Dorothea Lange Mississippi grocery store June 1937
If I were a citizen of the European Union, especially of either the more eastern countries or of Britain, I’d be getting worried right now. I wouldn’t be so sure that what the Boys from Brussels are concocting is in my best interest. It’s one thing to hear the leadership declare that when it comes to gas, Putin needs Europe more than the other way around, but is that really true or is that war talk that may even be based primarily on a lack of knowledge and/or competence? And if the EU bluff pans out wrong, what are going to be the consequences for the people in the EU? As in: how fast and now much can prices rise?
I know that gas exports from Russia have gone down a little bit, but I also know that doesn’t mean they can come down by whatever extra percentage we would wish at whatever point in time we would like. And I have the idea that beating Putin, at anything at all, seems to have become much more of a priority than energy safety or the economically most advantageous deals. And that carries the risk that while at some point Putin may have to do without X percent of oil and gas income from Europe that he may have counted upon, the Europeans themselves may end up paying much more for their energy, because there are simply no such things as endless supplies of oil and gas in the world.
Much of the change in natural gas imports that Europe envisions seems to be focused on LNG. And while there is an overcapacity in European LNG import terminals, supply in the world markets started to dwindle in 2012, as a major shift was underway towards Asia at the same time. China wants a lot of gas, and even if its economy sputters, that demand is not going to diminish, not if the Middle Kingdom is serious about tackling the crippling smog in its cities, which calls for a huge from coal to natural gas powered plants.
Japan’s natural gas demand has gone up enormously in the aftermath of Fukushima, and though there’s cautious talk of reopening some of the nuke plants closed since, for the foreseeable future natgas is the only viable option for the Rising Sun. And Asia is more than Japan and China: nations like India, South Korea, Taiwan, they all want more gas, and they all want it in the form of LNG. So where is the increase going to come from that Europe is talking about? Your guess is as good as mine.
We shouldn’t be surprised if Brussels counts on a main shale gas boom, of course, if you look at Barroso and Van Rompuy the first thought that comes to mind is: what do they know when it comes to energy, they’re gullible enough to go hook line and sinker for whatever data the industry feeds them, and the “promise money” is in shale today. Insane subsidies could already be had even if it never goes anywhere, and they’ll go even more insane now that “anything but Putin” is the overriding objective.
For Ukraine, the prize turkey that is the symbol of the European fight against Putin (for which I can’t shake the feeling that it is nothing but a goal-seeked battle for the unelected revolving door EU cabal), and for the Ukrainians, the first bills will land in the mailbox soon. The Yats government has announced a 40% rise in energy prices, while the price for Russian gas the country pays may soon double to $500 1,000 cubic meters. Of course we saw that Ukraine severely cut Russian gas imports starting February 1, three weeks before Yakunovych was ousted, and even more on February 24, 2 days after the ouster. Not that we know what they replaced them with.
Russia launched another bombshell over the weekend, saying that the deal with Ukraine for use of its fleet hosting Black Sea port, which was linked to gas prices, is now invalid, and not only does the country owe $2 billion in gas payments, but another $11 billion in discounts it has already enjoyed are now deemed invalid, since the deal ran to 2017. That means Kiev owes Moscow $13 billion. And Kiev is broke. So who’s going to pay up? Brussels? Not every likely. Washington? Even less likely.
That means that when people say Russia would never dare cut off Germany, they should keep in mind that if and when Europe would try to use reverse flow in its pipelines to supply Ukraine with gas Russia first sold to Germany or other EU nations, Putin has a very strong case to say that he’ll only continue selling to Berlin if they guarantee they won’t pump it back to Kiev, or he can either cut off Germany or take the case to an international court.
Some Europeans seem to count on US LNG shipments to make up for Russian gas, but that’s a pipedream (or rather, not even that). The US has one active LNG export terminal, it’s in Alaska and it supplies Asia. There are quite a few applications for additional terminals, but they will take too long to be sanctioned and come on line to make any difference in international trade. Plus, Japan and China may simply outbid Europe for the gas.
All in all, things don’t look good for the average citizen of either Ukraine or Europe. They can all expect enormous raises in their energy bills. That will be partly due to the inevitable consequences of dwindling resources, but it will be greatly enhanced by the power games the US and EU have been playing lately on Putin’s doorstep. And for those parties the power game is far more important than the increase in energy costs it results in for their people.
The EU/US leadership (and the energy giants that prod them on) lost on the Black Sea port they coveted so much. But they still have the Ukraine pipelines, which they will now use where they can to thwart Putin. That may well be the most dangerous play, since Putin will never accept losing control over the pipelines Russia itself built and paid for. That could be a premise to war. And maybe that’s all Brussels and NATO are waiting for. Don’t be surprised if they hastily make Ukraine a NATO member overnight one of the days. Because under NATO rules, when one member is under threat, or is being invaded, all other members have to come to its rescue. It looks like a chess game still. And Putin’s not a bad player.
The people of Ukraine and many EU nations look set to be sacrificed in the “bigger” power game and can “look forward to” much higher energy prices. Energy giants will get giant subsidies to build alternative projects that look set to fail, both in shale and in LNG.
One thing that snows under so far is that energy bills that skyrocket 40% or more, especially in countries that are already in dire straits, tend to lead to protests and fast changes in governments. So don’t be surprised if the EU/US sign fast and furious deals with the Yats people they themselves installed, before the latter get voted out in an actual election. The EU/IMF/World Bank troika deal that Yanukovych refused has apparently already been resurrected.
Whatever trouble comes, our leaders will count on being able to blame it all, in public opinion, on Putin. Who, if he can sign a new big gas deal with Beijing and Tokyo, won’t care too much. It’s when the west tries to interfere with Russia’s access to Ukraine pipelines that Putin will react. Interestingly, the South Stream pipeline seems to already have been cancelled, the one project that would make it easier to get Russian gas to Europe without involving Ukraine, ostensibly because Putin cronies were involved in the construction.
It’s all Ukraine now, with an unelected government, and an energy chief who was arrested a few days ago on the same corruption charges Yulia Tymoshenko was detained for, who made billions on Russian gas imports and is likely to be Ukraine’s next leader.
The only victim? The people. And while that may sound like just another familiar story, just wait till “the people” means you, and your energy bills go up 100%. Here’s looking at you, Britain.
European Union leaders want a road map by mid-year for reducing reliance on Russian natural gas as they seek to punish Russia for its annexation of Crimea, according to a draft EU document. The EU’s 28 chiefs plan to ask the European Commission, the bloc’s executive arm, to outline within three months ways to diversify energy sources away from Russia, which is the main supplier of gas and oil to Europe. The crisis in Ukraine, a transit country for Russian energy consumed by the EU, is set to dominate a two-day meeting of prime ministers and presidents in the European Council.
“Efforts to reduce Europe’s high gas energy dependency rates should be intensified, especially for the most dependent member states,” according to a draft statement to be adopted at the summit in Brussels tomorrow. “The European Council calls on the Commission to conduct an in-depth study of EU energy security and to present by June 2014 a comprehensive plan for the reduction of EU energy dependence.” The EU’s energy dependency rate is set to rise to 80% by 2035 from the current 60%, according to the International Energy Agency. Gas from Russia accounted for almost 32% and oil for about 35% of the bloc’s imports in 2010, according to EU data.
EU leaders may discuss energy security in the context of the Ukrainian crisis over a dinner today and are scheduled to hold a first debate on the 2030 climate and energy framework for the bloc tomorrow. They also plan to urge member states to step up integration of electricity and gas markets in order to help reduce prices, which in some regions of Europe are double those in the U.S., where shale-gas production has brought the world’s biggest economy toward energy independence.
Europe’s oil and gas import bills rose to more than €400 billion ($551 billion) in 2012, representing about 3.1% of the region’s gross domestic product, according to EU data. That compares to about €180 billion on average in 1990-2011.
Yesterday we warned that the honeymoon is over as Ukraine expects gas prices to rise 40% as Russian discounts fade. Today it appears the situation is even worse:
*Naftogaz, Gazprom Talks For March 20-21 Cancelled: Interfax
*Ukraine Police Detains Naftogaz Chairman Bakulin: Avakov
*Ukraine Naftogaz Raid Part Of Corruption Probe, Avakov Says
The issues up for debate, of course, are supply and pricing of gas from Russia and the payment for over $2bn of existing debt owed. While Interfax reports that this was because the Ukraine gas company executive was unable to leave the country, which now appears due to corruption allegations (“there’s corruption going on here?”) but merely exacerbates any Russian gas retaliation concerns.
Talks originally planned to take place on March 20 and March 21 between Ukraine’s national oil and gas company Naftogaz Ukrainy and Russian gas giant OJSC Gazprom (MOEX: GAZP) have fallen through at the last minute, a source from the Ukrainian government told Interfax. “The Naftogaz Ukrainy delegation was prepared to fly out [for the meeting], but the head of the company [Naftogaz Ukrainy] was not allowed to leave the country at the last minute,” the source said.
The main issues to be discussed were supposed to be the purchase and transit of natural gas, as well as the payment schedule for existing debt. The source said this concerned a personal ban on leaving the country for Naftogaz’s CEO Yevgeny Bakulin.
The price of Russian gas to Ukraine could rise to $500 per 1,000 cubic meters, as future developments in relations between Moscow and Kiev remain vague. From April 1 the price Ukraine pays for Russian gas will go up to $360-$370 per 1,000 cubic metres, after Russia cancelled the discount agreed in late December, Pavel Zavalny, the head of Russian Gas Society told Izvestia newspaper. In the worst case scenario, and Ukraine decides to take over Russian property, as well as new threats from radical nationalists, the price could jump to as high as to $500, the paper added.
Such a price rise may take place if the Kharkov agreement of 2010 is cancelled. Under its terms, Russia allowed a $100 discount to Ukraine for keeping its fleet in the Crimea, Izvestia quotes its source in Gazprom as saying. “The discount of $100 was connected with the Russian fleet’s stay in the territory of Ukraine. Now, when circumstances change, it’s a big question, whether we can keep it in the future,” the Minister of Energy of Ukraine Yury Prodan said. Gazprom has until April 10 to decide a new price.
Russia may revoke a deal with Ukraine, which gave Kiev a considerable discount on gas in exchange for hosting the Russian Black Sea fleet. The Russian PM said this would oblige Kiev to return $11 billion which Russia paid to lease the bases. The deal, which was signed in 2010 in Kharkov, extended permission to Russia to keep the Black Sea fleet at its base in Sevastopol for 25 years after 2017, when the current agreement was due to expire. In exchange Moscow offered Ukraine incentives, including a discount on the price of gas and a waiver for some payments to Russia.
“We started doing this [not requiring the payments from Ukraine – RT] immediately, even though the remaining time for hosting the base under the older document was quite long,” Medvedev pointed out. “So Ukraine in fact saved about $11 billion in unpaid payments while the budget of the Russian Federation sustained damages for the same amount.”
Medvedev said that now, with Crimea joining Russia, the Kharkov agreement is no longer applicable and should be ended. In that case Russia may seek the return of the $11 billion through the relevant courts. “Of course these are harsh measures, but on the other hand there is no agreement, and there is the payment we did. Our Ukrainian partners must understand, that one doesn’t get paid for nothing,” Medvedev said. On Thursday a Gazprom representative told Izvestia newspaper the cancellation of the Kharkov agreement could push the price of Russian gas to $500 per 1,000 cubic metres.
The PM’s statement comes at a time when the Ukraine economy is struggling for cash, with Russian officials insisting they were the first to be interested in Ukraine’s economic stability. The country’s treasury is almost empty, as Ukraine’s government debt stood at about $66 billion in 2012, which is 37.42% of GDP.
The country owes about $2 billion to Russia’s Gazprom, with the company insisting that it didn’t want a gas crisis similar to 2009. The company’s CEO Aleksey Miller said he doesn’t want Ukraine’s economy to collapse, and wasn’t asking for something extra, like advance payments.
Talking about Russia’s $3 billion loan tranche made in December, Deputy Russian Finance Minister Sergey Storchak said Russia won’t require early repayment of the debt, as it is interested in stabilizing the economic situation in Ukraine. Under the terms of the Russia-Ukraine deal signed in December, Ukraine’s debt shouldn’t exceed 60% of GDP. This means that technically Russia has the right to demand the money back before the bonds are due in 2015.
John Mills, the millionaire founder of direct consumer products company JML, is to launch a campaign for the immediate devaluation of sterling to boost the economy and revive the UK’s struggling manufacturing industry. The entrepreneur, who founded his home shopping empire from the basement of his Camden home in 1986, claims his plans could “transform our prospects” and boost the UK’s annual economic growth to 5pc within a few years.
On Tuesday he will launch “The £ campaign” which will lobby politicians to “change our economic polices or face decades of stagnation”. The launch will be accompanied by the publication of a paper by think tank Civitas, in which he calls for “radical changes from the orthodoxy that has prevailed in the UK for too long”. In the paper, Mr Mills, the Labour party’s biggest inidividual donor, argues that the UK will be consigned to years of mounting debts and austerity unless manufacturing and productivity levels are boosted.
As a major importer of goods, from kitchen gadgets and snuggies, to irons and sports bras for his JML range of television shopping channels, Mr Mills says manufacturing will only return to the UK if the costs come down. De-valuing the pound is the fastest way to achieve this, he says. “We’ve got to get the pound down to make light manufacturing profitable,” he said. “At JML we would buy UK products but we can get everything we sell produced in China for two-thirds of the cost. This is almost entirely an exchange rate issue. “As a result, industrial output just goes down. We can’t pay our way in the world and the economy stagnates – that’s what we’re heading for.”
He said UK politicians are only using two of the three major ways that a government can influence the economy – fiscal policy, monetary policy and exchange rates. “Everyone is fixated on the first two and has totally ignored the third,” he said. “This is the big, big policy mistake that has been made.”
The paper also calls for faster supply side reforms including faster planning laws and improved broadband speeds. It sets out the expected economic impact of the plan which, Mr Mills argues, would push GDP up by 3pc in the first year and by 5pc by the fifth year. The growth would give the Government flexibility to improve the cost of living without having to focus on the deficit. Mr Mills said that George Osborne’s move last week to double the annual investment allowance was a “step in the right direction” that would help UK manufacturers. Otherwise, he said the Budget would not help the economy in the long term.
Federal authorities are investigating whether General Motors hid an ignition switch defect when it filed for bankruptcy in 2009, The New York Times reported on Saturday. The Justice Department’s investigation of the automaker includes a probe of whether GM committed bankruptcy fraud by not disclosing the ignition problem, a person briefed on the inquiry told the Times on Friday, the paper said. Authorities are also investigating whether GM understated the defect to federal safety regulators, the Times said.
The ignition switch problems led to the recall of 1.6 million vehicles last month. GM has handed over documents to federal investigators in New York, the person, who was not identified, told the Times. The automaker cannot comment specifically on the Justice Department investigation, spokesman Greg Martin said in an email on Saturday. “We are cooperating fully with authorities on several fronts and we will continue to do so,” he said. The investigation is being run by FBI agents and federal prosecutors who worked on the fraud case against Toyota that ended in a $1.2 billion settlement last week, the paper said.
On Wednesday, GM was hit with a lawsuit demanding that the company be held liable for allegedly concealing ignition problems before its 2009 bankruptcy. GM is a different legal entity than the one that filed the 2009 bankruptcy that shook the U.S. economy. The so-called new GM is not responsible under the terms of its bankruptcy exit for legal claims relating to incidents that took place before July 2009. Those claims must be brought against what remains of the “old” or pre-bankruptcy GM.
But the proposed class action, filed in federal court in California, said plaintiffs should be allowed to sue over the pre-bankruptcy actions “because of the active concealment by Old GM and GM.” The lawsuit also said GM was responsible for reporting to the federal government any safety-related problems for cars made before its bankruptcy. It is one of several lawsuits filed against the company since the recall was announced.
Property agents have seen a surge of investment into London from wealthy Russians as the Crimean conflict escalates, according to leading real estate experts. Oligarchs and Russian professionals, such as bankers, lawyers and doctors, are withdrawing their money from the region, fearful of spiralling political and economic unrest, and sinking it into the prime central London housing market.
President Vladimir Putin, signed a new law this week formalising Russia’s take-over of Crimea from the Ukraine and triggering a fresh round of sanctions from the US and the EU. Property advisers Jones Lang La Salle (JLLS) said such restrictions are unlikely to stem the burgeoning flow of investment. “During periods of uncertainty in Russia, capital flows run out faster than normal. Economic growth has started to slow with GDP forecast downwards and a weakening rouble,” said Tom Mundy, head of research, Russia, at JLLS.
“The Russian-Crimea dynamic has accentuated deepening economic issues, and the Russians, who are financially cautious, are getting their money out quickly and pumping it into reserve currency assets outside Eastern Europe.”
International investors from the Middle East, Africa and Eastern Europe dominate the new-build market in prime central London.
JLLS estimated that Russian money accounts for 7pc of all property, both old and new, worth more than £1m in the capital’s core. It estimated this prime market was worth £8bn in 2012. “Due to current uncertainty, Russian money is making its way into the bricks-and-mortar assets of London – seen as a safe haven,” said Mr Mundy. “It’s only a four-hour flight from Moscow, schools and shopping are good.”
The deepening Crimean crisis is driving a new class of Russian investor. Capital flows from Russia into London are no longer dependent upon oligarchs buying £10m to £25m Chelsea townhouses or Hampstead mansions. Russian professionals are snapping up £1m to £2m apartments across central London. “London is seen as liquid,” said Mr Mundy. “It’s easy to buy, easy to sell and it has a depth of stock not available in Moscow. Pricing is not dissimilar and the pound is relatively strong compared to the rouble.” “It is difficult to see sanctions dissuading the Russians from investing in London.”
The list of Russian figures targeted by the EU and US sanctions, limiting travel and assets, is specific and those on it include Vladimir Yakunin, head of Russian Railways, who already owns property in London. “Lower-level government officials and normal businessmen will not be affected,” Mr Mundy said. “Financing could possibly become difficult but this will not affect the majority of transactions which are made by cash buyers.”
Energy production will increasingly strain water resources in the coming decades even as more than 1 billion of the planet’s 7 billion people already lack access to both, according to a United Nations report. “There is an increasing potential for serious conflict between power generation, other water users and environmental considerations,” said the UN World Water Development Report published today that focused on water and energy. Ninety% of power generation is “water-intensive,” it said.
Shale gas and oil production as well as biofuels “can pose significant risks” to water resources, pitting energy producers against farmers, factories and providers of drinking and sanitation services, the agency said ahead of tomorrow’s annual World Water Day. Water-related needs for energy production have tripled since 1995, according to GE Water, while more than half of the global cotton production is grown in areas with high water risks. Electricity demand is forecast to rise at least two-thirds by 2035, driven by population growth.
Infrastructure upgrades, smart meters and clean technologies would help conserve resources as “billions of gallons of water are leaked each day, and energy is required to clean and transport that water,” said Sensus, a U.S. developer of water-metering systems. “When water is wasted, so is energy.” The energy industry “needs to understand that if they don’t take water into account, they will have problems,” Michel Jarraud, who heads the UN-Water agency, said from Paris. “Water supply is already a constraint for energy projects in some countries, especially in Asia.”
Yesterday’s news from the NAR that in February all cash transactions accounted for 35% of all existing home purchases, up from 33% in January, not to mention that 73% of speculators paid “all cash”, caught some by surprise. But what this data ignores are new home purchases, where while single-family sales have been muted as expected considering the plunge in mortgage applications, multi-family unit growth – where investors hope to play the tail end of the popping rental bubble – has been stunning, and where multi-fam permits have soared to the highest since 2008. So how does the history of “all cash” home purchases in the US look before and after the arrival of the 2008 post-Lehman “New Normal.” The answer is shown in the chart below.
Remember when housing was the primary aspirational asset for a still existent US middle class, to be purchased with some equity down by your average 30 year-old hoping to start a family in his or her brand new home, and, as the name implies, aspire to reach the American dream? Those days are long gone. Back in those days the interest rate on the 10 Year bond mattered as it determined the prevailing marginal affordability of leveraged real estate. That is no longer the case, at least not for about 90% of Americans, because as Goldman shows, while before the great crisis only 20% of home purchases were “all cash”, since then the number has soared threefold, and currently the estimated percentage of cash transactions (by count and amount) has hit a record 60%. In other words, less than half of all home purchases are debt-funded, and thus less than half of all home purchases are actually representative of what middle-class America is doing.
[..] Our personal thoughts: just like the stock market has been levitating on zero volume and virtually no broad distribution, so the entire housing market appears to have morphed into a “flip that house” investment vehicle used by the usual suspects (wealthy foreign oligarchs abusing the NAR’s anti-money laundering exemption to park their stolen funds in the US, government sponsored firms such as BlackStone using near zero cost REO-to-Rent subsidies, and other 0.01%-ers) who piggyback on cash flows deriving from alternative cheap credit-funded investments and translate their profits into real-estate investments.
It also means that if nobody used leverage (i.e., mortgages) to buy houses before, they certainly won’t do it now, all the more so with interest rates soaring and purchase affordability imploding in front of everybody’s eyes.
[..] … the household savings ratio has dropped from 7.9% of GDP in Q1 2012 to 5.4% in Q3 2013 (we will find out soon if it has fallen even lower). That is a big swing. [..] Much of the latest surge in spending has been driven by running down savings yet again.
The deficit is testing levels last seen in the extreme ERM-linked boom in the late 1980s, and may soon test modern peacetime records. Some say the CA deficit doesn’t matter. I beg to differ. There are “healthy” deficits caused by capital inflows to fund investment booms, and “unhealthy” deficits to fund consumption of imported goods. The British variety is almost entirely toxic. It is said that a temporary shortfall in North Sea oil and gas distorted last year. That had better be the case.
Just to be clear, I am not against a revival of credit as such. We many need a mini-boom to achieve “escape velocity”, the “handover” to business investment and sustainable growth. But for this to work, there has to be a viable balanced economy to pick up the baton. This does not yet exist despite the heroic efforts of our entrepreneurs. Instead, we see that UK productivity has fallen to 21% below the G7 average, the worst level since the early 1990s. How long can we keep justifying this on the ground that faster job growth makes productivity look worse?
Frankly, you want to weep.
With Bernanke gone, the remaining Fed members knowing full well they will be crucified, metaphorically of course (if not literally) when it all inevitably comes crashing down, are finally at liberty with their words… and the truth is bleeding out courtesy of the president of the Dallas Fed, via Bloomberg.
Fisher says QE was a massive gift intended to boost wealth
Which incidentally coincides with Bernanke’s heartfelt “admission” that “my natural inclinations, even if it weren’t for the legal mandate, would be to try to help the average person.” As long as helped to boost the wealth of the non-average billionaire., all is forgiven. “The result was there are still many people after the crisis who still feel that it was unfair that some companies got helped and small banks and small business and average families didn’t get direct help,” Bernanke said. “It’s a hard perception to break.”
The truth, as again revealed by Fisher, will not help with breaking that perception. We wonder how President Obama, that crusader for fairness, equality and all time Russell 200,000 highs, will feel about that? In the meantime, just like the Herp, QE is the gift that keeps on giving.. and giving… and giving… to the 0.001%.
A top U.S. Federal Reserve official critical of the U.S. central bank’s super-easy monetary policy on Friday questioned the very core of the Fed’s current approach, which rests on giving markets a better sense of the future path of interest rates. That approach, known as forward guidance, received a makeover on Wednesday, when Janet Yellen wrapped her first policy-setting meeting as Fed chair with a decision to jettison narrow economic guideposts in favor of a much broader set of measures to determine the timing and pace of future rate hikes.
Dallas Federal Reserve President Richard Fisher, in brief remarks released ahead of a planned speech in London, appeared to question even the basis of that approach, which Yellen has credited with keeping borrowing costs lower than otherwise and boosting an economy in great need of stimulus. “Is ‘Forward Guidance’ a crotchet …. to which exaggerated importance is attributed?,” Fisher said in the brief prepared remarks. “Have we at the (Fed) just taken up another fad? Or is this a real, lasting practice?” Fisher did not answer that question in the prepared remarks.
Fisher is a member of the Fed’s policy panel this year and is one of the U.S. central bank’s most hawkish policymakers. He wants the Fed to wind down its bond-buying stimulus as quickly as possible. Separately, St. Louis Fed Bank President James Bullard said that Yellen’s “six-months” remark was was in line with private sector surveys. Following Wednesday’s Fed decision, Yellen suggested interest rate hikes would happen about six months after quantitative easing ends, which sparked a selloff in the stock and bond markets.
“On the ‘considerable period’ being six months, the surveys that I had seen from the private sector had that kind of number penciled in,” St Louis Federal Reserve President James Bullard said during a lunch with journalists. “That wasn’t very different from what we had heard from financial markets. So, I just think she’s just repeating that.” And San Francisco Fed President John Williams said the central bank should use policy tools other than interest rates to deal with potential risks to financial stability or asset bubbles.
Of all the various interpretations Western leaders and commentators have offered for why the president of the Russian Federation has responded the way he has to the events in Ukraine over the course of February and March of 2014—in refusing to acquiesce to the installation of a neo-fascist regime in Kiev, and in upholding the right of Crimea to self-determination—the most striking and illuminating interpretation is that he has gone mad. Striking and illuminating, that is, something in the West itself. [..]
We question someone’s sanity when we cannot explain their behavior or logic based on a common understanding of consensual reality. They become utterly unpredictable to us, capable of carrying on a normal conversation one moment and lunging at our throats the next. Their actions appear rash and disordered, as if they inhabit a world parallel to but completely different from the one we do. Putin is portrayed as a fiend, and the West acts baffled and scared. The feigned shock with which the West looks on at the developments in Crimea could be seen as a tactic designed to isolate and intimidate Vladimir Putin. The fact that this tactic is not only not working but actually backfiring changes feigned shock into real shock: Western meds aren’t working any more—on itself or anyone else. [..]
During the post-collapse period Russia could offer no competing ideology. In fact, it had no ideology at all, except for an implant of Western liberalism which, given a lack of a viable legal framework or traditions of private property and civil society, quickly turned into a particularly brutal brand of gangsterism. But then Putin came along and, using his experience in the KGB and connections with other post-Soviet “power ministeries,” he crafted a new order, which first decimated and either supplanted or absorbed the gangsters, and then imposed what Putin has termed “the dictatorship of the law.” This is the first important piece of the new Russian ideology: law matters and nobody can be above it—not even the United States. [..]
The US military are planning large scale war games in Poland, which would involve troops from several eastern European states, the American ambassador to the country, Stephen Mull, said. Poland, the Czech Republic, Hungary, Slovakia, Bulgaria, Romania and the Baltic states (Lithuania, Latvia and Estonia) will be participating in drills, together with the Americans, Mull told Radio ZET. Lask airbase in central Poland has been selected as the venue for the military exercise, the ambassador said, refraining from saying when it was scheduled for.
Mull’s announcement comes just three days after US Vice President Joe Biden’s visit to the Polish capital of Warsaw. Biden’s trip was aimed at reassuring that America remains a “steadfast ally” to Poland and the Baltic States after they expressed anxiety over the events in the Crimea, which signed a treaty of accession to the Russian Federation on Tuesday.
The vice president promised an additional 12 F-16 fighter jets for Poland and 10 more US F-15’s, instead of a planned four, to be assigned to NATO operations in the skies over the Baltics. He also spoke of rotating more American ground and naval forces through the Baltic States for training exercises. Biden once again stressed that there’ll be no changes to the US missile defense plans in Poland and Romania, with the controversial system to be operational by 2018.
Meanwhile, an unnamed US military official told Reuters that Polish radio has misrepresented the ambassador’s remarks in their report. Mull was only talking about the discussion between Warsaw and Washington of the “possibility of expanding aviation activities at Lask to potentially include other NATO partners, and then he mentioned those nations.” Poland’s geographical position has made it a strategically important NATO member as the country borders the crisis-torn Ukraine as well as Russia’s western enclave in the Kaliningrad region.
On Friday, the Ukrainian military joined two weeks of multinational military exercises that involve troops from 12 NATO members and partner nations, Reuters reports. The Saber Guardian war games will be staged at the Novo Selo training facility in eastern Bulgaria and will include some 700 troops from Armenia, Azerbaijan, Belgium, Bulgaria, Georgia, Moldova, Poland, Romania, Serbia, Turkey, Ukraine and the US, as well as NATO representatives. On Thursday, the US and NATO also announced that the annual Rapid Trident war games won’t be rescheduled and will take place in Ukraine this summer.
European leaders have rushed through plans aimed at breaking the Kremlin’s grip on gas and energy supplies, marking a fresh escalation in the emerging Cold War between Russia and the West. The move came as the EU slapped sanctions on 12 leading Russians in President Vladimir Putin’s inner circle, and vowed “additional and far-reaching” action if he intervenes in eastern Ukraine or further destabilises the region. The European Commission has been told to cock the gun by preparing “targeted measures” immediately.
The South Stream pipeline intended to link the EU to Russia through the Black Sea by 2018 is now “dead”, according to sources in Brussels, hitting contractors close to Mr Putin. EU staff are to come up with plans to shield Europe from energy blackmail by Russia within 90 days, finding ways to prevent frontline states being picked off one by one. Ukraine’s premier, Arseniy Yatsenyuk, said in Brussels that the West must stop Russia deploying energy as a “new nuclear weapon”.
The radical shift in EU energy policy comes as Russia feels the chill of US sanctions imposed on Thursday. The share prices of companies linked to oligarchs on the US blacklist plummeted on the Moscow bourse. Gas group Novatek, owned by Putin-ally Gennady Timchenko, has dropped 16% since he was named. He has had to sell his 43% stake in Gunvor to his partner in order to save the firm, the world’s fourth largest oil trader.
Visa and Mastercard halted transactions for Rossiya bank. Mr Putin said defiantly that he would make sure his salary was transferred to a new account at Rossiya “first thing Monday morning”. They also cut off SMP bank, co-owned by Mr Putin’s judo partner Arkady Rotenberg, though the bank itself was not named – evidence that US firms will not take any risks with US regulators. Aluminium group Rusal is in talks with lenders to delay rolling over some of its $10bn debt, a sign that Russian companies with $650bn of debt may struggle to refinance loans. An estimated $155bn must be rolled over this year..
Back in 2011, when as part of the Arab Spring one after another regime were toppled in North Africa following violent coups, not without substantial support by the US foreign service and the CIA, the local population was delighted – after all there is nothing quite like the specter of Hope and Change to lift one’s mood, and murder the reigning dictator. Unfortunately, what is usually not discussed, is that within a very brief period of time, usually within a year or two, the post-coup nations promptly reverted to violence and kicked out the ascendent coupy rulers themselves.
Hardly new, this is a process has been observed in history throughout time, most notably with the French revolution, where the concept of the Thermidorian Reaction was first penned. Most recently, this was best captured by events in Egypt in the past year, when the Hillary Clinton-blessed regime of Morsi was toppled last summer with even more violent witchhunts organized against its Muslim Brotherhood supporters. No wonder one hardly hears a peep about this particular US success story.
So where should we look for the next such process? Why in Ukraine of course. Only right now the general population is still in its euphoric Hope and Change phase. Understandable – the evil regime has been toppled and the new and pure (even though in reality they are just as corrupt as the old ones) politicians are in charge, so why not look to the future with rose-colored sunglasses?
When President Vladimir Putin signed a treaty this week annexing Crimea to great fanfare in the Kremlin and anger in the West, a trusted lieutenant was making his way to Asia to shore up ties with Russia’s eastern allies. Forcing home the symbolism of his trip, Igor Sechin gathered media in Tokyo the next day to warn Western governments that more sanctions over Moscow’s seizure of the Black Sea peninsula from Ukraine would be counter-productive.
The underlying message from the head of Russia’s biggest oil company, Rosneft, was clear: If Europe and the United States isolate Russia, Moscow will look East for new business, energy deals, military contracts and political alliances. The Holy Grail for Moscow is a natural gas supply deal with China that is apparently now close after years of negotiations. If it can be signed when Putin visits China in May, he will be able to hold it up to show that global power has shifted eastwards and he does not need the West.
“The worse Russia’s relations are with the West, the closer Russia will want to be to China. If China supports you, no one can say you’re isolated,” said Vasily Kashin, a China expert at the Analysis of Strategies and Technologies (CAST) think thank.
Some of the signs are encouraging for Putin. Last Saturday China abstained in a U.N. Security Council vote on a draft resolution declaring invalid the referendum in which Crimea went on to back union with Russia. Although China is nervous about referendums in restive regions of other countries which might serve as a precedent for Tibet and Taiwan, it has refused to criticize Moscow. [..]
The Advertising Standards Authority (ASA) of South Africa has ordered biotech titan Monsanto to withdraw its ads on local radio in which the company boasts the supposed benefits of GM crops, including a “healthier environment” and “more food sustainably.” The authority’s order for Monsanto to withdraw its commercial on Radio 702 will take immediate effect, according to a press release on the entity’s website. According to the ASA, the claims made by the leading producer of genetically engineered crops are unsubstantiated.
The move follows a complaint to the ASA lodged by the African Centre for Biosafety (ACB) about the commercial. In the ads, the agricultural giant claims that GM crops “enable us to produce more food sustainably whilst using fewer resources; provide a healthier environment by saving on pesticides; decrease greenhouse gas emissions and increase crop yields substantially.” The complaint was supported by Judith Taylor from the environmental and anti-nuclear organization Earthlife Africa, according to the ASA.
Monsanto responded to the complaint but was unable to provide input from an independent and credible expert confirming the ostensible benefits of GM crops, as is required by South African advertising law. “We are elated with this decision. Monsanto has already been warned by the ASA as far back as 2007, that it needs to substantiate its claims from an independent and credible expert in the matter of GM Food/M Wells/ 8739 (18 June 2007) regarding its claims of the so called benefits of GM crops. However, it appears Monsanto does not have much regard for South African law as it is hell bent on disseminating false information to the South African public, “ said Mariam Mayet, executive director of the ACB, according to its press release.
The ASA has warned Monsanto that “it should ensure that it holds proper substantiation for its advertising claims” or risk the expansion of further sanctions on the company – the products of which have already been banned in several countries.
France is among those countries which have enacted a recent ban. The nation’s agricultural ministry on Saturday banned the sale, use, and cultivation of Monsanto’s genetically modified maize MON 810. France insists that GM crops pose significant environmental risks. Another ban was imposed by China when the country last year refused no fewer than five shipments of American corn allegedly over concerns that it could have been tainted by a biotech variety of the crop.