A Financial Independence

in which Europe faces not only

China and Russia as authoritarian challengers

but also a United States that for the time being

has traded its role as a benign hegemon

for the ugly face of "America first"...

 

 

 

 

 

 

 

 





Europe is Working on Alternative to SWIFT for...

"Financial Independence" from the U.S.
by Tyler Durden
August 27, 2018
from ZeroHedge Website

 

 

 

 

 

 

In the aftermath of a report that Germany was working on a global payment system that is independent of the U.S. and SWIFT on Monday (August 27, 2018), Germany and France said they're working on financing solutions to sidestep U.S. sanctions against countries such as Iran, including a possible role for central banks, Bloomberg reported.

"With Germany, we are determined to work on an independent European or Franco-German financing tool which would allow us to avoid being the collateral victims of U.S. extra-territorial sanctions," French Finance Minister Bruno Le Maire said Monday during a meeting with press association AJEF.

 

"I want Europe to be a sovereign continent not a vassal, and that means having totally independent financing instruments that do not today exist."

 

The discussions, which also involve the U.K.,

are a signal that European powers are trying

to get serious about demonstrating a greater level

of independence from the U.S. as

President Donald Trump pursues his

"America First" agenda...
 


After the U.S. reimposed sanctions on Iran, making funding to Iran projects virtually impossible, European companies including Daimler and Total halted activity or backtracked on investment plans to avoid U.S. punishment, but France and Germany and their European Union partners want business with the Islamic Republic to continue.

Le Maire said using the European Investment Bank, which has exposure to the U.S., as a "financial channel" would be "very complicated" and that the French and German governments are talking to their respective central banks about their involvement.

"If we want to build a truly independent instrument we must open up all the options," he said.

Separately, Germany's Foreign Minister Heiko Maas again weighed in on the topic of European financial independence on Monday, saying the EU is working to protect economic ties with Iran and keep payment channels open.

 

 

German foreign minister

Heiko Maas

 


Maas said Europe has started work on creating a system for money transfers that will be autonomous from the currently prevailing Society for Worldwide Interbank Financial Telecommunication (SWIFT).

"That won't be easy, but we have already started to do that," Maas said at the annual Ambassadors Conference in Berlin on Monday, as quoted by RIA Novosti.

 

"We are studying proposals for payment channels and systems, more independent from SWIFT, and for creating European monetary fund."

Maas also announced plans to reveal a new foreign policy strategy towards the U.S.

"We have to react and strengthen Europe's autonomy and sovereignty in trade, economic and finance policy," Maas said in a speech in Berlin.

 

"It's high time to recalibrate the Transatlantic Partnership - rationally, critically, and even self-critically," the FM added.

Maas echoed his comments from last week when he called for European autonomy to be strengthened by creating payment channels that are independent of the United States, establishing a 'European Monetary Fund'.

Europe's desire to create its own system is connected to Washington's recent withdrawal from the Iran nuclear deal, and the re-imposition economic sanctions against the Islamic Republic.

 

As Brussels stays committed to the pact signed in 2015 between Tehran and the world powers, the EU had to enforce the 'Blocking Statute' in order to safeguard European businesses operating in Iran from U.S. sanctions against the country.

 

However, the measure failed to keep European majors like Total, Maersk, Mercedes in Iran, as they cannot function independently of the U.S.-dominated international banking system and international financial markets.

SWIFT, which is short for the Society for Worldwide Interbank Financial Telecommunication, is the financial network that provides high-value cross-border transfers for members across the world.

 

It is based in Belgium, but its board includes executives from U.S. banks with U.S. federal law allowing the administration to act against banks and regulators across the globe.

 

It supports most interbank messages, connecting over 11,000 financial institutions in more than 200 countries and territories.

Ironically, it was Russia who took the first initiative, after its Central Bank governor, Elvira Nabiullina, said that the country had created a national system for money transfers that could protect its banking from a potential cut off from SWIFT transfer services.

 

The step was triggered by the constant anti-Russia penalties introduced by Washington since 2014 for various reasons, including the reunification with Crimea, alleged involvement in the military conflict in eastern Ukraine, alleged U.S. election meddling, and the alleged poisoning of former double-agent Sergei Skripal in the UK.

 

The result was also a near complete liquidation of Russian holdings of U.S. Treasuries and their conversion into gold and other non-U.S. foreign reserves.

 

 

 

 

 

 

 

 

Russia's Central Bank Governor touts...

Moscow Alternative to SWIFT transfer system

...as Protection from US Sanctions
by Natasha Turak
May 23, 2018

from CNBC Website



 


Russian Central Bank Governor Elvira Nabiullina

addresses an extended meeting

of the Russian Finance Ministry's Board.
Dmitry Astakhov | TASS

Getty Images
 


 

Elvira Nabiullina said

Russia has developed its own system

for financial transfers.


But analysts have questioned

the viability of Moscow's transfer system.


 


Russia has developed its own system for financial transfers that would protect it from a potential shutout of the SWIFT global transfer system in the event of harsher U.S. sanctions, its central bank governor said Wednesday at the St. Petersburg International Economic Forum.

But analysts have questioned the viability of Moscow's transfer system.

"There are risks in using the global financial networks, the global financial system, of which Russia is a part," Russian central bank chief Elvira Nabiullina told CNBC's Geoff Cutmore during the forum.

 

"Therefore, since back in 2014, we have been developing our own systems, including a payments system. Inside Russia we have created a system for transferring financial data, which is similar to SWIFT."

SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunication, is a global financial network that enables high-value cross-border transfers among its members.

Most interbank messages are transferred using SWIFT, which links more than 11,000 financial institutions in over 200 countries and territories.

 

Based in Belgium, the cooperative has in rare instances disconnected countries' banks from its network as a tool of financial sanctions - notably on Iran in 2012, which was consequently denied access to billions of dollars in revenue.

The Donald Trump administration's increasingly muscular foreign policy, which has rolled out new financial sanctions against Iran as well as Russia, is raising questions of risk for Moscow's banks should Washington step up its financial penalties in the wake of rising tensions between the two countries.

But Russia's Elvira Nabiullina was confident in her country's risk-mitigation measures, saying that its own payments system,

"reduces the risks for Russian players, for Russian businesses and for Russian banks."

"This system is already operational and it allows, inside Russia, to transfer financial data," she said, calling it an "absolutely similar, competing system" that allows - at least inside Russia - "to nullify such risks."

 

 


 

 

Financial analysts have their doubts.

 

Timothy Ash, senior emerging markets sovereign strategist at Bluebay Asset Management, described it as "not very credible." It might work for the domestic market and some non-Western markets, he said, but was,

"not realistic for dealing with Western partners."

Maximilian Hess, senior political risk analyst at London-based AKE Group, echoed similar skepticism.

"Russia has indeed been working on its SWIFT alternative, but its potential for mitigating the risks posed by a potential SWIFT ban is limited," he said.

That it would nullify risks, he added,

"is a political statement aimed at those in the government attuned to these developments, not a serious statement that there would not be major concerns were such a ban to come to pass."

However, Hess did not see a SWIFT ban as imminently likely, although it will continue to be threatened.

The issue, he explained, is that other countries are very unlikely to use Russia's system, particularly as it would be fairly straightforward for the U.S. government to threaten sanctions against this too.

"Of course, it would be far more effective to have an international system on which everyone could rely, which would be distinguished by predictability and an inviolability to the rules and access," Nabiullina said, perhaps in a subtle jab at Washington.

Russia has been under older U.S. sanctions since its 2014 annexation of Ukraine's Crimean peninsula, which played a major role in its subsequent recession.

"Russia has encountered this and so, proceeding from this, we are taking measures that reduce the risks for the Russian economy and the Russian financial system," she said.

The U.S. Treasury in April announced fresh sanctions on seven Russian oligarchs and 12 companies they control, plus 17 top Russian officials in response to what it called "destabilizing activities", these include,

Relations between the two countries are said to be at their lowest level since the Cold War.
 











EU Looking to Sidestep U.S. Sanctions

...with Payments System Plan
by William Horobin and Birgit Jennen
August 27, 2018

from Bloomberg Website

 

 


Bruno Le Maire and Olaf Scholz
Photographer: Alain Jocard/AFP via Getty Images

 

 


Europe must avoid

being 'vassal continent'.

French minister


Goal is to maintain

business ties with nations

like Iran...
 



Germany and France said they're working on financing solutions to sidestep U.S. sanctions against countries such as Iran, including a possible role for central banks.

The discussions, which also involve the U.K., are a signal that European powers are trying to get serious about demonstrating a greater level of independence from the U.S. as President Donald Trump pursues his "America First" agenda.

"With Germany, we are determined to work on an independent European or Franco-German financing tool which would allow us to avoid being the collateral victims of U.S. extra-territorial sanctions," French Finance Minister Bruno Le Maire said Monday during a meeting with press association AJEF.

 

"I want Europe to be a sovereign continent not a vassal, and that means having totally independent financing instruments that do not today exist."

Trump reimposed the sanctions after pulling the U.S. out of the Iran nuclear accord in May, despite opposition from NATO allies and China and Russia.

 

European companies including Daimler AG and Total SA have halted activity or backtracked on investment plans to avoid U.S. punishment but France and Germany and their European Union partners want business with the Islamic Republic to continue.

The U.S. is targeting Iranian oil exports as it pushes demands for the government in Tehran to stop supporting terrorism and halt its ballistic-missile program.

 

President Hassan Rouhani has said the U.S. needs to ease sanctions before he'd agree to any talks.

German Foreign Minister Heiko Maas also weighed in Monday, saying the EU is working to protect economic ties with Iran and keep payment channels open. Maas reiterated a proposal to make international payments systems like SWIFT more independent of the U.S.

Bruno Le Maire said using the European Investment Bank, which has exposure to the U.S., as a "financial channel" would be "very complicated" and that the French and German governments are talking to their respective central banks about their involvement.

"If we want to build a truly independent instrument we must open up all the options," he said.

Maas said that while most of the "very difficult questions on the details" of any payments system are unresolved, at least the alternative of a nuclear escalation in the Middle East has so far been avoided.

 

As well as the U.S. sanctions against Iran, action taken against China, Russia and Turkey will also damage European business, he added.

"We have to react and strengthen Europe's autonomy and sovereignty in trade, economic and finance policy," Maas said in a speech in Berlin.

Canadian Foreign Minister Chrystia Freeland also spoke at the event and said that her nation shares the goal of preserving a multilateral world order.

Le Maire is due to meet German counterpart Olaf Scholz in Paris on Wednesday (August 29, 2018).

 

 




 

 

 

 

 

 



Trump's Trade War

...is Just Fine with Xi Jinping
by Michael Schuman
September 8, 2018

from Bloomberg Website

 

 


AFP/Getty Images
 

 


China's far from desperate

to reach a deal...




Anyone who expects China to concede defeat in its trade war with the U.S. should read about Biobase Group.

The Chinese manufacturer of laboratory equipment once struggled to win orders even at home in an industry dominated by foreign products.

 

But the company's prospects have brightened as the trade war prompts customers to turn to domestic alternatives.

"The local market was heavily reliant on imports," Biobase's chairman was quoted as saying. "Now, it's different. Opportunities beckon."

The story is from the state-run China Daily, so take it with a trailer-truck-sized grain of salt.

 

But it makes an important point:

The Chinese government is happy when its citizens buy locally made instead of American products.

Of the many misperceptions driving Donald Trump's trade policy, this may be the most dangerous:

China isn't desperate to maintain its interdependent relationship with the U.S. Rather, it's a national objective to become more economically independent.

That's a quite different China than the one in Trump's imagination.

 

To the White House, the country is still so reliant on the U.S. for growth and jobs that its leadership can be pounded into submission with tariffs. It's only a question of when President Xi Jinping comes begging for mercy.

In real life, Trump's tariffs are unlikely to inflict enough pain on China to compel Xi to make concessions. Its huge domestic market is becoming more important to Chinese growth.

 

But beyond even that, Beijing's entire economic strategy is designed to replace critical foreign technology and products with homegrown alternatives it can control. Simply, the Communist Party prefers Chinese to buy Xiaomi phones and Geely cars, not iPhones and Buicks.

That's exactly what the much-feared "Made in China 2025" program is all about.

 

The plan is to develop new, high-tech industries to compete with and eventually replace foreign rivals, at home and abroad. In that sense, it's official policy to limit overseas involvement in the economy.

The trade war, therefore, comes as a "blessing in disguise," as the China Daily put it.

 

Trump's trade sanctions have given Beijing another excuse to drag its feet on free-market reforms, to support local companies and to harass and exclude foreign business - all things Chinese leaders are inclined to do anyway.

If anything, Trump's tactics have only reinforced the critical importance of this quest for greater independence.

 

Take the ZTE Corp. kerfuffle. After the Chinese telecom giant violated U.S. law, Washington almost forced the company out of business by banning U.S. suppliers from selling it crucial components. Eventually, a settlement was reached.

The Chinese learned their lesson - just not the one Washington intended.

 

Rather than scaring Beijing into cooperating on trade, the incident reinforced how badly the country needs its own technology.

"We [should] hold innovative development tightly in our own hands," Xi said amid the ZTE troubles.

Even more, China's economic program is aimed at developing export markets other than the U.S.

 

The China Daily was sure to mention how the Biobase chairman had a map in his office marking countries participating in Xi's pet infrastructure-building program, the Belt and Road Initiative.

The goal of that plan is to entrench the country in new developing economies in order to expand the role of Chinese business. In this way, Beijing is striving to create its own economic bloc.

None of this means Beijing won't negotiate a trade deal with Trump. Nor does Beijing's policy make sense from a purely economic perspective.

 

Chinese growth prospects would be better served by further integration and cooperation with the U.S., to maintain access to American consumers and technology.

 

And since momentum in China's economy already appears to be weakening, it can ill afford the added headwinds created by slowing world trade.

But Beijing sees its development plan as critical for national security and the country's rise on the world stage. There's no place in this great mission for,

  • Intel Corp.

  • Apple Inc.

  • General Motors Co.

That means Xi may be in less of a hurry to seek a trade deal than Trump assumes, and will only conclude one that doesn't endanger his broader economic agenda.

The bottom line is that China is content to go its own way on its own terms. Without Trump and the U.S...