The sanction game of the West versus Russia is taking another notch upwards. Europe is rumored to announce soon what few believed they would, they are placing sanctions on Russian energy firms Gazprom, Rosneft and Transneft. I am personally quite surprised Europe would go this far.
What surprises me is their lack of future view. Any “thinking” person would look into the future and say, “OK, if we do this then what will Russia’s response be?” The response is beyond obvious because Europe is a captive energy customer. Russia can increase prices if they wish or simply cut back or cutoff the supply entirely. For the immediate future, Europe has no alternative whatsoever.
Were Russia to disrupt natural gas supply, Europe’s economy will feel it immediately? Europe is already in a contraction, either higher prices or a constrained supply will be enough to dislodge whatever confidence that’s left. Yes, winter is coming and some people will be cold or possibly freeze, this is known. The other side of the coin is Europe’s farmers will not be selling product to Russia so some Russians will go hungry, this is also known.
What is not known but in my opinion but “soon to be found out” is just how strong of a union the Eurozone actually is? Which country or countries will feel the pinch from these sanctions the worst? Who needs Russian natural gas more than other countries and which country relies on Russian food purchases more than others? In my mind, Europe is playing Russian roulette with these additional sanctions and their “unity” is what is at stake.
First, when push comes to shove, who will break from the union and import Russian gas even if done secretly? I don’t really understand the “sway” the U.S. has throughout Europe to get them to go this far. As I understand it, Germany was not in favor of the additional sanctions and this does make sense. They understand the ramifications to them personally and they also must be angry (if not publicly) about the status of nearly half of their gold. They deposited 1,500 tons of gold with the FRBNY and asked for 300 tons to be returned. They “accepted” a proposal to send this amount back over 7 years but only received 5 tons in the first year. (This is my opinion mind you, but I do think they probably asked for ALL of it back, time will tell if this is true or not).
Think about this for a moment, would you personally go out of your way to do something injurious to yourself to help or abide a business associate who owes you money but isn’t paying you back? This, along with common sense may be why Germany does not fully support the further sanctions. I see many dangers in this last round of sanctions. At the least, European unity will be tested thoroughly.
As for Russia, the decision to cut, ration or even discontinue the flow of energy will be an easy one. Russia does have the ability to sell elsewhere and in particular to China. The Chinese connection is also important in the finance department as they can help fund Russia should she feel the pinch from the credit sanctions. Another area which no one seems to be mentioning is in regards to the food sanctions. Couldn’t China just import extra grain or other foods and then turn around and send them to Russia? Would anyone try to slap China for their commerce with Russia (other of course than the U.S.)? So they go to the grocery store and buy some extra food which they then sell to Russia …who would know about it and if they did …”what are you going to do about it, they are our friend”?
It is very clear to me that we are willing to push Mr. Putin as hard as is needed to start a war. Sad to say, I believe this is our “strategy” almost in entirety. As I mentioned last week, “something needs to be pointed at” as the reason everything fell apart, a World War would certainly do it. I also believe a breakup of the European Union would also work. What will the markets look like were Europe to split into a version of “North and South?” Or what will happen if there is one or more individual countries who can’t take the heat (or lack of) and decide to break away? What then happens to the euro currency? Or Eurobonds? And then of course the word “ripple effect” takes over.
Looking at this from the most macro view of all, the U.S. is actually pushing Europe to “take sides.” I am afraid at what the actual outcome is going to be because when all is said and done, we really don’t have anything to offer them. Actually let me refine this. Though we may be bribing Eurozone officials to back the sanctions, the average person can and will see this for what it is. There in my opinion will be a very angry European population hell bent on replacing the scoundrels who went along with these policies.
Just as a reminder, it is important for you to understand the Ukraine coup which occurred during the Olympics last year. First, Russia held the Olympics and if you remember in your history books, all “war” between competitors stops during the Olympics. This was so even 2000 years ago. Who backed the coup? Whose government was put in place after the coup? The answer of course is the U.S., WE broke a 2,000 year tradition if not treaty. I would also add I think it is fortunate Mr. Putin obviously does not want war otherwise it would have started long ago.
To wrap this up I think two things are totally clear, Russian ties with China will only be strengthened by these further sanctions. I also believe Europe’s unity and thus relations with the U.S. are going to be tested to the limit.
The above was written late Sunday, we now have more information as the situation gets more complicated. First, Europe has been stockpiling natural gas, presumably in anticipation of a future problem with supply. I do not believe full storage tanks will last through January if all new supply is cut off. Second, it now seems Europe as a whole is having second thoughts on these new sanctions because as I suspected, there would be a/some defector(s). It turns out in this case to be Austria not going along with the sanctions. We now already know that some sort of split is occurring, but then again why wouldn’t it? …Austria is bidding to be a major natural gas hub of Russian gas. Hard to believe a country might actually do what’s in their best interest isn’t it? …whether you know it or not, you are watching VERY BIG history being made as the sides change and are rearranged!
None of this makes sense to me, either.
Here’s an interview with Marin Katusa from this week, and he mentions a lot of this at the start of the podcast.
http://www.futuremoneytrends.com/trend-videos/interviews/russia-kill-u-s-dollar-marin-katusa-interview
He also has a book coming out in November, “The Colder War: How the Global Energy Trade Slipped from America’s Grasp.”
thanks Matt, it very well may be over by November.
“Know your enemy and know yourself and you will always be victorious.” This could be the end game to isolate the UScorp. EU taking the bribes and acting like business as usual but behind the scenes something completely different going on. Good call on the food, that thought occured to me also the other day. Another thing I keep thinking about is Merkel’s recent visit to China, among the companies represented in Merkel’s delegation – and eyeing deals that could further cement bilateral ties – are Siemens, VW, Airbus, Lufthansa and Deutsche Bank, according to German media reports. Something just doesn’t seem right about these sanctions…
yes dishman, odd timing for the visit indeed.
Bill,
Another great article. It truly boggles the mind that Europe is just going along with whatever Washington wants to do until you consider a quote from a recent article from Dr. Paul Craig Roberts:
“My Ph.D. dissertation chairman, who became a high Pentagon official assigned to wind down the Vietnam war, in answer to my question about how Washington gets Europeans to always do what Washington wants replied: “Money, we give them money.” “Foreign aid?” I asked. “No, we give the European political leaders bagfuls of money. They are for sale, We bought them. They report to us.” Perhaps this explains Tony Blair’s $50 million fortune one year out of office.”
I think this explains it all. Until the European people revolt against their corrupt leaders, these bought and paid for traitors will continue to accept the bribes from the U.S.
yes.
Could the reason be:
U.S. says to Europe:
“If we don’t counter Putins agression, where will it stop, at the western shores of France? Can Europe defend itself from the Russian empire without US help?
So if Europe wants and needs the US to protect them in the long run, you have to belly up and be a full partner now before it gets out of hand (remember WW1&2?). Then, and only then, will the US will be there to protect you.”
How can we begin to protect them you ask? Can’t Putin can just sell his petro resources to China and bring his food in from them? Well, please realize how easy it is to destroy an oil or gas pipeline, a couple well placed guided bombs a month will make it useless and we wouldn’t even have to fly an airplane over them. Putin would then have the option of trying to eat his oil and watch his ecomomy crumble, or move to full out war with NATO which doesn’t seem like a good option for him to choose, nor has he indicated any such intent yet. He has just been grabbing as much free territory as he can with no resistance, but we have seen this script before with Germany and know to well how it ends.
Ukraine was a partner with Russia for over 400 years right, could Russia be looking at this as “reclaiming” what was theirs for centuries? I’m just saying…
Certainly that has to be a major part of Russia’s thinking, and with such a dovish US administration, why wouldn’t they take it back, the timing is perfect! It is more than a historical relationship for them however, Crimea and Ukraine offer major economic and strategic advantages for a mostly landlocked Russia, which brings in many more alternative motives than “renewing old friends”. So the West needs to be cautious about letting Putin go too far before it is too late as I mentioned, like can anyone really trust a man like Putin!?
yes on everything you wrote except the last. Mr. Putin seems to pretty much do what he says he will …and Mr. Obama? “Trust” is a very big theme in international relations and we have broken so much trust and burned so much goodwill it’s pathetic.
Absolutely, we’re on the same page and paragraph there, and I might add, it is not just international trust that has been shattered, can anyone in this country really believe what he tells us in the future? Not if you have any kind of functioning brain. Very, very sad to have to say that about this great country’s president, but the evidence is now quite overwhelming.
“overwhelming”.
Steve,
Although I don’t disagree with your points, we can also reverse that question and ask can anyone trust the U.S. and NATO? Let’s remember who started it all. It was the U.S. who orchestrated the coup in the Ukraine and installed a Western-friendly government who would be willing to join NATO.
It seems to me that it is the US that has become the biggest threat to world peace and Putin is gingerly trying to counter that threat without everything blowing up into another world war, which would play right into the hands of bankrupt Western governments who know better than anyone that a collapse is imminent and need someone or something to blame.
and the coup occurred during the Olympics …historically a very big NO NO!
Bill, and as the world burns silver is under $19. So goes the lunacy of the world we live in. I’m afraid that the TPTB will be able to continue this “slow” burn collapse and shake out the average Joe of his physical position. What’s the saying irrational markets can continue much longer than you can stay solvent… In your Greg hunter interview you stated that 2years ago should have been the you know what hitting the fan. So in that sense I guess you can’t underestimate TPTB influence. Lets hope people can hold out long enough for the PHYSICAL reality to exert itself onto the paper illusion.
physical will prevail.
“Europe Plays Russian Roulette” Rolling On The Floor Laughing My A** Off. Holter 1, Stockman 0 (for today’s battle of the wits).
what did Stockman write, I didn’t see it?