Since the start of the Russian attack at dawn on February 24, 2022, some economic indicators have reacted violently: stock indexes have fallen, gold has skyrocketed, and cryptocurrencies have collapsed. Europe soon announced economic sanctions on Russia. And obviously Putin was expecting this reaction, he was preparing for it for months or years. By Jean-François Faure, CEO and Founder of AuCoffre.com.
Putin’s large-scale military operation against Ukraine is more than a turf war. It has an important economic foundation.
Russia is obsessed with gold to reduce its dependence on the dollar
At the end of 2021, Russia had about 2,300 tonnes of gold in the central bank vault. This puts us in 5th place, just behind France. And this isn’t a coincidence, but it’s a real strategy that Vladimir Putin has led since taking power. Russia’s gold inventory in the 2000s was 450 tonnes.
But above all, the Central Bank of Russia had twice as much gold reserves as gold until 2018. At the end of 2018, efforts began to reduce Putin’s dependence on the dollar. He gets rid of half the dollar and starts buying a lot of gold.
At the end of 2020, the curves will cross for the first time. The Central Bank of Russia reserves are larger for gold than for dollars!
Reopened Siberian gold mine
In October 2020, a mining company was discovered in Siberia with approximately 1,100 tonnes of gold stored in the Sukhoi Log mine. Production should start in 2023. For manufacturers, the higher the price of gold, the more interesting it is to extract an ounce of yellow metal, even in harsh conditions.
Reduce reliance on Western financial systems
This is clearly the second part of Vladimir Putin’s plan. He knew that the West would respond to his attack with economic sanctions. Bruno Lemaire announced that he “wants to financially isolate Russia” the day after Russia’s operation.
Therefore, in recent years, oligarchs have been passionate about cryptocurrencies. In particular, they found that they could fund Bitcoin mining farms thanks to the low cost energy from Siberia.
They just applied the Bitcoin Creator Principles they wanted to do without global funding. Is Bitcoin’s collapse on the day of the attack a Western reaction to Russia’s fate?
Are European Sanctions Ineffective?
Some weapons are freely available to the Minister of Finance.
The first is to limit access to European funds. This has the effect of making money more expensive for Russians and thus increasing their debt.
The second major weapon is to eliminate Russia from the Swift system, which manages interbank exchanges around the world. No longer having access to it constitutes an expulsion with serious economic consequences.
Next, we arrive at Putin’s second defense economy curtain, Energy.
Russian gas as leverage and Ukrainian gas pipeline?
If you look at the map of the pipeline that transports Russian gas to the west, you can immediately see that everything passes through Ukraine and Belarus.
All but one: Northstream. (The South Stream does not seem to pass through Ukraine, but it does pass through the Black Sea at the same height as the Crimean Peninsula, not far from Ukraine’s territorial waters). This Baltic gas pipeline supplies Germany with gas. A country that relies heavily on energy from the east, especially because it does not have a nuclear power plant.
Therefore, Vladimir Putin knows that by shutting off valves in the North Stream and other gas pipelines that pass through Ukraine, Germany can be confused at any time. An excellent means of pressure.
The world stock exchanges were not mistaken for Brent, which traded for $ 105 on February 24th.
Ukraine: Russia’s breadbasket, but not only …
This is a word we often hear in economics classes before the collapse of the Soviet Union. Ukraine Soviet Republic was a very good agricultural student of the Soviet Union. Ukraine grows not only wheat, but also oil seeds, barley and corn.
In addition, the country is very rich in minerals as well as minerals such as uranium, titanium, manganese and iron (Second World Reserve). And in addition to that, you can add the production of ammonia and the excellent quality of its engineers and computer scientists.
Ukraine, a war plunder that can make a lot of money!