China and Russia to establish joint rating agency
RT | June 3, 2014
No more Fitch, Moody’s, or Standard & Poor’s for Russia and China, as they have agreed to establish a rating agency on joint projects, and later, international services, Russian Finance Minister Anton Siluanov said Tuesday.
“The establishment of an independent rating system is being discussed. Many countries would like to have more objectivity in the assessment of rating agencies,” Siluanov said.
“There will be a Russian-Chinese rating agency, which will use the same tools and criteria for assessing countries and regional investments that existing rating agencies use,” the minister said.
UK announces Yuan clearing Bank in London
The BRICS Post | June 2, 2014
The UK government has agreed to establish a yuan-clearing bank in London that would “act as a signal for London’s growing yuan activities”.
Mark Boleat, policy chairman for the City of London Corp said consultations were ongoing for a long time with the People’s Bank of China, Bank of England and many banks in London, and the PBOC has now decided to appoint the clearing bank.
“We assume it’s going to be a Chinese bank, because that’s the way the PBOC does things,” Boleat said in an interview to a Chinese daily in London.
China and the UK had signed an agreement last year to establish a reciprocal 3-year sterling/renminbi (RMB, or Chinese yuan) currency swap line.
UK Chancellor of the Exchequer George Osborne had said earlier this year that a clearing bank was the next logical step to take in building trade ties with China.
“It would be an important further milestone both in the development of the renminbi as a currency of the world’s economic future, but also of London and the U.K. as the western center for renminbi trading,” said Osborne.
China has also signed an agreement with Germany to work on appointing a clearing bank in Frankfurt.
Meanwhile, the UK administration would also allow Chinese banks to open new branches in the country soon.
Previously, Chinese banks, as well as many other international banks, were only allowed to set up subsidiaries, which are subject to the strict capital requirements that apply to Britain’s local banks, hence the lending and financing capacity is proportional to the balance sheet of the subsidiary.
China to ditch US consulting firms over espionage suspicion
RT | May 26, 2014
State-owned Chinese companies will cease to work with US consulting companies like McKinsey and Boston Consulting Group over fears they are spying on behalf of the US government.
US consulting companies McKinsey, BCG, Bain & Company, and Strategy&, formerly Booz & Co., will all be snubbed by state-owned Chinese companies, the Financial Times reported, citing sources close to senior Chinese leaders.
“The top leadership has proposed setting up a team of Chinese domestic consultants who are particularly focused on information systems in order to seize back this power from the foreign companies,” a senior policy adviser to the Chinese leadership was quoted by the FT as saying.
“Right now the foreigners use their consulting companies to find out everything they want about our state companies,” the adviser said.
Last Thursday China announced that all foreign companies would have to undergo a new security test. Any company, product or service that fails will be banned from China. The inspection will be conducted across all sectors – communications, finance, and energy.
China has already banned Microsoft’s Windows 8 operating system from government computers, according to Chinese state media agency Xinhua.
“Under President Xi Jinping, technology and implementation will look to be converging, so foreign tech firms should be very worried about their prospects,” Bill Bishop, an independent consultant based in Beijing, told the FT.
Chinese officials have said that government ministries, companies, universities, and telecoms networks are victims of US hacking, and will try to avoid using US technology in order to protect “public interest”.
The dictate follows the US Justice Department’s indictment of five Chinese military officers it suspects of committing cyber crimes against a number of major US companies, including US Steel, Westinghouse and Alcoa. The US accused the army officers of stealing trade secrets and even published their photos.
Beijing responded by calling the US a ‘robber playing cop’, and more recently said the US is a “mincing rascal” and involved in “high-level hooliganism”.
The US-China fallout came after revelations made by NSA contractor Edward Snowden that the US uses economic cyber espionage to spy on international competitors, including China.
The dispute is only the latest setback in relations between the world’s two largest economies. Issues like Ukraine, Syria, and North Korea have been divisive topics between the two superpowers.
FBI threatens to go after Russian hackers
RT | May 23, 2014
On the heels of a high-profile indictment announced earlier this week by the United States Department of Justice against five Chinese military officers, sources say Russian hackers could be among the next individuals targeted by the DOJ.
The Wall Street Journal, Foreign Policy magazine and the Chicago Tribune all reported this week that officials close to the US government’s hunt for foreign hackers say Russians are on the radar of the Justice Department, and could be named in the next DOJ indictment.
All three outlets hesitated to name their sources, but the Journal reported that people familiar with the government’s investigations said alleged cybercriminals in Russia are likely to be charged soon.
“For several years, the Obama administration has put Chinese and Russian cyber spies and criminals at the top of its list of worst offenders in what officials describe as a relentless campaign targeting American businesses for the benefit of those countries’ own industries,” Shane Harris wrote for FP. “Estimates on the true cost of cyber-espionage range widely, but are generally believe by experts and officials to be in the tens of billions of dollars annually.”
As Harris reported, Federal Bureau of Investigation Director James Comey told members of the Senate Judiciary Committee this week that the FBI was aggressively pursuing further criminal investigations pertaining to foreign hacking cases, but fell short of announcing the filing of new charges. Now with Monday’s indictment out of the way and the US officially charging members of the Chinese military for the first time ever, however, multiple sources said that American authorities are gearing up to throw the book at Russian hackers.
Earlier this week, the Justice Dept. said that five Chinese individuals working within a highly-secretive cyber unit inside the People’s Liberation Army have stolen trade secrets and sensitive communications from six American entities, including major metal companies that compete with Chinese businesses and the US Steel Workers union.
“The range of trade secrets and other sensitive business information stolen in this case is significant and demands an aggressive response,” US Attorney General Eric Holder said in a statement on Monday.
“This administration will not tolerate actions by any nation that seeks to illegally sabotage American companies and undermine the integrity of fair competition in the operation of the free market,” Holder added.
Nevertheless, the Chinese government fired back and accused the US of hypocrisy, and its Foreign Ministry demanded a withdrawal of the indictment and called the US “the biggest attacker of China’s cyberspace.” As RT reported earlier this week, leaked National Security Agency documents released by former US government contractor Edward Snowden have revealed that the US does, in fact, conduct economic cyberespionage in order to spy on competitors in Brazil, France, Mexico and, indeed, China. As with China, the Russian government has adamantly denied any involved in cyber spying, and claims to lack the same technical abilities as the NSA.
And although the Justice Dept. declined to name any other targets of investigation while touting their latest cyber indictment on Monday, reports for years have suggested that Russian hackers have targeted US businesses in a similar way to what China’s PLA Unit 61398 are accused of doing.
Most recently, American cybersecurity firm CrowdStrike reported in January that the Russian government spied on hundreds of US, European and Asian companies, which Reuters called the first time ever that Moscow has been linked to conduct economic espionage over the web.
“These attacks appear to have been motivated by the Russian government’s interest in helping its industry maintain competitiveness in key areas of national importance,” Dmitri Alperovitch, CrowdStrike’s chief technology officer of CrowdStrike, said to Reuters at the time.
“They are copying the Chinese play book,” he said. “Cyber espionage is very lucrative for economic benefit to a nation.”
In March, researchers in the US also traced a piece of malicious malware known as Turla back to Moscow.
“It is sophisticated malware that’s linked to other Russian exploits, uses encryption and targets western governments,” Jim Lewis, a senior fellow at the Center for Strategic and International Studies in Washington, told Reuters then. “It has Russian paw prints all over it.”
The Chinese-Russian ‘Power of Siberia’ … thanks to EU, US foot-in-mouth
By Dmitry Babich | The BRICS Post | May 22, 2014
The Russian press is rarely unanimous in its opinions, but there are two points in today’s coverage of the Russia-China gas deal where all the experts agree.
First, it is not yet clear whether the new deal is a boon for Russia.
But it is certainly a huge failure for the US and the European Union, who lose out on Eastern Siberia’s gas.
Second, in light of the sharp deterioration of Russia’s relations with the West because of the mishandled Western-supported “revolution” in Ukraine, the deal with China now becomes a strategic necessity for Moscow.
The West’s hostile attitudes toward both Russia and China (during his Asia tour last month, US President Barack Obama sided 100 per cent with Japan and the Philippines in their maritime disputes with China), pushed Beijing and Moscow closer together.
The Russo-Chinese contract, which had been in the works for 10 years, was finalized at 4 O’clock in the morning on Wednesday, on the second day of the visit to Beijing by Russian President Vladimir Putin.
It became a dramatic ending to several months of marathon negotiations.
The new contract is supposed to determine the next 30 years of Russo-Chinese cooperation in developing the Russian natural gas fields in Siberia (the eastern part of Russia) and the Russian Far East.
According to the words of Alexei Miller, the head of Russia’s largest gas company, Gazprom, the total cost of the contract is $400 billion.
The volume of gas to be delivered is estimated at a gargantuan amount of over 1 trillion cubic metres. Mr. Miller refused to reveal the price tag, as it is usually done after signing these sorts of deals.
He simply said it was a “commercial secret” for the moment.
“The Force of Siberia”
Nevertheless, most experts agree that Russia has been lucky to sign the deal.
The competition among countries willing to supply energy to China is very intense.
In the ten years that have passed since the start of Russo-Chinese negotiations on the deal, Beijing managed to sign contracts with several Central Asian states, including Turkmenistan, a country boasting gas deposits second only to Russia’s in the former Soviet Union.
Experts estimate an average price of $387 per thousand cubic metres for the 38 billion cubic meters of gas Russia is going to supply to China in the first years of deliveries beginning in 2018.
The deliveries will start once the construction of the pipeline nicknamed “The Force of Siberia” has been completed.
The pipeline is supposed to connect the Russian gas reserves in Eastern and possibly (in future) Western Siberia with the Chinese border.
The project will require investments, which both Russia and China agreed to provide.
The Russian participation is estimated at $55 billion and the Chinese are expected to add $22 billion.
Alexander Birman, a journalist specializing in energy issues, writes in the respected Russian daily Izvestia that the Chinese leader Xi Jinping showed a certain nicety to his Russian counterpart, since he did not pressure Moscow given its deteriorated ties with the EU and US.
“If the West had started applying the so called “sector-geared” economic sanctions, targeting Russia’s energy companies – if such sanctions had been applied, even the price of $350 [per thousand cubic metres of gas] would look good to Gazprom [Russia’s leading energy provider],” he writes of the gas deal.
However, Birman notes that the current standoff between Russia and the West is hurting first and foremost the West’s long-term interests.
(This standoff was made possible by the coup d’etat in Ukraine at the end of February when the legally elected president Viktor Yanukovich was toppled by crowds of pro-Western protesters in the Ukrainian capital Kiev.)
“Having assured for itself the supply of cheap energy, China will reaffirm its position as the world’s most competitive cost-cutting workshop,” Birman writes.
Obama, the pro-Russian lobbyist?
For Russia, diversifying the directions of its gas supplies has become a vital necessity.
The gas deal opens a market corridor for Gazprom to potentially access Asian super guzzlers Japan and South Korea, and allow it to become a player in the Liquefied Natural Gas (LNG) sector.
This is particularly poignant when considering that EU ministers day and night publicize how they want to decrease their “energy dependence” on Russia.
The Soviet Union and Russia have maintained a good reputation with the West since they began supplying gas to Western Europe in the 1960s.
There was a ‘pause’ only once in the winter of 2008-2009, when the Ukrainian authorities stole the Russian gas destined for Western Europe.
Despite this reputation, however, EU member countries make no secret of their preference for gas from Qatar, Algeria, Norway or even the US, where fracking technology has led to a surplus of gas at the domestic market.
“Politically, the Russo-Chinese contract is a success,” says Grigory Vygon, the Director of the Energy Center of the prestigious Skolkovo Business School, near Moscow.
“The Ukrainian risks and the position of Europe make diversification a vital necessity.”
One could add that Obama revealed himself (inadvertently) to be the best lobbyist for Russo-Chinese rapprochement during his recent visits to countries having territorial disputes with China.
By directly supporting the “revolution” in Kiev and by lending support to all of China’s challengers in the South China Sea and East China Sea, Obama helped Moscow and Beijing to bridge during their intense negotiations the gap in desired prices for their mammoth deal.
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Dmitry Babich is a senior journalist based in Moscow who has worked with the Komsomolskaya Pravda newspaper, Moscow News and Ria Novosti. He is currently a political analyst for Voice of Russia.
Obama Ends Asian Tour With Little to Show for it
Prensa Latina | April 29, 2014
Manila – U.S. President Barack Obama ended a tour today that included four Asian countries, accomplishing only the signing of a military agreement with the Philippines.
Of all the issues in Obama’s agenda, that was the only agreement to be brought to fruition, while Japan delayed its joining to a free trade agreement and Malaysia did not sign on either.
Obama’s South Korean stopover included a confirmation of Washington’s military reinforcement to Seoul, but the president met with no success in his attempt to improve relations with Tokyo, a regional ally.
The defense and security agreement with the Philippines will facilitate a greater U.S. naval presence in the archipelago, but thousands of people took the streets to protest the visit and the agreement.
Although the White House backs the Philippines in a territorial dispute with China, Obama clarified that the bilateral agreement does not aim at Beijing, with whom the United States maintains a constructive relationship.
Obama’s Asian tour cost taxpayers almost one billion USD, taking into account that a single day abroad for Obama costs more than $100 million USD.
BRICS countries to set up their own IMF
By Olga Samofalova | Russia Beyond the Headlines | April 14, 2014
The BRICS countries (Brazil, Russia, India, China and South Africa) have made significant progress in setting up structures that would serve as an alternative to the International Monetary Fund and the World Bank, which are dominated by the U.S. and the EU. A currency reserve pool, as a replacement for the IMF, and a BRICS development bank, as a replacement for the World Bank, will begin operating as soon as in 2015, Russian Ambassador at Large Vadim Lukov has said.
Brazil has already drafted a charter for the BRICS Development Bank, while Russia is drawing up intergovernmental agreements on setting the bank up, he added.
In addition, the BRICS countries have already agreed on the amount of authorized capital for the new institutions: $100 billion each. “Talks are under way on the distribution of the initial capital of $50 billion between the partners and on the location for the headquarters of the bank. Each of the BRICS countries has expressed a considerable interest in having the headquarters on its territory,” Lukov said.
It is expected that contributions to the currency reserve pool will be as follows: China, $41 billion; Brazil, India, and Russia, $18 billion each; and South Africa, $5 billion. The amount of the contributions reflects the size of the countries’ economies.
By way of comparison, the IMF reserves, which are set by the Special Drawing Rights (SDR), currently stand at 238.4 billion euros, or $369.52 billion dollars. In terms of amounts, the BRICS currency reserve pool is, of course, inferior to the IMF. However, $100 billion should be quite sufficient for five countries, whereas the IMF comprises 188 countries – which may require financial assistance at any time.
BRICS Development Bank
The BRICS countries are setting up a Development Bank as an alternative to the World Bank in order to grant loans for projects that are beneficial not for the U.S. or the EU, but for developing countries.
The purpose of the bank is to primarily finance external rather than internal projects. The founding countries believe that they are quite capable of developing their own projects themselves. For instance, Russia has a National Wealth Fund for this purpose.
“Loans from the Development Bank will be aimed not so much at the BRICS countries as for investment in infrastructure projects in other countries, say, in Africa,” says Ilya Prilepsky, a member of the Economic Expert Group. “For example, it would be in BRICS’ interest to give a loan to an African country for a hydropower development program, where BRICS countries could supply their equipment or act as the main contractor.”
If the loan is provided by the IMF, the equipment will be supplied by western countries that control its operations.
The creation of the BRICS Development Bank has a political significance too, since it allows its member states to promote their interests abroad. “It is a political move that can highlight the strengthening positions of countries whose opinion is frequently ignored by their developed American and European colleagues. The stronger this union and its positions on the world arena are, the easier it will be for its members to protect their own interests,” points out Natalya Samoilova, head of research at the investment company Golden Hills-Kapital AM.
Having said that, the creation of alternative associations by no means indicates that the BRICS countries will necessarily quit the World Bank or the IMF, at least not initially, says Ilya Prilepsky.
Currency reserve pool
In addition, the BRICS currency reserve pool is a form of insurance, a cushion of sorts, in the event a BRICS country faces financial problems or a budget deficit. In Soviet times it would have been called “a mutual benefit society”, says Nikita Kulikov, deputy director of the consulting company HEADS. Some countries in the pool will act as a safety net for the other countries in the pool.
The need for such protection has become evident this year, when developing countries’ currencies, including the Russian ruble, have been falling.
The currency reserve pool will assist a member country with resolving problems with its balance of payments by making up a shortfall in foreign currency.
Assistance can be given when there is a sharp devaluation of the national currency or massive capital flight due to a softer monetary policy by the U.S. Federal Reserve System, or when there are internal problems, or a crisis, in the banking system. If banks have borrowed a lot of foreign currency cash and are unable to repay the debt, then the currency reserve pool will be able to honor those external obligations.
This structure should become a worthy alternative to the IMF, which has traditionally provided support to economies that find themselves in a budgetary emergency.
“A large part of the fund goes toward saving the euro and the national currencies of developed countries. Given that governance of the IMF is in the hands of western powers, there is little hope for assistance from the IMF in case of an emergency. That is why the currency reserve pool would come in very handy,” says ambassador Lukov.
The currency reserve pool will also help the BRICS countries to gradually establish cooperation without the use of the dollar, points out Natalya Samoilova. This, however, will take time. For the time being, it has been decided to replenish the authorized capital of the Development Bank and the Currency Reserve Pool with U.S. dollars. Thus the U.S. currency system is getting an additional boost. However, it cannot be ruled out that very soon (given the threat of U.S. and EU economic sanctions against Russia) the dollar may be replaced by the ruble and other national currencies of the BRICS counties.
BRICS rejects sanctions against Russia over Ukraine
Press TV – March 25, 2014
The group of five major emerging national economies known as the BRICS has rejected the Western sanctions against Russia and the “hostile language” being directed at the country over the crisis in Ukraine.
“The escalation of hostile language, sanctions and counter-sanctions, and force does not contribute to a sustainable and peaceful solution, according to international law, including the principles and purposes of the United Nations Charter,” foreign ministers of the BRICS countries – Brazil, Russia, India, China and South Africa – said in a statement issued on Monday.
The group agreed that the challenges that exist within the regions of the BRICS countries must be addressed within the framework of the United Nations.
“BRICS countries agreed that the challenges that exist within the regions of the BRICS countries must be addressed within the fold of the United Nations in a calm and level-headed manner,” the statement added.
The White House said earlier on Monday that US President Barack Obama and the leaders of Britain, Canada, France, Germany, Italy and Japan decided to end Russia’s role in the G8 over the crisis in Ukraine and the status of Crimea.
Meanwhile, the G7 group of top economic powers has snubbed a planned meeting that Russian President Vladimir Putin was due to host in the Black Sea resort city of Sochi in June.
The G7 said they would hold a meeting in Brussels without Russia instead of the wider G8 summit, and threatened tougher sanctions against Russia.
Russia brushed off the Western threat to expel it from the G8 on the same day. The Autonomous Republic of Crimea declared independence from Ukraine on March 17 and formally applied to become part of Russia following a referendum a day earlier, in which nearly 97 percent of the participants voted in favor of the move.
On March 21, Putin signed into law the documents officially making Crimea part of the Russian territory. Putin said the move was carried out based on the international law.
China backs Russia on UNSC Ukraine vote
BRICS Post | March 16, 2014
After abstaining on the US-backed UN resolution vote that sought to brand the Crimea referendum as invalid, China on Sunday said it would not back a ‘confrontational route’ on the crisis.
Beijing said the Western-backed resolution does not conform to common interests of the people of Ukraine and that of the rest of the world.
“The vote on the draft resolution by the Security Council at this juncture will only result in confrontation and further complicate the situation, which is not in conformity with the common interests of both the people of Ukraine and those of the international community,” said Chinese Foreign Ministry spokesman Qin Gang in Beijing on Sunday.
Russia, a permanent member of the UNSC, has vetoed the UNSC resolution that declared that a planned referendum slated for Sunday on the status of Ukraine’s Crimea region “can have no validity” and urged nations and international organizations not to recognize it.
“China does not agree to a move of confrontation,” the Chinese Ministry spokesperson said on Sunday while asking all parties to “refrain from taking any action that may further escalate the situation”.
Authorities in Kiev and international leaders have condemned the referendum as illegitimate and threatened Moscow with sanctions over its apparent plan to annex the region.
Crimea is one of several Ukrainian regions that have rejected as illegitimate the government in Kiev that ousted President Viktor Yanukovych on February 22 after months of street protests following his step back from closer ties with the European Union.

Art of drills: 10 NATO war games that almost started armed conflicts
RT | February 28, 2014
The world’s largest military alliance seems annoyed about Russia’s “lack of transparency” over military drills at a very “delicate time.” NATO, however, has its own long history of war games all over the globe.
Western politicians have leveled criticism at Russia for planned drills on its own territory, seemingly glossing over the many joint military exercises Western powers, namely the US and NATO forces, have conducted on foreign soil over the years.
South Korea
This week, US and South Korean forces began their annual joint military drills, which will last until mid-April. The Foal Eagle exercise is conducted near Iksan and Damyan, South Korea.
The drills prompted a stern reaction from North Korea, which slammed the exercises as “a serious provocation” that could plunge the region into “a deadlock and unimaginable holocaust.”
Israel
The US joined Greece, Italy, and Israeli forces at Ovda air base in southern Israel for the ‘Blue Flag’ air-training drills in November 2013. The drills were called the “largest international aerial exercise in history,” by Israeli news outlet Haaretz.
According to Israel National News reports the exercises are geared towards “simulating realistic engagements in a variety of scenarios, based on Israel’s experience with air forces of Arab armies in previous engagements.”
Poland and Latvia
NATO’s ‘Steadfast Jazz’ training exercise was held in November 2013, in Latvia and Poland. The drills included air, land, naval, and special forces.
Over 6,000 military personnel from around 20 NATO countries and allies took part in the largest NATO-led drills of their kind since 2006.
Bulgaria
In October, NATO also held anti-aircraft drills in Bulgaria, along with the Greek and Norwegian air forces. The exercises were held to test responses in conditions of radio interference, according to the Bulgarian Ministry of Defense.
Persian Gulf
In May 2013, the US joined 40 other countries in the Persian Gulf for maritime war games. The US Navy said the mass exercises are aimed at “enhancing capability to preserve freedom of navigation in international waterways.”
The drills provoked a sharp response from the Iranian government who voiced concerns at how the maneuvers came in the run-up to the Iranian elections.
Japan
In August 2012, US Marines joined Japanese troops for military drills in the western Pacific. The drills were held in part in Guam, a US holding, just as an old territory dispute reemerged between Japan and China over islands in the East China Sea.
“China will not ignore hostile gestures from other nations and give up on its core interests or change its course of development,” the Chinese Communist Party stated in response to the drills, warning the US and Japan not to “underestimate China’s resolve to defend its sovereignty.”
Jordan
The US joined 16 other nations in May 2012 for military exercises in Jordan near the Syria border. The ‘Eager Lion’ drills included 12,000 soldiers from the participating countries, Turkey, France, and Saudi Arabia among them.
Denying accusations that the violence in Syria had nothing to do with the drills, the US claimed it was “designed to strengthen military-to-military relationships through a joint, entire-government, multinational approach, integrating all instruments of national power to meet current and future complex national security challenges.
Vietnam
In August 2010, the US Navy joined Vietnamese forces for drills in the South China Sea, to the dismay of China. Sovereignty claims in the South China Sea have long been a subject of debate and animosity among Taiwan, the Philippines, Brunei, Vietnam, and Malaysia, though China’s territorial declarations have been the most aggressive.
Ukraine
Ukraine welcomed a fleet of NATO warships for a two-week period of military drills in July 2010. Operation ‘Sea Breeze-2010’ focused on joint anti-terror exercises, despite Kiev’s decision not to enter the NATO alliance. Some 3,000 international military personnel were said to be a part of the drills.
Ukraine began hosting the Sea Breeze exercises in 1997, as part of its commitment to join the alliance. In 2009, the Ukrainian parliament voted against the drills, curtailing then-President Viktor Yuschenko’s efforts to seek NATO membership.
Georgia
In May 2009, 15 NATO countries held a series of controversial military exercises in Georgia less than a year after it launched an offense against its breakaway region of South Ossetia. Russia called the maneuvers “dubious provocation” saying it may encourage the country’s regime to carry out new attacks.


