The Revenge of the Rouble
On the Fallacy of an Economic Siege Against Russia
“Having been besieged, some, so as to show the enemy they have surplus grain and make him despair of being able to besiege them through hunger, have either thrown bread outside the walls or given a steer grain to eat and then allowed it to be taken so that when it’s killed and found full of grain, it shows what abundance they have.” - Machiavelli [Art of War, VII.81]
From the beginning of the Russia-Ukraine War, one of the things I have found the most remarkable is the “West’s” boundless faith in sanctions. As part of actual warfare blockades can have some impact- often at great human cost- but as a form of purely economic warfare they have nothing but a human cost. This should be no surprise, for example, Napoleon’s “Continental System” whereby he attempted to block the United Kingdom from European markets simply didn’t work and is considered by many to have led to his downfall. The US government has drastically failed at much more modest sanctions efforts, with the regimes in Cuba, Iran, and Venezuela still standing after well over a century of combined years of sanctions. It’s true that the Soviet Union collapsed, but no one believes decades of sanctions had much to do with that. The fact is that though a starving population may riot, which could lead to a regime being overthrown, almost everyone has the sense to blame the people doing the sanctions, not the people being sanctioned. It is only the extreme cognitive dissonance of imperial hubris which could make one believe anything else- though harming you and blaming someone else just is what governments do.
Here is Representative Matt Gaetz explaining how sanctions on regimes fail:
[I would like to note: I am not some sort of Matt Gaetz “Stan”, he just twice recently happens to have posted extremely relevant things on Twitter while I was writing.]
All of that being well known, they decided to sanction Russia. The goal was to destroy the rouble, because that would somehow accomplish something. Biden actually said as soon as the invasion occurred that sanctions “never deter.” He also tried to claim “see where they would be in a month” and his administration had no good answers a month later. So how is Russia’s humble currency doing a month into the West’s unprecedented economic warfare? See for yourself:
For all of the economic warfare and anti-enemy mania the plucky little currency seems to have mostly recovered. It could still crash again, but the 13~% it is down year-to-date could have easily happened simply from the instability of being at war, beyond which we’re in an era of global inflation which is having an uneven impact on global currencies. It seems as likely as anything that the “unprecedented” economic warfare against the rouble was actively counter-productive, as sanctions often are. Our rulers have such a knack for doing things actively counter-productive to their stated goals that I am often left wondering if the results we see are intentional. [The evil-incompetent matrix of government action is one of the most challenging things to accurately analyze.]
The idiot “experts” who are always wrong are now scrambling to prepare the public for the fact that, well, they were wrong again. The Economist just published an article titled “Under Unprecedented Sanctions, how is the Russian Economy Faring” with the subheading, “better than you might think.” Reuters is taking a different approach and saying, “Russia’s Rouble Rebound is not as Real as You Might Think.” This makes a few decent points, specifically regarding various capital controls Russia has introduced but this is in comparison to the dollar which the US government manipulates in a huge variety of ways. They can spin it however they want, but the fact is we were promised a collapsed rouble and it didn’t happen.
So why is this happening? Why is Russia able to withstand this “unprecedented economic warfare”? No one would even need to ask that question if not for non-stop media manipulation, because sanctioning Russia has always been a nonsensical premise. The idea that you can defeat people who survived 70 years of Soviet Communism while Americans grew up in suburbs by taking away material comforts is ridiculous. But more importantly, look at a list of Russia’s top exports in dollar value: by a huge margin gas and oil, gems and precious metals, iron and steel, cereals, nuclear equipment, lumber and finished wood products, fertilizers, and then a variety of other metals. How are you going to starve a people who produce more grain, fuel, metal, and lumber than they need? Basically they have an excess of all the things a civilization needs to thrive and anything they don’t have can be made from these source materials. Experts have long derisively called this a “resource based economy” as if exploiting and processing your natural resources is a bad way to make a living- whereas the oligarchs who run America want you happy in what they call a “service based economy” where I guess we just manage the transfer of our inherited wealth to oligarchs but don’t create anything new [note that article is sponsored by CitiBank- who surely just wants what’s best for you.]
But the people who want you to own nothing and be happy notwithstanding, here is Machiavelli’s description of how “German” [Swiss] cities prepare for sieges:
“They all have appropriate moats and walls; they have enough artillery; they always store in their public warehouses enough food, drink, and fuel for a year. Besides all of this, in order to be able to keep the lower classes fed without loss of public funds, they always keep in reserve a year’s supply of raw materials sufficient to give these people work at those trades which are the nerves and the lifeblood of that city and of the industries from which the people earn their living. Moreover, they hold military arts in high regard, and have many regulations for maintaining them.” - The Prince [X]
The only difference with Russia’s position is that instead of walls it is protected by its sheer vastness, and instead of stores it can also keep its lower classes employed at the production of raw material. The “West” is somehow sure that the Russians need them, despite that they export very little Russia can’t easily replicate besides foreign moneylenders and “NGOs” to propagandize children and create social dissent. Speaking of consumer credit, Visa and Mastercard being cut off would create extremely inconvenient immediate situations, but this means Russians don’t have to pay back their debts to Western lenders. I love how that is their punishment, I keep thinking of Andy Dwyer from “Parks and Recreation”:
On top of all of this, Russia is said to have legalized piracy, nullifying the intellectual property of companies from hostile countries. This means a lot more than getting free computer games on PirateBay. When McDonalds opened in Russia, the Russians had no money and did not know how to do business following 70 years of communism. When McDonalds left Russia, the Russians had a whole class of billionaire businessman positioned to take advantage of any openings in the market. Nothing McDonald’s does is difficult to copy, they simply previously could sue you if you copied them. As stated above, Russia has ample beef and wheat and thus can easily make their own goddamn Big Macs. But it isn’t just McDonalds: besides certain luxury goods everything is easy to copy and they have the resources, capital, and relative economic freedom required to do it. We could be seeing high quality Russian knockoffs of consumer goods for the rest of our lives. The woke Western corporations who have to go along with every moral panic have in essence ceded all of their business in Russia to Russian, Chinese, and other companies. This means that the profits are no longer going West and being turned into USD, so quite literally the demand for dollars goes down because Western businesses are no longer operating in Russia and thus are no longer buying dollars and Euros with their Russian profits. I mean seriously these people are trying to collapse the rouble’s value- measured in dollars- by stopping people from buying dollars with roubles.
One of my friends likes to say that the government’s actions are like the meme where the guy puts a stick in the spokes of his bicycle writ large and that seems to be as true of this as anything.
So, in the first place, cutting off Russia was itself always a non-starter. My one Marxist friend commented, in essence, that it is not just Russia’s resource, but trying to do this to any modern capital power is pointless. But the thing is Russia is not actually cut off. They are inconvenienced, but maintain massive trade relationships with other countries and retain access to most of the world. The Western powers are not themselves even able to stop trading with Russia. Germany, the worlds fourth largest economy, cannot function without Russian gas: it imports 55% of its [natural] gas and 34% of its oil from Russia. This is not something where they can tell you to just inflate your tires properly to save gas [okay, Obama didn’t get away with that either], it will bring their economy to a grinding halt. What’s more those idiots just deactivated their nuclear plants for no good reason. Russian gas is so important to Germany and the rest of Europe that it has continued to flow through Ukraine state-owned pipelines during the war. For all of the West’s hypocritical blathering about supporting Ukraine they won’t even give Ukraine the diplomatic support to not let it’s actual enemy stop using its assets for transit during a hot war. In a rare minute of properly observing the irony of human affairs, the Washington Post notes in the linked article that Ukrainians are rushing to turn off Russian gas to buildings Russia bombs.
Not unsensibly, Russia seeing its enemies bragging of unprecedented economic warfare and publicly stating their intention to destroy the rouble, was able to help the rouble through the asset that Europe needs the most. So of course, as should have been obvious, cut off from SWIFT and all Western financial institutions, Putin stated that he would demand payment in currencies besides dollars and Euros [which they’ve made it near impossible for him to use.] Notably, Russia announced that for them “hard currency means gold”, though it was the most reported that Russia wanted roubles [or Bitcoin.] What this means is that these necessary gas purchases will replenish Russia’s sanction-depleted currency reserves which are seen as guaranteeing the rouble. It needs to be added again, that the rouble’s value is always compared to dollars, and the dollar is propped up by the petrodollar system, which is crumbling because of these sanctions which the West implemented to destroy the rouble. Thus, what damages the value of the USD makes the rouble look relatively better.
So will European countries pay in another currency? Probably, the countries have no choice but to get the gas. Reporting on this stated that Russia would be turning off the gas on April 1st, but Russia stated that in fact March 31st was the last day they would accept dollars or Euros as payment. Gas will not be cut off until bills come due, in 2-6 weeks. The media is playing this as Europe rejecting Putin’s ultimatum, but it makes sense that Russia would want these countries to already owe money at the time when the gas supplies are cut off. I personally will not be surprised at all if these countries decide to pay in physical gold to avoid the current insane geopolitics of currency. Any disruption of delivery will be a massive problem for the Western regimes and economies. It was essentially guaranteed by cutting Russia out of the international banking system that an alternative form of payment would be found which didn’t rely on- and thus weakened- the American-backed international financial system. This move is counterproductive to the goal of collapsing the rouble.
So much for powers hostile to Russia, but there is a bigger problem for the quest to destroy the rouble: Russia isn’t actually under economic siege. As I covered recently, the so-called “International Community” is actually quite small relative to the world at large. The population of the BRICS bloc alone is greater than the world population in 1950, when US economic warfare against the Soviets really ramped up last time. But that is only five countries. Many more or not going along with this.
This recent meeting mostly went unnoticed in America:
It is ostensibly for countries that border Afghanistan, though Qatar and Indonesia’s involvement raise some questions about what else was discussed. Though Russia may no longer have the Soviet Union, it appears the entire former central Asian empire remains onside, at least enough to keep trading with them. And Indonesia, the world’s fourth largest country by population, is still meeting with Russia. Africa and it’s 1.3 billion people is still in business with Russia- they’re said to appreciate Russia’s less domineering and meddlesome approach to economic matters- the same thing which helped the USSR during the Cold War. Mexico won’t sanction Russia, with President Obrador’s stated reason being to “maintain good relations.” Biden had his minions beg Venezuela for gas, but Maduro outright supports Russia’s invasion of Ukraine. Russia’s long time allies of Cuba, Syria, and Iran have stayed on side. Turkey is still buying Russian military equipment while trying to profit from a non-aligned policy [despite its status as a NATO member] to host negotiations which it hopes will bolster its prestige. Not that it matters economically or makes Russia look good, but Russia’s isolated neighbor North Korea is also onside. Even Israel has been criticized for its reluctance to go along with the sanctions regime [and by people who would usually greatly avoid criticizing Israel.]
When you add up these countries, Russia retains access to a truly enormous volume of trading partners. More, by far, than are blocking Russia’s access. Perhaps not in GDP but in terms of population. And Russia provides real products that are useful for everyday life, whereas the Western economic powers basically export fiat currency, credit, luxury, and corruption. While Russia is certainly facing disruption and will suffer from a period of economic transition, Russia’s resource based economy still appears to be saving the rouble. True, they will suffer from decreased demand with fewer total consumers and working with poorer counties, but the West cut off their access to luxury goods so they’ll have less overpriced shit to waste money on and thus a lower need for dollar-assessed revenue.
India and Russia’s longtime strategic partnership is leading the way to a post-dollar-hegemony future where the rouble will survive, with Russia offering India discounted gas to be traded in a rupee-rouble exchange system they are planning. Sure, the cut-rate deal may seem like a sign of desperation, but they need the cash now and are nowhere near running out of oil; anyhow, peak oil is a myth, and there is surely much undiscovered oil in the vastness of Russia’s east.
The US policy class should have considered that a fiat currency’s value comes from more than just the government’s perceived prestige and various systems for maintaining power they have come up with: it also comes from the physical resources that country has- such as gold and oil- which can always find a buyer. It appears, so far, at least, that rumors of the rouble’s demise are greatly exaggerated. I don’t now how this will all end, but almost certainly with us poorer and looking like a bunch of bitches. [As ever, assuming we don’t die of nuclear war first.]
I will leave you with another Machiavelli quote:
“Men, iron, money, and bread are the sinew of war; but of these four, the first two are more necessary; for men and iron find money and bread, but bread and money do not find men and iron.” - Art of War [VII.178]
Machiavelli is using iron to mean weapons, and is referring to acquisition of resources through plundering, but this also applies well to economic conflict: any large country with the ability to make tools and and a large labor force to use them can easily enough find itself food and currency. Meanwhile, the United States and Western Europe are engorged on food and wealth while neglecting the well-being of their populations and the exploitation of their natural resources. But they seem sure that luxury and corruption is somehow the answer to everything. Time will tell, I suppose, but for the time being just enjoy laughing at yet another massive L for the Biden administration, or cry for your children’s future, your choice.
P.S. This article was written on Friday, before the burgeoning supposed “Bucha Massacre” story [which reeks of being staged] came out. I will try to get to that shortly, assuming I can pull myself away from trying to figure out how Hunter Biden funding biolabs is the key to everything.
Thank you for reading! If you enjoyed this article please share and subscribe. My shitposting can be found on Twitter @WaywardRabbler
It was never clear to me how making a nation's population poorer and more reliant on government handouts would help inspire them to overthrow their government.