China To Putin: Drop Dead

Max Rottersman
5 min readApr 10, 2022


Shanghai Might Kill Putin’s Gold-Backed Rubles Plan

Since 2014 Putin has worked hard to remove the West’s ability to strong-arm Russia through financial markets. Russian savings have been shifted to gold, RMB and Yen. This chart shows the historical change in Russia’s Central Bank allocation of assets.

What many news outlets fail to mention is that when Putin said “non friendly countries” must pay for gas in Rubles, he also backed the Ruble to gold. So I’m not surprised that the Ruble is back to its pre-invasion exchange rate.

As Putin expected, the West froze Russia’s Dollar and Euro assets after the Ukraine invasion. If Russia kept its savings at the 2013 allocation, it would have been roughly 80% of Russia’s reserves.

Today, it is probably 40%. Russia has options.

Buyers of Russian resources can buy in rubles, confident that in a worst case scenario they can trade in their rubles for gold*. (Keep in mind, no one wants to do business in physical gold because its expensive and difficult to store and transport).

With dollars and euros no longer usable for business with Russia, anyone who wants to buy or sell to Russia can do so electronically in rubles (without SWIFT) without worrying about their rubles losing value because Russia prints too many rubles (again, they’re backed by gold). If that becomes a real worry they can exchange their rubles for gold bars and Russia will ship it to them.

Putin probably calculated, so far correctly, that German industry would never cut off gas supplies no matter what Russia did. So far, so good.

Despite all the failings of the Ukraine special operation, Russia can prosecute the war for quite some time because there are always buyers for oil. Europe can’t smell the difference between Russian oil or American. Sanctions or not, that oil would reach Europe through the black market, a market backed by Russian gold.

We already know this is possible. In 2020, China outlawed the purchase of Australian coal (Australia insinuated that China caused Covid-19). Today, Australian coal is finding its way to China, either through the black market or directly though don’t-ask/don’t tell shipping.

All valuable commodities find their way around sanctions.

Nonetheless, Putin knows he doesn’t have forever. Eventually Western pressures would lead to Russia defaulting in global markets— unless everyone started accepting rubles, which is doubtful.

Until a few weeks ago, I could see Russia potentially achieving their goals of castrating Ukraine and selling resources on Russia’s terms, as the sellers.

But oh, the best laid plans of Putin!

Enter Shanghai.

Bad news for Russia if that blue line continues to fall

Putin didn’t see this coming. He expected the global economy to rebound after the pandemic. As Americans and Europeans started going out again, they would buy more cars, go on vacations, spend, spend, spend. And who would build those cars, airplanes? Who would add more trucks to the road? Mostly Germany. And who does Germany, and most other countries, depend on for assembly and raw material manufacturing?


Oops. In late March, 2022, China started closing down its largest city. The supply chain still hasn’t recovered and now this! How much manufacturing can Germany (Europe) do without China? My guess is that they won’t have enough demand to run their factories at full capacity, even if the war disappeared tomorrow.

In short, China is forcing the European (if not global) economy into a recession (if it wasn’t headed there already); that means less need for Russian resources.

As the Chinese economy shuts down Europeans will have even more time to shift from Russian resources to other resources. Once they spend the money on that change it would be decades before they’d go back to Russia. Also, keep in mind that everyone loses money in the black market, Russia and Germany alike.

China seems intent on sticking with their zero Covid policy for as long as possible. If the rest of the world has to wait another year for the global supply chain to work through China, so be it. If the world shifts more production to Vietnam, so be it. It’s an irony that Putin doesn’t realize China has prepared for this day too.

Next year it might be China who calls the shots in buying Russian oil. Despite some saber rattling over Taiwan, China cares more about their partners in Europe than Russia. Yes, China tells its domestic audience that it stands behind Russia. But all China really cares about is cheap oil and grains from Russia.

I must say my analysis here is quite, um, imaginative. China could change its zero-Covid policy tomorrow and focus on GDP growth at all costs. Western nations could go into a deep depression taking their attention away from Ukraine. Russia may win Donbas and the West accept a peace plan. Shanghai may end up having nothing to do with anything.

Nonetheless, I see the world moving away from the dollar. Putin’s gold-backed ruble play is serious enough that, think about it, you don’t see it talked about in the media.

Unless Russia is crushed in the end, the dollar-backed ruble may survive. China is not happy about the freezing of Russian assets. Many experts have warned again long-term ramifications to the U.S. scorched Earth policy with banking sanctions, notably SWIFT.

All Western global business are publicly agreeing that strong financial pressure must be applied to Russia. Privately, I doubt they’re happy. In the end, businesses don’t care about nationalist politics. They want to trade goods and services for a profit, with anyone. In short, even if the war were to end tomorrow I believe most businesses will quietly pursue, what I’ll call, non US dollar trade-routes; that is, like Russia they too will prepare to safeguard their business interests in the future.

(I don’t believe the Chinese Yuan will ever become a reserve currency, but that’s a whole other story.)

With a weakening dollar and a U.S. military no longer policing the world the future becomes very hazy.

Every day, young children die in Ukraine, and young soldiers from Ukraine and Russia who never chose this war. Please understand, I don’t forget that, no matter how much I intellectualize the issues.


*The U.S. went off the gold standard in 1933 in that creditors could no longer demand payment in gold. The U.S. went off backing dollars in gold, in 1971, when Nixon remove the right of citizens to exchange their dollars for physical gold.



Max Rottersman

Trying to connect what hasn't been connected.