Furious Russia, Downgraded To Just Above Junk By S&P, Proposes "Scorched Earth" Retaliation Against NATO Countries

Tyler Durden's picture

Cyprus and Russia - what's the difference (aside from the fact that the former was a money laundering offshore center of the latter until last year of course)?

If you said one is a lackey to statist, selfish banker interests, and after having its economy thoroughly destroyed by the great doomed European sociopolitical (and pathological) experiment, came crawling back to its Eurozone masters, while the other couldn't care one bit about Pax Petrodollariana and the global central bank cabal, you are right. In which case it will also be clear why a few hours ago that joke of a rating agency, Standard & Poor's, which also earlier announced it was "affirming" France at an AA rating making it very clear it will no longer accept being sued for telling the truth and downgrading sovereigns or otherwise have its offices abroad raided, not only upgraded Cyprus from B- to B (please deposits your funds in Cyprus banks now: they are safe, S&P promises), but - far more importantly - delivered a political message to the Kremlin, and downgraded Russia from BBB to BBB-, one short notch away from junk status. This was the first downgrade of Russia by S&P since December 2008.

WSJ reports:

"In our view, the tense geopolitical situation between Russia and Ukraine could see additional significant outflows of both foreign and domestic capital from the Russian economy and hence further undermine already weakening growth prospects," S&P wrote in its report.


Moscow's MICEX stock index fell by 1.5% after the move. The ruble weakened 0.6% against the dollar to 35.977.


A further cut to junk status would be a big move, given Russia's relatively modest level of debt, according to Tim Ash, an economist at Standard Bank.


"But if the crisis in Ukraine deteriorates further, and we see sustained capital flight and pressure on the ruble and Russian markets further, then it is possible," he said.

Russia's response was prompt.

First, in retaliation to the downgrade, Russian economy minister Alexei Ulyukaev said S&P’s downgrade of Russia’s rating was expected by investors, won’t significantly change their behavior, adding the obvious that the decision to cut Russia’s rating was partly political, partly based on economic situation. In other words, entirely symbolic - it is not as if Russia has access to bond markets anyway, plus as we wrote earlier this week in "Why Putin Is Smiling At The Bond Market's Blockade Of Russia", it is not as if it needs them.

But far more importantly, and ahead of yet another round of western sanctions which appears imminent unless Obama is to look even more powerless than he currently is (granted, a difficult achievement), Russian presidential adviser Sergei Glazyev proposed plan of 15 measures to protect country’s economy if sanctions applied, Vedomosti newspaper reports, citing Glazyev’s letter to Finance Ministry. According to Vedomosti as Bloomberg reported, Glazyev proposed:

  • Russia should withdraw all assets, accounts in dollars, euros from NATO countries to neutral ones
  • Russia should start selling NATO member sovereign bonds before Russia’s foreign-currency accounts are frozen
  • Central bank should reduce dollar assets, sell sovereign bonds of countries that support sanctions
  • Russia should limit commercial banks’ FX assets to prevent speculation on ruble, capital outflows
  • Central bank should increase money supply so that state cos., banks may refinance foreign loans
  • Russia should use national currencies in trade with customs Union members, other non-dollar, non-euro partners

In other words, a full-blown scorched earth campaign by Russia.

Granted, Russian holdings of US Treasurys are not that substantial (and could be monetized entirely in three months of POMO by the Fed), and western financial linkages to Russia, aside from trade routes, are not life-threatening, but if Russia were to take the baton, and other BRIC countries, already furious by the recent US decision to not boost their IMF status, follow suit, then Obama's life is about to become a living nightmare. Especially, if that most important BRIC member - China - does any of the many things it can do to indicate if, in this brand new Cold War, it is with or against the US...

Finally, those curious what are the linkages between the west and Russia are, review our recent post on the matter: All You Need To Know About Russia, In Charts.

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SidKhadak's picture
Russia, India, China planning epic $30 Billion Oil Pipeline that could shift the Geopolitical balance

Russia and India are planning to construct a $30 billion oil pipeline through China’s restive Xinjiang province. If successful, the pipeline will be the most expensive in the world.

The groundwork for the project was laid on October 21, 2013, during Indian Prime Minister Manmohan Singh’s visit to Moscow for the 14th India-Russia Annual Summit. Singh and Putin issued a joint statement that said, “Russia and India have agreed to establish a joint group to study the possibility of direct ground transportation of hydrocarbons.”

That announcement reaffirmed the two countries’ joint commitment to implement the Agreement between the Government of the Russian Federation and the Government of the Republic of India on the Enhancement of Cooperation in Oil and Gas Sector, which was concluded on December 21, 2010.

The project has been on the drawing boards for nearly a decade, as Russia and India first began discussing it in 2005.

Russia, India, China planning epic $30 Billion Oil Pipeline that could shift the Geopolitical balance
Haus-Targaryen's picture

Wake me up when someone starts shooting.

Rakshas's picture

What's your address I'll send an associate right over to help you out with that ....... he's very good at shooting.... you want lubricant ??

Rakshas's picture

Ok so that is no to Lube, my associate is hung like a mule but if you live at the 1600 you'll hardly feel a thing,  

Harlequin001's picture

No need to worry until Russia demands payment for its gas from Europe in gold.

Which is precisely what will happen once these stupid bastards have frozen them out of the bond markets.

Then you know the shooting war is about to start because Russia won't give a shit about downgrades once they have gold in money, and neither will anyone else.

Europe will want this ended, very quickly.

Supernova Born's picture

The lack of a single mention of gold in this thread's hypothetical strategery makes me doubt both its sincerity and its credibility.

old naughty's picture

Hey com'on Russia, at least they still put you above junk.

I like them down arrows now please.

SoilMyselfRotten's picture

Well now, talk like that won't get you a seat at the NWO table

old naughty's picture

who says i want to go there?

Does one has to put in /sarc?

Pinto Currency's picture


There's been a run on physical gold at the LBMA since last July and it has been ramping this year.

The gold/financial sytem rig is collapsing under the debt bubble it has created.

Blame Putin. 

We need war to address the problem of the central banking debt bubble.

strannick's picture

The same SnP that told us junk mortgages were AAA?

Jack Napier's picture

Living with you is like living in a living nightmare!

old naughty's picture

At least you l i v e (not e v i l), no?

jeff montanye's picture

sergei glazyev, given the timing, may feel "first things first".  gold is infinitely patient and the west will not have more of it in six months' or a year's time.  the world of currencies and counterparties must be addressed immediately.

born in Zaporizhia, Ukraine, dr. glazyev (phd in economics, moscow state university, but what can you do?) was one of the first people to be individually sanctioned by the obama administration. one of his many books, "genocide: russia and the new world order", is available in english translation. 

he may prove to be a formidable opponent of the western political class.

SafelyGraze's picture

left off of list:

withdrawing its gold from the IMF


NewThor's picture

If they found 10 times the amount of Gold known to man,

what would the price be?


Here ends the lesson.

Pinto Currency's picture


When you pay with Weimar currency, you always get an infinite price.

Here ends the Weimar currencylesson.

NewThor's picture

I understand Fiat Physics.

I am attempting to teach about Gold as a Religion.

How is GOLD created?

That's a big enough clue.

I don't want to get suicided. 



Pinto Currency's picture


While you are making infiinite gold, do a run of oiil and wheat please.

jeff montanye's picture

also intelligent, attractive, wealthy women with a taste for chubby old guys with a tendency to rant (since he's got the machine turned on).

Conchy Joe's picture

Shit I didn't realize that they were just a scam rating agency controlled by the US

I though they actually looked at each case and evaluated truthfully without bias like professionals do

/Sarc off

wee-weed up's picture

Hell hath no fury like a pissed off bare-chested grizzly-riding polonium-dispensing journalist-shooting ex-KGB Ruskie dictator.

jeff montanye's picture

don't forget "blueberry hill" singing and playing and "pattern on a hoarfrost-encrusted window" painting.

hungarianboy's picture

Problem here is that there is not enough gold in the EU and US to buy enough Gas/Oil from Russian federation.


Harlequin001's picture

Maybe not at this price. But if the gold price adjusts upward for fair value it would...

Citxmech's picture

By definintion.  

The scary part of all this for the "service" economies is that on a gold/oil standard, any country who needed to purchase oil would actually have to treat it like an investment with an eye toward producing stuff of value with it that other countries would pay for.  Otherwise they would be depleated of their PMs in a heartbeat and left immobile in the cold.

Leaping Lizard's picture

Time to reopen Kissinger's gold window.  Oh sorry, out of stock at the moment.

jeff montanye's picture

by definition indeed.  as you note though, not everyone has gold.  how much the west has left is a matter of some conjecture.

SDShack's picture

Bingo, plus don't forget that the Welfare state would have to collapse to conserve assets/gold/dollars for the elites. That's why the bankers are fighting like their lives depend on keeping the ponzi going, because they do. Cut off the EBT cards, and riots and revolution begin immediately.

msmith9962's picture

So you are saying that gold is a store of value?  And that it will be traded between places which actually create goods and services of value?  So what does this mean for my edible arrangements store?

TheReplacement's picture

Mmm, I think he was saying that there literally is not enough gold, as in, not enough gold at any price, as in, the gold is goneski.

Citxmech's picture

Oh - It's all somewhere.  If it existed before, then somebody has it


Raging Debate's picture

Harlequin001 - I agree. Here is another take to consider about the current geopolitics:

1) The US funded China to become the global reserve currency peg The IMF has stated this is a defacto situation.

2) Part of the job of reserve currency peg is to protect global trade. China is not ready militarily but Russia is. I do not buy all of these actions being taken in Ukraine by East or West as intentionally provocative above the surface, what the general population perceives.

3) The West should have begun global trade rebalancing with the East starting in 2005. Massive overshoot which had real consequences on both Western and Eastern populations.

4) There was too much interference or poor implementation from the West in Ukraine. Not all goes as planned. There are games within games. Everybody wants to rule the world. If there was no cooperation between the US, China and Russia you wouldn't be seeing cooperative EMP drills, Russia still sending up American astronauts to the space station or Russia Times being permitted to operate freely here in the US.

5) Russia is a very dangerous cornered Bear sandwiched between Europe, the US and China. Things go wrong with establishing global reserve peg and the shifting military provisioning to protect global trade. From a bigger perspective and dangers that exist, betrayels happen. Look at the US funding Nazi Germany to establish an EU back then. He went full retard.

Some food for thought.

DavidPierre's picture

Systemic failure and its pathogenesis have been over 50 years in progress, with countless events.

The origin is found with the cabal murder Kennedy, but the climax finale will be found with the Saudi Petro-Dollar rejection and the arrival of Eastern gold-backed currencies.

The pathogenesis is fierce, vicious, multi-faceted, coordinated, enforced, unstoppable, destructive, vile, with many unfortunate aspects and facades. The extreme vulnerability of the financial crime syndicate can finally be seen, the symptoms obvious.


JuliaS's picture

If Russia maintains its strategy there might very well be assassination attempts against Putin. I'm curious to know what substitutes he has standing by to take over if SHTF. Russia already had a Western puppet - Yeltzin... well, not so much a puppet, but a home-grown sellout. Almost brought Russia to its knees. Foreign investors were dumping cash into the country pillaging natural resources at an alarming rate.

Then Putin arrives and nationalizes everything worht nationalizing. Yeltzin's "open season" on domestic property ends up working in Russia's favor. With the western guidance Russia modernizes all of their industries and then turns right around saying: "Thank you very much. We take over from here".

This time around, if Putin's eliminated, the West would love to install a Yeltzin-like figure. The only problem is that with public sentiment running in favor of Putin's handling of the situation, the country would not tolerate anyone different, so pulling a sleight of hand would be extremely difficult.

It seems that the situation offers no "diplomatic" solutions to the coup-planning branch of the CIA. Ukraine is worth defending because it is already split in 2. It can be steered. Russia cannot. It cannot be sanctioned. It cannot be threatened. So the only thing left is an all out war.

Negotiations between NATO/US and any anti-west country always remind me of confrontation between ED-209 and Mr. Kinney.


Supernova Born's picture

How many bricks of gold can a house of cards support?

Gold and guns and Putin has won (without firing another shot).

If Putin wants Russia back on the first tier he will leverage gold against the scum banksters of the world.

The banksters don't even fear nukes as much as they fear a nation state of Russia's power putting gold back where it belongs.

Nukes AND gold. 21st Century power.

Tabarnaque's picture

Gold is catching up a nice breeze in the overnight market. I smell something burning, petro-dollars maybe?! And fuck the psychopathic criminals at the Federal Reserve. The've had the world hostage of their scam for way too long.

Ying-Yang's picture

The United States has constructed a financial neutron bomb.

For the past 12 years an elite cell at the US Treasury has been sharpening the tools of economic warfare, designing ways to bring almost any country to its knees without firing a shot.

The stealth weapon is a "scarlet letter", devised under Section 311 of the US Patriot Act. Once a bank is tainted in this way - accused of money-laundering or underwriting terrorist activities, a suitably loose offence - it becomes radioactive, caught in the "boa constrictor's lethal embrace", as Mr Zarate puts it.



DaddyO's picture

You missed the part in the article about Russia freezing EU assets and plunging the entire world financial system into global turmoil.

i.e. UK and France in the lead up to WWI, trying to contain Germany.

This whole affair is rapidly escalating into the leadup to WWIII


fudge's picture

Have you got a link that explains the deathly quite in Europe,,there's barely a word from from the leadership,,also looking for a link that explains how europe will cope with civil unrest in every fucking country when these "scarlet letters" cause a collapse as well as a Russia/NATO shooting match.

The fucktard that wrote that article left a shit load of crap unexplained and I don't think the Europe/UK will comply with those letters at all,,they got waaayyy too much to loose.

Kayman's picture

Obama's problem with Europe is that Europe has lived the history of Europe. Barry spent more time in the choom wagon than opening history books.

Perhaps a quick call to the President of Canada can enlighten him.

Bindar Dundat's picture

Canada and the U.S.  NOW share the same horrible problem.

Both Countries  have lazy crazy bums on our southern border who want everything for nothing and better healthcare too.

Down arrows please.

misitu's picture

Calm down, everyone, that was just one of Ambrose's retransmissions.

Salt cellar just over there ;-)

Drifter's picture

Maybe not gold settlement yet, but something better, complete abandonment of USD by the entire asian alliance.

That's what US regime is pushing Russia and China to do. Walk completely away from USD.

I expect to see China start unloading treasuries quietly, likely trading them for gold, maybe it's already happening.

Squid-puppets a-go-go's picture

s'ok - 'Belgium' will be happy to buy them all - even if the amount dwarfs its entire GDP

Drifter's picture

Belgium = ECB proxy = Fed proxy.

USD/EUR currency swaps to buy US treasuries don't count as QE.

Neat little gimmick isn't it?

Next we'll see little shitholes like Dunbfuckistan buying huge amounts of treasuries with dollars from under-the-table (off-balance-sheet non-reported) Fed USD/DFX currency swaps.

Any gimmick that doesn't count as QE.

SDShack's picture

Exactly right. The Fed and their CB proxies are all the same. They have gamed the system to create the perpetual ponzi in their mind. Their QE has so distorted the bond market that it doesn't matter anymore. China selling treasuries, and Belgium buying them proves it. Every doomsday scenario has been stopped by the bankers, Greece, Italy, Spain, Portugal, Cyprus. People need to stop thinking the BRICS are going to destroy the USSA by selling treasuries. Never going to happen so long as CB collude together to buy treasuries from each other, plus use their printing presses. Their ponzi is sustainable because they have co-opted govts to support the scheme. They did this by monetizing the govt debt. So the bankers own the govt's and the govt's are the muscle that protects the banks. Really a brilliantly executed plan that is horrific for the people, but perfect for TPTB. The only way this unravels is with a currency/trade/resource war. Russia isn't playing the debt game, and China is fast learning what debt problems are in their slowing economy. As commodity prices explode due to CB printing, soverigns will protect their hard resources leading to shortages and real economic hardship. A full blown trade war is the mother's milk of revolution, and can easily lead to a shooting war. At this point, the bankers are either going to win and create a New Feudal World Order, with the world being debt slaves, or the masses are going to revolt against the elites. That's why the bankers are fighting like their lives depend on it, because they do. Plan accordingly.