Rickards: U.S. Must Turn To Russia To Contain China

Authored by James Rickards via The Daily Reckoning,

Vladimir Putin stands accused in the media and global public opinion of rigging his recent reelection, imprisoning his political enemies, murdering Russian spies turned double-agent, meddling in Western elections, seizing Crimea, destabilizing Ukraine, supporting a murderous dictator in Syria and exporting arms to terrorist nations like Iran.

At the same time, the country of Russia is more than Mr. Putin, despite his authoritarian and heavy-handed methods. Russia is the world’s 12th-largest economy, with a GDP in excess of $1.5 trillion, larger than many developed economies such as Australia (No. 13), Spain (No. 14) and the Netherlands (No. 18).

Its export sector produces a positive balance of trade for Russia, currently running at over $16 billion per month. Russia has not had a trade deficit in over 20 years. Russia is also the world’s largest oil producer, with output of 10.6 million barrels per day, larger than both Saudi Arabia and the United States.

Russia has the largest landmass of any country in the world and a population of 144 million people, the ninth largest of any country. Russia is also the third-largest gold-producing nation in the world, with total production of 250 tons per year, about 8% of total global output and solidly ahead of the U.S., Canada and South Africa.

Russia is highly competitive in the export of nuclear power plants, advanced weaponry, space technology, agricultural products and it has an educated workforce.

Russia’s government debt-to-GDP ratio is 12.6%, which is trivial compared with 253% for Japan, 105% for the United States and 68% for Germany. Russia’s external dollar-denominated debt is also quite low compared with the huge dollar-debt burdens of other emerging-market economies such as Turkey, Indonesia and China.

Under the steady leadership of central bank head Elvira Nabiullina, the Central Bank of Russia has rebuilt its hard currency reserves after those reserves were severely depleted in 2015 following the collapse in oil prices that began in 2014.

Total gold reserves rose from 1,275 tons in July 2015 to about 2,000 tons today. Russia’s gold-to-GDP ratio is the highest in the world and more than double those of the U.S. and China.

In short, Russia is a country to be reckoned with despite the intense dislike for its leader from Western powers. It can be disliked but it cannot be ignored.

Russia is even more important geopolitically than these favorable metrics suggest. Russia and the U.S. are likely to improve relations and move closer together despite the current animosity over election meddling and the attempted murders of ex-Russian spies.

The reason for this coming thaw has to do with the dynamics of global geopolitics. There are only three countries in the world that are rightly regarded as primary powers — the U.S., Russia and China. These three are the only superpowers. Some analysts may be surprised to see Russia on the superpower list, but the facts are indisputable.

More to the point, Russia is a nuclear superpower at least on par with the United States and well ahead of China, France, the U.K. and other nuclear powers.

All others are secondary powers (U.K., France, Germany, Japan, Israel, etc.) or tertiary powers (Iran, Turkey, India, Pakistan, Saudi Arabia, etc.). This strategic reality sets up a predictable three-party dynamic.

In any three-party dynamic, whether it’s a poker game or a struggle for global control, the dynamic is simple. Two of the powers align explicitly or implicitly against the third. The two-aligned powers refrain from using their power against each other in order to conserve it for use against the third power.

Meanwhile, the third power, the “odd man out,” suffers from having to expend military and economic resources to fend off adventurism by both of its opponents with no help from either.

China is the greatest geopolitical threat to the U.S. because of its economic and technological advances and its ambition to push the U.S. out of the Western Pacific sphere of influence. Russia may be a threat to some of its neighbors, but it is far less of a threat to U.S. strategic interests.

Therefore, a logical balance of power in the world would be for the U.S. and Russia to find common ground in the containment of China and to jointly pursue the reduction of Chinese power.

One of the keys to U.S. foreign policy the last 50 or 60 years has been to make sure that Russia and China never form an alliance. Keeping them separated was key, but China and Russia are forging stronger ties through the Shanghai Cooperation Organization – a military and economic treaty – and the BRICS institutions.

The BRICS analogs to the IMF and the World Bank, critical infrastructure, bilateral trade deals, bilateral currency swaps, arms sales, etc.

Meanwhile, the U.S. finds itself at odds with both Russia and China over different issues. Who’s on the losing end of that? Obviously, the United States.

This two-against-one strategic alignment of China and Russia against the U.S. is a strategic blunder by the U.S.

The United States has largely withdrawn from the Middle East while Russia has stepped in on Syria and elsewhere, China is expanding in the South China Sea, and Russia is expanding on its periphery. They have each other’s back, and the U.S. is the odd man out.

But the Russian/Chinese relationship can be exploited. China and Russia have a history of conflicting interests, despite the fact that they were both communist during the Cold War.

The two countries had a number of border skirmishes in the 1960s, and one in 1969 was particularly serious. According to a senior Soviet defector to the United States, “The Politburo was terrified that the Chinese might make a large-scale intrusion into Soviet territory.”

The Soviets even considered a preemptive nuclear attack on Chinese nuclear facilities. Soviet officials advised Washington of the possibility, but the U.S. response was firm, warning that any nuclear attack would possibly lead to World War III.

The point being, there are fissures in the Chinese-Russian relationship that the U.S. could exploit.

For another thing, the U.S. and Russia are the first and second largest energy producers in the world. Saudi Arabia is the third largest energy producer in the world. If you put the U.S., Russia, and Saudi Arabia in a loose alliance, they dominate the energy markets. They can cut you off, they can supply, they can set prices.

Who needs energy the most? China.

China has very little oil or natural gas. It does have coal, but if you’ve been to Beijing lately, you know it looks black at noon because the air is so bad and you can’t breathe it. Pulmonary disease is becoming fairly common. They’re literally choking themselves to death. So, Russia, the U.S., and Saudi Arabia acting jointly have China completely at their mercy.

But the U.S. presently has no relationship with Russia to help back up our position against China. It’s two-against-one, and the U.S. is the odd man out — thanks to U.S. political dysfunction and the media.

In a three-handed poker game, if you don’t know who the sucker is, you’re the sucker. Trump will try to make China the odd man out. Very few people seem to get this.

As China’s power expands and as U.S. power is put to the test in Asia, it is likely that the U.S. will correct its recent strategic shortsightedness and find ways to work with Russia. Or at least it should. This will not be done out of wishful thinking about the true nature of Putin or his regime but as a simple matter of geopolitical necessity.


hedgeless_horseman Lost in translation Thu, 08/09/2018 - 22:02 Permalink


Vladimir Putin stands accused in the media and global public opinion of...

No.  Vladimir Putin stands in the way of Israeli and Arab gas production and pipelines to Europe through Syria, which is the only real reason why the USA continues to sanction Russia.

...which will soon become the site of the natural gas energy boom on which Israel’s economy may become increasingly reliant in years to come.


Much the same as the USA's occupation of Afghanistan stands in the way of gas and oil pipelines from Iran and the Persian Gulf to China.

Geography...it's fundamental. 

In reply to by Lost in translation

NoDebt 07564111 Thu, 08/09/2018 - 22:15 Permalink

Agreed with Mr. Numbers, above.  No way we're working with them together on anything.  Russiagate has poisoned that well but good.  It's a shame we can't work with another mostly-white, mostly-Christian, legit nuclear power on anything, but we're apparently more interested in comparing dick size with them than working with them currently.


In reply to by 07564111

Shemp 4 Victory MozartIII Thu, 08/09/2018 - 22:39 Permalink


Vladimir Putin stands accused in the media and global public opinion of rigging his recent reelection, imprisoning his political enemies, murdering Russian spies turned double-agent, meddling in Western elections, seizing Crimea, destabilizing Ukraine, supporting a murderous dictator in Syria and exporting arms to terrorist nations like Iran.

...from the opera "Seen Putin personally shot down the plane, but the battery in the phone died..."

 Russia and the U.S. are likely to improve relations and move closer together despite the current animosity over election meddling and the attempted murders of ex-Russian spies.

Evidence of such statements was considered unneccessary.

What can be guaranteed by the US, which throughout its history lied and cheated? The Russians do not cherish illusions.

In reply to by MozartIII

philipat roddy6667 Fri, 08/10/2018 - 00:06 Permalink

Yes, but actually Russia doesn't really need to work with the US at all. It's debt is less than 12% of GDP and it is self-sufficient in energy, food, technology and weapons systems. Russia doesn't need the USD and has its own SWIFT equivalent (which I'm guessing will soon be joined with China's system). It can do without US investment and as BRI develops and Europe joins the block, it can do without access to the US market, especially if the price to pay for that is subservience to Washington and the Empire. It won't happen.

In reply to by roddy6667

Adolfsteinbergovitch Bud Dry Fri, 08/10/2018 - 02:58 Permalink

Mark my words: Russia is going to be the place to be in under 20 to 30 years time. Moscow is buzzing with activity, day and night. The whole country is a Paradise, albeit cold in winter, if you are an entrepreneur and if you can choose reliable partners. The economy is absolutely booming and they do not need the USA. Actually most of the people regard them as the scum of humanity, at the same level than negroes. Everybody knows you have to be a fool to trust an American. There are not that many people from Russia who would move to the USA nowadays. And that's the difference, the USA are dying whereas Russia raises from the ashes of bolshevism. And everybody starts to understand this. Everywhere. Putin did an extraordinary work giving back his pride to his nation.

In reply to by Bud Dry

giovanni_f Adolfsteinbergovitch Fri, 08/10/2018 - 03:48 Permalink

"Rickards is an operative, and crooked as Hell. "

Yes. took me some time, too, to realize it. It became all too clear when Rickards defended the bombing of Hiroshima and Nagasaki as some sort of best way to end the war and save human lives.

With sentences starting like "Putin stands in the media..." it should become clear even to the most retarded that Rickards is a propaganda activist. 

Apart from that, the sheer thought that the US has even the option to turn Russia against China is idiotic.  

In reply to by Adolfsteinbergovitch

HowdyDoody giovanni_f Fri, 08/10/2018 - 03:58 Permalink

"U.S. Must Turn To Russia To Contain China"

It is too late for the US. It has made it's bed of untrustworthy terror-enabling state that will renege on any and every deal, so it will have to lie in it. Russia and China know their only chance of survival is to stick together, and are painstakingly showing other states it is in their interests to do the same.




In reply to by giovanni_f

spyware-free philipat Fri, 08/10/2018 - 00:55 Permalink

Russia has opened the northern arctic route to energy and durable goods trading.
They are linking Europe and Asia along that route cutting transportation time and costs in half. That combined with the Nord Stream 2 pipeline and further drilling & extraction of hydrocarbons will make Russia trillions in future revenues. This whole meme about Russia's weak economy is laughable.

In reply to by philipat

kralizec philipat Fri, 08/10/2018 - 08:11 Permalink

If America were free of the progressive/deepstate/crony-capitalist-globalist pestilence it is infected with?  Yes.  Putin himself has said the Russian people and the American people are not enemies...the real enemies of both people is the statist cabal.  People need to start thinking for themselves and quit being steered like cattle by the fake-news memes that perpetuate ignorance or there really will be no meaningful cooperation.  Holding onto past insults without understanding who is behind them is just that kind of ignorance that makes it possible for the statists to retain control and push us all ever closer to oblivion.  Stupidity and ignorance is what the statists thrive on, quit feeding the beast!

Oh, one more thing...for those idiotic people betting on just one horse...if the statists carry the day and an American-Russian cooperation is thwarted...and America withers into self-immolation...where do you think the Chi-Com interest will refocus on?  And having answered that correctly are you intelligent enough to see the tiger emerging triumphant or the bear?

The answer is painfully obvious...though I suspect few can acknowledge it.

In reply to by philipat

07564111 Free This Thu, 08/09/2018 - 22:42 Permalink

It is not possible because both Russia nad China know the plan is to divide. To that end agreements will be made privately to minimize any chance of errors in communication and to maintain a united front in the face of US and JOO Banking aggression.

In short..Rickards is a fool to think that Russian and China are not 10 steps in front of the failure that is US foreign policy.

In reply to by Free This

Tezkhat pluto the dog Fri, 08/10/2018 - 07:21 Permalink

they don`t have to like them, but there is mutual respect and trust that is being built with such treaties.As with history, in which animosity was built with aggressive moves against each other, actions that benefit both build trust and love.Its the way to move forward, through cooperation. Unfortunately, in some parts of the world the old Roman saying, divide et impera, is still the modus operandi. 

In reply to by pluto the dog

Umh NoDebt Thu, 08/09/2018 - 22:28 Permalink

If anyone knew for certain they would be a government insider, but Russia and the US have been spliting the world for longer than I have been alive. China is a rising power and is expanding...

Look at the history of the last few hundred years and see empires rise and diminish. In the history books and lectures some academic will say that moment XYZ is when the power shift occurred. In reality the shifts are not very fast until they are. Much like the old saying about how did someone goes broke, slowly and then all at once.

In reply to by NoDebt

chunga NoDebt Thu, 08/09/2018 - 22:32 Permalink

ZH has become the maverick's version of the Huffington Post. He is exempt from all criticism, direct or by inference.

His siding with the Skripal poisoning is absurd as are many other things.

// all he has to do to keep the flock enamored is occasionally tweet "cnn sucks". It works like a charm. //

In reply to by NoDebt

MrJoy NoDebt Fri, 08/10/2018 - 01:16 Permalink

I think what people want more is a new type of dialogue with Russia. Less of being the face of some NATO-financial-corporate blob, and more of being a trustworthy leader of a nation.

What Trump is doing with Putin is a little messy, but it’s probably a step in the right direction.

In reply to by NoDebt

MozartIII tmosley Thu, 08/09/2018 - 22:39 Permalink

Not until we see a Russia without Putin. The EU issue is in everyones face. See ya, don't want to be ya. The US is bringing in the same crap, much smaller numbers. The Asian countries are more free market in a broader sense than anything in the west. The west adopted the Hitler business regulations and now more and more excessive taxes, will kill the small businesses first. Just play basics out with simple economics, not that hard.



This is a very short version. Take some time and do your own research. Don't go in with a boxed mindset. 

I won't publish a book as a response on ZH, does not go over well.

In reply to by tmosley