Excerpts From Geopolitical Evolution: Russia's 'Rebellion' & A Return To Gold-Backed Currency

by Tyler Durden   Sunday, Jul 02, 2023 - 06:00 AM

Authored by Alasdair Macleod via GoldMoney.com,

The increasing number of nations seeking to join BRICS brings geopolitics into the spotlight. At the time of writing, existing members, those who have applied to join and those expressing an interest total 36 nations, with over 60% of the world’s population and one-third of global GDP.

Plans for a new trade currency backed by gold appear to be on the agenda for the BRICS meeting in Johannesburg in August. In this article, the geopolitical aspects of its introduction are considered, and the indications that how it will involve gold are discussed. The mechanics of this project are then suggested.

The thinking behind a new trade currency

While any announcement about a new trade settlement medium at the BRICS summit in Johannesburg is likely to be preliminary, we can be sure that the legwork has already been done by Sergei Glazyev. Furthermore, various statements by nations prepared to accept settlement in national currencies other than the dollar must be seeing this as a temporary solution, pending more satisfactory payment arrangements. The Saudis accepting Kenyan shillings, or Russia accepting Iranian reals makes no sense on any other basis. Because the current position is temporary, it is time limited. 

In an article entitled “Golden rouble 3.0: How Russia can change foreign trade infrastructure”[ii] written for Vedomosti, a Moscow-based Russian business newspaper published on 27 December2022, Glazyev laid out his latest thoughts. Furthermore, it was co-authored by Dmitry Mityaev, who is Assistant Member of the Board for Integration and Macroeconomics of the Eurasian Economic Commission — so this article was not just Glazyev’s musings, and we can assume that it carried official weight in Russia, at least. The article focused on the potential for a gold-backed rouble rather than the new trade settlement medium, but the same logic applies.

From this article, the EAEU currency commission now appears to have dropped the original indicated proposal for a new currency based on a weighted index of participating currencies and commodities entirely, using gold and credit based upon it instead as the principal means of settling trade imbalances. Presumably, the requirement to make payments in the new trade currency could be circumvented if one or more national currencies such as the rouble or renminbi went onto credible gold standards. The implication is that the rouble will readopt a gold standard sometime after a gold-backed trade currency is announced, reviving the gold backing (though not the relationship) that the Soviets operated between 1944 and 1961.

To reinforce the importance of a return to a gold standard, both Russia and the Saudis heading up OPEC+ will be aware of the consequences of the fiat petrodollar regime for their primary export product — crude oil.

In August 1971, when the Bretton Woods agreement was abandoned, crude oil was priced at $3.56 a barrel and the market price for gold was $42.85. Converting this into ounces of gold per barrel gives us a value of 0.0831 ounces. Today, the gold price of oil is 0.036 ounces per barrel, down 57%. In other words, using gold Glazyev can demonstrate that the true cost to OPEC+ of dollarisation has been to more than halve the value of their export revenues since the Bretton Woods agreement was suspended. By accepting a new trade settlement medium tied to gold, this US enforced erosion of oil values will cease. And to compensate for the loss of oil’s value from the ending of Bretton Woods, the gold price in dollars would have to be more than double that of today at over $4,400. 

The evidence mounts therefore, that gold provides a framework within which Glazyev intends to operate. That he must be thinking this way has become fundamental to his approach, confirmed by his many references to gold in his article for Vedomosti, to the rouble’s history tied to gold, and to the US’s debasement of petrodollars.

In the UK at least, Russia’s media appears to be censored, so Glazyev’s Vedomosti article (referenced in endnote ii) may not be available to many readers in the west. Therefore, for ease of reference the salient points in the English translation of his detailed article are summarised as follows [with additional commentary in square brackets]:

Read entire article here:  https://www.zerohedge.com/geopolitical/geopolitical-evolution-russias-rebellion-return-gold-backed-currency