"MASSIVE ESCALATION: US & EU sanction Russia’s Central Bank (Live)"
The Duran (February 27, 2022)
By Alex Christoforou and Alexander Mercouris with Gonzalo Lira
Alex Christophorou: "Germany. Germany is going to get hit really hard?"
[1:44] Alex Christophorou:: "... the big news is the sanctions on Russia's central bank. So, Alexander, the floor is yours."
Alexander Mercouris: "The sanctions on the central bank are the real sanctions. The SWIFT sanctions have been, if you like, a diversion. Everybody's been talking about SWIFT. The real sanctions are on the Russian central bank. Now this is the crossing of a giant Rubicon. They've now done something which I think fundamentally alters the way in which financial architecture around the world works because they've targeted the central bank of one of the key countries, one of the leading countries in the world economy. They've been doing in in small ways against lesser countries. They've done it against Iran. There are some similarities by the way to the approach they've taken to Russia. They seem to have copied some of the things they did against Iran but, anyway, they sanctioned the Iranian central bank, of course. They've sanctioned the Venezuelan central bank. They've sanctioned the Cuban central bank for a long time. And North Korea to the extent that it has a central bank ..."
[2:58] "But now they've gone against the Russian central bank. The central bank of a G20 country. And the rationale is this: They're going to try and freeze its reserves which are around 640 billion dollars. So that gives you some idea. Now. They can't freeze this all. They can only freeze those parts of the central bank's reserves which are in Western banks. I don't know what proportion that is. I'm not sure it's very huge to be straightforward about it. And obviously they're going to try and interfere in the central bank's ability to use dollars and euros and those sorts of things. But the thinking is this: If the Ruble falls -- and we can be absolutely sure that there's going to be a major attack on the ruble in the next couple of weeks -- there's going to be a major effort to short the Rubles. I'm not an expert on these things but I Know it can be done. So there's going to be a major speculative attack on the Ruble over the next few weeks. The idea is that the Russian central bank is now prevented from stepping in to defend the Ruble. And at that point that will cause inflation in Russia to rise. And the idea eventually is that this will cause a collapse in living standards within Russia which will in turn lead to a color revolution or some kind of uprising against the Putin government in Russia."
And if you're reading the British media today it is full of articles about how the British objective now is to overthrow Putin. This has been building up for months, ever since the new administration took office. And to my mind it makes full sense of this whole situation, the attempt to orchestrate a crisis in Ukraine, leading to a war, which was then going to lead to pressure on European governments to get them to agree to take this step, and now, eventually, this weekend, they finally got there. The key country that broke was Germany. Germany has a weak government. It's got inexperienced, atlantacist-minded ministers in the Green Party, Olaf Schultz isn't frankly a very bright person; whereas I'm sure that Angela Merkel would have put her foot down and said No; and whereas Friedrich Meltz the CDU leade would also have said No, Schultz and Baerbrock and Handbrake have done it."
[5:50] "Now, can I . . .
Alexander Mercouris: "Germany is going to get hit really hard.""
Alex Christophorou: "And if Germany gets hit hard, doesn't that mean that all of the EU is going to get hit hard?""
Alexander Mercouris: "Germany is screwed, to say it straightforwardly. I mean, this is going to be bad for the U.S. It's going to be awful for Europe. And hideous for Germany. Germany has very close economic links with Russia, and they've just burnt their bridges there. It's inconceivable, so it seems to me now, that those economic linkages that have existed will survive. So German industry gets to be hammered. They're going to lose one of their big markets, one of their major investment destinations, and they're also going to be faced with much higher energy costs than they've experienced up to now. All of this with the Chinese and other far eastern producers rampant and competing with the Germans at precisely the kind of things the Germans have been good at.""
[29:58] Alex Christophorou: "A little off economics, I just want your thoughts on the news that a lot of countries are going to be sending weapons to Ukraine. I mean, just take a quick detour and then we'll get back on this subject...""
Alexander Mercouris: "I mean, it's pure tokenism. How do you get those weapons to Ukraine at this time? You know, Ukraine is losing a war. Before I came onto this program, I was reading that they're about to lose Kharkov, that the Russian army is in Kharkov ... This is far too little far too late. It's not going to change anything decisively on the battlefield. This is simply symbolism. These are symbolic moves that have no real effectiveness or importance. Before very long this war is going to be over long before those weapons arrive. And when they do arrive, well, if they do arrive, they'll simply fall into the Russians' hands.""
[31:09] Alexander Mercouris: Once the Russians have overcome these problems, they are free. They are no longer tied down in the way that they have been ever since the Soviet Union's collapse, or indeed the last years of the Soviet Union, because a lot of these economic-interlinked connections which held the Russians down actually started to be built already before the Soviet Union collapsed. So the Russians are free. They now know that the West isn't going to fight them. It is not able to fight them. It doesn't want to risk World War III, obviously. And now that they've got Sanctions Max, now that the West is at the top of the sanctions escalator, [the Russians] can adapt and develop whatever necessary tools they need in order to deal with that. And from that moment on, they can do what they like in world affairs."
[32:44] "I said this before. We now see Belarus integrating with Russia. We see Kazakhstan increasingly integrating with Russia. We see – and, you know I think this is inevitable – now Ukraine is going to be drawn back into the Russian sphere. And we're going to see a new great power, a real great power, a much more solid great power than we've seen over the last thirty years, emerge in western Eurasia. And the Western powers will from this moment on have nothing very much more that they can do to restrain it. And that, I think, is what westerners perhaps don't understand. ... If you play your trump card you risk losing your card. ... if you go absolute max and then you act bewildered when the outcome turns out to be different from what you expected."
[34:47] Alex Christophorou: "How does this affect One Belt One Road? Because the purpose of One Belt One Road is to obviously use Russia and Eurasia in order to get your goods all the way to Lisbon, for example, right? That's One Belt. That's the dream. But now that's cut off, isn't it?
[35:01] Alexander Mercouris: "No, it is not cut off. That's the other thing. Because, as I've said, what they haven't actually done is interfere with trade. They haven't interfered with trade because they can't. That would be devastating. If you start cutting off Russian oil and gas and metals, then you devastate your own economies. There's no reason why goods can't travel to the West along the northern sea route or from Saint Petersburg or whatever. I'm going to say something else, actually. I think, anyway, there is that aspect to it which is obviously an important one, but the primary interest of the Chinese in Russia – and I've said this repeatedly – is not so much the transit routes to Europe, it is to provide China with strategic depth. To provide China with the food, the oil, the grain, and metals that it needs in case it finds itself under blockade from the United States. And that calculus hasn't changed at all."
[36:14] Alex Christophorou: "If this gets out of hand and Russia does enter a state of hyper inflation, do you think that could be a risk for protests and eventual regime change? I'm talking maybe a medium term instead of short term."
[36:21] Alexander Mercouris: "No, I don't think so, even if we get into that kind of a situation. I don't think it would create that kind of crisis in Russia. Bear in mind, I mean, that -- this is the weird thing about this – is that this has already been tried. This is what they tried to do in Iran, a much more vulnerable economy. Much more ...
"How did Iran handle it?"
"First of all, there wasn't hyperinflation. There was higher inflation but that ban, in Iran's case, they wer worse, because they did try to choke off Iran's oil exports. So they really did put Iran under seige. And what happened? Iranians blamed the West, solidified behind their government, and even a weak chaotic government like Iran's was able to do all sorts of things which were able to insulate its economy from these disruptions. So, yes, there was higher inflation. Yes, there was pressure on living standards. But Iran is still there. It has come through, as, by the way, I predicted.
Alex Chrisoforou: "Some stuff about India ..."
[:] Alexander Mercouris: "... the Indians prize their independence and their sovereignty very, very highly. Russia for them is a key friend as a major partner. They will not want to cut the Russians off. And the forged a strategic partnership with Russia. And they've presumably done that because they see that as a vital national interest."
[39:37] Alex Chrisoforou: "If India decides to side with the U.S. on this – if – does that change the calculus?
Alexander Mercouris: "No. It doesn't. If China were to decide to back the U.S. on this, then that would change the calculus. India is important but it is not critical. China is critical. But, well, as critical, because even that I have to hedge because Russia would still be self-sufficient in food, raw materials, and energy. And it would still probably have the resources to pull through by itself if it had to. You know the Chinese have already made statements today. I thinjk they [the Russians] would have no difficulty pullinng through. ... Chinese foreign minister Wang Yi has already come out and said clearly that China is strongly opposed to unilateral sanctions. He has repeated the Chinese talking points that this whole situation has arisen because of NATO expansion and that the West is refusing to take Russia's legitimate security concerns seriously and that this is the reason why this whole crisis has arisen and it's the West's fault that this crisis has arisen. So, it's standard talking points that the Chinese are making."
[41:00] "By the way. I'm going to make a guess. I think that the Russians and the Chinese have been talking about this whole business for a long time. And I think that when the Russians put forward those two draft treaties in December, I'm sure that they've been strategizing this with the Chinese for some time. It's given that, putting those draft treaties forward, has given the Chinese the talking points they need to counter whatever criticisms they now receive for reporting a Russian "invasion" of Ukraine. And I'm sure that this was done, in part, for that reason."
[48:13] Alexander Mercouris: "The Russians will see this as an attack on themselves. And the Russian government will act to mitigate this. In Europe, we are not going to act like this. European governments are not going to act to mitigate this because they are not going to do the necessary things that they need to do because it contradicts their ideology. They can't rethink their strategies because doing so would be an admission of failure, which is something they are not able to do. So that's why we have flexibility in the one place and total rigidity in the other. And when you're rigid, you lose."
[49:27] Alex Chrisoforou: "This is big stuff because, you know, it affects everybody. And it's going to affect me. It's going to affect you.
[49:31] Alexander Mercouris: "Absolutely. The amazing thing is, also, I've been reading the newspapers here in Britain. This has not been given the attention that it needs. I mean, the street fighting in Karkhov, which is no doubt important because Karkhov is about to fall and all that. But sanctioning a G20 central bank is a much bigger event than the fact that Karkhov is about to fall. I think that's an important thing to say.
Alex Chrisoforou: "Other people will say, look, people are going to get mad when you say stuff like that because there's a war going on and they're suffering, but like we're trying to focus on the economic side of things."
Alexander Mercouris: "But this is going to cause suffering. It's intended to, remember? There is kinetic war, which is people shooting and fighting each other. And then there is sanctions war, which is economic war, which is what we're seeing and the one is every bit as devastating and debilitatingd as a kinetic war is. It just is more insidious and takes longer."
[51:00] Gonzalo Lira: "There has been a curfew from yesterday, Saturday after noon at 5:00 p.m. until Monday at 8 a.m. and so I'm like stuck here in my hotel and I'm just going a little bit stir crazy. So, being on your show is a very welcome distraction. And by the way, Alexander, I saw your show the other day and you spoke so kindly about me and I want to thank you very much. That was so kind of you to say this, such nice things about me. ...
I would like kto give a quick military update. I am not a military man, so don't know the weapons and strategies and what not, but I understand the generalities but the specifics are beyond me. But what I do know – and this is factual – not only because of video evidence, but because of first hand accounts that have heard from people in Kharkov which is the second largest city in Ukraine, which is in eastern Ukraine. Russian soldiers have penetrated into the center of the city and there is small arms combat in the center of the city. And so we are on day four of this invasion. It started Thursday in the early hours Thursday, [then] Friday, Saturday, and here we are Sunday on day four. They are entering the city. They have it pretty much cut off from the rest of Ukraine. And this seems to be the overall strategy of the Russians. The Russian army seems intent on, first, surround and cut off, and then slowly advance and take over. And this is the strategy that they have used in smaller towns and cities that presented some slight resistance. And it seems to be what they are doing in Kharkov and it seems to be doing now in Kiev, where I am located at this time.
[53:07] "In Kiev, the northwestern or western northwestern, I forget the exact coordinate, road that leads into Kiev has been interdicted by the Russian army. They control it. And so, as I understand, there's only a single road that might be left. The straight eastward road, I forget the number of it now, but – it's not important, you can lookat a map – and so the Russians are slowly encircling Kiev. I am here in the center of Kiev and there is very very distantly an occasional rumble. It sounds like distant thunder. But very very once in a while. Maybe once an hour, once every two hours. But other than that, there's no noise going on. And since there's a curfew, stick your head out any window and it's crystal clear. You can't hear any kind of fighting. And the word that I'm getting from people here is that the Russians consistently come up against a group of Ukrainian defenders, they exchange small arms fire, and then they retreat. And that has been their consisten strategy, or tactic, rather."
[54:22] Now, some other people are basically saying – and this seems to be the general agreement – Russia is surrounding the major cities and just waiting them out. What is happening in Kharkov where I live – and, of course, I have a number of sources that are first-hand – and they have told me that the soldiers are just taking over the city. And it seems clear that Kharkov will probably be completely within Russian hands certainly within another four days, you know. Just to be very conservative about it. But there seems to be no possibility of reinforcements for the Ukrainian forces in Kharkov. They've been completely surrounded.
[55:05 ] "The other word I'm getting is that the Russians have taken Zaboroja and they are well on their way to Dniepro, the third largest city in Ukraine and it is dead center, when you look at the map, just look dead centter , right on the river, and that's Dniepro. It used to be called Dniepro Petrovsk. And it seems that that city will be reached by the Russian army in the next two 48 hours to 72 hours. And, again, the same kind of tactic."
"It's very weird to be on Twitter and the various social media platforms. I am not on Facebook. That's the one platform I just refuse [to use] I just don't like it. But all the other platforms I see, they keep saying that the Russians are losing, that they're not reaching their objectives. And I look at the map and I look at the amount of the number of hours since this started and where they are located -- and this is definitively located – video evidence, and it's very clear that it's Russian forces and the little landmarks are of these towns or cities or whatnot. And like, in Kharkov it's first-hand accounts of people who are there, who see them out the window, OK? And so my thinking is that the people on Twitter, the people on social media, they're delusional. Because they are swallowing nonsense. And they're spewing out nonsense."
"The Russians have advanced, and here's something else that seems to be increasingly clear. The soldiers that they are using, from various accounts, they are very green and they're very ill equipped. And it's a known fact that the Russians have a great deal of first-class weaponry, state-of-the-art tanks and self-propelled guns and what have you. And it's becoming increasingly clear that the Russian army flung out the second-tier of their army, quite frankly, as cannon fodder. And now that that operation is ongoing, it seems clear that the top tier of men and materiel are being held back. I would think for two reasons, two possibilities.
"[57:21] Number One: the top tier soldiers are going to be much more disciplined, and therefore they would be a perfect occupation army who will not abuse the citizenry, on the one hand. And on the other hand, this top-tier army, it will be fresh and ready to go if – and this is a big if – NATO or some NATO country or the United States does something very rash and foolish. And that seems to be the state of play at this moment."
"The other thing that is very apparent, is that the Russians are completely ignoring western Ukraine. They do control the skies – and I'm going to get to the issue of air superiority in just a moment. But insofar as the land war, they seem to be ignoring western Ukraine. Lviv and Ivanovsk and other cities (I can never pronounce the names), the cities out in the West that are close to Poland and the border with Poland and the border with Hungary. The refugees are going there. The lines are catastrophic. I got notice that the line for the cars, the wait-time for cars is between 20 and 44 hours to cross the border into Poland if you're going by car. If you're going by foot as a regular civilian it's at least 10 to 15 hours wait time to be processed and crossed into Poland. It's chaotic but peaceful. A lot of people wanting to get in but nothing, no panic going on because, of course, because Western Ukraine is completely free of any kind of Russian military aggression.
[59:23] "But the center of the country and the east of the country is rapidly being taken over. And there is something else, too, that I think is very interesting. I mentioned before that this first wave seems to be of the greener elements, clearly stiffened by more experienced soldiers, but the bulk of the army that is advancing initially is greener and they are, as I said, it seems to be kind of like cannon fodder because the Russians are known to have elite soldiers, elite tank battallions with state-of-the-art tanks. And the tanks that we are seeing are old. They are from the beginning of the century and some of them from the turn of the last century. These are old tanks, I could not tell you the makes, but there's enough video evidence to show that these are older tank. And it seems that they were deployed specifically as cannon fodder."
"And what's interesting is thatin the Lugansk and Donetsk where the battle is raging there, the people who are at the front are elements of the People's Republic army of Lugansk and Donetsk, which I think is very interesting. You can draw whatever conclusions you want from that, but it is very apparent that those initial troops from those eastern regions are not Russian soldiers. They're the [local militias] that are being used to move forward, which I think is very interesting. And I'll leave it at that.
[1:00:54] "Air superiority. There are some commentators on Twitter who seem to be saying that Russia doesn't control the air. That's bizarre. They do. That's obvious. And they keep saying that the Ukrainians have the equivalent of the Warthog anti-tank aircraft and such that are strafing the Russians. I don't really believe that. I think that it's propaganda and I'll explain why. The Russians have had four days over Ukraine. And they have the aircraft to cover the entire country. So any runway is either destroyed or in their hands or in the process of being in their hands. If it's destroyed, it's inoperable by Ukraine. if it's in the hands of the Russians, it's inoperable by Ukraine. If it's in the process of being taken by the Russians, you would never fly an aircraft out of there because it would be shot down by the surrounding forces. I don't believe these accounts. They don't square with the known facts at this time.
"I just have to say this. And it's very odd, even people who are very level-headed seem to have this very bizarre notion that the Russians are somehow losing. They're not. I mean, it's really clear that they are advancing consistently. And like I said, the accounts of Kharkov are first-hand accounts of multiple sources, people that I know, that I'm related to in some cases. So it's not just hearsay. So I fiind the commentary in the West extremely bizarre, OK? So that's my prescience in so far as the military is concerned."
[1:02:54] "Yes, I heard that they are going to disconnect from SWIFT several of the banks but it was already known that these banks were sort of likek in the doghouse as far as the EU was concerned. But I think they are going to get a little bit carried away and wind up actually disconnecting Russia from SWIFT. And I don't think they've realized that this is going to hurt them. Because the Russians can simply say, OK. Then we'll just cut off your gas. I mean, if you're not going to pay us, and the only way to pay us is by being on SWIFT and if you're going to steal the foreign currency reserves we have on deposit with your central bank from our central bank, then we'll just cut off your gas. We'll cut off your petroleum. And now that we control Ukraine, or at least can interdict any trade from you, Ukraine, to Europe, we're going to cut off your grain, too. What are you going to do about them? And I think the Europeans have not thought-through this self-generated hysteria that is driving them off a cliff because if I'm Putin and part of that class and the Europeans get this hysterical, I say then I'll just shut off the oxygen tube to you and see how you survive without it. Because they need the gas. They need the oil. And they need the food. And so I don't understand what these people are doing in Europe."
Alexander Mercouris: "I think that the Europeans have been swept along on a wave of hysteria. And you know what they say: If you make decisions in anger, then they are repented at leisure."
Gonzalo Lira: .. the unreality of the Western idea of what's going on in Ukraine. ... but the amount of territory that they have gained in the last four days, and the speed and effectiveness in capturing the country so far. And how it has been acheived with so little damage to the country, because it is extremely little damage. This is going to prove to be, it is seeming, and I don't make any judgment as to the moral cause, talking strictly from a military standpoint. This will be seen in hindsight as one of the most brilliant invasions ever because it's so soft and so gentle, there is no other way to put it because it's war and it's horrible but the civilians have not been injured. There's been a huge outflow of civilians, out of fear. And also of something that nobody is discussing. Which is the forced conscription of men between 18 and 60, which I consider just despicable. I mean real widespread panic because now they are stopping buses and pulling people off the buses who look between 18 and 60 and some of these people are babies. They might be eighteen, but you know, mentally they're still children you know. And men my age, in their 40s and their 50s and their 60s who are in no shape to pick up a weapon. And they have no training for. And they are even going so far as to release hardened criminals from the prisons who have military experience.
[1:07:47] "It seems the Zelenski regime is hell bent for leather on creating a lawless country. And I think it's outrageous. But nobody in Europe or the United States seems to recognize this and they're just going along with this hysteria. And you know, Zelenski good! Putini bad! And everything he does is wonderful and everything Putin does makes no sense whatsoever. It just happened out of the blue. And number two is by definition evil. I just want to hold my head."