The City of London’s Standard & Poor’s rating agency carried out economic warfare against Russia April 25, by downgrading Russia’s sovereign bond debt to BBB-, one step above junk status. S&P stated: “The intense geopolitical situation between Russia and Ukraine could see additional outflows of both foreign and domestic capital from the Russian economy and hence further undermine already weakening growth prospects.”
S&P simultaneously reported that during the first quarter of 2014, $51 billion left Russia, the biggest such outflow since 2008. The British-U.S. sanctions against Russia have significantly cut Russia off from international credit markets. For the year since January 1, there have been only two Eurobond issues–one by Gazprom and one by Sberbank–for $1 billion each, compared to $13 billion last year.
The Obama administration is rigging and utilizing every event in Ukraine, to call for increased sanctions, attempting to orchestrate capital flight and bankrupt Russia. Bloomberg news service reported April 18, and the New York Times reaffirmed April 25, that the Obama administration held a meeting of mutual fund and hedge fund executives in Washington the week of April 12, to promote the “inadvisibility” of investing in Russia, or keeping funds in Russian investments. Bloomberg asserts that Susan Rice’s National Security Council is a lead agency in running this strategy.
In response, on Friday April 25, Russia’s central bank raised its key lending rate to 7.5% (it had raised the rate in early March from 5.5% to 7%), in part to support the ruble and to stanch capital outflow. If rates were kept high, it could produce some damage to the economy. However, very significantly, the April 25 Wall Steet Journal reported, the Russian central bank “said it would begin the new facility to lend longer-term funds to large commercial banks at low rates to help fund investment projects.” (emphasis added)
Though the sanctions are dangerous, the situation is highly non-linear. The sanctions could push Russia to adopt Academician Sergei Glazyev’s 15-point plan, for Russia to follow a dirigist plan of long-term credit for development, and the “de-offshorization” of the Russian financial system. President Vladimir Putin will be going to China, reportedly in May. There, he will try to finalize a $22 billion long-term deal to supply gas to China. The insane sanctions could accelerate Russia’s shift toward Eurasian development.