Russia and the African Lions

Submitted by Serban V.C. Enache…

Hosting representatives of all 54 African nations, including 43 heads of state or government, at Sochi, the Russian Federation has not only signaled its return to Africa [since the implosion of the USSR], but its commitment to a heterodox financial model to boot. The gold bugs will be disappointed, for we’re not talking about a revival of the gold standard [a Government imposed system, highly prone to boom and bust cycles that also limits fiscal space for sovereign states]. What Putin’s administration pursues is a credit system [using fiat]. The Russians are seeking to invest and trade with the African states primarily using the Russian ruble. This was confirmed by the proposal of Andrey Kostin – Chairman of VTB Bank, which would ensure the smooth flow of funds among and between partner states. Asked about the solvency of the African countries, Kostin commented that most of the continent is spared of wars, and that Africa’s considerable mineral reserves [gas, oil, diamonds, gold, bauxite etc] is their method of payment [guarantee for accountability]. In other words, Russia’s trade partners will have to export to Russia in order to earn the rubles necessary to make debt payments [for debts denominated in rubles] and to purchase [more] Russian output. Alternatively, they can also save up in rubles by purchasing Russian Treasury bonds [aka. moving numbers from reserve accounts to securities accounts at the Russian Central Bank], postponing consumption [of what’s offered for sale in rubles] into the future.

Unlike Netanyahu’s wife, African leaders and representatives honored the ritual of hospitality by eating the host nation’s bread. At this huge summit, Putin engaged in a marathon of productive bilateral talks. Egypt and Russia, both co-chairs of the summit, stressed that commercial activity between the African states and the Russian Federation is far too small. Over the last five years, mutual trade has more than doubled, totalling over 20 billion dollars in worth. But Vladimir Putin expressed dissatisfaction, because 40 percent of that figure represents Egyptian-Russian business alone, and emphasized huge room for improvement.

Here are some of the highlights…

In the Suez Canal area, a Russian industrial zone is to be launched in the near future, translating into lots of jobs for both countries. Setting up production units close to the marketplace, alongside new infrastructure [worth about 190 million dollars], also translates into cheaper goods. The United Arab Emirates expressed interest in this project too, and the sums they’re pondering are in the billions. It was agreed that Russia will supply 1,300 railway cars to Egypt and would handle a general reconstruction of the country’s rail network.

Putin talked with the president of the Central African Republic [CAR] about security measures. They discussed the investigation of the murder of Russian journalists in that country and efforts to find the perpetrators. The Kremlin is actively helping the CAR in its battle against extremist groups and trying to support the Government there, which faces a military, political, and socio-economic crisis. President Faustin-Archange Touadera noted Russian aid in the form of training the CAR’s soldiers, supplying firearms, and asked for help with the training of helicopter pilots [for the Mi-35 model, one of them being shown right near the forum site].

Ethiopian PM Abiy Ahmed expressed interest in Russian nuclear energy on top of other things like trade and technology transfers. Putin talked with the Namibian president about uranium mining cooperation plans and joint exploration of pockets potentially rich in copper, gold, diamonds, and vanadium. Uganda announced it will be purchasing more Russian tanks and aircraft, while an oil pipeline was scheduled for the Congo Republic. Many of these countries entertain GDP and population growth, and are in need of fresh markets capable and willing to absorb their output.

The Russian Federation is hitting multiple birds with one stone. First, they’re securing stable demand for their output. This means creating high paying jobs for Russians, inside and outside the country. It crowds-in domestic private investment. It determines companies to invest in skill development. Russia secures for herself a new generation of skilled workers [know-how] and a bigger industrial base. Secondly, Russia is securing vital inputs to fuel her manufacturing expansion and technological development. By choosing to conduct business with the African states in rubles, Western-imposed sanctions are bypassed. Supplying trainers, commodities, and capital goods to her African partner states strengthens their ability to weather sanctions as well. Technology transfers are a huge thing for these nations, critical for attaining long-term sovereignty and a modicum of economic independence.

Since Russia has learned all the lessons the hegemon refuses to even acknowledge, let alone accept, the Kremlin won’t station Russian troops and Russian military bases all over Africa to defend its partner Governments, business assets, and vital infrastructure. Instead, the Russians will give these countries the necessary tools [affordable systems that actually detect and destroy incoming bogies] and know-how so they can defend themselves. The multipolar world system must encompass more than Eurasia; the African Lions wish to join.

The post Russia and the African Lions appeared first on The Duran.

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