Posted on 07/10/2022 8:56:07 PM PDT by delta7
Today I am risking being too glib, but my excuse is aspiring to meet the Einstein standard, “Make everything as simple as possible, but not simpler.” It’s not hard to see that as rough as economic conditions are now, they are set to get worse. And it’s not hard to see that despite the considerable blowback from the sanctions against Russia, the West is not going to relent.
Here’s a simple baseline forecast. Russia wins in Ukraine. The West may try to define it somehow as not a victory, but it’s hard to see how Russia does not take the entire Black Sea coast plus Ukraine east of the Dneiper by the end of the year, and I hazard to guess sooner, say October-November. What Russia decides to do with the western part is path dependent and so in play (consider how possible military coup/Zelensky flight, Democratic November wipeout, rising political strife in Europe, Poland deciding to get expansionist could all factor into Russian decisions). Some Russians are already getting cocky:
The West will remain fixated on making Russia pay for taking Ukraine. But the West lacks the ability to do so via conventional warfare (see this devastating analysis, The Return of Industrial Warfare, which shows that the West lacks the manufacturing capacity to match, let alone beat, Russia). So the only means left is economic war. Despite the fact that the West is losing decisively there too, it is determined to escalate, no matter how much harm it does to itself.
Russia has been measured in its responses. Perhaps the Russian leadership hoped that the West would recognize the balance of power and cool off after Russia force a Minsk-Accords-type solution plus a guarantee of neutrality upon Ukraine, which seemed a possible outcome as of the end-of-March negotiations in Istanbul, which the UK and US got Zelensky to undo. Russia knows there’s no point in negotiating with the West, or at least not the current actors.
Russia is nevertheless far from tit-for-tat-level retaliation; one assumes if nothing else Russia is now playing to China and India and the Global South to show that it is being pretty reasonable given the givens and trying to balance respecting contracts with not being ripped off. Merely requiring gas for roubles, and now “other commodities for roubles” as a way to prevent another $300 billion in foreign exchange reserves from being stolen was hardly a big ask,1 yet some buyers went ballistic. Poland and Bulgaria refused to comply with the new payment procedure and so Russia stopped shipping their contracted amounts.
Now the Western press is regularly complaining that Russia is not sending all the gas that it is “supposed” to. Austria complained in June (on the fourth day this happened) that was only getting 50% of the gas it expected. The article made no mention of the fact that this was in the period when Gazprom pointed, and it was confirmed, that Siemens had sent turbine used in St. Petersburg to Montreal and Canada would not send it back, and Gazprom had to cut deliveries on Nord Stream 1 by 40%. The other nation-level shortfalls could be due to Germany backfilling Poland and Bulgaria.
Recall also that Russia sanctioned 31 Gazprom European entities connected to Gazprom Germania because Germany stole Gazprom assets there, including storage facilities. At least one of those entities was Austrian.
In other words, it’s hard to unpack how much of the alleged shortfalls are the direct result of sanctions-related measures and specific counter-sanctions by Russia, as opposed to the Russia jerking the EU around because it can. So far, it looks to be mainly or entirely the former, but with more and more provocations like the Kaliningrad partial blockade, there’s a lot of room for Russia to get nasty. For instance, continuing on the economic front, Austria is about to seize a partly-Gazrprom owned facility in Austria, but you’d never know that from the press accounts unless you’d been paying attention. From Reuters:
Austria is following through on a “use it or lose it” threat to eject Russia’s Gazprom from its large Haidach gas storage facility for systematically failing to fill its portion of the capacity there, the government said on Wednesday.
Austria obtains around 80% of its gas from Russia but since the war in Ukraine it has accused Moscow of weaponising that supply and has been seeking alternatives. Fearing that Russia will cut it off, it is racing to fill its gas storage facilities, which are at just under half their capacity.
Since Gazprom has not been filling its portion of the Haidach facility near Salzburg, the conservative-led government told the Russian firm in May that if it did not use its storage there the capacity would be handed over to others. Legislation making that possible came into force on July 1.
“If customers do not store (gas) then the capacity must be handed over to others. It is critical infrastructure. We need it now in such a crisis. That is exactly what is happening now in the case of Gazprom and its storage at Haidach,” energy minister Leonore Gewessler told a news conference, adding that gas regulator E-Control had started the process of ejecting Gazprom.
First, it’s not clear if Russia was actually short on its contractual deliveries. Second, one wonders where Austria could possibly get the gas needed to fill its storage all the way up (as if the tanks were always full, something I doubt). Third, it is acting on “fears” Russia will cut it off, when it looks like Austria is in the process of triggering that outcome.
The key omission is who owns the facility. Per Bloomberg: “Haidach was built by Gazprom and Germany’s Wingas Gmbh.” As we wrote, Wingas was one of the entities sanctioned by Russia as a result of Germany seizing Gazprom Germania assets. So the cutback in deliveries may also be the result of those counter-sanctions.
So Austria’s response will be to copy Germany, steal the unsanctioned part of Gazprom asset… and they expect Russia to continue supplying gas? They posture as if they have an alternative when they don’t.
We’ve gone through this example long form to show that so far, Russia has been responding in targeted ways to Western actions, and so far in nothing even remotely approaching the magnitude of the central bank asset heist. But Austria shows that the West’s impulse when Russia respond is to engage in yet another round of escalation. And in parallel we also see the West trying to impose new punishments, like its oil price cap, which even if it kinda-sorta gets done, will result in lower to much lower oil deliveries to the unfriendly country participants, much higher oil prices, and Russia still fat and happy since at prices over say $200 a barrel, it can sell even less energy and prosper.
With enemies like this, who needs friends?
This is a long-winded way of making a point most readers already likely accept: no matter how bad things get in the US, Europe, Japan, and South Korea, absent the violent overthrow of governments, Russia’s opponents will not relent on their economic sanctions. We will hoist from India Punchline as to where this trajectory too obviously is going:
Germany is heading for a major economic crisis. The head of the German Federation of Trade Unions has been quoted as saying in the weekend, “Entire industries are in danger of collapsing forever because of the gas bottlenecks — especially, chemicals, glass-making, and aluminium industries, which are major suppliers to key automotive sector.” Massive unemployment is likely. When Germany sneezes, of course, Europe catches cold — not only the Eurozone but even post-Brexit Britain.
Welcome to the European Union’s “sanctions from hell.” The US literally hustled the Europeans into the Ukraine crisis. How many times did Secretary of State Antony Blinken travel to Europe in those critical months in the run-up to the Russian invasion of Ukraine to ensure that the door to any meaningful talks with the Kremlin remained shut! And American energy companies are today making windfall profits selling gas to Europeans. Won’t Europeans have the common intelligence to realise they have been had?
Now, Biden has washed his hands off the gas crisis. He brusquely stated at a press conference in Madrid on June 30 that such premium on oil prices will continue “as long as it takes, so Russia cannot, in fact, defeat Ukraine and move beyond Ukraine. This is a critical, critical position for the world. Here we are. Why do we have NATO?” …
But even if that’s the case [that Russia per Biden is suffering economically and will eventually crumble], how does all that help the Europeans? On the other hand, President Putin’s strategic calculations with respect to the war remain very much on track….Five months into the war, Ukrainians are staring at defeat and Russian army generals know it.
Russia didn’t wander into Ukraine unprepared, either. Evidently, it took precautionary steps both before and since the war to shield its economy. And this enables the Russian economy to settle down to a “new normal”. Washington’s options are quite limited under the circumstances. Fundamentally, western sanctions do not address the causes of the Russian behaviour, and therefore, they are doomed to fail to solve the problem at hand.
Remember, Germany just announced its first trade deficit in decades. Energy rationing will favor households over businesses. Businesses will fail. That means a loss of salaries and spending. And unless there’s a fast rebound, most of those losses will become permanent. Italy is also dependent on Russian gas, and it has a chronically sick economy and very weak banks. Eurozone fiscal rules provide for limited spending headroom when things fall apart. And fiscal operations can’t remedy a shortfall of energy and food (a separate stressor we’ve skipped over).
Japan’s severely weakened currency means even it if can play nice with Russia despite being an American military protectorate, some businesses may go wobbly due to high energy prices breaking their budgets. Remember both Japanese and German part (as well as inputs from other EU nations) are parts of some American just-in-time manufacturing. And if the EU has a full bore banking or sovereign debt crisis, the industry effects could extend beyond energy/oil product hungry businesses.
And we haven’t factored in Covid outbreaks making it even more difficult to keep businesses and essential services functioning.
So the image that keeps coming to mind is a tsunami. Remember that those on a beach first see a placid scene, with the ocean pulling back much further than a normal low tide. And then the water comes in and sweeps everything before it:
1 The point of the mechanism is actually not the roubles; the roubles are the pretext for forcing paying to be made via a Russian bank, as in outside the Western sanctions regime. Recall the payments are still made in the original contracted currency, be it euros or dollars or sterling. The Russian bank makes the currency swap.
Wishful thinking from Putin’s meat grinder.
Very good article. He spells out the current situation well, but I do not agree with his conclusions that the U.S. or the rest of NATO will continue the sanction campaign regardless of the devastating effects it is having on the West.
From my perspective it appears the will to continue this is already starting to crumble and this is likely to pick up speed as the suffering escalates.
The president of the Austrian Chamber of Commerce has already openly spoke out on the need to end sanctions. Macron and Scholz (according to a Ukrainian telegram source) have already devised a Minsk 3 plan that they are trying to push on Zelensky. Germany is blocking the EU 9 billion euro financing plan and the one billion euro IMF loan and not only has Germany been slow walking and delaying shipping to Ukraine the weapons they had previously pledged; but the Defense Minister has denied the previously promised 200 fuchs armoured personnel carriers saying that Germany needed to keep their weapons for their own defense.
The Italian government is in a crisis and may fall and the two main groups there are at odds about continuing to supply Ukraine. And some of the Eastern EU members have been cold to the sanction plan all along because it creates devastating harm for them. Etc., etc., etc.,
People may not recognize it yet; but this whole program is in the process of imploding.
"Objection, Your Honor! Counsel presenting facts not in evidence!"
Regards,
Good morning Boris! Good morning Natasha! How’s the weather in dear old Moskva this morning?
Amazing how quickly warfare technology changes. Just out an interesting article about the latest efforts from that “gas station masquerading as a country”...:-)
I wonder if there was ever anything John McCain was right about...:-)
https://www.space.com/russia-anti-satellite-laser-facility-satellite-photos
Satellites spot construction of Russian anti-satellite laser facility: report
By Brett Tingley published 3 days ago
Anti-satellite technologies are on the rise as space becomes an increasingly vital domain for military activities.
Recent Google Earth images reveal construction at what appears to be a sophisticated laser system at a Russian space facility designed to blind adversary satellites.
The construction is taking place at the Russian Ministry of Defense’s Krona space facility near Zelenchukskaya in Russia’s far southwest, home of the massive RATAN-600 radio telescope. The existence of this new complex was brought to light in an in-depth open source investigation published by The Space Review that analyzed public satellite imagery, solicitation documents from Russian industrial contractors and Russian financial documents.
All of these sources lay out the construction of a project named Kalina, described in the financial documentation obtained by The Space Review as a laser system designed for “electro-optical warfare” that can permanently blind adversarial satellites by shining laser pulses so bright they can damage optical sensors. (This is distinctly different from other lasers known as “dazzlers,” which are aimed at only temporarily blinding optics systems.)
Russian patent and procurement documents reveal that the Kalina laser facility features a separate tracking system with adaptive optics to help it better mitigate atmospheric disturbance. Along with this system, the laser itself features a transmit-receive system to measure laser light reflected back at it from its target in order to better aim directly at the optical systems on its target object.
This “shadow war in space,” as The Washington Post deemed it, is already playing out. Elon Musk wrote in May 2022 that Russia has been “ramping up their efforts” to jam and disrupt signals from SpaceX’s Starlink internet satellites. SpaceX recently sent many Starlink terminals to Ukraine to re-establish communication networks and provide emergency internet services in the nation, which Russia invaded in February.
It’s quite possible that ground-based lasers like Russia’s new Kalina system could provide exactly the type of “soft kill” methods described by Chinese researchers — techniques that, unlike “hard kill” methods, don’t create risks for everyone else operating in space.
There is no point for Russia to sign up for Minsk 3 because the first two are still haunting her.
As was the case with the previous agreements, Ukraine is going to violate them since day one, but the media is going to claim that Russia is doing it.
There is no point in any deals in such environment.
Regarding weaponized energy it takes a special kind of stupid to whine about.
Numerous top European leaders declared a total economic war on Russia, stating that they are going to stop the gas import as quick as possible.
Once the flow stopped, according to the Russian statement due to valuable equipment withheld due to sanctions and the facts on the ground confirm it, they scream ‘energy weapon’, instead of assuming responsibility for own actions.
Bottom line is that the European claims of alternative sources are mostly of symbolic nature. The US and Australia a decreasing gas exports due to domestic shortages, and Arabs do not want to invest trillions into idiots whose goal is to switch to renewables in ten years.
Russia at the same time is rather effective in diverting the European sales and it makes Euros frustrated as hell, except they don’t have any viable options.
Stop posting this blog in the News/Activism Forum.
“Russia at the same time is rather effective in diverting the European sales and it makes Euros frustrated as hell, except they don’t have any viable options.”
The Minsk 3 plan, of course, is never going to be agreed to by Russia. That ship sailed months ago once Russia understood that this wasn’t about Ukraine; but a carefully designed NATO (read: U.S.) plan to defeat Russia. But, the fact that Macron and Scholz have been trying so desperately to make it happen is a clear indication of just how badly they want the sanctions to end and how eager they are to reconnect with their energy supplier...:-)
The “biggest sanctions program in history” has failed and is now fizzling out.
Are you Russian?
The “intelligence community” probably said them that the exodus of Pepsi and IKEA is going to produce a revolution and they are going to get control over the energy assets for free. Once it failed to work they had no plan B.
If I were Russia I wouldn’t let them out of their own trap that quick. Euroidiots need to learn who is the boss the hard way to prevent future mischief.
Are you Russian?
You can’t post anything about Russia Ukraine if you look like you are taking a side. Flame wars are raging on every thread about the conflict. It’s the Putin Stooges versus the Ukraine Resistance. I only come here to see the insults.
Germany blocks EU aid to Ukraine: gas tension and sanctions
Federico Fubini
The standoff prompted Zelensky to remove the Ukrainian ambassador to Berlin. Meanwhile, Germany seems willing to violate some sanctions.
For more than a month, Germany has been blocking the € 9 billion aid package that should represent the main form of EU support for Ukraine . The stalemate, confirmed by various protagonists both in Kiev and in Brussels, could be one of the reasons that prompted Volodymyr Zelensky yesterday to suddenly and rather brutally remove the Ukrainian ambassador in Berlin Andryi Melnyk .
However, there is a further reason behind the Ukrainian president’s nervousness of these hours: the suspicion that the Berlin government is preparing to violate some sanctions against Moscow in order to recover Russian gas supplies through the Nord Stream pipelines.
Both issues have been troubling the Ukrainian government and relations with Brussels for days, with no solution yet in sight. German opposition to the aid package seems unrelated to the gas crisis , so it probably does not reflect an attempt by Berlin to flatter Moscow just as the Kremlin maneuvers to cut off energy supplies to Europe. Yet Berlin’s obstacles to lending to Ukraine remain formidable.
The idea of the 9 billion aid, born in the spring by the Commission, was confirmed by all the leaders of the European Union at the end of May. The project provides for loans in Kiev repayable after 25 years and effectively without interest , thanks to funds that the Commission itself would collect by issuing debt guaranteed by European states on the market. But Germany, the largest and most solid of the guarantors of that form of Eurobond, is opposed: after having given the assent to the top of the leaders, now it is not there .
Berlin’s finance minister, the liberal Christian Lindner, does not like the fact that Brussels has recourse to common European debt in the Ukrainian crisis after having done so during the pandemic. For now, the German manager has given his approval only to a first tranche of one billion, the proceeds of which should be paid to Kiev by July. Meanwhile, time passes, Kiev claims that it needs aid of $ 5 billion a month and the hypothesis is that Ukraine will default on a 900 million euro foreign debt maturity in September.
More intricate, if possible, is the question of gas destined for Germany. The Russian monopoly Gazprom has announced a first cut in supplies on Nord Stream by 60%, then a second up to 90% officially between 11 and 21 July , offering a technical reason only in appearance: the gas pipeline in the Russian part works at reduced pace because a Siemens turbine is missing, already sent for repair in Germany and never returned because it is subject to sanctions.
Therefore, according to Moscow, Germany is running out of gas because it applies European measures against Russia. After all , the blockade of technological and industrial spare parts is considered the most effective weapon in Europe’s hand to weaken Russia and its Di lei regime. Meanwhile Siemens had sent Gazprom’s turbine to be repaired in Canada, which in effect was holding it back in application of the sanctions.
Two days ago came the turning point that sent Zelensky into a rage: the Minister of Economy Robert Habeck, leader of the Greens, requested and obtained the return of the turbine from Canada to Germany, giving clear signs of wanting to send it back to Russia. “If there is a legal problem for Canada, I ask that the turbine be shipped not to Russia but to us. We are forced to ask with a heavy heart - said Habeck -. We need the capabilities of Nord Stream to fill the gas storages ».
And if this is not setting the stage for a sanction violation, with Berlin attempting to bow to Moscow’s blackmail on energy, then it closely resembles us .
The Jerusalem Post: Ukraine wants Iron Dome sale from Israel, blasts anti-tank missile refusal.
______________________
🇮🇱🇺🇦Reznikov said that the Iron Dome missile defense system is only good against “rockets from the garage.”
The complex was “rejected” by the Minister of Defense of Ukraine during an interview with Forbes.
“It was created against slow missiles flying at low altitudes, made, in fact, in garages,” he told reporters.
Actually, no one was going to give away or even sell the “Iron Dome” to Kyiv.
This was previously announced to the Ambassador of Ukraine to Israel Yevgeny Korneichuk.
By the way, in response, he demanded (yes, he demanded) from Israel “to leave the comfort zone and finally choose a side.”
Israel knows if they send their weapons to Ukraine, they might as well just hand them over to Russia and Iran, so they can be back-engineered to allow countermeasures, making them to become next to useless in the battlefield.
Israel also has no love of the Neocons, as they also demand ‘land for peace’ there in a way that will leave Israel defenseless.
So, given both of the above, Israel is not going to let go of their expensively developed weapons.
The size of the Russian economy is a fact that is meaningless - they can win by not playing. Meaning if the sanctions are irrelevant because the average Russian can still eat, drive, and watch TV, the Russians win. Keeping in mind Russia still gets plenty of technology/chemicals via Chinese imports in return for oil and gas.
Think about this - if you have a farm and the technology to make biodiesel and do metal working on hand, so you can feed your family, heat the house, and drive your tractor, do you really care that Amazon won’t deliver your box of French wine and Swiss chocolate? Nope.
A lot of folks on FR need to learn about the value of negotiating position - Pres Trump knew a LOT about it and kept us safe because he did.
My personal assessment - based upon 23 years of repeated lengthy visits to Ukraine and Russia, numerous intimate contacts with Russians, and continuing communications with Russians in Russia - is that the sanctions are working.
Big-city Russians are not to be compared with starving-but-compliant North Koreans. The unrest among the civilian population is growing.
Regards,
one option to continue the sanction regime and escalate further would be to keep pushing russia until it provokes a response that provides the excuse for going to fully open direct war (not that we aren’t now unofficially in a limited way, and apparently bragging about it)
done right, it could solve the pesky election problem in november too. I suspect that is a central factor in timing, actually.
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