Sergei Glazyev in Bloomberg

This Is How Putin's Advisor Sees The Ukraine Crisis Playing Out

Glazyev's talk from June

Zero Hedge,

8 August, 2014

Vladimir Putin's chief "integration" advisor, Sergei Glazyev, has been regularly featured on these pages in the past (see Putin Advisor Threatens With Dumping US Treasurys, Abandoning Dollar If US Proceeds With Sanctions and Putin Advisor Proposes "Anti-Dollar Alliance" To Halt US Aggression Abroad for two examples). So now that the Ukraine situation has once again escalated, this time with both sides openly engaged in trade war and many suggesting all-out war just over the horizon, how does Putin's advisor see the Ukraine conflict playing out?

For the answer we go to Bloomberg:

Putin has sought to lure Ukraine and its more than 40 million people into the alliance to build a trading bloc to rival the EU. Yanukovych pursued closer ties with the customs union and pulled out of an association agreement with the EU before his ouster in February. His successor, President Petro Poroshenko, signed the free-trade accord with the 28-nation bloc in June.

Russia can’t go it alone against the U.S. and must create an “anti-war coalition” to check the “aggressor,” Glazyev said.

“The point of a series of regional wars organized by the Americans, especially today’s catastrophe in Ukraine, centers on the U.S. securing control over all of north Eurasia” to bolster “its position against China,” Glazyev said. “That’s how the U.S. military and oligarchs are trying to maintain leadership in the global competition with China.”

The effort will backfire, said Glazyev, who spoke before a round of retaliatory steps announced by Russia yesterday banning food and agricultural products for one year from the U.S., the EU, Norway, Canada and Australia. The U.S.-led “economic war” against Russia will ricochet, leaving the EU to pay the steepest costs in the conflict, he said.

The trading bloc stands to lose about 1 trillion euros ($1.3 trillion), an estimate he says includes the possible bankruptcy of several European banks and companies toppled after the cutoff in financial and economic ties. An energy crisis in Europe will bring a sharp spike in prices and a loss of competitiveness for European producers. Meanwhile, Turkish, Chinese and east Asian nations will fill the void left by the departure of their European rivals from the Russian market.

The fallout will cost 250 billion euros for Germany alone while pushing the three Baltic states to the brink of an “economic catastrophe,” he said. Lithuania and Latvia will lose the equivalent of half of their entire economic output, and the cost for Estonia will reach 50 percent more than its gross domestic product, Glazyev said.

Where does that leave Russia?

“Task no. 1 is to block those threats to economic security that are now coming from the U.S., neutralize them by reducing the dependence of our external economic activity on the mercy of American politicians, whose aggressiveness threatens the entire world,” he said.

Glazyev's conclusion:

To further insulate its economy, Russia should abandon the use of the U.S. dollar as a reserve currency, according to Glazyev. Russia, which international reserves are the world’s fifth-biggest, needs to diversify its holdings to include China’s yuan, India’s rupee and Brazil’s real.  “If a country aspires to reserve status for its currency, it should behave properly, and that isn’t the case today,” Glazyev said.

And this is how Putin sees the world. De-escalation? Good luck.