We all know the drill
Nov. 28th, 2017 08:25 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
mahnmutThe economic hit-man method of enslaving countries and turning them into banana republics has been well known and well established. We've talked about it before.
Latest case in point: Venezuela. As the above-linked HuffPo article asks, "Are the food riots and blackouts just due to mismanagement and the drop in oil prices, or have the jackals arrived to look for communists under beds?"
1.6 billion dollars worth of state funds in Venezuela, most of it for paying for food and medicine, has been blocked by Euroclear, a clearing company related to JPMorgan. It's a brutal move in an economic war meant to put Venezuela on its knees.
Out of this amount, 450 million is in dollars, the remaining 1.2 billion in state bonds emitted by Venezuela, whose trade partners have agreed to take the bonds in exchange for food and medicine deliveries - but now they can't get their money back because of the Euroclear blockade. The company is based in Brussels and has clients in more than 90 countries, by the way.
The blockade is a direct consequence of the sanctions imposed in August by the US, which prohibits Venezuelan citizens from taking new loans emitted by their government or by the Venezuelan state oil company PDVSA.
Euroclear's blockade of the Venezuelan state payments, combined with similar actions by Clearstream (another clearing company owned by Deutsche Boerse Group), has practically caused an artificially imposed default upon Venezuela. The country's trade partners are being sent a signal of insolvency, although Venezuela has remained faithful to all its agreements, and has made all payments on time by now.
The two financial institutions have failed to comment on any of this up to this point. So we're left guessing. The most innocent explanation for their move is that they might be scared to complete the payments because they could be hit by the US sanctions as "accomplices" to Maduro's regime. Convenient indeed.
But the more cynical, and likely more probable version is, the payments have been withheld on purpose, so that the US rating company Standard & Poor's could get a formal excuse to downgrade Venezuela's credit ratings, and finally declare the country's default. And this in turn would provide the final shake to the Maduro government.
It's telling that the same scenario was used to cause an artificial default to the state Venezuelan company Electricidad de Caracas, Euroclear completing the withheld payments immediately after it was declared insolvent. That looked like the final rehearsal before the larger-scale similar assault on the entire Venezuelan government itself. The purpose is of course to cause panic among the investors who've trusted the Venezuelan state bonds and the country's trade partners, and most of all, its main creditors, Russia and China.
But since the attack is both political and geopolitical, Russia and China's response was key. And both countries have made it clear that they still consider Venezuela a reliable partner. The Russian ministry of finance for example used exactly the days of the biggest international financial panic to declare that Venezuela won't be needing to pay its debt to Russia (3+ billion dollars) for the next 6 years. There are ongoing negotiations for expanding this to 10 years now. Which instantly mitigated the tension at the finance markets. China helped too (Venezuela owes China 23 billion dollars), citing "full confidence" in Maduro's solvency.
So the panic was averted. And yet, Standard & Poor's still declared a downgrade of Venezuela's credit rating to D, which is practically equal to default.
The whole scenario is obviously meant to push Maduro's government toward negotiations for restructuring the foreign debt (worth about 150 billion dollars). If the expected panic is still nowhere to be seen though, the holders of Venezuelan state bonds (like Goldman Sachs and the numerous European investment funds) could sell their bonds to the infamous hedge funds (also called "vulture funds"). And they, as we're all so well aware, are trained in draining hundreds of billions of dollars from countries such as Argentina and Greece.
In Argentina's case (they've already been there), artificial default and the "vulture funds" have become a reason for economic and political destabilization, which at the end of the day has caused the leftist Peronistas to fall from grace.
Granted, the Venezuelan scenario for such a collapse has failed to work properly so far. The vultures are still in attack mode though, but they haven't been able to amass a critical amount of Venezuelan state bonds just yet. Over 90% of the bond holders have started negotiations with Maduro, and that's giving him hopes he could avert the collapse. Still, that's a huge challenge for all of his trade partners, because his government now has to urgently guarantee stable payments to all of them, while protecting them from being hit by the US sanctions.
It's a classic scenario of suffocating a trade rival. Sometimes it just fails to work as planned. Once it became clear that Maduro's government has stepped back on its feet somewhat (with some help from outside, like I said), the Venezuelan opposition has been discredited and fractured. Evidently, the next stage of the battle for Venezuela will be fought at the international financial stage. And don't assume that the white-collar fighting is any less bloody or dirty than a real hot war - because it really isn't.
Latest case in point: Venezuela. As the above-linked HuffPo article asks, "Are the food riots and blackouts just due to mismanagement and the drop in oil prices, or have the jackals arrived to look for communists under beds?"
1.6 billion dollars worth of state funds in Venezuela, most of it for paying for food and medicine, has been blocked by Euroclear, a clearing company related to JPMorgan. It's a brutal move in an economic war meant to put Venezuela on its knees.
Out of this amount, 450 million is in dollars, the remaining 1.2 billion in state bonds emitted by Venezuela, whose trade partners have agreed to take the bonds in exchange for food and medicine deliveries - but now they can't get their money back because of the Euroclear blockade. The company is based in Brussels and has clients in more than 90 countries, by the way.
The blockade is a direct consequence of the sanctions imposed in August by the US, which prohibits Venezuelan citizens from taking new loans emitted by their government or by the Venezuelan state oil company PDVSA.
Euroclear's blockade of the Venezuelan state payments, combined with similar actions by Clearstream (another clearing company owned by Deutsche Boerse Group), has practically caused an artificially imposed default upon Venezuela. The country's trade partners are being sent a signal of insolvency, although Venezuela has remained faithful to all its agreements, and has made all payments on time by now.
The two financial institutions have failed to comment on any of this up to this point. So we're left guessing. The most innocent explanation for their move is that they might be scared to complete the payments because they could be hit by the US sanctions as "accomplices" to Maduro's regime. Convenient indeed.
But the more cynical, and likely more probable version is, the payments have been withheld on purpose, so that the US rating company Standard & Poor's could get a formal excuse to downgrade Venezuela's credit ratings, and finally declare the country's default. And this in turn would provide the final shake to the Maduro government.
It's telling that the same scenario was used to cause an artificial default to the state Venezuelan company Electricidad de Caracas, Euroclear completing the withheld payments immediately after it was declared insolvent. That looked like the final rehearsal before the larger-scale similar assault on the entire Venezuelan government itself. The purpose is of course to cause panic among the investors who've trusted the Venezuelan state bonds and the country's trade partners, and most of all, its main creditors, Russia and China.
But since the attack is both political and geopolitical, Russia and China's response was key. And both countries have made it clear that they still consider Venezuela a reliable partner. The Russian ministry of finance for example used exactly the days of the biggest international financial panic to declare that Venezuela won't be needing to pay its debt to Russia (3+ billion dollars) for the next 6 years. There are ongoing negotiations for expanding this to 10 years now. Which instantly mitigated the tension at the finance markets. China helped too (Venezuela owes China 23 billion dollars), citing "full confidence" in Maduro's solvency.
So the panic was averted. And yet, Standard & Poor's still declared a downgrade of Venezuela's credit rating to D, which is practically equal to default.
The whole scenario is obviously meant to push Maduro's government toward negotiations for restructuring the foreign debt (worth about 150 billion dollars). If the expected panic is still nowhere to be seen though, the holders of Venezuelan state bonds (like Goldman Sachs and the numerous European investment funds) could sell their bonds to the infamous hedge funds (also called "vulture funds"). And they, as we're all so well aware, are trained in draining hundreds of billions of dollars from countries such as Argentina and Greece.
In Argentina's case (they've already been there), artificial default and the "vulture funds" have become a reason for economic and political destabilization, which at the end of the day has caused the leftist Peronistas to fall from grace.
Granted, the Venezuelan scenario for such a collapse has failed to work properly so far. The vultures are still in attack mode though, but they haven't been able to amass a critical amount of Venezuelan state bonds just yet. Over 90% of the bond holders have started negotiations with Maduro, and that's giving him hopes he could avert the collapse. Still, that's a huge challenge for all of his trade partners, because his government now has to urgently guarantee stable payments to all of them, while protecting them from being hit by the US sanctions.
It's a classic scenario of suffocating a trade rival. Sometimes it just fails to work as planned. Once it became clear that Maduro's government has stepped back on its feet somewhat (with some help from outside, like I said), the Venezuelan opposition has been discredited and fractured. Evidently, the next stage of the battle for Venezuela will be fought at the international financial stage. And don't assume that the white-collar fighting is any less bloody or dirty than a real hot war - because it really isn't.
