Ilargi: EU Gas Supply Is In Real And Imminent Danger

Yves here. This post, while informative, omits a critical piece of the calculus made by the West (or at least the US, in pushing Europe to fall into line) in its escalation of the conflict in Ukraine.

Europe depends on Russia for a significant proportion of its energy supplies. Last year, Russia provided roughly 30% of Europe’s gas. Half of this gas supply goes through Ukraine.

Russia is refusing to send Ukraine more gas until it pays past-due gas bills. Ukraine claims it owes Russia squat. Analysts have pointed out that Ukraine can and probably will syphon gas from supplies in transit to Europe. Russia could also shut the pipeline through Ukraine.

Thanks to Europe now having large energy stockpiles, due in part to a mild winter, conventional thinking had it that Europe could go at least six months from the tightening of sanctions before any energy restrictions started to bite. Some analysts (presumably based on official messaging) were confident that Russia would feel serious economic pain and be forced to relent before Russia could even begin to play its European gas supply card.

Ilargi’s post suggests that as this game of chicken is moving forward, European officials are starting to get nervous.

By Raúl Ilargi Meijer, editor-in-chief of The Automatic Earth. Originally published at Automatic Earth

More accusations fly across the media, like so many flocks of Canada geese, of direct Russian involvement in Ukraine. Much is made of an interview with Donetsk National Republic leader Alexander Zakharchenko, in which he “admits” there are Russian volunteers fighting on his side.

To the west, that’s all the proof they need. There are 1000 Russians in Ukraine, cries NATO. That doesn’t make them the Russian army though. If there are only 1000, that would be disappointing. These are people who are seeing their family just across the border shot to bits.

That Zakharchenko also said there were French and other nationals fighting on the same side is not deemed worth reporting. Just like not much has been made of the many thousands of German, British, French, Belgian, Dutch, Canadian and American nationals fighting in Syria and Iraq, mostly on the side of the IS. Other than the British guy in the beheading video, and the US citizen who got killed.

So the Commerce Department really just raised its Q2 US GDP estimate to 4.2%, one day after the CBO lowered its 2014 estimate to 1.5%? Oh my. What’s next?

I’m still thinking that even if Russia were involved in Ukraine, why would that make Putin a devil? After all, we know where the Ukraine army gets its financing from, and it too has many – foreign – mercenaries on its payroll.

Does anyone still think Putin is going to call uncle on this one? You should have been reading the Automatic Earth over the past year. He won’t, and he can’t.

Can we truly deny Russia, and Russian family members of east Ukrainian Russian-speaking people, the right to help out their people when they’re attacked by bombers and swastikas, while they have exactly zero planes themselevs? On what basis exactly? And what gives Kiev the right to bomb its own citizens?

But let’s not get into that again today. In the slipstream of the talks this weekend in Minsk between Putin and Poroshenko, a precious little detail seems to have escaped the western press entirely. But I think all our fine journalists will soon have to address it.

You may remember that in an earlier phase of the dispute between Ukraine and Russia (not to be confused with the Kiev vs rebels fight), no agreement was reached on the payment of a $4.5 billion gas bill that Russian Gazprom said was overdue from Ukraine’s Naftogaz. And Gazprom demanded pre-payment for any future gas deliveries to Ukraine.

Kiev, instead of paying the bill, claimed Russia had overcharged it for the already delivered gas, by $6 billion, going back to 2010. And brought its argument before the Arbitration Institute of the Stockholm Chamber of Commerce.

Now maybe, just maybe, someone in the Kiev camp should have paused right before that moment, and consulted with their western backers in Brussels and Washington. Perhaps not so much Washington, but Brussels for sure, and Berlin. And Athens. Rome. Prague. Warsaw.

You see, a pending case before the Arbitration Institute of the Stockholm Chamber of Commerce can apparently take 12-15 months to resolve. And perhaps Europe doesn’t have that much time. Which is what Putin hinted at at a press-op he did after the weekend Minsk talks. What it comes down is that even if Russia wanted to accommodate Ukraine, it can’t. On strictly legal terms, nothing political.

What’s more, Gazprom had already paid Naftogaz in advance for the use of Ukraine pipelines, but the payment was returned. And that can have grave consequences not just for Kiev, but for almost all of Europe. Lots of countries get their gas through these pipelines.

It looks like the EU, and especially Germany, has started to smell – potential – trouble:

EU Suggests Russia, Ukraine Sign Interim Gas Agreement

The E.U. has suggested an interim agreement on the gas supplies between Russia and Ukraine without waiting for a Stockholm arbitrary court decision, E.U. Energy Commissioner Gunther Oettinger said in a news conference following his meeting with Ukrainian President Petro Poroshenko late Tuesday Two cases are before the Stockholm court, but the hearings will take 12-15 months, which is too long, while Europe needs an interim solution for this winter, Oettinger said In June, Russian gas giant Gazprom switched Ukraine off gas over the unpaid debt and filed a $4.5 billion suit to the Stockholm arbitration court. Later, Kiev reciprocated by sending a suit to the court against Gazprom for making Ukraine overpay $6 billion for gas since 2010, setting too high prices in its contract.

The Russian Legal Information Agency has this:

Putin: Naftogaz Suit Against Gazprom Axes Discount For Ukraine

The fact that Ukraine’s Naftogaz has invoked arbitration proceedings against Gazprom prevents Russia from giving Ukraine a gas price discount, President Vladimir Putin said in Minsk where he met with Ukrainian President Petro Poroshenko. “We cannot even consider any preference solutions for Ukraine since it pursues arbitration,” Putin said. “Russia’s possible actions in this sphere could be used against it in the court. We couldn’t do it even if we wanted to.” After Gazprom switched to a prepayment system for gas deliveries to Ukraine on June 16, Naftogaz turned to the Arbitration Institute of the Stockholm Chamber of Commerce. Naftogaz wants Gazprom to cut the price for gas and to get back $6 billion that Ukraine has allegedly overpaid since 2010.

Gazprom in turn is seeking to recover Ukraine’s $4.5 billion debt for gas deliveries. Putin said Russia offered a compromise solution during the talks held before Gazprom switched to the prepayment scheme. “We reduced the price by $100,” Russian President said. Gas talks between Russia, Ukraine and the European Union went on from April to mid-June. Kiev said it would not repay its $4.5 billion debt unless Russia agreed to supply gas at a lower price. Russia offered a discount, but Ukraine turned down the offer. Russia then said it would only resume gas supply talks after Ukraine paid off its debt.

More signs of German nerves are here in a piece from the European Council on Foreign Relations – I kid you not, they exist -, along with a nice but curious admission:

Has Germany Sidelined Poland In Ukraine Crisis Negotiations?

As Germany takes over leadership of the European Union’s efforts to solve the Ukrainian crisis, Poland is questioning the motivations and strategies behind Berlin’s new diplomatic activism. The initiatives of German Foreign Minister Frank-Walter Steinmeier and Chancellor Angela Merkel are being followed closely in Warsaw – and often with mixed feelings. Is Berlin trying to mastermind a compromise with Russia on Moscow’s terms, ignoring Kyiv’s vital interests? And as Poland is increasingly edged out of the conflict resolution process, has Berlin-Warsaw co-operation on EU Ostpolitik broken down?

Poland was, along with France and Germany, one of the countries that orchestrated the political shift in Ukraine in February. Since then, Warsaw has played a central role in forging a bolder EU response to Russia’s aggression and in providing meaningful assistance to the Ukrainian government. However, as the conflict has worsened, Warsaw has become less visible as an actor in crisis diplomacy. Polish Foreign Minister Radek Sikorski was not invited to join his German, French, Russian, and Ukrainian counterparts in the negotiations on conflict resolution held in Berlin in early July and early August. Before Ukrainian President Petro Poroshenko and Russian President Vladimir Putin agreed to meet at the Customs Union summit in Minsk on 26 August, the idea had been floated of holding another high-level meeting in the “Normandy format” of France, Germany, Russia, and Ukraine.

Kiev is either so high on the EU, US and NATO support it was promised, or so desperate over its latest battlefield losses, that it goes for all on red, probably thinking, and probably rightly so, that the western press will swallow anything whole. Tyler Durden:

Ukraine Accuses Russia Of Imminent Gas Cut-Off, Russia Denies, Germans Anxious

So much for the Russia-Ukraine talks bringing the two sides together as even Germany’s Steinmeier could only say it’s “hard to say if breakthrough made.” Shortly after talks ended, Ukrainian Premier Yatsenyuk stated unequivocally that “we know about the plans of Russia to cut off transit even in European Union member countries,” followed by some notably heavy-on-the-war-rhetoric comments. The Russians were quick to respond, as the energy ministry was “surprised” by his statements on Ukraine gas transits and blasted that comments were an “attempt at EU disinformation.”

Here’s what Putin said at the press op after the talks:

Answers To Journalists’ Questions Following Working Visit To Belarus

Currently, we are in a deadlock on the gas issue. You see, this is very serious matter for us, for Ukraine and for our European partners. It is no big secret that Gazprom has advanced payment for the transit of our gas to Europe. Ukraine’s Naftogaz has returned that advance payment. The transit of our gas to European consumers was just about suspended. What will happen next? This is a question that awaits a painstaking investigation by our European and Ukrainian partners.

We are fulfilling all the terms of the contract in full. Right now, we cannot even accept any suggestions regarding preferential terms, given that Ukraine has appealed to the Arbitration Court. Any of our actions to provide preferential terms can be used in the court. We were deprived of this opportunity, even if we had wanted it, although we already tried to meet them halfway and reduced the price by $100.

The ball is squarely in the western court. Of course many will think and hope that Russia will give in because it needs the revenue, but the problem with that is it could cost the country too much (admittedly, that’s not the only problem). $6 billion to Ukraine for starters, then potentially many more billions on future deliveries to Kiev, and then there’s the rest of its contracts with two dozen or so European nations.

From a legal point of view, this may not be about what Moscow wants to do anymore, but about what it can. The Arbitration Court case may have tied its hands. And unless Europe wants a cold winter, it must seek a solution. Putin, who holds degrees in both judo AND law, understands this. But he didn’t set this up. Western and Kiev hubris did. Certain people got first too pleased with, and then ahead of, themselves.

So what now? There are several options. Ukraine can withdraw the case it has pending in Stockholm. A huge loss of face when you’re waging a war, even if it’s just against your own people. And it would still have to find money it doesn’t have, to pay its past and future gas bills. The fact that Naftogaz returned the Gazprom advance payment doesn’t bode well for that.

The west could end up – having to – withdraw its support for Kiev. But a lot of money has been poured into that support, NATO is erecting new bases on Russia’s borders, there is a war party sentiment, if not exuberance, building up.

There’s a lot of talk of Putin trying to save face, but I’m not so sure that comes from, let’s say, an ‘adequate’ understanding of what’s on the table. A more appropriate question might be: how does the Brussels bureaucracy save face? Angela Merkel may end up having to force them into humility, just so her people don’t freeze.

Or, of course, we could all go to war. Only, we wouldn’t even be able to figure out who’d be fighting whom, or for what reason. It would seriously risk repeating the very past the EU was designed to prevent.

Putin pointed to another rather difficult but highly interesting legal ‘technicality’ as well, which involves Ukraine moving closer to the EU economically:

We once again pointed out to our partners – both European and Ukrainian partners – that implementation of the association agreement between Ukraine and the EU carries significant risks for the Russian economy. We have shown this in the text of the agreement, directly pointing to specific articles in that agreement. Let me remind you that this concerns nullifying Ukraine’s customs tariffs, technical regulations, and phytosanitary standards.

The standards in Russia and Europe currently do not correspond. But, as you recall, the most classic example is the introduction of EU technical regulations in Ukraine. In that case, we would not be able to supply our goods to Ukraine at all. We have different technical standards. And according to the European Union’s standards, we will not be able to supply our machine-building products there, or any industrial goods. If that happens, we cannot accept Ukrainian agricultural production goods in our territory, because we have different approaches to phytosanitary standards. We feel that many problems would occur.

If we do not achieve any agreements and our concerns are not taken into account, then we will be forced to take measures to protect our economy. And we explained what those measures would be. So our partners must weigh everything and make corresponding decisions.

I think Ukraine, through Yatsenyuk and now Poroshenko, has grossly overplayed its hand. Encouraged by Brussels, which is also not nearly big enough for the chair it resides in, and Washington, which is partly simply clueless about the region and partly all too eager to engage in yet another campaign of “smart” bombing and regime change. And which, besides, stuck its neck so deep into the Middle East cesspool once again it has no chance of maintaining focus on an issue that mainly concerns Europe.

It is time for some cool heads to come to the fore, and for accusations and allegations and innuendo and spin to fade into the background, or this can get way out of hand.

European economies are easily doing bad enough for all efforts to be directed there, not to use this as an added motivation to incite trouble outside of EU borders.

If Kiev announces it’ll stop bombing its own citizens, and follows up on that, there’s no doubt the other side will calm down as well.

Ukraine and the west invited the lawyers in through the case they brought before the Stockholm court. Let’s leave it to the lawyers, and stop killing civilians while we do. Word.

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  1. farang

    Illargi is a wonderful writer. Brilliant. I marvel at how he can present all of the “players” issues in such an even-handed manner. As if they are all deserving of equal respect. As if all their points of view have equal gravitas and standing.

    They do not.

  2. Gaylord

    Merkel needs to publicly denounce U.S. meddling and put pressure on the U.S. to pay Ukraine’s gas bill as a condition of Ukraine withdrawing from the Stockholm Arbitration hearing and halting attacks on Crimea. The U.S. started this “cold war” but doesn’t have any skin in the game, whereas the EU will soon literally be suffering from the cold.

    1. Tsigantes

      Merkel would like to denounce the US but how can she? It is eminently clear after this summer who rules Europe, and that the 27 European states are mere satrapies.

      Since 1989 and the dissolution of the USSR, when NATO should have disbanded, it did not. Instead it ‘re-invented’ itself and lo and behold, coincidentally! the former EEC reinvented itself: please connect the dots!
      – German re-union (but without return of its sovereignty)
      – The US/NATO-led Yugoslav war which violated 2 of 3 founding principles of the EEC- inviobility of borders, no more war within Europe), started – coincidentally? – by reunited Germany’s first act, recognition of Croatian independence.
      – Absorption of the Warsaw Pact states and the eastward expansion of NATO – the last 2 violating Washington’s pact with Gorbachev.
      – As for Turkey’s inclusion in the EU, only NATO and Washington pressed for that – certainly not Europe or even Turkey.
      – The Maastricht and Lisbon treaties made membership of NATO mandatory for new EU member states, institutionalising neo-liberal economics, which would inevitably destroy the EU Social Contract.
      – The invention of the Eurozone under a Central Bank that lacked Central Bank powers, located in Frankfurt, made a re-named D-mark the toxic currency of 16 countries, benefitting only Germany. The Eurozone crisis when it came violated the 3rd founding principle: equality of the states.

      The original European community was instituted as a balance between 2 poles: France and Germany. Until 1989 it enshrined equality of states, inviobility of borders and it’s guiding purpose was to prevent all war inside Europe. All 3 founding principles have been torn up. Consider the EU today. Why is Germany the most powerful country in the EU, when it is the one country that no other state in Europe trusts? Where is France today? The ‘poles’ and ‘balance’ – ie the conceptual structure of union, is now also gone. And where is ‘old Europe’ today, the romanised Europe that created European civilisation and its values, and to which the eastern states adapted? Old Europe is sidelined and economically destroyed.

      Thus we have no European Union anymore, at least not the Europe that its states signed up to, and it’s people support.

      And what is today’s Germany? It is home to the US military command base in Europe, and NATO’s main base. The US, UK, and France ‘own’ its sovereignty. It rules the Eurozone, by enforcing a politically driven Austerity whose economic rationale has been completely disproven, and which has created economic and humanitarian devastation throughout the EU which is only getting worse. Austerity and ownership of the EU Central Bank is certainly somebody’s instrument – the question is whose? Is the economic destruction of Europe Germany’s desire or has it acting through outside agency? To what degree is Merkel a free agent to denounce the USA or its EU-based military arm even if she wished to? You decide.

      Meanwhile which country has institutionalised animus toward Russia? Who perceives war with Russia as within its interests? NOT the European countries, with the exception of Poland and its 3 minnows – Estonia, Latvia, Lithuania. And Poland appears to be led not by pro-Russia Donald Tusk, but its foreign minister Radek Sikorski, married to Bzrezinski protogee Anne Applebaum. It is a miracle indeed that from June forward, in EU talks with Ukraine, Poland has been sidelined.

      Last, it is common knowledge that the EU is one shock away from economic chaos. Is Ukraine / possible war with Russia to be that shock?

      1. susan the other

        It is always possible that this aggression on our part is aimed as much at Europe as at Russia. If “Old Europe” and “Old Russia” join empires the US will be out in the cold. I think Ilargi is wrong when he says that this flap in the EU has nothing to do with the Middle East chaos. I think it has everything to do with it, thusly: It is us, the US and the Saudis, who have threatened to shut down the Russian pipeline from the Caspian region through southern Ukraine/Romania. At least the first threat came from us. (Now we are using Ukraine as our propaganda puppet, as everyone knows.) We do not want any competition for the EU energy market. We want the pipeline the Saudis are planning – across Syria and Turkey and into southern Europe – to feed all of Europe’s energy needs. Maybe.

        1. vidimi

          Old Europe wouldn’t need to join empires with Russia to be a threat. the EU states together combine to form an economy larger than that of the united states. If the EU had any independence, if it had the freedom to formulate and pursue its own policies protecting its own interests, then it would be a real threat indeed.

        2. Yata

          So Israel has also just become a net exporter of natural gas with it’s finds in the Tamar and Leviathan fields. If memory serves me they have signed delivery contracts with Egypt and Jordan. They’re talking trillions upon trillions of cubic feet of gas here.

  3. John

    “Can we truly deny Russia, and Russian family members of east Ukrainian Russian-speaking people, the right to help out their people when they’re attacked by bombers and swastikas…”

    What a profound statement. Political boundaries use to have a meaning but I guess when Russia feels the urge to move in, someone will find that it is OK. First they deny they are in, then we find out proof positive they are in. Then they are caught in their own lie. They are not tourists after all but invaders, ready to annex.

    Time and again we’re confronted with civil wars where outsiders feel the need to come in and set the ground rules because they know what’s good for the invaded country. But we already know the outcome: this is a lost cause for the invader. So it is with Russia’s invasion into Ukraine. Russia is making a bad situation much, much worse. No matter the noble intent of Mr Putin, the West is going to ratchet up the political and economic pressure. Bad calculus.

    I would like to remind folks about Nazi collaborators during WWII and to keep in mind Europe is very complicated politically, by language and culturally and it has been this way for centuries. Here in Belgium, the Flemish (Dutch speaking) side, had been oppressed for centuries by the French speaking south, even to this day they have an ongoing urge to separate and nationalise. When the Nazi marched into Belgum during the war (similar things happened in WWI), many Flemish took sides with the Nazi invaders because they saw this as an opportunity to retaliate. Well, the Flemish collaborators betted on the wrong side and paid the price. Many were summarily taken before a firing squad without trial. Local justice was meted out. Women collaborator heads were shaved, paraded around town in the nude with swastikas smeared on their foreheads in humiliation. History does repeat itself. The bottomline is political boundaries matter.

    I checked the major news sources here in Europe and they are all regurgitating the same stuff. You can tell no one is doing any journalism in this conflict, which makes this situation frightening because a misstep could lead to something more disastrous. Outsiders must step back.

    1. Ignacio

      “Time and again we’re confronted with civil wars where outsiders feel the need to come in and set the ground rules because they know what’s good for the invaded country.”

      You included.

    2. vidimi

      that’s an oversimplification big time.

      a country on russia’s border had its rightful government overthrown in a coup organised by russia’s greatest threat and the new stooge government began paving the way for hosting that threat’s military bases, in addition to a gamut of economic and other interests hostile to russia. only the unreasonable can fault russia for reacting.

      put another way, if russia or china overthrew canada’s government and replaced them with stooges hostile to america’s interests, i don’t think you’d be batting an eyelid if the united states then tried to restore order.

      1. steviefinn

        John is quite right in his specially cherry picked example, but I fail to see what it has to do with the Ukrainian situation & I am pretty sure that if the Flemish were bombing Belgian civilians or Mexicans were bombing Americans or whatever, that young men would get involved to protect their kin or those they consider as fellow countrymen, whether there was a border or not.

        Maybe the Ukelanders should just stop bombing civilians which is causing massive casualties & ethnic cleansing – Or is that Ok simply because they have not crossed a border ? It’s these acts that are leading to people being willing to fight to cross a border to protect the innocent & I think damned right too, but maybe John in the same situation would consider not crossing a line on the map as the right decision for him.

    3. EoinW

      Funny how the satellite photos of Russian army movements appeared the next day, yet we’re still awaiting the satellite evidence on the Malaysian airliner shot down. I guess the Russians wouldn’t show their best profile for that snapshot.

      1. EoinW

        or an even more frightening thought: has the Pentagon lost its YouTube contact? Budget cuts? Is this the beginning of the end of the military-industrial complex? Excuse me while I go hide under the bed.

        1. NotTimothyGeithner

          The self imposed austerity for the country is about to hit a good portion of the Washington metro MIC. Senators Warner and Kaine are alerting local communities that the rest of the electeds want pork in their home districts and are coming after Virginia’s post 9/11 pork. Nominally, there might not be a problem, but the employees of the MIC are have huge mortgages with jobs about to be moved.

          Despite Obama’s war on while blowers, the employees of the MIC won’t be so loyal stuck in bedroom communities.

    4. washunate

      Just curious here, which political boundaries do you think would work best for Eastern Europe?

      That is an odd place to talk about political boundaries having meaning in a way that singles out Russia since so many borders have been redrawn so often in the area roughly from Paris to Stockholm to Moscow to Istanbul.

      The particular irony in Ukraine is that Russian involvement helped create it. The people to really be upset by Russian meddling are the Polish-Lithuanian Commonwealth fans.

  4. Ignacio

    In my opinion there are no institutions free of political bias and I don’t know the records of the Stockholm Court. Anycase, this post settles very clearly how the conflict is driven by the interests of Ucranian and Russian oligarchies represented by Naftogaz and Gazprom respectively. Less clear to me are the interests of “Brussels” and what exactly represents Brussels in this conflict. One of the weaknesses of the EU is precisely that Brussels is a politically dwarf entity with questionable legitimacy. Many europtean countries are passively allowing the lead of the European Comission in this conflict but they aren`t really attached to Brussels in this issue. To aknowledge what is the situation one should carefully analyse the energy policy in every EU country to evaluate the potential impact that the conflict migth have. I believe that Poland is simply playing the role of US allie against Russia in the EU (they may have enough coal not to depend on russian gas supplies). Since Poland is getting increasingly tied, financially and economically, to the EU their position as inconditional US allies migth change when “Brussels” starts changing their minds. Yet, i don’t understand very well what are the motivations of France in this conflict, and as Illargy states the position of Germany migth change radically if gas supplies are not guaranteed the coming winter. I also understand that US fracking gas producers have strong incentives in a prolonged closure of Ukranian pipelines to open international markets, overcome regulatory constraints and push gas prices up. h In Spain, the government is trying to push fracking ahead but there is strong public opposition. The conflict migth give a helping hand to the government in this issue.

    I would need to read a lot more on this issues before having any idea on how can this conflict unfold.

    1. Jim Haygood

      Lots of players with conflicting motivations, locked into alliances which don’t have coherent objectives either.

      Sounds like the run-up to WW I. Armed hostilities will boost demand, brother. Why hand cash to the unemployed, who will only waste it, when it can be issued to defence contractors who will create jobs, good jobs?

      Victory on the eastern front is within our grasp! /sarc

  5. timbers

    “This post, while informative, omits a critical piece of the calculus made by the West (or at least the US, in pushing Europe to fall into line) in its escalation of the conflict in Ukraine.”

    Know you know this (below) but just saying…

    As noted by others (maybe yourself as well), but if the U.S. policy makers represent the interests of those who benefit from gas prices rising, it is not necessarily a mis-calculation that gas prices could rise dramatically by promoting conflict with Russia. It might well be one of the objectives, to raise prices America gas owners can charge us and the world.

    Dick Cheney/Halibuton/Iraq War had some resonance among the left and Dems. Joe Biden’s son/Fracking/Ukraine is an obscure piece of info you have to search out.

    1. EoinW

      Excellent point! I was wondering what will happen to my gas rate if Russian gas is eliminated from the market. I can easily see Canada selling gas to Europe, then doubling the price of gas to Canadians. Okay maybe it’s not as simple as that, however I’m sure a European shortage will serve as a nice excuse to raise rates. I’m not too worried of course. I doubt they’ll count energy in the inflation index, therefore we won’t be facing increased inflation. I feel better already.

    2. susan the other

      Good comment. And the smokescreen about Ukraine wanting lower prices backfired when Russia offered them a $100 discount. Can’t have that.

    3. wbgonne

      “Dick Cheney/Halibuton/Iraq War had some resonance among the left and Dems. Joe Biden’s son/Fracking/Ukraine is an obscure piece of info you have to search out.”

      And some people say the two parties are just the same! Ha! The GOPers thieve and war for conventional oil while the Democrats thieve and war for fracking. Fracking is evidently the “Progressive” way to wreck the planet.

      Plus ça change, plus c’est la même chose!

    4. vidimi

      yes, good point, and one that gail tverberg made in her finite world post that was reposted on this site. interests in the united states want energy prices higher so that fracking operations will be more profitable.

    5. Yves Smith Post author

      We can’t send gas to Europe. We won’t have LNG facilities until 2019, which BTW is only a year before US gas production is projected to peak.

      So causing distress in Europe will not profit US gas producers on any time frame that stock market analysts or politicians care about.

      1. optimader

        none of the economics make sense. When politicians think they will manipulate global energy commodities as regional policy clubs, common sense has left the building. So even if we had sufficient LNG to displace Russia in Europe (we don’t), had the port facilities available (we don’t) had the LNG shipping fleet to reposition (we don’t, maybe we can contract Gasproms fleet!…oh wait..), why oh why would LNG suppliers sell to Europe at a discount on the price paid in Asia? Or can European economies pony up? I don’t think so.

        Are the Europeans prepared to sign up on long term supply contracts ( say 20 years or so)?

        Not a chance. frankly Russia could probably just give the Ukraine it’s NG free as a pass through toll and still be in a preferred pricing position in Europe relative to NA gas produced, processed, shipped and off loaded..

      2. Yata

        So Yves says: We won’t have LNG facilities until 2019.

        The square-one common sense rule is to follow the money, right?
        Who is building these LNG terminals, and what are the projected outlays?
        I’ve already read articles concerning proposed terminals, they will be built.

      3. vidimi

        but you don’t need to be able to export your hydrocarbons to profit from the price increase resulting from the bedlam and possible exclusion of russia from western markets. higher gas prices in europe may become higher gas prices at home

  6. Pwelder

    If geography is destiny, somebody needs to focus on the fact that Berlin is at the approximate latitude of Hudson’s Bay.

    Do the Germans know about this? Apparently not. They do this fiasco with the Energiewende, and now they’re thinking seriously about intensified economic warfare with their gas supplier.

    Every now and then the Germans get crazy.

  7. Banger

    I’m not sure what is or is not a main concern for planners in Washington–but clearly one of them is limiting Russian power. But the other, and perhaps more important one, is to limit the development of Europe as a power itself. The Ukraine operation kills both birds with one stone–it increases Russian isolation and brings Europe closer to U.S. domination. The finance oligarchs seem to have the same idea–weaken Europe through austerity and playing the south against the north and completely eliminate Europe as a possible rival to U.S.-centered power. The fact is that despite what appears to be foreign policy confusion the U.S. is always better off after every “defeat.” The U.S. government now appears to be in charge of all Western media outlets not just those in the USA clearly Operation Mockingbird is now operating throughout the globe.

    The U.S. wants Europe dependent on North American and Middle Eastern energy and its working. Europe may not have been a U.S. vassal ten years ago but it certainly appears to be now.

    1. Jim Haygood

      The unassailable foundation of European vassalage is US military occupation.

      NATO was never about mutual defense, since its two North American members face no credible threat of invasion. It’s simply a fig leaf for America’s obstinate refusal to demobilize from a war that ended three generations ago.

    2. washunate

      So true Banger. The real mystery to me of the past couple decades or so is why the Europeans sold themselves out for so little. Russia was obviously where NATO expansion was heading when you admit countries that don’t even border the North Atlantic. Makes me wonder what discussions have been happening behind the scenes.

      Although, I think the wildcard, the unexpected development, is that the American position is stronger in appearance than in reality. What I really think is going to happen is Europe (in particular, individual European nations) ends its ‘vassalage’ and then Washington will be hit with the metaphorical ton of bricks when it realizes its only two options are to accept the multipolar world or nuke everybody back to the stone age. It’s unfortunate that the latter option is a possibility, but I think the former will prevail. The US doesn’t have the troops to militarily occupy Europe, never mind fight Russia in Europe, and European national governments don’t have the stranglehold that the American government has to substantially reduce the living standards of its people without mass unrest. Even the American psychopaths are pushing that pretty close to the edge at this point.

    3. vidimi

      completely agree with this assessment. of course, by better off we don’t mean the plebs, but the united states, as an organism, keeps consolidating power.

  8. Brooklin Bridge

    This post, while informative, omits a critical piece of the calculus made by the West [US].

    I assume Yves is saying the 6 month stock pile of gas reserves held by Europe is the “critical piece of the calculus” held by the US and Western powers that IIargi omits, but I don’t see that fact soothing Germany’s or anyone else’s nerves by very much. Everyone in positions of power have watched Putin’s relative calm as compared to Washington’s equal but opposite outlandish accusations and caution-to-the-wind support/engineering of Ukrainian genocide against it’s people and economic suicide, not to mention the mounting frustration and hardship of being European poodle nations subject to Washington’s sanctions mania.

    Such a comparison would make most of the powerful European leaders very nervous that Putin will stay the course, whereas Washington will gyrate wildly and unexpectedly depending on which out-of-control “temper”, neo-con or neo-lib or realist, has more bile of the day. They are also perfectly aware that none of this -at least initially- costs Washington anything at home either politically or economically (due to the complete transformation of the media into corporate propaganda outlets that see no shame what so ever in Baghdad Bob style journalism ) whereas closer to home, as sanction consequences combine with the consequences of austerity, central European leaders will start to suffer the same fate meted out to political leaders of periphery EU member nations such as Greece, Portugal and Ireland. So far, outwardly at least, the central powers are jumping up and wagging their tails to mimic US insanity (Holland’s gambit to purge his cabinet of left wing ministers) with no shame at being court jesters, but I doubt that can last and Merkel at least seems increasingly aware of the gathering storm.

    I’m not saying calmer heads will prevail – we could easily be headed to war – but I find it hard to believe European leaders are counting on Putin folding in the next six months.

    1. wbgonne

      I think the allusion above to WWI is apt. This appears to be a drift into confrontation based upon misguided assumptions regarding other countries’ intentions. As an abject neoliberal ideologue, Obama simply cannot conceive that the Russians will endure economic punishment. I think Obama is dead wrong. Unlike the U.S., Russia is not committed to the neoliberal world order; i.e., the American Way. Putin will use capitalism but he isn’t committed to it for at least a few reasons. First, unlike the U.S., Russia has no history of fetishizing capitalism. Second, Putin surely understands that the neoliberal world order is how the U.S. maintains its dominance. Third, the greedy American puppet states in Europe will soon suffer more than the intended Russian victim and then we’ll see just how committed they are to the American Way.
      This may become the great unraveling for U.S. hegemony.

      1. wbgonne

        Put otherwise, and in response to Fukuyama, history is beginning again. And, as soon as there is a viable model to compete with neoliberalism, history will accelerate. The strength of an insane ideology like Radical Islam suggests there is a void that must be filled. Because Neoliberalism is ruining the planet and creating misery for ever more people, something will emerge to challenge it. When and what are uncertain but the challenge seems inevitable.

      2. Brooklin Bridge

        Nicely summarized and very good point in your conclusion. I also agree with Susan The Other that llargi is either mistaken or does not give enough focus to the ominous presence and degree of influence played by the US and the Middle East.

        Possibly he is simply making a particularly articulate plea for calmer heads to prevail -in Europe right now- and feels that message might be muddied by attention to the sort of preordained doom unfolding in the larger picture.

        1. wbgonne

          “Possibly he is simply making a particularly articulate plea for calmer heads to prevail”

          Yes, I imagine there were such voices before WWI as well. The question now — as then — is whether anyone who matters is listening to anyone else who matters. It doesn’t seem so.

        2. wbgonne

          And further to the point, it seems to me that the sole Obama/U.S. calculation is that the Russian oligarchs will force Putin to capitulate. That, I think, is a poor bet. And if the money-pain doesn’t work, what other options does Obama have? Frankly, I don’t think Obama can even imagine any other options. Russia isn’t a puny country like Iraq or Afghanistan and we can’t even succeed in those places.

          If this Russian gambit fails, the American emperor will stand naked before all the world. That’s what I mean by the great unraveling of U.S. hegemony.

          Of course, I could be wrong.

          1. Brooklin Bridge

            If Obama stands naked before anyone due to failure of the economic gambit against Russia, few but a relative handful people such as NC visitors will notice. The global media can swallow almost anything short of war and make it go poof. For the great unraveling of the empire you refer to, I suspect some fairly substantial level of military conflict with American/Nato support or participation will have to take place and I don’t see how something that substantial could avoid setting off WWIII. Your earlier point about things escalating due to misunderstanding (rank hubris and stupidity on Obama’s part) is exactly the scenario I’m thinking of.

            1. Brooklin Bridge

              Actually, I overstate that. A number of significant people around the world would be keenly aware of economic failure of our crazy lop-sided sanctions and it might even be enough to start or speed up the unraveling of the Empire. But if Obama were smart enough to confine the Empire to only economic warfare, he would also almost certainly have the smarts to know that patience would be key. Given enough time, I don’t think such an effort would or really could fail.

    2. optimader

      “I assume Yves is saying the 6 month stock pile of gas reserves held by Europe is the “critical piece of the calculus” ”

      I don’t get this “six month supply” bravado. Six months is nothing, at best it is a critical shortage by Christmas.

      1. Yves Smith Post author

        You are missing that various analysts assumed that we could break Russia financially in six months, that six months of them not getting much in the way of energy revenues would ruin them. In other words, the belief was that the West could wreck Russia via sanctions before the energy supplies to Europe became a real bargaining chip.

        I don’t come up with theories like that. I am just recounting them.

        1. optimader

          my incredulity is that I read this bantered about as a leverage position for Europe and I find it preposterous, no doubt you see it as an incredibly risky position for Europe as well as I. Intransigence can easily set in as the economic spinning plates come off the sticks. I’m guessin Deutschland needs gas sooner than Russia needs aging model year Audi’s that are piling up dockside.

    3. Tom in AZ

      We are simply on the road to making the same mistake that much of Europe has made over the last few centuries, and still remembers. Trying to get to Moscow before the snow hits is tough if you wait til Sept. to start….and if you lay waste in on your way in, they are waiting for you on your way out…

  9. MyLessThanPrimeBeef

    The Grande Armee knew one thing – the combination of Russia and winter means merde will happen..

    For the Wehrmacht, Russian and winter again means scheisse happens.

    But this time, it’s different for the EU politicians.

    1. MaroonBulldog

      Yes, but … I seem to recall the example of Germany utterly defeating Russia in World War I, then dictating the Treaty of Brest-Litovsk–the original international law source of Ukrainian claims to independence and nationhood.

      The name of “Ukraine” means “borderland”; and its geography is its destiny: it will be a buffer between whatever power is in control in Moscow and whatever power is in control in Berlin, and the puppet of one or the other. In short, Ukraine does have a border, it is a border.

      Maybe EU politicians are hoping this time is not different from that time in 1918. Maybe they are hoping that anti-ballistic missle systems will save them and their world from the consequences of backing Russia into too tight a corner.

      1. visitor

        What did Montgomery state as rule nr. 1 again? Do not march on Moscow.

        When Germans, French, Czechs, Americans, British tried to press their advantage over defeated, collapsing, disorganized Russia, helping the Whites to “march on Moscow”, they got licked.

        Similarly, the Germans in WWII utterly defeated the Red Army — till they were brought to a screeching, bloody halt. The same fate befell the French, the Swedes, the Poles, the Brothers of the German House of Saint Mary in Jerusalem: they always smashed the Russians to smithereens — till they had to run for their lives.

        Ukraine is part of what historian Timothy Snyder calls the “bloodlands”. Pity the Ukrainians.

        1. MaroonBulldog

          If the question is, can Russia be defeated in a war, the history of the 20th century the Russo-Japanese War and World War I as examples to show that it can, if the war is properly limited.
          If the question is, can Russia be conquered and occupied by invaders, history gives no example of this ever happening from the West, and the Tatar Yoke is probably not relevant to modern conditions, so the Russians may not be worried about invaders from the East, either. But you do notice that Mr. Putin isn’t doing anything to disturb the Chinese, is he?
          One point I was trying to make is that when Ukraine first emerged as a “nation state” in the 20th century, it was a German construct, devised as a buffer to contain Russia. This construct t ended with the Russian intervention you referred to, withe Red Army taking it back into the territory controlled by Moscow.

      2. optimader

        Worst case for Russia is to pivot more gas to Asia. There will always be a market for their energy products. Europe has fewer prospects for energy suppliers than Russia has for customers.

      1. Tom in AZ

        If he had the guts, he would go to Europe and say it to their faces. But, war criminal that he is, he will stay safe at home. I’m sure there is still a docket with his name on it waiting at the Hague.

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