The more the West attempts to "isolate" Russia and pushes it away from its "core values" and of course the US Dollar, the more Russia will seek the safety of a non-dollar based system. We have previously described how Putin has been scrambling to enmesh Russia in tight bilateral commodity-based trade with both China and India, and now it is Russia's turn to announce it would seek its own "national payment settlement system" following last week's surprising and unmandated service halts by both Visa and MasterCard, which as Vladimir Putin said earlier today, will be a "bid to reduce economic dependence on the West."
Putin observed, cited by AFP, that Russia is aggressively looking to trim its dependence on the west for payment settlement: "In countries such as Japan and China these systems work, and work very well," Putin told lawmakers in televised remarks.
"Initially, they started out solely as national systems limited to their own markets, their own territory, their own population but they are becoming more popular right now... Why should we not do it? We should definitely do it and we will do it," he said, noting that Russia's Central Bank and the government have been looking into the matter.
And as everybody knows, while the biggest trump card over the West Russia has are its energy exports, one can retort that Western leverage over Russia is in the form of SWIFT, or the "Society for Worldwide Interbank Financial Telecommunication", aka the umbrella framework for all interbank transactions taking place in a petrodollar world. If and when the day comes when Russia and/or China and/or India and/or any other BRICs and other nations who are tired of the hegemony of the fading US superpower, decide to create their own version of Swift, all bets on the reserve currency for the past century are off.
In the meantime, we will settle with Russia making its own electronic payment settlement system. More from AFP:
Last week the United States hit more than 20 Russian officials, including some of Putin's closest allies, with sanctions over Moscow's takeover of Ukraine's peninsula of Crimea. A lender described as a "crony bank" for the Russian elites, Bank Rossiya, was also blacklisted.
As a result of punitive measures, several banks last week saw their customers barred from using Visa (NYSE: V - news) and MasterCard credit cards prompting talk among officials and lawmakers that Russia should create its own operational network.
"It's a great shame that some companies have taken a decision on certain restrictions," Putin said. "I think it will simply lead to a loss of certain segments of the market for them, and a rather profitable market at that."
Unlike Obama, whose repeated iteration of "costs" to Russia should it annex Crimea, which it did, is now the laughing stock around the world, Putin's threats are not to be trifled with. To wit: "We should protect our interests and we will do it."
But not yet:
Finance Minister Anton Siluanov said on Wednesday that the government had no plans so far to ditch Visa and MasterCard. "But at the same time we are beginning to pay more attention to the creation of our own payment settlement system."
US President Barack Obama has threatened to target the broader Russian economy if Moscow moves into east Ukraine after its takeover of Crimea.
This week, Washington and its partners in the G8 club of leading industrialised countries cancelled an upcoming summit in the Black Sea resort of Sochi in a bid to punish Russia further.
Putin has shrugged off the sanctions, insisting Moscow will conduct an independent foreign policy and would not take orders from the West.
Ratings agencies Standard and Poor's and Fitch last week revised Russia's outlook to negative from stable, citing the direct and anticipated impact from the sanctions and the country's increasing isolation. Some Russia officials dismissed the revision, claiming the move was politically motivated.
Economy Minister Alexei Ulyukayev warned earlier Thursday that the country risked growth of just 0.6 percent this year with capital flight expected to reach $100 billion.
The problem is that should Russia enter into a recession, it will simply drag the economies of all those other countries who are reliant on bilateral trade with it. Such as Germany. Then again, this could be precisely the annual scapegoat the broken global Keynesian model will need to explain why - for yet another year - the global economy will fail to generate a self-sustaining growth pattern despite trillions in central bank liquidity injections, and $16 trillion in hot money emanating from China.