Putin is indeed giving Europe the energy middle finger. From Mike Whitney at unz.com:
“Rejection of Russian energy resources means that Europe will become the region with the highest energy costs in the world. This will seriously undermine the competitiveness of European industry which is already losing the competition to companies in other parts of the world…. Our Western colleagues seem to have forgotten the elementary laws of economics, or simply prefer to ignore them.” Vladimir Putin, President of the Russian Federation
On Tuesday, Russia announced a 40% reduction in the flow of natural gas to Germany through the Nord Stream pipeline. The announcement, that was made by Gazprom officials, sent tremors through the European gas market where prices quickly soared to new highs. In Germany—where prices have tripled in the last three months—the news was met with gasps of horror. With inflation already running at a 40-year high, this latest reduction in supply is certain to tip the German economy into recession or worse. All of Europe is now feeling the impact of Washington’s misguided sanctions on Russia. Here’s more from Oil Price website:
“Russia’s Gazprom said on Tuesday that it would limit natural gas supply via the Nord Stream pipeline to Germany by 40 percent compared to planned flows because of a delay in equipment repairs… The lower supply of gas via Nord Stream to the biggest European economy, Germany, sent Europe’s gas prices surging by double digits...
SLL has posted articles from Russians who rightly have pointed out that the West is shooting itself in the foot with sanctions against Russia. This is one of the rare articles from an American who realizes the same thing. From Mike “Mish” Shedlock at mishtalk.com:
Hello EU and President Biden “There Is No Alternative” to Russian energy.
Some European Factories, Long Dependent on Cheap Russian Energy, Are Shutting Down
For decades, European industry relied on Russia to supply low-cost oil and natural gas that kept the continent’s factories humming.
Now Europe’s industrial energy costs are soaring in the wake of Russia’s war on Ukraine, hobbling manufacturers’ ability to compete in the global marketplace. Factories are scrambling to find alternatives to Russian energy under threat that Moscow could abruptly turn off the gas spigot, bringing production to a halt.
Europe’s producers of chemicals, fertilizer, steel and other energy-intensive goods have come under pressure over the last eight months as tensions with Russia climbed ahead of the February invasion. Some producers are shutting down in the face of competition from factories in the U.S., the Middle East and other regions where energy costs are much lower than in Europe. Natural-gas prices are now nearly three times higher in Europe than in the U.S.
How is Russia weathering those tough sanctions? Just fine, thank you. From Alex Kimani at oilprice.com (hardly a Russia propaganda outfit):
Continued oil and gas exports as well as a propped-up ruble, have allowed Moscow to weather Western sanctions.
JPM has backtracked on its earlier forecasts of a 35% contraction in Russian GDP in the second quarter.
The lion’s share of Russian raw materials is traded via Switzerland and its nearly 1,000 commodity firms.
A couple of weeks ago, Putin went on record calling the war in Ukraine a “tragedy” and claiming that economic sanctions imposed on his country had “failed.” Turns out he wasn’t exactly bluffing.
Three months into the most severe and coordinated sanctions by Western governments, Russia’s economy is proving to be a hard nut to crack. Continued oil and gas exports as well as a propped-up ruble, have allowed Moscow to weather the West’s sanctions much better than expected.
In a note to clients dated last week and made public on Monday, JPMorgan Chase says business sentiment surveys from the country “are signaling a not very deep recession in Russia, and therefore imply upside risks to our growth forecasts. The data at hand therefore do not point to an abrupt plunge in activity, at least for now”.
JPM has also backtracked on its earlier forecasts of a 35% contraction in Russian GDP in the second quarter and 7% for all of 2022, now predicting that the recession will be far less severe.
The U.S. is the empire of debt and made-up money, and the empire is crumbling. If it wants to rebuild the empire, the U.S. government and central bank will have to do it with something more substantial than another fiat currency. From Alastair Crooke at strategic-culture.org:
A failure in Ukraine could well mean the disintegration of EU and NATO, Alastair Crooke writes.
Sometimes revolutionary change creeps up upon us by stealth; we only come to appreciate the major bifurcation when we come to notice it, in the rear-view mirror. This is especially so when the those who first pulled the trigger do not fully appreciate – themselves – what they have done.
What has been done? In a moment of visceral prejudice, a few ‘Team Biden’ staffers decided to leverage their plan to collapse the value of the rouble. So they hit upon the ruse of seizing the dollar, euro and Treasury bond reserves of the Central Bank of Russia.
So sure were they of their plan that this would completely stymie Russia’s efforts to save a sinking rouble, they did not even bother to consult the Federal Reserve or the ECB. The latter said so publicly and disagreed with the action taken.
At the end of all this the dollar may very well not be the global reserve currency for a good portion of the globe. From Brian McGlinchey at starkrealities.substack.com:
By incentivizing foreign governments to seek currency alternatives, U.S.-led sanctions could end the dollar’s global dominance and cause havoc at home
There’s much to despise about economic sanctions. Aside from the fundamental immorality of making innocent individuals suffer for the sins of governments, sanctions almost universally fail to achieve the goals of those who inflict them.
Nonetheless, sanctions have become the knee-jerk U.S. government response to any real or claimed foreign misdeed. According to the U.S. Treasury department, the number of U.S.-imposed sanctions soared 933% between 2000 and 2021.
Where today’s Ukraine invasion-prompted sanctions are concerned, civilians in Russia and all around the world are already feeling the effects, via increasingly expensive and scarce food, fuel and other goods.
In the end, however, the greatest damage may be inflicted on the United States government and its citizens: By incentivizing Russia and other countries to stop using U.S. dollars for trade, the sanctions regime threatens to topple the dollar from its position of global preeminence. That could spell disaster for the American economy and hasten the end of the U.S. empire.
The sanctions are destructive, but they’re destroying Europe far more than Russia. From Pepe Escobar at thecradle.com:
If the US goal is to crush Russia’s economy with sanctions and isolation, why is Europe in an economic free fall instead?
Washington’s competition with rising power Russia is so fierce, it is willing to sacrifice Europe.
Photo Credit: The Cradle
The stunning spectacle of the European Union (EU) committing slow motion hara-kiri is something for the ages. Like a cheap Kurosawa remake, the movie is actually about the US-detonated demolition of the EU, complete with the rerouting of some key Russian commodities exports to the US at the expense of Europeans.
It helps to have a 5th columnist actress strategically placed – in this case astonishingly incompetent European Commission head Ursula von der Lugen – with her vociferous announcement of a crushing new sanctions package: Russian ships banned from EU ports; road transportation companies from Russia and Belarus prohibited from entering the EU; no more coal imports (over 4.4 billion euros a year).
Russia is resilient enough to recover from U.S. sanctions. From James Rickards at dailyreckoning.com:
The U.S. and its allies in the EU and others around the world have imposed the harshest economic sanctions on Russia that have ever been used. In the past, even nations directly at war with each other would continue to pay the debts they owed each other.
Since this war is in Ukraine, let’s look at another war that took place in present Ukraine from 1854–56, during the Crimean War.
Britain (and France) was at war with Russia. Yet throughout the war, the Russian government kept paying interest to British holders of its debt. The British government also kept paying its debts to the Russian government.
One British minister said that civilized nations should pay their debts, even to an enemy during wartime.
But that was then and this is now. The U.S. and its European allies outside of Ukraine aren’t even directly at war with Russia (not yet anyway), but they’ve still imposed the most punitive economic sanctions in history.
To a great extent, the Russian economy has been cut out of the global economy.
Sanctions on Russia could destroy the U.S.’s and Europe’s financial and energy markets. From Pepe Escobar at unz.com:
Washington’s ‘replacement strategy’ for sanctioned Russian oil and gas imports appears to be to cozy up to its oil-producing arch-enemies Iran and Venezuela. Photo Credit: The Cradle
The official Russian blacklist of hostile sanctioning nations includes the US, the EU, Canada and, in Asia, Japan, South Korea, Taiwan, and Singapore (the only one from Southeast Asia). Notice how that ‘international community’ keeps shrinking.
The Global South should be aware that no nations from West Asia, Latin America and Africa have joined Washington’s sanctions bandwagon.
Moscow has not even announced its own package of counter-sanctions. Yet an official decree “On Temporary Order of Obligations to Certain Foreign Creditors,” which allows Russian companies to settle their debts in rubles, provides a hint of what’s to come.
Russian counter-measures all revolve around this new presidential decree, signed last Saturday, which economist Yevgeny Yushchuk defines as a “nuclear retaliatory landmine.” .
It works like this: to pay for loans obtained from a sanctioning country exceeding 10 million rubles a month, a Russian company does not have to make a transfer. They ask for a Russian bank to open a correspondent account in rubles under the creditor’s name. Then the company transfers rubles to this account at the current exchange rate, and it’s all perfectly legal.
Payments in foreign currency only go through the Central Bank on a case-by-case basis. They must receive special permission from the Government Commission for the Control of Foreign Investment.
It’s a better than even bet that the sanctions imposed on Russia will end up hurting the sanctioners more than the sanctionees. From David Stockman at antiwar.com:
What a tangled web these war-loving fools spin. We are referring, of course, to Washington’s belated attempts to ease or remove sanctions against oil producers Venezuela and Iran. That’s so it can crank up the sanctions against the new villain of the month, Russia, without monkey-hammering American consumers with $7 gasoline prices.
Then again, why is Washington in the Spanker-in-Chief business in the first place?
Yes, the Venezuelan people foolishly elected a socialist government which proceeded (predictably) to wreck their economy. But why did Uncle Sam have to administer a spanking, especially since the strapping occurred during a Republican Administration that should know better than to indulge in the folly of nation-building? Yet that’s the whole purpose of sanctions – to force recalcitrant nations to reshape themselves according to Washington’s dictates.
Then again, who ever said the Donald was a Republican or rational for that matter? The sanctions on Venezuela that Sleepy Joe is fixing to lift where actually slapped on by the Donald in a bid to consolidate the Cuban/Latin emigre vote in Florida.
Still, couldn’t Washington have let well enough alone and wished the people of Venezuela better luck next time rather than viciously hobble what remained of their energy industry?
Unlike many websites, Straight Line Logic does not solicit donations. If you're going to lay out your hard-earned money, you should get something in exchange. If you like the site and want to support it, buy The Golden Pinnacle or The Gordian Knot, either as a book or download. The links are on the right-hand side of the page, in the Blogroll section. You'll be supporting the site, and getting a great book and hours of enjoyable reading.