Will Fresh US-EU Sanctions Hurt the EU More Than Russia?

The sanctions could end up causing more pain to U.S. allies in Europe than Russia itself, which will probably use this opportunity to take another step closer to autarky. 

Following Vladimir Putin’s recognition of the breakaway regions in eastern Ukraine, the US has said it will unveil a raft of new sanctions against Russia on Tuesday. This follows a Reuters report on Monday, citing “three unnamed sources familiar with the matter,” that new sanctions could include could include a measure that would prevent financial institutions in the U.S. from carrying out transactions with Russian banks.

This is apparently the ace up Washington’s sleeve. Finally, sanctions on Russia that will really bite. However, as Reuters points out in the article, the White House hasn’t publicly announced plans to force US banks to sever relationships with Russian financial institutions. But behind closed doors that is what is allegedly happening — again, according to Reuters’ three unnamed sources:

They aim to hurt the Russian economy by cutting so-called ‘correspondent’ banking relationships between targeted Russian banks and U.S. lenders that enable international payments.

The sources also said the U.S. would place certain Russian individuals and companies on the Specially Designated Nationals list.

It would effectively kick them out of the U.S. banking system, ban trade with Americans and freeze their U.S. assets.

It was unclear who the targets would be, but the sources believe top Russians lenders like VTB Bank and Sberbank could be on the list.

Experts believe it would be a meaningful blow to sanctioned bodies, as it would make it difficult to deal in U.S. dollars – the global reserve currency.

Nord Stream 2

Severing transactions between Russian banks and U.S. financial institutions could have a bigger impact on Russia’s economy than the sanctions unleashed to date, but they could also backfire. Not only could it hurt Russia’s economy by further weakening the ruble, which is currently close to a historic low against the dollar, and turbocharging inflation (already at 8.73% in January); it could also set off ripple effects across Europe, which has far closer economic ties with Russia than the U.S. The Italian lender Unicredit has already backed out of a potential acquisition in Russia over fears of sanctions.

One of the biggest concerns in Europe is that the EU’s package of sanctions against Russia will include the continued closure of Nord Stream 2, the 750-mile, $11 billion underwater gas pipeline connecting Russia with Germany. The pipeline was finished in September 2021 but is still yet to receive final certification from German regulators. If it ever becomes operational, it will significantly boost deliveries of gas directly from Russia to Germany and then on to other parts of Europe, relieving some of the pressure in energy markets.

But the pipeline has faced concerted opposition from the United States, the United Kingdom, Ukraine and other European countries, which have been calling for the project’s cancellation ever since its launch in 2015 over fears that it will significantly increase Russian influence over Europe. Of course, the United States, as the world’s largest producer of natural gas, has a direct financial interest in preventing Russia, the world’s second largest producer, from increasing its market share in Europe.

Austrian Chancellor Karl Nehammer said Monday that EU sanctions against Russia in the event of an invasion of Ukraine (which to all intents and purposes hasn’t really happened yet) will include measures targeting Nord Stream 2: “Certification (of the pipeline) would then be stopped (if Russia invaded). There is no question about that. That therefore means that Nord Stream 2 is part of the sanctions.”

Another round of sanctions against Russia will probably have a relatively muted impact on the U.S. economy. The U.S. imported a meagre $30 billion of goods from Russia in the first eleven months of 2021 while $13.2 billion of goods travelled the other way. However, the U.S. could suffer indirect effects if consumer prices were to rise even higher due to surging energy and food prices. Pound for pound, Russia may be a bit-part player in the global economy these days but it is a major provider of food, gas, oil and other minerals, and sanctions could take a toll on the marginal pricing of those goods in global markets.

Europe, by contrast, has a lot more to lose, especially if the sanctions target Russia’s energy and financial sectors. Russia is the EU’s fifth largest trading partner, with imports of $188 billion and exports of $94 billion in 2021, according to Statista. And many European countries, including Germany, are massively dependent on imports of Russian natural gas. Around a dozen European countries procured more than half of their natural gas requirements from Russia in 2020, according to the European Union Agency for the Cooperation of Energy Regulators (ACER).

Ten Years of Sanctions

Russia has faced escalating U.S. and EU sanctions since the US enacted the Magnitsky Act in December 2012. Those sanctions were intensified in 2014 following Russia’s annexation of Crimea. The measures employed to date have included blacklisting specific individuals closely associated to the Kremlin, limiting Russia’s state-owned financial institutions’ access to Western capital markets, bans on weapons trade and other limits on the trade of technology, including for the oil sector.

Yet the sanctions have had little desired effect. All they seem to have achieved is to push Russia further along the path toward autarky as well as into the welcome embrace of China.

Now, Washington is considering taking much harsher measures, including directly targeting Russia’s banking system. The goal, according to Daleep Singh, White House deputy national security adviser for international economics, is to “devastate” the Russian economy.

But it could be Europe’s economy that will end up devastated. The biggest fear among European banks is that Russia could end up being excluded from the Belgium-based SWIFT transfer system, the backbone of cross-border payments and the global banking network. For European banks with significant exposure to Russia it would be the equivalent of an “atomic bomb” for the industry since it would prevent the repayment of debts, an unnamed banker told Reuters a week ago:

Banks in Italy, France and Austria are the world’s most exposed international lenders to Russia. Italian and French banks each had outstanding claims of some $25 billion on Russia in the third quarter of 2021, according to figures from the Bank for International Settlements. Austrian banks had $17.5 billion. That compares with $14.7 billion for the United States.

European banks with subsidiaries in Russia are most at risk of sanctions, according to JP Morgan research. The investment bank’s study pointed to a handful of banks, including Unicredit, RBI [from Austria], France’s Societe Generale and ING of the Netherlands, as having notable exposure to Russia.

RBI said its exposure was manageable, while ING said it was well prepared. Societe Generale said it was closely monitoring developments and confident about its Russian business. Unicredit did not immediately respond to a request for comment.

Interestingly, two of the four aforementioned banks — Unicredit and ING — are also among the most heavily exposed European lenders to Turkey’s embattled economy, where inflation reached a 19-year high of 48% in January and whose state-owned banks just received a $2 billion bailout.

A Step Back from the Edge

On Friday, the White House appeared to abandon the nuclear option of kicking Russia off SWIFT, presumably after hearing a cacophony of complaints from its European allies.

“All options remain on the table. But it’s probably not going to be the case that you’ll see SWIFT in the initial rollout package,” Daleep Singh, White House deputy national security adviser for international economics, said in a briefing Friday. “We have other severe measures we can take, that our allies and partners can take in lockstep with us, that don’t have the same spillover effects.”

Other sanctions options still on the table include banning exports of high-tech products to Russia, restricting the imports of some products from Russia, and placing some Russian individuals on the Specially Designated Nationals (SDN) list, which would essentially remove them from the US banking system through barring their trade with Americans and freezing their assets in the country.

Closing Nordstream 2 will put even further pressure on record-high energy prices in Europe, which are already pushing many household budgets to breaking point. In a retaliatory move Putin could even cut Europe off from Russian natural gas altogether. If that were to happen during a late-winter cold snap, it would plunge Europe into a far worse energy crisis while sending global energy prices spiraling even higher.

This is a vital point in any discussion of sanctions against Russia: the economic impact on the U.S. will be relatively muted compared to that felt in Europe. As Yves puts it, Washington is, if anything, cutting off Europe’s nose to spite Russia’s face, while providing big money making opportunities for US energy providers. As the Wall Street Journal reported recently, the U.S. energy industry is doing very nicely out of Europe’s gas shortages: “U.S. natural-gas producers and global commodity traders are emerging as some of the biggest beneficiaries of the surging energy prices spreading pain in Europe.”

Meanwhile, Russia will take another step closer to autarky as well as fall even deeper into the embrace of its ally in the East, China, with whom Putin recently signed a 30-year natural gas pipeline deal, one of whose clauses stipulates that the new gas sales will be settled in euros. Given its own energy pressures, China will be happy to take more natural gas off Russia’s hands.

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  1. PlutoniumKun

    I wonder what the reaction will be in the City of London over this – massive amounts of Russian oligarch cash runs though the City. I suppose they may benefit from sanctions busting, but I doubt the US will look favourably on this.

    I can’t see the EU taking instructions from the US on this too seriously. Europe is simply too dependent on a range of resources – not just gas – from Russia. Plenty of LNG is coming in, but there are serious bottlenecks in supply – Europe simply does not have enough LNG terminals – so that’s only a minor fix. Fortunately, its been a mild and windy spring so far over much of Europe so pressure on supplies has eased off. Unless there is a really bad cold snap I don’t see Europe suffering too badly from energy shocks, unless there are a lot of outages due to supply chain restrictions (lots of power plants are running way past their design stresses to make up for shortages, so lots of breakdowns can be expected). There may well be knock on impacts in Asia as LNG gets diverted away from Japan and ROK.

    Everyone also seems to have taken their eyes off oil prices. They are surging now, this could be a black swan setting off all sorts of economic problems. Bear in mind of course that it won’t bother the Russians if they lose markets for oil and gas if they are getting double the price from their existing markets. This is also of course a lifeline for the Saudis and the frackers.

    The only thing that all this has really confirmed is that the collective IQ of the Democratic/Washington brain trust is running down into single figures. They make Trump look like a tactical and strategic geopolitical genius.

    1. Louis Fyne

      Yes, you are correct but the London-Brussels-Berlin axis is too wrapped up in its moral superiority and smugness to think through the “molecular” effects of their actions.

      Without Russian metals, all the iron and bauxite in the world can’t make the sophisticated alloys needed by modern stuff. No catalytic converters without Russian palladium or platinum, which even if unsanctioned, can just be shipped to China.

      Replacing those Russian inputs will get expensive.

      Scholz is an employment attorney (IIRC), Boris et al + Brussels are permanent bureaucrats. Doubt that anyone on their staffs pondered the tertiary consequences of their actions on the physical economy.

      London can get scrape by pushing money around, but not Germany. Yet the German Greens get their wish of de-carbonisation.

    2. Carolinian

      And increasing oil prices would indeed bring blow back to America. It once was said that presidential approval ratings move in lockstep with gasoline prices. Biden is already below Trump’s approval rating at this stage of his presidency. How much lower will Joe’s go?

    3. Chris A

      I wonder if kicked out of SWIFT, Russia would refuse to sell gas. If they cannot be paid, why sell?

      Additionally, is it possible that the deal with China to sell gas in Euros would force Europe to make a choice between loyalty to the USA and expanding use of Euros in trade?

      1. nippersdad

        Selling in Euros has been the estimated response to such a move until they get their own version of SWIFT up and running. I think that was the main rationale against using SWIFT against them; it has the potential for killing off the petrodollar and reserve currency status the US presently enjoys.

    4. nippersdad

      It strikes me that Trump was effectively every bit the hawk on Russia that Biden or Obama were. Why that is should be subject to debate, but he was doing things that even Obama refused to do. What this actually shows is that the bi-partisan neoconservative world view has reached its’ limits and is now running out of seed corn to eat.

    5. Ashburn

      PK’s last comment hits the nail squarely on the head.:

      “The only thing that all this has really confirmed is that the collective IQ of the Democratic/Washington brain trust is running down into single figures. They make Trump look like a tactical and strategic geopolitical genius.”

      The Three Stooges of US foreign policy: Biden, Blinken and Sullivan appear to be victims of the Dunning-Kruger effect. Putin gave them every opportunity to back off their ill-considered drive to (in Putin’s words) ‘place a knife at Russia’s throat.’ They ignored his offers and have now made an historic miscalculation. 1) Pushing the two Eurasian giants, Russia and China, closer together. 2) Further straining the Atlantic alliance by inflicting serious damage to the European economies. 3) Contributing even more fuel to US inflation, just 8 months before US midterms. I suspect they will continue to compound this disaster with further sanctions in order to appear in control when objective reality exposes their incompetence.

      1. KD

        The problem is that the status quo is the result of what happens when your foreign policy is set on auto-pilot, and is directed by profit-seeking by defense contractors, military and state department bureaucrats combined with powerful foreign lobbies, all buying off Congress and the Executives with campaign dollars. The coherence is who gets paid as a result of the policy (Exhibit A: Hunter Biden), not whether it serves any meaningful national strategic interest.

    6. KD

      Russia can sell gas and oil to China in non-USD currency and are on the brink of implementing a non-SWIFT based transaction system between the countries. Unless they sanction China, the Russians will be able to get what they need through the Chinese, which isn’t that much as they have been adapting to Western sanctions since 2014. This gives China a reliable overland source of petro and makes them less dependent on imports through the South China Sea, and helps breaks USD supremacy as a currency reserve as well as in petro markets. You can do anything you want, just don’t throw me into the sanctions patch.

      It is German industry that will pay from sanctions, as it will dramatically raise their manufacturing costs.

      The West is all bark and no bite as far as Ukraine goes, unless they are foolish enough to go nuclear (in which case everyone loses except maybe some species of insects and some bacteria). The Russians are mobilized and ready to go, come the end of March, Ukraine will be a mud-pit. If the US/NATO mobilized, they would need a ton of troops, and it would pin everyone into Europe (good night Taiwan), and they aren’t trained in combined arms operations and would get their clocks cleaned with high casualties in a conventional war, which is likely to prove to be bad television and then lead to negative public opinion. It will look like what happens when a middle age jock at a bar decides to pick a fight with a scrappy kick-boxing champion because he is bigger than him. The US has a lot of personnel in the armed forces, but 90% is combat support because its all about logistics and supply lines 4000 miles away, so the actual combat troops are pretty small, whereas Russian and Chinese forces are intended to fight in their back yards. Not to mention, despite all the spending, you have a lot of $400 toilet seats and expensive and useless weapon systems like the F-35.

    7. vlade

      “Bear in mind of course that it won’t bother the Russians if they lose markets for oil and gas if they are getting double the price from their existing markets. This is also of course a lifeline for the Saudis and the frackers.”

      That’s not entirely true, as one of the main worries for Russia is transfer away from fossil fuels (I know for sure it’s one of big Gazprom worries). They want high-ish prices, but not so high that they would make move to alternatives eminently viable.

      What they really want is long-term contracts though.

      1. juno mas

        …and a long term contract is what they have with—China. (These sanctions will not turn out well.)

      2. Richard

        What alternatives? Germany is in trouble because it gave up nukes and coal before it had alternatives.

  2. JohnA

    The puppet German chancellor has now officially stopped Nord Stream 2. No surprise there, Europe is America’s lunch.

    1. Glossolalia

      As Henry Kissinger supposedly said, “It may be dangerous to be America’s enemy, but to be America’s friend is fatal.”

    2. Yves Smith

      Press appears to be somewhat overstating the situation. From John Helmer via e-mail:

      The Scholz statements indicate suspension of the certification process, not cancellation — he is buying more time. This is a clear indication that Germany is not committing to the full sanctions list upon and after “invasion”. Not yet. Scholz said: “. Scholz today asked the economy and climate ministry (BMWK) to withdraw the existing analysis of Germany’s supply security. “This may sound technical, but it is the necessary administrative step so that no certification of the pipeline can now take place,” said Scholz. “And without this certification, Nord Stream 2 cannot go into operation.” The report on supply security would now be reworked by the economy ministry. “This will certainly take some time,” said Scholz. The chancellor did not say what conditions would have to be met for the certification process to restart.” Taking into account the chaos of the coalition politics in Berlin, it is not capitulation to the Washington line.

      1. Dave in Austin

        Yes, Scholz was very careful and everyone pretended otherwise. For now Russia is providing the minimum required under the long-term gas contract via the Ukraine pipeline (much of it may be Khazak gas they have to take) and decided two months ago to sell nothing on the spot market via the Polish pipeline, which is now flowing backwards sending gas from Germany to Poland. Usually spot sales are dictated by pipeline contracts and the Russians have entered no bids through the end of March and will probably do nothing after that. No spot market gas is coming to the EU and prices will go up. The old lignite plants are in mothballs but may end up back on-line.

        German gas reserves are down and the US LNG tankers in Rotterdam will only help a bit, but spring is almost here so Germany and Poland will sqeak by without any industrial shutdowns. I wonder if the timing is being dictated less by “the ground will thaw and and stop the tanks” and more by a January determination that “The Germans have enough gas to last through the winter”.

      2. John

        If Germany, and others, are playing their cards intelligently, they are clutching their hole card to their chest waiting and waiting for the moment to declare their interest … and independence . At least that is what I would be doing.

        This looks like a master class game of chess from one side and low level checkers within the DC bubble.

  3. LawnDart

    I doubt oil will be added to the restrictions list, considering almost 10% of our imports come from Russia, but if it were, could you imagine the consequence?

    Until last month, I held shares in Gazprom and was sad to let them go (they had treated me nicely, and had a great dividend policy), but the way things were going was obvious. This Ukraine-stuff is bad for a lot of businesses, with the obvious exceptions, and it sure as heck is bad for Europe overall. I could invest in USA LNG companies to try and profit off this mess, but I don’t think that importing a much-higher cost product is politically sustainable for long– the guillotine is a European invention, after all.

    1. LawnDart

      China is not thrilled about any of this Ukraine business, as it sees the potential for disruption in the world’s energy markets as being bad for its economy.

      I guess, in USA, that the good thing about skyrocketing oil prices is that less idiots will be able to afford to travel around and spread their covid… …still kinda sucks though.


    2. juno mas

      I have some legacy stock in Sempra Energy. It is headed back to its high of $150+. I wonder where gold will go.

  4. Poul

    Sanctions is a game Russia can play too. After 2024 there are no contracts for gas via Ukraine. A perfect time to close that pipe line and pressure Germany/EU to open Nord Stream 2.

    Then we have potential positive effects for Russia from sanctions, We have seen that in agricultural products like pigs and wheat.

    Which is the risk for Russian oligarchs to have their money confiscated in the West is now so high that it could forced them to invest in Russian agriculture and industry and improve their self-sufficiency.

  5. DJG, Reality Czar

    The banality of evil in action: “We have other severe measures we can take, that our allies and partners can take in lockstep with us, that don’t have the same spillover effects.”

    First, the statement is pure bureaucratic-speak. But words like allies and partners are already debased in U.S. English. And “lockstep,” now isn’t that an intriguing signal to the satrapies?

    “Spillover effects” = “collateral damage” = Try not to look at how real people are being harmed by the powerful.

    The US and the UK wanted another nifty little war to keep the populace in line–and nothing riles up the proles like seeing “boots on the ground” come back home in coffins. So some vague “economic devastation” is in order, as if the economy is not made up of people’s work.

    It is obvious that Putin made his move noting the weakness of the USA and UK with regard to Covid logistics and treatment. And the response in the USA most likely will be to run Hillary Clinton, Avenger of American Honor, as president.

      1. Louis Fyne

        you are almost spot on as the etymology of “lock-step” comes from….

        the chain gang!

        Apt metaphor when Biden is talking about solidarity between the US and EU or Australia or Japan.

    1. LawnDart

      And the response in the USA most likely will be to run Hillary Clinton, Avenger of American Honor, as president.


      If Putin gets Hillary elected, I will have serious reason to hate the guy.

    2. Mikel

      The puppeteers of the global economic disorder may be satisfied with crisis after crisis and the resulting rising prices going to concentrated wealth. It’s a way to keep up those economic growth orders in the face of growing wealth disparity.

    3. KD

      The US and the UK wanted another nifty little war to keep the populace in line–and nothing riles up the proles like seeing “boots on the ground” come back home in coffins.

      That does not make any sense. The US/UK want something like the Falklands or Grenada where they come in in overwhelming force against a tiny country. The last thing they want is a hot war with a nuclear power in their enemy’s backyard. I’m convinced Biden wants out of this one, but it is not clear that he is actually in charge.

  6. The Rev Kev

    Certainly Germany had a tough choice to make. By stopping the Nord Steam pipeline being opened up – as well as the future construction of the Nord Stream 3 – they have now thrown a major spanner into their economy. With being unable to source a cheap supply elsewhere, it will put a crimp in the economy which will not be able to expand much more due to higher energy costs. In addition, heating prices for their people and their businesses will remain sky high with no relief whatsoever in sight. And as Biden demands now that Germany spend more on their military by buying US weaponry to deter Russia, the German government will certainly resort to making cuts to other parts of the economy – probably social welfare spending which will make them real popular with their electorate. And come to think of it, I never saw major German public support for the Ukraine with huge demonstrations against Russia so maybe the people there are not buying what is going on. And what do the Germans get for all this pain and sacrifice? Well I guess Washington’s gratitude.

    1. Librarian Guy

      Well, a bit of irony, isn’t it? The Germans (with French support) were the 2 financial bullies who imposed Austerity on all the Southern EU members like Greece (40-50% unemployment, massive jump in suicides) and Spain . . . & now they’ll be ‘Murika’s victims and pay thru the nose to “freedom” promoters like the USA & Saudis, enrich Exxon-Mobil et al while impoverishing their own population. Just brilliant!! Classic shoe on the other foot move!! . . . And all due to the specter of an all-powerful Russian imperial hegemon that collapsed over 3 decades ago!

    2. liam

      The thought occurs to me that the Russians themselves might consider leaving swift, and begin demanding payment through their own payments system. If they were particularly bloody minded they could even demand payment in roubles. It would force the EU into accepting roubles for European products, and utterly gut the impact of any sanctions.

    3. juno mas

      Germany (Volks AG) is the largest auto producer in the world. High energy prices could send the price of a new car even higher.

      1. Louis Fyne

        no Russian metals = expensive and/or shortages of alloys for cars.

        All the bauxite and iron in the world are useless for modern cars and industry unless in an alloy form.

        Hence why today’s Russia sanctions are the equivalent of Biden waving his flatulence in Putin’s direction, like in that old Monty Python skit.

  7. TomDority

    “No protracted war can fail to endanger the freedom of a democratic country.” -Alexis de Tocqueville
    “War against a foreign country only happens when the moneyed classes think they are going to profit from it.” -George Orwell

    “The essential act of war is destruction, not necessarily of human lives, but of the products of human labor.” -George Orwell

    “A state of war only serves as an excuse for domestic tyranny.” -Aleksandr Solzhenitsyn

    “It is a universal truth that the loss of liberty at home is to be charged to the provisions against danger, real or pretended, from abroad.” -James Madison

    1. Pate

      American examples
      Alien and Sedition Acts – Quasi-War with France
      Lincoln suspends habeas corpus – civil war
      Espionage Act 1917 – WWI (still on the books)
      Patriot Act – War on Terror (ongoing)

  8. Gumnut

    Germany has currently got less than 50 days of gas reserves at current consumption levels. Market shall fix it I presume. Or praying for spring to come early.

  9. Glossolalia

    It’s amusing to think about how the US would react if Russia were to insert its self in to a border dispute between the US and Mexico.

  10. Michael Ismoe

    I’ll bet the Kaiser thought WWI was an awesome idea too.

    Thank God I’m old. I don’t recognize my own country anymore.

    1. LowellHighlander

      I might be able to help you feel young again: Take a look at Howard Zinn’s masterpiece. You’d see that brutality, imperialism, and exploitation of humans (other races and powerless workers) has been going on here since history began being recorded on this continent.

      On a less sarcastic note, the good guys (please pardon the sexism in that phrase) can win one if we can convince the plutocrats in the Imperial Capital that young people will not be rallying ’round the flag this time and will not sign up in droves to fight this war. And, from my vantage point, I don’t see much of a cause that the plutocrats can sell to young Americans here.

      1. anon y'mouse

        they might not sign up “in droves” (when have they ever?) but economic conscription in a world where the ability to move up economically and socially, plus gain a plethora of lifetime special bennies not available to the civilian population, begins to look better and better to some whose prospects are diminishing by the day here in the heart of the empire.

        there’ll always be cannon fodder, or at least paid mercenaries.

    2. Louis Fyne

      UK could have sidestepped the carnage of WWI, but for its treaty with Belgium—a multiethnic nation-state with borders artificially crafted by the randomness of history.

  11. timbers

    “Those sanctions were intensified in 2014 following Russia’s annexation of Crimea.”

    Russia did not annex Crimea. Crimea voted freely and most probably completely legally to re-join Russia after the Ukrainian government was dissolved.

  12. timbers

    American’s are going to pay a lot more for heating their homes, too. Meanwhile wouldn’t be surprised if Iran makes out like a bandit from all this as Washington realizes it needs to get Iranian energy back into world markets to moderate the rise in energy prices. Hope the Iranians get even tougher negotiating with Washington.

    1. Librarian Guy

      Unintended consequences always occur, and Pride Goeth Before a Fall. I hate to resort to “Bumper Sticker Wisdom”, but can no longer do more when our Elites are so ignorant and incompetent and repeat the same (unforced) Errors over and over . . . a consequence of their impunity!! David Frum, Tommy Friedman, all the morons who were all in for Iraq, hell even “liberal” Josh Marshall all got promoted in the MSM and moved up, folks who were right like Phil Donahue & Bill Moyers were purged from the group-think MSM. . . It’s true that Americans evidently “can’t handle the truth” (was that Jack Nicholson in some movie?) so the diet of lies and distortion goes on and on ad infinitum. It won’t end well, that’s for sure, but that’s kind of the whole message of the Clinton-Biden wing of the Dems isn’t it– we know better, take the “medicine” we are dishing out, you peons don’t deserve and will never get nice things (a few years without a war or Recession where we enrich the 0.1%, affordable health care, etc.)

      1. flora

        Pride Goeth ….

        US policy is driving RU and CN closer together on building an alternative to dependence on western/US banks and SWIFT payment platforms. Encouraging dependent entities to build independent alternatives isn’t how you keep them dependent.

        Short term, however, (doesn’t anyone in DC think long term anymore?), from NYT:

        “Chancellor Olaf Scholz said on Tuesday that Germany would halt certification of the Nord Stream 2 natural gas pipeline that would link his country with Russia, one of the strongest moves yet by the West to punish the Kremlin for recognizing two separatist regions in Ukraine.”


  13. Matthew G. Saroff

    Any indication about how much of the opposition to Nord Stream 2 is actually about energy security, and how much is about US desires to ship LNG to Europe?

  14. vlade

    Re Russian autarky.

    Russia will not be self sufficient in high-tech stuff for quite a while. Say it has some silicon fab capabilities, and many Russians were hyping the russian chips, but testing (by Russians) said “not good enough for any but trivial tasks”, and indicated that it’s at least two, possibly three generations behind what say Intel/AMD can do (and that’s just on the chip design, never mind the actual fabrication). Which, TBH, is plenty for many applications (remember that Boeing still runs airplanes on 286s), including many military ones, but not all.

    To build a proper know-how for this stuff takes not just years, but decades.

    1. fringe element


      “Chip manufacturing is measured in sums of cash numbering in the hundreds of billions of dollars. According to a lesser-known observation from Intel co-founder Gordon Moore, the company — and every other chip manufacturer on the planet — will be unable to afford the equipment needed to make chips, as the costs increase exponentially above revenue.”

      “in the future, the company said it will rely on governments to make up for the rising cost of chipmaking tools”

      ” “The economics [are] going to force this whole industry to Asia and other places where they do give those kinds of offsets,” Esfarjani said. “This isn’t just, ‘Let’s subsidize this.’ Nobody has $20 billion to just go: next one, next one, next one.”

    2. Louis Fyne

      US can’t even keep fentanyl out of its borders.

      In the event of chip sanctions, no way US can prevent chips from being unofficially exported to Russia.

      1. anon y'mouse

        more like U.S. doesn’t want to keep fentanyl out of its borders.

        drugs here are a tool against the underclasses. like RAID for roaches.

  15. Gordon

    A 20-year perspective of Russia’s oil, gas and merchandise trade is here.

    How long before supply chain disruptions metastasise?

    Last autumn here in the UK an early problem was the closure of fertiliser maker CF Industries’ UK plants with the consequential loss of CO2 by-product needed for food production. The government was left with no option other than to subsidise them.

    Working on a slower timescale, fertilisers prices have gone through the roof. Nitrogen-based ones are very energy-intensive and Belarus, sanctioned by the US, produces around 20% of the World’s potash fertiliser.

    I’m hearing rumours that farmers can’t afford the resulting prices which will mean yields could be well down this year. What I don’t know is when the drop dead date for applying fertiliser is or how big an effect this is.


    1. Michaelmas

      Maybe we’re not going to rely on synthetic nitrogen-based fertilizers indefinitely, because there’s a better alternative? Here are a couple of real companies with real products.

      “…a scalable proprietary tech platform that enables microbes to reliably produce nitrogen for cereal crops – a discovery that has been chased by scientists for decades, and never available commercially until now. Pivot Bio microbes take nitrogen from the air and make it available for plants, replacing the need for synthetic nitrogen.”

      “Indigo Agriculture improves grower profitability, environmental sustainability, and consumer health through the use of natural microbiology and digital technologies.”

  16. Gularg

    It probably is worthwhile to resist the urge to read any of the recent events of the past 24 hours or so in any type of optimistic manner.

    As Rob Lee has noted, if Russian officials say one thing and Russian military deployment say another–trust the latter.

    From a purely military leverage perspective see the Feb. 21, “Foreign Affairs,” article by Michael Kofman (who has been eerily accurate thus far in his open-source predictions based on his tracing of the nature of Russian military deployments over the past 6 months) and Jeff Edmonds entitled “Russia Shock and Awe.”

    They state:

    “This time if Russia invades, it would not constrain itself. It would use the bulk of its military resources–ground forces, airpower, attack helicopters, powerful missiles and its navy–in a violent , open conflict. It would roll across large parts of Ukraine, not just the east and try to seize the capital with a goal of installing a pro-Russian government. Such ambitions would require an extensive initial operation, followed by the entry of additional forces that could hold territory and secure supply lines.

    1. Yves Smith

      Russia has no interest in invading. Going into the separatist regions is walking through an open door. They’ll given the Ukrainian military and their irregular buddies a date certain to leave. Then there might be some messy cleanup operations.

  17. Maxwell Johnston

    Joining the fray a bit later this evening, but a few quick observations re Russia sanctions:

    a. After 10 years of this, Russia is pretty well insulated from further damage. It is self-sufficient in the most important stuff: food, energy, weapons. It can buy consumer goods and electronics from China and medicines from India (and I highly doubt these two will seriously comply with any USA sanctions regime). Even the fabled SWIFT cutoff is overrated, IMHO: SWIFT is a messaging system not a payments system, and in any case for intra-Russia bank transfers the Russians already have their own system (as do the Chinese).

    b. Nordstream 2 isn’t cancelled, its certification process has been suspended. Lots of wiggle room there.

    c. The two Donbas states have not been annexed (yet), they’ve only been given diplomatic recognition; again lots of wiggle room for future diplomacy.

    d. During my daily visit to the BBC website, I was amused to see the screaming headlines about BoJo’s Russia sanctions (along with his soaring rhetoric)…..only to scroll down and read what the sanctions are actually targeting: three Russian (quote) businessmen (unquote), that would be the Rotenberg brothers and Timchenko, who are businessmen in the same mold as Hunter Biden and Mark Thatcher. And 5 Russian banks, 3 of which I’ve never heard of, and the other 2 are essentially pocket banks for the Russian government (and only 1 of the 5 is in the top 10 of Russian banks). In short: a nothingburger so far. Let us wait and see.

    We are still very early in what’s likely to be a long slog. But if things get nasty, the EU will definitely suffer. Russia still has a lot of cards to play.

  18. LawnDart

    Group of journalists from the United States, Italy comes under fire outside Gorlovka


    US juno is an independent, crowd-funded reporter. His video is raw but primary-source, not reports of reports or that of an “embeded reporter” taking dictation from a public affairs officer. The website that hosts his work seems pretty interesting too.


  19. Mikeyjoe

    This situaton reminds me of some lyrics from a Blue Oyster Cult song;

    History shows again and again
    how nature points out the foly of men…

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