COLD WAR, ACT TWO: OTHER ASPECTS OF THAT RUSSIAN DOMESTIC CLEARING LAWMay 15, 2014
This article came to me from Mr. V.T., who has also been following the story of the domestic clearing law just passed by the Russian state Duma and signed by President Putin. There's more teeth in this law than is being reported by the lamestream pressititutes of the Western media.
Taking a page from the mercantilist playbook, Mr. Putin seems intent to study tactics, and reverse them. For one thing, the law requires Visa and Mastercard, if they wish to remain in operation in Russia, to pay the Russian government $3.8 billion in fees. Impose a sanction? Here, have a (large) fee. Increase the sanction? Here, have an increased fee. I have to laugh, because this type of reversal is playing the sanctions game to the hilt, and there's little that can be done about it. Notably, the law did not require Visa and Mastercard to leave Russia, which it would have if Mr. Putin was the rabid, foaming-at-the-mouth neo-Stalinist devolution and throwback that he's portrayed to be by the lamestream media, and particularly by the American "conservative" talk radio.
By playing the sanctions card, the American oligarchy appears to have committed a blunder, and you've just got to love the Russian strategic sense here, which is heavily fried like a pirogi in a dollop of artery-clotting ironic humor: because Visa and Mastercard can opt not pay the fee, stomp out of their Russian play pen like angry petulant children, and lose the profits of their Russian business, which will be eagerly snapped up by Mr. Putin and his own cronies. Or, they can sulk, sourly pay the fee, continue to do business in Russia with slightly smaller profits, and still be enriching the coffers of Moscow, which will doubtless turn over some of the money to Roscosmos to help in its lunar commercialization plans while the chief of Roscosmos continues to advise NASA to use trampolines to get into space
. (I have this vision of Mr. Putin and his advisors, as they cooked this one up, sipping hot strong Russian black chai from a samovar Russian-style, through a sugar cube, and cackling amongst themselves as they hatched this one.)
But now, adding insult upon insult, and a heaping tablespoon of rock salt to the open fester, there's something else in the law and I hope you caught it:
"The new law forbids international payment systems from cutting off services to Russian clients and obliges them to base their processing centre in Russia. To ensure their good behaviour, international operators will have to place a security deposit in Russia's central bank equal to the average value of two days' worth of transactions."(Emphasis added)
So, Visa and Mastercard are welcome in Russia: just pay a fee and put your processing center in Russia, where we can get to it quickly if we have to.
Now, as the article goes on to point out, the Russian domestic clearing system is not a substitute internationally for Russian businesses conducting international trade.
But that, as I've been arguing all along is the next step. Imagine, however, if this system were to include Russian banks penetrating the West's Visa and Mastercard franchises to such an extent that these names become substantially "BRIC-sized," or "Russianized." A nightmare scenario for the western oligarchs(or, at least, to some of them who still have a shred of patriotism or belief in western cultural values), to be sure. (For the rest, it will simply be another way to make money, so why not?)
So, this is one to watch, and don't be surprised if someday, rather than getting endless (and, I hope they take notice in London) rejected and declined offers for a LIBOR-rigging major British Bank credit card, you get an invitation from a Russian bank for your very own Visa or Mastercard (sans Cyrillic characters of course), at better rates than those LIBOR-rigging banks can offer you. That, of course, is a long way off, but if the BRICSA nations are successful in establishing mechanisms of international clearing independent of the West, it could happen.
The question is, will western consumers buy it?
See you on the flip side.