Yves here. Below is the latest offering from OilPrice’s house neocon, Simon Watkins. Alexander Mercouris has remarked at the marked gap between reporting in the US versus across the pond on the state of the Ukraine war. Authoritative mainstream outlets like the New York Times and Washington Post are now regularly acknowledging that Ukraine is on the ropes and even that Russia has the ability to continue the war at the current pace indefinitely. Some have even described Russia’s large advantage in weapons production, and even mentioned innovations like its use of fiber-optic-cable controlled drones.
Here, by contrast, Watkins runs the what-ought-to-be-discredited trope, that Russia is exhausted and really wants a way out. The worst is that Watkins and his supposedly informed sources believe that, and the Trump Administration might as well.
Here, Watkins argues that Europe has had such great success in finding energy alternatives to Russia that it can well afford to keep and even increase sanctions. Has he missed the spike in electricity prices in the Baltics after they cut the Russian cord? The deindustrialization of Germany? The difficulty Europe is having in meeting its gas storage targets? The laundering of Russian oil through refineries in India, among other devices? This level of denial confirms the reality-distorting power of Putin Derangement Syndrome.
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
- Europe remains committed to sanctions on Russia.
- EU leaders see continued Russian aggression as likely, with NATO emphasizing a need for a “wartime mindset”.
- The EU’s latest sanctions target Russia’s shadow fleet and financial system, expanding restrictions on oil and LNG exports.
As the U.S. team continues its negotiations in Saudi with its Russian counterparts to end the war in Ukraine, not a single representative from a European power is directly involved. Nor is there one from Ukraine, the subject of the unprovoked invasion by Russia on 24 February 2022. It may well be that U.S. President Donald Trump is able to effect a peace deal with Russia in such circumstances.
After all, its President Vladimir Putin knows very well his country is just a few months away from the complete exhaustion of all possible financial reserves and in the meantime is suffering from inflation at 10% and benchmark interest rates at 21%. “We think he’ll take any deal that gives him any concession in anything, as in three or four months of tightening sanctions and minimal military gains in Ukraine he’d have got nothing at all,” a senior source who works closely with the European Union’s (E.U.) energy security complex exclusively told OilPrice.com last week. “Trump may give him [Putin] a lot more than nothing so he can keep his promise to the voters back home to end the [Russia-Ukraine] War quickly, but it doesn’t mean we [Europe] have to go along with it, nor Ukraine itself, particularly given the trouble involved in reducing Russia energy supplies in the first place,” he added.
Indeed, before the 2022 invasion, cheap and abundant oil and gas from Russia had been a key factor in the economic growth of many E.U. countries, most notably its de facto leader Germany. These energy supplies (and the effective devaluation of its prevailing currency when the then-mighty Deutschemark was replaced by the feeble Euro) turbocharged its growth for over two decades, so it was little wonder that Berlin was extremely unwilling to give them up.
This was the primary reason why Russia’s test-run invasions of independent European sovereign countries Georgia in 2008 and Ukraine in 2014 were met with such an impotent political, financial and military response from the E.U. at the times. And this pathetic reaction was a key reason why Putin felt so confident that the same would happen with a full-scale invasion of Ukraine that his armies rolled into the country on 24 February 2022, as fully detailed in my latest book on the new global oil market order. His calculations were almost right, with the early days of the invasion being marked in the E.U. not by furious and fierce rhetoric and actions but by whingeing concerns over how its member states could keep Russian oil and gas rolling into their refineries, despite clear knowledge that the proceeds would be used by the Moscow to fund murder in Ukraine.
Following the 31 March 2022 decree signed by President Vladimir Putin that required E.U. buyers to pay in roubles for Russian gas via a new currency conversion mechanism or risk having supplies suspended, an official guidance document was sent out to all 27 E.U. member countries on 21 April by its executive branch, the European Commission (E.C.). It said: “It appears possible that E.U. companies can ask their Russian counterparts to fulfil their contractual obligations in the same manner as before the adoption of the decree, i.e. by depositing the due amount in euros or dollars.” The E.C. added that existing E.U. sanctions against Russia also did not prohibit engagement with Russia’s Gazprom or Gazprombank beyond the refinancing prohibitions relating to the bank. It was only because Russia’s invasion was not completed in the anticipated seven days that the E.U.’s planned capitulation did not go ahead. Instead, the extra time gave the U.S., U.K. and France time to formulate a broad strategy that would allow the relevant E.U. member countries to see their Russian oil and gas supplies replaced from other sources, as also detailed in my latest book.
From then until now, companies from the U.S. and Europe – especially the U.K., France and Italy – have worked hard to build a network of new oil and gas supply sources stretching from the U.S. itself through the Middle East (notably Qatar) to North Africa (especially Egypt). Big new supply deals have also been signed in other geopolitically vital energy-rich countries as well, including Iraq, Libya, and Saudi Arabia, by such firms as the U.S.’s ExxonMobil, Chevron and ConocoPhillips, the U.K.’s BP and Shell, France’s TotalEnergies and Italy’s Eni, among others.
As it stands, Russian crude oil imports to Europe have fallen from around 4.7 million barrels per day (bpd) in 2021 to less than 2 million bpd now, although the exact figure is clouded by the country’s oil exports through its growing shadow fleet of tankers. The E.U. banned most seaborne Russian oil imports shortly after the 2022 invasion and imposed price caps of US$60 per barrel (pb) on Russian crude alongside the U.S., Australia and other G7 allies. It added a further price cap on premium oil products of US$100 pb. Further sanctions have resulted in Russian gas imports to Europe plummeting from 136.7 billion cubic metres (Bcm) in 2021 to 28.5 Bcm in 2024.
That said, the E.U.’s ambition does not end here, with a target to completely end all Russian fossil fuel imports by 2027. A short-term focus of this will be tightening sanctions again on Moscow’s oil and gas imports and redoubling current efforts to reduce liquefied natural gas (LNG) imports, which have increased from 13.5 million metric tonnes in 2021 to 15.6 million metric tonnes in 2024. This is a key strategy for the E.U. as LNG became the world’ emergency energy supply following the 2022 invasion of Ukraine.
Unlike oil and gas moved through pipelines, consistent LNG supplies do not require years of planning and construction beforehand, or lengthy and complex negotiations over transit routes. Instead, LNG can be bought quickly and in size in the spot market and moved fast to anywhere in the world. E.U. countries believe the chance of further Russian aggression on the eastern borders of member states is highly likely, regardless of any peace deal struck by Trump’s team. Indeed, NATO Secretary General and former Prime Minister of the Netherlands, Mark Rutte, recently said: “[Russian President, Vladimir] Putin believes that a serious, irreconcilable struggle is unfolding for the formation of a new world order – these are his own words. Others share his belief, not least China.” Consequently, he added: “This requires us all [in Europe] to be faster and fiercer. It is time to shift to a wartime mindset and turbo-charge our defence production and defence spending.” It also means that securing adequate and sustainable LNG supplies from sources other than Russia is a European security priority.
Therefore, any peace deal reached between the U.S. and Russia on Ukraine’s future – without Ukraine and Europe agreeing the terms – is unlikely to alter the intention of European countries to keep ratcheting up sanctions on Moscow. So although a deal concluded with the U.S. would make it easier for Russia to export oil and gas more freely around the world, its previous key market of Europe will remain difficult for it to exploit again to the same degree as before. “We have our own sanctions mechanisms in place that have been working well, and they will continue to perform properly even without any U.S. help,” the E.U. source told OilPrice.com last week. “It is increasingly obvious that we [the E.U.] cannot rely on the U.S. as we did before to safeguard our security, so it is even more vital that we assert ourselves against further Russian aggression by keeping current sanctions in place and extending them to our goal of zero [fossil fuel] imports [from Russia] by 2027,” he concluded.
In precisely this vein, the gruesome three-year anniversary of Russia’s invasion of Ukraine was greeted with a raft of new sanctions from the E.U. This 16th package of E.U. sanctions includes the dramatic expansion of restrictions against Russia’s shadow fleet of tankers that has made gauging the true effect of several previous sanctions measures on reducing Russian oil and LNG exports more difficult than it would be otherwise. In fact, the new sanctions increase the number of vessels targeted by 73, to 153 in total. It also extends sanctions to other high-volume, high-profit export areas for Russia, notably aluminium, chromium and high-value chemicals. Crucially as well, the E.U. is now targeting for the first time, the Russian System for Transfer of Financial Messages (SPFS) which was established to act as an alternative to the international SWIFT payment system. Specifically, the E.U. has imposed a ban on all SPFS transactions that occur outside Russia itself. As a broader signal of its intentions to allies and potential allies of Russia, the E.U. additionally imposed multiple sanctions on neighbouring Belarus.
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“Unlike oil and gas moved through pipelines, consistent LNG supplies do not require years of planning and construction beforehand, or lengthy and complex negotiations over transit routes.”
That is inexact. Setting up a land-based (onshore) LNG terminal takes 4-5 years. Setting up an FSRU-based (offshore) LNG terminals can be expedited in 9-12 months, but it is the most expensive way to procure LNG.
“Instead, LNG can be bought quickly and in size in the spot market and moved fast to anywhere in the world.”
This flexibility hides, but does not compensate, the constraints and costs imposed by the required LNG-handling infrastructure. In fact, as I already explained in a comment regarding a recent NC article, the peculiarities of the current German gas infrastructure make it impossible for that part of the German industry that depends on methane inputs to be competitive, even compared to other EU countries, if it must rely upon LNG imports.
My thoughts exactly. A classic case of propaganda by omission.
Vao, your comments yesterday and today were invaluable. NC’s commentariat rules!
Yes, its not that simple, although there are a number of more or less fully consented LNG sites around Europe now (mostly Norway and Germany), so are theoretically shovel ready. However, there are specialist construction materials required for LNG infrastructure, and there is likely a backlog in supply for these. Only a small number of companies around the world (mostly in South Korea) make the required pressure vessels.
Your point in your earlier comment on the odouriser chemicals is very relevant too.
Natural gas demand is dropping very rapidly in Europe the past few years – not just because of deindustrialization, but also renewables are cutting deeply into demand. However, European production is also dropping rapidly, so it seems to be a bit of a race between both dropping curves. Which every way you look at it though, its a mess.
Sorry, this was meant as a reply to vao above.
The demand component used for power generation has been reduced significantly and, as you say, with renewables being an important factor (In Spain the most important indeed). NG demand for heating not that much, it will depend mostly on winter weather. Heating gas is, in the case of Spain, only about 20-25% of total NG demand but I don’t see there any kind of effort that will help significantly in the next several years to reduce demand in this segment. I expect that further reductions in demand will possibly be more a case of de-industrialization as renewables will increasingly need to be accompanied by energy storage investments. Europeans are anything but equal on this and each country faces different challenges.
Watkins article is politically loaded BS in my opinion.
I have trouble understanding how the purveyors of propaganda square it with reality when they say thatvwe pay less for energy now than we did before the SMO. The simple fact is that my gas bill during the winter months went from €100/month before the war to almost €200/month after Bulgaria diversified in the wake of SMO. That’s not an insignificant sum in Bulgaria. Not all of it is US LNG either, a lot of it is Russian gas that has been relabeled as Azerbaijani gas.
Similarly hard to square is how last year Bulgaria sold to Ukraine two ready to be installed Russian nuclear reactors, in the name of “energy independence from Mordor”, and Parliament voting to buy two untested AP1000 reactors from Westinghouse instead. Lot’s of funny financial numbers were used to pass the deal, too – we are to believe that they can be built and installed for around $10 billion and within 13 years.
Now our EU misleadership wants us to believe that Trump is decoupling from the EU and leaving it to twist in the wind, hence the need to continue to fund Ukraine and fight the war. And to spend trillions on weapons, of course, most of them US-made, like our shiny new AP1000s and F-16s. All the while they wonder why the far-right is surging as food and energy price increases have hit the populations hard and all they give us is yet more heaping servings of “Putin Putin Putin.” Frankly, looking at the EU from within is even more disconcerning than the view from without.
As an outside observer, I became disconcerted about the EU when they began overturning elections when unelected bureaucrats in Brussels didn’t like the outcomes. If they want respect from the US, perhaps they should either stop talking about human rights and democracy or stop trampling on them.
And as for whether Europe can resist concessions to Russia, of course they can, but the political will isn’t there. Let me explain.
Add up the gross domestic products of just France, Germany, and the UK. Currently that figure is about fifteen times Russia’s GDP. If all of the EU raised the VAT by five percentage points for one year, those funds alone would sum to more than Russia’s GDP. As Europe’s defense sector is rather anemic and has been since the Berlin Wall came down, and I get the impression that they don’t really like the idea of manufacturing artillery shells in their countries, they could still use that money around the world. Munitions manufacturers in the US would be gleeful to take those contracts to supply the Ukrainians. There are manufacturers of drones, missiles, and other advanced weaponry all over the world now, from South Korea to South Africa to Brazil to Taiwan to Indonesia. The EU, if it wanted, could crush Russia and defeat the invasion in months, without sending a single soldier from a single EU member nation to fight at the front lines. It would be trivial for them but they aren’t doing anything of the sort. Therefore the EU doesn’t want any such thing. They’re too busy arresting dissidents for posting memes. And besides, Putin would cut off that cheap gas.
As the EU appears to have Stockholm Syndrome, I submit that they haven’t earned a place at the table. They could prove me wrong any day. I predict they won’t. As an observer from the US, I’d like to see the EU cowboy up, but I already expect the worst.
Wow, cliches, talking points and good ol’ American “ready, fire, aim” 🤭
Childish Gambino – This Is America – said – won’t link.
Has it become fashionable amongst traders not to do in-depth country analysis to get to the bones of the matter, or is Watkins in training to become as great a master of irony as the good Dean Swift?
This of course is why Germany is consuming more Russian gas than last year, labelled French or Belgian LNG. I wonder who are the intended customers of these sorts of articles ( and they are daily in the UK media)? Are the average EU/UK politicians so myopic?
When we were in Germany twice during the teens, I had discussions with people who resented the way the US tried to keep Germany away from trade with Russia–an absolutely natural, and geographically close, neighbor. The demonization rankled, the loss of billions in potential trade rankled, and the need to diversity Germany’s ossifying economy loomed even larger. When Trump got elected, my sense was that his take was quite similar: Why shouldn’t I be able to build hotels in Moscow? Grow my brand there? This pretty straightforward desire, I still think, was an enormous threat to vested interests who had spent decades creating Russia as a new bete noir after the Soviet collapse, to a huge web of deceit that had accompanied this, to the idea that we could control Europe through NATO, and to billions in long-term projected arms sales. This was the one damned construct that I thought that Trump really might prove useful in exploding. I still have some vain hope that this thrust can be destabilizing enough to knock us off of the road to quite immediate ruin and perhaps–nationalist-fascist-corporatist-Dominionst terror notwithstanding–provide us with some openings to better.
What I don’t get–what I would love someone to explain for me–is what keeps Europe’s leaders from wheeling and taking advantage, too? Is now not the time to tell us to f*ck off? Is the EU misleadership class really so entrenched, so invested in this dystopic vision of an EU without social protections–armed to the teeth, with elderly citizens just frying off by the tens of thousands in the summer heat annually? How did we end up in a place where our social structures and political systems so clearly fail to serve the great majority of us? (Okay, that’s a larger question!)
I think it’s probably the same issue as the US where the media is relentless in pushing the Narrative that Putin is evil and ready to invade all of Europe if not stopped in Ukraine.
Very, very sad that intelligent people fall for this. I do think the the tide appears to be turning based on polling. But definitely still a long slog.
Thank you, both.
There is a core of people In Europe, not just in the UK where I’m writing from, who despise Russia (and what it means / stands for, e.g. the nation state, religion, social conservatism etc.) and Russians. There’s a strong hint of racism. Some of that goes back decades.
In addition, over decades, many people have become wealthy and risen in their professions by shilling for the US / US MIC. Rice bowls are a risk.
One hopes Aurelien (formerly David) pipes up as he has written about it and, I imagine from work, come across these people.
On Twitter, Sahra Wagenknecht is being smeared relentlessly and pervasively as a Putin puppet and/or as being on the Kremlin’s payroll. Virtually every negative comment involving her I’ve read in the last couple of days contains something to that effect.
Propaganda works. Very, very well.
There are people in Europe that relish the good old days prior to the French Revolution… and hate all that Social-Democracy fostered avter WWII to keep the damn commies ideas out of hoi polloi minds…
Goering said: “Naturally, the common people don’t want war; neither in Russia nor in England nor in America, nor for that matter in Germany. That is understood. But, after all, it is the leaders of the country who determine the policy and it is always a simple matter to drag the people along, whether it is a democracy or a fascist dictatorship or a Parliament or a Communist dictatorship.”
Gilbert replied: “There is one difference(…) In a democracy the people have some say in the matter through their elected representatives, and in the United States only Congress can declare war.”
To which Goering said: “Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country.”
Stopped reading when I got to ‘unprovoked invasion’. These people haven’t a clue how the real world works. Immediately after the end of the 2nd war, MI6 was in West Ukraine offering harbourage to the Banderistas. Many of them were given passage to the UK and Canada. THEY WERE NAZI’S. They went on and on and on – culminating in the 2014 coup. Russia has no alternative but to crush them unless the US (and Europe) will agree to a European wide security agreement.
I believe “unprovoked invasion or “full-scale invasion” in the introductory sentence of any artile or spoken news report is demanded on pain of being fired or ostracized in the Western main-stream media. It is probably on page one of all the major style guides. /sarc
“ Ukraine, the subject of the unprovoked invasion by Russia on 24 February 2022”
I stopped right there too. At least it’s an early warning that the article is a bs waste of time.
After all, its President Vladimir Putin knows very well his country is just a few months away from the complete exhaustion of all possible financial reserves and in the meantime is suffering from inflation at 10% and benchmark interest rates at 21%.
And couple paragraphs later…
E.U. countries believe the chance of further Russian aggression on the eastern borders of member states is highly likely, regardless of any peace deal struck by Trump’s team.
What are those “all possible financial reserves”, anyway? (Maybe it’s something obvious to those in the know, but I can’t help finding the vagueness and lack of attestation suspicious. Besides, while Putin probably would know something like that, would Watkins?)
Yes, I am so tired of “the media” herd singing the same Establishment refrains one topic after another: hate Trump, hate Russia, excuses for racist Israel, etc.
It seems to be an article of faith in the EU that Russia is weakened to the point of being a few months from utter failure in Ukraine, while simultaneously being an existential threat to Europe if EU countries don’t militarize and resist in time.
One of those absurd claims that you must nevertheless profess to believe if you want to get invited to parties – like “Trump is a Russian puppet” or “the 2020 election was stolen” in the US.
I thought this one was pretty reality-challenged as well:
We might soon be without US military support and forced to rely on our own paltry resources, so it’s even more important for us to continue picking fights with Russia.
Foreign currency reserves for Russia were about $610 billion in January 2025. Russia also now has a gold stock of about 2,335 metric tons, and Russia has a persistent balance of payments surplus.
Even the Oreshnik may have trouble busting the bunker of collective delusion these people are retreating into. It would be comical to witness if it weren’t so tragic.
The guy seems to have an obsession – apart from plugging his latest book – about how Russia will lose the European energy market. Will the Russians even care if this happens? They still can sell to China even if Trump does something stupid like threaten China with sanctions if they buy Russian energy. As it stands the state of energy supply is crippling the EU countries and I can’t see the Russians riding to their rescue. For that to happen they would have to return all the money that they stole from Russia first and that is never going to happen.
sanctions became a tool of the white supremacists. here is the guy who supercharged them,
https://foreignpolicy.com/2022/01/30/us-sanctions-reliance-results/
“Today, the United States has an unrivaled ability to use its dollar hegemony against its adversaries, even against the wishes of its European and Asian allies. But its ability to impose steep costs on rival states has not been matched by a corresponding success in changing their behavior.
This should not come as a surprise. At a basic empirical level, the odds are stacked against sanctions achieving their goals. Economic Sanctions Reconsidered, the canonical empirical investigation of their use in the 20th century, finds that only 1 in 3 uses of sanctions was “at least partially successful.” Cases of unmitigated success that can clearly be attributed to sanctions are even rarer. Setting more modest goals gives sanctions better chances of working. But the data suggests that the history of sanctions is largely a history of disappointment.
What is striking is that this limited usefulness has not affected frequency of use. To the contrary: Sanctions use doubled in the 1990s and 2000s from its level in the period from 1950 to 1985; by the 2010s it had doubled again. Former U.S. President Bill Clinton used economic pressure to go after human rights violators. His successor George W. Bush deployed them against rogue states, terrorists, and nuclear proliferators.
And then Barack Obama turned to sanctions as an easier-to-use form of hard power that did not carry the domestic political costs of the increasingly unpopular interventions in Iraq and Afghanistan. Yet while in the 1985-1995 period, at a moment of great relative Western power, the chances of sanctions success were still around 35 to 40 percent, by 2016 this had fallen below 20 percent. In other words, while the use of sanctions has surged, their odds of success have plummeted.”
the sanctions are premised on the quack theory that non pure whites and people of color, simply cannot innovate.
and they still have those feverish beliefs, even as they are publicly humiliated as the non pure white/people of color technology far surpasses the white supremacists rickety old technology.
i remember not to long ago, the word was out that russia would no longer be able to fly much domestically because they simply cannot build planes.
see boeing today, vs. russia and china’s entries into the airliner world.
https://www.youtube.com/watch?v=xh8UZygnR3s
The Russian NEW MC-21 Just SHOCKED Everyone NOW! Here’s Why
https://www.youtube.com/watch?v=qp7rnrCCQ6w
Can China’s Comac break up the Airbus-Boeing duopoly?
sanction and threats simply will not stop the slow but steady acceptance of these planes from other countries.
perhaps boeing should consider more stock buybacks, so that they can compete in the third world used plane markets as a way to stay alive:)
I guess piracy on the high seas is a core value of the “Rules-based International Order.”
Sorry, but the cope is strong with Mr. Watkins and the EU. I recall hearing how scary the Soviets were well into the ‘80s only to not much later see them roll back to Russia on the US’ and Germany’s dime because they couldn’t afford to lose. Today’s Russia is not your father’s Soviet Union.
I completely disagree. The European leaders are satraps. They follow orders from Washington and if Washington orders them to stand down sanctions they will do so. Pretending that the current generation of European leaders are sovereign or even have notions of sovereignty is an insult to those who genuinely want more European sovereignty.
Principles went out the window during Gaza. I refuse to pretend Europe’s leaders have them.
Intensifying European sanctions on Russia is a bit like intensifying verbal abuse of someone who has left the room.
The trouble with neoconservative propaganda is not that it is dishonest, it’s that it has nothing to do with the real world at all. The propaganda has so overwhelmed them that they can no longer distinguish their own lies from their perceptions.
Ironically, many such people notice this in other people, but never in themselves.