s the official basis for the sanctions, a total lie. But the media spun that as a “formality” that we don’t have to worry about – an outrageous lie is just a “formality”.
Then of course Trump took it to another level. With Obama’s sanctions the impact was a bit unclear and hard to calculate, hard to quantify. Things were going on but it was harder to nail down, but then Trump did something very extreme. He implemented financial sanctions on Venezuela which made it illegal basically for Venezuela to get any financing from the US financial system. That was devastating for two reasons. One is that all of Venezuela’s foreign currency dominated bonds that are outstanding are governed under New York state law. That alone gives the United States tremendous leverage against Venezuela if it is freed from any moral and legal constraints on what they can do. That’s what the propaganda campaign against Venezuela is all about. The other reason [Trump’s financial sanctions] were so devastating was because one of Venezuela’s major assets is a company named CITGO which is based in Texas. The sanctions Trump introduced in August of 2017 also made it illegal for CITGO to send profits and dividends back to Venezuela. Those had been averaging roughly $1 billion per year even during the crisis.
Those things made the sanctions very devastating. They also made it easy to calculate and determine the impact on the economy… Francisco Rodriguez wrote a piece in which he pointed out that from the moment Trump imposed financial sanctions sphere was a drastic decline in Venezuelan oil production.
You can see from the graph. And this comes from Francisco Rodriguez, a Venezuelan economist. He is with the opposition. He was the key economic advisor to Henri Falcon, the main opposition presidential candidate who ran against Nicolas Maduro in May. The blue line is Venezuela’s oil productions and the red line is Colombia’s. In January of 2016 when oil prices hit about $30 a barrel, their lowest point in about a decade or more, there was drop in investment, which makes sense, and therefore a drop in production. You can see Colombia and Venezuela following a similar pattern from that time. But then you see when Trump’s financial sanctions come in Venezuela’s oil production falls drastically – just falls through the floor – while Colombia’s stabilizes. So with that information I was able to do a calculation of how much revenue Venezuela lost as a result of Trump’s financial sanctions.
And by the way, a few things about that. One is I did not assume that without the sanctions Venezuela’s oil production would also have stabilized. I assumed it would have continued to go down but at the same rate it was going down before which corresponds to the worst case estimates [forecasts] that had been made. I compared that to what actually happened because of Trump’s sanctions. The value I came up [difference between the two cases] was $6 billion. I passed these calculations by Francisco Rodriguez and Mark Weisbrot and they both basically agreed that they were valid.
So $6 billion, to put that in perspective, right now that is equivalent to about 6% of Venezuela’s GDP. Most Latin American countries spend about %7 of GDP (that’s combined public and private spending) on health care. In Canada we spend 10% of GDP combined public and private spending on heath care, so 6% of GDP for any country at any time is a massive hit to take in a year. And for Venezuela that is especially true because it is in the middle of this horrible crisis. It’s not able to do what countries can do under normal situations if they get hit with a $6 billion dollar bill. They say “ok we’ll go to financial markets, raise money and we’ll really just have to worry about paying off interest. When the principal come due we’ll just issue more bonds and worry about the interest.“ Venezuela can’t do that – largely because of Trumps sanctions. It’s illegal for them to raise money in the US financial system.
One last point I want to make is that the media loves to cry crocodile tears about the impact of Venezuela’s economic crisis, but they absolutely hate if you bring up that Trump has obviously, deliberately, made the situation much worse with the intention of making the government fall. I had a lively exchange recently with this journalist Evan Dyer of the CBC. They really hate when you bring that up because they don’t like to accept responsibility for what their propaganda campaign has enabled the United States to do to Venezuela.
There is one article I have to mention quickly. It was by Stephanie Nolen of the [Toronto] Globe and Mail. It’s actually from a while ago, I think from a year or so ago. It is striking because these journalists, some of them, they identify so completely with US goals and objectives (and those of their allies) and sometimes they are honest, inadvertently, because they don’t understand how immoral what they are saying is. She wrote this very long article about Venezuela and it had the standard distortions, totally biased against Maduro’s government. But near the end show wrote (and I quote) “The opposition’s chief hope is that Maduro regime finally will go completely broke. When the food runs out entirely, the thinking goes, the streets will fill and people won’t go home until he leaves.”
So she is saying bluntly that United States and its allies back the side that wants to starve the country into rebellion. There is no reflection on the incredible immorality of that. When you consider what the US and its allies have done to countries all over the world it really isn’t surprising. Like I said at the beginning of this talk, it is a very dangerous propaganda system and it’s our responsibility to combat it as best we can.
QUESTION: Can you speak to the recent change in currency used for oil sales?
ANSWER: It looks like has at least unified it exchange system. It used to have a multi rate system. Oil sales are now officially based on the Petro but it remains to be seen if that eventually inspires any confidence. One recent development that is important. I mentioned that people turn to the black market for dollars because want a store of value. It seems like that is no longer that case. It seems like the hyperinflation, for now, is running out of steam [slowing down], but it remains to be seen if that will continue. The big question is if they can get significant financing, I would hope, from China or Russia to offset the impact of US sanctions.
QUESTION: Do you see similarities with the US strategy for regime change in Nicaragua?
ANSWER: One major similarity I see is just an insurrectionary opposition that would never be tolerated in the United States, Canada or the EU. Killing police officers, blocking roads, trying to strangle the economy. That just isn’t tolerated. If you have public sector workers in Canada go on strike for a few weeks the courts will be forcing them back to work within weeks and the union leaders will be facing jail terms and massive fines. It would never be tolerated.
One way to see that is the Russiagate hysteria. There has been so much hysteria over supposed Russian meddling in the US electoral process through some hacking or leaking of emails. There is no comparison with what the United States has done in Nicaragua and in Venezuela. That level of interference, openly supporting, even if it was just propaganda support for protesters in the streets killing people, damaging property, doing major harm to the economy. That really would be an act of war. Just consider that the whole Russiagate thing in the United States has been called the equivalent to Pearl Harbor.
They support violent insurrection in other countries. They kind of activity isn’t “dissent”. That is not what we’d call it if it happened in our own countries.
QUESTION: Has the government been hampered by violent protests in plan to confiscation and fining companies for excessive profits?
ANSWER: I think the main thing that hampered the government throughout is that it hasn’t been able to bring down the black market exchange rate. One thing about the black market exchange rate is that it is a small percentage of importers who use it – from 2013 to 2017 – but because of the way supply and demand works they end being the ones who set the price. So even the businesses who are getting the dollars at preferential rate are not engaging in illegal speculation themselves they can sit back and get a huge profit. That’s been thing the government has not been able to control.
NOTE: I should have added that other efforts to clamp down on business – price controls, fines etc,,- are ineffective a long as black market rate for dollar doesn’t come down. People will sell price controlled products on a black market for goods for example as long as prices are being driven by a black market in dollars.
QUESTION: Can you comment on early impacts of Maduro’s monetary reform on inflation?
ANSWER: It looks like the dollar is no longer seen [as much] as a store of value. Things have basically improved. I read Francisco Rodriguez [the opposition economist I mentioned before] his latest says that as of right now there has been improvement – hyperinflation running out of steam – and the whole idea of going to the black market for a store of value seems to be going away because of recent changes that have been made. There has been some improvement. You can also see that from Datanalisis – an opposition-aligned pollster – they show an increase in support for Maduro recently and decrease in support for core opposition leaders.
There seems to be some improvement but in the background you have some dangerous developments. Just look at Brazil. The US still has other cards it can play, not just a military attack, but even an oil embargo. They could do a lot of crazy things so it is still very dangerous.
There has been some improvement but I don’t know if it is sustainable.
QUESTION: Will Venezuela be involved in the “belt and Road” initiative with China?
ANSWER: I honestly don’t know. I wish China would help Venezuela more. Some people in the audience probably know more about this than I do. I think that will be crucial if Venezuela can get more help from some of the countries that Trump is provoking. China and Russia are two obvious countries but there are many others. Russia is interesting because Trump has been hammered so much for being “Putin’s puppet” but his [Trump’s] recent withdrawal from an important arms control treaty shows that he has inflamed tensions with Russia – and is surrounded by people who want to inflame tensions like John Bolton. As the United States provokes other countries maybe that will open up opportunities for Venezuela. I hope so.
QUESTION: How do you have predictions and comments the Venezuelan [municipal] elections in December?
ANSWER: Surprisingly, it seems for now Maduro ‘s allies are likely to do well in those elections. The US-backed opposition is very divided. None of their main leaders have high levels of support, even according to an opposition-aligned pollster like Datanalisis. I think for the short term Maduro’s allies are likely to do very well in any elections.
QUESTION: Why is the US and Canadian media so biased against Venezuela and what is the best way to combat it?
ANSWER: I think the best way is just to point out the facts and arguments that they ignore. Just one I mentioned – that in 1999 Venezuela has a poverty rate of 50%. That’s when Chavez first takes office, yet the media portrays Venezuela as this rich country that was great until Chavez came along….You just have to push back and keep alive the history they want to bury like US support for the coup and all those things.
As for why, the Canadian governments are ideologically tied to the United States. They have the same world view. They think they have the right to determine who is a democracy and who isn’t. Who gets to be supported and who doesn’t, and they have very little regard for human life. Glenn Greenwald has this line that Saudi Arabia is “one stop shopping for exposing Western hypocrisy”. Canada continues to sell arms to Saudi Arabia and has this $15 billion deal it refuses to cancel. That’s $15 billion over 15 years so it’s $1 billion per year. For a country like Canada that is not very much, but it is committed to arming the most brutal and backward government on earth. They [Canadian government] just aren’t civilized. They don’t regard human life very highly and they are willing to do terrible things all over the world because the media supports that.
QUESTION: What are some crazy things the US might do [against Venezuela]?
ANSWER: Trump has made it obvious. He is constantly threatening. Even now OAS chief Almagro was saying recently “we mustn’t rule out military intervention”. The new Colombian president (or some official) just said if Brazil were to take military action against Venezuelan then Colombia would be behind them. Pompeo and Tillerson back when he was with the [Trump] government have been openly (really unprecedented) in encouraging – basically saying to the [Venezuelan] military “come on overthrow the government and we’ll be behind you”.
By the way, I asked Amnesty International if they would denounce Trump’s economic sanctions against Venezuela and even if they would denounce the remarks that Trump and his officials have been making to encourage a military coup in Venezuela and Amnesty refused. The big NGOs are on board with crushing whoever the empire wants crushed.
QUESTION: Who do your recommend we follow for news on Venezuela?
ANSWER: Venezuelanalysis.com. I think they are the best source. They are base din Venezuela doing the work that needs to be done.
QUESTION: Are the NGOs in Venezuela receiving NED money as in Nicaragua?
ANSWER: That’s been exposed for a long time – from USAID, from NED [Vince: National Endowment for Democracy, along with US AID and a Soros foundation, were instrumental in the violent and illegal Maidan coup in Ukraine] and from Miami where there is a very extremist sector of the Venezuela opposition. It is very well known.
Note by Vince: Remember that the US in 2014 spread propaganda painting the legitimately elected Ukraine government as corrupt and self-serving, just as it portrays Maduro now. That was in 2014. Since then, what happened to Ukraine? Did conditions improve?
Answer: Before the Maidan coup, Ukraine had a normal economy. They were struggling but with their heads above water. Just recently, however, the IMF included Ukraine in a list of the poorest countries in Europe. They achieved that status thanks to the government hand-picked for them by Washington!
The lesson to be drawn from this is that a legitimately elected government is sovereign and no other state has the right to intervene in its internal politics. Not only that, US intervention has a bad habit of making things much worse.
Be careful what you wish for, Venezuela!
Our translation of an article from Ria Novosti follows. Commentary by Vince Dhimos.
It is noteworthy that the sanctions against Russia actually had a beneficial effect, inducing Russia to pay off loans that it may otherwise have held on the books a bit longer. It is amazing that if you take into account the gold reserves, Russia can be said to have zero public debt because the debt is 100% offset by these reserves. No other world power can make this claim.
Russia was smart to keep its outstanding credit low, in contrast to China, which could be setting itself up for a jolt if the economy sags. This has helped the rouble stay stable. As a result, investors are clamouring for Russian bonds, which have made gains lately.
Even as the West dabbles in all sorts of experimentation, from money printing to blowing stock market bubbles, Russia sticks to old tried and true economic fundamentals that have always been a prerequisite for a stable and growing economy.
Reverse effect: the United States helped Russia save $450 billion
MOSCOW, Feb 19 - RIA Novosti, Natalia Dembinskaya. While Washington is preparing new sanctions against Moscow, the United States came to unexpected conclusions. Impressive international reserves of Russia, exceeding the entire external debt of the state, are largely thanks to the American and European sanctions. The share of borrowed funds in the economy is minimal, but free capital has significantly increased. Since the country has insured itself against sanctions risks, why can it easily redeem all debt and why are so many reserves needed? By RIA Novosti.
Why we need reserves
By February, the volume of foreign exchange reserves (gold reserves) of the Bank of Russia was estimated at 475 billion dollars. This is noticeably more than total public debt (453 billion) and is almost three times the standard recommended by the IMF.
International reserves are highly liquid foreign assets held by the Bank of Russia. They are used to finance the balance of payments deficit, to influence the exchange rate of the currency through interventions, to maintain confidence in the currency and the economy of the country, and also as a basis for foreign borrowing. Gold reserves consist primarily of assets in foreign currency and monetary gold.
Their accumulation was promoted by a fiscal rule: all oil and gas revenues exceeding the budgeted base price of oil at $ 40 per barrel were sent to the treasury. This is despite the fact that last year Brent crude barrel cost an average of about 70 dollars a barrel.
In 2014, the Central Bank conducted foreign exchange interventions to support the rouble and save the economy from the effects of the economic crisis. As a result, reserves decreased immediately by 25%.
But since 2015, stocks have been being replenished. Since February of last year, reserves have been replenished by $27 billion. These rates are among the highest among the world’s largest economies.
Central Bank consistently pursues this policy. Not surprisingly, sanctions pressure is increasing and Russia is more actively building up the safety cushion.
Moreover, the growth of the gold and foreign currency reserves of the country is not only due to the fiscal rule and relatively high oil prices. Paradoxically, American and European sanctions helped.
“Because of the sanctions, the largest banks and oil companies of Russia could not renew loans of Western banks. Therefore, they paid off debts as they matured, thereby reducing the share of borrowed funds. The result is an accumulation of free capital,” notes the influential American newspaper The New York Times.
This can be regarded as a negative factor indicating a decline in economic activity in the country and a slowdown in the investment process, the publication continues. However, as economists point out, there is simply no urgent need for foreign loans, since Russia is one of the least indebted countries in the world. Over the year, the state’s external debt has decreased by almost ten percent.
A solid amount of gold reserves insures against sanctions risks, maintaining the safety margin of the national economy. It is especially important that the reserves entirely cover all foreign debt. That is, the Russian Ministry of Finance can pay it off any time it needs to.
Gold instead of dollars
Over the past ten years, the structure of Russian reserves has changed significantly: investment in US Treasuries has decreased to a minimum, but the share of gold has increased tenfold - to $90 billion, or 18% of total gold reserves.
From the standpoint developing a financial system, there is no alternative to gold. This is protection against currency risks, and insurance against sanctions, and, of course, the opportunity to earn. Any currency, whether it be dollars or euros, is heavily burdened with debts, and in the long run, debts can result in write-offs. In the event the dollar system should collapse, gold will definitely retain its value.
There is less and less trust in the dollar. The Central Bank has more than doubled its share in gold reserves: from 46% to 22%. In the spring of last year, the regulator transferred from the US currency to the euro and yuan a fifth of international reserves - almost one hundred billion dollars.
Such actions of the Central Bank could slightly reduce the liquidity of international reserves, but now the gold reserves are less at risk of depreciation, because US government bonds are getting cheaper. And the reduction in dollar assets was provided mainly by the sale of American securities.
Below is our translation of an analysis from RIA Novosti with commentary by Vince Dhimos.
While it is true that the economy of Venezuela melted down after Maduro came to power, mostly because of oil prices and US Sanctions, if the world applied the same yardstick to the US as the US does to Maduro, a case could be made for an invasion of the US by all threatened parties, including Japan, Europe, Russia, China, India, etc, and removal of the current government for threatening the US and world economy (more serious than the Venezuelan situation) with its unmanageable debt that will inevitably topple the US, the dollar and the world economy. This is because we are in a situation which the Russian author describes as “path-dependent.” The Russian equivalent can be rendered literally as “rut effect.”
Path dependence can be defined thusly:
Path dependence is the idea that decisions we are faced with depend on past knowledge trajectory and decisions made, and are thus limited by the current competence base. In other words, history matters for current decision-making situations and has a strong influence on strategic planning.
Applied to the debt, if the US is, as I suspect, path dependent, then all decisions will always be made as they have been for decades, disregarding the clear and present threat of the US debt level to the US economy. This threat is described in the translation below, based not on some specifically Russian reasoning but based on statements made by Western analysts and leaders.
One of the main drivers of this suicidal economic policy is the steadfast belief that America is threatened by the Chinese and Russians and must “keep up” with their advances in military hardware. In other words, the arms race is determining US policy. Thus, it is now thought in upper military circles that the US must, for example, develop hypersonic missiles to counter the Russian Kinzhal and Avangard. However, this thinking is flawed because having an equivalent offensive weapon does not in any way help defend against these missiles. Defence would require air defences. But the problem there is that it is intuitively impossible form a scientific standpoint, to develop any means to intercept a hypersonic missile travelling in an unpredictable zigzag trajectory. Therefore, the only possible response is to start negotiations right now. Instead, the government has chosen the opposite approach, withdrawing from the ABM and INF treaties. This too is part of the path-dependence since the US public itself, not only the arms makers and government, is opposed to showing weakness and demands that Russia be dealt with from a “position of strength” even though the US no longer credibly possesses such a position.
There can be no better illustration of US path-dependence, which boils down to fatalism, not an enviable position for any nation. This is why the debt issue will probably never be dealt with and the dollar is in for an inevitable collapse – either imminent or gradual.
Point of no return: US $22 trillion national debt spinning out of control
MOSCOW, February 14 - RIA Novosti, Natalia Dembinskaya. The US national debt has exceeded $22 trillion - the highest level in the entire history of the country. Under Trump, growth is at a record pace of one trillion a year. American economists point out that the process will gain momentum, since government spending is not controlled at all. Will the United States cope with the situation and what will happen if the debt pyramid collapses?
Passed the baton
The previous owner of the White House, Barack Obama, began to actively increase US foreign debt. During the eight years of his presidency, the amount of the country's debt almost doubled - from 10.6 trillion dollars to 19.9 trillion. This was largely due to the fact that after the 2008 crisis, the congress and the Obama administration approved a stimulus package to support a rather weakened economy.
During the election campaign of 2016, Republican candidate Trump assured everyone that he would deal with the huge debts and liquidate them within eight years. So far, the opposite has happened. The national debt has been growing at the fastest pace in the last six years. In just two years, it has increased by almost two trillion dollars. And in the next two years, according to Bloomberg’s estimates, another 4.4 trillion more will be added.
Trump continues to make the best of a bad hand. At the end of last year, he once again promised that the United States would fully repay the national debt "by the end of his second presidential term." But economists say debt obligations will continue to grow, as the budget situation worsens.
For the 2018th fiscal year, the US budget deficit grew by 17 percent and reached 779 billion dollars – that’s the most since 2012. According to the forecast of the budget management of the congress, this year it will grow by another 15.1 percent - to 897 billion dollars. And in 2022, it will exceed the trillion mark and will not fall below this level.
The US budget deficit has reached a new high since 2012
The deficit rose by 17 percent to $779 billion. Total spending rose by 127 billion, while revenues grew by only 14 billion.
To mitigate the deficit, Washington will have to borrow more money, and the debt burden risks becoming uncontrollable. Last summer, Republican Congressman Andy Biggs recalled that budgetary allocations should not exceed 700 billion dollars, and the current disproportionately high budget expenditures are fuel for the rising "debt fire."
“The country spends more than it receives, and is forced to borrow money. The structural deficit creates a “path-dependence effect. “I think we are heading for the abyss,” said the parliamentarian. The congressman estimates that the US authorities have no more than ten years to solve the problem.
However, the collapse may occur earlier - by 2026, the fund of the medical insurance program for the elderly (Medicare) will be exhausted, and social benefits to aging members of the numerous generation of baby boomers will have to be paid directly from the budget. This will bring down the entire US financial system. Otherwise, the social security system will collapse. Both scenarios threaten the country with a large-scale disaster.
As noted by USA Today, the increased growth rate of public debt is largely due to last year's tax reform (it cost the US budget 1.5 trillion dollars), as well as an increase in defense spending.
Trump signed in December 2017 a bill creating the largest tax reform in US history - this was one of his key election promises. First of all, it eased the tax burden for businesses, corporations and enterprises, in particular, by drastically reducing the income tax from 35 percent to 21 percent.
Although the White House says that tax cuts will eventually pay off by accelerating economic growth, economists' forecasts do not confirm this. On the contrary, tax cuts will undermine economic growth, as they will lead to increased debt.
The fact is, investors view the growing amount of debt obligations as an increase in the tax burden on future generations.
The situation becomes especially dangerous when the ratio of debt level to gross domestic product approaches 77 percent. According to a World Bank study, each percentage point of debt growth above this mark takes away from the economy 1.7 percent of GDP.
Meanwhile, according to the Congressional Budget Office, the critical mark has already been passed. In 2018, total government debt amounted to 78 percent of the gross domestic product of the United States — the highest since 1950. Barring any changes, by 2028 it will be 96 percent.
The huge public debt will complicate the federal government's access to new loans and increased spending in the event of a new recession. Countries and markets around the world are already questioning the solvency of the US government.
One of the leading American financiers, the founder of the world's largest hedge fund Bridgewater Associates, billionaire Ray Daliot, believes the triple deficit - of budget, trade balance and current accounts - will soon finally scare away foreign investors from US Treasury bonds, provoking an explosive growth in their yields and a collapse of the dollar. And this is already a direct path to the financial crisis, which by its scale is capable of surpassing not only the upheavals of 2008, but also the Great Depression of the 1930s.
Above link thanks to RT, shows a huge pro-Maduro rally in Venezuela. Not all of them want the US puppet.
The Western press is a rubber stamp for US policy.
For example, I just read 2 articles in a popular German news site on Venezuela. There was no new perspective on the US and its attempt to overthrow a democratically elected government. Neither author mentioned that Venezuela is a sovereign country and that the US intervention was illegal. The author could have been an American. And yet, a new Pew study published just this week shows that Germans and French trust Putin more than the US. If a poll were taken among Europeans, it would be interesting to see how many approve how the US and allies chose the new president of Venezuela without consulting with the Venezuelans.
Likewise, an older study among young Arabs shows similar results – ie, more of them trust Russia than they do the US.
This sharply contradicts the notion that Trump is making the US great. Nations with no friends are threatened with an imminent decline similar to that of the Roman Empire.
One of the aforementioned 2 authors expressed an opinion that is very common in the US. He admitted that US sanctions hurt ordinary people more than they do the governments, but that, unfortunately, there is no other way that the “free world” can oust “dictators” like Nicolás Maduro (who was, let’s remember, democratically elected) and that the people will just have to suffer for a while until the US can install its choice (in the name of “democracy”). He did not admit that it was not so much Maduro’s socialism that hurt the Venezuelan economy but rather the sharp drop in crude oil prices that lasted for years and the economic pressure, including sanctions. Reports on the earlier sanctions that hurt the country are hard to come by, but a report from Forbes published in 2011 reveals:
“Secretary of State Hillary Clinton included Petróleos de Venezuela SA (PDVSA), parent company of large American refiner and gasoline retailer CITGO, in a list of seven companies sanctioned last month for supporting Iran’s energy sector.
“PDVSA ‘delivered at least two cargoes of reformate to Iran between December 2010 and March 2011, worth approximately $50 million,’ the statement says. Reformate is [crude] blended with gasoline to improve its quality.
“The sanctions bar PDVSA from access to U.S. government contracts, financing through the U.S. Export-Import Bank and export licenses.”
Well, that pretty much kills business and hence, the economy.
The article then goes on to complain that the sanctions don’t apply to PDVSA subsidiaries and that the US does not “prohibit the export of crude oil to the US.” In other words, it is a crying shame that the sanctions don’t attempt to starve the Venezuelans completely instead of only partially.
So, while the US was imposing sanctions on Venezuela supposedly because the local government was harming the economy, there were powerful voices in the US that urged more harm to the Venezuelan people. Thus while the established wisdom in the US is that socialism doesn’t work, the US Establishment wants to make sure it can’t work.
So which is it? Socialism doesn’t work? Or let’s not give it a chance to work? Can you appreciate the subtle difference here?
And note the speed at which Trump declared usurper Guaidó president. Why? Because Turmp knows that Maduro has just signed deals with Russia and China that are designed to resolve the economic crisis by selling oil to these two countries under easy terms for Maduro, and if Trump waits too long to intervene, these oil deals will start easing the economic burden on the people and the opposition will no longer have a strong case against Maduro. Trump needs to get Maduro out of office before he can solve the economic problems. It is the same kind of reasoning behind the quick decision to launch the Tomahawk attack on Syria before the OPCW could get to the alleged chemical attack site in Douma and discover that there either had been no chemical attack or it was an attack launched by the US-backed rebels. Everything — absolutely everthing — in the Trump administration is smoke and mirrors and decisions are made at lightning speed so that the skullduggery cannot be detected in time!
It is easy to see how prohibiting Venezuela’s biggest oil company from doing business must have stunted Venezuela’s economy since 2011 (8 years ago, mind you!), and yet the only reason any Western journo gives today for the sagging economy in the country is Maduro’s socialist policies. This clearly doesn’t wash.
The Western media are lying to you to provide an excuse to intervene illegally to oust Maduro so that – let’s be clear – the US can plunder the South American country with the largest oil reserves in the world. Not only are the sanctions illegal and not authorized by the UN, but they directly contradict Donald Trump’s promise to the American people.
Back then, The Gurdian reported on a Trump promise even after his election:
“We will stop racing to topple foreign regimes that we know nothing about, that we shouldn’t be involved with,” the president-elect said on Tuesday night in Fayetteville, near Fort Bragg military base in North Carolina.
Ok, you might argue that Venezuela is not a “country that we know nothing about,” but that is not quite true. If you consider the sanctions that prevented Venezuelan oil from being developed and sold, we know quite enough to realize that it was not all Maduro’s fault that his people were suffering. But if the US thought that was the case, all they had to do was relax the sanctions and see how the country responded to free market economic conditions. Then if the economy continues to sag, the US might have had a strong case against Maduro – although recall that the slump in crude prices also had a powerful impact. So just blaming it all on Maduro is ultimately just an excuse and smart people can see through the childish rhetoric.
Finally, the worst news is that neither the media nor the grassroots seem to care in the least about respecting the sovereignty of other nations. For example, Politifact ran what appeared at first glance to be an exhaustive list of Trump’s campaign promises and a rating of the degree to which they were kept. Out of well over 100 promises, not one pertained to promises to avoid foreign wars and intervention. Politifact didn’t mention this glaring omission.
Bloomberg wisely noted that Trump’s 2018 UN speech stresses sovereignty for the US but neglects to promise to respect the sovereignty of other countries.
Respect for the sovereignty of all nations is one of the cardinal points of Putin’s foreign policy and part of the idea of the Multipolar (or multicentric) world that Putin has stressed repeatedly during and since his famous speech at the 2007 Munich Security Council.
Yet, Trump’s ethnocentric world view apparently has no room whatsoever for such unpatriotic notions. His omission of this issue and the lack of demand among the grassroots for attention to sovereignties of other nations is a red flag signalling the extremely dangerous state of US foreign and military policy, which seems almost designed and intended to start a war!
As Bloomberg points out:
“Before U.S. President Donald Trump arrived in New York to deliver this year’s address to the United Nations General Assembly, his top national-security officials promised that he would affirm the importance of sovereignty in U.S. foreign policy and world affairs. As National Security Adviser John Bolton put it, Trump planned to ‘talk a lot about American sovereignty.’
“He did, and that was precisely the problem. The president fails to recognize that sovereignty isn’t a one-way street — and that institutions like the UN, far from threatening sovereignty, in fact establish the conditions in which it can flourish.”
Operating on this incredibly one-sided policy of not only “America First” but in fact “America Only,” the United States has seriously damaged Venezuela's economy and harmed its people, and now, suddenly, pretends to worry about the people it has harmed, first warning of a possible military invasion and then hypocritically sending aid, pretending that the economic crisis is due solely to Maduro’s poor administration and not to US sanctions falsely pointing out that Maduro’s justified refusal to accept this hypocritical aid is proof that he does not care about this people.
This is a disgusting hypocrisy.
My message to the Venezuelan people is this:
In the past, the post-war US offered defeated European countries and Japan generous aid, eg, under the Marshall Plan for Germany, and established a precedent that created an aura of trustworthiness throughout the world. This aura held for many years. However, the US set a new precedent in the Korean conflict, offering no aid at all, and instead bombing all major population centres in what can only be called an attempted genocide.
This precedent set the stage for Vietnam, where again, the US killed abundantly and indiscriminately, including in the horrific documented atrocities at Song Mai, with a death toll estimated at as many as 2 million. Iraq got no help to get back on its feet either after the horrific US bombing attacks that killed an estimated 100,000 Iraqis. Syria gets nothing today except sanctions intended to punish the Syrians for electing a president who helped them survive the attacks by foreign and Syrian US-backed terrorists since 2011. Without that last-minute Russian intervention, the Syrians would have no homeland or sovereignty. Kosovo is another example of a US attack that left nothing but ruins with no offer of help from the US (well, at least they got free mosques and terror-promoting imams from Saudi Arabia). Afghanistan attests to 17 years of failed US military intervention with no significant aid offered to the longsuffering populace.
Ukraine suffered a US-instigated coup in 2014, when its economy was still normal and stable. Now, according to the IMF, Ukraine is the poorest country in Europe! And in case you think that this is due to the influence of Russia, the IMF has declared that this poverty is due to the corruption of the Ukrainian government, hand-picked by the US.
In conclusion, do not trust the American government.
There is a wise old saying that should serve as a warning for every country that has weighed the option of petitioning the US for help:
Be careful what you wish for.
The following is our translation from RIA Novosti. Note that the info sources are all American.
Boomerang effect: sanctions against Venezuela hit US oil workers
MOSCOW, February 6 - RIA Novosti, Natalia Dembinskaya. Refiners in the United States spend billions on heavy grades of oil, and thanks to sanctions imposed by Trump against Venezuela, are forced to rush out looking for other suppliers. But the crude quantities may simply not be enough: given the production cutbacks within OPEC, the market is facing a shortage. As a result, according to analysts, the largest American oil companies will suffer the most from sanctions.
Asked not to interfere
Back in January, oilmen asked Trump not to restrict oil imports from Venezuela. India, Russia and China will continue to buy Venezuelan crude, and a unilateral ban will put American refiners in a deliberately disadvantaged position, they explained.
But the administration stated that the sanctions are unavoidable, and recommended seeking alternative sources of heavy oil.
The fact is, the technology of US refineries does not allow using only light oil coming from the Perm Basin and West Texas. It must be mixed with heavy crude, imported mainly from Venezuela.
Producers who have invested billions to profit from the processing of cheap low-quality crude are now paying fabulous premiums for high-sulfur oil. This is a boon to OPEC members like Iraq and Saudi Arabia: not so much light low-sulfur oil is produced there, but there are no problems with heavy grades.
Nothing to replace it with
Analysts warn: the crisis in Venezuela, along with the cut-back in OPEC production, will only increase the imbalance in the market. The South American republic exports one of the heaviest grades of oil in the world, and the sanctions have practically blocked this channel. Oil refining companies that are left without crude oil really need to urgently look for alternative suppliers.
However, there is no telling that the search will be crowned with success. Mexico already increased shipments to the eastern states last year, surpassing Venezuela. Ecuadorian and Colombian oil goes to the west coast. And now, refineries will have to fight with each other over crude oil.
Market players admit they do not have enough oil, and so far there is nothing to replace the Venezuelan supplies that have been dropped.
“There have been significant gaps in the plan for the next month. The problem is that we are not getting anything from Venezuela,” said Gary Simmons, head of the largest US oil company, Valero Energy Corp, to investors.
Experts emphasize that all this is a direct result of the White House’s actions. Saudi Arabia, Russia and Canada are cutting production, sanctions are forcing Iran and Venezuela to curb exports, and the market for low-quality crude oil is on the verge of a crisis.
"In the real crude oil market, tensions continue to be felt, due to the acute shortage of high-sulfur crude oil," said Amrita Sen, lead analyst for the oil market, consulting firm Energy Aspect.
The main victims
Refineries of the Gulf of Mexico and the East Coast, designed for processing heavy oil, are facing the most difficult situation.
"Venezuela is very important for the market - it's not so much about the volumes, but about the quality of the oil of American companies. Oil refineries on the Gulf coast will suffer most from the sanctions," say Rystad Energy analysts.
Among those who suffer the greatest losses are the main players in the US oil industry.
Heading the list is Houston Citgo Petroleum, the American division of the Venezuelan PDVSA, managing refineries, pipelines and terminals.
According to the International Energy Agency, Citgo is the largest importer of Venezuelan oil (according to last year’s results, 176 thousand barrels per day). Valero Energy has the second largest output (166 thousand barrels per day), and Chevron Corp has the third largest (83 thousand barrels per day).
According to Bloomberg, the shortage of Venezuelan sour crude oil has already led to a sharp rise in commodity prices in the region. In late January, Mars Blend crude went up to a five-year high, while the profitability of refining Mexican oil fell to a four-year minimum.
If American refiners do not find an affordable replacement for Venezuelan crude, they will have to drastically reduce production rates. And this, in turn, will cause a fuel price hike, which will hurt Trump's rating.
The following is our translation of an article from RIA Novosti with commentary, and notations [in square brackets] by Vince Dhimos.
Europe is on a roll, and if Jim Rickards is right in his audio presentation that we discussed here, the IMF, led by Christine Lagarde, is transforming the Special Drawing Rights, launched by the IMF in 1969, into an actual bona fide currency rather than the basket of currencies that has been used by the IMF for reserve purposes. That would be a really big deal. But as I mentioned there, even so, the Europeans are moving to make themselves immune to sanctions. Which is the subject of the translation below.
The article in Fortune referred to by Ivan Danilov is linked here.
I have reported in July of 2017 that the currency to challenge dollar hegemony will most likely be the euro. Then Jim Rickards recently issued an insider report that the IMF is plotting to use the Special Drawing Rights as a bona fide currency. Whether this turns out to be true or not, the confirmed information we now have in hand clearly shows that Europe is on the forefront of the movement to cut the world’s economic and financial umbilical cord with the “Land of the Free.”
Let's spell out the importance of this historic turning point.
First, when Russia entered the war in Syria, and when Putin showed the world his unstoppable hypersonic missiles last March, the world turned a corner because the US could no longer wage war with full impunity anywhere it pleased. So since then, the US has been relying heavily on sanctions to slap around states that refuse to come to heel. But now, Europe has accomplished a master coup, breaking free of US sanctions.
Let us not forget that the US' harassment of Iran has nothing to do with US interests. This constant pressure on Iran is due to the termendous influence that Israel and Saudi Arabia hold over the US government, as discussed here, here, here, here and here.
For now, the gamut seems to have been run. Military intervention in check, sanctions in check. We will see what the US does next. It probably won't go down without a fight.
The conspiracy of European leaders against the United States "will infuriate Trump"
A few days before the European Union confirmed this operation [development of a system circumventing sanctions] against the States at an official level, the respected American journal Fortune wrote that “the European Union will soon infuriate Trump” and the reaction of official Washington confirms this assessment.
It would seem that the European Union just created an official channel for circumventing the sanctions that the US imposed against Iran, but on both sides of the Atlantic it is clear to everyone that this is not about Iran, but that the EU has thrown out a double challenge: on the one hand, the dollar system and, on the other hand, US control over European countries’ foreign policy. In terms of symbols, we can say that if the American eagle has its “sanctions talons” pulled, you’ll get a rather funny-looking but aggressive chicken, this is why the issue of circumventing the Iranian sanctions has become so fundamental. The authors of the by-pass scheme — Germany, France, and the United Kingdom — designed it in such a way that the responsibility was collective. That is, this situation can have only one of two outcomes: either Berlin, Paris and London set a precedent for collective disobedience to Washington and defiantly humiliate American diplomacy and the entire Trump administration, or the Trump administration defiantly “returns to their stall” the European vassals who wanted too much freedom.
The so-called INSTEX (Instrument In Support Of Trade Exchanges) is a German-French-British mechanism that allows European companies to do business with Iran without using dollars and without direct transactions with Iranian structures that could be traced and blocked by the State Department. It has already received a lot of press, but there are a few key points that deserve special attention.
Firstly, it should be noted that in the process of creating this mechanism, Berlin and Paris united with London and that this joint anti-American work was carried out despite the acute conflict between Great Britain and the rest of the European Union countries in the context of the upcoming Brexit. This is paradoxical and incredible, but the facts indicate that the desire to “punish” the Trump administration is so strong in European capitals that even the “scandalous divorce” between the UK and the EU could not prevent unification around this idea.
US President Donald Trump threatened to destroy Turkey if it attacks the Kurds in Syria. Political analyst Dmitry Yuriev on radio Sputnik spelled out the trouble with the US policy in the region.
The second important aspect of the current situation: the Europeans have demonstrated hitherto uncharacteristic stubbornness and readiness to pursue an independent policy, despite direct threats from the Trump administration, which were voiced through “leaks” to American news agencies and, most likely, were also transferred to Berlin, Paris and London through the appropriate diplomatic channels.
"The White House is warning the Europeans that if they try to circumvent US sanctions against Iran, they will be subjected to heavy fines and punishments. The EU is calmly implementing the plan, which, if implemented, could aggravate transatlantic relations," reported the Associated Press.
The consistency and courage of the leading European powers is especially valuable in view of the fact that prior to the creation of the current tripartite mechanism, countries such as Austria and Luxembourg, traditionally financial and banking centres of Europe, abandoned the role of the “host countries” of the structure through which transactions with Iran will pass, and this refusal was motivated by pressure from the United States. However, apparently, the issue turned out to be so fundamental that the leading EU members decided to take matters into their own hands and divided the responsibility into three: the structure itself will be located in France, its head will be a German banking specialist, and the organization's supervisory board will be located in the UK.
It is abundantly clear that American diplomacy has completely lost this round and has in general demonstrated a lack of understanding of European sentiment and the seriousness of the intentions of the leaders of Germany, France and the United Kingdom. Last year, the US ambassador to Germany celebrated a victory when German banks refused to work with Tehran, and the Western media wrote that it was hardly possible to create a European mechanism to circumvent American sanctions.
Usually, it is safe to bet that European countries will not be able to agree on a complex issue, but this time, American foreign policy is faced with an exception to the rule.
If you look at things cynically, then you can say that the Trump administration has done more for the unity of the European Union than all the officials of the European Commission put together. Moreover, if the Europeans get away with this “Iran conspiracy” now, then the main instrument of US foreign policy [sanctions] will be useless, and you don’t need to be a prophet to see the next move in this game. If Washington tries to make good on its threats to impose sanctions for Nord Stream 2, the same mechanism will simply be extended to work with Russian companies, which makes the sanctions, by and large, meaningless. Of course, the Trump administration still has the “last argument”: imposing restrictions not on companies, but on Germany, France and the UK as states, but if the US president has the bravado to take such a crazy step, then he is in for serious internal political problems, and European Leaders will have simply the perfect reason to adopt virtually any measures, and these measures will even receive public approval.
Paradoxically, the most vulnerable element of the by-pass scheme is Iran itself, which does not like the limitations of the European solution to the sanctions problem. Official Tehran’s irritation and nervousness is understandable: the economic situation is complex, and so are domestic politics, the Europeans missed the deadlines for creating a mechanism for by-passing sanctions (it should have been ready in November last year), and now they still need to get the bugs out , which will most likely take several precious months.
However, the most important thing in this story has already happened: old Europe has demonstrated the will to free itself of US dictates, and the forms in which this will is put into practice in the future is not so important. The important thing is that Washington does not like this European freedom much.
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A friend, who is involved in local politics but strives to know the truth about things, sent me a link to a talk by respected investment councillor Jim Rickards in which the latter predicted that the IMF was plotting to elevate the Special Drawing Rights instrument to the status of an actual currency (not just a basket of currencies) intended to replace the US dollar as the world reserve currency. Rickards predicts (see link below) that the dollar will be replaced by March 1 of this year.
My friend wanted my opinion as to the veracity of Rickards’ audacious claim and whether the fall of the dollar may be imminent.
My email to my friend:
I can't say whether it is imminent, but the Chinese and Russians have been working on de-dollarization of international trade settlements for years now and there is no doubt it will happen sometime.
I was unaware that the IMF was plotting something like this but it is logical. After all, as Rickards mentioned, the French got screwed royally by Obama's Treasury Department when they made a transaction with Iran in dollars and were fined $8.9 billion for that, and as Rickards said,the transaction was not even illegal. So IMF president Christina Lagarde, a French national, would be carrying a big grudge against the US and its all-powerful dollar. Rickards is pretending to be pro-Trump, or maybe he is, but his pitch is that the IMF is trying to make Trump look bad by scheduling this on his watch. Whatever, it doesn't really matter.
The SPD, special drawing rights, was created by the IMF in 1969, and the principle is to sort of create a currency-like instrument by blending a bunch of world currencies in a single "basket" and assigning a value to it so that it can act as a single currency for reserve purposes. It was not intended for settlements in trade.
Rickards neglected to mention that the US dollar is one of the currencies in that basket so the dollar will not lose all its value over night no matter what steps the IMF should take.
BTW, much of this is in fact Trump's fault because he uses the USD as a weapon, slapping sanctions on everyone and his brother. All recent presidents have done this, but Trump took it to a new level, ignoring the possible consequences. It was only a matter of time till someone slapped down the dollar, and that – ie, de-dollarization – has been in progress for several years, spearheaded by Russia, China and the BRICS.
Recently, the EU, Russia, China and Turkey came up with a plan to create a Special Purpose Vehicle to transfer money without using SWIFT, to get around sanctions, particularly sanctions on Iran. The SPV is now viable and has a new name, ISTEX. Trump is working on blocking it, but that may not be possible. In any case, theoretically, the US will not be able to track payments made by this international transfer system and therefore, Europe, for example, can truthfully say to the US Treasury that a trade with Iran is “none of your darn business.” Imagine the sense of freedom in being truly free of the machinations of the Land of the Free.
At any rate, aside from what Rickards says, these 4 groups plus Iran will not be using dollars in their trade any more, and that in itself will hurt the dollar.
The reasoning of Europe is that they are sick of the dollar being used as a weapon, and since Trump is the biggest bully in this regard, they are going after him. I am referring not only to the IMF’s alleged plan to replace the dollar with the SDR but also to the well-known plan to use the SPV/ISTAX for that purpose.
Russia and China are de-dollarizing because they are tired of the US using dollars to make war on everyone and his brother.
The euro will probably play the biggest role in the existing systems, ie, the SPV and the Russian-Chinese schemes to de-dollarize world trade. However, Rickards may be right that the SDR will be the currency to take down the dollar. He says he has insider info and Rickards is indeed an insider.
Yes, it is scary. We are in for a rough ride no matter who comes out on top.
Sadly, the US people were not awake enough to see that the bullying, ie, endless wars and sanctions, would eventually lead to this, so almost no one in the US protested. Now they may not have to protest.
The only worry will be survival of the Americans.
But who will take pity on them when the crash comes?
Libya maybe? Iraq? Syria? Serbia? Iran? Venezuela?
What goes around comes around as they say.