My title refers to Vladimir Putin. “He will get paid.” Actually, he will probably end up getting paid many times over if he plays his cards right. He probably will, because he is holding almost all of them anyway. The latest is that Ukraine must come up with some $5 billion in order to get a continuous flow of natural gas. First, I used a “$” but only because I am an American and my readers for the most part think in dollars. Russia will be paid most probably in euros, maybe rubles…or would gladly accept gold, but that’s not going to happen. Please understand that when you read headlines with dollar signs attached that it does not necessarily mean that even a single “dollar” will be involved in the transaction.
I have seen two separate estimates of how far in arrears Ukraine has gotten on their “accounts payable.” I have seen the number $17 billion and also $35 billion… it doesn’t really matter which one is true. I say that it doesn’t really matter because Ukraine doesn’t have it no matter what the number is. Before delving any further into the broad matter, I have a question or two. I assume that the Ukrainian citizens who use gas to heat their homes and businesses do actually make payments each month. What happened to this money? If the gas was not paid for by the end user, did the gas get shut off or not? I know, these are simple questions but simple answers would suffice.
In any case, here is Mr. Putin’s stance as I see it. Ukraine is in very serious arrears to Gazprom. I am sure that as they began to go into arrears that Mr. Putin began smiling from ear to ear because he knew that this would give him leverage. I say this because a great majority of the gas that arrives in Europe must flow through Ukraine. Now, Ukraine’s financial problems have become Europe’s problems. Will Europe come up with the money to pay Ukraine’s bills? Please don’t forget that Europe already has the Greek problem, the Cyprus problem, now the Ukraine problem (or the gas gets shut off) and don’t forget Turkey’s problems.
One would think that Europe will come up with the money somehow or some way before the cool October winds arrive. Another alternative would be for the IMF to step in and “lend” Ukraine the money. This would work right? Well yes, it will work, but for who? Stepping back and looking at this, we have played right into Mr. Putin’s plans. Does he want to use dollars for his commerce? No, of course not, but he HAD TO because “those were the rules” since the early 1970’s. Now in our very own homegrown foreign policy brilliance, we are telling him that he HAS TO DO exactly what he has wanted to do all along…not use dollars…AND we (the West) will be the ones paying him the arrears in something other than dollars.
Before going any further I want to point out that there have been theories bouncing around that the Obama meeting with the King of Saudi Arabia was about crushing the prices of oil and gas to squeeze the Russians. I can only laugh at this logic. First off, our relations with Saudi Arabia have never been worse than they are now and this is not 1985 and President Obama is not Ronald Reagan even if he does get to sit behind the desk and pretend to be. Also, let’s assume that this deal was struck and that Russia were to get squeezed… is this a big deal? What’s the worst that could happen to Russia? They default? Again? To whom? In what currency? Dollars? They have their own “home grown currencies” called oil and gas. Even if they declared bankruptcy and defaulted on everyone (which would probably be enough to detonate a system ending derivatives chain nuclear explosion)…they will still have when all is said and done their oil and gas.
Mr. Putin will probably sign a multi-year deal with China next month which will create further construction of pipelines and further cash flows. Like I said in my title, “He will get paid.” He will be paid by Europe or the IMF or the Chinese or whomever, but he will be paid. He will be paid because Russia has a “product” that is a necessity. Yes I know, there are also theories that the U.S. could supply Europe the gas that is necessary. Do you see a little flaw in this line of thinking? The little flaw being “when?” Could we supply Europe this decade or maybe the next….or maybe even next century? We are talking about “real” gas that needs a real transport and delivery system to arrive where intended. Futures contracts, words, deals and promises will not fire up as temperatures drop below freezing. Only gas (oil) will do this trick but it has to actually be delivered to be used.
I ask you this; do you believe that Vladimir Putin or even the Chinese for that matter are happy with “the West?” Are they happy that the U.S. has caused regime changes all over the globe for many years? Are they happy that all of their communications have been monitored? Are they happy that we have warred wherever and whenever we’ve pleased based on false flag events, untrue “intel” or for no reason at all? Are they pleased that we get the privilege of printing the world’s reserve currency and can kick back, relax and enjoy the advantage? The answer of course is “nyet” to all of it.
So far all of what Russia has done has been to take “the high ground” from an international perspective. They have not shed blood and not even shut off gas supplies due to non-payment. They have however gotten exactly what they have desired… to be shut out of using dollars. You must ask yourself whether or not if the Saudis feel the same way? Are they happy with a deal that was struck over 40 years ago? Is it still a fair deal to all parties involved?
Let me leave you with these thoughts. As I have maintained, we will have a reset of values one way or another. The reset will more than likely be preceded by some sort of bank holiday, shutdown or whatever you’d like to call it, but the important thing is that everyone will be “locked” into place with whatever they are holding. In Russia’s case, they will emerge from the reset with the ability to provide oil and gas and get paid in whatever the new “currencies” happen to be. They WILL get paid and they will get paid in something more to their liking. Mr. Putin is merely giving this process a little “push” by having sanctions placed on him.