Today's WrapUp by Jim Willie CB 11.18.2004 Mon Tue Wed Thu Fri Archive


PUTIN SHAKES THE PETRO-DOLLAR REGIME

Subtle changes are in the wind on the energy front. As much as some people want to regard Russia as a strong American ally, their behavior on several fronts testifies to the contrary. Some truly staggering developments are underway, not adequately reported. Behind the scenes, covered little by the intrepid US press & media, a meeting was convened two weeks ago in the Urals of Russia. European leaders, and OPEC representatives, and Putin quietly are plotting to establish stronger ties between Europe and Russia in their basis for financial transactions. Putin is adroitly offering to install euro pricing of crude oil, which would surely favor Germany and other large EU nations. He strives to obtain geopolitical concessions from EU leaders, namely a more powerful voice for Russia in world politics.

OPEC appears to be willing and eager to join in new alliances to undermine the US domination from owning the world reserve currency. Enormous consequences follow, which lie completely in US blind spots. A strange contrasting parallel might exist between the United States and Russia, regarding relationships with large energy companies. The USA has evolved into a cooperative collusion with big companies like Halliburton. Russia has broken down into a confrontational situation steeped in confiscation with big companies like Yukos. The USA seems to work constructively with large firms, with governmental support. This is seen in sponsored foreign grain sales, in development of petro-chemical plants, in defense contracts for the military complex, in permissiveness toward software monopolies, in protection of the steel industry, and elsewhere. Russia seems to work in adversarial roles to steal back and forth with their big firms.

RUSSIAN ASSAULT ON FREE ENTERPRISE

Russian legal treachery embodies a big insult to free enterprise and rights to property. One might say Yukos Oil began as a company with stolen property, or cozy deals to gather in several purchases from state-owned regions, or tax scoffs at Russian authorities enabled growth. Fine, whatever. My attention is trained on current methods, which can be aptly labeled as legal warfare, and trends which betray private property. The Yukos tax & fine bill submitted was revealed to be $18.5 billion, which exceeds the company’s annual revenue, and goes far beyond the level where embarrassment is profoundly clear. The Russian government has established a modus operandi, i.e. method of operation. A company is targeted for seizure. It is charged with tax evasion. Their assets are then frozen, pending investigations and legal outcomes. Cash flow is interrupted, only to put debt service repayments in jeopardy. The courts declare debt default, a fresh new problem for the targeted company, whose stock declines in value, and possibly sharply. Under financial duress, a deal is cut, as taxes are paid as a fraction of the original demand in return for a sale of large tracts of the company’s properties to the Russian govt. Charges are reduced or negotiated along with the distress sale of their property. Such a pattern has shown itself clearly with the Yukos case.

Moreover on the front tied to cooperative agreements, Russia’s treachery is wholly evident in its dealings with western firms. Pan Am Silver was severely victimized, via dissolution of a partner firm and reconstitution of a new corporate entity Polimetall with those mining rights, leaving the US firm out in the cold Siberian winter. PanAm Silver appears not to be in line to share profits where silver production is forthcoming. The original company was dissolved, and along with it, all contracts with PanAm. Czarist gamesmanship with western energy companies is now in focus. British Petroleum is at risk with older contracts, while others like Conoco Philips are at risk with newer contracts. British Petroleum could be in the midst of a bold double-cross, for the craziest of sounding reasons. They exce