Global trends and challenges for Russia in 2022

MOSCOW, 09 Jan 2022, RUSSTRAT Institute.

 

 

In today’s busy and accelerating information flow, we can identify a number of trends that may turn out to be challenges for Russia in the new 2022. With a certain degree of probability, we can even talk about specific events that will take centre stage this year.

Earlier, in the article “The West has entered the epicentre of ideological, political and socio-economic crisis”, it was pointed out that, due to the exhaustion of the possibility of extensive growth of the capitalist model, the existing world system in recent decades has started to disintegrate.

In 2022, the old world system will continue to fall, the only question is what will be the rate of collapse. It should be noted that the United States and Britain are fully aware of the fact of the destruction of the current system and are already trying to glue together several pieces of the union of Britain-USA-Australia = AUKUS. Russia, in turn, reflected the break-up of the former world system in its security demands to the United States, which were dubbed the “ultimatum”, as well as the rapid entry of CSTO forces into the crumbling Kazakhstan.

There are several global factors that will determine the year 2022.

Firstly, it is, of course, the COVID-19 pandemic – as indicated in the previous forecast, we will still feel it in 2022. However, the absurdity of the level of information pumping of the current pandemic is spilling out.

The notorious Omicron strain, which came to Europe from South Africa, managed to make a lot of noise, leading to lockdowns in Britain and the Netherlands. BigPharma has already promised new types of vaccines specifically for Omicron. In South Africa alone lockdowns were not introduced, since the Omicron disease is lighter and the death rate is 75% lower compared to previous waves of COVID-19, and there was no collapse of the health care system there.

The world average statistics show that ≈ 18 people die per 1,000 infected with COVID-19, that is, the mortality rate is 1.84%, so the mortality rate from Omicron may be even lower than that of influenza, with its slightly less than 1% mortality rate.

From this we can conclude that, despite the lack of proper justification, the desire of some medical officials to intimidate the population with the pandemic has not yet disappeared. Let’s hope that with the arrival of the Republican party in the US Congress in the autumn of 2022, the BigPharma orgy will end, since Republican lobbyists need workers, and not just objects for injection.

The second major global factor is rising inflation. The Federal Reserve’s pumping of domestic market liquidity has already sent prices soaring around the world. Against the background of a negative rate of profit in production, in fact, there are no other forms of maintaining the current capitalist system.

The Fed is obviously late in its usual pattern of responding to inflation with a key rate hike, as this will make debt servicing more difficult. Even a minimal rate hike from the 3 stages promised by the Fed can cause a storm in financial markets and, above all, within the United States itself.

In addition, the supply chain crisis and higher energy prices, which are already causing electricity rationing in some countries, will add to a round of rising prices for consumer goods. In 2021, these factors have not yet had time to fully affect the price for end users, and 2022 will fill this gap.

Third. A separate issue is the increase in food prices, which is inevitable and, above all, due to the increase in fertiliser prices, which, in turn, increased due to the increase in natural gas prices. If the weather factor negatively affects crop yields in 2022, this could lead to collapse in some third world countries, which in turn will lead to waves of refugees. Back in December 2021, the IMF warned about the “economic collapse” of some third world countries if the G20 countries did not write off part of their debts.

To assess promising trends, it makes sense to pay attention to such a “visionary” as Bill Gates, who in 2015 warned of a global pandemic. Now he claims that, thanks to the speed of Omicron’s spread, it will become the dominant type of virus and, if the right steps are taken, the pandemic could end in 2022.

However, his actions say much more than just words. Bill Gates’ startup TerraPower and Warren Buffett’s PacifiCorp plan to build a 345 MW fast-neutron nuclear power plant in the US state of Wyoming. According to Forbes, Bill Gates owns more than 1,000 square kilometres (268,984 acres) of agricultural land in various US states, both directly and through third-party organisations such as Cascade Investments.

Back in 2018, the Gates Foundation invested in research on ways to increase cow milk yield, raise better quality chicken eggs, and improve crop resilience to drought and disease. In January 2020, the foundation announced the launch of the “Gates Ag One” initiative to strengthen support for farmers in developing countries and enable them to gain tools and access to innovations to increase yields and adapt to climate change.

Thus, we can say that electricity and food products, for some countries, will become the main values in 2022.

Now let’s look at the main global players and the dominant trends that will affect the position of Russia and the world in 2022.

USA

Unfortunately, the development of a certain kind of conflict in Russian-American relations was seen immediately after the arrival of the new US President Joe Biden in the White House, and, above all, this is due to people who occupied key positions in the State Department.

If we ignore the current conciliatory rhetoric of the White House and look at the dry facts, it becomes obvious that Russian-American relations have only degraded in 2021. However, in order to understand the logic of the following predictive conclusion, I will have to plunge the reader deeper into the nuances of US politics.

At the moment, following Russia’s demands to the United States, a number of negotiations are planned. On January 10, negotiations between Russia and the United States on security guarantees will take place in Geneva, a meeting of the NATO-Russia Council will be held on January 12, and negotiations between representatives of Russia and the OSCE will take place the next day.

We can assume that Joe Biden recalled his past experience when he came to the USSR and established contacts with the Soviet leadership, and now he is really trying to find compromises on security issues with modern Russia. This is in the spirit of the paradigm voiced by US National Security Adviser Jack Sullivan: “a multilateral approach (of the US) should become more flexible, more adaptable (to new conditions in the world), and include a network of alliances, partnerships and institutions.”

At the same time, the Secretary of state Antony Blinken adheres to the old paradigm, saying that “when we (USA) do not lead the way, then one of two things happens: either someone else is trying to take our place, but not in a manner that would promote our interests and values, or no one is trying. Then it’s chaos.”

The State Department, as one of the main branches of the “deep state”, is struck by the ideological picture of the superiority of the United States, which they themselves instilled in the world. They are not ready to admit the fact that the United States has lost its former power, and this became immediately clear after the first scandalous negotiations between representatives of the new State Department and Chinese diplomats in Alaska.

In the article “Nuland vs Biden: Who’s in charge of the White House?” it was directly pointed out that the State Department is playing its own game in US-Russian relations, using the media resource of the US Democratic Party. Biden’s unfulfilled promise to announce a December 10 meeting between Russia and the United States, plus several of their NATO allies, is a marker that Biden does not fully control the situation in the negotiation process.

In addition, in the central Western media, both in the United States and in Europe, there are no publications that would prepare the common person in the street for political compromises with Russia, individual statements of narrow specialists, in specialised journals, cannot be taken into account here.

On December 30, a telephone conversation took place between the Russian and American presidents, during which Biden mentioned that “if the escalation continues along the Ukrainian border, Western countries will take large-scale sanctions,” including in the economic and military spheres.

According to Russian presidential aide Yury Ushakov, Putin immediately reacted to this by saying that if the West still decides to impose the previously mentioned unprecedented sanctions in one way or another, all this may lead “to the complete severance of relations between our countries”. It is unlikely that the Russian president could have so “flew into a rage” in the conversation – most likely, it was a previously prepared answer, based on the prospects of the planned negotiations.

Politico magazine, the mouthpiece of the Democratic party, which, at the end of October, started hysteria about a possible Russian invasion of Ukraine, commented on this phone call in a characteristic spirit. According to experts interviewed by the publication, Putin is trying to use Biden to “maximise his next aggressive step”, this is not de-escalation at all, but quite the opposite. They assume that the Russian side perceives the current situation for itself more optimistically than it actually is.

In the summer of 2021, publications of the RUSSTRAT Institute examined in detail the report of the “Chatham House” British institute of international studies, where it pointed out the reasons why the West cannot not to go for a “Grand bargain” with Russia, it can’t even get close to Russia in the “triangle of Kissinger”, where the relationship of the West needs to be stronger on one side than the relations of Russia and China together.

Of course, the reader may doubt that there is a direct link between the findings of the British Institute and US foreign policy. In this case, one should not underestimate the level of connectivity in the Anglo-Saxon world.

In September 2021, the head of the Democratic Party in the US Congress Nancy Pelosi spoke at Chatham House about the shortcomings of the current version of capitalism in the United States and the need to improve it to “stakeholder capitalism”, which is known to us from the concept of Klaus Schwab.

Let me also remind you that the FBI investigation into “Trump campaign collusion with Russia” began with a case paid for by a firm affiliated with the US Democratic Party, which was compiled by Christopher Steele, a former British MI6 intelligence officer, and, as is known, there is no such thing as a “former” intelligence officer.

Many people miss the British factor and its connection with the “deep state” when evaluating US policy, especially in the context of Ukraine, since the US did not deal with it during the Trump period and Britain increased its influence there during this time. Great Britain is extremely interested in the aggravation of relations between the United States and Russia and the weakening of continental Europe. Given the island’s experience in carrying out provocations, the scenarios for the development of events are quite definite.

On January 1, 2022, it was reported that two former US ambassadors to Russia, as well as 22 other American experts and former diplomats, demanded that US President Biden disclose sanctions against Russia.

Such pressure on the White House administration from “deep state” has not been seen since the days of Trump. With this demand, the “deep state” wants to deprive the White House of the opportunity to back down on the promised “hellish sanctions” for Russia in the event of an ”invasion” of Ukraine.

From this, we can conclude that a provocation that would give the West a reason to talk about Russia’s aggression against Ukraine is probably already being prepared. The consequences of this provocation can only be assessed by its scale, because, depending on the level of hysteria that has unfolded, “capital flight” is possible not only from Russia, but also from parts of Europe.

Judging by the fact that US Vice President Kamala Harris has already stated that the US is ready to impose sanctions against Russia in the event of its “invasion” of Ukraine, although such statements are not typical of her position, we can say that the top in the US is increasingly inclined to a confrontational scenario with Russia. All the latest statements about the US-Russia talks there are in the context of “protecting the integrity of Ukraine”, and not Russia’s security demands.

The hawks of the US Democratic Party have their own reason in the conflict between Russia and Ukraine. They need to maximise the hysteria about the Russian invasion, and then “virtually” save Ukraine and punish the “aggressor” with unprecedented sanctions. This will be more of an informational provocation, since in the event of a real Russian invasion of Ukraine, the chances that Ukraine will be “saved” will be minimal.

With this step, the Democrats cover several problems for themselves at once. Firstly, they restore the eroded status of a tough player, a leader in the international arena. Secondly, during the congressional campaign, they will now have something they can use to fend off Republican criticism of the problematic exit from Afghanistan. Thirdly, NATO is once again showing its relevance in Europe, which allows the “deep state” to at least maintain its previous financial flows.

Fourthly, under certain conditions, under the “aggression of Russia” there is a chance to write off the volatility in the stock markets that will occur as a result of an increase in the Fed rate. They still have the only relevant problem for the American electorate – the price of oil (gasoline), which can be reduced by agreements with Iran.

The chances of such a scenario are very high, even if the US and Russia manage to reach some compromises at the January talks. The fact is that Biden is catastrophically losing credibility in conducting domestic policy. He failed to deal with the virus, saw a spike in inflation, a supply crisis in full swing, a disaster on the border with Mexico, and a surge in crime.

When the president loses authority in conducting domestic policy, it entails a loss of authority for conducting foreign policy, which gives room for manoeuvre to hawks from the Democratic Party and the “deep state”.

Europe

Europe, in its own way, is experiencing the collapse of the former world order. In September 2021, the “Strategic Partnership Agreement in the field of defence and security” was concluded between Greece and France, let me remind you that both NATO member countries are actually entering into a partnership against another NATO member – Turkey.

In November 2021, an expanded cooperation agreement was signed between Italy and France. The new agreement provides for a comprehensive strengthening of cooperation between the two countries in many areas: in international relations, in the field of justice, in solving immigration problems, in expanding economic and industrial cooperation, in transport, education, culture, and energy. Thus, Italy and France are consolidating their position in the EU against the main financial donor – Germany.

It is likely that in 2022 we may see several more similar agreements or even coalitions.

In December, a virtual “Summit for Democracy” was held under the auspices of the United States and was positioned to divide the world into conditional democratic and autocratic countries. Even in the Western media, the results of the summit did not cause much enthusiasm. The attempt to consolidate the countries that are pro-American, based on European countries, has remained an attempt without concrete results.

However, against the background of these processes, the situation for Russia in Europe is taking a negative turn. Many have not yet realised what kind of partner Russia has lost with Merkel’s departure from the post of German Chancellor. In addition, Austrian Chancellor Sebastian Kurz resigned. These two European leaders did a great deal to promote the ideas of cooperation between Russia and Europe.

The new German Chancellor Olaf Scholz immediately, in the first New Year’s address to the Germans, spoke about the value of the inviolability of Ukraine’s borders. Scholz also called for a “sovereign, united, strong Europe”, noting the need for transatlantic cooperation (with the United States) to ensure security in the region.

The ideologisation of the coalition agreement of the new German government, where the Green Party plays a significant role, is off the scale. The head of the VGTRK correspondent bureau in Berlin, Mikhail Antonov, who is completely immersed in the information reality of Germany, openly declares the current anti-Russian mood of the German media. According to Antonov, Russia should generally be ready for a complete severance of relations with Germany.

At the same time, it is likely that Olaf Scholz is only publicly playing out the ideological position that he got as a result of the coalition agreement. The German newspaper Bild reported that, despite the resistance of the “greens”, Scholz intends to make relations with Russia a priority of foreign policy, take this process under personal control and is already preparing a meeting with the Russian president in the near future.

Sooner or later, German pragmatism will overcome ideological biases. The main funding for the Green Party also comes from German businesses that are interested in stable energy supplies. On December 31, 2021, Germany closed 3 of the 6 remaining nuclear power plants and, except for Russian natural gas, they still have nothing to fill the lack of electricity generation. Therefore, Nord Stream 2 is vital for Germany.

However, I would like to draw your attention once again to the fact that so far there are no publications in the central European media that would form the mood of the public masses for compromises with Russia. It is not difficult to understand that in a situation where the media just cursed “Putin’s Russia” for creating an energy crisis in Europe, the European leadership cannot make unexpected concessions to Russia, as in the eyes of the layman they will look like complete weaklings.

For example, in an interview with the German newspaper Welt, the head of European diplomacy Josep Borrel, in response to Russian proposals to the United States and NATO on security issues, said that only winners can make demands. Therefore, the probability of a confrontational scenario developing in relations between Europe and Russia is quite high.

Bloomberg writes that “Europe Sleepwalked Into an Energy Crisis That Could Last Years“, after the gas price increase by almost 4 times, Europe will come out of the current winter with minimal reserves. Traders are already preparing for the worst. Over the past month, prices for gas supplied from spring 2022 to 2023 have increased by about 40%.

Some experts expect that the crisis will last until 2025, until new LNG projects are implemented in the United States. You will agree that the US is quite happy with this development if it develops its own production, which is more competitive than in the energy-deficient EU.

Even against the background of the energy crisis in the coming year, Europe will not be able to refuse to promote the “Green Deal” and ESG standards for business, including non-European countries. This will be held under the shouts of European officials, which if not now, then later will be even more expensive. Of course, this can lead to social unrest, which is again in the interests of the United States and Britain.

China

Relations between Russia and China in 2021 reached a new level of interaction, both in the field of diplomacy and the military. Obviously, this trend will continue. However, the main thing I would highlight is that the leaders of Russia and China agreed to create a financial structure for mutual settlements in trade.

It is in the sphere of finance that China will revolutionise in 2022. As of January 4, 2022, an app with a digital yuan (e-CNY) wallet has already been launched, both on Android and in the Apple App Store. The Chinese expect that the use of the digital yuan at the Winter Olympic Games (which start on February 4) will contribute to its promotion both domestically and internationally. Tourists who have visited the Beijing Olympics and installed the app with digital yuan will then go home and continue using the app, involving more and more people in the process.

I don’t think I need to explain that in the modern world, time is money. Money that turns around faster is more expensive. With the ability to instantly transfer digital yuan anywhere in the world 24/7, and no bank clearing and waiting for deposits, the growth in the value of digital yuan in relation to fiat currencies is inevitable. If China finally accepts the concept of imitating a digital currency only by the central bank of the country directly to the client’s wallet, this will turn the entire financial system upside down, since banks in their classical sense will no longer be needed.

The Wall Street Journal newspaper pointed out in April 2021 that with the help of the digital yuan, China is exiting from the dollar system’s control, that is, Washington. At the same time, Bloomberg wrote that the administration of US President Joe Biden is studying China’s plans for a digital yuan, as the digital yuan can accelerate “China’s long-term attempts to overthrow the dollar from the position of the dominant world reserve currency”.

Of course, this will not happen in 2022 alone. However, if the digital yuan is successfully tested by non-residents of China and cross-border e-CNY payments are implemented after the Beijing Olympics, the rest of the leading central banks will have to react to the situation. They will not be able to let this go by itself, which means that we are waiting for substantive changes in the world of finance.

It should be noted that the Central Bank of Russia takes an example from China and plans to ban investments in cryptocurrencies, as was reported by Reuters. Simply considering that only the central bank will issue the digital ruble, it does not want to have other “digital competitors”. Of course, the prospect of a decline in the role of ordinary banks with the introduction of state-owned digital currencies is already recognised by many. It is not for nothing that SberBank abandoned the ending “Bank” in its name and began to develop related areas of activity that it could reach.

It is also worth recalling that Reuters reported that SWIFT (an International Interbank System for Transmitting Information and making payments) has created a joint venture with the research institute of the National Bank of China and, in fact, is creating a new global transaction system using blockchain technology. The end date of development was not named, but during the technical process, the source code of the product will clearly be in the hands of the Chinese.

Looking to the East

Although the topic of Russia’s presence in Syria has been put on the back burner, we must remember that the Russian armed forces are fighting there. The conflict of interests between Syria and Russia and Turkey over Idlib has not been resolved. Turkish President Erdogan has put the country in a very difficult economic situation, and the cost of his military adventures has exceeded the profit received.

We cannot exclude the possibility that he will go on some new adventure for the sake of introducing a state of emergency in the country and changing the power structure, since in today’s conditions he will not win the presidential election in 2023, and it is almost impossible to correct the economic situation in a year.

Russia

The combination of factors described above in the forecast suggests that relations between Russia and the West, with a high degree of probability, may worsen due to the provocation in Ukraine.

On December 7, while testifying in the US Senate, Deputy Secretary of State for Political Affairs Victoria Nuland explained that in the event of Russian aggression against Ukraine, it is planned to isolate Russia from the global financial system, with all the ensuing consequences for Russian business and the population.

On December 21, the Reuters news agency, citing an unnamed administration official, reported that possible “extraordinary” export control measures were being considered as a punishment for Russia, which could prevent Russia from importing smartphones, critical aviation and automobile spare parts and other materials. According to an anonymous source, the measures taken may have a serious impact on Russian consumers, production activities and employment.

Let me remind you that in March 2021, after Joe Biden called Vladimir Putin a murderer, the press secretary of the Russian president Peskov confirmed that the West may disconnect Russia from SWIFT.

At the same time, the Ministry of Finance warned about the risks of blocking domestic assets in the United States and Western Europe and offered to distribute money to the National Welfare Fund for interstate loans for the purchase of Russian products.

It was also assumed that the National Welfare Fund’s funds would actually be placed in foreign currency assets, but outside the jurisdiction of countries that pursue sanctions policies. In addition, the Ministry of Finance proposed to allow the contribution of free funds of the National Welfare Fund that exceed the savings bar of 7% of GDP to shares and debt obligations of domestic companies and infrastructure projects.

I would like to add that, in theory, the purpose of the sanctions may be to hinder lending and investment in the domestic economy by Western organisations, as well as to limit Russia’s ability to take advantage of the situation of high energy prices. Although it is unlikely that there will be a break in existing contracts.

Expectations that Russia will give a quick response to the provocation that will clearly put everything in its place may not be justified. Since provocations are very different, sometimes it takes time to understand what happened in general and what the dispositions of the parties are.

If this scenario is implemented, Russia will need to build a new configuration of the financial system and rebuild the economy.

It cannot be ruled out that to the already familiar point of periodic aggravations in Ukraine, the West may cause Russia trouble in Transnistria and destabilise countries in the Central Asian underbelly of Russia. Everything is being done to ensure that our country splits resources and reaches an overstrain of forces.

Probably, the January events in Kazakhstan are of this nature. Of course, the unrest in Kazakhstan is based on internal reasons for the economic dissatisfaction of the population.

However, no “popular uprising” in the modern world begins without the support or, at least, approval of external forces. Since after the collapse of the old government, someone must legitimise the new one in the international arena. We have already seen an example of this in Ukraine, after the “Maidan” of 2014.

By the way, the US Embassy in Kazakhstan warned American citizens on December 16, 2021, that riots that would escalate into violence were possible in a number of major cities of the country.

Conclusions.

The old world system that has existed for the last decades is disintegrating. The creation of AUKUS and Russia’s security requirements for the United States clearly confirmed this trend.

COVID-19 remains one of the global factors that will determine the year 2022. However, the arrival of the new strain “Omicron”, with which the disease progresses more lightly and the mortality rate decreases, gives us hope that the danger of the disease will be equal to the usual flu.

Another global factor is accelerated inflation. The US Federal Reserve, which has been pumping billions of dollars into a global economy that is not backed by goods, does not seem to have time to raise the interest rate to reduce inflation, and it cannot do so without causing turmoil in financial markets. This means that inflation will continue to rise throughout the global economy.

Rising inflation and the current energy crisis in Europe will inevitably lead to higher food prices, which, given a poor harvest in 2022, may cause waves of refugees from third world countries.

The development of US-Russian relations is largely determined by the elite struggle in the United States itself. Emerging trends show that in the long run, the conditional “pigeons” lose to the “hawks”, on the side of which Britain plays.

The political situation in Europe is currently developing against Russia, which increases the likelihood of a conflict situation developing.

China, by launching an app for the digital yuan that will be used during the Beijing Winter Olympics, is revolutionising the world of finance, which the rest of the world’s leading central banks will have to respond to.

In the event of a likely victory of the “hawks” in the United States, an incident in Ukraine may be provoked that will allow the West to declare Russian aggression. This incident will be as hyped as possible in the media sphere, and will not correspond to the level of real danger and severity of consequences.

The aim of the West’s “unprecedented sanctions” against Russia “as punishment for its aggression in Ukraine” is to try to slow down the country’s technological and economic development.

In the event of the introduction of “unprecedented sanctions”, Russia will need to build a new configuration of the financial system and rebuild the economy.

It cannot be ruled out that by the already familiar point of periodic exacerbations in Ukraine, the West may cause trouble for Russia in Transnistria and destabilise countries in the Central Asian “underbelly” of Russia. Everything is being done to ensure that our country splits resources and reaches an overstrain of forces.

Institute for International Political and Economic Strategies – RUSSTRAT

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