The Coming Sanctions-Induced Economic Tsunami?

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Today I am risking being too glib, but my excuse is aspiring to meet the Einstein standard, “Make everything as simple as possible, but not simpler.” It’s not hard to see that as rough as economic conditions are now, they are set to get worse. And it’s not hard to see that despite the considerable blowback from the sanctions against Russia, the West is not going to relent.

Here’s a simple baseline forecast. Russia wins in Ukraine. The West may try to define it somehow as not a victory, but it’s hard to see how Russia does not take the entire Black Sea coast plus Ukraine east of the Dneiper by the end of the year, and I hazard to guess sooner, say October-November. What Russia decides to do with the western part is path dependent and so in play (consider how possible military coup/Zelensky flight, Democratic November wipeout, rising political strife in Europe, Poland deciding to get expansionist could all factor into Russian decisions). Some Russians are already getting cocky:

The West will remain fixated on making Russia pay for taking Ukraine. But the West lacks the ability to do so via conventional warfare (see this devastating analysis, The Return of Industrial Warfare, which shows that the West lacks the manufacturing capacity to match, let alone beat, Russia). So the only means left is economic war. Despite the fact that the West is losing decisively there too, it is determined to escalate, no matter how much harm it does to itself.

Russia has been measured in its responses. Perhaps the Russian leadership hoped that the West would recognize the balance of power and cool off after Russia force a Minsk-Accords-type solution plus a guarantee of neutrality upon Ukraine, which seemed a possible outcome as of the end-of-March negotiations in Istanbul, which the UK and US got Zelensky to undo. Russia knows there’s no point in negotiating with the West, or at least not the current actors.

Russia is nevertheless far from tit-for-tat-level retaliation; one assumes if nothing else Russia is now playing to China and India and the Global South to show that it is being pretty reasonable given the givens and trying to balance respecting contracts with not being ripped off. Merely requiring gas for roubles, and now “other commodities for roubles” as a way to prevent another $300 billion in foreign exchange reserves from being stolen was hardly a big ask,1 yet some buyers went ballistic. Poland and Bulgaria refused to comply with the new payment procedure and so Russia stopped shipping their contracted amounts.

Now the Western press is regularly complaining that Russia is not sending all the gas that is is “supposed” to. Austria complained in June (on the fourth day this happened) that was only getting 50% of the gas it expected. The article made no mention of the fact that this was in the period when Gazprom pointed, and it was confirmed, that Siemens had sent turbine used in St. Petersburg to Montreal and Canada would not send it back, and Gazprom had to cut deliveries on Nord Stream 1 by 40%. The other nation-level shortfalls could be due to Germany backfilling Poland and Bulgaria.

Recall also that Russia sanctioned 31 Gazprom European entities connected to Gazprom Germania because Germany stole Gazprom assets there, including storage facilities. At least one of those entities was Austrian.

In other words, it’s hard to unpack how much of the alleged shortfalls are the direct result of sanctions-related measures and specific counter-sanctions by Russia, as opposed to the Russia jerking the EU around because it can. So far, it looks to be mainly or entirely the former, but with more and more provocations like the Kaliningrad partial blockade, there’s a lot of room for Russia to get nasty. For instance, continuing on the economic front, Austria is about to seize a partly-Gazrprom owned facility in Austria, but you’d never know that from the press accounts unless you’d been paying attention. From Reuters:

Austria is following through on a “use it or lose it” threat to eject Russia’s Gazprom from its large Haidach gas storage facility for systematically failing to fill its portion of the capacity there, the government said on Wednesday.

Austria obtains around 80% of its gas from Russia but since the war in Ukraine it has accused Moscow of weaponising that supply and has been seeking alternatives. Fearing that Russia will cut it off, it is racing to fill its gas storage facilities, which are at just under half their capacity.

Since Gazprom has not been filling its portion of the Haidach facility near Salzburg, the conservative-led government told the Russian firm in May that if it did not use its storage there the capacity would be handed over to others. Legislation making that possible came into force on July 1.

“If customers do not store (gas) then the capacity must be handed over to others. It is critical infrastructure. We need it now in such a crisis. That is exactly what is happening now in the case of Gazprom and its storage at Haidach,” energy minister Leonore Gewessler told a news conference, adding that gas regulator E-Control had started the process of ejecting Gazprom.

First, it’s not clear if Russia was actually short on its contractual deliveries. Second, one wonders where Austria could possibly get the gas needed to fill its storage all the way up (as if the tanks were always full, something I doubt). Third, it is acting on “fears” Russia will cut it off, when it looks like Austria is in the process of triggering that outcome.

The key omission is who owns the facility. Per Bloomberg: “Haidach was built by Gazprom and Germany’s Wingas Gmbh.” As we wrote, Wingas was one of the entities sanctioned by Russia as a result of Germany seizing Gazprom Germania assets. So the cutback in deliveries may also be the result of those counter-sanctions.

So Austria’s response will be to copy Germany, steal the unsanctioned part of Gazprom asset… and they expect Russia to continue supplying gas? They posture as if they have an alternative when they don’t.

We’ve gone through this example long form to show that so far, Russia has been responding in targeted ways to Western actions, and so far in nothing even remotely approaching the magnitude of the central bank asset heist. But Austria shows that the West’s impulse when Russia respond is to engage in yet another round of escalation. And in parallel we also see the West trying to impose new punishments, like its oil price cap, which even if it kinda-sorta gets done, will result in lower to much lower oil deliveries to the unfriendly country participants, much higher oil prices, and Russia still fat and happy since at prices over say $200 a barrel, it can sell even less energy and prosper.

With enemies like this, who needs friends?

This is a long-winded way of making a point most readers already likely accept: no matter how bad things get in the US, Europe, Japan, and South Korea, absent the violent overthrow of governments, Russia’s opponents will not relent on their economic sanctions. We will hoist from India Punchline as to where this trajectory too obviously is going:

Germany is heading for a major economic crisis. The head of the German Federation of Trade Unions has been quoted as saying in the weekend, “Entire industries are in danger of collapsing forever because of the gas bottlenecks — especially, chemicals, glass-making, and aluminium industries, which are major suppliers to key automotive sector.” Massive unemployment is likely. When Germany sneezes, of course, Europe catches cold — not only the Eurozone but even post-Brexit Britain.

Welcome to the European Union’s “sanctions from hell.” The US literally hustled the Europeans into the Ukraine crisis. How many times did Secretary of State Antony Blinken travel to Europe in those critical months in the run-up to the Russian invasion of Ukraine to ensure that the door to any meaningful talks with the Kremlin remained shut! And American energy companies are today making windfall profits selling gas to Europeans. Won’t Europeans have the common intelligence to realise they have been had?

Now, Biden has washed his hands off the gas crisis. He brusquely stated at a press conference in Madrid on June 30 that such premium on oil prices will continue “as long as it takes, so Russia cannot, in fact, defeat Ukraine and move beyond Ukraine. This is a critical, critical position for the world. Here we are. Why do we have NATO?” …

But even if that’s the case [that Russia per Biden is suffering economically and will eventually crumble], how does all that help the Europeans? On the other hand, President Putin’s strategic calculations with respect to the war remain very much on track….Five months into the war, Ukrainians are staring at defeat and Russian army generals know it.

Russia didn’t wander into Ukraine unprepared, either. Evidently, it took precautionary steps both before and since the war to shield its economy. And this enables the Russian economy to settle down to a “new normal”. Washington’s options are quite limited under the circumstances. Fundamentally, western sanctions do not address the causes of the Russian behaviour, and therefore, they are doomed to fail to solve the problem at hand.

Remember, Germany just announced its first trade deficit in decades. Energy rationing will favor households over businesses. Businesses will fail. That means a loss of salaries and spending. And unless there’s a fast rebound, most of those losses will become permanent. Italy is also dependent on Russian gas, and it has a chronically sick economy and very weak banks. Eurozone fiscal rules provide for limited spending headroom when things fall apart. And fiscal operations can’t remedy a shortfall of energy and food (a separate stressor we’ve skipped over).

Japan’s severely weakened currency means even it if can play nice with Russia despite being an American military protectorate, some businesses may go wobbly due to high energy prices breaking their budgets. Remember both Japanese and German part (as well as inputs from other EU nations) are parts of some American just-in-time manufacturing. And if the EU has a full bore banking or sovereign debt crisis, the industry effects could extend beyond energy/oil product hungry businesses.

And we haven’t factored in Covid outbreaks making it even more difficult to keep businesses and essential services functioning.

So the image that keeps coming to mind is a tsunami. Remember that those on a beach first see a placid scene, with the ocean pulling back much further than a normal low tide. And then the water comes in and sweeps everything before it:

It would be better if I were wrong. But what is coming has the feeling of destiny, in a bad way.


1 The point of the mechanism is actually not the roubles; the roubles are the pretext for forcing paying to be made via a Russian bank, as in outside the Western sanctions regime. Recall the payments are still made in the original contracted currency, be it euros or dollars or sterling. The Russian bank makes the currency swap.

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  1. PlutoniumKun

    Its hard to know for sure, but I suspect it is not until politicians and CEO’s return from their summer holidays and start thinking hard about the winter that minds will concentrate. By then it may already be too late to heal all those feet with bullet holes in them. In part this may be deliberate, as there are some indications I think that many German businesses simply assumed that sanctions and pain would be short term and that something would come up (a little like UK businesses and Brexit). We seem to have business leaders congenitally incapable of looking beyond the next quarter.

    One issue that hasn’t had too much attention I think is how many businesses, especially airlines, have been protected by hedging. The budget airline Ryanair is apparently getting fuel at $60 a barrel (one wonders who is on the wrong side of that hedge). So real pain in some sectors from commodity costs may not hit until 2023, and then it will be like a meteor strike as nobody will be able to hedge themselves.

    1. Yves Smith Post author

      First, hedges won’t protect you from shortfalls. That is what German businesses foresee now, and it’s hard to see airlines not being afflicted too. Airlines are high fixed cost businesses, so if they can’t run enough flights, they are quickly in a world of hurt.

      Second, businesses appear to be weirdly disenfranchised. We saw that during Brexit, when they were afraid to speak up (and their noisemaking could have led to a much less hard Brexit). Some German business leaders are now bleating in the press, but even the prospect of catastrophic-seeming outcomes like BASF shuttering its massive 200 plant chemical facility (which gives an indication of how hard other operators might be hit) hasn’t even led to a batting of the eye by Habeck, Scholz, or von der Leyen. So even if the corporate types are even more freaked out after their holidays, I don’t see EU leaders as willing or able to change gears. They simply can’t wind down the Russia sanctions. It would amount to a massive loss of face. And the US will be all over them not to as well.

      Update: Let me qualify this a bit. I gather that Scholz made a speech this week where he did acknowledge that Germany was moving into an economic crisis. But he was pitching it as worth it to secure the Great Ukrainian victory. So even the reality that is seeping in isn’t enough to produce a course change….which is consistent with the view above. My belief is that even when they internalize that Ukraine is lost, they still won’t let up because Russia must pay, and they still think they can hurt Russia more than they are hurting themselves.

      1. Deak

        “My belief is that even when they internalize that Ukraine is lost, they still won’t let up because Russia must pay, and they still think they can hurt Russia more than they are hurting themselves.”

        This seems a pretty common belief among friends I’ve spoken to about the war, so it seems to extend well beyond just the halls of power. The constant reporting on the scale of sanctions really has got people believing that Russia’s economy is on the brink and all it will take is one little push to knock it over the edge. I wonder whether it’s gotten to the point that this view is no longer subject to evidence and is simply something that everyone knows, reality be damned

      2. Carolinian

        Thanks for this post. This sort of thing is why we are here. As for

        It would amount to a massive loss of face.

        perhaps realists like Mearsheimer need to concede the role of Alpha dog oneupmanship and look back at all the mayhem committed to defend US (and now EU) “credibility.” The ghosts of Lyndon and Nixon are hovering nearby–not to mention all those other power poisoned leaders to be found in Tuchman’s March of Folly. Democracy was supposed to save us from sovereigns and their ego trips. But that’s a hard thing to keep in its box.

          1. Carolinian

            About as many Americans died under Nixon as under Johnson. I’ve always thought that was the real reason he got himself impeached. And in the end his “peace with honor” didn’t last very long.

            To be sure Nixon and Dr. K were a lot smarter than Biden and Blinken. But that’s a low bar.

        1. Adams

          Tuchman was such a rock star! Kennedy’s “Rise and Fall of the Great Powers” is also worth a read. Both from the 1980’s, great historical context, prescient.

          Arrogance, stupidity and testosterone. And here we are.

        1. Yves Smith Post author

          I’m not disputing the point about hedges. But hedges presuppose you can will be buying a certain level of commodity that you are hedging. I am suggesting the airline will have bought more hedges than they use.

      3. Richard

        Seems like a stages of grief thing to me. They’ve passed denial and are somewhere between anger and bargaining, hopefully with depression and acceptance to follow. Can’t happen soon enough.

        By the way, I think Naked Capitalism’s coverage of this issue is superb.

      4. hk

        The apparent disenfranchisement of the businesses is an odd (but very true, from my sense of things, too!) observation given the obsession many people have about alleged “politics of capitalism” and the supposed power of the big businesses over political interests. Ironically, it’s the business interests that want to moderate while the politicians (and the shrill activist part of the public opinion) that keeps wanting to escalate regardless of the cost. Now, this is actually not unheard of–apologies in advance for WW2 analogue–German economic interests were absolutely against escalating conflict, in 1939 as well as in 1941. There were immense profits to be had through dealings with the West and the economic cooperation with the Soviets. Of course, they didn’t carry the day and the rest was history. (But this still doesn’t keep some people from insisting that the Nazi gov’t was ultimately a cabal in service to the big businesses in Germany….)

        1. Hickory

          Germany’s not like the US – the US is center of the empire, Germany has been a protectorate for decades. It never stopped being occupied after WWII. I’m sure it’s been a top priority of the CIA and NSA to keep their fingers sunk deep into that country’s leadership system in tons of ways. In contrast, if the US chemicals and manufacturing sectors+their banks were in equivalent trouble, I think the US gov’t would respond differently.

      5. Schopenhauer

        The political situation here in Germany is rather bleak: the party-cartel (SPD, CDU, FDP, “Greens”) dominates not only in parliament and public service, but they subjugated public TV (ARD & ZDF…..the german BBC) and the press so that public opinion is more or less identical with the last statement of the government spokesman – Germany is now a very good example for Chomskys & Hermans “manufactured consent”.
        The so-called political elite tries to crush the powerless rest of oppositional voices – a couple of weeks ago, Thomas Haldenwang, President of the “Verfassungsschutz” (a branch of the internal secret service), came up in his annual report with the information that his agency is going to surveil citizens who either have the political tendency to “delegitimize the state” with systemic critique or who bring representatives of state and government in contempt.
        The former left party “The Left” is in dissolution: Two weeks ago at the party convention the faction around Sahra Wagenknecht – the last heir of the classic german left – lost nearly every vote against their opponents from the sectarian “lifestyle left” (which is not left at all). And today – after Wagenknecht and Klaus Ernst called for an end to the silly and self-defeating sanctions on Russia – the apparatchiks from the party and parliamentary group denounced that as unhelpful deviance from the partyline which says yes to the sanctions.
        Maybe a long and cold “winter of discontent” will be made to a glorious political summer next year but this son of York will not come from the ranks of the established and totally corrupt party system.

    2. Ignacio

      Yes It looks like inability to plan in advance, except may be for the next 3 months, is what drives Western companies and politics. Something will come up. Are they still betting that one day Russia will surrender to sanctions, if not as expected before June it might be before September, and then may be before December? Do we just need to be patient enough and may be push a little bit harder if we can? Cassino politics anyone? Yet I don’t see anyone here in the collective West thinking that there could have been some miscalculation and may be more we wait the worse will it be? Yes It may be the case that short term hedges are shifting and distributing the pain in a way that hasn’t already resulted in a cascade of failures. I thought that 2021 couldn’t be worse than 2020 and later that 2022 must bring improvements relative to 2021, how mistaken I was. Now I wonder how on earth will 2023 worsen relative to 2022.

      1. Greg

        If i was to hazard a guess, I’d say 2023 is when food stockpiles have shrunk and the capacity of global systems to absorb reduced output pain in agriculture is exhausted. The starving times begin in earnest. We are unlikely to see real food shortages this year in any but already fragile states.

        Fingers crossed it doesn’t happen, but if we get another year of catastrophic drought and/or flood in key regions…

    3. Watt4Bob

      There is another issue that is not receiving the attention it deserves, the problem of the damage done by the never-ending pressure of austerity which combined with the effects of the pandemic has resulted in the airlines being unable to put enough pilots in cockpits whatever the price of fuel.

      The airlines have gradually turned what was once a wonderful job into one that is no longer attractive.

      The situation of the airlines is a perfect illustration of hysteresis, their history of mistreating their employees has fatally damaged their ability to restore capacity in the face of rising demand.

      I’m sure this situation affects many more industries, witness the “Great Resignation”.

      1. Deak

        Youre not wrong about training as a pilot losing its appeal – I have a number of friends working as pilots, and all have had to take on around $150k in training debt only to make less than a graduate accountant for their first 4 or 5 years flying. It really has become a job you pursue because its your dream rather than because it seems like a good career decision

    4. Julian

      The reason European businesses do nothing is simple. It is physically impossible to wean EU off Russian commodities in less, than ten years. Therefore either politicians come back to Earth in time, or they will be ejected by angry, jobless, freezing and destitute mob of ex-middle class people.

      The business people are powerless to do anything about politicians (at least in a legal way), so they can only protect their assets and adopt a wait and see strategy.

      1. Yves Smith Post author

        That makes sense but why are they powerless? They employ workers and having to throw them on the street is very bad for political parties then in charge. Doesn’t that give them some leverage?

        1. GlassHammer

          Well, what is worse for marketing/public relations for a European company right now:
          A -Being anti-war, pro business, and against the current political narrative.
          B -Being pro-war, anti-business, and in support of the current political narrative.

          At this point I think the worst option is A until the current crop of leadership resets from voter anger. (Voter anger being the best thing to stoke if your a business because it keeps your hands a bit more hidden than direct public action against a polotician)

          Also throwing someone out of a job won’t translate into voter anger against politicians even if you tell a worker they are to blame for the conditions that lead to their termination. People will always blame the employer first and with the greatest intensity when it comes to layoffs.

        2. Julian

          Powerlessness comes from fear of being ostracized. See what happened to Gerhard Schroeder for just stating the obvious, that you can’t isolate a big country like Russia.
          Besides people in Europe went somewhat crazy with anger towards everything Russian. So any kind of “earth to ignorant” messages were responded to with aggression and accusations of support for Putin.
          And also now the politicians are mostly mingling with financial types, so industrialists have little sway.
          So in the end the business people can only wait and see, and if the push comes, they will fire people and point finger, protecting themselves from popular anger.

          1. Richard

            “Powerlessness comes from fear of being ostracized….”

            Yeah, but I don’t understand Schroeder. Kissinger as well, who I think backed off his already tepid criticism at Davos.

            Doesn’t success come from buying low and selling high? Politically right now, what’s lower than anti-war/against-the-narrative, and what’s higher than pro-war/support-the-narrative. Where’s the loss in being ahead when this turns, especially for retired guys like Schroeder and Kissinger? And the upside, ultimate recognition as oracular.

            Just for their own advantage, ignoring the right and wrong of it, I don’t understand why we don’t see more elder statesmen proclaiming the obvious.

            1. Julian

              Sometimes you have to let idiots ef-up so bad, that the pervasive tolerance for failure will run out. Many of the people running the collective west should have been barred from holding office ever again and some should have been jailed for years.
              Instead we get a culture of ef-up and move up. In this environment only a catastrophic failure can give the system a chance to clean itself up, and if it won’t survive, then well, it will not be the first time a state fails. Only surprise will be the number of states failing simultaneously

              1. foghorn longhorn

                Just have to let, the smartest people in the room, prove it.
                Look up kamala in chicago, watch any clip lately of biden, putin certainly does.
                IM Doc said chaos is the next stage of this tragi-comedy, prepare accordingly.
                All you can do is try to get your krewe thru the incoming storm.

            2. Hickory

              First, we did see elder statesmen speak out just before the war started – some public statements and letters were made by individuals and groups of highly ranked military and high level business people, and perhaps other notables. You see what good it did.

              I suspect the relationship between the US and Germany is not as benign as it’s commonly portrayed. America wants to keep Germany in its orbit, and it’s going to tremendous lengths to separate Germany and Russia. At the highest levels of America, and I suspect its protectorates, there’s an agreement between the very richest: play along and get massively rich, or go against the tide and bad things happen to you. Hence Kennedy getting assassinated and the FBI+CIA getting acknowledged in a Congressional investigation as being impediments to the investigation of his death. Or look at Epstein, who invited the super wealthy to molest children, possibly to blackmail them such that they had to support the system or be outed and charged as pedophiles, and then Epstein was offed suddenly. The people on top are really really not nice, and Germany’s elites are subordinate to America’s really not nice elites. Thus it makes sense to me that public discussion in Germany is muted.

        3. NN Cassandra

          Perhaps it’s just coordination problem? Whoever sticks his neck out now is going to have head immediately chopped off. Maybe the oligarchs should convene emergency Bildeberg meeting or something, and let all their presses and think-tanks know that from next Monday the talking point switches from “gas from Russia is financing Putin’s war” to “gas from Russia helps EU wage war against Putin and reconstruct Ukraine”.

        4. Skip Intro

          I think the threat of ‘cancellation’ – PR-based sanctions on one’s livelihood and associates, is sufficient to cow most people and businesses. The economic war against Russia easily spills over onto western entities that appear too Russian, or too sympathetic. I think your analogy with Brexit is apt as well, because the hollowing of the British diplomatic corps that was widely blamed for at least some parts of the debacle, mirrors the transformation of experts into propagandists and of the Western democracies into machines for enriching MIC donors, even unto the point of relying on F35s. This is the very model of a modern neoliberal… country. And of course I could have been describing the covid response.

          This rot is accompanied by cognitive impairment, a PMC-wide Dunning-Kruger bubble chamber that busily believes and amplifies its own hype. And now NATO meets its first real army just as Crypto meets its first real interest rate, and the call is to double down. These sanctions may create the fastest regime changes on record, though not in Russia.

        5. Kouros

          What is the ownership structure in the bigger German companies?? I think many a Land has shares in these companies and thus have the ability to put political pressure on the executives… Just a thought…

      2. vao

        I still ascribe much of the complacency of large corporations to their belief they have a nifty plan B in case things go really sour in Europe — relocate elsewhere. Whether this is feasible in a realistic time frame is irrelevant, they believe they can do it because they already did it so often.

        A bit like the oligarchs who do strictly nothing against climate change because they believe they have a feasible, nifty plan B — relocate to New Zealand.

        1. Julian

          Large corporations usually don’t have to relocate, only to liquidate unprofitable business operations.

          As for climate change, supposedly it is baked in since the permafrost is defrosting. So I don’t care about it anymore, mitigate, adapt and survive. Or die as unfit to new environment.

    5. Tom Stone

      Russia had time to prepare and wasted little of that time.
      One example is Russian Artillery which has been getting heavy use since February 24th.
      There has been no shortage of ammunition, which means that not only was production ramped up a year or more ago, but workable means of delivering the ammo to the guns was in place which is nowhere near as easy as you might think when you are talking a trainload or two of Ammo daily on top of everything else your army needs.
      And given the hard use the artillery has seen their maintenance/supply troops have been doing their job well
      Coordinating resupply given the realities of your road and rail network is an art.
      It’s an impressive performance.

      1. Paul Jurczak

        There is no hard data on recent ramp up of artillery ammunition production in Russia, and I suspect preparation wasn’t as smooth and well planned as you suggest. The key factor are ginormous reserves from Soviet times. A lot of it is still before the expiration date, and expired stuff is still good to use. No one looks for expiration dates in the Red Army.

        U.S. had to reach for WWII vintage of .50-cal ammo during invasion of Iraq. “Government Accountability Office estimated that it took 250,000 rounds to kill one insurgent.” The Return of Industrial Warfare

        1. Polar Socialist

          We do know that during their intervention in Syria Russians did notice that the artillery and tank ammunition expenditure was much bigger than estimated, so they did include modernizing their ammunition factories between 2017-20 into their State Armament Program 2020.

          As a result Techmash corporation reported 40% more shells produced already in 2018 and Technodynamika opened this January a new huge factory in Perm allowing them to produce 150% more ammunition.

          So whatever they were producing in 2017, they can now produce three times as much. Sorry, at least three times as much.

          1. foghorn longhorn

            And these factories are state owned so they get a hell of a lot more bang for the buck.
            We’ve been playing cowboys and indians with third world countries the last 30 years.
            Now we’re going from punching out light weights to stepping up to the heavyweight division and appear to be sorely under prepared.
            This shant end well.

      2. hk

        Soviet (and before that, Imperial Russian) military was always built around the heavy use of artillery and Russians never bought into the idea that, somehow, high tech would make piles of dumb munitions obsolete. I’d imagine that the stockpile of munitions from 1970s and 80s would be huge. The curious thing is that Ukrainians inherited a sizable chunk of that, too…so I’d figure that they can’t possibly be running out of weapons or ammunition, at least in big picture sense (and given that Soviet artillery was usually at least as good as their Western counterparts and all the problems with transitioning to new gear), this makes you wonder what, if any good, the billions of dollars worth of munitions supposedly being shipped in from the West would do for Ukrainians….

        1. foghorn longhorn

          They also have the S-300 air defense missiles which is why russia isn’t trying to use aerial forces.
          They are quite formidable, hard to locate on radar and are also shoot and scoot mobile.

        2. Greg

          Large parts of the world use soviet weapons, and everything not nailed down in Ukraine was sold. I imagine most of their inherited stockpiles left long before 2014.

          That is another factor to consider – Ukraine has been using artillery on the Donbas since 2014, so probably used a bunch more rounds up before Russia stepped in.

    6. hemeantwell

      some indications I think that many German businesses simply assumed that sanctions and pain would be short term and that something would come up (a little like UK businesses and Brexit).

      I’d hazard that German business might recall the 90s and the opportunities to pick over the bones of economies of Eastern Europe and the former Soviet Union. Putin’s fall wouldn’t have resulted in anything like that episode of accumulation by dispossession since the state sector now is much smaller. But I’m sure that the imposed realignment of the Russian economy, relaxation of controls over capital flows, export limits, etc., that would have followed Putin’s departure would have been very fruitful for the well-positioned.

  2. fresno dan

    I don’t know how many times I have posted this – maybe a dozen.
    “Why, of course, the people don’t want war,” Goering shrugged. “Why would some poor slob on a farm want to risk his life in a war when the best that he can get out of it is to come back to his farm in one piece. Naturally, the common people don’t want war; neither in Russia nor in England nor in America, nor for that matter in Germany. That is understood. But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy or a fascist dictatorship or a Parliament or a Communist dictatorship.”

    “There is one difference,” I pointed out. “In a democracy the people have some say in the matter through their elected representatives, and in the United States only Congress can declare wars.”

    “Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country.”
    There really is no anti war, or minimize war, or just stop playing (dare I say it) Russian roulette in this country. The US is no longer pragmatic or sensible. All war, all the time, despite making us poorer and less safe. It is an amazing thing how people can indoctrinate themselves to engage in self harm…

    1. Lex

      I spent a little time on last night and went to bed feeling like all is lost because of your point. There is no anti war, though I would classify it as anti-imperial, force left in the US. I read long screeds about the horrible, racist and imperialist behavior of Russia always and forever. And the US doesn’t even have to do serious propaganda lifting anymore. The American people propagandize themselves. It’s the social media influencers denouncing “pacifism”, and most of those influencers are nominally Democrats.

      Projection and imperial war machine cheering all the way down. We are a very sick nation. Not as in demented, as in unwell … though we’ve got our fair share of demented and dementia.

      1. Glossolalia

        Regarding the fact that the pro-was faction is all on the left these days, I think that it goes back to Hillary’s loss in 2016. The Democrats are still certain that it’s Russia’s fault that she lost, and I think that’s the lens through which they are seeing the whole Russia/Ukraine war. It’s all about revenge.

        1. anon in so cal

          Neocons in the State Dept have been planning this war against Russia since at least 2014. As far back as 2001, actually. Hillary’s loss interrupted their plans.

          “How the Democratic Party prepared the war in Ukraine

          Part One: From the dissolution of the USSR to the “Maidan Revolution”

          …Obama had declared the use of chemical weapons in Syria a “red line” that would justify US military intervention against Assad, and an incident in August 2013, likely engineered by the CIA, provided the necessary pretext. But Obama had not secured the home front. His factional opponents in the Republican Party, in control of the House of Representatives, blocked a vote for an Authorization for the Use of Military Force, similar to those before the Afghanistan and Iraq wars, and Obama’s threats were left hanging. Putin swooped in, offering a diplomatic escape route, and Obama accepted the Russian offer to take custody of all chemical weapons in Syria and remove them from the country.

          This humiliating public backdown provided further impetus for the US effort to undermine and weaken Russia, which was not long in coming. In November 2013, Ukraine President Yanukovych announced that his government would no longer support an effort to seek membership in the European Union and would instead align itself with the customs union established by Russia. There were immediate protests in Kiev by pro-EU elements in the middle class, which were reinforced and ultimately taken over by openly fascistic forces such as the Svoboda Party and the Right Sector.

          These groups had little popular support, but they had been the recipients of massive financial subsidies from the United States and other imperialist powers. In a phone call intercepted in early February by Russia and made public, US State Department official Victoria Nuland could be heard boasting that the Obama administration was spending $1 billion a year on regime-change operations in Ukraine….


        2. Oh

          5 years of “Russia, Russia. Russia” and “Putin bad” propaganda has influenced the thinking of the people in the US and the western nations who now believe that Putin will attack. Lies repeated ad nauseam! The G7 nations are probably thinking they can win the conflict quickly with nuclear weapons. If people don’t protest the war there will be nuclear devastation.

          The tsunami video is really frightening. Mother nature will strike in similar fashion with earthquakes, floods, droughts, tornadoes and viruses because the people on this planet are disregarding warning about climate change. I hope DC wlll be the first city on the receiving end.

      2. John Wright

        Some of this anti-Russia narrative can be traced to the narrative that :”Russia, Russia, Russia” caused HRC to lose to Donald Trump.

        This made the selling of the current Ukrainian adventure to the USA populace far easier.

        The USA MIC and security complex owe a debt of gratitude to HRC and minions as money flows to their coffers and they stay employed,,

        The Vietnam war made me suspicious of USA government pronouncements.

        The treatment of whistleblowers such as Ellsberg, Assange, Snowden and Manning only reinforced my skepticism,

        Yet the USA is an “exceptional” nation that lacks exceptional leadership and “rehabilitates” former leaders who did massive harm to the world and the USA (George W. Bush).

        1. Skip Intro

          And some of that narrative can, in turn, be traced to Ukrainian nationalists within the sphere of the Clinton campaign/DNC.

        2. Paul Jurczak

          It is deeply disturbing that Biden uttered: ”Russia, Russia, Russia” just a few days ago and it was not a joke. The delusion is complete. I hope that so-called Democratic Party implodes soon.

        3. rob

          does Daniel Ellsberg really belong listed with the others?
          I don’t think so.

          Ellsberg is a member of the establishment.
          He was a member of the council on foreign relations after that point in time.
          assange is not getting that kind of treatment. niether is snowden, so far… we will see.

          he “? may?” have been “cover” for the establishment…
          a way out of the mess they made.
          My opinion comes with the caveat that I don’t actually know… maybe he was still young and idealistic, and really only had that to offer, at the time. The pentagon papers, were what they were; even without the rest of the stories which should have been told back then. it was obviously a wrinkle in the fold.but isn’t that the point?

          It is like , was watergate a “way out”…
          Maybe nixon getting busted for something minor like burglars going after pychiatric discussions… was less damming than being busted ;at that time, for plotting with kissinger BEFORE the 1968 election/ paris peace talks with the north vietnamese via the anna chennault back channel to derail the 1968 peace talks and prevent a “peace” from breaking out on the democratic watch?
          In the intelligence /espionage circles, “cover by blown cover” is an oldie but goodie.
          Nixon was able to resign a criminal, which isn’t as bad as getting tried for treason.

          and all of that was the road to how we got here.

      3. Tom Stone

        The United States has been darn good at maintaining public order for a long time, that’s what the surveillance state, and the 1033 program is all about, and the weird obsession about Gunz and particularly the AR-15 from the media and the “liberals”.
        Rifles of all kinds were used by murderers a little less than 400 times during the last reporting period, and there are 20 million AR style rifles out there…
        Why the fuss?
        You are a lot more likely to be beaten to death than you are to be murdered by someone using any kind of rifle.
        There are now 36 “Constitutional carry” States ( Starting with Vermont), and with Bruen decided it seems that all states will be “Shall Issue” states.
        There haven’t been the wild shoot outs for parking spaces at Christmas time some predicted… Sheriff’s and Police Chiefs lost a little arbitrary power and a way to improve friendships with the right people and not much else changed.
        And if you are part of a minority of any kind, and a responsible adult, buying a firearm and getting training might not be a bad idea.
        Covid is a hell of a lot more dangerous than Gunz and getting more so, pay attention to the real threat and do what you can to stay safe.

  3. Polar Socialist

    Even Intellinews seems to be admitting reluctantly that Russian economy has weathered the initial shock better than even Russians expected. And that it seems to be recovering faster than anyone expected.

    Who would have guessed that replacing imports with domestic stuff has a positive effect on unemployment? Especially since the high price of energy exports allows the government to retain the workforce in government owned industries even if the production has contracted.

    Also I don’t quite understand claims that automotive production has collapsed by 97%*, since domestic models had 30-40% of the market, and the automotive sales have dropped “only” 83.5% year on year in May. With people’s trust in the economy returning fast and the interest rates dropping, one would assume the car sales to pick up again rather quickly.

    * Unless Russia was exporting 13.5% or so of it’s car production to the countries sanctioning it, which I do find implausible**.
    ** Might still be true, but I’m too busy to try and find out at them moment

    1. Polar Socialist

      Sorry for replying to myself, but the city of Moscow just announced that it will revive the Moskvitch brand in the Renault factory it now owns by building Chinese JAC JS4 and S7 SUVs.

      The mayor signed a deal today with Kamaz for assembling cars from “friendly countries”.

      1. Marlin

        The having a certain share of domestic car brands doesn’t mean, that there aren’t important parts, that are imported. However, China indeed does have some full supplain chains and seems to be willing to fill the gaps from the lack of western parts. Russia needs a few months to redirect the orders, China needs a bit to ramp up the production. Of course medium term car production will be back in Russia and I don’t think the supply chains will be redirected again to the west in the foreseeable future, even if the war ends.

    1. sinbad66

      “Those whom Jupiter wishes to destroy, he first deprives of reason”

      Well said, KD.

  4. Mike

    The problem with the West “escalating no matter how much harm it does to itself”, can only mean no matter how much harm it does to the citizens who are stuck within their countries. We know how the wealthiest members of our societies have built themselves enclaves for expatriate needs, on islands or swathes of land bought by them in anticipation of the current crisis, far from centers of possible war. With their land and liquid wealth spread over the globe, they can afford to lose “citizenship” in any country existing. Their leadership to this brink will do them some harm, but they will survive, and might try to rebuild the world in their image. The question is, will we survive the conundrum they created?

    1. Mikel

      They don’t and won’t have to escape to islands, bunkers, or space. It’s not feasible for a number reasons. The number one reason is that there is no set amount of time that they could be given for such retreats. It would be essential to have a timeline to ensure their own survival.


      The frogs were placed in the water long ago and the heat has been turned up slowly.
      Monitors are placed in front of the frogs to add to the distraction as the cooking continues.

      1. Mike

        All considered, Mikel, and I think they will have that warning in ample time due to their position among the elite of any society involved, as well as their preparation to have the most liquid and moveable assets firmly planned for such events. The commanders of society, those 250,000 who are sycophants of such folk, and what hangers-on they will suffer, will have means to escape, and will not look back upon the wreckage they leave behind, sociopaths that they are. We should plan accordingly to rid ourselves of such politics as these vermin practice before they skip.

  5. David

    As long as you have sanctions, you have a strategy, even if it’s a stupid one. To the question “what are you doing about this terrible war?” you therefore have an answer to give to the media and the public. Stopping sanctions would be an admission of defeat, and a recognition of impotence.

    I think, to be honest, that western elites today are so disconnected from reality that they genuinely do not fully appreciate what they are doing to their own economies, or to the lives of ordinary people. Because modern politics is about controlling the narrative, then the problem of people dying of cold or hunger can be successfully managed by blaming it on Putin, after which it will all go away. There will come a point where reality hits the elites with a sickening crunch, but we’re not there yet. And after that, they will need to deal with the longer-term political consequences of being much weaker economic powers, confronted by more powerful providers of raw materials and components, not to mention plastic bags and garden furniture.

    1. Robert Hahl

      If economic sanctions failed to cause regime change in Cuba, Iran, Venezuela, Ethiopia, Libya, etc., etc., etc., they will probably fail to cause regime change in Germany, England, and USA also. That seems to be the thinking anyway.

    2. Kouros

      Generals, French and British alike, during the trench warfare in WWI, had no idea – 250-300 km from the front lines how the reality looked like. And the slaughter continued with no change in tactics.

      Lloyd George admitted that the public in GB was kept in the dark with many issues, including casualties suffered and conditions on the front, because the public would have asked for peace (probably like the Russians…).

    3. Tom Stone

      David,I agree that the Western Elites are delusional.
      When the Biden White House unilaterally decided on the sanctions and seizures of assets without consulting with any other departments of the Government, the Fed, or any of the USA’s “Allies” I expected some recognition on the part of US “Allies” that these policies are deranged.
      Did Biden call BoJo and ask…
      “Hello,would you like to join us in WW3 and a world wide great depression while the climate rapidly collapses?
      You would?
      We’ll bring the blow, you bring the hookers.”

      Nope, no call to BoJo,or Macron or that polite feller from Japan…or anyone else.
      Which was quite rude to a lot of people who won’t forget.

    4. Eclair

      “There will come a point where reality hits the elites with a sickening crunch, … ”

      Perceptive analysis, David. Do you think you could manage give us NC junkies a few weeks notice of this moment? Just so we can take cover. We don’t want to get in their way as they rush to leave the sinking ship …. umm ….. planet.

  6. Follow the Money?

    OK, let us play with the thought that it is not of incompetence but by design they are tanking the EU economy. Who will win? Can we follow the money?

    “You follow sanctions, you get dumb and dumber. But you start to follow the money, and you don’t know where the fuck it’s gonna take you.”

    1. Geoffrey

      Wm Engdhal once refined that dictum by suggesting “Follow the money creators”, (that is, the “credit creators”) and I think that is wise advice….

    2. Greg

      I believe our hosts have chased that thread quite extensively, and it leads back to US oil & gas, military industrial businesses. They appear to be willing to burn the world down so long as it pumps next quarter.

  7. The Rev Kev

    I keep on trying to understand how so many of our elites can look reality in the face and yet still want to indulge in their own fantasies. It makes no sense. You can see that Russia will win this war and the Ukraine will lose big time. A lot of the big industries in countries like Germany will be forced to shut down and once they do that, they will never come back. Maybe China will be interested in all that unused machinery. You have countries like France and Germany and others also talking about rationing energy so for sure, they had better hope it is a very mild winter this year. And now you have Rutte trying to seize farmer’s land while cutting food production.

    Sure our elites act like sociopaths but that is not enough to describe their attitudes. Maybe I am wrong here but I think what is key is that no matter how bad they screw things up, they never really suffer any consequences for their actions but carry on to their next project. Boris may be typical here as his whole career is one of failing up. And look at Ursula von der Leyen. Any other person should be long ago on prison for the stuff that she has pulled but instead she failed all the way to the top. It makes them sound like Gatsby’s Tom and Daisy.

    And this is my point. What happens when you have a mutually-supporting cadre of elites like that and then one day they hit a wall. They come up to a country that tells them no and can back it up. A country that will not get with the neoliberal/neocon program but base themselves in what we call nationalism – and are proud to. How does such an elite cope with that big No. And no matter how they rage and scream, they still can’t get their way. The world is not supposed to be like that they think. They cannot understand what is going on. Their ever increasing wealth depends on what they want to happen to actually happen. But it isn’t. So maybe this is partly what we are seeing at work.

    1. Yves Smith Post author

      Back in the days when I was perceived as not totally feral and due to a serious funder of the Atlantic Magazine’s annual econ conference taking a shine to me, I was regularly invited to be on one of the warmup panels (the big dogs like gah Larry Summers and Grover Norquist (!!!) and Gene Sperling (also icky) and Paul Volcker got one on one interviews) I think because I didn’t act like a DC person and spout talking points but actual said things that should have been obvious but could not be spoken.

      Anyway, one year I started out by saying, “I’m from New York. Every time I come here, it feels like Versailles 1788.” That got a laugh.

      That was years ago, during the Obama admin.

      As Lambert pointed out, the level of arrogance and incompetence has degenerated further to late Romanov era. And we know how that movie ended.

      1. JEHR

        Yves, you have done yeoman’s service with your blog and taught us all what reality is really like. Thank you for your perseverance in bringing forward all this evidence of what our world is all about. At least we can start with something solid that we have learned on this site. You are a courageous teller of the truth.

      2. orlbucfan

        Talk about a blue ribbon bunch of white collar criminals who belong in the great stripey hole, starting with Numero Uno Grover Norquist. Your stomach had to be made out of pure steel, Yves. That crew would have made Grendel throw up!

      3. Louis Fyne

        —As Lambert pointed out, the level of arrogance and incompetence has degenerated further to late Romanov era. —

        Don’t forget the beyond-the-event-horizon terminal decline of the Franz Josef era!

        Optimistically, the West/EU will fall apart, relatively benignly, like the Austro-Hungarian Empire unlike post-1917 Russi.

    2. NN Cassandra

      I see it as kind of gambling addiction. We may have lost the previous ten rounds, but in the next, man, the things are finally turning around, we just have to bet our mom’s house. The Russians may be firing 50k shells a day now, but their luck and stock must run out soon.

      1. John

        I have used Versailles on the Potomac,1786, and the DC Bubble and Echo Chamber in my writing for a number of years. The “elites” are insulated by their “money and their vast carelessness” ,to quote Fitzgerald, and they are busily smashing things up and moving never noticing that icky wreckage they leave behind. Even the ‘Jackpot’ will penetrate their fantasy … until it does.

    3. hk

      Same country that produced von Hindenburg, someone who, even as a junior officer, was thought to be a bit too thick. Yet, he wound up being hailed as a national hero (thanks to able but less connected subordinates) and wound up being the president, who helped usher in some guy with a tiny mustache.

    4. Robert Hahl

      I can not believe that even the most well-bought and well-blackmailed politicians could force BASF to shut down operations in Germany just because. Something else is going on, and I have a WAG. There must be a back door to the Euro system, put there by the Clintonistas in the ’90s. It can be used to block payments to Russia so the sanctions are not really being imposed by Europe. It’s all beyond their control. The reason they don’t say so is because this is classified information. Prove me wrong.

  8. JTMcPhee

    “So the only means left is economic war.” I’d say that it is wrong to omit the US’s version of the Israeli Samson option,

    There’s already a lot of chin noise about using the US nuclear weapons to take down the Soviet Beast in the East. This article starts with the mainstream disinformation that Putin threatened to use nuclear weapons against the west FIRST, early in the invasion. From what I read, his comments on the Western rulers facing unprecedented damage are much more likely, in context, to refer to the “conventional” hypersonic non-nuclear systems that, can by the West’s own admission, reach out and touch pretty much any place in the Combined West’s decision structure and critical infrastructure, and against which the West has virtually no defense. He has made it clear he knows any nuclear use will celebrate into total war destruction, and the Russian policy, more so than the US’s, eschews any first use. We ought to remember that Russians still have the Perimeter system, a dead-man doomsday switch for their deterrent weapons, in operation, which will launch all the remaining weapons in event of a decapitation strike of the type the US and NATO have clearly in mind as very much a potential part of the long game of “decolonizing” Russia.

    This article, among many others,, notes the effort of “commentators” and war-gamers to “normalize” use of nuclear weapons, part of conditioning the public to accept this sort of policy:

    There have been many demands for NATO to impose a “no-fly zone” over Ukraine to end Russia’s airstrikes against Ukrainian cities, with little regard for the fact that this could very well lead to the use of nuclear weapons by Russia or all-out nuclear war. Instead, some politicians and commentators are suggesting that a no-fly zone is worth the risk of Russia using what are misleadingly called “tactical” nuclear weapons. Others are escalating the rhetoric of potential nuclear war, arguing that Putin is “irrational” and likely to use them, or that the Russian government sees a nuclear exchange as a “viable strategy”.

    In this apparent attempt to either push for or at least normalise the prospect of nuclear war, much of the focus is on the type of nuclear weapon that Putin is “expected” to use. The New York Times describes tactical nuclear weapons as “smaller bombs,” “lesser nuclear arms,” “less destructive by nature,” “much less destructive,” and having “variable explosive yields that could be dialed up or down depending on the military situation.”

    Even while acknowledging that one of these weapons, if detonated in Midtown Manhattan, would kill or injure half a million people, the Times suggests that the use of these weapons is “perhaps less frightening and more thinkable.” The article says the billions of dollars that the Obama administration spent on nuclear weapons went towards “improving” US tactical nuclear weapons and turning them into “smart bombs” that “gave war planners the freedom to lower the weapons’ variable explosive force,” would have a “high degree of precision,” and would lower “the risk of collateral damage and civilian casualties.”

    Thus, even in an article warning that tactical nuclear weapons could lead to lowering the threshold for their use, it takes up significant space and employs a range of descriptors to suggest that these weapons would cause less destruction if used.

    Focusing on the details of the size or type of bomb, Russian nuclear forces expert Pavel Podvig notes, misses an important point: “That bringing nuclear weapons into this conflict, in whatever shape or form, ought to be unacceptable, deplorable, and criminal.” Nuclear war-gaming distracts from this message, he argues, shifting the discussion in the direction of what weapon could be used and how “effective” it could be. “What it does is it normalizes nuclear weapons, making it look like this is all about cost and benefit, political calculation, or military utility.”

    These discussions condition people into believing that all this is somehow normal. “Let’s keep the message simple,” Podvig urges. “Even the thought of involving nuclear weapons in this conflict should be considered unacceptable.”

    So economic warfare, which also will decimate the mope population of the Combined West as effectively if not as instantaneously as opening the nuclear Pandora’s Box, is clearly NOT the furthest limit of what the sociopathic kleptocrats that rule us have in consideration and are willing to use to ensure their version of the global order.

    1. Yves Smith Post author

      First, the “Russia made a threat” is a typical Western cherry picking to the degree that it’s pretty much untrue. Scott Ritter (who remember was a NATO guy) explained how NATO made an escalatory measure very early on that only NATO geeks in the West like him would understand but Russia clearly grokked. So Russia going on an elevated nuclear preparatory footing was a proportional response to the not recognized/not reported NATO action. Because this was in a video, and I really don’t like videos as a means of taking in information (they are time inefficient even when you can listen at 1.25 or 1.5x) I tend to tune in only with one ear and often grasp only the drift of the gist, not the fine points. And of course no way can I search on the innertubes to find that particular vid and run down the details.

      Second, as Larry Johnson describes in a new interview on the Duran ( Russia’s missile defenses are so good that they could intercept US nukes and survive. This does not seem to be understood in the West. But Russia can wipe out key Western locations with hypersonic and other ballistic missiles, so they don’t need to create nuclear fallout to cripple the US.

      1. David

        I hadn’t picked that up from skipping through the linked interview, but I’ll go back and check again. Johnson is wrong, of course. The Russians have had an operational ABM system around Moscow since the 1960s, intended to soak up a first strike out to about 1000km. That said, it’s possible some of the latest Russian AD systems have a capability against ballistic missiles in the mid-course phase, but not to tackle hundreds of missiles coming from different directions at the same time. And once you get to the terminal phase, after the independent warheads and penetration aids are released, I don’t think there’s much anyone can do, except duck.

        But it is true that the Russians can destroy targets in the West with precision attacks by conventional missiles, and they have the numbers to overwhelm any defence the West can mount now, or could plausibly mount for at least a decade. This is actually a change in the strategic situation, and one that has potentially enormous consequences, for all that nobody seems to have thought about it properly yet.

        1. Yves Smith Post author

          You seem to be behind on the state of Russian missile defenses.

          I suggest you read up on the S-500, a hypersonic ABM system, already deployed. The S-550 is being rolled out at the end of the year.

          1. David

            I know all about the S500. If it works as advertised and if the Russians can also build a massive network of EW radars with 360 degree coverage and a fire control system that works flawlessly and links into some kind of command and control system which works perfectly every time and if they build thousands and thousands of the things and deploy them around every potential target, then the rubble that was Moscow might bounce twice rather than four or five times. Even if you have a theoretical capacity, missile defence is hard, and total defence is impossible. Ask the US.

            1. PlutoniumKun

              I think one of the biggest changes in the balance of power is that Russia can now credibly counter most tactical or medium range strategic missiles or cruise missiles – i.e. the type available to most European countries, or indeed other powers that might theoretically find itself in conflict with Russia from Iran to Korea (both of them). The big land based ICBM’s and SLBM’s are still untouchable. The German Tornado launched nukes are now pretty much useless, far too risky to use.

              I think another area where the Russians have changed the strategic picture is the value of fixed bases. With the Kinzhal they have developed a cheap system that can wreck any small military base outside the continental US in a matter of hours. They can do what the B2 is supposed to do for a tiny fraction of the cost. Ironically, this may mean aircraft carriers become even more important than island bases as they are harder to track and hit. Maybe this is why the Chinese are so keen on big carriers.

              The term hypersonic is I think overused and poorly defined. There are all sorts of potential hypersonic missiles – all it means is that its pretty damned fast. For the bigger hypersonics, I doubt even the Russians will have the capability of tracking them in the upper atmosphere due to the stealth plasma effect. Of course, the US will have to develop ones first, and they seem to be struggling. Its a pity all the old X-15 engineers appear to be dead.

              On the subject of stealth plasma, there are rumours that the Su-57 may be a lot more stealthy than everyone thought (it looks like the Ukrainians and Nato have not been able to track them when used over Ukraine). If this is true, then its very bad news for any F-35 pilot.

      2. Abby

        Suggest every advocate of No Fly Zones, strategic nuclear use, expanded “war for freedom”, read Cormac McCarthy’s The Road.

        After the horror of reading that, my boyfriend and I vowed that any rational American would gladly kill any politician that brought us closer to nuclear war, no matter what the cost to themself, as the greatest gift to the human race and biosphere.

    2. Polar Socialist

      Even the very people who implemented the no-fly zone(s) over Iraq say a no-fly zone over Ukraine can not be done – it’s so freaking big country! A pipe dream if there ever was one. Also the Russians have clearly stated that should one still be attempted, they would use conventional cruise missiles to destroy any airbase involved.

      Yes, it takes less than 24 hours to fix a runway (at least to be used by Soviet/Russian aircraft), but no hangars, maintenance shops or fuel parks makes continuous operation pretty much impossible.

      And Russia still has over 100 Mig-31 interceptors, not so far used in Ukraine, from the old school of fighter construction: decades old, but still can engage enemy from 160 miles (way outside of any western missile range) and then go on it’s merry way at mach 3.

      In other words: Russia has no need to relent to nukes for preventing a NATO no-fly zone.

      1. Louis Fyne

        Russian S-400 missiles can destroy NATO airplanes as the take off from their runways in Poland or the Baltics.

        Or conversely the Russians can cripple the fuel depots at every major military NATO base in central and eastern Germany over the course of a weekend via missiles .

      2. David

        I’d argue that there is an NFZ already, and it’s Russian. What people forget is the historic Soviet/Russian obsession with quantity. Yes, you can repair runways relatively quickly, but the Russians will simply launch more missiles the next day. And the next. And the next. And pretty soon, the West will have no air power, but the Russians will. If your military strategy is based on outlasting the enemy in a war of attrition, and you have more assets than the enemy, you win.

  9. Mikel

    Not one country is really up to the task of global warfare.

    So it all has to be about something else.

    1. foghorn longhorn

      One side of me believes it is all a giant Hollywood production like J6.
      That our “leaders” cannot obviously be this freaking stupid, but then you see em with cue cards telling them to sit down and you think, yeah they’re this freaking stupid.

      Have thought since I was a wee lad crouching in the hallway, kissing my ass goodbye, that the world would end in nuclear war. It was the main reason I didn’t have children, looks like that was a good decision on several fronts.

      Tl:dr, we got em, we’re gonna use them.

  10. Camelotkidd

    This excerpt from “Farewell to Bourgeois Kings” sums up our problem with rule by the professional managerial class. “It is not just that the elite class is incompetent – even kings could be incompetent without undermining belief in monarchy as a system – it is that they are so grossly, spectacularly incompetent that they walk around among us as living rebuttals of meritocracy itself. It is that their application of managerial logic to whatever field they get their grubby mitts on – from homelessness in California to industrial policy to running a war – makes that thing ten times more expensive and a hundred times more dysfunctional. To make the situation worse, the current elites seem almost serene in their willful destruction of the very fields they rely on for legitimacy.”

  11. Jesper

    I’d say that the explanations might be found in what has been said and allued to:
    -we have to be seen as doing something and the sanctions is something seen
    -being afraid of sticking out can keep even (supposed) tough skinned leader from saying anything counter the narrative but closer to the reality

    The priorities of the leaders of companies seem to be:
    1. Themselves
    2. Nothing
    3. Nothing
    4. Shareholders (the company)
    5. Nothing
    6. Nothing
    7. Something that benefits the wider society

    I’d expect CEOs to be very very careful about possibly sticking their necks out. The first one to speak out might well lose his job, the 10th to speak out might make a difference but the ones who keep quiet might keep enjoying the perks of the position until that happens and can later change their position by claiming that circumstances changed and that is why they changed their opinion. They’ll change their opinion when the crowd has changed their opinion first

    We are ruled by people who as a general principle do not under any circumstances admit to having made an avoidable mistake or will they ever take one for the team so I’d expect the failed strategy to continue

    1. notabanker

      Yesterday I received a work email to attend yet another workplace violence, active shooter “class”. I was furious. This is the best they have.

  12. Wukchumni

    The USA has been through hyperinflation twice with Continental Currency and Confederate Currency, and it has been a long time between visits with the almighty buck being indispensable in keeping the hounds of hyperinflation away, but even the mildest case would ruin us, imagine gas going to $20 a gallon, and that’s a whole 400% increase over the present price, but enough that it was ruinous to our drive-by way of life.

    I’d mentioned the big uptick in cars having their gas tanks punctured in My Kevin’s (since 07′) bailiwick of Bakersfield, and the more valuable you make it, the more thieves want it.

    Similar deal with catalytic converters, until the bullion value got to a point, you never heard of them being stolen, and then it was open season.

    My mom told me that in Czechoslovakia under Communism, everybody was stealing from one another the meager possessions one had, as the system had boiled down not to money, but to spoils.

    The movie: The Fireman’s Ball is a satire of the times (1967) and everybody is purloining from other purloiners as things go missing.

  13. cristobal

    I am with you on the gloom and doom. Hard times are a´comin´. For several years now I have been convinced that normal political processes will be incapable of making the US less of a threat to peace, or for Europe to break free of its Stockholm Syndrome. The US is leading the world to a nuclear war, sooner or later. You don´t spend a trillion dollars building a new generation of nuclear bombs if you don´t intend to use them. The only hope I can see is a complete economic collapse that will distract those in charge and cripple their ability to destroy things and kill people across the globe. I have no illusions that this could happen in the US. I don´t know whether to hope for it or not. If something like this does happen, it will probably occur first in Europe. As Hemingway described his bankruptcy, and as glaciers are reported to collapse: little by little and then all at once. After seventy years of military occupation, Germany is a wholy owned subsidiary but as Yves has pointed out some cracks may be occuring. In Spain, the junior partner of the government is resisting the increase in military spending – a small first step, and we will see how that goes. Italy has some internal fisures as does France. I will watch and keep my fingers crossed. It would be intereting to hear from readers about other European countries.

    On the bright side (??), the influx of poor suffering refugees from parts of the world that have been brutalized militarily and economically to Europe and the US may slow.

    1. Leroy R

      “The only hope I can see is a complete economic collapse that will distract those in charge and cripple their ability…”

      That is one way I see out of this too — but other off-ramps from the course to nuclear destruction may include climate change and weather catastrophes (including drought, heat, fires and floods). A more dicey possibility would be a strategic takedown of an electrical power grid — if nukes had not been used to this point, all bets are off.

  14. Louis Fyne

    Effectively Russia is at war with NATO intelligence, NATO military doctrine-strategy, NATO logistics, and NATO weapons, only that the blood being shed is Ukrainian.

    From Russia’s POV, war against Germany/Poland/the US Army based in Germany-Italy largely will be similar to what they are fighting now—just on a larger scale.

    If part of a military’s job is deterrence, NATO failed at that job….I doubt Russia is afraid of the conventional capabilities of NATO.

    The economic sanctions war is continuing and will continue until at least the 2024 US election because the West has no other quiver, except using nuclear weapons. And even in that case, using tactical nuclear weapons on the Russian army won’t make any difference as the Russian forces are too diffusely deployed for a tactical nuke to make a dent.

  15. nippersdad

    I am going to be very interested to see how the upcoming G20 meeting goes. As far as I am aware, the only official meeting scheduled is with Blinken so that he can insult Wang Xi again.

    Let’s see how fast the G7 walks out when they find themselves surplus to .requirements again.

    1. LadyXoc

      Very happy to see you call out the Chinese Foreign Minister by name, but it’s Wang Yi, not Xi.

      1. nippersdad

        Thank you for the correction.

        Not meant as a call out of the Chinese Minister. Rather, I wonder that he bothered with making an appointment to meet with Blinken at all. At this point a cold shoulder is about the best Blinken could have expected.

    2. RobertC

      The US seems inclined to swerve off-motto Recover Together, Recover Stronger with Russia’s War in Ukraine High on Agenda of G20 Foreign Ministers Meeting

      …”As the world is recovering from the damaging effects of the pandemic, we must collaborate and do our part to contribute towards economic recovery,” Rosan Perkasa Roeslani, Indonesia’s Ambassador to the U.S., told VOA on Tuesday. “A war in Europe is certainly detrimental to that goal. The G-20 is the forum to talk about major economic issues and contribute meaningfully in addressing them.”

      …This week’s ministerial will not produce an official document or communique, according to G-20 co-sherpa Dian Triansyah Djani.

      WRT to the two bi-lateral ministerial meetings the US requested with China

      …[U.S. Secretary of State Antony Blinken] will have two lengthy meetings with [Chinese Foreign Minister Wang Yi], with the first session likely focusing on bilateral relations and the second focusing one on regional and international issues, according to diplomatic sources.

      …Blinken’s meeting with the Chinese foreign minister would be their first in person since [May 26, 2022 when] the chief U.S. diplomat unveiled the Biden administration’s strategy to outcompete the rival superpower.

      The strategy’s goal is

      U.S. Secretary of State Antony Blinken, in a major China policy speech Thursday, outlined the Biden administration’s strategy to out-compete China in the next decade by investing in critical infrastructure and working with allies to bolster supply-chain security, while preventing unintended crises.

      No mention of hobbling the competition through the use of “long-arm sanctions” against foreign companies using or incorporating US technology to provide services and products to China.

      1. nippersdad

        That strategy article looks like a lot of waffle, and from what I have seen it is backed by insufficiently large bribes to make much of a difference.

        Blinken and Sullivan should prolly just stay home and hope that no one notices their absence.

  16. Abby

    The best way everyday people can stop this war is to constantly mention the direct costs in monetary terms:

    Solve homelessness in America?

    Free community college for all Americans?

    Working mass transit?

    “The taxes we have already paid that are sent to foreign governments could pay for that.”

    Food and energy prices to double?
    Forcing Ukraine to negotiate peace would return prices to where they were.

    1. Jeremy Grimm

      I expect the Russians will soon be victorious in their war in the Ukraine, and some time after that, I believe there will eventually be peace in the Ukraine — a peace of some kind. However, I greatly doubt prices will return to where they were. I cannot forget the way prices went up on a loaf of bread around the time of the 1973 Soviet Union wheat deal. I am not sure what happened to the cost for a bushel of wheat. I suspect it went down after the dust settled. But the price for a loaf of bread never went back to where it had been.

  17. elviejito

    The European and American strategy seems to be to make the result of sanctions (all Russia’s fault, of course) to be worse that nuclear war. Backing down is impossible for the U.S. misleadership and they would just as soon take it all down with them.

  18. Patricia Winter

    I don’t believe for a second that in a time of gas shortages German households will be prioritized. Already citizens practically beg – it’s hard to imagine how cold winter gets in mid-summer – for the gas companies to prioritize the industry, so they can keep their jobs. So it will be. Either way, people will probably freeze or starve in numbers, unless the umpteenth variant gets us first.

  19. ChrisRUEcon

    When will the majority of the denizens of the US/EU realize the folly and malevolence of their so-called leaders?

    How many wars are you going to let these leaders lie you into without consequences?

    How much suffering are you expected to endure on behalf of the warmongering 1% and their apologists?

    I keep waiting for Americans to get angry at the right things instead of at each other. Sometimes I see signs of hope, but the level of inception as consent manufacturing is unbelievably strong.

    #NC is a place that encourages “prepared minds” … thankful for it, everyday.

  20. RobertC

    Once again I’m going a bit contrarian with optimism in the G20 timeframe.

    Host Indonesia
    Date 15-16 November 2022 (planned)
    Motto Recover Together, Recover Stronger
    Cities Nusa Dua, Bali (host)

    Europe’s August will have passed, sanctions effects will be widely apparent, and the long-term forecast for winter will be known with adequate accuracy.

    The US election results will have provided an unambiguous poll on Biden’s political credibility, which will be noted with care by the other 29 G20 participating leaders and invited guests.

    In April 2022, United States Secretary of the Treasury Janet Yellen said she will not participate in sessions at the Bali summit which include Russian delegates.” She may find her mind changed by November.

    And Ambassador Katherine Tai may find herself discussing RCEP membership with Vice Premier Liu He to achieve “Recover Together, Recover Stronger.”

    1. ChrisRUEcon

      > Motto: Recover Together, Recover Stronger

      Sheeesh … sounds recycled from #HRC’s “Stronger Together”?!!

      1. Polar Socialist

        Given the context of The West having caused havoc all around the globe by the moronic sanctions, it could also be understood as the Global South “subtly” telling The West to get it’s manure together, and pronto, or they will be left out of the stronger part.

  21. jan van mourik

    Right now I’m assuming we’ll have a recession. But will this turn into a depression? Doesn’t look too good for Europe, but will the USA be able to profit from it maybe, like they’re already with energy and weapons? What would the effects be on the European and USA economies and stock markets?

    1. Oh

      I’d like to know how these folks with financial advisors are doing now that their portfolios are sucking wind.

      1. Kfish

        All those people who didn’t pay off their mortgages because interest rates were so cheap, and there were better returns elsewhere, are hopefully reconsidering their strategy.

  22. Stephen

    Thank you for this.

    I fear your analysis is spot on.

    Difficult to think of a historical parallel where “leaders” from so many countries at once have behaved so utterly irrationally, with so little concern for their people and such total disregard of reality.

    Possibly 1914. But that was just a handful of countries.

  23. RobertC

    Dang nippersdad looking to win the NordStream 2 bet.

    Apparently German politician Oskar Lafontaine is arguing NS2 is the cheapest of several bad options so choose it.

    (I’m not a German reader but the little bit I’ve seen seems to imply the above.)

    1. nippersdad

      I wonder what the US and the EU will have to sign to get the gas back on. A Minsk III type thing is so six months ago, do you think Russia could bag the draft treaty that Russia was proposing?

      Whenever it happens, I hope it is sooner rather than later. They need to fill up those caverns.

      1. RobertC

        No signature required comrade, just your roubles available at these friendly Russian banks.

        There is no US/EU if NS2 gas starts flowing so no treaty.

        1. nippersdad


          I can see the EU and NATO being doomed regardless, but Russia will never turn on the taps without a new European security arrangement to cover their rear. That seems like a minimum requirement,

          The US will just have to suck it up and sign if we don’t want to become pariahs.

          1. RobertC

            Since shortly before Russia’s SMO I’ve asserted that Putin’s (and Xi’s) objective was weakening the Atlantic Alliance using Ukraine as their cat’s paw and commodity prices as their lever.

            There are several parts to this conflict, one being force-of-arms against Ukraine and another being economic against the West.

            I believe Russia has adequately demonstrated, via force-of-arms, it doesn’t need (and wouldn’t trust) a signed security arrangement.

            The US has engaged in and the EU, with varying degrees of enthusiasm, joined economic sanctions against Russia’s petroleum exports as their major tool with natural gas as the initial focus. Being the primary entry into the EU market, the export-dependent industrial giant Germany is the critical bulwark. If that bulwark fails, the remainder of the sanctions regime will erode away.

            Circumstances are closing off NordStream 1 as a supply path and LNG is coming in too slow and too expensive. If (when) Germany finds political cover to activate the NordStream 2 supply path, the efforts of the US since its inception to block its construction will be swept away revealing the commercial self-interest behind them.

            And the German bulwark will fail. Along with the Atlantic Alliance.

            Of necessity, this is a simplified analysis but I think it’s adequate for the circumstances.

            1. Yves Smith Post author

              No, Russia did not want this special military operation. Putin was clearly pissed off on Feb 24. He didn’t want to launch a campaign. He’s cautious and dovish.

              Russia clearly hoped Ukraine would get over itself and agree to something like Minsk but with an assurance of Ukraine neutrality added. They were negotiating in Istanbul at the end of March. Ukraine had made important concessions and there was clearly a deal to be had. The UK and US shut that down.

              China and Russia are also not tightly aligned enough to be scheming together. They will protect each other’s backs, but that is a far cry from coordinated offense.

              1. RobertC

                Yves — I concur without reservation neither Putin nor Xi wanted the SMO. And that before and after it started the US/UK directly acted multiple times to block a negotiated resolution.

                But US/NATO was presenting a military and economic existential threat to Russia and Russian citizens that couldn’t be negotiated away.

                Putin tried … for two decades. And then he did his duty.

                I concur Russia and China are not executing a coordinated offense.

                But I am sure China is modelling the force-of-arms portion of the conflict: to improve its military operations; to provide assessments to the Russian military; and to prepare for any territorial or technology breakouts of the conflict.

                Can I point to specific papers, reports, etc to support my assertion? No. But China was using algorithms and computing for military planning over a decade ago which leads me to believe they are doing so today for real-time military operations.

            2. nippersdad

              As Yves points out, I think you give Russia and China credit for far more Machiavellian motivations than they actually possess. Though they clearly had plans for eventually facing Western military and economic aggression it seems clear that their use was thrust upon them while their plans were still incomplete. Also, too, the close coordination of Russia and China has shown that they have been working it out as they go along.

              The US has long known of the potential for inexpensive Russian petroleum products to create a wedge between the EU/NATO and Russia, hence our opposition to NS II, so it should come as little surprise that they did as well. That we overplayed our hand on behalf of Texas LNG interests is also not much of a surprise; overplaying our hand is kind of what we do. What is surprising is that we thought we could replace their market with Russia. As with NATO arms, someone should have known that we could not hold up our end of the deal and then expose us as paper tigers. The largest factor in weakening the Atlantic Alliance that they have is the Atlantic Alliance, itself.

              So, as you say, Russia has shown that it need have no fears on either the economic or military fronts. However, I think you have missed how legalistic both Russia and China are when it comes to things like treaties. Just because they can do anything they want does not mean that they do not hold a law-based rationale in high regard; we have seen them vetting each others actions for months now. They will pay a high price to get legitimacy for their actions.

              I have been looking at this from their perspective, and I simply cannot see them letting go without a new security arrangement in Europe, they are going to want to tie that artery off, and the existence of a treaty that does just that is not going to gather dust.

    2. Xiaolei Mu

      He argued about it, but the problem is whether anyone of note will listen to him. Lafontaine alongside his wife Sahra Wagenknecht are the leftovers of Germany’s true political left. And both the German MSM and their party Die LINKE were marginalized over the last few years.

      Wagenknecht stuck out particularly as one of the few sane voices in German politics who both voiced scepticism about the BioNtec Vaccine as well as the one-sided demonization of Russia during the Ukraine crisis. This has earned her hit piece after hit piece from newspapers, dogpiling tactics during prime time talk shows like Markus Lanz and a shrinking base within the LINKE who are more than happy to throw her, and by extension her husband under the bus – repeatedly.

      Lafontaine left the LINKE this year, the party he himself founded. And that party is in dire straits, having barely made it through the 5% hurdle into the current Bundestag.

      As such, his suggestion is not even a blib on the political radar and easily dismissed.

  24. Geoffrey

    So what happens when the ‘penny drops’ in EU? I fear – rather than a return to ‘sanity’ (some way back to less extreme politics and economics) – we lurch further towards authoritarianism. Ismael Zadeh Hussein wrote a piece a number of years ago positing that fascism was a integral component of capitalism under severe crisis. Elsewhere a blogger opined recently that with Ukranian extremists seeking refuge in EU (as well as possibly being invited and trained by the CIA in Germany and Poland for counter-insurgency back in Russian-occupied parts of Ukraine) there will be a ready supply of hoodlems to terrorise the population in parts of the EU if needed, to create distractions, intimidate etc. We know alot about Operation Gladio. Alastair Crooke sees the possibility of a return to Badaar Meinhof era type violence, of possibly both the right and the left. Indeed he sees disappointed climate warriors becoming radicalised and violent at the EU’s effective abandonment of its climate goals (tho’ not rhetorically). He’s point to a recent climate activist’s promulgation of techniques to ‘blow up a pipeline’ when all other options have failed to stop carbon emissions.

    1. Greg

      Kim Stanley Robinson’s take on climate activists turning violent on the down low is probably still a reasonable bet. All it takes is one or two major heatwave megadeath events, and they’ll have a grateful citizenry egging them on.

  25. spud

    the free traders still are under the delusion that money is wealth, and that will mean in the end the delusional will use nukes to prove money is wealth.

    can’t figure out why we cannot make hypersonic missiles, jet fighters that the landing gear works, that the wings don’t come off, or the plane rusts away, why we can no longer make rocket engines or ships that float?

    well here it is, nice take from Baker and Keens.

    Everything we thought we knew about free trade is wrong

    “What Ricardo imagined was you could easily move the capital from one country to another, and you simply can’t do it,” Keen says. “You can’t take a spinning jenny and wave a Harry Potter wand over it and get a wine press out of it. It’s simply nonsense.”

    “This is a big reason why “comparative advantage doesn’t benefit everyone or even most people,” says Dean Baker, founder of the Center for Economic Policy research and author of Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. In fact, says Baker, “the majority of people are losers.”

    “By the time Clinton became president, America’s free-trade crusade—backed by the IMF—broadened beyond simply slashing trade barriers, into clearing the path for foreign investment. Though it bore scanty resemblance to the simple model that Ricardo sketched out, its prophets—a.k.a. Davos Man, free-marketeers, the Washington Consensus—still touted free trade deals as benefiting all. When Trump blames US leaders for favoring “globalism” over “Americanism,” it’s this world order he is condemning. The North American Free Trade Agreement (Nafta) is its watershed.
    Nafta and the free trade bait-and-switch
    President Bill Clinton enthusing about Nafta in 1993.”

    1. Kfish

      But it did benefit the people making those decisions, and that was the important part.

  26. Diogenes

    Buck up, sports fans.
    Insanity is the new normal.
    Go with the flow.
    Don’t fight the system.
    Buy natural gas futures. US price is $5.50,
    EU price is ~ $45. See IEA (International Energy Agency) website.
    Each $1 increase gains $10,000 per futures contract.
    Channel your Carly Fiorina: “Think of the possibilities” of a break up of the US imperium:
    • no more 600+ US military sites world wide,
    • no more IMF or World bank as minor subdivisions of US Defense Department and JP Morgan,
    • no dollar as reserve currency to fund pointless wars,
    • a de-fanged MIC,
    • the benefits are endless.
    And best of all, the US Imperium itself is bringing it about.
    You don’t have to do anything.
    “Sit tight, and assess,” as Meryl Streep said in “Don’t Look Up”
    Pour yourself another brandy.

  27. Alan Roxdale

    Desperate western elites will inevitably move to declare __actual__ war, not just economic as their power base, ideology, and privileges come under threat from their enraged populace.

    I strongly believe the entire EU leadership would rather a hot War with Russia (even one they could not win), over a resurgence of Corbyn-like figures across the continent.

    Anyone considering this far fetched has underestimated the sole and spectacularly effective element of western/Nato strategy so far: The Propaganda Wave. I think the insiders have good reason to be confident enough in its power, and their censorship control, to carry their populations into a war they don’t actually want.

  28. drumlin woodchuckles

    I don’t think the ” violent overthrow of governments” will be enough.

    Perhaps the violent mass-extermination of entire governing class cadre-membership lists will be enough. Perhaps even that will only be a start.

    1. Polar Socialist

      Perhaps even that will only be a start.

      Isn’t that how certain type of revolutions often work out? Until “la révolution dévore ses enfants” and so forth.

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