This is probably one of the most important editorials you'll read in 2015, and I mean it with every sense of earnestness. But first, let us set the facts and numbers, which you won't find as direct and complete elsewhere. Europe imports around 36% of its natural gas from Russia, which in turn exports 60% of it through Ukraine. The other 40%, Russia exports through Belarus, Latvia and Finland. When Russia supported the separatists in Ukraine, the US and Europe responded with some tough sanctions against the Russians. This week, Russian president Vladimir Putin ordered that Russian gas to Ukraine be stopped, accusing the latter of stealing it. The end result is that Europe just lost 22% of its total natural gas supply overnight. Now the details.
Obviously, Putin has launched his own revenge agenda, and as usual he's playing it smartly by the book. He didn't cut Russian gas passing through any other country, or otherwise, he would be officially declaring World War 3, and he's too smart to do that. Instead, he picked the same country, which the Americans and the Europeans are claiming to defend, i.e. the cause of the problem, and which happens to handle the majority of Russian gas exports. Instead, Putin is offering the West Russian gas through Turkey, and with infrastructure not ready yet, the Europeans have to wait; let alone the infrastructure between Turkey and the rest of Europe. Do I hear anyone calling for Turkey's inclusion to the EU? Well, let's first take Erdoğan's opinion on this.
And if you think this is all what's Putin been preparing for the West, you'd be terribly wrong. The Russian president, this week, also ordered the liquidation of Russia's dollar dominated assets fund. He is now selling nearly 100 billion U.S. Dollar worth of Western assets, and what is he doing with the cash? Aha, he is first rescuing his ailing Russian Ruble, and second, he's buying dirt cheap Russian energy stocks from their Western shareholders! The Russian stock market, which lost 35% of its value in December 2014, tempted the Russian president to bring those energy shares back home at less than half the price they were originally sold for. Smart enough? Read on, it's not over yet!
Russia has been accumulating physical gold since 2005. Oh wait, this is when Putin served his first presidential era! Indeed, and now during his second presidency, he has tripled his country's gold reserves, so what's the trick? Simple, the Russian leader is moving closer to back his Ruble with physical gold. He first hiked the key interest rate from 10% to 17%, then he gave state-owned companies until March 2015 to bring down their foreign exchange balances to their October 2014 levels. This last move translates into tens of billions of U.S. Dollars being sold for Rubles in the coming few weeks. And eventually, he looks set to back the Russian currency with gold.
And as if natural gas and gold were not enough of a revenge, Putin added oil to his arsenal. This oil price war started with both the Americans and the Saudis triggering it in defense of the U.S. currency and in an attempt to bring Russia - the world's second largest oil exporter - to its knees. So how exactly did president Putin respond to this? He is selling Russian oil for physical gold! In other words, he is pulling Russia out of the Petrodollar market, and hence exposing the U.S. currency to a disastrous outcome. Consequently, what started as an attempt to bring Russia to its knees, could very possibly end with the U.S., Europe and the rest of the world except China on their knees instead.
The best thing I read on Vladimir Putin, which actually led me to burst into laughter was what Russian lawyer Dmitry Kalinichenko wrote few days ago, when he described the case as follows: "Very few people understand what Putin is doing at the moment. And almost no one understands what he will do in the future". I definitely agree! So what should you be doing as this geopolitical financial war escalates? One thing! Buy silver and gold!