The Rise of Russia and the Coming Resource Wars
"The best armor is to keep out of gunshot." - Francis Bacon 1561-1626, British Philosopher, Essayist, Statesman
Russia's move in rejecting all outside help for the development of the Shtokmas field is a small subtle but potentially dangerous long term warning signal to nations that are low in natural resources, especially to the United States which imports the bulk of its oil. Let's take this move one step further. If a nation or for that matter certain companies start to feel that the price of the commodity is too low they can hold back on developing new fields or maybe even drastically cut down production in anticipation of much higher prices in the future. Essentially oil, natural gas, coal etc can now be considered as money in the bank and the longer someone holds out the higher the rate of return (interest). Russia is loaded with dollars and it wants to drastically reduce its holdings and come up with an alternative currency to price oil and other natural resources. Don't be surprised if they start of by giving the appearance that they want to embrace other currencies but actually make a push for their own resources to be priced in Russian Rubles.
Putin made the following comments on May 10, 2006
Our goods are traded on global markets. Why are not they traded in Russia?" Putin said. "The ruble must become a more widespread means of international transactions. To this end, we need to open a stock exchange in Russia to trade in oil, gas, and other goods to be paid for with rubles," Putin said Wednesday.
In his Wednesday's address, Putin urged work on achieving ruble convertibility sped up and completed by July, six months ahead of the original January 1, 2007 deadline.
If this exchange comes into existence it could have the equivalent effect of several Iraqi/Afghanistan style wars occurring simultaneously. The dollar will pull back dramatically as all this excess paper that was used to buy oil will now find its way back to the United States. This means the rate of inflation will rise significantly and commodities such as oil, natural gas, Gold, Silver, Platinum etc will experience huge price surges.
Many resource rich nations are tired of being paid for good in worthless dollars and many of them want to do something about it. The only nation in a position to seriously challenge the US in this area is Russia. Even though there are other nuclear nations out there none of them have an arsenal that is significant enough to threaten the US. When we mean none we are referring to nations that are not allies of the US, hence the entire western European hemisphere can be ruled out and Israel which is rumored to have over 200 war heads can also be ruled. So that really leaves China, India, Russia, Pakistan etc. Even though China is in the midst of a massive military build up it cannot single handedly challenge the US? The only nation that has enough firepower to take on the US is Russia. Note they are the largest producers of oil (they do not hold the biggest reserves) and they have the worlds largest supply of Natural gas. They also control over 70% of the worlds Palladium and the list goes on. Hence Russia is in a position to challenge the Dominance of the Dollar and actually go out there and start asking for payments in other currencies. When this is done a lot of worthless dollar based paper will be left out there which means that prices of natural resources will accelerate even more when priced in dollars.
What Russia is effectively doing right now is attacking the US where it hurts? The cold war between Russia and the United States never ended it just took a different course. Putin is determined to teach the West a lesson and bring Russia to the forefront of world matters. They are busy exerting their influence over all the countries that made up the former soviet union, forming military relationships with the Chinese, supplying the Iranians with weapons and know how, supplying the Venezuelans with weapons and the list goes on. Note how both Russia and China are both embracing rogue nations but nations that are loaded to the gills with natural resources.
One can see how Russia and China have both changed their stance and attitude towards the US in the last few years; as two permanent members on the security council they openly oppose any strong action that comes from the US regardless of whether the threat is credible or not. Two examples; they have opposed the US policy on North Korea and Iran every single step of the way and when they do agree its only because the original decrees are so watered down that they are insignificant at best.
It appears that Russia is looking for means to deal a severe blow to the United States. One way of doing this is to place all the majority of the assets under state control and then use these assets as a weapon. The other means is to go out and strategically and purchase controlling interests in commodity based companies all over the Globe. Russia has slowly been doing this; one example is they very cunningly purchased controlling interest in Still Water mining at an incredibly low price. They paid a measly 7.50 per share and thus assumed full control of North America's largest Palladium producer. If the new commodities exchange goes into effect Russia will effectively deal the dollar a death blow and we could very well enter into the first leg of a hyper inflationary move. Emboldened by Russia's move nations such as Venezuela and Iran will soon follow suite and further erode the value of the dollar. In the precious metals sector the biggest benefactors are going to be Gold and Silver.
Even though in our most recent article we stated that if Gold is unable to stay above its main trend line it could test its recent lows again; the geopolitical situation is such that everyone should at least have a portion of their assets in Gold and Silver bullion.
"One must change one's tactics every ten years if one wishes to maintain one's superiority." - Napoleon Bonaparte 1769-1821, French General, Emperor