By David Lawder, Reuters, 4/10/22

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of infrastructure damage exceeding $100 billion by early March – about two-thirds of Ukraine’s 2019 GDP – are well out of date “as the war has raged on and caused further damage.”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)

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.