By Pepe Escobar, The Cradle, 4/7/22

The stunning spectacle of the European Union (EU) committing slow motion hara-kiri is something for the ages. Like a cheap Kurosawa remake, the movie is actually about the US-detonated demolition of the EU, complete with the rerouting of some key Russian commodities exports to the US at the expense of Europeans.

It helps to have a 5th columnist actress strategically placed – in this case astonishingly incompetent European Commission head Ursula von der Lugen – with her vociferous announcement of a crushing new sanctions package: Russian ships banned from EU ports; road transportation companies from Russia and Belarus prohibited from entering the EU; no more coal imports (over 4.4 billion euros a year).

In practice, that translates into Washington shaking down its wealthiest western clients/puppets. Russia, of course, is too powerful to directly challenge militarily, and the US badly needs some of its key exports, especially minerals. So, the Americans will instead nudge the EU into imposing ever-increasing sanctions that will willfully collapse their national economies, while allowing the US to scoop everything up.

Cue to the coming catastrophic economic consequences felt by Europeans in their daily life (but not by the wealthiest five percent): inflation devouring salaries and savings; next winter energy bills packing a mean punch; products disappearing from supermarkets; holiday bookings almost frozen. France’s Le Petit Roi Emmanuel Macron – perhaps facing a nasty electoral surprise – has even announced: “food stamps like in WWII are possible.”

We have Germany facing the returning ghost of Weimar hyperinflation. BlackRock President Rob Kapito said, in Texas,“for the first time, this generation is going to go into a store and not be able to get what they want.” African farmers are unable to afford fertilizer at all this year, reducing agricultural production by an amount capable of feeding 100 million people.

Zoltan Poszar, former NY Fed and US Treasury guru, current Credit Suisse grand vizir, has been on a streak, stressing how commodity reserves – and, here, Russia is unrivaled – will be an essential feature of what he calls Bretton Woods III (although, what’s being designed by Russia, China, Iran and the Eurasia Economic Union is a post-Bretton Woods).

Poszar remarks that wars, historically, are won by those who have more food and energy supplies, in the past to power horses and soldiers; today to feed soldiers and fuel tanks and fighter jets. China, incidentally, has amassed large stocks of virtually everything.

Poszar notes how our current Bretton Woods II system has a deflationary impulse (globalization, open trade, just-in-time supply chains) while Bretton Woods 3 will provide an inflationary impulse (de-globalization, autarky, hoarding of raw materials) of supply chains and extra military spending to be able to protect what will remain of seaborne trade.

The implications are of course overwhelming. What’s implicit, ominously, is that this state of affairs may even lead to WWIII.

Rublegas or American LNG?

The Russian roundtable Valdai Club has conducted an essential expert discussion on what we at The Cradle have defined as Rublegas – the real geoeconomic game-changer at the heart of the post-petrodollar era. Alexander Losev, a member of the Russian Council for Foreign and Defense Policy, offered the contours of the Big Picture. But it was up to Alexey Gromov, Chief Energy Director of the Institute of Energy and Finance, to come up with crucial nitty-gritty.

Russia, so far, was selling 155 billion cubic meters of gas to Europe each year. The EU rhetorically promises to get rid of it by 2027, and reduce supply by the end of 2022 by 100 billion cubic meters. Gromov asked “how,” and remarked, “any expert has no answer. Most of Russia’s natural gas is shipped over pipelines. This cannot simply be replaced by Liquified Natural Gas (LNG).”

The risible European answer has been “start saving,” as in “prepare to be worse off” and “reduce the temperature in households.” Gromov noted how, in Russia, “22 to 25 degrees in winter is the norm. Europe is promoting 16 degrees as ‘healthy’, and wearing sweaters at night.”

The EU won’t be able to get the gas it needs from Norway or Algeria (which is privileging domestic consumption). Azerbaijan would be able to provide at best 10 billion cubic meters a year, but “that will take 2 or 3 years” to happen.

Gromov stressed how “there’s no surplus in the market today for US and Qatar LNG,” and how prices for Asian customers are always higher. The bottom line is that “by the end of 2022, Europe won’t be able to significantly reduce” what it buys from Russia: “they might cut by 50 billion cubic meters, maximum.” And prices in the spot market will be higher – at least $1,300 per cubic meter.

An important development is that “Russia changed the logistical supply chains to Asia already.” That applies for gas and oil as well: “You can impose sanctions if there’s a surplus in the market. Now there’s a shortage of at least 1.5 million barrels of oil a day. We’ll be sending our supplies to Asia – with a discount.” As it stands, Asia is already paying a premium, from 3 to 5 dollars more per barrel of oil.

On oil shipments, Gromov also commented on the key issue of insurance: “Insurance premiums are higher. Before Ukraine, it was all based on the Free on Board (FOB) system. Now buyers are saying ‘we don’t want to take the risk of taking your cargo to our ports.’ So they are applying the Cost, Insurance and Freight (CIF) system, where the seller has to insure and transport the cargo. That of course impacts revenues.”

An absolutely key issue for Russia is how to make the transition to China as its key gas customer. It’s all about the Power of Siberia 2, a new 2600-km pipeline originating in the Russian Bovanenkovo and Kharasavey gas fields in Yamal, in northwest Siberia – which will reach full capacity only in 2024. And, first, the interconnector through Mongolia must be built – “we need 3 years to build this pipeline” – so everything will be in place only around 2025.

On the Yamal pipeline, “most of the gas goes to Asia. If the Europeans don’t buy anymore we can redirect.” And then there’s the Arctic LNG 2 project – which is even larger than Yamal: “the first phase should be finished soon, it’s 80 percent ready.” An extra problem may be posed by the Russian “Unfriendlies” in Asia: Japan and South Korea. LNG infrastructure produced in Russia still depends on foreign technologies.

That’s what leads Gromov to note that, “the model of mobilization-based economy is not so good.” But that’s what Russia needs to deal with at least in the short to medium term.

The positives are that the new paradigm will allow “more cooperation within the BRICS (the emerging economies of Brazil, Russia, India, China and South Africa that have been meeting annually since 2009);” the expansion of the International North South Transportation Corridor (INSTC); and more interaction and integration with “Pakistan, India, Afghanistan and Iran.”

Only in terms of Iran and Russia, swaps in the Caspian Sea are already in the works, as Iran produces more than it needs, and is set to increase cooperation with Russia in the framework of their strengthened strategic partnership.

Hypersonic geoeconomics

It was up to Chinese energy expert Fu Chengyu to offer a concise explanation of why the EU drive of replacing Russian gas with American LNG is, well, a pipe dream. Essentially the US offer is “too limited and too costly.”

Fu Chengyu showed how a lengthy, tricky process depends on four contracts: between the gas developer and the LNG company; between the LNG company and the buyer company; between the LNG buyer and the cargo company (which builds vessels); and between the buyer and the end user.

“Each contract,” he pointed out, “takes a long time to finish. Without all these signed contracts, no party will invest – be it investment on infrastructure or gas field development.” So actual delivery of American LNG to Europe assumes all these interconnected resources are available – and moving like clockwork.

Fu Chengyu’s verdict is stark: this EU obsession on ditching Russian gas will provoke “an impact on global economic growth, and recession. They are pushing their own people – and the world. In the energy sector, we will all be harmed.”

It was quite enlightening to juxtapose the coming geoeconomic turbulence – the EU obsession in bypassing Russian gas and the onset of Rublegas – with the real reasons behind Operation Z in Ukraine, completely obscured by western media and analysts.

A US Deep State old pro, now retired, and quite familiar with the inner workings of the old OSS, the CIA precursor, all the way to the neocon dementia of today, provided some sobering insights:

“The whole Ukraine issue is over hypersonic missiles that can reach Moscow in less than four minutes. The US wants them there, in Poland, Romania, Baltic States, Sweden, Finland. This is in direct violation of the agreements in 1991 that NATO will not expand in Eastern Europe. The US does not have hypersonic missiles now but should – in a year or two. This is an existential threat to Russia. So they had to go into the Ukraine to stop this. Next will be Poland and Romania where launchers have been built in Romania and are being built in Poland.”

From a completely different geopolitical perspective, what’s really telling is that his analysis happens to dovetail with Zoltan Poszar’s geoeconomics: “The US and NATO are totally belligerent. This presents a real danger to Russia. The idea that nuclear war is unthinkable is a myth. If you look at the firebombing of Tokyo against Hiroshima and Nagasaki, more people died in Tokyo than Hiroshima and Nagasaki. These cities were rebuilt. The radiation goes away and life can restart. The difference between firebombing and nuclear bombing is only efficiency. NATO provocations are so extreme, Russia had to place their nuclear missiles on standby alert. This is a gravely serious matter. But the US ignored it.”

By Eva Bartlett, In Gaza Blog, 4/5/22

*Following is a lengthy overview of my recent re-visit to the Donbass, on a two day media delegation, with a brief critique of some of the media’s slanted reporting. It is also a follow up from my 2019 visit to hard hit areas of the Donetsk People’s Republic. It is now 8 years of Ukraine’s war on the people of the Donetsk & Lugansk Republics.

In the last week of March, I stood on a central Donetsk main street next to two of the impact points of a Ukrainian missile attack that killed 21 civilians and injured nearly 40 more on March 14. The Donetsk People’s Republic (DPR) maintains that their military intercepted Ukraine’s Tochka-U ballistic missile, that not all of the cluster munitions inside exploded in the city streets, thereby lessening the already terrible bloodshed it caused. Indeed, if all of the munitions exploded in the streets, it would have been a bloodbath more horrific than the 21 killed.

Near the ATM, flowers and candles laid in memory of the civilians murdered that day, with haunting photos nearby depicting the aftermath of the bombing, the grisly scenes of the dead and the maimed—scenes you will generally never see blasted across Western corporate media, just as the same media were silent when terrorism struck civilian areas of Syria.

I’m intimately familiar with war zones, and with Western corporate media’s white-washing of the perpetrators’ crimes (Israeli crimes against Palestinians; Western-backed terrorists’ crimes against Syrians; Ukrainian military and Nazi crimes against the civilians of the Donbass—and also against Ukrainians proper), so the lack of media coverage on this recent Ukrainian war crime doesn’t surprise me.

They don’t report on it, or the myriad Ukrainian war crimes prior, because it doesn’t suit their narrative, the narrative which erases the eight years of Ukraine’s war against the four million people of the Donbass republics, killing at least 14,000 people, a modest estimate.

War crimes investigator, Ivan Kopyl, spoke about Ukraine’s March 14 attack, noting, “The warhead of a Tochka-U missile contains 50 cassettes of cluster munitions. We managed to find 28 traces of cluster explosions on the soil…A Tochka-U missile changes its orientation just before landing, so after it flies on a trajectory it makes a turn and falls vertically down before detonating at a certain height. The fragments then shower the surface in a radius of approximately 150 meters.”

I have one of those cluster fragments, a twisted and jagged square-shaped piece of metal—seemingly harmless looking on its own, but deadly when flying through the air at high speed, in great numbers.

Read full article here, photos included.

Rania Khalek interviews Tarik Cyril Amar who goes into more detail about some of the issues we discussed in our interview here.

Note: This doesn’t prove one way or the other what happened in Bucha. As I’ve said before, all sides commit atrocities in wartime. It is unfortunately the nature of war. I don’t believe that Russians are incapable of doing horrible things. But this is important overall context about the observations of Ukrainian militias’ behavior in general versus Russian forces. What is said in this video is generally consistent with the interviews of so many civilians in Donbas who have experienced the behavior of both Ukrainian militias (different from official Ukrainian military) and Russian forces. – Natylie

By Gilbert Doctorow, 4/7/22

By good fortune, I turned on our satellite receiver of Russian state television today just in time to catch key moments from the Prime Minister’s annual report to the State Duma on the work of the Government in the year gone by. Mishustin described in substantial detail the Government’s funding for domestic social and economic needs in 2021, but went on to say how the appropriations are being greatly increased in the current year to counter the negative effects of the “sanctions from hell” which the USA and the EU unleashed after the start of the Russian “special military operation” in Ukraine on 24 February.

Mikhail Mishustin is a heavy-set man but radiates energy, mastery of the subject matter of the day and enormous confidence in the ability of his team to manage effectively all of the challenges, challenges which would have already sunk most every other nation on earth save China. Instead, Russia recovered from a brief collapse of the ruble exchange rate, attaining once again in the past few days the level from before the sanctions. Of course, the exchange rate is not the only measure of success in coping with the sanctions, but it is a good initial barometer of business and public confidence in the government’s financial management.

At his appointment by Putin a couple of years ago, Mikhail Mishustin had going for him a reputation as what the Russians call a хозяйственник, meaning a technocratic manager who can keep tight reins on government spending and get things done. Following the trials of seeing Russia through the Covid crisis, Mishustin has filled out his inventory of skills to be a very impressive manager of men as well as means. He is a good public speaker. What he is not is a politician: he does not pose a threat to the occupant of the Kremlin; instead he is deferential and mentioned at every turn how this or that initiative of the Government or the legislature is made in response to directives from the Head of State.

He spoke a good deal about support for the people in these trying times, in particular about subsidies for mortgage loans to ensure that housing construction remains at the highest levels of output ever seen in modern Russian history. This is good for employment and good for people’s well being. In farming communities, the mortgage will be held at 3%.

He spoke about the massive funding being realized for infrastructure build-out, in particular for roads having regional importance. He talked about several industries having national importance which are being given special assistance – ship-building and civil aircraft production. The latter is being given every support to complete import substitution of all critical components, a task which began already several years ago following earlier waves of sanctions against Russia when Russia was denied supplies of the materials for composite wings on its newest passenger airliners.

But the greatest attention appeared to be to assist industry and commerce with subsidized credit for both investment and working capital. This takes on special importance under conditions of the very high prime rate (20%) which the Bank of Russia recently imposed to rein in inflation. The inflation was sparked by the sanctions and pull-out of foreign suppliers and manufacturers from the Russian market. It also related to the collapse of the ruble in the early days of the ‘special military operation.’

Such high prime rates would normally put a halt to the currency exchange crisis which it did very nicely. However, it would normally also starve the economy of capital and so lead to sharp reduction of supply as well as of demand. The measures that Mishustin set out, feeding capital at affordable rates directly to enterprises through subsidy arrangements with the banks, provides oxygen where it is needed at this critical moment. The objective is to keep enterprises afloat, workers employed, and give a breathing space for the enormous challenges of import substitution to be resolved. It all makes good sense.

In general, despite its statist overarching policies, which include, in present circumstances, naming champions in the target industrial sectors for import substitution, the government’s emphasis remains on encouraging private entrepreneurship at all levels, from small and medium sized enterprises, to the industrial giants, which are also under great stress from the sanctions. That is to say, Russia remains predisposed to free markets as the best response to foreign pressure.

The statist, interventionist side of the present Government shows itself in the measures Mishustin listed with respect to facilitating closer cooperation between universities and other centers of research on the one side and industry on the other. Going back to Soviet times, this was always a weak point in the Russian economy. Now, listening to Mishustin, it appears that there are people in charge who know how to fix the problem just when the Russian economy will be in greatest need of innovation and new technological talents.

My take-away from Mishustin’s speech is that Russia has in place a world class management of the economy and finance. Those in Washington who thought the country could be crushed misunderstood Russians and underestimated the capabilities, determination and sang froid of their Government.

But then there is nothing to be surprised at in this state of affairs. Russian studies in the United States have been virtually useless to anyone for at least two decades. Taking the well known and respected Harriman Institute of Columbia University as a marker, I can say that apart from LGBTQ issues in Russia or Ukrainian films, the monthly program of events for the student body has zero on offer. The lectures and round tables on the Ukraine war today are talk between tweedle-dum and tweedle-dee, with all panelists reading from State Department briefings, no different from what the journalists in mainstream media are doing. Not an original perspective or thought to be found there. The field has been totally politicized into an anti-Putin street party and otherwise trivialized. There is no way that this esteemed institution could help anyone in Washington planning economic warfare on Russia to understand the resilience of the Russian side and the futility of their mission.