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1 Feb, 2010 12:56

Paulson points finger at Moscow for plotting crisis in the US

The former US Treasury secretary has accused Russia of trying to undermine the American economy shortly before the global recession.

Henry Paulson's newly released memoirs claim Moscow approached China with a plan to devalue the assets of America's key mortgage companies by dumping bonds.

Henry Paulson is known as one of the most recognized faces of the global financial crisis, so it could be assumed that he is simply trying to push the blame off onto another country and Paulson is representing an authority that is trying to share responsibility for the crisis with others.

It is highly unlikely that Moscow was trying to take advantage of the situation by devaluing the assets of the American companies Russia owned in 2008, believes Vladimir Ismailov, chief financial officer of the Moscow School of Management “Skolkovo”, simply because the timing of the “plot” coincided with Georgia’s intervention in South Ossetia.

“During those days, the conflict between Georgia and South Ossetia was probably the main conversation topic in Russia’s White House,” said Ismailov.

Obviously, Russian Prime Minister Vladimir Putin kept an eye on the economic situation and the financial markets, but it is doubtful it could be his prime focus at the time, added the economist, saying that he would not be surprised if the US – in the guise of Henry Paulson – will try to the blame for the crisis on some other countries as well, not just Russia.

Ivan Eland, senior fellow at the Independent Institute in the U.S. says the main problem is not whether there was a deal, but that America got itself to the point where this was possible.

“Countries do these types of little games all the time whether there’s border skirmishing or something like this,” Eland said. “But the real problem is why is the United states in a weak position. These organizations were in terrible shape and the Bush administration did nothing about it. It created vulnerability for any country if they wanted to do it.”

Andrew Leung, an International and Independent China Specialist, thinks despite the fact that there is no way to verify these allegations, they might be the truth.

“I would not be surprised if these allegations have a degree truth because at that time the relations between the United States and Russia was at a very very low point because of the Georgian situation,” Leung told RT. “But in terms of the dumping of these bonds, I think, as far as China is concerned, China of course would be the first to get hurt, because China has gotten a lot of investment in the US treasuries and [that] represents a large proportion of China’s foreign currency reserve.”