Another warning shot was fired before an all-out assault on the dollar system begins. This time, an official shot: Alexey Ulyukaev, Russia’s Minister of Economic Development and former Deputy Chairman of the Central Bank, fired it. It was a major escalation, Valentin Mândrăşescu, editor of The Voice of Russia’s Reality Check, told me from Moscow.

Last time, it was Sergei Glazyev, an advisor to Vladimir Putin who’d fired the shot. But he wasn’t a government official. “Anonymous sources” at the Kremlin claimed he wasn’t speaking for the government. As Mândrăşescu reported in his excellent article, From Now On, No Compromises Are Possible For Russia:

From the economic point of view, everyone should get ready for tough actions from Moscow. Sergei Glazyev, the most hardline of Putin’s advisors, sketched the retaliation strategy: Drop the dollar, sell US Treasuries, encourage Russian companies to default on their dollar-denominated debts, and create an alternative currency system (reference currency) with the BRICS and hydrocarbon producers like Venezuela and Iran.

Unlike radical-sounding Glazyev, Ulyukaev is part of Dmitry Medvedev’s Cabinet. And as former Deputy Chairman of the Bank of Russia, he doesn’t take currencies lightly. He told Rossia-24 news channel about possible retaliatory measures if Washington adds economic sanctions to the political sanctions. Moscow wouldn’t worry too much about political sanctions, he said, but if Washington tries to hurt Russia’s economy, Moscow would retaliate by targeting the US dollar.

Some of it is already happening

Washington’s decision to release a minuscule 5 million barrels of oil from the Strategic Petroleum Reserve caused the price of oil to tank – a direct attack on the main revenue source of the Russian government, and a sign that Washington is willing to hit where it hurts the most.

Russia instantly retaliated, it seems. Suddenly, there was a mysterious mega-plunge of $104.5 billion in US Treasuries held in custody by the Federal Reserve during the reporting week ended March 12. It brought the balance down to $2.86 trillion. These securities are owned by foreign countries. As of the US Treasury’s December statement, the most recent available, the Fed held $138.6 billion in Treasuries that belonged to Russia – down by $22.9 billion from a year earlier. The mega-plunge of $104.5 billion? No data is available yet to confirm these securities belonged to Russia. And if they did, it’s unlikely that Russia dumped them on the market, but it could have transferred them to another banking center, such as Luxemburg, to get them out of reach of the US government, and be able to dump them at an opportune moment.

Getting out from under the dollar

Russia has been palavering with other countries about initiating alternatives to the dollar. Formal plans emerged from the Kremlin last May on how Russia wanted the BRICS to dismantle the dollar system. So now it was Ulyukaev, an official heavy-weight, who said that Russia would work on increasing the volume of international trade denominated in national currencies, thus bypassing the dollar (translation by Mândrăşescu):

“Why should we have dollar contracts with China, India, Turkey?” he said. “Why do we need this? We must have contracts in national currencies. And this applies to energy and other spheres.” The focus would be on Russian oil and gas companies. “They must be braver in signing contracts in rubles and the currencies of partner-countries,” he said. “I think now there is an additional impetus to finally finish this job.”

And the “currency reserve policy” would need some adjustment with maximum focus on “local currencies”; it was the normal way, he said. In Mândrăşescu’s analysis, Ulyukaev was outlining an attack on the petrodollar system and the enormous advantages it confers on the US, with the goal of creating parallel petro-currencies.

Media blackout in the US

The warning, issued officially and publicly by a Cabinet member, to target the dollar, has been vigorously ignored by the mainstream media in the US. It’s a touchy subject here. The dollar reigns supreme. Its status as the sole world reserve currency, which has provided the US with enormous economic advantages, remains unquestionable forevermore. Or so wishes the Fed, which has done such a wonderful job of managing the dollar for the last 100 years that it has lost most of its value, though it’s still a heck of a lot better than the ruble.

“I have a suspicion the Western media don’t want to report on this,” Mândrăşescu said. “It could be a bit unpleasant for the S&P 500 and the nanobots trading the US stock market.” Better keep them in the dark.

It took a while. But it had to come, the public warning shot – after some ferocious lobbying behind closed doors. No one in Germany is allowed to get in the way of the sacrosanct exporters. Read….German Exporters Fire Warning Shot About Russia “Sanction-Spiral,” Banks At Risk

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.