I’m amazed to see financial threats being made this openly. Like real military threats, real financial threats are usually made via backchannels. But, then again, President Obama has threatened Russia openly with sanctions.
MOSCOW, March 4 (RIA Novosti) – An adviser to Russian President Vladimir Putin said Tuesday that authorities would issue general advice to dump US government bonds in the event of Russian companies and individuals being targeted by sanctions over events in Ukraine.
Sergei Glazyev said the United States would be the first to suffer in the event of any sanctions regime…
Glazyev noted that Russia is a creditor to the United States.
“We hold a decent amount of treasury bonds – more than $200 billion – and if the United States dares to freeze accounts of Russian businesses and citizens, we can no longer view America as a reliable partner,” he said. “We will encourage everybody to dump US Treasury bonds, get rid of dollars as an unreliable currency and leave the US market.”
Is it just bluster? As recently as last year, the answer would be yes. But China holds approximately $1 trillion in U.S. Treasury bonds; and if Russia ‘goes there’, China will not want to be left behind.
And for several years now, China has been working with its partners (including Russia, Japan, Brazil, the UK, France and Germany) to set up facilities for trade & finance that would enable them, collectively and at long last, to be independent of the U.S. dollar. Even before this crisis, some experts were predicting that 2014-15 would see those efforts bear fruit.
Leave it to John F.-n Kerry and Barack Obama to be just stupid enough to push Russia and China further along a road that they are already well-and-gladly on.
Russia’s threat also comes via its Foreign Ministry:
MOSCOW, March 4 (Reuters) – Russia said on Tuesday that it would retaliate if the United States imposed sanctions…
“We will have to respond,” Foreign Ministry spokesman Alexander Lukashevich said in a statement. “As always in such situations, provoked by rash and irresponsible actions by Washington, we stress: this is not our choice.”
“We have frequently explained to the Americans … why unilateral sanctions do not fit the standards of civilised relations between states,” Lukashevich said.
Lukashevich did not describe any measures Moscow might impose in retaliation but said the Russian response would not necessarily mirror the U.S. sanctions.
Translation: Dumping Treasury bonds.
If China were to follow suit, it would mean a spike in U.S. interest rates; followed by further Quantitative Easing (QE) from the Federal Reserve to absorb the ‘returned’ bonds and keep rates down; followed by $150+ oil (or $6+ gas) as the dollar’s value collapses on international markets.
The question for me is: Does the U.S. have a compelling national security interest in the Ukraine, that would make it all worth it? We well might; but Obama hasn’t yet explained it.