Is Russia Plotting To Bring Down OPEC?

Yves here. Even with this post giving what looks to be an overly-generous take of the impact of Western sanctions on Russia, the intriguing part is its argument that Russia is well on its way to organizing an anti-Saudi block within OPEC. While Russia has long been allied with Iran and Venezuela, they’ve never been heavyweight international oil players by virtue of the fact that they produce high cost and not terribly desirable heavy sour crude. By contrast, Iraq, which is moving closer to Russia, has the second largest proven oil reserves and they are light sweet crude. The fact that the US spend billions in treasure and lots of American and local lives, only to have Iraq align itself with Russia (even if only on a case-by-case basis) would be a colossal geopolitical own goal.

By Dalan McEndree who has studied at the East European Institute of Berlin’s Free University and the U.S. Army Russian Institute in Garmisch, Germany (now the George C. Marshall European Center for Security Studies). His career has focused on the Soviet Union and Russia, and has included fifteen years in Russia as a U.S. diplomat, in business, working both for international and Russian businesses, and in consulting. Originally published at OilPrice

President Putin’s recent moves in the Middle East—to shore up Bashar al-Assad’s regime in Syria through deployment of combat aircraft, equipment, and manpower and build-out of air-, naval-, and ground-force bases, and the agreement in the last week with Iran, Iraq, and Syria on intelligence and security cooperation—could contribute to Russian efforts to combat the myriad negative pressures on Russia’s vital energy industry.

Live by Energy…

Energy is the foundation of Russia, its economy, its government, and its political system. Putin has highlighted on various occasions the contribution Russia’s mineral wealth, in particular oil and natural gas, must make for Russia to be able to sustain economic growth, promote industrial development, catch up with the developed economies, and modernize Russia’s military and military industry.

Even a casual glance at the IMF’s World Economic Outlook statistics for Russia shows the tight correlation since 1992 between GDP growth on the one hand and oil and gas output, exports, and prices on the other (economic series available here). According to the IMF’s 2015 Article Iv Consultation-Press Release and Staff Report, published August 3, oil and natural gas exports comprised 65 percent of exports, 52 percent of the Federal government budget, and 14.5 percent of GDP in 2014. Including their domestic contribution, hydrocarbons represent ~30 percent of GDP.

While oil and natural gas are crucial to Russia, Russia’s crude and natural gas are crucial to its neighbors on the Eurasian landmass. Russia supplied about 30 percent (146.6 bcm) of Europe’s natural gas in 2014, and about 25 percent of its crude (3.5 mmbbl/day) in 2013. Russia’s oil and natural gas are also important to its Asian and Central Asian neighbors.

It is not only the commodities that make Russia crucial, but its massive land-based infrastructure for their distribution throughout the Eurasian landmass. As Tatiana Mitrova, head of the oil and gas department, Energy Research Institute, Russian Academy of Sciences, pointed out regarding natural gas in The Geopolitics of Russian Natural Gas:

“Russia has a unique transcontinental infrastructure in the heart of Eurasia (150,000 km of trunk pipelines), which also makes it a backbone of the evolving, huge Eurasian gas market (which could include Europe, North Africa, the Commonwealth of Independent States (CIS), Caspian Sea region, and Northeast Asia). Control over the transportation assets in this region together with vast gas reserves make Russia the key element of this new market.”

The land-based oil distribution network is smaller, but also important. The 4,000 km Druzhba pipeline delivers about 1 mmbbl/day of crude to Europe—about 30 percent of total shipments to Europe. In the Far East, Rosneft shipped 22.6 million tons of crude to China in 2014 through the East Siberian Pacific Ocean (ESPO) pipeline.

The Russian government continues to seek to extend and expand the natural gas distribution infrastructure—into Europe, with various proposed pipeline projects (Nord Stream 2, Turkish Stream 2, 3, and 4, South European Pipeline), and into China, with two large pipeline projects, Power of Siberia Pipeline (to supply China from East Siberia), and the proposed Altai pipeline (to supply China from West Siberia).

…Death by Energy

In the last few years, the threats to Russia’s energy industry have multiplied and intensified. They pose an existential threat to the industry and therefore to the Russian economy:

– The revenues Russia can earn from its crude and natural gas exports face intense pressure. The Saudi decision to let the market set prices and to pursue market share, has led to steep declines in crude and petroleum product prices. The decision also has impacted natural gas export prices negatively, since, for Russia’s long-term supply agreements, they wholly or partially are indexed to oil prices. The transition in Europe to hybrid natural gas pricing models (which take European spot hub prices into account) also has pressured natural gas pricing. (Natural gas data from Gazprom).

dalanrus1 - copia


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Adding to the revenue pain, natural gas export volumes have been falling, according to Gazprom (which has a monopoly on pipeline exports), as have domestic volumes within Russia:


dalanrus2 - copia

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It is therefore not surprising that the aforementioned IMF Article Iv Consultation-Press Release and Staff Report projected sharp declines in 2015 and 2016 from 2014 levels for oil export revenues ($109.8 billion and $96 billion respectively) and natural gas export revenues ($12 billion and $14.3 billion respectively).

dalanrus3 - copia


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Since these IMF projections are based on $60.1 and $65.8 per barrel prices in 2015 and 2016, oil export revenues will undershoot these pessimistic IMF projections, as crude prices are projected to stay below $60 through 2016 (EIA estimates for Brent are $54.07 and 58.57 in 2015 and 2016 respectively).

– The U.S. and European Union’s decisions to impose—and maintain—sanctions on Russia after its invasion and annexation of Crimea and invasion and informal annexation eastern Ukraine will pile more pressure on the Russian energy industry. They include bans on financing for and the supply of critical equipment and technology to important Russian energy projects. Novatek and its partners Total and Chinese National Petroleum Company still lack $15 billion of the $27 billion needed to finance the Yamal LNG plant. Denis Khramov, Russia’s deputy Minister of Natural Resources, said September 28 at a conference in Russia’s Far East that Rosneft and Gazprom are delaying some offshore drilling by two to three years because of sanctions and low oil prices. The sanctions are also impeding Gazprom’s ability to develop the Chayandinskoye and Kovyktinskoye fields in eastern Siberia, from which it plans to supply natural gas to China under the bilateral $400 billion, thirty year deal signed in 2014.

– Following the Russian invasion of Crimea and eastern Ukraine, The European Union is now even more determined to reduce its dependence on Russia for natural gas and to force Gazprom submit to EU competition rules. Europe has sought and continues to seek alternatives Russian natural gas (among them, U.S. LNG and Iranian pipeline and/or LNG). The European Commission, the European Union’s executive body, has refused to bless Gazprom’s proposed 55 bcm/year Nord Stream 2 natural gas pipeline project, citing existing surplus Gazprom pipeline capacity into Europe and insufficient future demand for Russian natural gas. Also, the EU Commission in April charged Gazprom with violating the EU’s anti-trust laws for anti-competitive practices and unfair pricing in Central and Eastern Europe. If found guilty, Gazprom could face substantial fines of around $1 billion. Even if Gazprom avoids fines and manages to reach a settlement with the EU, as it hopes to do, its European market share and pricing will remain under pressure into the future.

– The emergence of the U.S., along with Canada, as powerful crude, NGL, and natural gas producers is also a major concern for the Russian economy. This has transformed the U.S. from a market for Russian crude and natural gas (via LNG) to a global competitor. If, as seems increasingly likely, the ban on crude exports is lifted, U.S. crude will compete with Russian crude in several key markets. It would also force foreign suppliers to seek other markets for all or part of the exports they previously sent to the U.S. This in turn would intensify competition among these crude exporting countries for share in those markets. In regard to natural gas, its explosive output growth in the U.S. undercut Gazprom’s rationale for its Baltic LNG project (10 mtpa), turned the U.S. into a major (potential) LNG competitor in global LNG import markets, and, via the U.S. toll- and Henry Hub- pricing model, weakened Gazprom’s ability to insist on oil-indexed, long-term contracts.

Saving Russian Energy (and Russia) through the Middle East?

Putin’s moves in the Middle East could help Russia address the impact of these threats to the Russian energy industry. They potentially enhance the attractiveness of Russian crude and natural gas supplies compared to those from Saudi Arabia and its Gulf Arab allies.

In the selection of crude and natural gas suppliers, security is a key consideration for importers. Wary of U.S. naval power, the Chinese, for example, prefer pipeline natural gas supplies over seaborne LNG supplies. Importers therefore must take into consideration the potential threats to transport. In this critical area, Russia enjoys a decided advantage over Saudi Arabia and the Gulf Arab producers, which depend on sea transport through the Persian Gulf and the Red Sea to ship their oil and LNG.

Each of the three routes from these two bodies of water passes through a “choke point” (from the Red Sea, through the Suez Canal to Europe and through the Mandeb Strait to Asia, from the Persian Gulf through the Strait of Hormuz). By adding an airbase to their military presence in Syria, the Russians—coordinating with Iran, Syrian President Assad, and eventually possibly Iraq—would have the capability to disrupt shipments from Persian Gulf and Red Sea terminals.

Russia’s export channels are less susceptible to disruption. With the exception of LNG exports to Asia from Sakhalin, Russia sends natural gas to its customers via pipeline. About 70 percent of Russia’s seaborne oil exports are susceptible to choke points (shipments from two ports on the Gulf of Finland through the Baltic Sea to the Atlantic and one port on the Black Sea through the Turkish Strait/Bosporus to the Mediterranean), while 30 percent are not (pipeline shipments to Europe and ESPO pipeline shipments to the port of Primorsk near Vladivostok).

Putin’s moves also are strengthening Russia’s influence with OPEC. Russia already has extensive and close ties with Iran and Venezuela, and is now laying the basis for such ties with Iraq. Putin has aligned Russia with OPEC’s have nots–the members lacking financial resources to withstand low crude prices for an extended period and that have objected to Saudi policies (Iran, Iraq, Angola, Nigeria, Libya, Algeria, Ecuador, and Venezuela)—against the haves (Saudi Arabia, Kuwait, the UAE, and Qatar). He has continually supported Venezuelan President Maduro’s calls for an emergency OPEC meeting on prices and his efforts to persuade Saudi Arabia to reverse its policy. Most recently, in the beginning of September, Putin told Maduro that the two countries “must team up to shore up oil prices”.

In addition, Russia’s deputy prime minister in charge of energy policy, Arkady Dvorkovich, in the beginning of September made comments that, in tone and substance, mocked Saudi policy, saying that “OPEC producers are suffering the ricochet effects of their attempt to flush out rivals by flooding the world with excess output,” expressing doubt that OPEC members “really want to live with low oil prices for a long time,” and implying that Saudi policy is irrational.

Indeed, Russia can be seen as maneuvering to split OPEC into two blocs, with Russia, although not a member, persuading the “Russian bloc” to isolate Saudi Arabia and the Gulf Arab OPEC members within OPEC. This might persuade the Saudis to seek a compromise with the have nots.

A strategic alliance with Iran and Iraq offers Putin two more potential avenues to pressure the Saudis. They can test Saudi determination to defend their market share at any price and its wherewithal financially to do so. Iran claims it can raise crude output by one million barrels within six or so months of the lifting of sanctions. The Saudis may be calculating that Iran must first rehabilitate its oil fields and that Iran, cash poor, cannot do so quickly. If this is the case, Russia could step in, offer Iran financing, and force the Saudis to contemplate prices staying lower longer than they anticipated and therefore continuing pressure on their economy.

Russia also could cooperate with Iran and Iraq to take market share from Saudi Arabia in the vital Chinese market. As a recent Bloomberg article pointed out, Saudi Arabia, Iran, Russia, Iraq and other countries are vying intensely for sales to China, the second largest import market and the major source of demand growth in coming years. Coordinating their pricing and consistently offering the Chinese prices below the Saudi price, they could seek to win market share. Such a price war would pressure the competitors’ currencies.

Since the Russians allow the Ruble to float, Iran maintains an informal and unofficial peg for its Rial to the US$, and Iraq has indicated it is willing to adjust its peg if necessary, while the Saudis are committed to the Riyal’s peg to the US$, Russia, Iran, and Iraq would have any advantage over Saudi Arabia. To the extent that Iran and Iraq allowed their currencies to adjust, Russian, Iranian, and Iraqi revenues in local currency terms would not decline as much as Saudi revenues fixed in US$ (and might even increase) as their currencies depreciated.


Each of these opportunities offers the possibility to address the pressures on the Russian energy industry. However, Putin will have to play his cards carefully. Played heavy-handedly, he could intensify fears in Europe of excessive dependence on Russian energy supplies and awaken such fears in China. This could lead the Europeans and Chinese to search for other suppliers. In addition, mismanaged confrontation with the U.S. and Europe in and over Syria could lead to broadening and strengthening of economic and financial sanctions. Moreover, neither Iran nor Iraq will want to become overly dependent on Russia, which lacks the resources they need develop their energy industries.

Finally, the opportunities assume Putin’s gambits in Syria and with Syria, Iran, and Iraq in intelligence and security cooperation will succeed. And this, given the Soviet experience in Afghanistan and Putin’s experience in eastern Ukraine, is far from certain.

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  1. AWB

    Even if the title of this post is misleading, US foreign policy, beginning with the American Indian has been nothing less than barbaric. The US has more than enough resources to be self sustaining.

    Get your own house in order. Or, biblically speaking, take the beam out of your own eye.

    1. participant-observer-observed

      The article also deceptively speaks of the “US oil” as if it is a nationalized product, whereas we all know the private corporations live off of Washington subsidies but never make any contribution whatsoever to the well-being of the US nation and its inhabitants.

      The self-interested, short-term profit driven lack of accountability to anyone of the US oil and gas beyond the corporate stake-holders is why the USA cannot have any kind of forward-thinking policy, while China and Russia plan for 5, 10, 20, 50+ year periods.

      The idea that the Chinese would turn away from Russian supplies is also laughable.

  2. Gene Poole

    Russia “invaded” Crimea and Eastern Ukraine, but the US didn’t invade Iraq… To this writer, both would seem to go without saying.

    1. par4

      I quit reading it when I saw “invaded Crimea”. Look who the asshole works for and you know it’s a propaganda piece.

        1. washunate

          I find it interesting on these kinds of subjects trying to guess whether a piece is reality-based or propaganda-based solely on the title. This one had me at plotting. Such a wonderfully nuanced and jam-packed word, feeding one of the core lies that the US empire is inherently stable.

      1. different clue

        Maybe “invaded Crimea” doesn’t make the author a propaganDIST. Maybe it means the author has been propaganDIZED. I read the whole article. If one were to substitute the phrase “events in Crimea and East Ukraine” for “invaded” and “invasion of” . . . . would the article seem otherwise reasonable on its face?

        Those who continue to not-think-so deprive only themselves of the information in this article.

        1. washunate

          That is a much more troubling indictment of this piece, then. Look at how the author sets up the bio – it’s all based on official credibility.

          Your suggestion means that the author neither illuminates an establishment perspective nor possesses rudimentary critical thinking skills. The value of posts like this is to get a glimpse into the elite mindset. If that’s not what is offered, then it’s just another headline where the answer to a silly question is no.

      1. PWF

        No, the Soviet Union did not invade Germany, and I’m sure the author of this article doesn’t believe so either. I assume your comment is intended as a polemic, but for clarity the Soviet Union *did* invade (several) countries in WWII. The first and perhaps most notably example occurred when the Soviet Union invaded Poland in September 1939, following a secret part of the Molotov-Ribbentrop Pact that divided the countries of Romania, Poland, Lithuania, Latvia, Estonia, and Finland between Germany and the USSR.

        You may feel that real politik or military security necessitated the recent Russian invasion of the Crimea, but implying that Russia’s seizure isn’t an invasion is pretty tenuous. The territory was transferred to the Ukraine in 1954. Russia didn’t complain about the status quo in the 1989 era.

        I think the article presents an interesting and probably important view on the geopolitical machinations of Russia. The article does leave a lot unsaid about the corresponding US machinations. That doesn’t make the author an idiot.

        1. Yves Smith Post author

          Russia did not invade Crimea. The Crimeans had a referendum (to which Ukraine and the US objected) and an overwhelming majority voted to join Russia. At most, you can call it an annexation. There was absolutely nothing remotely like an “invasion” involved.

          1. casandra

            …and I believe that Putin himself, ever careful with legal niceties, pointed out at the time that the earlier secession of Kosovo formed a precedent. Kosovo’s departure was hailed as a welcome assertion of human rights, though unlike the Crimean secession, no formal referendum was taken. This elevation on one’s own petard is oft forgotten.

            1. PWF

              Cassandra: I suppose some folks may have their petard hoisted on this subject, but I was discussing the “intervention” (official New Speak) in Kosovo in March 1999 in Atlanta while walking past the Sherman monument with a friend and colleague. The similarities to the US Civil War on the matter of electively leaving a country (succession) were noted. There were of course many other differences, making the comparison a bad one by other measures.

              Yves: If you object to “invasion”, how about “coup d’etat” in Crimea? It wasn’t only a matter of a referendum: the Russian military took over the government in Sevastapol, installed a government more to their liking, after which there was a referendum. Annexation is the ends, not the means, and I would be much easier on McEndree’s (author of article under discussion) use of the word “invasion” than many of the other posters here. The fact that a fair number of senior governmental people in the US are arguably indictable for the crime of aggression in Iraq doesn’t improve Russian behavior.

              1. skippy

                “No. The U.S. government claims that annexation would violate international law and the Ukrainian constitution because Ukraine has not given its consent to the referendum. But Russia is not bound by the Ukrainian constitution. Nor does any international law prohibit two countries from merging together.

                The real question is then whether Crimea’s secession–which you might think of as a legally separate act that (conceptually) precedes the annexation–violates international law. As I explained before, there is no law against one territory seceding from another. In fact, the right to self-determination is enshrined in the UN charter and several human rights treaties. Ukraine could certainly try to stop its territory from seceding–just as the United States fought to prevent the South from seceding–but if it fails, it can’t complain that the secession violates international law. Ukraine’s best argument is that the secession was driven by Russian meddling–Russia’s invasion of Crimea did violate international law, and the occupation violates Ukraine’s sovereignty. But if the referendum is free and fair, that argument will lose much of its force. Perhaps, Ukraine is owed some remedy by Russia (good luck), but that remedy could not be an injunction on Crimean secession, which would injure the Crimeans themselves.

                U.S. officials note that Scotland’s secession vote was approved by the UK government. But the more pertinent analogy is Kosovo. Kosovo’s declaration of independence was not approved by the Serbian government. Kosovo’s secession was abetted quite significantly by the United States through military and diplomatic means.”


                Skippy…. good luck arguing with a track record of what you decry…

                1. Paul Fenimore

                  “good luck arguing with a track record of what you decry”? What? What I decry?

                  Oh: You must mean my comments about readers who trash an article (and author perhaps?) because he calls what-ever-it-was-that-happened-in-Crimea an “invasion” (a term used by one of the sources you cite) and the use of that term must, just must, mean the author is a tools of US global machinations, double standards, etc.? I think point of view is at best silly, and probably quite a bit worse.

                  Or are you complaining that I pointed out that many “he’s a tool” comments are effectively saying what Russia does is ok because the US does it? That’s not much on point principle…

                  Now I remember why I usually don’t post comments below news articles.

                2. PWF

                  I didn’t decry what you seem to think I did. What I decried was posters who trashed an article because the author used the word “invasion” in reference to Crimea — a term used by one of the sources you cite. I also made some noises about folks who implied Russian behavior was ok because the US has done similar things … a poor precedent for arguing behavior on the merits or on principle.

  3. Mac

    LNG production from Cyprus/Israel/Egypt in Eastern Med. will reduce pressure on supply further. Not to mention, massive fields in Mozambique, plus upgrades in Algeria boosting production over the next ten years. LNG regasification terminals are coming online in Northern Europe this year, giving further access to Qatar, and US exports (next 3-5 years), and elsewhere. All this means, LNG prices will stay low for the foreseeable future as supply continues increasing.

  4. southern appalachian

    “Finally, the opportunities assume Putin’s gambits in Syria and with Syria, Iran, and Iraq in intelligence and security cooperation will succeed.” – relative, I’d guess. Put another way, he simply has to fail less than Obama and his successors.

    And that’s the thing. This feels like a second string election, where we are having to pick through the people we decided to leave on the bench when we picked Bush and Obama, who turned out to suck.

    Which is to say I’d wager Putin’s got some room to maneuver.

  5. EoinW

    Interesting article and great subject. I dare say the 10 ton gorilla in the room is US militarism. That gorilla drawfs any other security concerns China, Iran and Russia might have. Makes an Asian alliance a necessity. Plus Syria blows up Bill Holter’s theory of the Saudi’s dumping the dollar and joining up with China and Russia. Also the idea that OPEC can turn around oil prices runs contrary to Nicole Foss’ view of massive deflation and even system collapse.

    It’s all greek to me! I simply observe who is on our side: the Wahabbi sect ruling Arabia, ISIS, the Jewish Taliban running Israel, the neo-nazis in Ukraine, neo-liberals everywhere else and the real freak job – the neocons in Washington. Been desperate to see anyone stand up to these nut jobs. Are we all Russians now?

    1. PWF

      I am skeptical of claims that US militarism is the biggest concern for other large, nuclear-armed countries. There is no question that US wars against small countries play a major role in global politics, but I think the very scary aspects of the US military for residents of small countries are not relevant for China or Russia (Iran is border-line on “large”). As far as I can tell, the outcome of wars between major “powers” since the Industrial Revolution is determined by industrial capacity, so long as the military at the start of the war is sufficient to prevent immediate conquest. By this measure, the US is much closer to a paper tiger than is generally believed where a hypothetical war with China or Russia is concerned (assuming things stay non-nuclear). I now assume that the post-capitalist economies of East Asia are geared (to an important degree) towards making sure that key US industrial capabilities are transferred to East Asia (and stay there) as part of a long-term strategy of preventing a repeat of the three wars the US fought in East Asia in the 20th Century: Japan, Korea/China, Vietnam/China (win, stalemate, loss).

      The current “Great Game” machinations by Russia take on greater importance for the future if one believes that the US is now largely reliant on geopolitical machinations for maintenance of power, in contrast to a basis in industrial power that prevailed from at least the end of the Civil War, but began to change around 1960 with the ascent of the Japanese keiretsus, and now 50 years later is a major factor limiting US power.

      EoinW: Why do you classify Daesh/ISIS as “on our side”? Wouldn’t “Apartheid Israel” be better than “Taliban”? The Israeli Government is not anti-modernist.

  6. digi_owl

    The impression i am getting is that Putin is looking for stability and security for Russia.

    Having the black sea military port taken away goes against the security aspect.

    Similarly, Assad is a known entity on good terms with Russia. IS is anything but, and Russia has had (and may still have) problems with fanatical Muslims internally before.

    Look at any map and you will find that IS is a hop skip away from Russia’s southern border.

    1. Synoia

      Sebastipol, the Bacl Sea Port, is Russia’s ONLY warm water port. For Centuries, it was and is a strategic imperative for Russia to keep a warm water port.

      Russia has controlled the port since they bought it from the Swedes after the end of the 30 years war.

  7. Alex morfesis

    Oil to salt…the game is on…400 yrs of carbon fuel in a world that won’t need any in 50 yrs due to solar, wind and kinetic hydro/water based power…China will be green in 35 years…the new market will be India, Pakistan, Bangladesh, Thailand, Vietnam, Indonesia…and Africa…but even they will transition within 75 yrs…long term game is up…but Russia is physically in 75% of time zones occupied by humans…trying to ignore Moscow…unless one plans to watch China March north(China has never moved much past historical borders) and take eastern Russia, is a foolish idea…Syria is a nice little toy for vlad “the inhaler” raz-Putin to chew on for a while to eat up his 168 hrs in a week

    1. Synoia

      Partly incorrect:.
      1. All the good hydro sites are already used.
      2. Wind delivers power 30% of the time.
      3. Solar is useless at night.
      4. You ignore the unpredictable impact of climate change.

      The chemical bond, as we currently use in gas, oil and coal, is the most compact form of energy storage. The key to all the above is storage of energy.

      However our enemy is energy storage is the second law of thermodynamics, where 50% of the energy is wasted in the store/release cycle, wasted as HEAT.What you believe solution make the climate change problem worse. All it does is move the waste heat problem under a different rock.

      Refer back to climate change.

      1. Gio Bruno

        3. Solar is useless at night.

        …well, one could try the best method available for energy storage: CONSERVATION.

        By using less energy one can limit the storage element. Here’s a link to a Eco-Home that does just that: (And this was accomplished 25 years ago.) We can use science to make better batteries and use knowledge to make ourselves better homo sapiens.

      2. Paul Tioxon

        Solar power works 24/7. Batteries.

        CSP also stores super heated salts that are used when the sun goes down to drive the commercial off the shelf steam driven turbines.

        Hey did you know that nuclear power plants shut down yearly for 1-2 months to replace spent fuel rods! Can’t count on them 1/6 of the year. But nobody complains about nuclear power not working when they run out of fuel? Solar power captures the raw energy of the sun, then engineering takes over and processes it so we will have it when we need it and guess what? We won’t run out of fuel like nukes do!!
        Wind operates best at night complementing solar panels and plants. See Germany on the old 1 2 punch of wind turbines and PV panels.

        1. different clue

          And also, for utility-sized solar electric projects, just generate twice as much power as is needed through the daylight hours. Use the “other half” to electrolyze water into oxygen and hydrogen and store the hydrogen. Starting at nightfall, burn the stored hydrogen to generate
          electricity through the night till next daybreak. Then start generating real-time solar power again and restoring the coming night’s worth of stored hydrogen. To burn down again for power all through the next night.

    2. jgordon

      Oil is becoming increasingly expensive to extract. To the point now where it’s nearly uneconomical to extract it in both monetary and energy terms. So yes, our “economy” won’t be based on fossil fuel in a few years, but then our economy probably won’t be based on anything at all by then.

      Well have to radically change our life styles–by cutting our energy consumption by 90-95% or so before we’ll have an economy that can run renewable. That means no personal passenger vehicles, no air conditioning, no interstate high system, among other things.

  8. oho

    Dunno why the “think tank establishment” don’t just take Putin for his word—-Russia is in Syria mainly because thousands of Russian Chechans are fighting aming the “moderate” Islamists. And a Syria without Assad means thousands of war vets go back to Chechnya.

    And if any country knows the real threat of fundamentalist terrorism it’s Russia (google the Beslan school siege).

    Affecting OPEC is just some icing on the side cake.

    If anyone’s a Adam Curtis/documentary fan, go search for “Bitter Lake” a film that tells the story of the US, Afghanistan, Sunni Islam and a relatively forgotten 1945 FDR-Saudi summit.

  9. Jim McKay

    This article is, IMO, beyond highly speculative. Uses numbers and stats to “guess” at motives, not much different then Wall Street’s means of creating bubbles. And, as others have said, entirely mis-stating Russia’s intervention into Crimea/Ukraine, not to mention gross distortions in U.S. media (again BTW, going back to Iraq) wrt what Putin is doing in this SYRIA mess that we (U.S.) screwed up beyond imagination.

    NC has been great in getting many people “to think” by providing excellent information on financial “foibles”. Not going to get people “to think” with reality based conclusions with an article like this that gets so many of the basics wrong, right out of the chute.

    It’s really interesting reading European press this last week on Syria: much of the article content has similarly glazed over “facts” (U.S./CIA supplying and training Al-Qaeda in Syria as “opposition” forces, etc.) that led to this mess (forgetting Libya for the moment), but reading comment sections… overwhelmingly citizens simply do not believe assertions of Putin imperialistic ambitions, do not believe their own leader’s claims to that affect, and largely are somewhat relieved Putin may actually be trying to do something that may improve things.

    What the author has to say about Russian sanctions, essentially accepting them as a normal condition of Russian/Euro petro market, I would flip and ask:

    1) Were these sanctions motivated by U.S. lobbied oil interests, worried about major EU energy $$ going to Russia in a normal functioning market? There was plenty of quotes from U.S. republicans and oil execs early on after Iraq “liberation” grumbling about Russia’s (at that time just becoming formidable) natural gas production potentially supply EU. Seemed, then… and now, as though in U.S. politics there’s 2 kinds of oil: good & bad. Good is what Exxon controls, bad is what Russia controls. We even have a name for this: “free trade”. :)

    2) Again, not long after Bush’s “liberation” of Iraq began, a few emails made their way out of communications between his WH & Exxon execs, foaming at the mouth over getting control of Iraq’s huge undeveloped oil fields. Many of us thought this was why we really went in there. And, sure enough… Exxon did get control of them. I vividly recall, when things started going south in Iraq badly, educated professionals from all over the ME were coming to Iraq to fight what they perceived as U.S. takeover of Iraq for oil. Remember reading of huge blackouts, often over 18 hrs a day, as Iraq’s antiquated production stopped. They had tons of capable natives who had kept that system working for years, but by then Bush had turned management over to Bechtel. Convoys of Bechtel white shirts and ties were reported and photoed driving up to this non-functioning facilities while former workers there were cordoned off to protect them: over 60% unemployment by this time.

    Things haven’t really improved much for most Iraqis. And then there’s the Iranian sanctions… (ughhh)

    3) Geo-politically, Saudi’s have been one of 3 biggest regional influences supply “rebels” in Syria. They were similarly complicit in Iraq (gave us military bases), and we now have a domino of failed interventions creating staggering suffering: Iraq, Pakistan/Afghanistan, Libya, Yemen, and now not just Syria war but refugee exodus rivaling what (have people forgotten already) what happened in Iraq. And we haven’t yet even touched on financial resources we’ve poured down the drain with all this idiocy.

    I’m not familiar with Mr. McEndree, nor have I (that I recall) read anything else he’s written. I am sure he’s well intentioned, and I understand how a “snapshot it time” evaluation he’s provided can lead to speculation as he concludes.

    But… the world is in a “world of hurt” right now, perhaps confronted with the greatest challenges humanity has ever faced. We’ve arrived here through a process (years/decades), and Mr. McEndree’s “snahpshot” ignores too much. The U.S. is hugely complicit in so much that is wrong, but seemingly as inflexible in “change” as the titanic.

    So with all due respect (much here for Yves & NC), just hard to let McEndree’s “suggestions” pass, which really lead to suspicions which then lead to more “retaliation”, without trying to at least point out some of what he omitted.

    1. Yves Smith Post author

      Honestly, this is overwrought and misplaced.

      I took the long opening section of this article to be McEndree bending over backwards to establish his bona fides as not being pro-Putin to then advance a reading of what is happening now that argues that Putin is playing a much bigger and shrewder game than people in the US (and perhaps also in the UK, the UK media parrots US media touting US success v. Russia when our sanctions haven’t done anywhere near as much harm as we had hoped, plus Putin-demonization, but I have no idea whether their intelligensia buys them lock, stock and barrel).

      1. Jim McKay

        > Honestly, this is overwrought and misplaced.

        Point taken.

        > (…) McEndree bending over backwards to establish his bona fides as not being pro-Putin to
        > then advance a reading of what is happening now that argues that Putin is playing a much
        > bigger and shrewder game than people in the US (realize).

        If Mr. McEndree had not written his 1st paragraph (eg: “President Putin’s recent moves in the Middle East—to shore up Bashar al-Assad’s regime in Syria”(…) ), then added:

        “Following the Russian invasion of Crimea and eastern Ukraine,”(…)

        … I would not have commented. Absent those statements, author’s speculation wrt Russia’s “gambits” in global energy markets just fine with me.

        My view is Russia Putin did not “invade” Ukraine, he responded to a western clandestinely supported coup of their poplularly elected president, and that’s when the blood shed began. Similar thing happened in Georgia in ’08. Contextualizing the Syria action, by misstating and lending support to a lot of political hyperbole currently feeding U.S.’s “Putin is an invader” stuff right now, IMO is unwise.

        To the contrary, Russian support in Ukraine is wanted by large majorities there. In these instances, Putin is one or the other (invader or well intentioned AND desired intercessionist). Evidence strongly suggest the later.

        So if we’re going to get months (years, depending on how Syria goes) of U.S. media fomenting the flames of “Putin must be stopped” and is a “danger to (fill in blank)”, I would hope NC would be careful to not ad fuel to the fire with (however inadvertent) mistakes. I don’t think there are grounds currently, to tie Russian activity in Syria this last week with their global petrol designs and ambitions.

        Before Bush invasion of Iraq I never thought I would possible say such a thing, but honestly… I’m rather grateful Putin has jumped in there. And I know a lot of people both here and “across the pond”, thinking the same thing.

        Just my $0.02, and thanks for doing all you do with NC.

        1. Yves Smith Post author

          I don’t see why one should assume that Putin does not have multiple objectives in intervening in Syria, just as the Saudis did in their superficially more straightforward action of deciding not to prop up oil prices. They managed to whack the US fracking complex, which is a threat to them if the US builds LNG facilities (those plans are now somewhere between delayed and scuppered) as well as whacking geopolitical enemies like Iran and Russia. Similarly, for Russia to move forward in Syria advances both strategic and economic aims.

  10. blert

    OPEC has been pre-destroyed by fracking in America.

    A cartel ceases to have meaning when it has lost control of the market.

    And a price war initiated by a cartel of this severity is so punishing that it constitutes a free market.

    The cartel is being forced to do what it is loathe to do… by the market.

    This price war constitutes an ‘un-taxing’ of the West.

  11. Another Gordon

    I’m sure manoeuvring over OPEC and the oil price has a lot to do with Putin’s strategy but I suspect a still deeper game – the overthrow of the petrodollar and with it the American Empire.

    If Putin’s Syria gambit works then we are only a skip away from a new Persian [i.e. Iranian] empire stretching to Syria’s Mediterranean coast. Of course, it won’t be called that but both Syria and Iraq have big and undoubtedly restive Sunni populations and are much smaller so will likely look to Tehran – indeed that increasingly looks like an established reality. And Tehran will have to coordinate with Moscow for heavy-weight military support. Equally Moscow would likely be happy to have an Iranian-led coalition stretching across the middle east. Together they could isolate Sunni insurrectionists in Southern Russia and also prevent the building of any pipeline to carry Qatari or Saudi gas from the Gulf to Europe or China which matters because LNG and pipeline gas are different markets (LNG costs a whole lot more).

    Of course the US could increase support for the Saudis but their key oil assets are only a short missile flight away from Iran. The mere threat of attack leaves Europe’s oil and gas supplies hanging by a thread – depending on no-one in the middle east doing anything stupid. That’s not a calculus that will go down well in Europe.

    With that reality on the ground what future does the petrodollar have? Not much I guess and without it American imperial overstretch would be instantly exposed; Europe would have to pay for its own defence and would have no reason to slavishly follow US policy vs. Russia and every reason to build mature trading relations with it’s key resource supplier.

    Game over Russia wins.

    1. blert

      The petrodollar jibe does not really make sense. It’s just a glib term of art that some scribe cranked out way back when — without any knowledge of how international trade really works.

      The US dollar will continue to be ‘International Money’ until such time that Red China is willing to run sustained trade deficits — and accept the unemployment consequences that must surely follow.

      There’s a real reason why it’s impossible to dethrone the US dollar: no money IS money if you can’t trust its nation’s court system… and the rest of its institutions.

      It really is that basic. Nothing else matters. Not even the balance of trade in oil.

      The WHOLE idea of the petrodollar was that OPEC was willing to accept unlimited amounts of these fiat creatures as payment for oil. Yet America’s need for OPEC oil at this time is nil.

      It’s everyone else that needs OPEC’s oil. (Japan, Red China, Korea, India,….)

      It’s then no wonder why the US dollar is trading strong — the exact opposite of a weakening nation’s.

  12. Roland

    There is no possibility whatsoever of an Iranian empire stretching across the Middle East.

    It can’t happen militarily.

    It can’t happen economically.

    It can’t happen culturally.

    Get real.

  13. VietnamVet

    The Western sanctions, the European refugee crisis, the Ukraine civil war and the crash of oil income influenced Russia’s decision to invade Syria but geo-politics are in play. They saw America’s weakness with radicals in power making bone headed ideological decisions: 1) greenlighting the War on the Kurds to get access to Turkey’s air base it built or 2) imposing austerity on Greece which stopped border enforcement which allows millions of Muslim refugees to trek to Germany. This avoided the loss of the warm water port on the Mediterranean Sea if Assad fell. Perhaps most important, it gives Russia chance to kill enemy Islamists supported by the House of Saud.

    Lost in all western analysis is the basic reality. A regional religious war has commenced in the Middle East with two nuclear powers in combat on opposing sides. Three if Israel and Russia tangle. Mankind will be lucky if it survives this war without a nuclear holocaust.

  14. susan the other

    about the petrodollar. We know better than most that in a world that is cutting back on FF the petrodollar will become insignificant. Our fracking is going to be a national passtime so we can insure fuel for essentials, like the military. But massive deflation is taking care of OPEC for us. Remember when we and the UK stockpiled oil in tankers, 3 or so years ago? Then we stopped. We stopped holding up OPEC and we voluntarily allowed the petrodollar to begin to phase out. Same thing with other commodities. Think Goldman Sachs’ warehouses. Russia needs energy revenue and this makes me think that it is a battle between the Saudis and Russia. It was never the Saudis in an ordinary price war, it was the Saudis using their natural advantage to defeat “credit” – aka fracking. Now Russia is doing the same thing to the Saudis, using their own natural advantage of direct pipelines which are more reliable and can feed all of Eurasia. So Russia is making sure Qatar and SA don’t put in their pipeline across Syria, among other goals. Maybe. Interesting.

  15. different clue

    Whatever else this all means, it means: sell more oil, sell more gas. Skydump more carbon and acidify the oceans more. What’s not to like?

  16. Oregoncharles

    It occurs to me that Russia and Canada have a remarkable amount in common. Both are extremely far north, such that a large portion of their land is all but uninhabitable. Both are oil states – though Canada’s status as such depends on relatively high oil prices.

    Not only do both benefit financially from burning hydrocarbons, both can expect to benefit – at least once things settle out – from global warming. They will have vastly more arable land, and will be able to grow a wider range of crops – and spend less on heating (albeit, more on air conditioning). Both have smart people who will have figured this out by now.

    Trouble is, the rest of the world’s interest is directly contrary. In particular, we will suffer terribly if the permafrost releases all its frozen methane. The area will be very unstable for a while, but would ultimately become arable.

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