Will Europe Go Down to Defeat Before Ukraine?

Dominic Stone: So do you know what’s going to happen?

Eric Finch: No, it was a feeling. But I can guess.

– V for Vendetta (“Beginning of the End”)

During the runup to the financial crisis, your humble blogger pointed out that financial time moved faster than political time. Market players often had better and more comprehensive access to important information than officials did and had strong incentives to act on it.

By contrast, regulated entities were motivated to shuffle their feet and mumble until problems became undeniable…and then the regulators themselves would too often hope gunshot wounds would magically heal themselves, rather than risk having to answer embarrassing questions by going into emergency response mode.

Compounding these institutional and behavioral issues was the fact that decades of deregulation had produced a financial system that was tightly coupled. That means, in layperson-speak, that when a problem starts, it propagates thorough the system too quickly to be stopped. There aren’t enough natural or man-made firewalls to arrest the cascade.

With the Ukraine conflict, commentators have fixated on the timetable for prosecuting the war, trying to argue that the fact that Russia has not already “won” (whatever “won” means) implies Russia is losing, despite Russia and its allies having taken over 20% of Ukraine and continuing to gain ground with a mere peacetime expeditionary force. Russian officials have also made clear that they aren’t following a timetable. Some analysts have even argued that the seemingly slow pace is to Russia’s advantage. It does not merely allow them to continue the conflict without resorting to a general mobilization. It also appears to lead Ukraine to bring the war to the Russian front line, facilitating the destruction of the Ukraine army and equipment away from major cities, where civilian casualties would be greater. And the front line is not all that far from Russia, facilitating resupply.

However, there is also a big difference between when a war is won or lost versus when the vanquished is finally prostrated. For instance, Germany’s World War II fate was sealed in the Battle of Kursk, but it was nearly two full years more before Germany surrendered.

Some Western military experts have argued that Ukraine lost within weeks of the start of the Russian forces’ attack. For instance, Larry Johnson contended Ukraine was a goner as soon as Russia took out its radar, air force command and control, and most of its fixed wing aircraft. Ukraine could not mount a counter-offensive against a military using a combined arms operation when it lacked air support. Colonel Douglas Macgregor also stated publicly that Ukraine had lost a month into the conflict; the only open question to him was how long we kept the fighting going to try to weaken Russia.1

In other words, while officials, armchair generals, and the press have been paying at least intermittent attention to the calendar for the military campaign, they’ve not paid much heed to the timeline for the economic war.

We will be so bold as to posit that not only has the sanctions war against Russia backfired spectacularly, but the damage to the West, most of all Europe, is accelerating rapidly. And this is not the result of Russia taking active measures2 but the costs of the loss or reduction of key Russian resources compounding over time.

So due to the intensity of the energy shock, the economic timetable is moving faster than the military. Unless Europe engages in a major course correction, and we don’t see how this can happen, the European economic crisis looks set to become devastating before Ukraine is formally defeated.

Now that European leaders are returning from summer holidays, it appears only now to be dawning on them that Europe is entering a severe and almost certainly protracted economic crisis.

Mind you, they were worried enough in late July to Do Something in the form of agreeing to 15% voluntary energy use cuts starting August 1. The lack of any planning or implementation time, even before getting to the “voluntary” uselessness, confirmed that this measure was a handwave.

Emmanuel Macron rattled pundits last week by telling France it faced the “end of abundance,” as in they need to accept a permanent reduction in their standard of living. As Agence France-Presse translated it:

This overview that I’m giving – the end of abundance, the end of insouciance, the end of assumptions – it’s ultimately a tipping point that we are going through that can lead our citizens to feel a lot of anxiety.

Faced with this, we have duties, the first of which is to speak frankly and very clearly without doom-mongering.

Frankly, more doom-mongering is in order. Despite spot market electricity prices sending a dire warning of the consequences of reduced supplies of Russian gas, and citizen and business desperation over recent and expected near-term energy price increases, Macron depicts that as something voters should accept because Ukraine. And that’s before getting to the other stressor that Macron mentioned, food price increases due to droughts and fires.3

We’ll stick to the energy crisis for now. As we’ll explain, this shock will be so severe if nothing is done (and as we’ll explain, it’s hard to see anything meaningful enough being done), that the result will be not a recession, but a depression in Europe.

The 1970s oil embargo produced a rapid four-fold increase in US prices, which led to both a serious recession and inflation, the now-infamous stagflation. By contrast, at the end of last week, the one-year forward contacts for electricity in France and Germany were more than ten times higher than a year ago. And that was with the underlying inflation rate in EU countries already being high (9.8% year to year as of July for the European Union):

Spot prices are not yet quite as bad:

Note that most prices subsidies and limits on increases are for households. Even so, there’s already fear and anger over some pending residential price increases. UK homes will see an 80% rise in their combined energy and gas rate cap come October 1 with that rate set to increase again in January. Mind you, this follows a 57% increase earlier this year.

Businesses in normal times pay full freight. As a result, there will be large scale company failures.

We are already seeing early signs of distress, like aluminum smelters cutting output or shuttering facilities. From Reuters on August 25 (visit original story to see full detail on chart):

Europe’s aluminium output capacity is around 4.5 million tonnes. Of that, about 1 million tonnes has been taken offline since 2021 and another 500,000 tonnes is under threat, analysts at Citi say.

Following is a list of smelters that have cut production.

Aluminum smelters are not the only early casualty. From France24:

Industries are also affected by the soaring energy prices.

Factories that produce ammonia — an ingredient to make fertiliser — announced the suspension of their operations in Poland, Italy, Hungary and Norway this week.

And while those losses can happen quickly, it takes a long time to rebuild.

In theory, Europe can cap or subsidize prices.4 But high prices serve as a rationing mechanism. Subsidizing prices means other forms of rationing will take place instead. Blackouts? Brownouts? Which businesses and homes will be preferred and which will be sacrificed?

Save the euro weakening against the dollar, the EU has not faced much pressure in recent months on the oil price front. But things could get worse there too, albeit not to the same degree as with gas and electricity. Many experts think that oil prices moderating wa s due in large degree to lower demand from China, first from off and on Covid lockdowns hitting production, and now from heat waves doing the same. If China’s demand perks up, so to will oil prices. And if they don’t, the Saudis are threatening to cut output.

With its notorious democratic deficit plus Europeans being more inclined to take to the streets when things get bad than Americans, it’s not hard to imagine that unions and consumers will protest…particularly since they’ve already planning to do just that. From the Guardian:

Britain is facing a wave of coordinated industrial action by striking unions this autumn in protest at the escalating cost of living crisis, the Observer can reveal.

A series of motions tabled by the country’s biggest unions ahead of the TUC congress next month demand that they work closely together to maximise their impact and “win” the fight for inflation-related pay rises.

The move, which includes the two biggest unions, Unison and Unite, comes amid growing anger at the government’s failure to agree a detailed package of help for families following Friday’s announcement that average gas and electricity bills are to rise by 80%.

While coordinated action would be short of a “general strike” floated by some union leaders, Unite’s motion would give the TUC the task of ensuring that walkouts are synchronised or deliberately staggered to deliver the greatest impact.

If UK corporate profit share as a percentage of GDP is anything like that of the US, companies have a fair bit of room to increase pay levels without raising prices or cutting output. But given deeply held neoliberal views and the lack of a government willing to browbeat CEOs into living with less (starting with cutting executive pay and bonuses), we’re likely instead to get whinging and more price gouging.

If labor actions become common across Europe, expect a new version of the early 1970s capitalist complaint about the US, that it’s become “ungovernable”.

But in all seriousness, businesses and households simply cannot swallow energy cost increases this high, particularly in winter.

The reality is the cutoff from Russian energy can’t be remedied with fiscal spending. Government intervention can make it less painful only at the margin. This is a real economy problem and it can only be solved in the real economy, either by getting a lot of that Russian energy back or by getting new energy sources. We know how well the latter is likely to go. The Prime Minister of Belgium was brave enough to say the quiet part out loud, that the energy crisis in Europe will last for ten years.

In theory, the EU could try to make up to Russia. But the time for that has passed. It isn’t just that too many key European players like Ursula von der Leyen and Robert Habeck are too deeply invested in Russia-hatred to retreat. Even if there were blood in the street come December, they wouldn’t be turfed out quickly enough.

It is also that Europe has burned its bridges with Russia beyond just the sanctions. Putin has repeatedly offered the EU the option of using Nord Stream 2. Even with Russia now using half its capacity, it could still fully substitute for former Nord Stream 1 deliveries. Putin did warn that option would not stay open for all that long, that Russia would start using the rest of the volume.

Even with Putin being more dovishly inclined than anyone else in the Russian leadership, it now seems politically untenable for him to agree to let Europe use Nord Stream 2 even if he were still inclined to agree. First is that most of those who have advocated turning on Nord Stream 2 have suggested doing so in a bad faith manner, just to fill up storage, and then renege on payments. Mind you, EU gas storage facilities are meant to be a supplement. They can’t hold a full year supply. So this idea would just be a stopgap…showing its advocates to be clueless on multiple levels.

But putting that wee EU problem aside, the Russian interest in opening up Nord Stream 2 would be to repair economic relations with Europe. But Europe’s posture is that it still thinks Russia should bow to European interests, as opposed to deal on the basis of mutual benefit.

Second, the outpouring of hatred from ordinary Europeans against Russia, as shown in cancellation of performances by Russian artists and athletes, and even the removal of Russian compositions from symphonies, has led many Russians to wish Europe good riddance.

Third, even as the loss of Russian energy is becoming more painful, European leaders are determined to keep punishing Russia even though none of the past blows have landed all that hard. They are now discussing a seventh round of sanctions. The Baltics have been pushing for the EU to follow Estonia and stop issuing Schengen visas to Russians. If Russians can no longer receive Schengen visas, they would have to get a visa for each visit, and I understand not a 90 day visa but one that specified the time of entry and departure.

However, the European Commission has said the EU cannot halt the issuance of Schengen visas but individual member states can. My impression is that the fact that this idea hasn’t been denounced by any prominent European (even if under the guise of undermining Schengen and therefore the EU) has not gone unnoticed in Russia.

So the outcome seems inevitable: many Europeans businesses will fail, leading to job losses, business loan defaults, loss of government revenues, foreclosures. And with governments thinking they’d maybe spent a bit too freely with Covid relief, their emergency energy fillups will be too little to make all that much difference.

At some point, the economic contraction will lead to a financial crisis. If the downdraft is rapid enough, it could be the result as much of (well warranted) loss of confidence as actual losses and defaults to date.

The reason the September-0ctober 2008 crisis was so cataclysmic was that it was a derivatives crisis. Derivatives generated considerable leverage of the worst real-economy subprime exposures and significantly concentrated those risks at systemically important institutions like AIG, Citigroup, and Eurobanks.

Yours truly does not have a good handle on where supposedly but not really hidden leverage sits now. Even though there has been an awful lot of speculation in crypto-land, so far, its wild ride down does not seem to have done much damage to the critical traditional payments infrastructure (as in the linkages to real economy banks don’t seem to be very significant).

However, a long standing concern is that after the crisis, derivatives were not tamed. The easy and obvious remedy would be to require adequate margining. But high enough margins make derivatives unattractive for most users….and those undermargined, as in ultimately government subsidized, derivatives are a big profit center for big financial firms. Can’t mess with that!

So they were largely moved over to central clearing houses. These clearing houses are not backstopped but are widely seen as too big to fail entities. So they are a possible flash point if the financial system goes wobbly.

In other words, Europe’s trajectory seems likely to lead to accelerating bad outcomes, first in the real economy and then soon in the financial economy.

And it seems entirely plausible that the unwind will become acute before Russia imposes terms on Ukraine or the conflict is frozen, Korean-War style.

And a final cheery note: if things do get that bad, it is hard to see the US (banking and supply chain ties) and China (big loss in demand from a key customer) emerging unscathed.

1 Some like Scott Ritter who do agree that Russia is winning the war, argue that it would still be a defeat for Russia if Russia did not decisively prevail. I’m not sure what this would look like, unless Ritter believes that Russia not capturing the western part of Ukraine would amount to a Russian loss, when regime change or “liberating” the non-ethnic Russian parts of Ukraine were never an objective. If Russia takes the Black Sea coast, whatever is left of Ukraine will be economically weak. And Medvedev let the cat out of the bag that Russia would very much like to see western Ukraine partitioned, but how that comes to pass is over my pay grade.

2 It was Europe that vowed it would be off Russian energy by winter, while not mentioning that that depended on completely filling up all gas storage and not cutting themselves off until sometime in the fall. That is already “customer from hell” behavior: “We’ll default on our agreement in the way most convenient for us and brag about it too.”

Recall also that some of the loss of EU supply was due to Ukraine cutting off transport through one line going through Lugansk (weeks after the separatists took territory near a key junction, thus showing that the Ukraine claim that the separatists might do something bad were trumped up. Why not wait until an incident to deprive Europe of needed gas? But no one, not even a European columnist, chided the sainted Ukrainians for taking an action detrimental to Europe.

Supply to Europe also fell due to Poland and Bulgaria refusing to pay for gas in the contracted currency at Gazprom bank.

Recall also that Germany stole the assets of Gazprom Germania, yet Russia retaliated narrowly, by sanctioning the entities involved in the heist (I have yet to see any discussion of that impact….is the Western press not willing to admit to any?)

As to the uproar over the reduction of shipments on Nord Stream 1, Putin offered repeatedly to let the EU use Nord Stream 2. So Russia cannot be accused of denying Europe supply. This is about putting institutional and personal egos ahead of serving the public good.

3 In France, it’s not unreasonable to link the energy crisis to climate change given how the water part of the equation complicates running nuclear reactors.

4 One assumes that this practice would lead to utilities having to sell power below cost…so they would either need subsidies or an eventual bailout. So this response would also impose fiscal costs on governments. And with the EU already suffering from inflation and having Maastrict budget rules, there will be a lot of reluctance to save people by busting budgets. The EU might resort to more Eurobond issuance, but that will be seen as inflationary and could further weaken the euro….which will lead to higher commodity and import prices. So there are no good finesses.

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  1. fresno dan

    And a final cheery note: if things do get that bad, it is hard to see the US (banking and supply chain ties) and China (big loss in demand from a key customer) emerging unscathed.
    Biden 2024 is Carter 1980. The big difference is instead of the suppliers (Saudi’s) cutting off oil, its like the importers saying we don’t want your cheap energy!

    1. LawnDart

      The former importers are giving-up more than cheap energy.

      China will lose some demand, BUT will they offset this to a degree by picking-away at the global market-share of the following, Europe’s top-ten exports?

      1. Machinery including computers: US$837.6 billion (13% of total exports)
      2. Vehicles: $686 billion (10.6%)
      3. Electrical machinery, equipment: $614.9 billion (9.5%)
      4. Pharmaceuticals: $496.9 billion (7.7%)
      5. Mineral fuels including oil: $329.7 billion (5.1%)
      6. Plastics, plastic articles: $293 billion (4.5%)
      7. Optical, technical, medical apparatus: $237.6 billion (3.7%)
      8. Iron, steel: $179 billion (2.8%)
      9. Organic chemicals: $164.6 billion (2.6%)
      10. Articles of iron or steel: $137.8 billion (2.1%)


      I can see India and other countries benefiting from Europe’s pain, not to mention USA.

  2. OIFVet

    “Will Europe Go Down to Defeat Before Ukraine?”

    Yes. I only hope that we take the US finance sector and the Democrat Party down with us in the process.

      1. OIFVet

        It’s a decent movie, however it never ceases to amaze me how some BG directors can take a beautiful setting and make you want to OD on Prozac by the time they are done filming it. The setting in the movie is the Strandja Nature Preserve and it’s a favorite hiking place hiding a unique flora, customs, and many Neolithic stone dwellings. But yes, it is timely. Erdogan seems to have turned on the migrant spigot lately, last week two cops were killed by a Syrian migrant smuggler while trying to stop him and the nationalists are up in arms about it. Frankly, it makes no sense for the migrants to still be flowing into Europe. I guess they haven’t heard about the cold winters ahead. Last winter my apartment’s heating cost 200 Euros/month in a relatively mild winter, I am already cringing about this heating season.

        1. Carolinian

          I thought it was just fair but hey we don’t get to see many films from Bulgaria here in South Carolina.

          1. OIFVet

            Personally, I much prefer BG movies from the 1970s and 1980s. Many of these were wickedly subversive and some were quite upfront about showing the reality of the ‘socialist paradise.’ For all the talk about censorship in the Eastern Block, the regime allowed fair amount of criticism in the arts and literature. Frankly, modern BG films are pretentious wannabes trying to recapture the spirit of those earlier times in a completely different reality. It just ain’t working :)

            I will see if I can find some of those earlier films with EN dubbing or subtitles and will let you know.

        2. Lars

          Refugees in EU don’t pay for heating. They don’t pay for anything except drugs, BMW and designer sneekers 😁

  3. KLG

    Meanwhile, “Putin’s People” will stay warm, dry, and well fed, if somewhat deprived of European “luxury goods,” through the coming crisis. The West is channeling the 1962 New York Mets as noted by the Old Perfesser, Casey Stengel: Can’t anybody here play this game?

    1. jsn

      A year from now the non-sanctioning world will have seen one or two more major waves of COVID burn through the collective West, an economic collapse, rampant homelessness and freezing of those with homes and a substantial spike in the death rate.

      This list ignores any political backlash from these, which, once it starts, I suspect will be substantial. It’s interesting the US midterms will come before the February/ March choke point, we’ll have a government for at least two years still mostly harboring the delusions underlying current policy, from Jerome Powel to Mark Milley.

      Othering the West along with some sense of cultural/ethnic superiority should get logarithmically easer for non-aligned nations.

  4. bold'un

    Europe has survived in the past on coal and coal gas. Clearly winter 2022/3 will be a problem, but it takes less than 10 years to convert back.

    Wars are essentially ‘Ungreen’.

    1. JohnA

      Russia is one of the biggest source of coal as is the Donbass. In Britain, Thatcher destroyed the mining industry. Most of the abandoned mines have since flooded and will be impossible to resurrect. So dont buy Russian gas and oil but do buy Russian coal?

      1. Bob

        The mines weren’t simply abandoned. After recover of a limited amount of machinery from the seams closest to the shafts, the shafts were filled from bottom to top with alternate layers of gravel and concrete. To get to the coal now, new shafts would have to be sunk before the old seams could be pumped dry and reworked – or new seams cut.

    2. Lex

      Surviving and prospering are different things. Are westerners willing to just survive without making their political leadership pay a significant cost? Westerners have gotten used to pretty good times and obviously feel entitled to them.

    3. Louis Fyne

      Getting more coal isn’t like opening a box in the chemistry room supply closet.

      Even assuming zero environmental litigation, there isn’t enough spare capacity for coal miners to deliver more coal by this winter to make any meaningful difference.

      Can’t open new mines without miners and equipment.

      few 20-something trainees will want to enter an industry that is marked for extinction by the Brussels bureaucracy

      1. nippersdad

        “Can’t open new mines without miners and equipment.”

        For a small ongoing fee, Kamala could send off some of the California prison population that she reserved for just such occasions to mine lignite in East Germany; they probably still have “facilities” there from the war that they could house them in. Biden could do a lend-lease deal for equipment with his buddy Manchin. What ever happened to the American can-do attitude?

        That one could even joke about such things is a testament to how far we have fallen.

    4. OIFVet

      Many newer homes in Europe are built to be heated with gas. Converting to coal heating or wood heating is impossible without a major financial outlay for construction, not to mention how long it will take even for those who do have the money.

        1. c_heale

          To make coal gas the coal needs to be heated. If there is a shortage of coal
          (and other energy sources) then maybe this isn’t viable.

    5. Tjh

      Can’t go back. No modern appliance would work with coal gas. You’d have to go full out with coal gasification with conversion to methane. Take a lot longer than 10 years.

  5. Alex V

    What I haven’t been able to figure is out why electricity prices are currently 10 times higher in Europe when the underlying infrastructure hasn’t gone down by a factor of ten, the total available supply of joules in the form of coal, gas or oil haven’t gone down by a factor of ten, and demand hasn’t gone up by a factor of ten. Fear of high prices seems to be the only thing that has gone up by that much. The price seems completely decoupled from physical reality, and this doesn’t seem to be discussed anywhere in mainstream media.


    Was there really so little slack/extra capacity in the system that a major but not total supply disruption makes the price go from a linear to exponential behavior?

    A large role is likely played by the marginal pricing model currently used in part to discourage fossil fuel use, but it seems there are other mechanisms at play. What are possible actors and systems that could be causing this? Is it all just pricing algorithms battling each other in the electricity pools?

    1. JW

      Function of demand outstripping supply at the margin. LNG trading,changing delivery locations whilst ships are crossing Altantic. Panic buying to fill storage asap. All economic markets clear at marginal price.

      1. upstater

        Of course it begs the question why a natural monopoly is a “market” in the first place. The 1970s fixed rates of return, integrated resource planning models and long term supply contracts for electric generation inputs had their problems. Burning it all down for “markets” was strictly a financialization and corruption of a system that largely worked well. In the US it resulted in stagnant investments in infrastructure and worse reliability. Public ownership or strictly regulated monopolies work. “Markets” work for predators. Those who live by the sword get cut or worse.

        1. JBird4049

          Enron’s vampiric demon blood squids deliberately caused rolling blackouts in California; it fun listening to the radio while driving to the office to hear whether it was open or not; eventually they set up a system in which everyone was put in blocks. If there was a need for a blackout, the block on top of the list got cut off. Usually, you could guesstimate when and how long with that system. Still was not good, but still better than having random blackouts for random amounts of time.

          What cheeses me is the news stories about the executives making fun of people suffering for the executives’ bonuses. And when the governor asked President Bush to intercede, he said no.

          1. David Whitney

            Unless you lived in a block having a school, hospital or other protected enterprise. My power never went out, nor did I have to worry about it. Some animals are more equal than others.

      2. José Freitas

        This. There’s a worldwide bidding war for resources pushing prices up, then the futures market amplifies everything.

    2. Grumpy Engineer

      @Alex V: Electricity prices on spot markets are not inversely proportion to supply. The key thing here is to recognize that spot markets can operate in two modes: [1] When supply exceeds demand, and [2] When demand exceeds supply.

      In the first mode (supply exceeds demand), energy suppliers must offer low prices. If they fail to do so, they will get undercut by cheaper offerings. Their competitors will supply power, and they’ll have to cut their equipment off until the next bidding period. For purposes of keeping electricity prices down, this approach works rather well. [When supply exceeds demand, some suppliers must cut off. It’s a matter of physics. If they don’t, voltages and/or frequencies on the grid will go too high and damage equipment everywhere. Maybe even start fires.]

      In the second mode, though, customers must offer high prices. If they fail to do so, they will be outbid by competitors willing to pay more. Other customers will receive the power, and they’ll have to cut off their equipment until the next bidding period. For purposes of keeping electricity prices down, this approach is disastrous. [When demand exceeds supply, some customers must be disconnected, whether by being priced out or by explicit cut-off. It’s a matter of physics. If they don’t, voltages and/or frequencies on the grid will go too low and trigger blackouts.]

      Electricity spot markets normally work in the first mode. But since Europe has effectively cut off fuel to a significant percentage of their electricity suppliers, they’re spending more time in the second mode. It’s gonna get ugly, especially as winter rolls around.

      1. Alex V

        I’m somewhat familiar with these mechanics of the market, but that doesn’t really explain the reality with prices today? There haven’t been blackouts or other reductions in electricity production yet that I know of, which means fuel and equipment is sufficient to meet demand. Daily spot prices have risen immensely, not just futures. Yes, some users have closed production because of high prices – it doesn’t seem to be because of no physical supply? Or have current prices killed industrial demand sufficiently to stop going over physical limits?

        1. Grumpy Engineer

          Or have current prices killed industrial demand sufficiently to stop going over physical limits?” Yep. That’s the one.

          And that is a function of the market. As noted in the article, “high prices serve as a rationing mechanism.” It’s harsh, but cutting off customers who lose out in the bidding in a supply-limited scenario does prevent wide-scale blackouts. Overall grid reliability is significantly improved by this practice.

          Of course, that’s of limited comfort to the people who get laid off because their employer had to shut down. Or people who had their own household power cut because they couldn’t afford it anymore. Yeah, it prevents blackouts, but there’s still a lot of human suffering involved. Particularly for the poor.

      2. The Rev Kev

        A factor here is how the EU was totally against fixed contracts but wanted all their countries to get their supplies on the spot market, particularly gas. The Russians were trying to convince EU nations to go for fixed contracts as that led to stability and predictability in the market but the EU had this obsession about spot markets and now prices have gone up a dozen fold. Sucks to be not on a fixed contract like some countries still do. But I guess that the EU wanted to provide lucrative jobs to the financial boys in the spot markets.

    3. Louis Fyne

      electricity is a weird good, it’s not like stocking a shelf with loaves of bread; and demand for electricity is not consistent between hours over a year.

      Land-sited wind power is intermittent and seasonal. If one runs a large factory, you need electricity 10+ hours a day, 300+ days a year. For residential customers, utilities need to satisfy peak demand (4p to 8p summer). Getting that electricity reliably during those windows of time costs money.

      In normal times the solution was simple, (essentially) on-demand natgas-powered electricity.

      In a time of scarcity, industry and utilities needs to pay a premium to prevent brownouts. that premium raises the cost for everyone else.

      1. Grumpy Engineer

        Electricity is a weird good, it’s not like stocking a shelf with loaves of bread; and demand for electricity is not consistent between hours over a year.

        Yes. This is critical to understand. Most spot markets for electricity re-bid prices every 15 minutes because of varying demand (and now with renewables, supply). In some markets it’s every 5 minutes.

    4. Anon

      As other commenters have noted, though I think the point sometimes is made with insufficient clarity, all suppliers of electricity in EU and US energy markets are paid the market clearing price, meaning the last supplier to be chosen to meet demand, who has placed a higher bid than all the suppliers chosen before them, determines the price paid to all suppliers. I.E. logically gas does not make up enough of the electric generation mix to affect prices as much as it does, but because it’s so often the fuel used to meet marginal demand, it sets the price paid to suppliers no matter the fuel source. See Yanis Varoufakis here as of a few hours ago: https://www.project-syndicate.org/commentary/marginal-cost-pricing-for-electricity-disastrous-in-europe-by-yanis-varoufakis-2022-08

    5. Tim

      Simple answer: Demand is inelastic, so slight changes in supply result in outsides changes prices. It’s a non-linear situation.

    6. H. Alexander Ivey

      WTH guys? You are NC’s (presumable) readers. Yet you all don’t seem to grasp what Ives and Hudson (and Matt Stoller, among others) have been saying: It’s the bottlenecks, the monopolists, the one or two suppliers of a critical component, that are the reasons for the shockingly high prices, not “Russia”, “Putin”, or “the Ukraine”.

      There is a supply and demand part here, yes. But HECK no, the high prices are not due to that, it’s the (often unseen) middle men.

      1. H. Alexander Ivey

        ps. Yves didn’t call this site “Naked Capitalism” for nothing. This EU energy crisis pulls back the curtain and shows that all economic activity is driven by people, not laws of nature i.e. supply and demand.

  6. Klimashkina

    How sad. And while the EU destroys its economy, it’s happy to sacrifice the personnel of its outsourced army (Ukranians), with no signal that negotiations will ever be on the cards.

    1. polar donkey

      I have friends in Greece and France. They are starting to hurt from the situation. I try to explain Putin wasn’t the cause of the increased suffering. They don’t want to hear that, …yet. I’m concerned about their families’ futures.

      1. OIFVet

        Just returned from a long-ish vacation in Greece. Better climate to withstand winter, but people are worried. Most do not blame Russia, however. Say what you will about Greeks, they are rather well informed about things and a rather substantial proportion do not like the US at all. I seemed to score major brownie points by telling them I left the US for Europe. It’s about as close to ‘attaboy’ as a Greek gets.

        1. lyman alpha blob

          The Greeks and Russians share a religion more or less, which makes them more sympathetic to Russia than the rest of Europe.

          The Greeks also remember very well the US sponsored junta that overthrew their government and led to a military dictatorship which is where a lot of the antipathy toward the US comes from.

        2. Mikel

          I’m not surprised people in Greece take EU claims with a grain of salt. Especially after what they’ve been through with them. And they know the history of the type of characters in politics the US has liked to back in the past.

  7. Gregorio

    It seems like the Rand Corp/U.S.’s plan to “overextend and unbalance Russia” has been flipped and adopted by Putin. It’s starting to look like Russia is the one who will ultimately benefit by drawing out the war.

    1. Carolinian

      After both the Georgia/Nato gambit and the Ukraine coup blew up in DC’s collective face. Never eat at a place called “Mom’s”….never try to outwit a country whose national pastime is chess?

        1. Rikard

          Chess (Russia, India) vs. Go, Mah-Jong and Shogi (China and Japan) vs. Checkers (US) vs. Tic-Tac-Toe (EU) I’d argue.
          As an analogy to the leaderships’ understanding of tactics, strategy and complexity that is.

  8. The Rev Kev

    This is beyond sad this. Unless the people in Europe rebel, we are about to witness an entire continent de-industrialize itself for absolutely no benefit whatsoever. The leadership will be protected from the worse effects of their decisions but you are talking about hundreds of millions of people being thrown into the cold and the dark with only the vague assurance that things will improve – in about five or ten years time. If there is a cold winter, then the people of Europe will come out the other end owning nothing but I can guarantee you that they will not be happy. People talk about the Rust belt in America but that took a whole generation to achieve. The EU leadership seem to be attempting to do it in only a year or two.

    I would imagine that a lot of nations will make their way to Europe to buy up all that no longer used industrial machinery. And I would guess that we will see waves of highly qualified people leaving Europe to emigrate to other countries to make a living for themselves and their families. And in Europe itself they European Union will convert themselves into the European Hegemony as the military and police will do a continent wide crack down on protestors and dissidents in the coming months – all the while claiming that it is all Russian-inspired. Gawd, what a clusterf** and a half. And if Europe does go into a Depression with a capital D like Yves suggests, then I can’t see it being limited to only Europe.

    1. nippersdad

      “And in Europe itself they European Union will convert themselves into the European Hegemony as the military and police will do a continent wide crack down on protestors and dissidents in the coming months – all the while claiming that it is all Russian-inspired.”

      Not just in Europe, from Politico:

      “We’ve seen the Russian playbook enough times to know what it looks like
      — and this is it,” said one person caught up in the hacks. “It’s low-tech, but it’s sophisticated.”

      Ross Burley, co-founder of the Centre for Information Resilience, explained: “Each day, the Kremlin and actors linked to it use disinformation, cyber attacks and propaganda to confuse and disrupt. No one is immune from the threat.”

      He added: “They are constantly adapting new techniques and channels to target journalists, politicians, government officials, academics and civil society actors with a variety of influence operations — including so-called ‘hack and leak’ operations.”


      The Grayzone controversy has crossed the pond and it looks like Max Blumenthal is about to get the Julian Assange treatment.

      1. Jonathan Holland Becnel

        Lol at Russian Playbook or “RPB” as Katie Halper and Aaron Mate refer to it on Useful Idiots!

        Only the Establishment knows what’s in it….

    2. digi_owl

      I dear say it to a large extent already had.

      Checked up on Germany recently, as the single largest sector was car manufacturing at 10%. After that it was a mix of parts and chemistry but nothing really stood out as consumer facing.

      I suspect if it it has not moved to Poland, it is likely being done in China and shipped back. As i understand it there are whole train loads of computers and phones going from China to Germany regularly.

    1. digi_owl

      Speaking of gas, it is sad to see Russia flaring off gas in order to balance pipeline pressure being presented as Russia trying to give Europe the middle finger.

      The lack of understanding among journalists of the physcial processes involved in operating modern society is distressing and infuriating.

      1. Grumpy Engineer

        I recall seeing a link in Saturday’s Links about Russian flaring… Ah, here it is: https://www.bbc.com/news/science-environment-62652133.

        This is one of the few instances I’ve see where Russia is actually suffering some economic harm. Instead of selling that gas, they’re flaring it. It’s pure waste. And of course, the Europeans are looking to burn more coal to make up for the lack of gas. So CO2 emissions in Russia go up (because they’re flaring directly on-site) and CO2 emissions in Europe go up (because coal produces twice as much CO2 as gas per kWh of electricity delivered). And the lose-lose scenarios keep stacking up…

  9. JW

    The ‘secondary’ sanctions haven’t worked. The RoW outside five-eyes, EU and Japan, Taiwan, Singapore, S Korea ,are not being cowed by US pressure to apply sanctions. Indeed some players like Iran and India are making the most of this situation to improve their position.
    All its done is increase the global split between the ‘financialisers’ and the commodity owners. The risk is that this will encourage the ‘financialisers’ to look for a quick solution , ie wage war.

    1. hk

      Surely, not even financializers think that a full scale war with Russia is a “quick solution” for anything other than life on Earth

  10. Tony Wright

    I have read commentry by financial analysts (e.g. Andrew McGuire, Alasdair Macleod) that the “assets”of several European banks (mostly leveraged derivatives) are between 25 and 60 times their equity values. This would appear to be the end point of the program of artificial suppression of interest rates by central banks worldwide during most of the last twenty years, so that traditional banking revenue derived from borrow/lend interest rate spreads has more or less vanished, replaced by more profitable but riskier investments.
    One can only hope for the sake of their normal depositors that these banks have very skilled traders working for them in what appears to be an extremely fragile situation which they have gravitated towards.

    1. jsn

      Or deposit insurance.

      I quick massive bout of deflation, this time with a clean sweep of C Suites, might have a salutary effect.

      Unlikely, however, without some Robespierre somewhere whetting the blade.

  11. Stephen

    Europe seems to have established a mass suicide cult.

    Not the first time in history that Europe has jumped off a cliff. We spent most of the first half of the twentieth century doing that. Now reverting to form.

    Russophobia is the root cause, I guess. Why is there so much of it? It is crazy.

    1. Carolinian

      In WW2 Russia was always Hitler’s primary target. Pat Buchanan wrote a book suggesting that if the Allies hadn’t declared war on Hitler after Poland he might not have attacked them–at least not right away. Of course for Buchanan Hitler knocking out the Commies would have been all good (for Churchill too). Some have suggested Britain’s Russophobia goes back to Crimea and concerns over their “jewel” India. So perhaps 19th century imperialism is the original sin.

      1. russell1200

        What Hitler/Germany would have done if (improbably) the British/French don’t intervene is an interesting question. The British and French, in the granular accounts I have read of the Norwegian Campaign, seem to regularly over estimate their abilities.

        But at this point, the Molotov–Ribbentrop Pact is in place. The Soviets are also invading Poland, and Hitler had his big naval “Z plan” that looks an awful lot like it is directed at Britain-France.

        Hitler certainly wanted to push East at some point. But the Soviet grab of Rumanian territory (threatening oil supplies), and Soviet bungling in Finland probably got him thinking earlier about it than he otherwise would have done.

        1. Carolinian

          Buchanan seems to suggest that Poland too could have been put off if the British guarantee (after earlier appeasement) hadn’t encouraged the Poles to defy Hitler over Danzig. He says the British and French shouldn’t have offered a guarantee that they were unprepared to back up militarily.

          But one could make a case perhaps that the entire situation including capitalist support for Hitler’s rise was about fear of the Russian Revolution.

        2. digi_owl

          The thing is Norway as baited into action by British action.

          For one they flagrantly violated Norwegian neutrality by chasing after a Germany ship to free POW onboard.

          And the British had long been trying to cut of Swedish iron or being shipped out via Narvik. One such move was offering to send British troops that way to support Finland against USSR, but Germany strongly protested as teh same troops would be perfectly placed to control both the port and the mine at Kiruna.

          When Germany invaded Denmark and Norway, the Royal Navy was getting ready to mine the Norwegian coastline in order to hinder shipping. They knew Germany was going to invade, but was caught off gard by how soon it got under way.

          And you see the British priorities, as they sent their best troops and equipment up to Narvik rather than further south to help the Norwegian king and government.

          And frankly, Britain and France not intervening after Poland would be a major political faux pas. And even then they hemmed and hawed and took their sweet time to mobilize.

          But yeah, if Poland had been left alone then the British in particular had been quite happy to see Germany either exhaust themselves against USSR, or exterminate the Communist threat. After all, Communism was seen as the greater evil at the time (and USSR likely inherited Russia’s seat at the great game).

        3. Kouros

          Soviet grab of Bessarabia (what is now Republic of Moldova) has been fully approved by Hitler and did not in any way endanger the oil fields in southern Romania. The extra bits Stalin took were in northern Bucovina, now part of Ukraine, still far away from the oil fields.

          1. Polar Socialist

            Considering that the region had been part of Russian Empire since 1812 and occupied by Romanians during the civil war, pretty much the whole international community silently approved the grab with the World War already brewing.
            Hitler did not just approve it, but told the Romanians to shut up and play ball. Turkey was the only country to object, I believe.

      2. David

        Ironically, whilst Russia was always Germany’s major target for living space and resource extraction, Hitler saw the British Empire, and beyond that the United States, as the long-term challenge, and a united Europe under German leadership with Russian and Balkan resources as the solution. He couldn’t fathom why the British didn’t share this very reasonable perspective, and, irony or ironies, the invasion of Russia was launched in part to persuade the British to give in and follow him. Once the only power in Europe that could potentially resist Germany had been despatched in a couple of months, Britain would come to its senses. History is an endless series of ironies wrapped inside each other.

        1. K.k

          Agreed. They wanted to smash communism and ultimately dominate Europe and keep the U.S at bay.
          The concept of Lebensraum, which would become a pillar of Nazism, an expression of settler colonialism demanded the depopulation of Central and Eastern Europe. They wanted that fertile land to feed the German population. Its been argued this was inspired and was their own form of manifest destiny. This concept predated ww1 but really gained currency after the experience of being denied the resources of their hideously brutal colonial projects in Africa as a consequence of ww1.

    2. digi_owl

      I don’t want to be part of any such cult, but the crazy hag in Brussels and her crew seems hell bent on force feeding us all their cool-aid.

      And frankly i have zero clue what they expect to gain from it.

      1. Petter

        Be of good cheer, Ursula and EU Commission to the rescue, according to an article on the NRK website.
        The EU will intervene in the electricity market

        The European Commission wants to slow down the violent rise in electricity prices. The EU is now planning an emergency reform of the market. That’s what Ursula von der Leyen, head of the European Commission, says.

    3. Mikel

      I’ve wondered if there was also a personal element to the Russian hatred.
      The Russians killed “Nicky” and his family.
      They had a lot of powerful relatives then and have them now – even if they were playing war with each other in the early part of the 20th century.

      1. eg

        I think British enmity towards Russia precedes Czar Nicholas II’s assassination by more than 50 years

  12. HotFlash

    The anti-Russian West reminds me of a small child holding it’s breath until it turns blue to blackmail its parents. Thing is, once the child passes out its autonomic nervous system will resume normal breathing. The West will just freeze in the dark, northern Europe first.

  13. Louis Fyne

    for family blog’s sake….I learned the “value of water paradox” in high school economics:

    the price paid for something (water, natgas) sometimes prices have no relation to its true value.

    if waterless in Death Valley, you would gladly pay $100 for water that is worth a few cents anywhere else.

    With natgas so high, the EU is pricing its exports out of the market….making China very happy

    1. John k

      The secret coming to light is that eu prosperity/exports depended on cheap Russian energy. Paying what lng importers pay for gas, currently worsened by worldwide short gas supplies itself worsened by reduced supply of Russian gas, makes high eu wages not affordable.
      Immigrants didn’t factor in eu cutting their gas supplies, they’re gonna be unhappy this winter – and they neither hate Russia nor have any loyalty to eu leaders.

  14. ALM

    As I understand it, the mainstream European press is not blaming European leadership for any part of their energy and cost of living crises which they brought upon themselves by imposing a brutal trade embargo on their own governments and people to teach Russia a lesson. The mainstream press in the U.S. is equally guilty. Here, to the extent that it’s even covered, you get the impression that somehow, inflation in the U.S. is entirely the fault of the Russian and Chinese governments due to the bad faith withholding of much needed resources by a demonic Putin and supply chain disruptions for which China is responsible for having the nerve to protect its own people with Covid lockdowns. Profiteering by corporations and the rentier class are not blamed except rarely and without conviction.

    It beggars belief that Europe, with the encouragement of the U.S., is ready, willing, and able to commit economic suicide which will surely swamp many other boats. The European leadership class and the U.S.’s for that matter, are an embarrassment of brain dead lunatics. How did this happen?

      1. Louis Fyne

        geriatric, ray-cist, out-of-touch, technocratic EU leadership are the perps. Neoliberalism is ‘merely’ a tool

        1. Michaelmas

          Neoliberalism is ‘merely’ a tool

          No, it’s more than a tool. Neoliberalism requires and creates — indeed, will not tolerate anything besides — elites and ‘governance’ such as we we see in the EU and DC today.

    1. Grumpy Engineer

      It beggars belief that Europe, with the encouragement of the U.S., is ready, willing, and able to commit economic suicide which will surely swamp many other boats.

      Personally, I’m not that surprised. My strong suspicion is that EU authorities flung out sanctions as fast as they could without asking, “What side effects might occur?” And like most political leaders, they’re greatly reluctant to admit they got it wrong, so they’re sticking to their guns even as evidence mounts that it was a bad idea.

      But wow, they really botched it, didn’t they? Cutting of their own energy supplies to deny Russia revenue to use for imports? Yves’ comment about the differences in “timetables” was particularly astute. The sanctions are causing some harm to the Russian economy, but I’d guess that the biggest effects are a reduction in the number of imported goods available for sale, and perhaps an increase in inflation. But Russian citizens are making do (often by substituting domestic goods for imported ones), and I doubt their military is slowing down at all. The effects here are very gradual.

      But on the European side, the energy crisis hit hard and fast. Energy prices rose sharply in a matter of days. Within weeks we saw many industrial facilities shuttered indefinitely. Unless something changes, I expect rolling blackouts to start in 2 or 3 months and to continue throughout the winter. And what will European citizens substitute for electricity in the middle of a blackout (or following a disconnect for non-payment)?

      The timelines are all wrong here when it comes to leverage. Europe will implode long before Russia is forced to make a change. But most of our political class doesn’t get that. Fully understanding the implications of resource constraints seems to be beyond the ken of the average politician.

      1. Copperhead

        It is a mistake to believe they are stupid. They are owned. The people who own them wanted these problems to happen. Go back to the coup in Ukraine in 2014 and who orchestrated it. It is a wholly foreign-run government. They have been killing ethnic Russians in eastern Ukraine for 8 years. Russia didn’t want this war.

      2. c_heale

        Another interesting side effect, is that in a world going into a depression, less goods will be purchased. Just as the UK did with Brexit, Western Europe is now closing down its’ factories. Therefore this will help the other leading manufacturing powers (China, and other Asian countries). The USA buys far more from these regions than Europe, so it could be seen as Western Europe uncoupling itself from the world economy.

    2. Karl

      How did this happen?

      A clue to the answer, I believe, is from this exchange (from the link Yves provided) in an interview with Larry C. Johnson:

      “Interviewer — Second, do you agree [with Colonel Douglas MacGregor] that Ukraine is being used as a staging ground for the US to carry out a proxy-war on Russia?”

      “Larry C. Johnson – Doug is great analyst but I disagree with him—I don’t think there is anyone in the Biden Administration that is smart enough to think and plan in those strategic terms. In my view the last 7 years have been the inertia of the NATO status quo. What I mean by that is that NATO and Washington, believed they could continue to creep east on Russia’s borders without provoking a reaction….But I have trouble believing that after our debacles in Iraq and Afghanistan, we suddenly have Sun Tzu level strategists pulling the strings in Washington.”

      The answer to the question posed, I suspect, comes down to this fatal combo of traits that are widespread at the top of our leadership class: Inertia, laziness, stupidity, ambition, conformism and more than a dash of hubris. All combine to a fatal and widely shared cognitive bias. A similar diagnosis is the “Three Poisons” in Buddhism: Attachment/Greed; Fear/Hatred; and Delusion. We are attached to the idea of ultimate victory; we hate the Russians (why escapes me); and we are deluded about our virtue and power.

      Our intelligence agencies are (theoretically) there, in part, to counter-act home-grown errors of this kind. My question is:

      What is wrong with our Intelligence Agencies that we keep getting ensnared in these expensive, unwinnable and humiliating contests?

      Oh yeah, the three poisons.

      1. digi_owl

        I’m tempted to say that Russia unnerves us because they are similar yet different enough to trigger something akin to uncanny valley.

        Also, i think thanks to WW2 much of the world inherited the UK viewpoint. And they long had a duel going with Russia (the great game) over the border regions of India.

        And to some degree “we” seem to behave as if Putin has recreated USSR, or is trying to. Meaning that under him Russia has inherited the ancestral sin of communism.

        1. Polar Socialist

          On April 7th, 1950, president Trumen was presented with U.S. National Security Council paper 68, which pretty clearly stated that Soviet Union was the Devil and that the only chance the Good had of winning the eternal battle was for the USA to become the champion of all free men everywhere, no matter the cost.

          And that’s quite literally what the paper said. It uses language like “the issues that face us are momentous, involving the fulfillment or destruction not only of this Republic but of civilization itself.” Even one principal author, Secretary of State Dean Acheson, admitted later that the was rather hyperbolic.

          From then onward, it was real war between light and darkness to save the globe from the slavery of the Communism hellbent of conquering it. The rest of us though it was a Cold War, and that the leaders of Soviet Union we paranoid.

          And I also think that Nordic countries are culturally closer to Russia than they are, say, France, Spain or Italy. Somewhere between German and Slavic.

      2. Louis Fyne

        the Three Poisons is a great mental framework, thanks for sharing

        Didn’t learn about it in my college Buddhism class, or maybe I forgot about it

  15. David

    There’s a lot to say, so I’ll just restrict myself to a couple of the issues that don’t get talked about much.
    First, the supertanker effect. Not only is the EU and its adjacent organisations enormous it is by far the dominant lobby and dominant subject in its 27 member states’ governments. Nothing else comes close. All the main Ministries – foreign affairs, finance, industry, internal affairs, development, agriculture justice, even defence- are involved with the EU in its intergovernmental forms and with the Commission virtually all the time. Everything that comes out of Brussels has ramifications for national governments. Ditto national parliaments, all of whom have links with the EP, large and well-funded European groups and endless visits to Brussels. All the researchers, all the administrative staff, all the hangers-on in think-tanks, are interested in working in Brussels one day, just as many of the MPs hope to be MEPs, or are after jobs in the Commission or in an EU institution in their own country.

    In Brussels, of course, it’s worse. Not only the MEPs and their staff and the staff of the Parliament, and the institutions at Strasbourg, and the lobbyists and the NGOs and the Delegations of other countries and organisations to the EU, but also the EU based media, internships, “outreach” initiatives, staff working for the EU overseas … it’s like a small country, and it very largely talks to itself. As, say, a junior Minister in the finance ministry, you could send an entire week, including two days in Brussels and bilateral meetings with several of your opposite numbers, never hearing or reading anything that deviates from the standard line. Lunch with a visiting Commissioner. Drinks with journalists. Council of Ministers. Hearings in Parliament. You never really meet ordinary people, and, to the extent that you hear their voices indirectly reflected, that’s a problem for the media experts to sort out. So Ukraine is winning, Putin is desperate and sanctions are working, and you never meet anyone who knows differently.

    Second, and because of this, the frenetic activity is divorced from real world consequences. Almost everything that’s produced is produced on literal or figurative paper, and may or may not have a connection with reality. I remember thirty years ago after a long, difficult meeting of a European forum the chairman congratulating himself and us for all the hard work we’d done and how much we’d achieved. Yet all we’d “achieved” was an anodyne document on some subject that papered over the substantial differences between nations. But that reflects the international diplomatic view that the production of an agreed piece of paper is an end in itself irrespective of what it says. So much of the EU’s discussions are in a kind of dreamland. An agreement for a non-binding percentage target for reductions in fuel use is therefore a major step forward. As I’ve said before, and as I’ve written about at length elsewhere, our present political classes and the hollowed out states that support them are incapable of dealing with events of this gravity. I think they will start to come apart .

    Just a quick word on Macron. These were remarks that he made before last week’s Council of Ministers, carefully leaked by his staff. They were mainly an appeal for unity within his own government, which has no majority and is very divided. He was casting himself as the world-historic figure, alone capable of guiding the country through all the turmoil of the next years – climate change was mentioned as well as Ukraine. It’s also being seen as an attempt to head off the very likely social disturbances of this winter by suggesting that the country is too fragile to survive them. And of course Macron is known for striking dramatic poses when the spirit of Napoleon takes him over. He made the same kind of doom-laden pronouncements at the time of the Gilets jaunes and the start of Covid. In neither case was he convincing.

    1. Colonel Smithers

      Thank you, David.

      What you say about the discussions in Brussels feels like yesterday evening’s discussions on LCI and France Info. Utterly delusional, if not dire, but with some comedy gold from Bernard-Henri Levy. Crisp white shirt unbuttoned, comme d’hab.

    2. Ignacio

      I agree. It is mostly an EU thing, and everybody that wants to be seen as EU compliant is following the course. Dissent is mostly hidden so far but there is, almost certainly. For instance i think that parties like RN, AfD, VOX and the like remain silent as they see they have good chance to be the beneficiaries of turmoil. They will take their chances the moment this gets nasty. The ‘left’ has totally fallen in the EU trap.

      The EU already realises that nothing is going according to plan and last Saturday the Czech Minister of Energy called for an urgent meeting of the Council of Energy Ministers. Remember in July they agreed on a voluntary paper (hahaha, the kind you criticize in your reply David) to make plans to reduce energy demand by 15%. So far all plans released fall short, very short on this objective. Nobody knows exactly what is on the agenda but this time, according to the Forbes link, they might be discussing changes in sacred electricity markets (my god!) as they realise that the crisis is filling a few utility pockets at the expense of the rest of the economic actors.

      1. c_heale

        This reminds me of all the voluntary agreements on climate change. Worse than useless, since they give us the illusion that something is being done, when the situation is only getting worse.

    3. Thuto

      Lord have mercy!!

      The word “cult” comes to mind. I imagine one of the properties a bureaucratic Alice in Wonderland juggernaut of the type you describe must possess is utter ruthlessness in dealing with internal dissenters whenever and wherever they appear, swiftly and very much publicly, lest people start thinking their opinions and critical thinking are valued above their sheepish compliance. Self-censorship and nodding approvingly at even the most fantastical schemes must then become, out of necessity, prized skills if one is to dine at the top table in Brussels and maintain pride of place inside the echo chamber. This is clearly a system that can’t be reformed from within, the bubble must be pricked from the outside.

    4. Bazarov

      The EU is the reincarnation of the Holy Roman Empire in all its weird indeterminacy and confusion.

      I remember reading that some German scholar around the 17th century tried to write a “life’s work” style treatise making sense of the Holy Roman Empire’s constitution and gave up after multiple volumes.

      1. Bazarov

        Incase anyone was wondering (I had to track it down in my old notes), the scholar in question was the 18th century (not 17th century) jurist Johann Jakob Moser. He published over 100 volumes puzzling through the Imperial constitution before giving up the futile effort!

      2. David

        Oh absolutely, and if you look at the founding documents and the speeches of Schuman etc. this is absolutely clear. I’ve argued for, oh, thirty years now, that the EU is the final attempt to rebuild the Christian unity that was lost in the Reformation. Hence of course the importance of Brexit as the symbolic expulsion of the largest Protestant influence (revocation of the Edict of Nantes anyone?). Likewise, the slightly touchy relationship between Europe and France, even up to Macron, reflects the historic competition between the Emperor and the King of France. (Which is why the French crown frequently sided with Protestant powers during the Thirty Years War, and why Louis XIV conspicuously did not send troops to help defend Vienna against the Ottomans in 1683).
        This could go on for ages….

        1. jsn

          That’s an interesting historical perspective.

          In parallel, in the throes of the Reformation the Pope ended the ban on usury because he needed a war loan from Jacob Fugger who was, at the moment, financing suppression of the second great Peasants Revolt.

          Maastricht budget rules imposing revanchist Roman Dominium across the EU has made of it an Unholy Roman Empire.

        2. Bazarov

          The Imperial Ban against Frederick in 1621 during the Bohemian crisis remains me of the sanctions against Putin during the current crisis in Ukraine.

          The Holy Roman Empire invented “canceling” in the 12th century.

      3. Chas

        Yes. The supreme righteousness of the Europeans is a wonder to behold. They are like the early Christians. Doing without Russian energy is like being thrown to the lions. Maybe a new religion will arise in Europe as a result of sanctions blowback.

    5. vao

      Regarding Macron, I already mentioned that attitude with those same examples — plus the one that made quite a stir in its time (and, just like the others, petered out): the “NATO experiencing brain death” speech. Macron did nothing to reorient France within or outside NATO, of course.

        1. hunkerdown

          Americans, watch and learn how to treat your figureheads while you enjoy W’s “Mission Accomplished” and Jeb’s “please clap” in the same person at the same time.

    6. Maxwell Johnston

      Thanks for this description of the EU. Brussels 2022 increasingly reminds me of Vienna 1914: the capital of a multiethnic empire with a weak military, a bloated bureaucracy, and a wildly out-of-touch leadership.

      1. Carolinian

        Ditto on praise for the above interesting stuff. We are here to learn…

        Sounds like Europe is as fractious as the United States. Maybe their odd love for Ukraine is a desperate attempt to maintain unity and all those jobs at headquarters. Always about the rice bowls?

        1. Mikel

          “Sounds like Europe is as fractious as the United States.”

          I’ve always thought more along the lines of it’s as fractious as the Middle East.

    7. russell1200

      Your last paragraph, when you (via Macron) bring up climate change, has me wondering if the above points made by Yves shouldn’t at least have a brief aside as to how on earth the Europeans are going to get to a carbon free future without crushing themselves – Russians or no-Russians.

    8. flora

      Thank you, David. I’ll make this limited historical observation: I think Brussels and the EU believe, after the past 120 years of their history, that the US will come to the rescue if anything goes badly wrong. Brussels and UK may think they have an external backstop in the US that will right everything should worst come to worst. I think this time they are misguided, if that is part of their assumptions. The US seems to be jumping off the same cliff for the same rationales.

      1. flora

        I think the Treaty of Paris (1951) forming the European Coal and Steel Community, formed by “the inner six “: France, Italy, the Benelux countries Belgium, Netherlands, and Luxembourg, was a good idea in its day. The EU that has grown out of it is less fit for purpose, imo.

        1. flora

          Germany was also a major part of the original Coal and Steel Community. (Apologies for omitting naming a major power in the original Coal and Steel community in the above comment.) The hope was to reduce the likelihood of war on the continent.

      2. David

        I don’t think that Europeans have ever been so naive as to suppose that the US will “come to their rescue”: the most they have hoped for is that, as in WW2, Us and European interests should happen to coincide. I think European leaders today are aware that the US doesn’t have the capacity to rescue anyone from anything very much.

        It’s a bit more subtle than that. In the Cold War, or at least in its early stages, the idea was that a still-weak Europe was in an inferior position strategically to the Soviet Union. But that position could be improved if, in some way, the US could be brought into the game. The Washington Treaty was fine, but I don’t think many people actually believed that the US would actually intervene in case of war or crisis. The trick was to have US forces deployed in such a way that they would inevitably be among the first to die if there was a conflict, thus binding the US to Europe in peacetime as well as wartime. This was not a policy predicated on likely war, but rather a way of giving the Soviets something to think about in a crisis.

        1. flora

          Thank you, David.
          The idea that European govts are wrangling the US govt is something we in the US never hear as a possibility. I’m not sure modern Washington even considers the possibility it’s being used for purposes other than what it thinks.

    9. Karl

      Anatol Lieven described the bureaucratic deliberations within NATO in similar terms:

      I think this [Ukraine] crisis is a paradise for NATO, for Western staff officers and military bureaucrats everywhere. It’s back to the Cold War: You move troops around on paper; you talk constantly about defense; you spend huge sums on exercises and papers and papers and papers and more papers, but you never have to fight!

      In another interview, Lieven (Chomsky’s go-to guy on Ukraine) Lieven likens the current dangerous escalation of the U.S. in Ukraine to that great movie Bedford Incident with Richard Widmark. He says:

      You’ve got to watch it [the movie]. It’s a retelling of Moby-Dick but with an American sea captain pursuing a Russian nuclear submarine who becomes increasingly obsessive. And the point is that he can’t back down and his inability to back down from confronting this Russian nuclear sub ends up leading to the same catastrophe that it leads to in the novel Moby-Dick. These are the most dangerous situations….

      Lieven, by the way, has been consistently prescient on Ukraine and how it would play out from the start of the invasion.

      So maybe Biden is our captain Ahab…. From a certain angle, he even looks a bit like Richard Widmark.

      1. Rolf

        Karl, good call and thanks for the link to Lieven. Although Biden is a pretty weak Ahab (at least compared to Widmark’s Finlander), he unfortunately also lacks both a skeptical press (Sidney Poiter’s Munceford) as well as an experienced advisor (Eric Portman’s stoic ex-U-boat commander, Wolfgang Schrepke) to point out the lunacy of current direction. Joe Biden seems otherwise completely detached in perspective and insight.

    10. Rolf

      Great comment, thank you.

      You never really meet ordinary people, and, to the extent that you hear their voices indirectly reflected, that’s a problem for the media experts to sort out. So Ukraine is winning, Putin is desperate and sanctions are working, and you never meet anyone who knows differently.

      You just described DC in the US as well.

    11. Kouros

      Romans did not invent the position of “Dictator” for nothing…. But theirs was just a small city with a bit of a hinterland…

  16. Louis Fyne

    for those in the US who want to play along at home….generally USAers pay (b) $25 – $40/month for the electricity hookup (even if you use zero electricity that month) + (b) a small percentage of usage as a delivery fee.

    Then add (c) the cost of the actual electricity which is usually your local state-regulated price.

    European spot/year ahead prices now are 5x to 7x American prices (value c)…or if you use 500kWh per month, something along the lines of $300 more per month (when the cost increases get passed along).

    even with severe conservation, the average
    EU family is going to get hit hard in their pocketbook.

    nevermind farmers, tourism, and industry

  17. jan van mourik

    What to make of articles like this one? Too optimistic?


    “The nightmare scenario of a cold winter without access to heating seems to be off the table, according to Germany’s economy minister, while Russian gas now accounts for less than 10% of Germany’s consumption.”

    “There had been fears — still not entirely extinguished — that a shortage of gas would force German industry to shut down and, in the worst-case scenario, see households have to suffer a cold winter without sufficient heating.”

    1. Louis Fyne

      End-users have not paid the bill for the gas in storage yet.

      narrative will be different when the bills go out.

    2. Stephen

      Unless I am missing something:

      They do not say what percentage of the winter requirement is covered by the storage. Simply that they have met some arbitrary target.

      Talking about August consumption and saying that very little gas is from Russia also feels disingenuous. It is presumably a low usage month from both climate (air conditioning not so big as in southern US) and industrial vacations perspectives. Would be good if they went on to explain why this August supply ratio is sustainable through the winter as usage everywhere ramps up.

      Feels overly optimistic. Or at least not giving the full facts to enable optimism from a critical party!

      1. vao

        I partially answered that question here.

        Basically, Germany has total gas storage equivalent to 3 months average yearly consumption, which corresponds to approximatively 1.5 months winter consumption — at most. Currently, Germany gas tanks are 82.74% full, i.e. at most 5 weeks of winter consumption.

        Other countries may be in completely different situations depending on the proportion of gas in their energy mix, their storage capacity, etc. For instance, Austria can theoretically store one full year of gas consumption; its tanks are now 65.2% full.

        1. TroyIA

          If anyone wants a deeper dive here is a study with figures showing what Germany is facing How It Can Be Done Even with the best case scenario of 100% storage Germany will need to reduce demand by 25% in the event of being cut off by Russia. So it is disingenuous to report storage levels without mentioning flow levels.

          The political decision to stick to gas imports from Russia despite the Russian war of aggression on Ukraine has also made it possible to increase the filling levels of German gas
          storage facilities by a good 100 TWh to around 70%. It should be noted here, however, that the storage facilities only have a total capacity of just below 250 TWh, which is roughly equivalent to the consumption of two winter months.
          In the event of an immediate halt to Russian gas supplies in August 2022, Germany would have to manage significantly lower supplies over the coming winter than in previous years.

          The gas that will be available in the coming months in the event of a loss of Russian supplies, results from pipeline imports from third countries, new liquefied natural gas terminals, domestic production, and stored gas.
          From non-Russian sources, Germany can currently access supplies of around 52 TWh per month. Starting in December or January, the new LNG terminals will add about 8 TWh per month, based on the assumption that additional LNG volumes are procured on the world market and that Germany transfers about 30% of the additional LNG imports to other European countries, as it does with other gas imports (see McWilliams and Zachmann,
          Assuming that storage levels do not fall below 20% of storage capacity, even over the heating season, e.g., to provide a buffer for a particularly harsh winter or for supply disruptions from other sources, Germany will need to reduce its gas demand by 210 TWh, or 25% relative to average demand in previous years in the August-April period (829 TWh), by the end of the coming heating season.

          1. Ignacio

            Thank you TroylA good link in there!

            And this raises the question. What kind of kool-aid is Habeck drinking? Don’t you like the déjà vu feeling in the question? Hahahahaha! – sorry, sorry I coudn’t resist!

    3. Ignacio

      I have the intuition that Habeck is counting there gas supplies that are already there in place plus some supplies that might be coming in the near future to paint a rosy picture. This other article (Russian sources) says the contrary. Is anyone here in self deception mode?

  18. Colonel Smithers

    Thank you, Yves.

    Talks were held last week between schools and the local authorities in Buckinghamshire about closing schools over the winter due to energy, food and staffing issues. It has yet to be decided whether to close from half term holidays in October or the Christmas holidays.

    How children whose only meal is at school or can’t learn from home will be helped has yet to feature.

    There were talks with Whitehall last month, but the Tory leadership contest has disrupted them. No minister is available.

    There were similar discussions in Germany last month.

    I’m in Deauville for a few days and have spotted some expensive Ukrainian registered cars.

    1. LawnDart

      Closing schools so that the kids can be both cold and hungry (and uneducated)?

      I can’t find the words, but my blood is boiling.

      Thanks for your observations, Colonel.

      Slava Ukraini.

  19. ex-PFC Chuck

    Just go give some idea of how far off the past charts electricity prices in Europe are in comparison to past experience elsewhere, back in the mid-1990s one of my clients had a two unit mine-mouth generating station in the USA Midwest with a bus-bar price was $19 & change per MWH. When one of the units went down during an exceptionally hot July 4 weekend the management was aghast over the unprecedented fact replacement power was costing them nearly $100/MWH. This was when the dust of the financial sector-driven industry “deregulation” was still settling. Now, with year ahead quotes in Europe approaching ten times that it seems quaint.

  20. Louis Fyne

    Should also add knock on effects—-aluminium shortage? = new car price inflation and/or car factory stoppages as given fuel efficiency mandates, aluminum now is absolutely critical and non-substitute-able for making vehicles.

  21. Ignacio

    Imagine, with all those cuts in Aluminium… solar farm construction might come to a halt. It is so self-defeating I cannot believe how idiotic we, Europeans, have become lately.

  22. spud

    the people who came to power in the west in 1993, built a economy based on a tiny foundation of demand. they also through massive deregulation of trade, regulation, taxes, safety net, privatization thought they built up a economy where the wall streets and banks of the west were no longer reliant on the deplorable for their profit and wealth maintenance.

    that arrogance and stupidity created the free trade mantra, whats mine is mine, whats yours is mine, and their will be no discussions period, and the sub humans will be allowed to exist, for the sole purpose of toiling for the rich.

    2008 popped that bubble, that tiny foundation of demand, could no longer service their debts, and the bailouts began, at least 29 trillion under obama, and those bailouts are still going on, trillions more under trump, and who knows how much is going on under biden.

    behavior of the entitled from what was created in 1993 will not go down without a mass suicide of western economies. proving that in the end, the entitled were not de-linked from the deplorable, and the sub humans were actually far more advanced than the entitled.

    1. Mikel

      “2008 popped that bubble…”
      The establishment loves to talk about that period like something was solved.

      But isn’t alot of that mortgage garbage a part of the Fed’s current balance sheet that they have to unwind?
      Correct me if I’m wrong…

      1. Yves Smith Post author

        I’ve corrected that REPEATEDLY. The Fed never bought subprime mortgages. Never. It bought only Treasuries and government guaranteed mortgages. It was lowering mortgage interest rates to goose housing prices generally.

  23. Matthew G. Saroff

    Before you ask this question, you need to ask if Europe has already been defeated.

    Soaring energy prices, vanishing military stockpiles, etc.

    1. KD

      This winter you can tell your kids to clear their plate and to think about all the starving children in Europe again.

      1. Matthew G. Saroff

        And they will not be Western European kids, it will be the Baltics and the Balkans, (And probably Poland and Slovokia as well) because the EU will ensure that all the necessary food flows west, because they are the ones with the money.

  24. hemeantwell

    Anticipating political responses to this crisis is tough. Yet I’m finding it hard to shake the idea that the immense impact of a recession/depression across all social classes + the well duh, easy to conceive, politically potent solution in the form of refurbished relations with Russia could lead to a major revamp of NATO mindedness, overriding current Euroelite opinion. David’s description of life aboard the EU starship sounds accurate, but can it keep on during a severe crisis when the major beneficiaries of the Big Market, the corporate sector, starts losing limbs? Russia would certainly hesitate to forgive all, but doesn’t it have substantial flexibility in its market options? Isn’t it possible for the Putin-led oligarchy to come up with a plan that doesn’t risk vulnerability to sanctions while gaining the benefits from increased trade?

  25. Tom Pfotzer

    Picking up on Jan Van Mourik’s remarks above…

    With respect to Germany, it seems like we have both a lot of hyperbole about shortages, and some obfuscation about supply (how new natGas sources will be found) and demand (how much demand can be reduced for natGas in the short run without major econ damage).

    Let’s review the short-term situation for this coming winter.

    The MSM from Germany and the U.S. is asserting that “gas reserves are nearing full capacity” in Germany, due to new gas purchases from Netherlands and Norway, and restarting coal-fired plants to substitute for natGas-fired electricity generating plants.

    The link I provided is just one; there were several. Search “germany gas reserves filling”.

    If the reserves are filling, and will likely be full by November, why all the angst?

    1. The gas that’s being bought now to fill the reserves is expensive, and those costs will get passed on to consumers – both residential and commercial

    2. Part of the reason the gas reserves are filling is because demand is falling due to curbs on residential use, and commercial plant shut-down due to the cost of gas; for some industries like smelting, glass mfg’g, and fertilizer mfg’g, nat gas is a major input, and as costs rise, the production economics fail; the end product is too expensive

    The German government is taking steps to socialize the additional costs that consumers face, and those steps seem to be adequate. Please rebut that statement if you disagree.

    What isn’t clear to me is how much industrial production will be curtailed in the short run, and what impact that’ll have long-term. Shutting down aluminum and glass (and importing from elsewhere) may or may not have a long-term impact. It depends on cost differentials (produce domestically .vs import) and duration of the differentials. I don’t have a clear idea yet of those impacts. There’s a lot of smoke, but I can’t tell how much actual fire.

    Longer term outlook (2-10 years)

    Longer term the gas not imported from Russia will be supplanted by liquefied natural gas shipped in from overseas, from U.S. and Canada for example. Terminals to facilitate the transport are being built now. Industrial processes are also being redesign to use electricity instead of natural gas for heat. In Germany, that additional electricity is expected to come primarily from renewables. This transition is under way now, will have impact starting next year, and will accelerate thereafter.

    Renewed Push for Renewables

    This is quote from Professor Claudia Kemfert, the director of the Energy, Transportation, and Environment department at the German Institute for Economic Research (DIW),

    “We could have 100 percent renewable electricity by 2030 and have converted out entire energy economy to renewables by 2035,” Kemfert told German broadcaster ARD. Kemfert and colleagues are also calling for significant increases in government programs to make buildings more energy efficient and encourage technologies like heat pumps.

    “Claudia Kemfert believes it’s possible for Germany to convert to one hundred percent renewables by 2038, and I personally think she’s right,” says Grigoleit. “I remain totally optimistic that we can do this. What we lacked in the past was the level of commitment, also from industry, we’re seeing now. Not so long ago, some people said if we have ten percent renewables in the mix, the whole system will break down. Now we have 40 to 50 percent, and on sunny and windy days in summer, renewables can cover almost 100 percent of our energy needs. In any case, we have no choice.”

    Are the German politicians crazy, misguided, or better-informed than we armchair quarterbacks? Maybe they actually can get through this winter without too much turmoil, and they can redesign the German economy to use LNG and coal in the short run, and renewables in the long run.

    Tell me why that isn’t possible. If the reserves are indeed filling, if extra costs are being socialized, if the economy is being redesigned away from natGas…those are examples of pretty good policy-making, are they not?

    Which of the assertions above are false? I’m trying to cut down on the fog-factor and get a realistic assessment of where things are. Please help if you have better info.

    1. Yves Smith Post author

      We were very clear that gas storage is inadequate. I don’t understand cheery headlines from places like Reuters. They say (more or less) total storage in Europe is a bit over 100 billion cubic meters. I’ve seen various estimates of Russian supply, and they are around 150 billion of pipeline gas and 14 billion of LNG.

      So storage is inadequate to meet even one year of supply from Russia. And storage is about 75% full, at 79 BCM.

      Russia is still supplying about 11 BCM at an annual rate via NS1 and just shy of 16 BCM at an annual rate through one leg of Tureystream.

      And this is not a one year game.

      1. Tom Pfotzer

        Yves – thanks for the addnl info on supply .vs. storage. That really helps scale the problem.

        Please note that I didn’t assert that storage was a substitute for incoming supply from Russia.

        I did question whether the winter is going to be as full of hardship and econ dislocation as some seem to think.

        It does appear that – assuming no further reductions in supply from Russia – it does appear that there’s enough gas on-hand and continuously in-coming to make it through this winter.

        Unless the MSM is fibbing about what’s actually in storage.

        It also appears that LNG supplies from elsewhere are coming on-stream rapidly, and that there is renewed vigor toward transitioning to renewables. That – at least partially, and possibly substantially – addresses the out-years issue, if indeed the Germans follow through on those industrial policy timelines.

        So if Germany uses this crisis as the prod to get off fossil and nuke altogether (e.g. by 2040), and build some new products to sell the world (e.g. the tools nec to get off FF and Nukes), then this is going to end up being a good thing for Germany, and the EU in general. They may emerge from this energy-independent (from Russia, the U.S., or elsewhere), with a re-designed economy, and new products to sell.

        Therefore, it is not clear to me yet that the German industrial leaders are necessarily misguided or crazy. I am also not yet convinced that the German government can get too far afield of the industrial leaders / owners.

        1. Ignacio

          If you have been attentive to European media the confusion is granted. They have been trying to sell EU policies all the time and the supposed high levels of reserves have been sold as mission accomplished, now is time for Russia to melt down on sanctions or war defeat. The values they are supposed to defend have been trashed.

          1. Tom Pfotzer

            Ignacio – I agree that our values have been trashed, that the U.S. and western Europe have not negotiated (at all) and certainly not in good faith with either Russia or China or Iran, just to name three. We are in agreement there.

            My original memo was mainly a reality-check reaction to what I perceived as our team’s group-think. Whenever the yes-chorus gets that loud, I get antsy.

            There’s another thing that’s bugging me, and that’s the fact that speculators love a situation like this (spot prices for nat gas going wacko). There’s major money being made here, and you know how capable the Mighty Wurlitzer is.

            That Wurlitzer is often used to fleece the public, to pump and dump, to sell war, to profiteer. There’s a lot of that going on right now with this nat gas situation. There is a problem, but it’s being made worse by the hype.

        2. Revenant

          “So if Germany uses this crisis as the prod to get off fossil and nuke altogether (e.g. by 2040), and build some new products to sell the world (e.g. the tools nec to get off FF and Nukes)” – which are what precisely? We have covered to death the inability of wind and solar to provide dispatchable (or in the case of wind, even predictable) electricity for the purposes of demand fulfilment or even basic grid stability. A power grid needs a certain amount of spinning generation capacity on demand for frequency maintenance, let alone additional power input. There are various storage ideas proposed to timeshift renewables to match demand intra day and some of these (compressed air, superthermal stores) can even spin turbines. Nine of these us capable of inter seasonal capacity smoothing and, if they were, would require raw materials beyond our dreams, unless we are using gas industrially for smelting etc….

          I am not prepared to cold baked beans in the dark because economists assume an energy source right after they assume the can opener

          1. Tom Pfotzer


            I am expecting four things to happen which will gradually address your question of constancy:

            a. conservation. Most electricity is used for HVAC right now. Most buildings leak heat so badly that 4 hours after you turn off the heater/AC the building is ambient (outside) temp.

            b. The shift of elec demand to autos can be partially met with a concurrent shift to less driving. There is still a great deal of potential for driving reduction

            c. Renewable supply balancing via fuels. Hydrogen, methane and ammonia are fuels which can be made from intermittent renewable power, and can be run thru fuel cells at short notice to provide booster power to a (lower) base load generating capacity to smooth out supply variations from renewables. This is why there’s so much interest in the so-called “Hydrogen Economy”. I’m sure you know this already, so how come that didn’t get mentioned in your message to me? Why are you discounting this?

            d. The generation of fuels produces a lot of heat, most of which is currently wasted. I expect heat-intensive industries like smelting, glass, cement, etc. to be co-located with fuel-production facilities. I also expect that the heat will be re-used several times before it’s finally released, rather than just once and then released to atmosphere. Heat is expensive, it’s recoverable, and it’s storable.

            Most electricity is used for buildings (commercial and residential). The next-biggest electricity consumer is industrial use. I’ve addressed both the demand and the supply side for the top-2 uses of electricity.

            There are working examples and plenty of current practice for each of the items I mentioned above. There isn’t very much new technology that needs to be invented to the foregoing. It’s all in-use at some scale at the moment, and can be readily scaled up.

            1. Revenant

              None of these wishes can be granted before this winter and given the investment and restructuring required, not before the next five either. Plus the quantities involved to.replace energy dense fossil fuels are prohibitive.

              1. Tom Pfotzer


                Who said it had to get done before this winter? I already asserted that there’s enough gas to get through the winter.

                The focus is on “then what?” And I think I addressed the “then what”, and I was hoping you’d be able to debunk the assertions I made about what to do next.

                Furthermore, I care not a whit about “prohibitive quantities”. Either it is necessary to act, or it isn’t.

                Is it necessary to respond to the issues of fossil fuels, or not? Is it necessary for EU to achieve energy (political) independence, or not?

                If it is, then how hard it is, or isn’t, is immaterial.

                Necessary, or not?

                And these ideas are not “wishes”. They are viable solutions, and they are being gradually implemented.

                1. Yves Smith Post author

                  “in the long run, we are all dead.”

                  Five years of worse case scenario (chronic shortages and hunger) means the social and political structures needed to move this agenda forward will be shattered. Where will the money be to buy EVs and build charging stations if Europe goes into a depression?

                  1. Tom Pfotzer

                    Yves: if your depression scenario is the one that pertains, then there’s certainly very low possibility of coherent, fundamental progress.

                    If the disruption is middling and it becomes clear that depending upon others for energy is now a failed proposition – and caused a lot of damage “never to be repeated”, then it may work as lever to do some good fundamental progress.

                    We’ll see.

            2. Revenant

              Since you want to set an assignment:

              “a. conservation. Most electricity is used for HVAC right now. Most buildings leak heat so badly that 4 hours after you turn off the heater/AC the building is ambient (outside) temp.”

              This is simply not true of heat loss. You would be amazed by how well insulated houses are in Nordic and German-speaking Europe, where triple-glazing is standard. Traditional Southern European apartments also have high construction standards, driven more by insulating to keep the heat out. Atlantic Europe is, er, not so hot, literally: the UK and Ireland have poor standards of thermal design and I am not sure non-Alpine France is much better. All three nations had cheap domestic fossil fuel resources and largely temperate climates requiring moderate heating and only in winter months. Even so, I would expect average European thermal performance to be better than US thermal performance, where your houses are flimsy wood and plasterboard (urban apartments may be better).

              Air conditioning is simply not relevant in EU domestic energy use. As a rough approximation, only hotels and commercial buildings have air conditioning in Europe. Some houses may have air con in specific rooms. We mostly open the window. Even in Spain (Ignacio, please comment!).

              And domestic energy consumption is a relatively small part of overall energy consumption, compared with transport and industrial processes.

              “b. The shift of elec demand to autos can be partially met with a concurrent shift to less driving. There is still a great deal of potential for driving reduction”

              Shifting to electric cars is a misdirection here, what is reducing energy use in this scenario is simply reduced driving (and the shift may go into reverse, now that the cost of fuelling an electric vehicles in the UK is now HIGHER than a petrol or diesel equivalent!).

              Yes, we can reduce transportation but how will people and goods get around, beyond very modest reductions in mileage, given there are no public transport options for these journeys? Building mass transit systems will take years. Asking people to reduce journeys is absurd as a short-term measure when the housing stock and places of employment have been organised on a suburban model and reorganising them will take years and involve… more energy.

              “c. Renewable supply balancing via fuels. Hydrogen, methane and ammonia are fuels which can be made from intermittent renewable power, and can be run thru fuel cells at short notice to provide booster power to a (lower) base load generating capacity to smooth out supply variations from renewables. This is why there’s so much interest in the so-called “Hydrogen Economy”. I’m sure you know this already, so how come that didn’t get mentioned in your message to me? Why are you discounting this?”

              Methane is a fossil fuel. Happy to continue with natural gas powering the country but generating methane from renewable energy involves double losses and, for a given required methane flow rate, will require double the solar acreage, say, to enable 24h production in 12h. And we will have to produce enough in the summer to cover the winter, so you can double the acreage again (if you assume spring and autumn are in balance). Ammonia and especially hydrogen are less energy dense than methane and only make the problem worse. There was an article or comment in NC recently (possibly PlutoniumKun?) stating that losses in green hydrogen production are over half, approaching two thirds, I think.

              Then, how are we going to expand renewables to fill the gap this winter? And if we do it over a decade, how much metal and energy will this require – in addition to current levels of demand to sustain current life?

              And finally, fuel cells are not spinning generators: they cannot stabilise AC grid frequency and so we need other sources (only tidal and hydro can do this for renewables, other we need combustion turbines of some sort or experimental technologies like compressed air storage).

              “d. The generation of fuels produces a lot of heat, most of which is currently wasted. I expect heat-intensive industries like smelting, glass, cement, etc. to be co-located with fuel-production facilities. I also expect that the heat will be re-used several times before it’s finally released, rather than just once and then released to atmosphere. Heat is expensive, it’s recoverable, and it’s storable.”

              This is just bad physics. The fate of all energy is to end up as low grade heat. Industrial processes need high grade heat. Say you need 1200degC for glass-making. You need to burn gas. You may end up with 400degC waste heat but this can never be used for glass-making. You cannot “concentrate” the heat into a one third volume of 1200degC heat – you can certainly try but only by inputting more energy and by accepting a much lower efficiency: think of heat pumps which can pull a few degC out of ambient temperature air or water and use it to heat a much smaller amount of water to 50degC but use electricity in the process to fight against the entropy. You could co-locate a chain of industrial process, each of which can use the lower grade heat of the last, but you still need to fuel the first process and on a scale that all the other processes receive their full amount of heat, potentially over-providing on the first. Admirable but impossible to solve the winter crisis in Europe.

              “Most electricity is used for buildings (commercial and residential). The next-biggest electricity consumer is industrial use. I’ve addressed both the demand and the supply side for the top-2 uses of electricity.”

              This is an energy crisis, not an electricity crisis. Europe needs gas for direct consumption (petrochemicals, ammonia and hydrogen production, industrial furnaces of all stripes) as well as for electricity. Energy is far bigger than just electricity. All of your solutions would be plausible over 50 years; some of them would be plausible over five years, if governments went into New Deal mode; none of them can keep the lights and fires on for the next five years. Europe (and the western economy generally) needs cheap Russian energy.

              1. Tom Pfotzer


                That was a great, great essay. This is a dead thread, so can we pick this up next appropriate thread? I’ll summarize your post, and respond to it. Keep an eye out for it.

                I apologize if I seemed as though “giving an assignment”.

                I want to respond as thoroughly to your remarks as you did to mine.

    2. Failed Intellectual (Emeritus)

      The question is not necessarily whether or not there will be gas available over the winter. Gas will be there, but will you be able to afford to use it? Germany’s economy is built on cheap Russian energy and commodities inputs, and those can’t be replaced easily or cheaply without a huge hit to the German economy and living standards over the short to medium term. Europe is hoovering up the entire world’s excess supply of LNG as it is and you can see the resulting prices that has caused, because there isn’t enough to replace what Russia supplied via pipeline. No amount of ‘socializing the costs’ can fix a hard resource constraint if it’s a vital input that you can’t do without.

      1. Tom Pfotzer

        ” No amount of ‘socializing the costs’ can fix a hard resource constraint if it’s a vital input that you can’t do without.”

        I posited that in the intermediate term, you _can_ “do without”. You can substitute renewables and conservation.

        Adapting is what healthy societies and healthy economies and healthy cultures do.

        Please read my post to Revenant, above.

  26. Ted

    Thanks Yves! You deserve your victory lap for spelling out how the Financial Markets would get and contextualize critical ‘game information’ much faster than political institutes.

    It’s funny that countries like the US and Canada, because of Green Delusions, aren’t doing normal capitalistic things and going after things like EU Smelting and Iron, and Paper. EITHER country could probably replace most of Europe’s capacity completely, given enough time. Instead, they are all trying to move these jobs elsewhere, I guess if this work is done in China or Russia it doesn’t effect the environment the same way. May you don’t get local Acid Rain, but you get Climate issues regardless. Or or all our Green Theories at this point just a patchwork of guesses and pop pseudo science, mixed with weather reports.

    The best example of this, I can think of, is Canada refusing to expand it’s Natural Gas industry to help the EU, because it wants to go with an unproven technology (Green Hydrogen) that won’t be available for many years and whose actual total lifecycle environmental impact is unknown, current hydrogen is mostly made as a waste product in Aluminum smelting, it’s literally one of the least green activities known to man.

    1. jrkrideau

      The best example of this, I can think of, is Canada refusing to expand it’s Natural Gas industry to help the EU

      Look at a gas pipeline map of Canada. https://www.cer-rec.gc.ca/en/data-analysis/facilities-we-regulate/canadas-pipeline-system/2021/natural-gas-pipeline-transportation-system.html The capacity does not exist.

      Canada, assuming everything went extremely well in building a pipeline—and it would actually be a wild fight—might be able supply the EU with some natural gas in 5 or 6 years. Ignoring all the political and environmental and jurisdictional issues, who is going to invest in this really uncertain market? Germany may make up with Russia, go green enough to not need the gas or be so impoverished it cannot afford to buy the gas.

  27. Michaelmas

    Yves S: For instance, Larry Johnson contended Ukraine was a goner as soon as Russia took out its radar, air force command and control, and most of its fixed wing aircraft. Ukraine could not mount a counter-offensive against a military using a combined arms operation when it lacked air support.

    So there’s no question this is true, and you, me, and the NC Thought Collective have in general been pretty bullish about Russian air dominance. The Russian analysis from August 20th on the Top War/Military Review site that I’ve linked to below is interesting because more granular and qualified about Russian air dominance. As always with everything, to be read with due scepticism, but the picture it presents makes sense —

    ‘Dominance in the sky of Ukraine: a myth or not quite?’

    Most relevantly —

    ‘In the sky of Ukraine, everything was also decent. Russian more modern aircraft and air defense systems have significantly reduced the number of combat-ready aircraft of the Armed Forces of Ukraine. But then …we can quite calmly say that it was in early May that the United States and its NATO allies began to fight on the side of Ukraine.

    ‘There, across the ocean … since the war continued in Western brains to the last Ukrainian, our potential opponents decided to start supporting the Armed Forces of Ukraine, thereby entering the war on their side.

    ‘Instead of the destroyed radar stations and air defense command posts, American means of airspace control took over their role. We already know the role of AWACS aircraft, which are on combat duty in the air almost around the clock along the border with Ukraine. And besides AWACS, there are also heavy reconnaissance UAVs, there are also satellites in near-Earth orbit, radio interception facilities located on the territories of neighboring NATO countries such as Poland and Romania. In general, a whole system for collecting data that was transmitted to the command posts of the Armed Forces of Ukraine.

    ‘That is, the Armed Forces of Ukraine received a luxurious gift from NATO. A well-established and stable information surveillance and tracking system. I am sure that as soon as a pair of Su-34s in Voronezh take off from the runway, a signal is sent from the satellite to the appropriate satellite information processing center, say, on the island of Maui (Hawaii), which is processed and transmitted further.

    ‘It is clear that Ukraine was included in the NATO information network, and from the corresponding information processing center it very quickly gets to the Ukrainian military.That is, it turns out a very unpleasant situation for our pilots: the planes are flying, the observation and detection devices of the radar are silent, but the planes are visible to the enemy, who is practically aware of where the “dryers” are flying.

    ‘And the radars of anti-aircraft missile systems are extinguished and do not reveal themselves in anything. They are simply not needed, they even harm, unmasking the air defense system. Target designation is practically issued by the Americans and air defense systems fire missiles “in the dark.” ….

    ‘… And we still do not have the right and opportunity to shoot down satellites that work for the Armed Forces of Ukraine.’

    So, if all the above is true — and it does makes sense — the Russians have dominance, but qualified in that they have to grind the war out. As this post of yours points out, however, in the long run that is very much not in the EU’s favor.

    1. hemeantwell

      Yes, I’ve seen this in abbreviated form elsewhere and the sorta remedy is that planes try to stay under 1000 feet and rely on drones etc for targeting info instead of determining targets by parking at a greater altitude.

    2. David

      Really for the air-power buffs among the commentariat, but I think that this is as much a doctrine issue as anything else. Western doctrine largely supposes total air superiority (or air supremacy) such that airpower can be used as the principal method of finding and destroying enemy targets. Much of NATO’s equipment only works correctly on the assumption that that air supremacy has been obtained.

      The Russians seem to have a different philosophy. They seek to control airspace and attack enemy targets at least partly by missiles. They don’t seek to use air superiority aircraft to have control of the airspace, and they fly proportionately fewer sorties than a NATO air force would. I think this comes under the “good enough” rubric of a lot of Russian doctrine and equipment use. They control the airspace over Ukraine “well enough” to get what they want done. And don’t forget that, unlike western units, Russian BTGs are not only part of a layered air defence, they also have their own integral air defence assets, so being found by enemy aircraft doesn’t have to be a disaster.

    3. Yves Smith Post author

      As David said, this is a doctrine issue. Russia does not seek air supremacy (no foreign craft in the sky) but air superiority (very low if any foreign air presence). Russia is willing to take the occasional loss of armored units to gain a time advantage in launching ground operations. It take much longer to establish air supremacy than air superiority.

      Western commentators also regularly miss or choose to overlook:

      Russia’s clear superiority in missile defense. Its S-400 is better than anything we have and Russia also has the S-500 deployed.

      Russia’s superiority in offensive missiles. They have layered missiles and use them in preference to fixed wing aircraft to the extent possible. Why send a pilot and a plane if you can just send a bomb? Russia also has 6 hypersonic missiles in production while we have yet to test one successfully.

      Russia’s signal jamming capabilities. They can mess with some of our offensive goodies, like drones.

      Johnson’s point is without air cover, a military faced with an enemy using combined arms operations cannot launch a meaningful counteroffensive. They cannot take and hold terrain.

      Had you clicked on the link provided, you would have read:

      Within the first 24 hours of the Russian military operation in Ukraine, all Ukrainian Ground Radar Intercept capabilities were wiped out. Without those radars, the Ukrainian Air Force lost its ability to do air to air intercept. In the intervening three weeks, Russia has established a de facto No Fly Zone over Ukraine. While still vulnerable to shoulder fired Surface to Air Missiles supplied by the U.S. and NATO to the Ukrainians, there is no evidence that Russia has had to curtail Combat Air Operations.

      Russia’s arrival in Kiev within three days of the invasion also caught my attention. I recalled that the Nazi’s in Operation Barbarossa took seven weeks to reach Kiev and the required 7 more weeks to subdue the city. The Nazis had the advantage of not pulling punches to avoid civilian casualties and were eager to destroy critical infrastructure. Yet many so-called American military experts claimed that Russia was bogged down. When a 24 mile (or 40 mile, depends on the news source) was positioned north of Kiev for more than a week, it was clear that Ukraine’s ability to launch significant military operations had been eliminated. If their artillery was intact, then that column was easy pickings for massive destruction. That did not happen. Alternatively, if the Ukrainian’s had a viable fixed wing or rotary wing capability they should have destroyed that column from the air. That did not happen. Or, if they had a viable cruise missile capability they should have rained down hell on the supposedly stalled Russian column. That did not happen. The Ukrainians did not even mount a significant infantry ambush of the column with their newly supplied U.S. Javelins.

      The scale and scope of the Russian attack is remarkable. They captured territory in three weeks that is larger than the land mass of the United Kingdom. They then proceeded to carry out targeted attacks on key cities and military installations. We have not seen a single instance of a Ukrainian regiment or brigade size unit attacking and defeating a comparable Russian unit. Instead, the Russians have split the Ukrainian Army into fragments and cut their lines of communication.

      1. Michaelmas

        David: I think that this is as much a doctrine issue as anything else. Western doctrine largely supposes total air superiority (or air supremacy) such that airpower can be used as the principal method of finding and destroying enemy targets. Much of NATO’s equipment only works correctly on the assumption that that air supremacy has been obtained.

        Yes, David. All that is so stunningly obvious that it’s already understood by everybody. I’ve made that exact point so many times here that I’ve felt at risk of becoming a bore.

        More interestingly, what the Russians have accomplished looks in fact like a minor RMA (Revolution in Military Affairs), which (a) never happens with the adoption of — yes — new strategic doctrine alongside some new configuration of military technologies; and (b) happens to be exactly the RMA that fifteen years ago Andrew Marshal at the Pentagon’s Office of Net Assessment predicted was next.

        ‘Although he is little known among Americans, Marshall enjoys an outsize reputation in Moscow and Beijing, where Russian and Chinese strategists have long admired his ideas, even if their countries were in the strategic crosshairs.“Our great hero was Andy Marshall in the Pentagon,” Gen. Chen Zhou of the People’s Liberation Army said in an interview last year with the Economist. “We translated every word he wrote.”

        ‘Such thinking has led Marshall to argue that some foundational weapons of the armed services — the tank, the aircraft carrier and short-range fighter jets — are doomed to obsolescence because of advances in missile technology. That has made him an unbeloved figure among some U.S. generals and admirals, who view him as an unrealistic radical and a threat to conventional military strategy.



      2. Michaelmas

        Yves S.: Russia’s superiority in offensive missiles. They have layered missiles and use them in preference to fixed wing aircraft to the extent possible.

        I realize you can’t remember who here says what, but I’ve made this same exact point so many times that, as I remark to David, I’ve felt like a bore on the subject. However ….

        Yves S (quoting Larry Johnson): ‘In the intervening three weeks, Russia has established a de facto No Fly Zone over Ukraine. While still vulnerable to shoulder fired Surface to Air Missiles supplied by the U.S. and NATO to the Ukrainians, there is no evidence that Russia has had to curtail Combat Air Operations’

        Yes, Johnson’s assumption was my assumption and also yours. That the Russians basically had complete operational preponderance and if there was a No-Fly Zone over Ukraine it had been established by the Russians.

        But we can’t know everything, by definition. Can we?

        And if that Russian analysis that I’ve linked to is true (?), the picture is more complicated.

        The claim that article makes is, essentially, that out-country US/NATO surveillance via satellites and AWACS on Ukraine’s borders is good enough that, when piped straight through to the Kiev regime’s anti-aircraft missile defense units in the field, those units can do a ‘shoot-and-scoot’ without turning on their radar long enough for the Russians to necessarily get a return fix on them.

        And *that* is plausible, in my view. If it’s not plausible, why it isn’t?

        (And, yes, obviously it’s not going to change the outcome of the whole conflict.)

        1. Polar Socialist

          And *that* is plausible, in my view. If it’s not plausible, why it isn’t?

          Because no AWACS sensor system can reach the combat zone from outside Ukraine.

          Because no satellite is parked over the area, so the surveillance is not continuous and the satellite data (for military intelligence) is not real time, anyway. It has to be transferred, processed, interpreted and distributed (need to know) before it’s of any use.

          Because for any chance of hit most anti-aircraft missiles need fire-control radar on the ground. Only IR-seeker missiles are fire and forget, all other need some guidance on the way to target, whether they have passive or active radar homing. And guidance means radar beam on the target.

          Russian SU-25 attack aircraft was designed for, and still excels at, short-range quick dashes flying extremely low using anything that burns as fuel and any relatively flat field as a forward base. They have the turnaround time and speed to do multiple sorties in a short time, so they’ve probably taken out their designated target long before any NATO system is aware of their activity.

          1. Michaelmas

            Polar Socialist: Because no AWACS sensor system can reach the combat zone from outside Ukraine.

            False. Provably so —

            Straight line flying distance between Kherson and the Ukraine-Moldova border, for instance, is 150 miles / 241 km flying time. The Boeing E-3A Airborne Warning & Control System (AWACS) has a detection range of more than 200 miles (320 kilometers) for low-flying targets and farther for aerospace vehicles flying at medium to high altitudes.

            Polar Socialist: Because no satellite is parked over the area, so the surveillance is not continuous.

            Almost certainly false. Again, provably so.

            You again offer no evidence for your claim. Conversely, whatever the regular US/NATO military satellite capability may be, the US can park one of its three X-37 Boeing mini-shuttles over Ukraine –
            — either for purposes of doing continuous surveillance of the whole Ukraine battlespace itself, or else to put in place satellites for continuous surveillance.

            Polar Socialist: and the satellite data (for military intelligence) is not real time, anyway.

            A strikingly improbable claim, for which you again offer no evidence.

            Seriously: what would be the point of US/NATO not running a 24-hour real-time feed to the Kiev regime’s in-country anti-aircraft and anti-missile defenses? It defies common sense and the evidence of the Russian claims I’m seeing.

            Polar Socialist:It has to be transferred, processed, interpreted and distributed (need to know) before it’s of any use.

            No, it doesn’t. I repeat: the US/NATO is almost certainly running a live 24 hour feed to the Kiev regime’s air-defense C&C (such as that may be at this point).

            Again, what earthly purpose would be served by the utterly useless, after-the-facts setup you propose? You’re again making an extraordinary claim, for which you again offer no evidence.

            Polar Socialist: Because for any chance of hit most anti-aircraft missiles need fire-control radar on the ground. Only IR-seeker missiles are fire and forget, all other need some guidance on the way to target, whether they have passive or active radar homing. And guidance means radar beam on the target.

            But radar beam on the ground turned on for how long? The claim in the Russian article I originally linked to was:-

            ‘The calculations of the (Ukrainian) air defense system absolutely do not need to turn on their radars to determine and identify the target, the Western allies have already done everything for them. The air defense radar is switched on at the very last moment, for the minimum time of approach to “illuminate” the target and guide the missiles ….

            ‘Naturally, after the launch, the air defense system folds up and leaves the launch area. In general … the radar, by the radiation of which it is possible to detect air defense systems, turns on for a very short time.’

            Shoot and scoot, like I say.

            Yes: as you write, “Russian SU-25 attack aircraft was designed for, and still excels at, short-range quick dashes flying extremely low using anything that burns as fuel and any relatively flat field as a forward base. They have the turnaround time and speed to do multiple sorties in a short time.”

            No: the rest of your claim—“they’ve probably taken out their designated target long before any NATO system is aware of their activity”–-does not necessarily follow.

            Two final points, both obvious if one thinks about them but still worth making:

            [1] In a war both sides should be expected to evolve their tactics and strategies continually. In the Special Military Operation’s earliest phases, the Russians appear to have effectively knocked out all of Ukraine’s air power, and created very large holes in its air defense/detection systems.

            In early May, the US/NATO then adapted. What it appears they did was set up a regular real-time 24-hour feed to the Kiev regime of such airspace surveillance as they collected.

            [2] This being said, that’s not as easily said as done. I’ll again quote the Russian article:
            “…it is worth noting that this is not easy: to take and put Ukraine on “information allowance” in NATO. This suggests that there was a long preliminary preparation and training of the Ukrainian military….Considering that NATO military advisers have been working in Ukraine for more than one year, we can conclude they did a good job. And the Ukrainians, who received new opportunities, began to use them.”

      3. hk

        One thing I came to realize is how unbelievably expensive and difficult “air supremacy” is. US never achieved this in most of history–not in Korea, not in Vietnam. Only over Iraq did this happen and it took swarms of aircraft trying to hunt a handful of hostile aircraft causing fairly minimal trouble (and this, in turn, places the role of Finnish air force during WW2 in perspective–heroic though their pilots may have been, what good did they achieve?). Allowing a small nuisance of an air force to linger if the cost of wiping it out is too great seems pragmatic.

  28. SteveW

    Zoltan Pozsar has an amazingly astute observation: “in Germany, $2 trillion of added value depends on $20 billion of Russian gas”. 100 times leverage. Even a 20% shortage will cause tremendous disruptions and deleveraging. No short term solution in sight.

  29. Boomheist

    I am not at all sure that when absolute push comes to shove we won’t see Europe trying to bury the hatchet with Russia in order to get that gas back; in fact, become desperate to bury the hatchet. I am also of the belief that Putin, always the pragmatist, will be entirely willing to send that gas in exchange for a Ukraine settlement on his terms (ie meeting the objectives he originally set and has held to) despite knowing the US and some others may be agreement incapable. I believe this because I am expecting Putin to agree to send the gas but only using the ruble yuan financial system. I think this has been the aim al along, actually.

    If what Yves is describing is accurate, and she always is accurate, the level of desperation and terror in Europe come January 1st will be of a style never seen before. I think if Russia can “win” this by settling to send gas again in exchange for stopping the Ukraine battles according to Putin’s objectives, Russia will. The challenge then will be, what does the US and NATO do? The midterms will be over. Biden will be able to say, we did all we could, more than we could, sent billions. He will be blamed for losing Ukraine, of course, but the midterms will be over, and the end of the Ukraine fiasco will mean peace, markets will respond, etc etc….

    Maybe Yves is right, that Russiaphobia will overwhelm all, as it has in the past, but maybe not. We will see. I still think in the Grand Scheme of Things this 21st Century will be Russia’s not our or China’s, and this SMO is the start of it…..

    1. JustTheFacts

      Although we might have forgotten history, it casts a long shadow over Russia. We do not have a long history of greedy foreigners casting their covetous eyes on our land, thinking “oh, they are few, and easily defeated”, and trying to invade us.

      Putin’s parents survived the German siege of St Petersburg. 750k people died of famine. His mother was left for dead. His father fought Estonian Nazis. These very same Germans are training Ukrainians who have been shelling “Russian subhumans” in Donbass since 2014. These very same Estonians want to ban all Russian visitors. And these very same Europeans have been living their “life of abundance” on the back of Russian commodities. The fact we demonstrate no basic human sympathy for the suffering Russians endured within living memory must grate.

      I was shocked to see how things have degenerated on Russia TV: This fellow seems to run an important Russian TV program and seems to be becoming even more strident… This is what Russians see on TV. Most of them get their daily firmware update from TV just like most of us do.

      The fact the EU has banned Russian media also doesn’t help: when you don’t know anything about the other, you can be convinced they are evil incarnate. When you know them, you realize they’re just people, like you, with a different culture and different presumptions, but certainly not worth hating.

      I would not be surprised if many Russians were in a mood to to give those arrogant Westerners a lesson they won’t forget for some time: no more resources. And I fear Europeans will be told to hate Russia because their suffering the coming years will be blamed on Russia and not our leaders. This new hatred saddens me greatly.

      What I cannot understand is what is the EU’s end game: is this simply the product of incompetence, ignorance and arrogance? Or do they want us to hate the Russians so much we go to war with them, perhaps to wrest control of their resources to keep the capitalist merry-go-round going for another decade or two before resource depletion puts an end to the magical thinking that infinite growth is possible on a planet with finite resources?

      1. Yves Smith Post author

        An additional bit of history: Putin had two older brothers who died very young, I think both before they were four years old. In his interviews with Oliver Stone, Putin said something to the effect that his parents were brave to try again with him, in 1952. I have the sense that St. Petersburg went through what the Japanese called the staving times, which for them was through 1947, of inadequate food supplies and maybe also other infrastructure issues, like public water sometimes being contaminated. Is that impression correct, that hardship in Russia lasted well beyond the end of the war?

        1. Daniil Adamov

          In brief: yes. Though I’d need to look up the details. But the late 40s at least are remembered as very hard times, especially in the directly war-ravaged areas.

          1. Polar Socialist

            The famine in 1946 killed approximately 2 million people and affected 90 million. Rationing lasted until the end of 1947, and there were still serious shortages in 1948.
            Of course, the whole Europe was suffering, and Soviet Union was actually one of the fastest to recover, even if it had lost 1/8 of population, 1/4 of urban living space (the front swept twice over a huge swath if Russia) and devastation of her industrial areas.

            What helped in recovery was the fact that a lot of industry had been transferred to east and totally new areas thus opened to exploitation, while the old industrial bases were reconstructed. Due to the many errors done in the 1930’s, Soviet Union had a lot of dormant capacity and there’s a good argument made that the GDP (sorry!) development matched the potential trajectory only in the late 60’s.

            But yes, it’s a much longer story and there are many books written about it.

        2. JustTheFacts

          Yes, it took until 1951 for things to stabilize. Drought and incompetence caused a famine until 1948. There was a brief respite, but then Stalin purged the city a second time: he saw it as too close to the West, and he saw its leaders as competitors in terms of prestige because it survived the German siege without his help. More on that here.

    2. KD

      Europe collapsing economically, even if accompanied by mass starvation and deaths from exposure will not result in some deal with Europe and Russia. Europe’s leaders will not be starving or freezing to death or collapsing economically, and they have consumed the kool aid. Instead, you are going to have civil unrest and perhaps opportunities for the European far right parties, but that doesn’t necessarily mean change.

      In Italy, if the Far Right wins (and they are sort of pro-Nato), say they come out against the war–so what? The EU won’t change, NATO won’t change, and there will be back channel stuff threatening to break their fingers or stage unrest to “restore democracy”. Its going to take a long time, and a lot of suffering before European governments respond to the problem they have created for themselves.

      Further, Putin is not likely to make up and provide gas, unless the US drops sanctions and that is never going to happen. Remember, Russia is accusing Ukraine of conducting hits on its citizens, and the EU is allegedly harboring terrorists. . . hard to gloss that over diplomatically.

      Germany needs cheap gas to compete, and without Russia, they are not going to be competitive economically. China is Germany’s largest export market, and if the German’s think they can be NATO toadies and maintain their export market, they are deluded. Once the German export economy collapses, because it cannot compete and it is shut out of Eurasian markets, then the entire rationale for the EU collapses from the German perspective, and so the EU collapses. Not to mention all the economic shrinkage that is going to happen to comply with Maastricht, so all of Europe will come out in the economic ICU before its over.

      1. KD

        Europe is not sovereign: it cannot defend itself, and accepting US defense means not only basing alien forces on their territory, but allowing infiltration by US NatSec services, as well as cooperating with CIA/NGO operations which are all intended to keep European national security arrangements on a short leash. One would be naive to imagine there is no election interference to promote democratic values in Europe or that accidents could not happen. So now they are stuck with Uncle, just like the former Confederacy, except unlike the former Confederacy, they don’t even get a vote.

      2. David

        Europe will have to come to an accommodation with Russia eventually, perhaps over the corpses of governments. Perhaps over the corpses of members of governments. Western Europe, economically enfeebled as it will be, and already partially disarmed, will have to recognise that it is strategically inferior to Russia, and just accept it. This doesn’t mean that the Russians are going to attack, or threaten to attack, just that the calculus of power has changed. And there’s not a lot that Europe (or the US) can do about that in the short or medium term, for practical reasons which I’ve described here.

        Much depends after that whether the US wants to be an obstacle or not, bearing mind that they will have their own problems. The war shows conclusively that the US can do very little to affect the security situation in Europe, and this is unlikely to change. I suspect we’re quite close to a major cleavage between at least some European states and the US, and the effective narcolepsy of NATO; The problem is that history suggests this is likely to be a messy and dangerous process.

        1. Tom Pfotzer

          KD: “Europe cannot defend itself”.

          Tom: From what? Who is threatening Europe?

          David: “The war shows conclusively that the US can do very little to affect the security situation in Europe”.

          Tom: What? The war shows that the U.S. can radically, thoroughly and for years to come screw up the security situation in Europe. This war was the U.S. NeoCon’s idea, and it got rammed down Europe’s throat.

          If there is anyone the Europeans need to defend themselves from, it’s the U.S.

          Remember what H. Kissinger said about the “friends of the U.S.”.

      3. Daniil Adamov

        Russia is trying to provide gas either way, though. Agreed on Europe – I don’t think any serious political figures, including any halfway viable far right or far left leaders, would want to compromise any time soon. Regardless of the merits of the case, it would just be too difficult in terms of internal politics, since anyone who tries this will be ganged up on.

        1. David

          That’s why it’ll happen in bits, furtively, through intermediaries and whatever. Then, in true political fashion everything will have changed but no-one will be responsible. And because Putin didn’t take Kiev, the West will have won.

          1. hk

            The way things are moving, the West is practically daring Putin to take Kiev (and possibly Lwow), and I don’t think, in the long run, Putin will have to “take” them one way or another. (More likely another than not, admittedly).

  30. chuck roast

     “…this shock will be so severe if nothing is done…the result will be not a recession, but a depression in Europe.”

    Well, someone finally said it, and of course it would be Yves. However, unlike back in the balmy days of the GFC, I don’t expect that Yves will be getting much face time in front of the corporate agit-prop cameras any time soon. I told a few of my friends that the English will be facing $3,500 monthly utility bills this winter. After they picked their jaws up off the floor, they immediately asked my where I got that information. I cited the Financial Times…the organ of the ruling euro elite. No solutions, because markets.

    As an aside: The Plutocrat Boutique Bank has erected new protective firewalls for the worst financial speculators by setting up a new Repo facility that is not permitted by any Federal statute. “Counterparties for this (Repo) facility will include primary dealers and will be expanded over time to include additional depository institutions.” They will be lining up soon. Anyway, off to the athenaeum to check out the pink paper and the latest magical thinking from the ruling class. Toodles!

    1. Revenant

      I don’t think it has got to $3.5k pcm yet, unless the dollar has taken a beating. At the moment, the cap is about that for an *annual* energy bill. With the forecast that it will rise to £5k pa in October and potential £6k+ in Q2’23.

      For reference, we have a large house by UK standards (4,000 sq ft) and our monthly payment used to be £300 for gas and electricity combined (1926 construction, cavity wall brick with no cavity insulation, tile roof, single glazing, gas CH and DHW; profligate use of tumble dryer and the indefensible always on gas-fired Aga; no electric cars or swimming pools or aircon or other toys, thermostat set to 18degC in winter and wear a jumper / hot water bottle in bed). I hate to think what our bill may become. £500-£600 pcm beckons.

      Not much we can do to save energy. We are giving serious consideration to turning the heating off in the main zone of the house, just keeping the hot water and downstairs bathroom heated, and relying on the Aga to heat the kitchen and repairing the wood burner to heat the sitting room and just doubling up the duvets and hot water bottles upstairs.

  31. Ignacio

    Because summer heat, and it has been an hot and dry awful summer that has forced shutdown of nuclear plants and NG demand for power generation has been too high compared with other years at the same time when every country is trying to build reserves prior to winter, but with lower supply. This explains high spot prices these days.

    Regarding reserves, these are built every year though I cannot say if the 80-85% threshold in October is the normal but I believe it is. In previous years this was enough, but counting with Russian supplies during the winter so if Russian supplies remain at current level or shut down, such reserves might not be enough for next winter. It is difficult to find the good numbers for all countries.

    Because we are in self-defeating and quite possible in self-deception mode it is difficult to say what the situation next winter will be. Joeri’s tweet about future delivery prices suggests Mr Market feels that reserves are not enough and we are indeed in self-defeating mode no matter what Habeck says.

    Let us prey we have a windy and rainy autumn. If not, problems might compound to extraordinary levels. Is this what the Commission is actually doing? (praying like crazy).

    1. OIFVet

      I just read that von der Leyen will propose EU-wide measures to tackle rising electricity prices: https://www.rte.ie/news/world/2022/0829/1319422-energy-emergency/. However, not a word about gas supply, and based on her saying, also today, that Russia must lose the war (https://www.msn.com/en-gb/news/world/von-der-leyen-says-putin-must-lose-the-war-and-calls-for-more-democracy-in-response-to-russia-and-china/ar-AA11ehzj?ocid=EMMX) and we need more democracy (!?!?), I think that the emergency proposal will be a giant nothingburger. I guess we will heat our homes with democracy this winter. Truly, the EU is screwed.

        1. OIFVet

          Expanded democracy in the EU will be put on hold. Olaf Scholz today proposed that veto power be removed and he justified it with the future enlargement of the EU: https://www.brusselstimes.com/eu-affairs/279968/towards-a-multi-tiered-europe-scholz-calls-for-eu-enlargement

          You wanna bet that this benefits the interests of Germany, France, and the Netherlands? The EU has become an unworkable monster and it will be even more unworkable if it expands to 36 states, as Scholz proposes. But removing the individual states’ veto power will not answer that problem. The problem is that the EC is all too powerful, is filled with mediocrities, and generally does the bidding of Germany and France. The democracy deficit in the EU will only increase, and von der Leyen’s talk about more democracy is simply Orwellian.

      1. Ignacio

        Indeed. That would tackle soaring electricity bills for consumers but does not guarantee full supply.

  32. IEL

    There has some speculation about Poland absorbing part of Ukraine. I don’t understand why they would want it, since it would dilute their “nation-stateness” but that would make Kiev part of the EU and NATO without going through the normal processes. What kind of response might we expect from various parties?

    1. Polar Socialist

      Polish borders have been probably the most volatile thing in the European history, but for it’s statehood and national identity those of Lviv and Volhynia given to Ukraine by Stalin in 1945 still may hold some meaning even today. Even if the polish population in those areas has been mostly either ‘cleansed’ or escaped elsewhere.

      I don’t think any half rational Polish would want those areas back, but then, “rational” seems to have left the room some time ago. And Ukrainian parliament already gave the Polish the same rights in Ukraine as citizens have (except if the said citizen is less than pure Ukrainian). It’s abit confusing, to be honest.

      Now, in the Zakarpathian region south of Lviv area there is a significant Hungarian ethnic minority, which has actually asked Orban for help against the Ukrainization of the last decade.

  33. Mikel

    Another big Russian military advantage: they don’t have a foreign power directing and calling shots. Cuts out middle men of all sorts.

  34. Susan the Other

    Speaking of finesse, maybe the Fed is ready to handle the next financial implosion. It has been very agile with ignoring inflation until something clicked and they slammed it all into reverse; upped interest rates that do more than effect the USA – they cause financial hardship for emerging markets, force other countries to raise their interest rates and go into austerity and all the while fill American coffers with foreign currency exchanged for dollars at killer prices. And that will be for as long as we keep funding and feeding the war for oil in Ukraine. So we are set to hoover up everybody’s money for as long as we can maintain high interest rates. According to Powell perhaps a few years. So if the euro collapses and all the financial TBTFs in Europe collapse it will still leave the Fed standing and therefore the financial system. And then when the dust settles in 3 or 4 years, or more, the dollar will emerge once again as the cleanest dirty shirt. But I do get the feeling that this is Custer’s last stand. We probably can’t do this again (because climate change) because when finance implodes because business imploded because profits imploded because consumers imploded because nature imploded we will have to start over with a better idea. I don’t think capitalism for fun and profit will cut it next time. I hope they’ve got something clever waiting in the wings.

    1. Yves Smith Post author

      US banks have substantial European operations. US businesses have exposure to Europe. Europe cannot go down without pulling the US down, not to the same degree but there will be damage.

      And central banks cannot solve a real economy problem: an energy shortage in Europe that will persist for years. The only solution is getting Russian energy back. That will likely require regime change in Europe.

      1. KD

        The Financiers will just sweep in and buy up everything worth owning at distressed prices and the US will just print money to ensure everything stays on life support until conditions stabilize, at which point they will dump and make a trillion. Good times if you are not a European pensioner.

        1. Yves Smith Post author

          The Fed is not in printing money mode. QE is an asset swap and props up the price of financial assets. The US does not want higher financial asset prices (which equates to lower interest rates) right now. And if Europe is going into a protracted downturn due to lack of energy, buying on the cheap will take real economy rebuilding skills, as in on the ground, something to which most financiers are allergic. The expression here is “Don’t catch a falling safe.”

      2. thoughtful person

        It’s crazy but in the minds of the neocons who laid the foundation for the current conflict, what if they see regime change in Moscow as the solution? This would mean a wider European war. Very profitable to the MIC.

        India and China could possibly be bribed not to come to Russia’s aid?

        As for timing perhaps in Spring of 2023 or 2024, once the population of Europe has been hearing all the pain of conservation and higher prices (and maybe worse, food rationing?) is all due to evil Putin 24/7.

  35. Mikel

    “Colonel Douglas Macgregor also stated publicly that Ukraine had lost a month into the conflict; the only open question to him was how long we kept the fighting going to try to weaken Russia…”

    I’ll venture to say the Russians aren’t the only targets for aggression. Hence:

    “Emmanuel Macron rattled pundits last week by telling France it faced the “end of abundance,” as in they need to accept a permanent reduction in their standard of living…”

    Then the ECB and FED and their sacrifice speeches…

    It’s a multi-front war that includes the class war.

  36. Mikel

    “Yours truly does not have a good handle on where supposedly but not really hidden leverage sits now. Even though there has been an awful lot of speculation in crypto-land, so far, its wild ride down does not seem to have done much damage to the critical traditional payments infrastructure (as in the linkages to real economy banks don’t seem to be very significant).”

    I’ve wondered about leverage and crypto as well. Is it far off the mark to wonder if the people in crypto with the most leverage are probably ones that have a much lower cost basis (earliest insiders)? If so, how far would it have to drop to throw them into a tizzy?

  37. Telee

    Keep in mind that a major part of Michael Hudson’s analysis is not only did the US strategy aim to weaken Russia but is aimed at weakening the economy of Europe in order to maintain US hegemony.

    1. David

      I don’t doubt there are a few fruitcakes in Washington who would like to see that, but then there are fruitcakes everywhere. It’s just that it isn’t remotely within the powers of the Washington beehive to properly conceive, let alone implement, such a strategy. And the US will be the big loser from all this, notably in that US “hegemony” (in part a myth anyway) will be mortally wounded.

      1. ACPAL

        That depends on who is really in charge. Foreign policy hasn’t changed significantly with changes in presidency or political party in decades which means that whoever is in charge is above them. Biden and the other “fruitcakes” are mere puppets. The real puppet masters (likely international oligarchs) may well be intentionally weakening Europe so that they can buy up Europe’s industries and resources while loaning them money at usury interest rates making them even more colonies than they are already. All at little risk and high return on investment.

  38. chris

    I like reading the Guardian and Slate better the the NYT when it comes to seeing what the establishment thinks is the reality that they can drown the public with. The NYT talks around the point and wastes my time. But the Guardian tends to get right at it, like in this opinion piece from Mr. Simon Tisdale.

    You would think Mr. Tisdale was running out of hyperbolic things to say about Russia, but you’d be wrong. Gone is any discussion about how much the current energy crisis is a European own goal. Gone is any attempt to explain why Ukraine does nothing but retreat. Instead we have assertions that 10s of thousands of Russians are dead, attacks inside Crimea and Donbas have ruined any Russian strategy, and that Russian collapse is imminent. So imminent is Putin’s collapse that he has fallen back on the desperate strategy of inflicting economic hardship on Europe and the UK.

    I don’t know much about military analysis. I don’t read enough or have access to maps and data that explain things clearly. I don’t speak or read Russian or Ukrainian. But it seems to me that Mr. Tisdale and all the people who agree with him have some testable hypotheses there. If we find ourselves with Russia still holding strong and gaining territory in November, while the chill of winter begins to strangle a fuel starved Europe, I will look to Mr. Tisdale said to see if anything he has asserted was correct.

    If Putin had any kind of theatrical bent, you could imagine him giving Europe a fireside chat on the day of the first freeze. I can imagine Tisdale’s headline then… “Putin desperately assuming the West will freeze without fuel to heat their homes” or “With Russian backs to the wall, they are resorting to an untried strategy: waiting for winter to do their work for them”.

  39. David

    What’s beginning to worry me is that the western ruling class no longer understands the difference between money and real things or, if you like, between placing an order for something and having it delivered. But then what do you expect after forty years of financialisation? The idea that you can buy your way out of any problem will not survive contact with a world in which there are actual, you know, shortages of things, and absolute limits on energy that you can source. You can’t order a nuclear reactor or a hydroelectric system on Amazon and have it delivered tomorrow. The amount of (say) aluminium or chemical constituents for making fertiliser is actually limited. You might get involved in a bidding race, but even if you are successful you can’t actually buy any more than is available. Let’s imagine that a government, worried about heating bills, makes extremely generous payments to its citizens to keep bills down. Fine, but that doesn’t mean there will be any more fuel, all it means is that people will still freeze to death, but freeze to death more cheaply. To actually make any practical difference, you would have to start rationing, not between countries but between households. Good luck with that.
    I sometimes think our political classes no longer understand anything. I don’t know what they do to Putin, but they sure as hell frighten me.

    1. Glen

      Yes, the neoliberal financiailization of everything is having real consequences. And having our elites live in a different world that the rest of us means they can continue these policies (why not since these same actions made most of them very, very wealthy) for long, long time.

      It’s best to redefine the terms of winning and losing in the EU and Ukraine to clarify the issue. Who’s winning? The ultra wealthy. Who’s losing? Everybody else.

    2. vao

      But then what do you expect after forty years of financialisation?

      It is more profound than that.

      The political personnel currently governing European countries is mostly composed of jurists, finance people, political scientists, career politicians. In other words, people for whom manipulating symbols is the reality — drafting a law, juggling with budgets, taxes and loans, delivering speeches, hammering out working papers, negotiating treaties. Once these are done, they view their work as accomplished.

      There are very few members of governments who actually worked in the industry, transport or agriculture, and hence who ever had to deal with the nitty-gritty of producing and delivering things. Hence, what must must happen afterwards for a law, a budget or a treaty to actually have an effect lies not just outside of their sphere of interest, but also outside their apprehension. The civil service was supposed to provide the necessary back-up to understand those concrete aspects, but in many countries it has been eviscerated.

      Their reaction to the coronavirus pandemic illustrates quite well the point. Duly proclaiming measures by decree, allocating budgetary resources, and making stirring speeches about national unity in the face of adversity were one thing, making sure their implementation actually worked and negative consequences were properly dealt with was just too complicated and too much trouble. Better to abandon all pandemic measures, return to “normalcy”, go back to not having to get one’s hands dirty with the recalcitrance of the concrete world, and let the “market” do its magic. For another example, look at how the British government dealt with Brexit while EU technocrats at least understood quite well the concrete implications on commerce.

    3. eg

      The western ruling class have confused “spreadsheet land” with “real resource land.” They are in for a rude awakening when it becomes apparent to all that their maps do not reflect the territory …

    1. Tony Wright

      One thing that amazes me in all of this, which I have not yet seen discussed elsewhere:
      Angela Merkel, a scientist who grew up in former East Germany under the “watchful eyes” of the Stasi, placed her trust in Vladimir Putin, a ruthless, allegedly murderous, Russian imperialist, attitude unreconstructed former KGB operative to supply the energy necessary to run the German economy. Talk about putting your head in the lion’s mouth.
      Along with Dubya’s invasion of Afghanistan and Iraq, that has to share the award for the dumbest political decision this century.

      1. Yves Smith Post author

        This is serious Putin Derangement Syndrome. I hope you can get treatment.

        First, Putin is not a decider. This is a bizarre myth that the Western press loves to propagate. He had to campaign hard in 2012 to win in a fairly close contest. Even actual dictators like Xi are hostage to powerful factions, and Putin is more so as an elected leader. The West does not want to acknowledge that Putin has a lot of cred in Russia for pulling the country out of its very deep late 1990s economic hole, over time increasing real per capita incomes more that five times in PPP terms, getting the oligarchs to pay massive back taxes, and wresting control of key energy resources from the West. The latter is why the West hates Putin, he stopped the looting. Putin has managed to get and keep a lot of very good people (Lavrov, Medvedev, Nabiullina, I suspect there are others)

        Second, despite the above, Putin has long been somewhat distrusted by Russian voters as being too pro-Europe. He is the least hawkish of the Russian leadership group.

        Third, you do like caricature. Putin when he was in Germany was an external KGB officer. That meant he was not operating as a spy but was carrying a KGB business card and meeting with people, Lord only knows for what. Edward Luttwak had dinner with him often back then. And as for murderous, any recent American president is responsible for vastly more deaths than Russia via our protracted nation-breaking campaign in the Middle East. Our death count over Putin’s time in leadership has to be 10x his.

        Forth, German industry has long been dependent on Russia energy. Are you suggesting they had an alternative? Pray tell what? Inventing a perpetual motion machine? Cold fusion? Maybe at best nuclear but even then they’d probably have gotten the uranium from Russia, as the US does.

  40. VietnamVet

    What makes today so bad is that the wealth in the West mostly comes from the tools that extort money from others that neoliberal financialization introduced. This is what China, Russia and Iran are trying to get away from by creating their own commodity based currency. For the ruling elite to recognize reality is to realize what crooks they really are. “Behind every great fortune is a greater crime”. They can’t. They won’t. There are no working sovereign governments in the West to fight the European proxy world war by mobilizing the public and industry. Either there is a collapse in Europe that will impact the rest of the world or there is a restoration of good government that works for the greater good to prevent it.

    There is a good discussion, above, on the fake markets for deregulated electricity that Enron pioneered that simply do not work well and can be manipulated to increase profits. Electric utilities by their very nature are a monopoly. There is only one metered electric power line into a home or small business. Profiteering is ingrained within current western political/economic system.

  41. ArvidMartensen

    So the whole thing looks to be insane if you try and use rationality to understand the situation. Maybe that is a mistake and a new mindset is needed, perhaps more along the lines of.
    1. The US sees Europe as one of its colonies. (Occupation by US troops long term, Operation Paperclip etc). Europe agrees it is a colony.
    2. The US mandates that colonies support and enrich the US or suffer the consequences.
    3. Harsh, Christian consequences are the answer to disobedience Ezekiel 38:22 – “With pestilence and with blood I will enter into judgment with him; and I will rain on him and on his troops, and on the many peoples who are with him, a torrential rain, with hailstones, fire and brimstone.”.
    Anyone who disobeys the country anointed by God to rule over the world must suffer terrible consequences. The rulers must suffer. But importantly the people must suffer greatly.
    History throws up a few examples where death, destruction, pestilence, blood, and fire and brimstone have been meted out by the US as punishment in the past on countries and the old, sick, young, women, men,workers:
    Chile, Korea, Vietnam, Indonesia, Iran, Iraq, Libya, South America in general, Afghanistan, Syria etc

    Now Europe has defied the US and built links with Russia. So Europe must be punished. All of them, rulers and people, the aged, the workers, children. By fire and brimstone using Ukraine. Through hunger, cold, poverty. Nothing is off limits. There can be no mercy.

    That might explain what is really going on. Punishment and revenge. Death and destruction. No mercy. Powerful and irrational entitlement of the just, dressed up as “democracy” and “economic interests”.
    And if the US can make a quick buck in the meantime on LNG, well, all to the good.

  42. ChrisPacific

    Thanks for this post, which struck me as vintage NC: a lot of should-be-obvious stuff, with all of the dire and easily derived consequences outlined, which nonetheless seem to be universally ignored by those whose job it is to understand and lead.

    It reminds me of the old pre-GFC days, and the role NC played back then. This is not exactly a comforting thought.

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