Yves here. We sometimes run articles by Simon Watkins because they epitomize a sadly-common hard-core neocon school of thought in policy circles. Unfortunately, given the number of hawks that Trump has appointed to foreign policy and defense positions, it seems likely that the views Watkins set forth below have a strong following within Team Trump.
Here we see Watkins as a true believer who builds his vision of how to beat Russian, China, and Iran on shaky foundations. The first is the depiction of all of them as belligerents. Larry Wilkerson, who has over his long career often had a seat at the table, forcefully disputed that notion in his latest talk on Nima’s Dialogue Works. He describes how the US military is so weak that it can attempt to maintain its dominance only through proxies, and that is has been a matter of explicit policy not to allow any competing power to threaten that position.
The entire video is very much worth your time, but consider in particular the section that starts at 27:50:
The real reason is ee do not want peace! Period. We want everything from the Baltic to the Persian Gulf to be in turmoil and chaos. We want it that way by proxy wars and proxy conflicts so that the power shift is arrested, so that we maintain our American empire imperium and it is not taken over and subjugated by China. That’s what it’s all about.
A second unfathomable reading is Watkin’s insistence that Russia is economically weak and can be broken by a further tightening of Western sanctions to hurt Russia’s energy sector to the advantage of US LNG. Has he missed the IMF data that shows Russia having one of the highest GDP growth rates among advanced economies? That since the Special Military Operation started, Russia has advanced to become the fourth largest economy in PPP terms? The sanctions of Russian energy have done far more harm to US allies, particularly in the EU. Since when does weakening your allies make you a stronger power?
We’ll stop our critique here in the interest of encouraging readers to apply their knowledge and analytical skills.
However, it does seem that the prevalence of articles like Watkins’, that recommend yet more aggressive US action, first and foremost against Russia, provide yet more confirmation of the notion that Trump’s end the war plans for Ukraine are dead on arrival. The official information is so polluted that his emissaries, and almost certainly Trump himself if he meets Putin, simply will not believe that Russia is in a position to get its way in Ukraine with respect to the disposition of territory. And they also seem convinced that the Russian economy is flagging and can’t keep up the war effort for much longer.
The only reason to hope that Trump might still walk away from Project Ukraine is his extreme antipathy towards NATO and other spending that he regards as welfare for Europeans…compounded by the fact that European leaders during his first term and to this date keep making clear that they loathe Trump personally.
By Simon Watkins, a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for Credit Lyonnais, and later Director of Forex at Bank of Montreal. He was then Head of Weekly Publications and Chief Writer for Business Monitor International, Head of Fuel Oil Products for Platts, and Global Managing Editor of Research for Renaissance Capital in Moscow. Originally published at OilPrice.com
- Trump’s second term aims to counter the Axis of Upheaval.
- Plans include tightening sanctions on Russia’s LNG sector and transshipment methods, and extending similar sanctions to Iraq for aiding Iran’s oil exports.
- Broader sanctions and measures on Iraq, Iranian proxies, and Chinese financing networks indicate a U.S. strategy to curtail economic and logistical support for adversaries.
As Donald Trump’s new advisory team prepares for his second term in the U.S.’s highest office, the general feeling is that the much-vaunted ‘Axis of Upheaval’ is at its lowest ebb to date. The aim of this axis – driven by Chinese money, Russian military aggression, and the respective destabilising Middle East and Asian presences of Iran and North Korea – is to replace the primacy of the U.S. and its key allies’ influence in global geopolitics with a multipolar version, albeit in reality with Beijing at its centre.
However, according to a senior source who works closely with the new presidential team: “China’s finances are failing [with struggling economic growth], Russia’s military has failed [in Ukraine and Syria], Iran’s proxies have been incapacitated [Hezbollah, Hamas, Houthis et al], North Korea is on the sidelines, and now Trump is back.” Consequently, although many observers expect a continuation in Trump’s second presidential term of the neo-isolationism evident in several key respects in his first term this is unlikely to be the case. Instead, the Washington-based source exclusively told OilPrice.com, the second term is going to be about reasserting the primary influence of the U.S. and its allies in the world through whatever means necessary in order that Trump can be seen by his voters as keeping his promise to ‘Make America Great Again’. In essence, it will be a bold reassertion of the original 1992 Wolfowitz Doctrine. This was modified slightly in 1994 for public consumption, but the original version is the one that Trump’s second-term vision will most closely approximate.
Top of the Trump team’s list of priorities internationally is ending the war in Ukraine, which they are still confident of being able to do relatively quickly through the methodology previously outlined by OilPrice.com. From there, the aim will be to dramatically reduce Russia’s capability to mount any credible conventional military invasion of further European territories by severely degrading its financial ability to do so. The immediate focus here, according to the Washington source, will be continuing to reduce Russia’s gas and oil export receipts to as near to nothing as can be managed. As liquefied natural gas (LNG) became – and remains – the key global emergency energy source following the invasion of Ukraine in February 2022, Russia’s ability to monetise these exports will be the first in Washington’s cross-hairs, to be hit hard not just by the U.S. but by its European allies as well. “Early on, the [presidential] team will expand the actions taken in August, with many more key LNG targets hit by new sanctions,” said the source last week. In this context, the day before the 24 August commemoration day of Ukraine’s Declaration of Independence in 1991, the U.S. Treasury and State departments expanded their sanctions-related designation of individuals, companies, projects, and trading and delivery mechanisms involved in developing key energy projects and associated infrastructure including the Ust Luga LNG Terminal, the Vostok Oil Project, and the Yakutia Gas Project, among many others. This aligned with earlier comments from the U.S. Assistant Secretary of State for Energy Resources Geoffrey Pyatt that: “We’re going to keep tightening the screws [on Russia’s major LNG sector projects, including the cornerstone Arctic LNG 2 project].”
The Trump team has already been busy laying the groundwork with the U.S.’s allies in Europe to support this tightening of the screws on Russian energy exports. These arguments are even more forceful now, as the warnings Trump’s team made in his first term to key European Union (E.U.) states – especially de facto leader, Germany — of the political and economic dangers of becoming over-reliant on Russian gas and oil were proven correct with its second invasion of Ukraine in less than 10 years, as analysed in full in my new book on the new global oil market order. The same E.U. states have already reduced these energy imports considerably, but just over a week ago they agreed the organisation’s 15th sanctions package against Russia aimed primarily at disabling the ability of Russia to move oil and LNG through a shadow fleet of tankers. According to industry figures, over 80% of Russia’s seaborne crude exports are currently moved by tankers not flagged, owned or operated by companies based in the G7, the E.U., Australia, Switzerland and Norway, and not insured by Western protection and indemnity clubs. Consequently, the new shipping sanctions greatly expand the number of individuals and entities to the previous sanctions list. These dramatically increase the list of entities not just in Russia but in third-party countries and organisations in Russia that indirectly contribute to Moscow’s military and technological enhancement through the avoidance of export restrictions. At the same time, similar E.U. sanctions are being introduced to prohibit the transshipment of Russian LNG through E.U. ports as from March, alongside further bans of the import of Russian LNG into terminals not connected to the E.U. gas pipeline network. All these moves – and more to come, according to a senior E.U. energy security source exclusively spoken to by OilPrice.com last week – are ultimately geared to completely end Russian fossil fuel imports into the E.U. and non-E.U. European countries by 2027.
A similar idea of degrading the ability of Axis of Upheaval members to side-step direct sanctions by utilising ‘useful idiot’ states to help them is also under consideration for Iran’s key accomplice in this regard – Iraq. As highlighted recently by OilPrice.com, the Trump team is considering imposing similar-style sanctions on Iraq as it has in place for Iran, including on individuals and entities connected to the financing, movement, and logistics involved in moving Iranian oil and gas, and the money relating to it.
A precedent for this was set in the first Trump presidency when, after Iraq signed a two-year contract gas and electricity import deal with Iran despite pledging to reduce the length of such deals, Washington responded with swingeing targeted sanctions on 20 Iran- and Iraq-based entities. The State Department cited them as being instruments in the funnelling of money to Iran’s Islamic Revolutionary Guards Corps’ (IRGC) elite Quds Force. It added that the 20 entities were continuing to exploit Iraq’s dependence on Iran as an electricity and gas source by smuggling Iranian petroleum through the Iraqi port of Umm Qasr and money laundering through Iraqi front companies. And it said that Iraq was continuing to act as a conduit for Iranian oil and gas supplies to make their way out into the world’s major export markets. As nothing whatsoever has changed in this complicity, there is every reason to expect the threat of such sanctions on Iraq early in Trump’s second term, according to the Washington source last week, followed by the imposition of further sanctions if the threats are not heeded.
Extending such measures on Iraq – and increasing their scope – would also signal to Iraq, and to other members of the Axis of Upheaval, that a much greater degree of accountability for acts deemed hostile against the U.S. and its allies is in the offing. Again, there is recent precedent here as a year ago the U.S.’s Department of Treasury’s Office of Foreign Assets Control (OFAC) applied sanctions against Iran to a broader part of its international support network, especially to those entities and officials involved funding the Islamic Republic’s proxy terrorist organisations – Hamas and Hezbollah. Those sanctions were focused on 20 individuals and entities for their involvement in financial facilitation networks for the benefit of Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL) and Iranian Armed Forces General Staff (AFGS), and the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF). Interestingly, among the long-suspected list of names and companies that were sanctioned at that point were companies in Hong Kong and the United Arab Emirates that were suspected of being part of the network that sells billions of dollars’ worth of Iranian commodities to customers in Europe and East Asia. “It flagged that the U.S. can and will go after the major financing centres that China uses if Washington thinks Beijing is consistently overstepping the line in challenging key areas of strategic interest for the U.S., in addition to the scalable tariff rates to be applied on China’s critical export flows,” the Washington source concluded.
Without even getting into the whole destruction of the German/EU economy angle, if strangling Russia is so important, why is it still being planned and talked about 3 years into the war? I question the seriousness and commitment of Washington to this project, especially if there is money to be made in arbitraging Russian gas via third countries.
They’re very serious. They thought the measures they’ve brought in so far would take Russia down, they didn’t but they’re prepared to double down and to go at it with a frenzy. For them it’s about who rules the world and it may all come down to who buckles first under the weight of sanctions, Russia or the Europeans. If it’s Russia, the Americans will then turn on China and will try doing to China pretty near what the Israelis have done to Gaza, nothing less drastic will work for them, they are psychopathic lunatics and will stop at nothing.
Russia may have increased it’s GDP, but how much of that increase is military equipment manufacture?
A GDP based partly on stuff that gets destroyed sooner or later is not a sutainable GDP.
Probably about as much as US government consumption spending keeps US’ paltry GDP growth going.
Paging Joan Robinson. Decades ago she was pointing out that military Keynesianism is very effective in the short to medium term in keeping economies ‘growing’, but in the long term it matters what you are spending money on.
Iran is the poster child for this. They have a hugely impressive domestic military sector, but the rest of the country is crumbling due to both sanctions and long term neglect and maladministration by its own government. Despite its enormous oil and gas reserves, it is struggling to keep its own lights on. Its not just a matter of where the money is spent – its also just ‘bandwidth’ – governments focusing on external threats and defence spending often take their eyes of the ball when it comes to long term domestic investment planning.
The Russians do seem to be well aware of the dangers, hence Putins firm insistence on not letting military spending get out of control, but sometimes these things develop a momentum that can’t be stopped.
A NC member posted yesterday the idea the grim news regarding Iran is suspect, saying it comes from an anti Iran source which only promotes negative info about Iran. Interesting it true.
Whatever about that particular article, its no secret that Iran’s electricity network is outdated and patched up. Its struggles with updating its oil and gas infrastructure are well attested too. Much of this comes from a huge backlog dating back to when oil prices were very low 2 decades ago, plus general neglect and incompetence.
Add in a devastating war, constant external threats, internal sabotage and nearly half a century of sanctions and any country would be struggling here. We just saw that with Syria.
Scratches chin. What major western hemisphere power does that also apply to?
Yes. Then add in railway, road transport, power and sewage infrastructure plus education and healthcare, shipbuilding/repair and probably more that are not on the tip of my tongue right now.
That was probably me, and I know I wind up posting on Iran a lot, mainly because there’s so much static in the air around it, plus I’m weirdly Persianized in ways.
I don’t disagree with PlutoniumKun on any of the material facts about the state of Iran’s infrastructure; it is very creaky, particularly for transportation IIUC. Plus he/she knows 1000x more about how to actually implement these systems than I do. I’m just skeptical about interpreting the long-term trend negatively as a sign of government incompetence.
Obviously that’s partly because there’s a lot of misinformation on Iran you have to wade through here in the West. But I also think some of it is that Iran is culturally and politically unique in ways that make it very easy to misinterpret. One big cultural stereotype I’ve learned, partly based on observations by Iranians I’ve met, is that almost nothing they do is just what it seems on the surface. Not in the sense of dishonesty or ill-will, but as in subtlety and acting on the oblique.
For the specific case of the current power grid, just spit-balling and putting together some other things that were in the news recently, it’s very possible power is being throttled to industry intentionally. I don’t remember where, but there was a report recently that a boom in domestic manufactures due to sanctions has probably led to overcapacity. At the same time, in the past, you would hear about households losing heat in cold weather. By diverting gas from industry to residential power (and probably exports, particularly as a quid-pro-quo for Turkey in Syria), the government can also cull the stragglers in its industrial sector without ever having to tell businesses that’s what they’re doing.
As for sources, If there’s one seemingly unbiased English-language site for Iranian economics I’ve found, it would probably be Bourse & Bazaar. I can’t say for sure what their angle is, and they only do periodic, think-tank reports, but at least they leave out all the politicized stuff you see in most reporting on Iran. There’s also a US professor that writes there occasionally, and he seems pretty sanguine about the Iranian economy, though even he notes the sanctions have hit physical investment:
Tyranny of numbers, by Djavad Salehi-Isfahani
You responded regarding my suggestion that if Iran is in such bad shape, that Russia and China might consider showing more help towards Iran, lest she follows in the footsteps of Syria, which would probably be significant blows to China regarding energy and Russia regarding geo military security. So guess my concern stands.
Whilst I would not presume to know the real truth about the present strengths or weaknesses of the Russian economy, I must thank you for mentioning Robinson, and I would urge readers to memorise this apt quote from her famous 1973 essay ‘The Need for a Reconsideration of the Theory of International Trade’ in a volume entitled ‘International Trade and Money’:
“In the case where borrowing is covering a deficit on income account, there is a certain sense in which savings are being exported from one country to another. The deficit country is absorbing more, taking consumption and investment together, than its own production; in this sense its economy is drawing upon savings made for it abroad. In return it has a permanent obligation to pay interest of profits to the lender. Whether this is a good bargain or not depends upon the nature of the use to which the funds are put. If they merely permit an excess of consumption over production, the economy is on the road to ruin. If they permit an excess of investment over home savings, the result depends upon the nature of the investment.” (reproduced at 221 here: http://digamo.free.fr/jrcontrib78.pdf)
Thanks for mentioning Joan Robinson.
“The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.” Joan Robinson (1955).
The point is that Iran needs not only an impressive military sector, but a highly effective one due to US sanctions and its continued military threat. Even Joan Robinson, sadly a greatly underrated economist who actually understood that an economy consists of real human beings and institutions who worked, consumed, saved and invested in an uncertain world in which neither free competition nor free choice exists to any extent, made an exception for Hitler and future Hitlers. For Iran, military expenditure is not a choice but a necessity, whereas the US has freely chosen the path of military Keynesianism, not least by supporting proxies with a pronounced gift for failure.
If I am thinking correctly, Russia’s spectacular jump in the size of it’s economy is due greatly to Western propaganda vehicles (in this case the World Bank) admitting their propaganda was wrong and throwing it and using better data. World Bank abruptly said it’s previous estimates of Russian GDP were wrong because it errors, and finally admitted after decades of disinformation that Russia was a high income nation and 4th largest economy the world. And if ignore the war itself and look solely at western sanctions, western economies have contracted due to their own sanctions by increasing the flow of their wealth to Russia and intermediaries.
“Spectacular” is a bit strong, but otherwise I agree with you that RU’s rise in the PPP rankings is largely due to the World Bank ‘fessing up to previous miscalculations (and the others following along). Plus the ongoing implosion in Germany and stagnation in Japan which has dragged down their measured performance.
I would add that the sanctions have forced RU money that would otherwise have fled abroad (to Swissie/Dubai/BVI/London et al) to stay in-country, and since money never sleeps this has been a welcome boost locally.
Faulty reasoning.
It’s about 6% of GDP. The official US #s are about 3.4% of GDP. But we have massive black budgets, so I would guesstimate 5% of GDP.
You further miss that Russia is working hard to make sure that as much of the military-related manufacturing is dual use, as in can be repurposed without too much additional spending to civilian production.
By contrast, if you want to look at an actual war economy, the US’ defense spending in WWII was 40% of GDP.
Russia’s weapons are much cheaper than ours and I would strongly suspect the biggest expenditure is on soldiers, and their pay is eventually spent back into the economy. That’s what happened in WWII.
This may be a fine distinction, but as well as direct ‘dual use’ there is also the possibility of particular technical innovations in weaponry leading to breakthrough advances in future civilian technology.
I’m not an economist but it seems that turning inward for manufacturing goods because of the sanctions has had a stimulatory effect on the economy. And goosing the sanctions won’t help.
You could ask the same thing of the EU. The European Commission wants to increase the funding of ammunition production and other military projects. European NATO members will probably also try to achieve a military spending that is 5% of GDP. And since the recent Mario Draghi report for the European Commission mentions the defence industry as part of the EU’s future industrial policy, I guess the military industry will get a fair amount of support in the future as well.
It doesn’t look like the EU’s GDP goals are that sustainable either.
Should US’ “project Ukraine” fail it is not a win for “Putin aggression” (propaganda loss) it is a failure of a project of the US [PNAC/neocon] empire.
I was first lead (several years ago) to Watkins by J. Barkley Rosser, who was a devout hater of Russia and Putin in particular. Rosser; a neocon by way of marrying a Russian national whose family was punished by Stalin.
US is already exporting roughly equivalent of 6 million bbls of LNG per day putting US as a larger net energy exporter. This is since 2022, with the US imposed sanctions on Russian energy over Ukraine.
US may throw more LNG out on the world market as the new administration opens more leasing for drilling.
Keeping energy costs high for consumers ……
According to what I’ve read, increasing LNG is not so simple. To open up new wells/whatever, there has to be a guaranteed market as once started it’s very hard to turn off.. Then the mechanical extraction infrastructure has to manufactured plus supply infrastructure etc. which all takes time. I imagine there is much more than that, too.
The concept of the Russian economy as a ‘gas station’ is still alive a kicking.
The Russians want to cool down their economy a tadge to get inflationary pressures under more control. so growth rate of say 2.5% rather than 4%, for a year or two is planned. Some of these neo-con efforts might help a bit.
But the real harm is on the EU/UK economies. Making energy expensive and less than plentiful is a recipe for stagflation which is where Europe is at and increasingly will become. Reduction of competition is the neo-con aim, they just aren’t naming the real target.
The US and our fellow citizens are really testing the question of whether it is possible to be wrong and delusional about everything. And the perceptions are not just wrong, but completely inverted from the truth. Whom the gods would destroy…
This reads as nutsy. The US has already forced both China and Russia into a partnership when the US should be trying to split them up but that was not good enough for the Neocons. Now, by pushing Iran, that country too will become a part of this partnership. I wonder what this guy thinks of Boris Johnson’s idea that ‘If Ukraine falls, it will be a catastrophe for the West; it will be the end of Western hegemony.’ Or has Watkins already written off Project Ukraine? But here is the thing. Simon Watkins seems to forget that the other side gets a say on any measures taken against it. As an example, Biden is pressing against China’s development so as a shot across the bow, China restricted some rare earths that are vital to US military needs.
Russia could hit back too by restricting the export of such materials as titanium and if LPG is restricted, they might just send it east instead. The EU has already been wrecked and if LPG is further restricted there, the EU may become politically a non-entity. As for Russia’s shadow fleet of tankers aka the ghost fleet, these are simply tankers who are not insured by London. It is that simple. They are insured by other countries as it turns out that London is not in fact the capital of the world. And should it be mentioned that the US is not the only country in the world that can use proxy forces. And with 1,000 bases scattered around the world, I would call that a target rich environment. France is already being pushed out of Africa and the US has already been pushed out of Niger.
But one thing that I find risible is where he says ‘Trump can be seen by his voters as keeping his promise to ‘Make America Great Again’’ by doing all these foreign adventures. Correct me if I am wrong but isn’t Make America Great Again all about reforming America at home and bring in a working economy again for average Americans. It is definitely not about trying to ensure that American Hegemony remains unchallenged and undisputed around the world, not matter what the cost is to Americans at home. I think that many Americans saw this at work when Biden was pushing tens of billions of dollars to the Ukraine while a disaster-hit South Carolina was semi-ignored.
H-1B reform/termination – GONE. Ending Project Ukraine – soon to be gone also? Trump is irrelevant. He just thinks he isn’t. I’m wondering what kind of vindictive tantrum and retaliation he may come up with after he meets with the Russians and don’t grovel as the losing military and economy he’s probably being told they are. If Trump were smart he’d cut and run and terminate further Ukraine aid. That’s what the people who voted for him want.
Panama temper tantrum is Grenada or Panama I redux. Show the might of the US to the world by throwing some weak patsy to the wall.
«Correct me if I am wrong but isn’t Make America Great Again all about reforming America at home and bring in a working economy again for average Americans.»
Not so long ago people talked about “the imperial presidency”, but it’s been a long time since the president had imperial power. Even FDR was stymied by the oligarchs, who still owned much of Congress and shifted massive investment to Germany and Hitler, bringing on the 1937-38 recession.
Nutsy? Probably. Consistent? Certainly. Zelensky is instructed not to renew an agreement on transit of Russian gas through Ukrainian territory. Another nutsy Zelensky move, or part of the neocon scorched earth plan as described by Simon? Torch anybody doing hydrocarbon business with the Russians. If suicide is the result…well…
If Trump reneges on his promise to get out of the war business by the DoD and covert color revolutions by the CIA, he is in deep trouble with the MAGA base who are – not – Neocons!
Right now Trump doesnt own any of Obama decisions whether directly or via his puppeteer program with biden. Walking away from Ukraine is easy for him politically and especially so financially – stop the armaments and money! As Larry Wilkins, Colonel MacGregor, Scott Ritter, and many other serious people have said Putin cant allow NATO nor a Ukraine proxy management on his doorstop – Losing proposition for Trump to continue and Putin knows it – too many other problems for Trump to deal with.
The EU is not about the danger of stagflation, it’s all about the complete end to exports especially of serious tangible goods like autos – due to exorbitant cost of energy in all forms, especially LNG from the uSA and regulations in the EU.
Time to walk away !
Just as a point of interest, the biggest LNG exporter in the world is Australia. And Japan is a very big player in international LNG trade through its shipping industry. Its odd how both countries tend to get overlooked in articles like this. Likewise, its rarely mentioned that Qatar shares its gas geology with Iran. Nobody knows what sort of under the counter deal allows Qatar to extract the lions share of the South Pars field, but it probably involves a lot of money. The Qatari government has always been masterful in its ability to avoid the various geopolitical missiles flying around and somehow persuade everyone that they are on their side.
Its also easy to exaggerate the importance of Russian natural gas to Europe as a whole. It generates around 20% of its electricity and total energy use, and around 15% of this comes from Russia (down from 40% pre-war). Its industrial use is important, but mostly restricted to specific sectors (particularly in Germany). The structure of EU energy markets and its importance for electricity load balancing gives gas an outsized role in setting electricity prices as rates are set by the most expensive input. So gas restrictions leading to very high electricity prices have been a huge boon to the nuclear and renewable sectors, both of which have been making very outsized profits. To some degree, I suspect the slow response of European leaders to the impact of very high electricity prices is precisely because they are hoping that these prices will spur faster investment in renewables and energy savings (some EU policy documents come very close to saying this out loud). The share of renewables in overall energy consumption in Europe has risen from 10% in 2005 to 25% now, with a likely unrealistic target of hitting 40% by 2030, although the very rapid increase in solar roll-out means it could come close.
LNG is a fungible product (unlike crude oil), so it generally goes to whoever can pay most for it (so the big loser in all this could well be Japan, not Europe, they are most dependent on it). The biggest issue for Europe with LNG is less its price than the lack of LNG terminals – industry has been very reluctant to pay for them – this issue predates the Ukraine war, the EU had been trying to build more terminals for years for security reasons, mostly fruitlessly. The LNG industry has always been seen as a high risk one for investors due to the very high capital inputs required and the very unstable long term pricing outlook. It is a very different industry than pipeline gas, which requires firm long term unbreakable supply/consumption contracts to make even quite short pipelines viable. But transnational gas pipelines are very time consuming and expensive to build, so they add little to short term changes in demand and supply.
I suspect the biggest hit to Russia from renewed sanctions would not be on the total sold, but the pricing. Sanction busters expect big discounts on the oil/gas they sell and even Russia’s allies will likely play hardball when it comes to how much they pay. So the impact on Russia would likely be very dependent on the overall price of oil. No doubt a high priority for Trump would be to push down the price by pressurising the Gulf States to turn the taps up. Given the overall weaknesses in the world economy, this could well have an effect, and I suspect would impact Russia more than sanctions if oil went to $50 a barrel or less. But there are plenty of countries highly dependent on high prices, so Trump won’t get it all his own way.
That to me is maybe the most interesting side of this article, especially because it could be another example of the US invoking the law of unintended consequences by not looking past the next few quarters.
Whatever else it is, once you have the terminals to distribute it, LNG is truly a commodity. But that not only means that it goes to the highest bidder, but that in the long-run, market share goes to the producer with the lowest marginal costs. The US may be competitive now with a head-start on terminals and strong production, but it will be interesting to see what happens if the shale formations wind up tapped out relatively soon.
If both the total energy pie in the EU is shrinking (offshoring and recent energy intensive industries closed), modest conservation reductions and aggressive renewables development, the relative share of renewables increases. This is an apples and oranges comparison 20 years apart. It is analogous to the much ballyhooed share of renewables in California; heavy industry is largely gone while there has been aggressive renewables development (ignoring the huge fossil imports from adjacent states!).
As you say, electricity prices are set on the margins for the golden billion thanks to Thatcherism. Natural gas will play an outsized role in setting electricity prices. Costly imports to Europe and Japan, massive exports from the US.
Yes, but isn’t most of that Australian LNG sold to China under long-term contract? I recall those being negotiated when I was in Oz back in 2002-2004. So it’s not part of the supply that could go to the EU.
These LNG exports have been our undoing. Since the Ukraine war started the rise in gas prices has doubled electricity prices in Australia. The Empire has forbade us from having domestic gas reservation to stop this because it wishes to prop up its satraps in Asia where a lot of this gas ends up despite Chinese contracts. This is finishing off what little manufacturing we had left. We have been in a per capita recession for a couple of years and as soon as electricity bill subsides end it will become a real recession, with iron ore income the only thing stopping a disastrous drop in AUD.
The burden of housing has also skyrocketed here due to excess immigration and interest rate normalisation so we are in a bit of a situation.
We’re doomed. How anyone could look at the combination of events we ended 2024 with and conclude the above is a mystery. Which brings us to a discussion that has been suggested a few times since Trump won and DOGE became a thing. If Trump isn’t a disruption of the neocon and neoliberal status quo, if these brilliant techbro disruptors can’t or won’t change things, then what options do the American people have to actually change the direction of the country? We were treated to a variety of moves to “Trump Proof” our government in 2024. It seems like they were unnecessary. So what happens next if nothing changes for US citizens?
Nothing, for a short while. The US is the world headquarters of Distraction, and its citizens the most propagandized in the world. However, a critical mass will emerge, perhaps even this year. A hot summer ahead? Damn, I retire in the Spring . . ..
Different groups of people in states and parts of states, counties, towns, cities, etc. will try different things which can be tried at those local and regional levels. Darwin will decide if any of these different things work out.
Where do we have some official documentation on the real US/RU GDP numbers, real defense spending, US black budgets or above World Bank admission quoted by timbers? Which I of course read about too, but via blog comments only.
And what on Russian true budgetary spending? For months now Russia as war economy is rampant in German news reporting. In German language you find no serious sources on this. (Sure it’s buried somewhere.)
And John Helmer had this brief thingy:
“President Vladimir Putin gave a party rally speech in Moscow on Saturday in which he omitted to mention seven of the eight domestic issues most troubling Russian voters – inflation; high interest-rate caused stagnation in the economy; corruption; low quality education; poor public health care; terrorism; and illegal immigrants.”
He made an exception for the Special Military Operation and “the front to fight for the Motherland”.
p.s. three Cold War US military increases: Truman / JFK / Reagan.
Truman: trippled defense budget from 5% to 14,2%
JFK´s budget statement from Oct. 11th 1961, which lead to a post-war high in defense spending of $46bn in 1962.
(I like to use them to show people he was not your beloved peace POTUS)
I guess with redefining R&D at universities, or the space program etc. you get much higher percentages.
“(…)
President Kennedy, speaking to an Oct. 11 press conference, said his Administration had increased the previous defense budget by more than 14 percent.
He added: “In strategic forces, which are the nuclear forces, we have ordered a 50 percent increase in the number of Polaris submarines to be on battle station by the end of 1964; a 50 percent increase in the number of strategic bombers on 15-minute ground alert at the end of runways, which is already in effect; a 100 percent increase in our capacity to produce Minuteman missiles against the day when that production capacity may be needed, and a similar increase in Skybolt, and other programs which affect our strategic arm. To strengthen our non-nuclear forces…we have called up two additional divisions, and many thousands more, particularly in the air. We have increased by 75 percent our modern long-range aircraft capacity. We have increased our anti-guerilla forces by 150 percent. We have stepped up the delivery of the M-14 rifle from a maximum of 9,000 a month to 44,000 a month. We have taken other steps to bring the Army and Navy and Marine units to full strength in terms of manpower and equipment.…”
(…)”
Helmer hates Putin. You need to severely discount anything he says about Putin. His approval ratings continue at around 80%, even according to independent, as in Western-aligned pollsters, which even Helmer concedes. Since most people care most about kitchen-table issues, they can’t be as upset as Helmer wants you to believe. And Russians are well aware that their GDP per capita in real terms increased 5x under Putin. Putin did address inflation, and pointed out that the central bank is working on bringing it down and even with inflation as high as it is, real wages are up. But he also added that averages miss cases and sectors where workers are feeling pinched by cost increases.
For instance you mentioned the increase in wages just recently in a post.
I am also well aware of Helmer´s skin in this. Which he indirectly admits by describing himself persona non grata.
What I am rather looking for is the official documentation of the economic and military spending issues which we all here agree on. But I can’t quote NC commentariat in Germany.
And I was trying to gather material to point out the inadequacy of that GREENPEACE study about how NATO is outdoing the Russians. (I posted it here around Nov.)
Because this misunderstanding has become a stalwart talking point among the entire antiwar movement now. It’s the argument next to avoiding WWIII. The Greenpeace study is quoted everywhere. I feared this would happen. It’s a bit like the faulty RAND studies on the USSR which Ellsberg talked about, exaggerating everything – it’s just the other way around now.
But if people do not understand how the reality of military affairs, the true nature of geopolitics and economic truths interwine they will undertake all kinds of incompetent things – such as demand negotiations with a freeze of this war.
Which the Russians will never accept. Then the peace people will eventually lose leverage as hawks claim: See, we told you so.
All this because they do not understand that RU is not inferior but the opposite. And they do not understand that simple numbers of NATO expenditure which are multiple of Russia’s mean virtually nothing.
None of this they will grasp. They will therefore pursue wrong policies and thus achieve the opposite or nothing at all.
Long story short: To make the German peace movement understand how these things really work is indespensable for finding a viable strategy vis a vis Russia and the US that offers Germany and Europe a meaningful future.
Otherwise we will become a Sparta without the hoplites – armed to the teeth (with garbage) and no money left for serious things. Jingoist, desparate and deplorable.
Russia’s Central Bank seem to be in thrall to neoliberal economics as this idea of raising interest rates to ‘control’ inflation has never worked in practice. All that happens is that an economy becomes degraded so that inflation is curbed. Americans saw this with Volker in the 1970s and are seeing it now. Rising interest is just another increased expense, inflationary in itself. [Michael Hudson]
If inflation is caused by scarce resources, then Russia can wither “suck it up” for the war effort or increase production. If inflation is caused by too much lending, then the Central Bank can curb lending by whatever means, but the easiest is to reduce the ratio of reserves to loans.
I haven’t read a lot of Helmer’s work. Did Putin do something bad to Helmer? If not, why would Helmer hate Putin?
Helmer was exiled from Russia.
He was not even allowed to return to attend the burial of his wife in Siberia.
Kennedy was dealing with the Sputnik effect. We still have ICBMs in siloes he bought as well as B-52 and KC-135. Boeing is not the same.
MEDICARE won’t arrive until LBJ with “guns and butter” and SS outlays were trivial.
Today the MIC % vis a vis entitlements is reversed.
Ah, the wondrous “Sputnik effect”. I was in high school when the government decided it needed to catch up with the Soviets as fast as possible. To that end, I was treated by the Federal government to a summer at Oregon State University to study marine biology, meteorology, and a few other Earth Sciences. I only remember the meteorology and marine biology classes, probably because I skipped the other classes to play with my Oregonian girl friend or to play handball. Best summer of my life!
I benefitted from a couple of National Defense Student Loans that were partly forgiven for years of military service.
re: Sputnik
As it comes up here I figure it would be interesting to compare the Cold War assessments made by Marc Trachtenberg, e.g. in “A Constructed Peace” vs. Dan Ellsberg in his Doomsday book. It appears there are two different views on US “riddles wrapped in a mystery inside an enigma”.
Any evaluation of GDP isn’t likely to be useful this context. We applied some minimal number of additional sanctions after the SMO started and that just about crippled Europe. Plus, in any definition of GDP numbers we’d need to understand in support of a war economy, I’d think we’d want to know REAL numbers. Strip out the imputed contributions. Strip out the inflated gains because of predatory actors like insurance companies or drug companies. Strip away remittance and transcendental investments in things like AI. I don’t think Owner’s Equivalent Rent matters when you’re trying to produce soldiers and materiel. You need to know what can a country really do. And in that case, Russia has already demonstrated it can do a lot. Saying we need to know more than that just seems like cope to me.
Andrei Martyanov has gone into this topic more than a bit on his website, that Russia fares extremely well on a world comparative basis in terms of actual outputs. I need to turn in, otherwise I’d go hunting on his site.
Thank you Yves.
My comment was meant to bring the discussion away from metrics the US and our allies have successfully gamed into uselessness. Listening to people discuss this issue makes it seem like Swift was too kind in discussing how the Lilliputians decided who was going to rule. We have statistics on how many times and how well the tiny people leading us should be able to jump over and under the bar but we have yet to see them actually prove they could do it, or that they’re being capable of performing those feats means anything.
Right now we know that Russia can produce drones and other military hardware far in excess of what we can supply our proxy in this conflict. Right now we know that Russia can adapt to realities on the battlefield with a short development cycle. Right now we know Russia has an ample supply of soldiers. Right now we know Russia has advanced missile technology that we can’t match. Right now we know Russia has a logistics advantage that we can’t match. Right now we know that Russia has no shortage of customers for its petro products. Right now we know Germany and other allies who we would have to rely on to meet the logistics challenges of supplying the Ukrainian proxy can’t do much without Russian fuel. Right now there appears to be no domestic opposition that is going to stop the SMO, in fact, if Putin is ousted, he will probably be replaced with someone even more hawkish. So what the family blog does relative GDP have to do with anything? I don’t understand why someone would even ask that question at this point in time.
None of this is in question here.
All of it in the world where I operate.
Martyanov addressed the same issue you did, 2 days ago, from a different angle – quoting himself from 2016. He was then saying that a country (RU) that is building state-of-the-art missile systems, SSBNs, etc. has a certain degree of technological capabilities that can only exist under certain guaranteed economic standards. But just this very simple relatioship between highest levels of R&D and a country’s general progress are not just not reckognized – they are beyond imagination in Germany. Two mundane examples of Western discourse: RUs belittled Sputnik vaccine during COVID and this planted idiocy of washing machine chips. And even among circles that want peace with and respect towards RU some would buy into such obvious fabrications – because it’s “oh those poor Russians, they need us, we need to help them”. If you quote Russian sources on any of the above issues you are not trusted. You have to quote World Bank. Then you might get a shot to be heard. And the higher you are in the hierarchy of decision-making the worse this racism gets.
p.s. I haven’t checked but allegedly Wagenknecht had called Putin a thug a few weeks ago.
Martyanov bitterly complained. Of course, I need not care about what he thinks about German politicians. But this story if true proves the immense pressure on those who do not follow ideology. And eventually change positions.
Sorry for repeatedly circling the same subject here.
No need to apologize. Thanks for an explanation. Your statement makes me think we’re doomed. Nothing that I said should be controversial. It’s all easily visible for people to see. Suggesting that your crowd disputes any of it is frightening.
I guess we’ll be treated to a show of, in practice Russia didn’t lose, and in theory, we won! On to the next glorious proxy conflict…
I am really curious when “Project Ukraine” will hit the wall.
Alex Christoforou in the end of yesterday´s video says, when the RUs reach the Dnieper it´s over for Z. I doubt that. They will retreat and regroup.
Until the AFU rank&file truly revolt. Would they tolerate a loss of Kiev?
And even if it does happen. Will the EU swollow or rather try sending troops?
Because at some point simulation reaches its limits. And then the EU will have to stand for their incompetence and answer accountability in some form.
Will the Russians call their bluff? And if so how far will RU push the envelope.
Eventually it turns out that you were right and they were wrong. How will they explain that?
p.s. Sometimes there are surprises. One such was the German parliament´s decision to not vote for a vaccine mandate with COVID in Dec. 2021. I was surprised. But that also meant that the MPs did very well follow the facts and incosistencies produced by the system and – their bluff was called and they backed down.
Same could become true now. At some point reality always catches up with you.
And yes, this insanity and incompetence paired with hatred and double standard and US nukes is scary. Without the nukes there would be none of this. It´s where they´re hiding.
If Trump has 1/2 a brain-cell still working, he’ll ask, “The biden team really HATED Russia, if it’s such a great idea, why didn’t they do this any time in the past 3 years?”
The EU commission’s eagnerness to commit seppuku in support of the cause is also very perplexing.
I hope Trump realizes the craziness of the parties involved and just drops the whole thing.
Russia realized Assad was unsalvagable and walked away. It is very hard to fold a losing hand where you’ve already invested in it.
Will Trump be able to assess this mess as similarly unsalvageable?
A casual follower of the petroleum economies of Iran and Iraq: they share access to a massive reserve of crude/NG. Overlap the border.
Development has been invested into by both PRC and RF investment organizations.
Reason for batching both in sanctions to keep oil markets tight.
We don’t get much news from Iraq, where roughly 2/3 of the population are Shi’a with some level of mutual sympathy with the Islamic Republic (110 million total Shi’a in rough proximity). In clearing ISIS Iranian advisers assisted Iraqi Shi’a militias. Why Trump did Solemeini in Iraq.
https://www.imf.org/en/Publications/WEO/weo-database/2024/October/weo-report?c=223,924,132,134,532,534,536,158,546,922,112,111,&s=PPPGDP,PPPSH,&sy=2000&ey=2024&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1
October 15, 2024
GDP, 2024
China ( 37,732)
United States ( 29,168)
India ( 16,020)
Russia ( 6,909)
Japan ( 6,572)
Germany ( 6,017)
Brazil ( 4,702)
Indonesia ( 4,658)
France ( 4,359)
United Kingdom ( 4,282)
Italy ( 3,598)
Turkey ( 3,457)
Mexico ( 3,303)
Korea ( 3,258)
Canada ( 2,582)
Just wondered but do unnecessary and or grossly inflated medical care, unnecessary and inflated legal fees and litigation, inflated finance costs go into a GDP calculation? Does the money spent by drug dealers and such get counted at some point? Does the interest portion of credit card financing get counted….payday lenders? Do campaign funds get counted since it looks like it is a billion dollar industry.
Surely an important factor in petroleum based geopolitical analysis is the future productive capacity of U.S. fracking production of oil and gas. If this source of gas declines, so does the ability to displace Russian exports of gas. Environmental concerns limiting fracking and the depletion of these deposits indicate that the glory days of U.S. oil and gas abundance may soon come to an end.
From a Google AI search:
According to Goehring & Rozencwajg LLC, U.S. shale output is in the early stages of a prolonged decline. They predicted that the explosive production growth would flatline in late 2024 or early 2025
https://www.imf.org/en/Publications/WEO/weo-database/2024/October/weo-report?a=1&c=119,998,&s=PPPGDP,PPPSH,&sy=2000&ey=2024&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1
October 15, 2024
GDP, 2024
China ( 37,732)
United States ( 29,168)
European Union ( 28,044)
We can discuss this all day long but America doesn’t have the natural gas, particularly fracked to take on any serious competitor in gas wars. As for there oil does this guy know how much it costs to drill the quickly depleted ultra deep oil in the Gulf of Mexico compared to Russia?
They’ll never win a war with or without NATO conventional or otherwise so it’s back to the hundred year old Halford Mackinder idea of plenty of proxy wars on Russias perimeters. That idea goes back a lot longer than Mackinders, it’s just that he put the stamp of ‘intelligencia’ on it. Good luck paying all your debts America, the banking clans are everywhere and never forget and all these mercenaries/proxies stop there terrorising for you when they don’t get paid and start robbing and doing there jihad elsewhere,,,like New Orleans for example.
How long till Ukraine NG pipeline infrastructure become a target?
If Russia’s shadow fleet becomes a target of western piracy, how long till western LNG tankers start sinking?
What would happen if Norway’s NG pipelines are blown up?
It seems that the US-EU is quite vulnerable if the war against Russia continues to escalate.
I suspect a lot of Greek and Indian nabobs would be upset if the tankers carrying Russian oil were interdicted – and I doubt Glencore or Vitol or Trafigura would be happy if Gunvor were affected
I doubt politicians will play with fire
There is a really silly and self-destructive notion that Russia needs to sell natural gas and oil to fund its war effort. This is vestigial mercantilist thinking. Russia has abundant resources in energy, steel, and industrial and scientific prowess to make all the war she wants, practically forever. If she exports natural gas and oil, then she can import other useful things. It was precisely this break in export/import caused by sanctions that encouraged Russians to become self-sufficient. Granted, there are useful military items that Russia would prefer to import, but these easily come from China. As far as the economy, Russia can just create money to pay soldiers and suppliers because of her rich resources and productivity. Europe is the big loser and only because their thinking comes from the last century or before.
I have been trying, with about zero impact, to make precisely these points to my friends and in the comments section of the Globe and Mail. So much neoliberal cotton has been stuffed into the heads of the public that progress towards understanding is glacial …
When I first saw the phrase “axis of upheaval” in Yves’s preface, I thought it a reference to the US and its vassals. It says much about Watkin’s delusional post that the phrase is far more applicable to the West, not the East.
Oreshnik – no mention of this game changer. Or of Andrei Belousov who is a trained economist and is Russia’s newest minister of defense.
Both of these show that Russia is very competent.
P.S. Thanks for this wonderful site that keeps me thinking.
These people are talking their own book.
The largest gas reserves globally are held by Russia + Iran+ Qatar and they have agreements. Qatar shares a major gas field with Iran called Pars. It cannot survive without good relations with Iran and Russia.
I find it hard to understand Kamikaze Americans who think they will survive the coming storm. Just because war has cost Americans very little – and the gains have been so vast – is not a law of nature
I was reading about the King-Crane Commission today and how it proposed US as Mandate Power in Ottoman lands conquered by British and French troops and staged a Zionist State could only be installed and maintained by military force and at least 50,000 soldiers. Even in 1919 Wilsonian factotums we’re proposing US imperialism
There is a sliver of chance Trump will avoid destruction. Europe and Israel intend to drag US into an apocalyptic war and only Russia and China are there to hinder them
US should consider its vassals can only be liberated when US falls.
If you really want to bring Russia to its knees economically, you need to stage a repeat of 2Q 2020. Lift all sanctions on oil and gas and drill baby drill until oil is under $30 a barrel. Get the price under the break even for Russia. The more you “punish” Russia by sanctioning a commodity with a highly inelastic demand, politically decreasing supply, the more you drive up the price and the profits, and the more lucrative it becomes to smuggle Russian gas and oil.
If you really want to bring Russia to its knees economically, accept it into EU and NATO.
When I read about how backward Russia is I can only think about how Russia used to provide transport for our astronauts to the Space Station. Now we have two US astronauts stranded in space for months and that the MSM seems to ignore. So much for our vaunted technology.