"Money, after all, only has value as long as we think it does."

Matt O'Brien

Matt O'Brien, in his report "Checkmate, Putin. Russia’s economy is stuck in a catch-22", in The Washington Post of December 16, 2014.

Matt discusses the unprecedented fall of the Russian currency - ruble - to the lowest level of 80 rubles per dollar despite increase in the interest rates from 10.5 to 17 percent. According to him, Russia is facing the economic catch-22 situation for which, typically, the word "checkmate" is used. 

Russians have totally lost confidence in their currency. They are using any rubles they can't turn into dollars to go on shopping sprees buying things like like cars, real estate, Ikea furniture, and Apple products, which is only going to lead to ruble's faster demise.

"Money, after all, only has value as long as we think it does. If ordinary people decide that they'd rather turn all their rubles that are rapidly losing value into things that won't,"  Matt writes adding that Russians are exactly doing that. "It's a bank run on the currency. Prime Minister Dmitry Medvedev has already asked Russia's top exporters to behave "responsibly" and Russian Finance Ministry has started selling foreign currency to keep ruble alive.

It is widely felt that in order to stabilise ruble, Putin might declare capital controls that make it illegal for people or companies to turn their rubles into foreign currency. Next few days are going to be crucial not only for Russia but for global markets, too.

"Putin has, in effect, launched a vast experiment into whether it is possible to extract a large and relatively well-integrated country from the global mainstream, and to reject the rules by which that mainstream runs"

Anne Applebaum

Said : Anne Applebaum, a columnist for the Washington Post and Slate, in her post titled "Putin's great gamble is about to backfire" published in The Spectator. 

Anne has compared the current scenario with the one in 1941, when Hitler invaded the USSR and the nation rallied round Stalin. "The Ukrainians were said to be Nazis; NATO was said to be encircling. The head of a state polling agency told the Wall Street Journal, ‘If the West doesn't like us, that means we’re on the right track,’ she writes. 

According to her, the newly born ultra-rich Russians, who have minted oil money during the past decade, have no clear mechanism to respond to the onrushing economic crisis that has resulted from Western sanctions. tumbling oil prices and crash in the ruble. "Alternative leaders (in Russia) have been eliminated, and alternative policies are not discussed, but that doesn't mean they’ll remain passive forever," writes Anne. "They could leave the country, withdraw their money, stage a palace coup or simply find ways to make life in Russia unpleasant for Russia’s leaders in ways we haven’t yet imagined," Anne concludes. 

Photographer: Alexander Zemlianichenko/AP Photo

Bloomberg reported today that the ruble plummeted into a free fall, losing as much as 19 percent as panic swept across Russian financial markets after a surprise interest-rate increase of 6.5 percentage-point, to 17 percent, failed to stem the run on the currency. The ruble has plunged 52 percent this year. Policy makers are likely to consider currency controls as “the last solution” to stop Russians from converting money into dollars.

"Russian President Vladimir Putin has to put his shirt back on and stop acting like a thug"

Fadel Gheit

Said : Fadel Gheit, senior energy analyst at Oppenheimer in an analysis of OPEC's oil battle and to opine on how long Saudi Arabia can withstand low oil prices. His comments were published in CNBC Executive News Editor Patti Domm's post titled : "Oil battle is sticky, but OPEC may be forced to act." 

According to Fadel Gheit the Saudis could take low prices for more than a year. But other countries, like Iran, Venezuela and Russia, will be increasingly impacted, reported Patti.

Patti notes that Russia is feeling the pinch of sanctions and has lost the assistance of Western drillers. Saudi Arabia sees $60 as the level where prices will stabilize, after OPEC's decision not to cut its production. According to her "the U.S. shale industry is relatively new, and some analysts say it really is not clear what the impact will be."

"It's a threshold of pain. Saudi Arabia has enough money and is applying pressure on Iran. They have to bring Iran to its knees to bring it to the negotiating table, … and (Russian President Vladimir) Putin has to put his shirt back on and stop acting like a thug," Patti quoted Fadel Gheit saying in her article. 

Oppenheimer's Fadel Gheit on oil's next move

Putti also noted that the OPEC gathering was just days after negotiations between Iran, the U.S. and five other nations on Iran's nuclear program were extended after failing to reach an agreement by the Nov. 24 deadline.

The OPEC Secretariat in Vienna

It is worth mentioning here that the Organization of the Petroleum Exporting Countries (OPEC) in it's 166th meeting, last month, decided to maintain the production level of 30.0 mb/d, as was agreed in December 2011 ruling out any production cut "in the interest of restoring market equilibrium."  OPEC noted that "stable oil prices – at a level which did not affect global economic growth but which, at the same time, allowed producers to receive a decent income and to invest to meet future demand – were vital for world economic wellbeing."  The next Ordinary Meeting of OPEC is scheduled to be held in Vienna, Austria, on 5th June 2015, immediately after the 2-day OPEC International Seminar on “Petroleum: An Engine for Development” on 3rd and 4th June.

"We have excellent contact with Indian government. You cannot undo the past, but future is bright"

Said : Switzerland's Ambassador to India Linus von Castelmur in an interview with PTI in Mumbai as reported by most Indian media today. PTI's story titled "Come with proof, not for fishing : Swiss to India" is expected to be front page news item in tomorrow's print media. PTI's synopsis of the story says : "As India continues its pursuit of black money allegedly stashed abroad, Switzerland has said it would not entertain any "fishing expedition" and authorities cannot ask for names of all Indian account holders in Swiss banks without doing their own independent investigations."

As per the News Nation, the Swiss Ambassador told PTI it was difficult to deal with the past and whatever has happened over the last 50 years or so "cannot be undone". However, he assured for Switzerland's full cooperation to the Indian government on the basis double taxation avoidance bilateral agreement with India. "In future cases of the money deposited by Indians, Germans or Americans in Swiss banks, the Swiss banking and taxation authorities would inform the national tax authorities of the client country and there will be transparency," the Ambassador was quoted to have said. He also made it clear that if somebody has obtained stolen data improperly-illegally, Switzerland cannot honour such claims. Swiss authorities can only work when there is true investigation by the Indian tax authority or the Enforcement Directorate. Not only that they must also have a clear prima facie evidence, that there has been a tax fraud involved. "Once they hand over a list thus prepared, we can cooperate and we will really try to cooperate," he reportedly said.

A quick glance at the officially available information in public domain indicates that although Switzerland has launched several initiatives to promote internationally coordinated action to combat potentate funds [monies illegitimately siphoned off public funds and transferred to international financial centres by holders of political power in dictatorial regimes], there is hardly any visible mention of the so called "Black Money" (all wealth, on which the applicable legal taxes have not been paid by the depositor) as people understand in India. They mostly talk of "heads of state and high-ranking officials (so-called "politically exposed persons" or "PEPs") who may fraudulently enrich themselves with public money and, if so, that they often move these so-called "potentate funds" abroad and invest them in international financial centres." In such cases they have a provision to freeze their assets but only in special situations, e.g. in the event of the collapse of a political regime. Generally, the Federal Council provides support to the judicial authorities of the states concerned, which can request mutual legal assistance from Switzerland, to help them initiate criminal proceedings. It is incumbent on the relevant judicial authorities of the country in question to initiate the necessary criminal proceedings and to demonstrate the illicit origin of the frozen assets.

We cannot undo the 'Black' past but can try for a 'White' (bright) future.

Under the Swiss legal framework, "potentate funds" have to be localised, frozen, confiscated and returned to the state where they originated. The process of restitution places specific demands on the states involved : they need to make sure, once the funds have been restituted to their country of origin that they are not fed back into the cycle of corruption, and sent to foreign bank accounts again. Switzerland claims that it is "working at an international level to ensure the effective implementation of the United Nations Convention Against Corruption (UNCAC) of 2003, specifically with potentates' assets."

Recently, during the annual meeting of the Global Forum on 29 October 2014 in Berlin, Switzerland became the 52nd jurisdiction to sign the Multilateral Competent Authority Agreement, which will allow it to go forward with plans to activate automatic exchange of financial account information in tax matters with other countries beginning in 2018. 

More information from Switzerland's Federal Department of Foreign Affairs (FDFA) can be accessed from it's website.

Tony Abbott underestimates how stark the rivalry between America and China has become, and he overestimates Australia's ability to stand above it.

Tony Abbott to Xi Jinping : "when I listened to the President today, some of the 

shadows over our region & over our world lifted & the sun did indeed shine brightly"

Said : Hugh White, Professor of Strategic Studies in the School of International, Political & Strategic Studies at the Australian National University (Lowy Institute), in his post in The Sydney Morning Herald titled : "Abbott clueless on how to handle US and China." 

Hugh, supposed to be a prominent analyst of US-China and Australian affairs, has made several very wild remarks in the above post which, of course, must be based on his deep analysis and long experience in this field. His post finds prominent position on twitter today and has been widely publicized, and perhaps acknowledged, too.

Before I explain why I call Hugh's remarks 'wild', let's have a quick glance at the summary of his major remarks:

• Tony Abbott rejected stern warnings from Barak Obama not to get too close to China. He ignored Obama's advice which implied that the US offers co-operation and liberty, while China offers conflict and oppression. Obama's purpose was to warn Tony Abbott against accepting Beijing's vision of a peaceful and harmonious Asian future under Chinese leadership in return for a free trade agreement (ChAFTA). British PM David Cameron also issued exactly the same warning when he spoke to Australian parliament just the day before Obama's address.
• Abbott trusted President Xi's assurances in his speech that Australia could look forward to a safe and prosperous future under China's regional leadership - as long as "we respect each other's core interests and major concerns." These assurances came after Xi calmly and confidently asserted that China would be "the big guy in the room" in Asia in future.
• Later, at the State Dinner for Xi after his speech, Abbott praised Xi for his commitment to democracy and a rule-based international order. And in what sounded like a direct repudiation of Obama's dark warnings, Abbott went so far as to say that "when I listened to the President today, some of the shadows over our region and over our world lifted and the sun did indeed shine brightly".
• So why did Abbott do it? According to Hugh, the answer to this question cannot be the free trade agreement with China or Obama's direct attack on Abbott's climate change policy. Hugh says Abbott does not know what he is doing. Despite the speeches he has heard over the past 10 days, he underestimates how stark the rivalry between America and China has become, and he overestimates Australia's ability to stand above it.
• According to Hugh's analysis : "Tony Abbott probably believes that what he said last week will soon be forgotten, and he can return to his alignment with  the US and Japan against China whenever he likes, with the free trade deal in his pocket. He perhaps mistakes such patent insincerity for clever diplomacy. He thinks he has struck a careful and clever balance between China and the US, allowing Australia to maintain a close alliance with one while expanding trade with the other. In fact he is swinging helplessly between the two poles of regional power, siding with the US one day and China the next, without any clear conception of where we want to end up."
• Hugh concludes his analysis: "In the end we cannot afford to side with either of them. The only way to protect Australia's immense interests in the Asian power struggle that came to our shores last week is to think for ourselves about what outcome suits us best, and to act as best we can to promote it. Whether we try to do that or not is the real choice we face."

Hugh White

Having gone through Hugh's earlier views “Xi and hiscolleagues believe that the gravitational force of China’s economy will pullAustralia into its political and strategic orbit and keep it there,” I think he is immensely confused in determining or even in suggesting what suits Australians best in the current scenario. In making above remarks, Hugh is contradicting himself at nearly every stage. For example, when he refers Abbott's handling of Xi as underestimation of stark rivalry between America and China, and overestimation of Australia's ability to stand above it, what exactly he wants to convey. Hugh should be in a position to indicate and describe the level of Australia's ability to stand above the prevailing level of US-China rivalry. Is it really possible to remain non-aligned in such a rivalry? Does clever diplomacy mean merely trying to be seen not sided with either China or US while each thinks you are sided with the rival? Is practicing this so simple? It may appear so to analysts who do not have to involve themselves in any decision making process but those running the affairs of their countries as the final decision makers cannot afford to delay the final choice forever. One may call Tony Abbott's decision to cooperate with China a patent insincerity or clever diplomacy but that is what he thought to be the best possible choice. Somehow, I tend to be supportive to him except that he could have avoided excessive praise of the Chinese leader and used more diplomatic language in doing so and in dealing with him. In this context I find Hugh's remarks 'wild' because Abbott is being criticized for wrong reasons.

Obama would like India to play a greater role :

"We support a greater role in the Asia-Pacific for India, which is the world's largest democracy. Together, we can improve maritime security, upholding the freedom of navigation, and encouraging territorial disputes are resolved peacefully."

- President Obama at the G20 summit in Australia 

I am sure Prime Minister Narendra Modi did a better job at that and Obama should be really pleased with India. Although Modi also committed similar mistakes, he made his choice very clear right at the first opportunity he got. He knows whom to trust and work with from a long-term perspective. The Commerce and politics have their distinct dividing lines but can co-exist in today's globalized world so that one can be a political rival but a trade partner at the same time. China wants to make every nation dependent on her for commerce while keeping the controversial boundary issues for future settlement when they hope no one capable to oppose will exist. I am sure Abbot did what he did out of the trade benefits that he could have done without praising Xi. And certainly not for Xi's "commitment to democracy and a rule-based international order."

“Xi and his colleagues believe that the gravitational force of China’s economy will pull Australia into its political and strategic orbit and keep it there.”

Hugh White

Said : Hugh White, Professor of Strategic Studies in the School of International, Political & Strategic Studies at the Australian National University (Lowy Institute), as quoted in Jane Perleznov's news analysis published in The New York Times of November 22, 2014.  

While Prof. Hugh White specializes in Australian strategic and defence policy; Asia Pacific security; global security, Jane Perlez is the chief diplomatic correspondent in the Beijing bureau of The New York Times. She covers China and its foreign policy, particularly relations between the United States and China, and their impact on the Asian region.

Jane Perleznov

Jane describes the recent visits of Xi Jinping to Australia, New Zealand and Fiji as "Asia’s ‘Big Guy’ Spreads Cash and Seeks Influence in Pacific Region," the title of her news analysis. According to her : "Everywhere Mr. Xi went, he left a trail of money, a bounty aimed at showcasing China as the dominant economic power in Asia." According to Jane when Mr. Xi said :“We have every reason to go beyond a commercial partnership to become strategic partners who have a shared vision and pursue common goals,” he was trying to entice Australia, one of America’s closest intelligence-sharing allies, away from its more than half-century alliance with Washington. Already, Mr. Xi and the Australian prime minister, Tony Abbott, have declared the completion of a China-Australia free trade pact, 10 years in the making, that will open China’s markets to Australian beef, dairy products and other products. It seems that President Obama's warning to America’s ally not to get too close to China has been ignored by Australians.

China has committed to spend $20 billion for loans and infrastructure for the 10 countries in the Association for Southeast Asian Nations besides $40 billion for a Silk Road infrastructure fund in Central and East Asia. In the tiny Pacific island of Fiji, Mr. Xi committed financial support for strengthening economic and strategic ties including defence cooperation with Pacific island nations. Mr. Xi also offered visa exemptions for Fijians travelling to China. A Chinese cultural centre will also be established in Fiji. In exchange Prime Minister Mr. Bainimarama said: "China had been "a true friend of Fiji" and had never interfered in Fiji's internal politics. Fiji wanted China to be fully engaged in the Pacific." China is already under American attack for its assertive behavior in strategic South China Sea waters.

In 2011 Hillary Clinton, then America’s secretary of state, explained President Barack Obama’s “pivot” to Asia in an article in Foreign Policy: “We all know that fears and misconceptions linger on both sides of the Pacific. Some in our country see China’s progress as a threat to the United States; some in China worry that America seeks to constrain China’s growth. We reject both those views.” China’s president, Xi Jinping, at a meeting with Mr Obama in California last year, responded in kind: “The vast Pacific Ocean has enough space for the two large countries of China and the United States.” (Source)

Hugh White, in a different post, has provided the answer to the question: "Why China and America are Headed Toward a Catastrophic Clash?"

"China is trying to build what President Xi Jinping calls "a new model of great power relations under which he wants China to wield much more power and influence in Asia than it has for the past few centuries. These things are inherently zero-sum, so for China to have more power and influence, America must have less. This is what Xi and his colleagues are trying to achieve."

Indeed, the G-20 summit in Australia provided world leaders an opportunity to show-case their policies and power to contribute to the world prosperity i.e. their capability to politically influence the socio-economic world order. With the near isolation of Russia's Putin and apparently weakening Obama, China has emerged as the only world power with huge amount of Vitamin-W (Wealth) needed by a good number of US allies for venturing into their own gigantic to-do-list. While the West is trying to maintain its fading power under the leadership of the United States, many alliance partners are finding it difficult to resist the mouth-watering temptation of China's economic capacity and desire to have partnerships with them that go beyond just the economic ones.     

Whoever said money can’t buy happiness has never been inside an apartment 1,300 feet above a bustling metropolis (New York)

Said : Matt A.V. Chaban in the Appraisal column of The New York Times of Oct. 13, 2014

The Appraisal covered New York’s tallest residential building, 432 Park Avenue, which attained its full height of 1,396 feet on Oct. 10. The 104-unit condominium tower of 96 stories, between 56th and 57th Streets, opens next year and the penthouse views, in all directions, are spectacular, as per Chaban's Appraisal. 

The total cost of building developed with Los Angeles based CIM Group - a premier full service urban real estate and infrastructure fund manager - is reported to be $1.3 billion. According to the Appraisal, more than half of the 104 condos have already been sold, including the $95 million penthouse and the cheapest units starting at $7 million. 

"If Manhattan has truly become a playground for the rich, here is its new beacon," Chaban concludes.