Austrian Chancellor Karl Nehammer walked away from his meeting on Monday with Russian President Vladimir Putin convinced that sanctions aren’t weakening the Kremlin’s determination to resolve the Donbass crisis before ending the military offensive in Ukraine.
“He clearly confirmed that the sanctions are tough for Russia but the situation in Donbass, as he said, must be, so to say, resolved, despite the sanctions – even if they are quite tangible,” Nehammer told reporters following the meeting at Putin’s residence outside Moscow, as cited by Tass.
The talks marked Putin’s first in-person meeting with an EU leader since the Russian attack on Ukraine began in February. While Nehammer had said he hoped to “build bridges” by traveling to Moscow, he told reporters afterward that “I generally have no optimistic impression that I can report to you from this conversation with President Putin.”
After pulling back its forces from around Kiev, Russia is preparing an offensive in eastern Ukraine “on a massive scale,” Nehammer claimed. Putin sees the war as necessary to defend Russian national security and mistrusts an international community that he considers “one-sided,” the chancellor said.
Nehammer said the meeting wasn’t “a visit of friendship,” adding that the conversation was “direct, open and hard.” He said he told Putin that alleged war crimes in Ukraine must be investigated to ensure the perpetrators are brought to justice.
Another topic discussed was the fact that anti-Russia sanctions will remain in place and intensify “as long as people keep dying in Ukraine,” Nehammer said. He also called for humanitarian corridors to be set up to bring food and water to besieged towns and evacuate women, children and injured people.
“I will now inform our European partners about the conversation and discuss further steps,” the chancellor said.
Russia has denied committing war crimes, saying Ukrainian officials had made false allegations to manipulate international public opinion.
The Donbass conflict goes back to the Western-backed overthrow of Ukraine’s elected leadership in 2014. Largely Russian populations in Ukraine’s Donetsk and Lugansk areas opposed the coup and declared their independence from Kiev, leading to seven years of fighting between government forces and separatists.
Russia officially recognized the Donetsk (DPR) and Lugansk (LPR) People’s Republics as sovereign nations in February, two days before launching its military offensive against Ukraine. Putin accused Ukraine of committing genocide against ethnic Russians in the Donbass – a crisis that Western nations ignored for years. He cited Ukraine’s refusal to abide by terms of the Minsk agreements, which were meant to end bloodshed in the Donbass, as one of the reasons for ordering a military solution.
Perhaps the bird we should strive to be is neither hawk nor dove, but the American Eagle depicted on our great seal.
The following piece is the transcript of a keynote address entrepreneur and investor David Sacks gave at The American Conservative and American Moment’s “Up From Chaos” conference in Washington, D.C., on March 31, 2022.
I want to thank the American Moment for the invitation to speak here today. As I appear before you, I’m reminded of the immortal words of Admiral James Stockdale: “Who am I? Why am I here?” As a tech entrepreneur and venture capitalist, I cannot claim to be one of those “experts” in foreign policy that we are constantly being told to listen to. However, my area of expertise does involve placing intelligent bets on future outcomes and identifying existential risks. And I’d trust in our expert class more if what I heard from them sounded anything like intelligent forecasting and risk assessment.
We face the most dangerous situation in American foreign policy since the Cuban Missile Crisis. The Russians have put their nuclear arsenal on high alert and warned us to stay out of their invasion of Ukraine. Our “experts” in government and the media feed us a stream of information oscillating between fear-mongering and hopeful arrogance: They tell us on the one hand that Russia’s territorial ambitions won’t stop at Ukraine and will eventually threaten all of Europe, but on the other hand that the Russian army is bogged down and on the brink of humiliating defeat. They tell us in one breath that we can safely escalate our involvement, but in their next panicked breath declare that Putin is a madman who is capable of anything. They reassure us that a “No Fly Zone” won’t precipitate World War III, while sometimes openly declaring that we’re already in World War III so let’s just get on with it already.
How can any American citizen listening to these contradictory and reckless statements have confidence in our expert class? We’ve just lived through more than two years of another group of experts giving us a constantly-shifting set of theories and guidelines around Covid, only to see many of those confident predictions and pronouncements unravel.
But while those health experts got a lot wrong, our foreign policy establishment has gotten everything wrong for over two decades. They spent trillions of dollars in Afghanistan, Iraq, Syria, and Libya and only made all of those situations worse, unleashing staggering death and destruction. In every case, they told us we were winning and our policy objectives were being achieved, up until the very moment when our withdrawal laid bare the extent of our total failure. This is the same foreign policy establishment that gave us the policy of Constructive Engagement towards China, feeding that baby tiger until it became a dragon that can challenge us for global hegemony. So maybe it’s time to listen to some new voices.
And that’s why I’m here. Perhaps a voice from outside the Beltway needs to remind our experts, especially at the State Department, that their job is to keep us out of war, and one way to do that is through effective diplomacy. I realize that after two decades of nearly continuous wars, they may not have much practice at this. Their diplomatic skills may have atrophied from lack of use. This has made the current situation much worse than it needed to be for many brave and innocent Ukrainians. It has also placed us at risk of a wider war, rising inflation, a steep recession, massive food insecurity, and even a potential nuclear confrontation if this war spins out of control. So we should all be very concerned at the incompetence that’s been on display, first in the months leading up to the war, and now as the combattants attempt to negotiate peace. I want to speak to each of these two situations.
This War Was Preventable
First, it is my belief that the war in Ukraine could have been prevented. Asserting this in no way implies that anyone other than Vladimir Putin is responsible for starting this war. He ordered this invasion, and the blood spilled is ultimately on his hands. But just because his actions caused the war doesn’t mean it was inevitable or that we couldn’t have taken steps to prevent it. Years ago, a number of academics—albeit not ones favored by our foreign policy establishment—predicted a future crisis in Ukraine that would wreck the country. If a war is predictable, shouldn’t it also be preventable?
There are two ways to prevent conflict: strength and diplomacy. Consider the American Eagle depicted on the Great Seal of the United States that’s also on our dollar bill. In one talon, the eagle clutches 13 arrows, and in the other it clutches an olive branch. This reflects our nation’s understanding of how to make and maintain peace since our founding: strength and diplomacy. This administration failed on both fronts.
First, President Biden failed to project American strength when he gutted our energy independence, canceling the Keystone pipeline on his very first day in office and restricting domestic energy production. Meanwhile, other NATO countries like Germany made themselves even more dependent on Russian gas by shuttering their nuclear power plants. Putin must have concluded that the West needed his gas too much to sanction him effectively. Next, the Biden administration botched the withdrawal from Afghanistan. The Afghan army that we had spent many years and countless billions of dollars to “stand up” was exposed as a fraud in a matter of days. Then our troops and their local allies beat a chaotic retreat from the country that revealed tactical incompetence in the general corps, with zero accountability to follow. Lastly, in the crucial days and weeks leading up to the war, Biden appeared to give the green light to a “minor incursion” into Ukraine by Putin’s forces, suggesting that wouldn’t necessarily trigger the sanctions and other penalties.
But of course in Washington there is never a shortage of those who will chide an administration for failing some test of strength in foreign policy. What is rarer and therefore more vital is to point out failures of diplomacy, which can just as easily lead to unnecessary war. And I believe our State Department failed in its diplomatic mission in the run-up to the Ukraine invasion.
Ever since the Bucharest Declaration of 2008, when NATO opened the door to membership for Ukraine and Georgia, the Russians have indicated that membership for these two border nations was an unacceptable “red line” for them. They quickly proved their seriousness later that year by invading Georgia and securing territory where predominantly-Russian populations were located. (Doesn’t that sound eerily familiar?) For the last 14 years, Putin and the entire Russian elite have spoken with one voice: NATO membership for Ukraine was an intolerable security threat. We ignored this red line, continuing to push for NATO expansion and transitioning Ukraine’s military onto a NATO platform even before official membership.
In response, a Russian troop buildup began on Ukraine’s border around the beginning of last year. This had the intended effect of getting the new president’s attention. Biden called for a summit and met with Putin in Geneva in June last year. We don’t know exactly what was said in the room but we do know that Biden said publicly at that time that corruption in Ukraine prevented its entry into NATO. Putin seemed mollified, and tensions seemed to abate. According to recent reporting by The Intercept based on U.S. intelligence sources, the Russian military buildup on Ukraine’s border started to subside after the Biden-Putin Summit and did not increase again until October/November. So what happened in between to upset the apple cart?
On September 1, Ukrainian President Volodomyr Zelensky visited the White House. This was the first such visit by a Ukrainian head of state, fulfilling one of Kiev’s long-standing diplomatic objectives. On that day, the U.S. and Ukraine issued a “Joint Statement” affirming deep economic and military ties between the two nations, including support for Ukraine’s NATO membership. This likely reflected weeks of back-channel negotiations that preceded Zelensky’s visit, suggesting Biden’s reassurances to Putin were dead-letter virtually from the day he made them. On November 10, Secretary of State Blinken and the Ukrainian foreign minister signed a massive 10-year Charter Agreement, which was the long-form version of the Joint Statement issued earlier.
Predictably, the Russians hit the roof. Foreign Minister Sergei Lavrov said they had reached “the boiling point.” They delivered a virtual ultimatum to the U.S. in December demanding written assurance that Ukraine would not become part of NATO. A month of furious negotiations began in January between Secretary of State Antony Blinken and Lavrov, during which Blinken gave no ground on NATO membership. In fact, he seemed proud of western intransigence, making statements like “There has been no change; there will be no change.” And: “NATO’s door is open, remains open, and that is our commitment.”
Yet that’s not what Blinken was saying privately. We now know, thanks to a stunning recent interview by Fareed Zakaria, that Zelensky was privately told that Ukraine wasn’t going to be admitted into NATO but that the door had to remain publicly open.
What could possibly be the rationale for this diplomatic approach? We refused to accede to the Russians’ most long-standing and important demand even though we privately admitted to Ukraine that we had no intention of following through. In other words, we refused to give the Russians “the sleeves off our vest,” a concession that was largely meaningless to us but of paramount importance for them.
Was it really so hard for us to imagine that the Russians might have a genuine concern about being encircled on a 1200-mile border by what they regard as a hostile military alliance? Aren’t diplomats supposed to be able to put themselves in the other guy’s shoes? Even if we see NATO purely as a defensive alliance, is it really inconceivable that Russia could see that vast military power as having offensive potential? After all, they watched NATO take offensive action to topple Moammar Ghaddafi in Libya and to bomb their Serbian allies during the Kosovo War. Is it really so hard to understand Russian paranoia about having American troops, weapons, and bases on their Ukrainian border, from which they’ve been attacked throughout history? The United States itself was willing to risk a nuclear confrontation with the Soviets over offensive weapons placed ninety miles off our shores in 1962, yet we treat the same concern by the Russians as crazy or a bluff.
But let’s say I’m wrong. Let’s say you believe that NATO expansion was not a real concern of the Russians but rather just a pretext for Putin’s invasion. We should still have been willing to give that guarantee to take it off the table as a casus belli. Polling of the Russian people showed that they favored an invasion to prevent Ukraine joining NATO by 2 to 1, but a majority did not favor attacking Ukraine for reunification. Even if it was just a pretext, we should have robbed Putin of that pretext in order to drive up his negatives among the Russian people. Just today, a new poll by Levada Centre showed that 80 percent of the Russian people support Putin so obviously we failed at that.
Nobody can claim that American negotiators didn’t know the Russians’ key demand. The Associated Press headline on January 19 practically screamed it: “Russia says it will take nothing less but NATO expansion ban.” Yet we never relented on the public assertion that Ukraine would join NATO while privately saying that it wouldn’t. It’s as if Blinken trained at some Bizarro World school of diplomacy where you say publicly what you should say privately, and privately what you should say publicly.
What was our goal? The degree of our State Department’s obtuseness has caused some commentators to speculate that American intransigence was a deliberate ploy to goad the Russians into an Afghan-style quagmire. I suspect that’s giving the administration too much credit. As Hanlon’s razor states, “Never attribute to malice that which is adequately explained by stupidity.”
Whether we thought the Russians were bluffing, or were hoping to goad them into a mistake, we know what happened next. The talks broke down, and after a two-week pause for the Beijing Olympics so as not to upset his buddy Xi Jinping, Putin invaded Ukraine on February 24.
Let me reiterate what I said earlier for any media types determined to twist my words. The invasion of Ukraine was solely Putin’s decision. He had other options. The repercussions for that criminal decision—the war, the deaths, the humanitarian disaster—fall entirely on him. I’m not seeking in any way to diminish his culpability for the monstrous atrocity of this war. But I do believe that, by not giving Putin the sleeves off our vest, the State Department failed to do everything it could to avoid this war.
It was diplomatic malpractice, pure and simple. Of course, incompetence like this always has to be covered up. So as soon as the war began, administration officials started claiming that the invasion of Ukraine had nothing to do with NATO expansion, and anyone who said differently, according to Jen Psaki, was “parroting Putin talking points.” Their goal was to create a taboo around the subject that has lingered to this day. Nobody was even allowed to discuss the causes of the war without having their loyalties questioned.
Following Psaki’s logic, were George Kennan, Henry Kissinger, Bill Bradley, and Sam Nunn all parroting Putin talking points when they warned years ago that expanding NATO up to Russia’s front porch would eventually result in disaster? Was former defense secretary Robert Gates parroting Putin talking points when he wrote in his memoir that trying to bring Ukraine into NATO “was truly overreaching” and a case of “recklessly ignoring what the Russians considered their own vital national interests”?
Are we to conclude that Biden’s own CIA director Bill Burns was parroting Putin talking points in his famous 2008 memo, “Nyet Means Nyet,” when he wrote to then-Secretary of State Condoleeza Rice, that NATO expansion to Ukraine is “the brightest of all redlines for the Russian elite (not just Putin)”?
It became necessary to memory-hole all of these warnings and many more by a long litany of eminent foreign policy thinkers to cover up the administration’s diplomatic incompetence prior to February 24.
Will Peace be Prevented Too?
That brings us to the present day. We can all agree that we sympathize with the Ukrainians in their desire to defeat Russian aggression and to be free of Russian domination. The Ukrainians have fought fiercely and bravely for their sovereignty. While opposing U.S. military involvement, I have supported arming the Ukrainians under Cold War rules so they can fight for their own freedom. I also believe that targeted sanctions can create pressure on Russia to come to the negotiating table. But it must be our objective now to help achieve a ceasefire and negotiated peace rather than protract the conflict.
Peace negotiations have been underway for a few weeks now, and the broad contours of a potential deal have been clear for some time: Ukrainian neutrality in exchange for international security guarantees; the recognition of Russia’s annexation of Crimea, which has been a fait accompli since 2014 and which is supported by the vast majority of people who live there; and some form of independence for the Russian-speaking areas in the Donbas, Donetsk and Luhansk, which would bring an end to the bloody civil war that has been raging there.
The United States should do everything it can to support such a deal. We don’t have a vital national interest in the details of who rules the Donbas. We do have a vital national interest in avoiding the existential risks of a protracted war. These risks include escalation into a wider war that could even involve nuclear weapons, the escalation of economic warfare or inflation that tips the West into recession, and damage to the global food supply chain causing potential famine around the world.
Of course, Antony Blinken and his State Department will be forced to eat a lot of crow given his many public declarations that we would never close NATO’s door or recognize Crimea. It’s only because of these previous statements that perfectly reasonable accommodations to achieve peace—that are really just the status quo—will be seen as appeasement by the Washington war machine. That’s not a reason to let our diplomatic corps fail us again. As President Obama said, “we have to be very clear what our core interests are and what we’re willing to go to war for.”
It’s bad enough that we aren’t leading the effort to reach a peace. We don’t even seem to be participating in it. Blinken and the U.S. seem curiously absent while France’s Macron, Israel’s Naftali Bennett, and even Turkey’s Erdogan step into the peacemaker roles. If anything, Blinken seems to be throwing cold water on the progress of the peace talks, harrumphing at a press conference Tuesday that he has seen “no signs of real seriousness” from the Russians in pursuing peace. Of course, “trust but verify” has always been good policy when making any deal with the Russians, but a more optimistic public stance is typically what American diplomats who are trying to lead two warring nations to a settlement would offer.
Are we sandbagging a deal because we want to bog Putin down in a long Ukrainian insurgency that bleeds his regime? It’s not wild speculation to conclude that, as Niall Ferguson and others have done. The ultimate aim of such a strategy would have to be the destabilizing and toppling of Putin’s regime. It’s clear that elements in Washington, particularly at the State Department, not-so-secretly want that. This faction believes that Biden’s “gaffe” last weekend that Putin “cannot remain in power” should be official U.S. policy and was a gaffe only in Michael Kinsley’s famous definition of the word: when a politician in Washington accidentally tells the truth.
All our attempts at regime change over the past 20 years have failed spectacularly, leaving humanitarian catastrophes and power vacuums in their wake. There is no reason to think regime change in Russia will be any exception. Our diplomats should be agents of peace, not agents of regime change.
If it is true that the Russian invasion has stalled, the policy choice we now face is akin to Bush 41 vs Bush 43. George Herbert Walker Bush had the wisdom to stop on the road to Baghdad after repulsing Saddam’s aggression. George W. Bush kept going, pursued regime change, and created an epic disaster.
Restraint never feels as good as maximalism. When Bush 41 stopped, he was widely called a wimp, whereas Bush 43 got to declare “Mission Accomplished” on an aircraft carrier. It took years to prove that Bush 41 had been right.
In his final days, George Herbert Walker Bush, heartbroken over the way that Cheney and Rumsfeld had ruined his son’s presidency, warned against that style of diplomacy: He called it the “iron ass view of everything”; he called it “arrogant”; he said it “doesn’t care what the other guy thinks,” it “just wants to kick ass and take names.”
I can’t think of a better description of our State Department’s intransigence before the war, and its disinterest in peace now. I can’t imagine a more toxic combination than a State Department that only conducts iron-ass diplomacy while defining American interests so broadly that it includes checking aggression virtually anywhere in the world. That is a recipe for an America that is permanently at war.
To be clear, I’m not a dove. War is sometimes a necessary evil when our vital national interests are truly threatened. In those narrowly defined cases, you will find me to be as hawkish as anyone in Washington. But perhaps the bird we should strive to be is neither hawk nor dove, but the American Eagle depicted on our Great Seal: flying above the fray, avoiding unnecessary conflict, willing to reign down arrows like Tomahawk missiles when our vital interests are truly threatened, but only after we have fully exhausted the olive branch of diplomacy and seized every last opportunity for peace.
WASHINGTON (Reuters) -Ukraine’s economic output will likely contract by a staggering 45.1% this year as Russia’s invasion has shuttered businesses, slashed exports and rendered economic activity impossible in large swaths of the country, the World Bank said on Sunday.
The World Bank also forecast Russia’s 2022 GDP output to fall 11.2% due to punishing financial sanctions imposed by the United States and its Western allies on Russia’s banks, state-owned enterprises and other institutions.
The World Bank’s “War in the Region” economic update https://openknowledge.worldbank.org/bitstream/handle/10986/37268/9781464818660.pdf said the Eastern Europe region, comprising Ukraine, Belarus and Moldova, is forecast to show a GDP contraction of 30.7% this year, due to shocks from the war and disruption of trade.
Growth in 2022 in the Central Europe region, comprising Bulgaria, Croatia, Hungary, Poland and Romania, will be cut to 3.5% from 4.7% previously due to the influx of refugees, higher commodity prices and deteriorating confidence hurting demand.
For Ukraine, the World Bank report estimates that over half of the country’s businesses are closed, while others are operating at well under normal capacity. The closure of Black Sea shipping from Ukraine has cut off some 90% of the country’s grain exports and half of its total exports.
The World Bank said the war has rendered economic activity impossible in many areas, and is disrupting agricultural planting and harvest operations.
Estimates of infrastructure damage exceeding $100 billion by early March – about two-thirds of Ukraine’s 2019 GDP – are well out of date “as the war has raged on and caused further damage.”
The bank said the 45.1% contraction estimate excludes the impact of physical infrastructure destruction, but said this would scar future economic output, along with the outflow of Ukrainian refugees to other countries.
The World Bank said the magnitude of Ukraine’s contraction is “subject to a high degree of uncertainty” over the war’s duration and intensity.
A downside scenario in the report, reflecting further commodity price shocks and a loss of financial market confidence triggered by an escalation of the war, could result in a 75% contraction in Ukraine’s GDP and a 20% contraction in Russia’s output.
This scenario would lead to a 9% contraction in the World Bank’s Europe and Central Asia region of emerging market and developing economies – more than double the drop in the baseline forecast.
“The Russian invasion is delivering a massive blow to Ukraine’s economy and it has inflicted enormous damage to infrastructure,” Anna Bjerde, the World Bank’s vice president for Europe and Central Asia, said in a statement.
“Ukraine needs massive financial support immediately as it struggles to keep its economy going and the government running to support Ukrainian citizens who are suffering and coping with an extreme situation.”
The World Bank has already marshaled about $923 million in loans and grants for Ukraine, and is preparing a further support package of more than $2 billion.
“Rapid IMF and World Bank assistance has allowed Ukraine fiscal space to pay salaries for civilians, soldiers, doctors, and nurses, while also meeting its external debt obligations,” U.S. Treasury Secretary Janet Yellen, who oversees the U.S. controlling share in the World Bank, told U.S. lawmakers during a hearing last week.
(Reporting by David Lawder in Washington; Editing by Matthew Lewis and Stephen Coates)
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.”
