Economic Pearl Harbor

Assessment of LHLaRouche:
 
     The report on the developments around the gold chervonets, 
as reported  today, belongs, in terms of its historical 
implications, to the same general category as the Dec. 7, 1941 
Pearl Harbor events.  It is a development, whose immediate 
escalating implications can be understood only in the context of 
my work. It should be so handled. 
     The word of the day, "Try in any way to deny this, you 
dummy! I am serenely confident that you will attempt to do so, 
however hysterically foolish the attempt." 
                         - 30-30-30 - 

[Source: EIR files, Russian press and wires] 
     Aug. 29--TATYANA KORYAGINA'S FORECAST INTERSECTS THE FALL OF 
THE DOLLAR AND RUSSIAN MOVES TOWARDS A GOLD-LINKED MONETARY 
REFORM. What follows is a timeline of Russian Presidential and 
Central Bank steps, taken this year, to bring the gold chervonets 
into play; the public debate of these moves; their intersection 
of the forecasts of Tatyana Koryagina, policy initiatives of 
Lyndon LaRouche, and shifts involving other key Russian 
policy-makers. This is a working reference document, which does 
not pretend to be exhaustive on these topics. 
     February 1997: Helga Zepp-LaRouche and Natalya Vitrenko 
co-initiated the international appeal for a New Bretton Woods 
conference, based on the policy initiatives of Lyndon LaRouche. 
     1998-1999: In the wake of Russia's default on GKO bonds and 
the devaluation of the ruble, and during the eight-month tenure 
of the Primakov-Maslyukov government, various Russian maverick 
economists proposed an international role for the ruble, and for 
gold. Proposals circulated at that time included Ramon Kantov's 
"The Ruble as a World Reserve Currency," and  Artur Sazonov's 
plan for a "gold-backed ruble," linked to the European Monetary 
Union currency, the euro. 
     Autumn 2000: President Vladimir Putin, elected in June, 
instituted his new State Council, which marks an institutional 
shift from the hegemony of monetarist economists under Boris 
Yeltsin. Seeking economic policies that are consistent with 
national security, Putin began to draw on the expertise of 
economists, like Dr. Sergei Glazyev and Academician Dmitri Lvov, 
who previously were strictly opposition figures. He commissions 
the Ishayev report (see EIR, March 2, 2001). 
     March 6-7, 2001: LaRouche associate Jonathan Tennenbaum was 
a featured speaker at a conference on "The Threat of a Crisis of 
Global Reserve Currencies," held near Moscow. Participating 
economists included ones from the circle that had produced a 
celebrated forecast of U.S. financial disintegration, due to the 
demise of the "New Economy," published by economists Grigoryev 
and Khazin in Summer 2000; and, participants in a project under 
the auspices of State Duma Committee Chairman Yuri Maslyukov, to 
investigate the weakness of the dollar as a world reserve 
currency. 
     April 3, 2001: President Putin delivered his "state of the 
federation" message to the Russian Federal Assembly, focussing on 
the national security dimensions of economic policy. See 
LaRouche, "Putin's Silent Offer to the U.S.A.," in EIR, April 13, 
2001. 
     May 2001: Maslyukov's committee published book, "The 
Collapse of the World Dollar System: Near-Term Prospects," in 
Russian. 
     June 18, 2001: Russian Central Bank Chairman Viktor 
Gerashchenko signed a decree, making the gold chervonets and the 
silver sable coins legal tender. The chervontsy, of which ten 
tons were minted as prospective Moscow Olympics souvenirs in the 
late 1970s through 1982, have been sitting on Bank of Russia 
depository shelves, with a relatively small number of them in the 
possession of state-owned banks. 
     June 21, 2001: President Putin signed a decree "On 
Procedures for the Import and Export of Precious Metals and Gems 
To and From the Russian Federation," assigning the regulation of 
these processes to the State Chamber of Standards, under the 
Finance Ministry. The decree is promulgated on June 25, to go 
into effect on August 25. 
     June 28-29, 2001: As the guest of State Duma Committee 
Chairman Sergei Glazyev, Lyndon LaRouche presented -- first at a 
press conference, then at Duma hearings -- his policy for the 
institution of a new Bretton Woods system to replace the moribund 
post-1971 system. At both events, speakers Glazyev and Dmitri 
Mityayev called for the diversification of Russian gold and 
currency reserves, to deemphasize the dollar. 
     June 29, 2001: During the same hearings, economist Tatyana 
Koryagina forecast the "explosion" of the U.S. economy and 
dollar-centered financial system. See transcript in EIR of July 
20, 2001, for her remarks in full. She named Aug. 19 as a likely 
inflection point in the crash process, and suggested that the 
dollar would soon be worthless as anything but bathroom 
wallpaper. 
     July 4-5, 2001: The forthcoming promulgation of 
Gerashchenko's June 18 decree, began to be discussed in the 
Russian press. {Nezavisimaya Gazeta} previewed the action under 
the headline, "Central Bank Attacks the Dollar with the 
Chervonets," while Strana.ru reported that the chervotnets was 
"Russia's Alternative to Dollar." 
     July 10, 2001: The Central Bank decree was promulgated, the 
chervonets becoming legal tender on that day. 
     July 12, 2001: Koryagina elaborated her forecast, in an 
interview with {Pravda}. Within that interview, she stated, "I am 
closely watching the measures taken by the President and the 
Central Bank. From the standpoint of pre-crisis measures, they 
are acting properly. It is possible that after August 19, the 
ruble may become a rather good currency." 
      July 15, 2001: Koryagina spelled out her warnings, in an 
interview to Ekho Moskvy radio, touching off an uproar inside 
Russia, about her forecast. (See article in July 27, "Russians 
Anticipate Dollar and Bush Crash" for details, and related 
developments.) 
     July 17, 2001: Interviewed in {Pravda}, Sergei Glazyev said, 
"Koryagina is a serious scientist. If she says something, it 
means she has grounds for saying it.... Personally, I would not 
be `tied down' to a specific date, Aug. 19, as the date of the 
onset of crisis in the U.S. economy.... Most of the witnesses at 
our Parliamentary hearings ... were inclined to think that the 
American economy is {already} in crisis." To rescue Russia from 
its "excessive dollarization," Glazyev proposed, "We require a 
flexible monetary policy, expanding the sphere of utilization of 
the ruble.... Without waiting for the dollar to crash, the 
question should be raised now, to the European Union, of shifting 
to trade in our national currencies: the Europeans take our 
rubles in order to use them to pay for our exports, while we take 
their euros for purposes of paying for our imports. This 
automatically makes the ruble a reserve currency on the scale of 
Eurasia. The same thing in trade with China and India: abandon 
the dollar, and shift to national currencies." 
     July 17, 2001: Malaysia announced it is minting a gold coin, 
becoming the twelfth nation to do this. 
     Aug. 1-3, 2001: President Putin conferred with CIS heads of 
state in Sochi, reportedly dealing with the coordination of 
monetary policy, among other matters. 
     Aug. 15, 2001: {Vedomosti} reported that Russia is preparing 
to take bids for the development of Sukhoy Log, one of the 
largest known gold deposits int he world. 
     Aug. 20, 2001: {Ekspert} magazine reported that the gold 
reserves of the Bank of Russia have increased by 48 tons during 
the past nine months, and that "the long-term tendency for the 
share of gold in the gold and currency reserves to fall," has 
been reversed. {Ekspert} discussed the potential strategic weight 
of the gold holdings of a number of nations: "The increase in 
Russia's reserves of `the yellow metal' is cause for concern in 
certain circles of the `gold' community. The reason is that 
Russia, with its 391 tons of reserve gold, along with China 
(which has approximately the same quantity of the precious metal) 
is among the countries, whose intentions regarding the use of 
gold are unclear." (Full slug was in briefing of August 24.) 
     Aug. 23, 2001: {Kommersant-Bank} updated the status of the 
chervonets, a report then highlighted in Strana.ru of Aug. 24 as 
a challenge to the dollar. 
     Aug. 25, 2001 Import and export of precious metals and gems 
was suspended by Russia, pending implementation of the regulatory 
measurse mandated by Putin. The price of palladium jumped by 
4.5%. 
     Aug. 27, 2001: {Izvestia} reported the rise of 
ruble-denominated lending in the Russian banking system, as part 
of a policy of "dedollarization." [RBD] 




  
[Source: Strana, Interfax, Russia Journal, Aug. 29] 
     RUSSIAN WEB SITE TRUMPETS CHERVONETS AS ALTERNATIVE TO THE 
DOLLAR. The widely-monitored Russian web site Strana.ru, in its 
English-language edition, today showcased the Aug. 23 
{Kommersant-Bank} article by Yelena Kiselyova on the potential of 
the gold chervonets to become a popular, liquid means for savings 
in Russia. Under the headline, "Chervonets To Replace Dollar," 
the {Kommersant} update on the chervonets was advertised today as 
the lead item in Strana.ru's daily review of the Russian press. 
     The {Kommersant} article is the feature in the business 
publication's monthly supplement, reported in yesterday's morning 
briefing. In the Strana.ru version, it comes across through these 
direct quotations: "The chervonets has gained a new status -- it 
is now a financial instrument that could theoretically become a 
worthy alternative to the U.S. dollar. Until recently, Russian 
gold coins have been of interest only to collectors and to 
government officials trying to convince the Russians of the need 
to go back to the gold standard. Today, however, they could 
become a full-fledged currency that could be used for personal 
savings." 
     The precis then gives the characterization of the liquidity 
of the chervonets, the tax-exempt status of chervonets 
transactions, and, therefore, its ability to replace the dollar 
as an inflation-free instrument for savings, as reported in 
yesterday's slug from SPB. 
     The timing of the {Kommersant} article is even more 
interesting, because it occurred two days before the scheduled 
August 25 implementation of President Putin's decree, redefining 
the regulation of all exports and imports of gold and other 
precious metals. [The decree was not implemented; instead, all 
such exports and imports were temporarily suspended. See separate 
slug. -RBD] The unusual presidential intervention is read by 
insiders as a step to impose efficient control mechanisms on the 
precious metals sector of Russia, and to dry out the black market 
for these metals. 
     Putin has also ordered the Russian government to contact the 
governments of the other CIS states, to coordinate policies on 
the issue. Related discussions also took place during the 
"informal" CIS summit in Sochi, Aug. 3-4, and during a parallel 
meeting of CIS central bank officials in Astrakhan. [RAP/RBD] 
 
[Source: www.vtordrag.ru, www.finmarket.ru, gazeta.ru, Vremya 
Novostei, Strana.ru, Ekho Moskvy] 
     Aug. 29--UPROAR OVER PUTIN DECREE ON PRECIOUS METALS TRADE, 
SUSPENSION OF RUSSIAN IMPORTS AND EXPORTS. On June 21, Russia 
President Putin signed a decree, "On Procedures for the Import 
and Export of Precious Metals and Gems To and From the Russian 
Federation," which was officially promulgated on June 25 and was 
to go into effect two months after that, on August 25. {EIR} has 
not yet obtained the full text of the decree. Some sources 
describe it as totally "deregulating" such import-export 
operations, while the more plausible accounts describe the 
measures as a centralization of the regulatory function, under a 
State Chamber of Standards, established by the Ministry of 
Finance. In addition, the decree ordered the Russian government 
to coordinate its implementation, with Russia's customs union 
partners -- Belarus, Kazakstan, Kyrgyzstan, and Tajikistan. 
     On Aug. 25, when the new regulatory procedure was supposed 
to go into effect, instead all Russian import and export of 
precious metals and gems was suspended. This was reported to 
Interfax by Andri Belov, deputy head of the State Chamber of 
Standards, and has been discussed throughout the Russian media in 
recent days. The other person widely quoted, Sergei Gorny of 
Almazyuvelireksport (the agency dealing in ex-im operations in 
platinum and other precious metals), told Gazeta.ru today that he 
hoped operations could resume by the end of this week. Gazeta.ru 
claims that the reason for the suspension, is that the Finance 
Ministry (headed by monetarist A. Kudrin) had failed to implement 
the Presidential decree and set up the new regulatory function. 
     Vremya Novostei On-Line, meanwhile, asserts that this is 
merely the official explanation, while the "unofficial" one is 
that the government is abetting Norilsk Nickel in driving up the 
price of platinum. Norilsk supplies 65-70% of world palladium and 
about 20% of platinum. 
     According to Polit.ru, the Russian export freeze prompted 
palladium prices to jump by $20 per troy ounce (to $470) 
yesterday. Vremya Novostei analyzes Sergei Gorny's remark, that 
in fact Almazyuvilereksport, in coordination with Norilsk Nickel, 
stopped spot sales of palladium "half a month ago," as reflecting 
on a shared metals-producer and government desire to drive up 
metals prices, in light of "the stagnation of the world economy." 
     N.B.: The Putin decree was signed June 21, three days after 
Central Bank Chairman Viktor Gerashchenko signed the decree to 
make the gold chervonets legal tender. [RBD] 
 
[Source: Izvestia via RFE/RL Newsline] 
     Aug. 29--RUSSIAN BANKS STRIVE TO SOAK UP DOLLARS. The Aug. 
27 article in {Izvestia} titled "Bush's Nightmare," about 
"dedollarization" moves by the Russian government and banks, had 
another important element. The increased ruble-denominated 
lending, reported in the write-up of this article in yesterday's 
briefing, takes the form of Russian bank loans that are issued in 
rubles, but with payments due in dollars. This serves the purpose 
of pulling dollars out of the huge mass of the U.S. currency, 
circulating in Russia. This aspect was highlighted in the Radio 
Free Europe/Radio Liberty report on the {Izvestia} article. 
     To avoid unclarity: Its author, Georgi Osipov, shares a 
surname with, but is not the same person as, Academician Gennadi 
Osipov. [RBD] 
 
[Source: Strana, Interfax, Russia Journal, Aug. 29] 
     RUSSIAN WEB SITE TRUMPETS CHERVONETS AS ALTERNATIVE TO THE 
DOLLAR. The widely-monitored Russian web site Strana.ru, in its 
English-language edition, today showcased the Aug. 23 
{Kommersant-Bank} article by Yelena Kiselyova on the potential of 
the gold chervonets to become a popular, liquid means for savings 
in Russia. Under the headline, "Chervonets To Replace Dollar," 
the {Kommersant} update on the chervonets was advertised today as 
the lead item in Strana.ru's daily review of the Russian press. 
     The {Kommersant} article is the feature in the business 
publication's monthly supplement, reported in yesterday's morning 
briefing. In the Strana.ru version, it comes across through these 
direct quotations: "The chervonets has gained a new status -- it 
is now a financial instrument that could theoretically become a 
worthy alternative to the U.S. dollar. Until recently, Russian 
gold coins have been of interest only to collectors and to 
government officials trying to convince the Russians of the need 
to go back to the gold standard. Today, however, they could 
become a full-fledged currency that could be used for personal 
savings." 
     The precis then gives the characterization of the liquidity 
of the chervonets, the tax-exempt status of chervonets 
transactions, and, therefore, its ability to replace the dollar 
as an inflation-free instrument for savings, as reported in 
yesterday's slug from SPB. 
     The timing of the {Kommersant} article is even more 
interesting, because it occurred two days before the scheduled 
August 25 implementation of President Putin's decree, redefining 
the regulation of all exports and imports of gold and other 
precious metals. [The decree was not implemented; instead, all 
such exports and imports were temporarily suspended. See separate 
slug. -RBD] The unusual presidential intervention is read by 
insiders as a step to impose efficient control mechanisms on the 
precious metals sector of Russia, and to dry out the black market 
for these metals. 
     Putin has also ordered the Russian government to contact the 
governments of the other CIS states, to coordinate policies on 
the issue. Related discussions also took place during the 
"informal" CIS summit in Sochi, Aug. 3-4, and during a parallel 
meeting of CIS central bank officials in Astrakhan. [RAP/RBD] 
 
[Source: www.vtordrag.ru, www.finmarket.ru, gazeta.ru, Vremya 
Novostei, Strana.ru, Ekho Moskvy] 
     Aug. 29--UPROAR OVER PUTIN DECREE ON PRECIOUS METALS TRADE, 
SUSPENSION OF RUSSIAN IMPORTS AND EXPORTS. On June 21, Russia 
President Putin signed a decree, "On Procedures for the Import 
and Export of Precious Metals and Gems To and From the Russian 
Federation," which was officially promulgated on June 25 and was 
to go into effect two months after that, on August 25. {EIR} has 
not yet obtained the full text of the decree. Some sources 
describe it as totally "deregulating" such import-export 
operations, while the more plausible accounts describe the 
measures as a centralization of the regulatory function, under a 
State Chamber of Standards, established by the Ministry of 
Finance. In addition, the decree ordered the Russian government 
to coordinate its implementation, with Russia's customs union 
partners -- Belarus, Kazakstan, Kyrgyzstan, and Tajikistan. 
     On Aug. 25, when the new regulatory procedure was supposed 
to go into effect, instead all Russian import and export of 
precious metals and gems was suspended. This was reported to 
Interfax by Andri Belov, deputy head of the State Chamber of 
Standards, and has been discussed throughout the Russian media in 
recent days. The other person widely quoted, Sergei Gorny of 
Almazyuvelireksport (the agency dealing in ex-im operations in 
platinum and other precious metals), told Gazeta.ru today that he 
hoped operations could resume by the end of this week. Gazeta.ru 
claims that the reason for the suspension, is that the Finance 
Ministry (headed by monetarist A. Kudrin) had failed to implement 
the Presidential decree and set up the new regulatory function. 
     Vremya Novostei On-Line, meanwhile, asserts that this is 
merely the official explanation, while the "unofficial" one is 
that the government is abetting Norilsk Nickel in driving up the 
price of platinum. Norilsk supplies 65-70% of world palladium and 
about 20% of platinum. 
     According to Polit.ru, the Russian export freeze prompted 
palladium prices to jump by $20 per troy ounce (to $470) 
yesterday. Vremya Novostei analyzes Sergei Gorny's remark, that 
in fact Almazyuvilereksport, in coordination with Norilsk Nickel, 
stopped spot sales of palladium "half a month ago," as reflecting 
on a shared metals-producer and government desire to drive up 
metals prices, in light of "the stagnation of the world economy." 
     N.B.: The Putin decree was signed June 21, three days after 
Central Bank Chairman Viktor Gerashchenko signed the decree to 
make the gold chervonets legal tender. [RBD] 
 
[Source: Izvestia via RFE/RL Newsline] 
     Aug. 29--RUSSIAN BANKS STRIVE TO SOAK UP DOLLARS. The Aug. 
27 article in {Izvestia} titled "Bush's Nightmare," about 
"dedollarization" moves by the Russian government and banks, had 
another important element. The increased ruble-denominated 
lending, reported in the write-up of this article in yesterday's 
briefing, takes the form of Russian bank loans that are issued in 
rubles, but with payments due in dollars. This serves the purpose 
of pulling dollars out of the huge mass of the U.S. currency, 
circulating in Russia. This aspect was highlighted in the Radio 
Free Europe/Radio Liberty report on the {Izvestia} article. 
     To avoid unclarity: Its author, Georgi Osipov, shares a 
surname with, but is not the same person as, Academician Gennadi 
Osipov. [RBD] 
 

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