Sunday, May 17, 2015

Yahoo News: Somethings Brewing in Central Asia

Yahoo News picked up this Business Insider article by Elena Holodny. It won't come as surprising news to readers here, but she quotes an offical as saying the new Russia-China alliance that is building is "something the west needs to take seriously".  Below are some quotes and then a comment.


Although the Sino-Russo relationship predates the Ukraine conflict, there's no question that the crisis has shifted Moscow even more toward Beijing.
Over the last year, we saw the two countries sign highly publicized energy deals, conduct jointmilitary exercises, and even generally support each others' foreign policy adventures.
And this shift has more implications than just short-term deals.
Russia pulling toward China will lead to "expanded" political cooperation in three areas: "cooperation in Central Asia; alternatives to the Bretton Woods institutions; and increased cooperation on domestic political issues," although the two countries will "likely stop short of a formal military alliance," according to Alexander Gabuev, a senior associate and chair of the Russia in Asia-Pacific Program at Carnegie Moscow Center.
The Beijing-led, Moscow-supported "answers to the Bretton Woods institutions," such as the Asian Infrastructure Investment Bank (AIIB) and the BRICS Development Bank, have already been created.
Furthermore, the decreasing global influence of the US — specifically in Central Asia and the Middle East — leaves room for a new regional economic and political powerhouse in those regions.
My added comments:
This is mostly old news for readers here, but more and more mainstream new articles are showing up on this topic. It takes a while for change to take hold and sink in. The new Chinese led banks (the AIIB and BRICS bank) are going to spur some type of change as they begin to operate and get fully funded. It remains to be seen what the change will be and how quickly it happens.
It would be a mistake to think that all this means the IMF has been bypassed. So far the Chinese appear to want to use their new banks to increase their leverage at the IMF, not to bypass the IMF. Until we find out what happens with the IMF reforms and the possible addition of the Yuan to the SDR currency basket later this year, our focus remains on the IMF in terms of potential monetary system change. We will know a lot more by the end of this year.

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