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5 Ways Russia’s Ukraine ‘Boomerang’ Could Strike Asia | The Diplomat

5 Ways Russia’s Ukraine ‘Boomerang’ Could Strike Asia | The Diplomat.

Putin has warned that U.S. action over Ukraine would have a boomerang effect. Will the target be Asia?

harry-kazianis
March 12, 2014

Last week I noted four lessons Asia watchers should ponder in light of the events unfolding in UkraineAs there has been no letup and various pundits warn of a new Cold War it seems timely to consider what actions Russia could take against the United States if tensions were to spiral out of control. Clearly Vladimir Putin has a number of options to create significant havoc in multiple areas of American national interest—especially in Asia.

Last week Russian Foreign Minister Sergey Lavrov declared that any sanctions introduced by Washington against Moscow will have a “boomerang” effect. And such a boomerang could have some oomph. What would such a boomerang look like? Here are five ways (beyond the one Ankit Panda pointed out last week) Putin could make life very difficult for America and its allies in Asia if tensions in Eastern Europe were to intensify and Russia sought to retaliate:

1. Russian Arms Sales to China go hog wild – Remember that deal that keeps floating around concerningRussian SU-35s and advanced conventional submarines to China? Even if things don’t get worse in Ukraine, I think we can consider that a done deal now. But, heck, why stop there! If Washington wants to keep upping the ante in Ukraine it might be a great time for Moscow to expand its dealings with China to levels never seen. Remember all that talk about hypersonic weapons in January? Since both nations are pursing such weapons, why not share the costs and the spoils? It seems 5th generation fighters aren’t easy for anyone to craft these days—so why not a joint Russo-Sino development project? If things were to get really nasty, and Russia decided to pull out of the INF treaty, maybe it’s time Moscow and Beijing exchange notes on all those lovelyA2/AD weapons systems we like to talk about here on Flashpoints? I could go on and on. The bottom line: If Russia wanted to make things hard for America in Asia at a time when its defense budget is shrinking, here is an easy way to do it.

2. Moscow goes all in on natural resource sales to Beijing – While large deals were announced late last year, China would love to purchase as much Russian oil, natural gas and any other natural resources it could get its hands on. While issues of price have slowed or halted other deals in the past, Russia this time might be a little more flexible, especially if it were to halt or slow sales to Ukraine or Western Europe. China clearly wins in such a deal as it would become less reliant on sea-borne natural resources imports that could be disrupted if things with America were to go really south.

3. Russian Arms Sales to Iran, Rebooted – While any analysis here must factor in P5+1 negotiations over Tehran’s nuclear deal, Moscow could seek to make trouble for Washington and its allies by rebooting arms sales to Iran. With Russia and Iran already trying to work out the aftermath of an aborted sale of the S-300 air defense system, Putin may decide to put the system back on the table for Iran. In fact, he may even suggest selling Tehran the more advanced S-400 system. Consider this: if nuclear negotiations fail and Iran fears an attack by the West over its nuclear facilities, Russia could be in position to supply all the weapons it needs to make such an attack even more complicated than it would already be.

4. Syria: Give Assad all the arms he wants: While Russia may have offered an unlikely solution to the chemical weapons crisis of last summer, the U.S. and its allies should expect nothing from Moscow if Putin’s boomerang comes lunging back at them. Putin could easily begin sending even more arms to his allies in Syria, raising the stakes and a death toll that is already reaching epic if not historic proportions. While it may be hard to envision Russia being able to completely turn the tide with Assad winning a clear victory, Moscow could certainly change the calculus if it decided to go all in and arm Syria to the teeth.

5. The Death of the Pivot/Rebalance: So say tensions in Eastern Europe were to escalate even further with Russia formally annexing Crimea or worse—Russia taking large sections of Eastern Ukraine. It does not seem out of the question that Washington would be forced to consider beefing up its security commitments in Europe. While additional forces could certainly move into the region as a deterrent to further Russia troublemaking, missile defense plans scuttled in the past could be re-crafted, and U.S. naval power could make a strong comeback. All this comes at a price however. Unless the U.S. were to increase its defense spending which, short of a shooting war I consider unlikely, American forces, already stretched thin to begin with, would be even more strained. Washington may simply have no choice but to reconsider its mighty pivot/rebalance to Asia. Add in the fact that a senior defense department official may have put the final coffin in it anyway– stating that “right now, the pivot is being looked at again, because candidly it can’t happen”– one more nail for good measure thanks to Russia would certainly seal its fate.

5 Ways Russia’s Ukraine ‘Boomerang’ Could Strike Asia | The Diplomat

5 Ways Russia’s Ukraine ‘Boomerang’ Could Strike Asia | The Diplomat.

Putin has warned that U.S. action over Ukraine would have a boomerang effect. Will the target be Asia?

harry-kazianis
March 12, 2014

Last week I noted four lessons Asia watchers should ponder in light of the events unfolding in UkraineAs there has been no letup and various pundits warn of a new Cold War it seems timely to consider what actions Russia could take against the United States if tensions were to spiral out of control. Clearly Vladimir Putin has a number of options to create significant havoc in multiple areas of American national interest—especially in Asia.

Last week Russian Foreign Minister Sergey Lavrov declared that any sanctions introduced by Washington against Moscow will have a “boomerang” effect. And such a boomerang could have some oomph. What would such a boomerang look like? Here are five ways (beyond the one Ankit Panda pointed out last week) Putin could make life very difficult for America and its allies in Asia if tensions in Eastern Europe were to intensify and Russia sought to retaliate:

1. Russian Arms Sales to China go hog wild – Remember that deal that keeps floating around concerningRussian SU-35s and advanced conventional submarines to China? Even if things don’t get worse in Ukraine, I think we can consider that a done deal now. But, heck, why stop there! If Washington wants to keep upping the ante in Ukraine it might be a great time for Moscow to expand its dealings with China to levels never seen. Remember all that talk about hypersonic weapons in January? Since both nations are pursing such weapons, why not share the costs and the spoils? It seems 5th generation fighters aren’t easy for anyone to craft these days—so why not a joint Russo-Sino development project? If things were to get really nasty, and Russia decided to pull out of the INF treaty, maybe it’s time Moscow and Beijing exchange notes on all those lovelyA2/AD weapons systems we like to talk about here on Flashpoints? I could go on and on. The bottom line: If Russia wanted to make things hard for America in Asia at a time when its defense budget is shrinking, here is an easy way to do it.

2. Moscow goes all in on natural resource sales to Beijing – While large deals were announced late last year, China would love to purchase as much Russian oil, natural gas and any other natural resources it could get its hands on. While issues of price have slowed or halted other deals in the past, Russia this time might be a little more flexible, especially if it were to halt or slow sales to Ukraine or Western Europe. China clearly wins in such a deal as it would become less reliant on sea-borne natural resources imports that could be disrupted if things with America were to go really south.

3. Russian Arms Sales to Iran, Rebooted – While any analysis here must factor in P5+1 negotiations over Tehran’s nuclear deal, Moscow could seek to make trouble for Washington and its allies by rebooting arms sales to Iran. With Russia and Iran already trying to work out the aftermath of an aborted sale of the S-300 air defense system, Putin may decide to put the system back on the table for Iran. In fact, he may even suggest selling Tehran the more advanced S-400 system. Consider this: if nuclear negotiations fail and Iran fears an attack by the West over its nuclear facilities, Russia could be in position to supply all the weapons it needs to make such an attack even more complicated than it would already be.

4. Syria: Give Assad all the arms he wants: While Russia may have offered an unlikely solution to the chemical weapons crisis of last summer, the U.S. and its allies should expect nothing from Moscow if Putin’s boomerang comes lunging back at them. Putin could easily begin sending even more arms to his allies in Syria, raising the stakes and a death toll that is already reaching epic if not historic proportions. While it may be hard to envision Russia being able to completely turn the tide with Assad winning a clear victory, Moscow could certainly change the calculus if it decided to go all in and arm Syria to the teeth.

5. The Death of the Pivot/Rebalance: So say tensions in Eastern Europe were to escalate even further with Russia formally annexing Crimea or worse—Russia taking large sections of Eastern Ukraine. It does not seem out of the question that Washington would be forced to consider beefing up its security commitments in Europe. While additional forces could certainly move into the region as a deterrent to further Russia troublemaking, missile defense plans scuttled in the past could be re-crafted, and U.S. naval power could make a strong comeback. All this comes at a price however. Unless the U.S. were to increase its defense spending which, short of a shooting war I consider unlikely, American forces, already stretched thin to begin with, would be even more strained. Washington may simply have no choice but to reconsider its mighty pivot/rebalance to Asia. Add in the fact that a senior defense department official may have put the final coffin in it anyway– stating that “right now, the pivot is being looked at again, because candidly it can’t happen”– one more nail for good measure thanks to Russia would certainly seal its fate.

Enbridge Gas Price Hike Could See Customers Paying 40% More

Enbridge Gas Price Hike Could See Customers Paying 40% More.

OTTAWA – The harsh reality of this winter’s exceptionally cold weather is catching up to millions of natural-gas users in central Canada.

The natural-gas company Enbridge has applied to Ontario regulators for a nearly 40 per cent hike in the energy rates it charges customers, just one month after predicting that its massive storage capacity should mute any price increase.

But it has been so cold, for such an extended period, that the utility says it was forced to buy more natural gas — at a much higher cost — than expected.

“For a customer that does burn 3,000 cubic metres of gas a year, the increase for them is going to be in the order of $400,” said Enbridge energy supply and policy director Jamie LeBlanc.

Normally, such a household would typically pay roughly $1,000 annually for natural gas.

If approved by the Ontario Energy Board, the rate increase would take effect April 1.

But once taxes are added, the price increase is closer to 50 per cent, says former Liberal MP and energy-market watcher Dan McTeague, who advocates capping taxes on home-heating fuels.

“My estimate is that, within a year … the federal government will have probably pocketed an additional half billion dollars from the misery of Canadians trying to keep themselves warm,” he said.

“And that to me is outrageous.”

Other natural-gas suppliers are expected to also apply for rate increases as they are forced to buy more expensive energy supplies on the open market.

Households heating with propane and oil have already experienced a price shock.

Propane customers in eastern Ontario and western Quebec saw their home heating bills nearly double in January and February compared with what they were paying in November.

Even those with fixed-price contracts have seen their bills go up because they’ve been using more energy.

Natural-gas prices in Ontario are set every three months, and Enbridge said it doesn’t expect prices to remain high.

“We don’t believe that this is a long-term natural gas event,” said LeBlanc.

“A typical winter we wouldn’t see this type of pricing.”

But that’s cold comfort for people on fixed incomes, such as seniors, who have had to absorb the energy price increases by spending less on other necessities including food, as well as cutting back on non-essential purchases.

“People are suffering,” said McTeague.

Enbridge and other utilities have energy assistance programs available for low-income households, as well as payment plans to spread out the cost of heating over a longer period of time.

They also offer tips for conserving energy by turning down thermostats, reducing hot water use and, as a longer-term solution, retrofitting homes for better efficiency.

Earlier this week, a preliminary report to the ministers of natural resources and industry predicted that a propane shortage that hit Ontario and Quebec would continue until temperatures warm up.

“Given current production, storage, transportation and export trends, tight supply and high prices are expected to continue for the remainder of the high-demand winter season,” said the report made public Tuesday.

“Consumers of propane, including households that cannot easily switch to other fuels, will continue to be significantly impacted.”

The federal government asked the National Energy Board and Competition Bureau to review the propane market after supplies dried up and prices skyrocketed.

The report said there were four main factors for the shortage — a colder-than-normal winter across eastern Canada and the U.S., exceptional use of propane to dry wet crops in the U.S. midwest, and already-low inventory before the peak winter season and “rapidly growing” U.S. propane exports to overseas markets.

But it offered no recommendations on how to mitigate shortages and energy price shocks in the future.

OPEC Update and my argument that OPEC is producing flat out » Peak Oil BarrelPeak Oil Barrel

OPEC Update and my argument that OPEC is producing flat out » Peak Oil BarrelPeak Oil Barrel.

The OPEC Monthly Oil Market Report is just out with OPEC crude only production numbers for February 2014. OPEC Crude production was up 258.6 kb/d in February on the strength of a big jump from Iraq. Iraqi crude oil production was up 400 kb/d to 3,397 kb/d. OPEC crude only production, less Iraq, was down 141.4 kb/d.

OPEC 12

Iraq was the only big gainer this month.

Iraq

 

Saudi Arabia was down 102 kb/d but that was after January production had been revised up by 99 kb/d.

Saudi Arabia

Saudi admitted, early that their old giant fields were in steep decline. Ravensworth.org published the following quote about eight years ago however their web site has since been taken down:

One challenge for the Saudis in achieving this objective is that their existing fields sustain 5 percent-12 percent annual “decline rates,” (according to Aramco Senior Vice President Abdullah Saif, as reported in Petroleum Intelligence Weekly and the International Oil Daily) meaning that the country needs around 500,000-1 million bbl/d in new capacity each year just to compensate.

That quote by Abdullah Saif was widely circulated. and in 2007 International Business Publications published this on page 144:

One challenge for Saudi in achieving their strategic vision to add production capacity is thattheir existing fields sustain, on average, 6 to 8 percent annual “decline rates”(as reported by Platts Oilgram) in their existing fields, meaning that the country needs around 700,000 bbl/d in additional capacity each year just to compensate for natural decline.

However in 2006 Saudi Arabia’s Center for Strategic and International Studies claims they have gotten this decline rate down to almost 2%.

Without “maintain potential” drilling to make up for production, Saudi oil fields would have a natural decline rate of a hypothetical 8%. As Saudi Aramco has an extensive drilling program with a budget running in the billions of dollars, this decline is mitigated to a number close to 2%.

The drilling program they are talking about is those horizontal wells placed at the very top of the reservoir.  Now imagine, that with all those brand new horizontal wells sucking the oil right off the top of the reservoir, they still had a decline rate of  over 2%! Of course that was in 2006. It is likely that the water has already hit many of those horizontal wells and their decline rate is now well over 2%. More likely it is a lot higher than that.

But they have brought on Khurais and Manifa since then with a combined production capacity of 2 mb/d. That has enabled them to keep their production levels up… for now. Saudi may, just may, be able to produce half a million barrels per day more than they are right now but I doubt it.

Okay then is OPEC producing flat out? There is absolutely no doubt that, with the possible exception of Saudi Arabia, they are. Eight OPEC nations have serious declining production since 2005. Even to suggest that these eight nations are not producing flat out is to deny reality. To believe that they would deliberately cut production while four countries, Iraq, Saudi Arabia, Kuwait and UAE, are increasing production is delusional.

Algria et al.

What about the other four? Iraq makes no bones that they are producing every barrel possible and hope to produce more. And I have discussed Saudi Arabia but what about Kuwait and UAE?

Kuwait+UAE

Kuwait and the UAE were later than Saudi Arabia in getting their infill drilling program going. They both started their infill drilling program around 2007, delayed it during the drastic OPEC cuts from late 208 until early 2011, but have since gone full steam with that program. They reached their peak about a year ago. I expect them to hold at this level for two or three years before they start a not too slow decline.

Yes, it is my sincear opinion that OPEC is now producing every barrel they possibly can. OPEC production may increase slightly as Iran dlowly increases their production as sanctions are lifted. And there is even a slight chance that peace may break out in Libya and their production increases, but not likely.

My point is there is OPEC has no spare capacity. If anyone seriously doubts my opinion on this subject then please post your reasons, and name the countries you believe are not producing flat out, in the comments section below.

Updated charts of all 12 OPEC countries can be found here: OPEC Charts

Energy & Capital is a web site that pushes energy stock. They are usually bullish, very bullish on shale oil and usually deny peak oil. That is why it was so surprising to get their latest edition in my email box. However this is just one writer for Energy & Capital. I am sure most others have a different opinion.

Peak Oil: It’s Baaaack

Over the past few months, I’ve been sharing my concerns about shale oil.

Namely, that it’s more comparable to a Ponzi scheme than any sort of boom.

I’ve articulated the reasons for my thesis, including fast decline rates, the amount of new rigs and wells needed, and a cost of production that’s been higher than the price of sale for some time now.

And further down he says:

Predictions are tough, especially with a still-struggling economy. If I had to say, prices at least need to rise to the marginal cost of production at $115ish. Trouble with that is anything over $110 for a sustained time causes recession, which of course would send prices lower making projects unviable once more.

It’s classic peak oil. It never went away, we’ve just been able to paper over it with free money for the past half decade.

Seems like the majors realize the gig is up. They’re selling unconventional assets in a big way, wanting to mitigate risk and capex by getting back to conventional. Still, conventional peaked in 2005 and that strategy seems like a last-ditch effort.

Note: I send out an email notification to about 110 people when I have published a new post. If you would like to be added to that list, or your name removed from it, please notify me at: DarwinianOne at Gmail.com

Ukraine: Challenging the pipelines narrative

Ukraine: Challenging the pipelines narrative.

by Alexis Rowell, originally published by Resilience.org  | MAR 11, 2014

As a former correspondent in Kiev, Moscow and Georgia at the time of the collapse of the Soviet Union, and as someone who has an ongoing interest in events in the former Soviet space, I would maintain that the attempt to link the Ukraine conflict with pipelines and natural resources is highly debatable. There are of course pipelines running through Ukraine transporting oil and gas from Russia to the West, and Crimea currently gets its oil, gas and much of its water from pipelines that flow from Ukraine, so they are important, but the idea that these pipelines, and natural resources in general, are in some way the cause of this conflict seems to me to be unfounded.

Most Moscow-watchers agree this conflict is about the limits of the Russian sphere of influence, the anxiety of Russia as it watches NATO and the EU expand up to its front door and stupid moves by the new Ukrainian government such as the dropping of the new language law. It’s about Russian pride, Putin’s vision of a Greater Russia, and Washington’s desire to keep pushing their views even when their interests are not really affected. It’s about competing nationalisms and Ukrainian clumsiness or worse.

Natural resources and pipelines are not causes, they are merely potential weapons – although who would actually win by using them can be hard to pin down. For example, Ukraine could stop Russia exporting gas to the West, or cut off gas and water to Crimea, but then Russia would close the stopcocks at the Ukrainian border thereby closing down Ukrainian businesses and making life unbearable in Ukrainian homes. Alternatively Russia could stop pumping gas to Ukraine, but then they would reduce their petro-euro earnings in Europe.

Most far-fetched of all is the idea that this conflict is in some way about Persian Gulf oil.

One article last week said Crimea would face difficulties without its connections to Ukraine. True, but those problems will be temporary and far fewer than the problems Ukraine is likely to experience. If Russia annexes Crimea, Crimea will, in time, be fine in terms of natural resources – just like Abkhazia and South Ossetia eventually were when they exited Georgia/were annexed by Russia. It may take a while, but Moscow will build a new bridge over the Kerch Strait that will carry water, oil, gas, goods, Russians and weapons. Until then the resources will arrive by boat and plane.

Ukraine, by contrast, will have enormous natural resource problems. Or rather Ukraine will have more problems than it already does because it has no natural resources except agricultural land.

A post-script on Crimea…
Of course, arguably Crimea is no more Russian than it is Ukrainian. The Cimmerians, Bulgars, Greeks, Scythians, Goths, Huns, Khazars, the state of Kievan Rus’, Byzantine Greeks, Kipchaks, Ottoman Turks, Golden Horde Tatars and the Mongols have all controlled Crimea. In the 13th century, it was partly controlled by the Venetians and by the Genoese. A Crimean Khanate emerged in the 15th century, which came under the protection of the Ottoman Empire until the 18th century when it became part of the Russian Empire. During the Russian Civil war it changed hands several times and was a stronghold and last stand of the anti-Bolshevik White Guard. From there it became part of the Russian Soviet Socialist Republic until Germany invaded during the Second World War. After the Germans were kicked out and Stalin had died, Crimea was transferred by Khrushchev to the Ukrainian Soviet Socialist Republic in 1954, where it stayed until becoming part of independent Ukraine with the break-up of the Soviet Union in 1991.

Ukraine flag on painted on cracked wall via shutterstock. Reproduced at Resilience.org with permission.

Where The Russian Troops Are – The Full "Pre-Takeover" Infographic | Zero Hedge

Where The Russian Troops Are – The Full “Pre-Takeover” Infographic | Zero Hedge.

As we reported yesterday, Crimea is last week’s story. Now it is all about east Ukraine. In that vein, moments ago John Kerry’s latest stand up comedy routine hit the tape which contained, besides the usual laugh lines, this particular pearl:

  • KERRY SAYS RUSSIA DOESN’T YET HAVE FORCES FOR UKRAINE TAKEOVER

Is that so? We provide this map showing the latest distribution of Russian military forces on the Ukraine borders so that readers can make up their own mind.

 

And here is another map compiled by Dmitry Tymchuk, a former Ukrainian military officer, who has established an organization, the Center of Military and Political Research on Kiev, to effectively collect and gather data about military-related facts.

Kerry concluded:

  • KERRY SAYS `CONTINGENCIES’ IF RUSSIA MOVED INTO EAST UKRAINE

We’ll know just what those are by Sunday night. The only question: will Referendum Sunday be the new Lehman Sunday…

h/t @BSpringnote

Where The Russian Troops Are – The Full “Pre-Takeover” Infographic | Zero Hedge

Where The Russian Troops Are – The Full “Pre-Takeover” Infographic | Zero Hedge.

As we reported yesterday, Crimea is last week’s story. Now it is all about east Ukraine. In that vein, moments ago John Kerry’s latest stand up comedy routine hit the tape which contained, besides the usual laugh lines, this particular pearl:

  • KERRY SAYS RUSSIA DOESN’T YET HAVE FORCES FOR UKRAINE TAKEOVER

Is that so? We provide this map showing the latest distribution of Russian military forces on the Ukraine borders so that readers can make up their own mind.

 

And here is another map compiled by Dmitry Tymchuk, a former Ukrainian military officer, who has established an organization, the Center of Military and Political Research on Kiev, to effectively collect and gather data about military-related facts.

Kerry concluded:

  • KERRY SAYS `CONTINGENCIES’ IF RUSSIA MOVED INTO EAST UKRAINE

We’ll know just what those are by Sunday night. The only question: will Referendum Sunday be the new Lehman Sunday…

h/t @BSpringnote

Here come the wage and price controls

Here come the wage and price controls.

More from Simon Black 5 hours ago

March 13, 2014
Belize City, Belize

Nearly four thousand years ago, King Hammurabi of Babylon laid out his eponymous “Hammurabi’s Code”, a series of laws that is still famous to this day.

Most people know Hammurabi’s Code as “an eye for an eye, a tooth for a tooth”. Yet what few realize is that the code was actually one of the original attempts at government wage and price controls.

Hammurabi’s Code decreed, for example, that the daily rate of pay for a tailor would be five grains of silver, and a farm laborer would be six grains of silver. The cost of hiring a small animal for field work would be four bushels of corn. Etc.

Of course, Hammurabi’s attempts to control prices didn’t work one bit. In his book The Old Babylonian Merchant: His Business and Social Position (published 1950), historian W.F. Leemans writes:

“Prominent and wealthy tamkaru [merchant traders] were no longer found in Hammurabi’s reign. Moreover, only a few tamkaru are known from Hammurabi’s time and afterwards . . .”

Despite the economic failures of Hammurabi’s experiment, though, wage and price controls have been tried again and again throughout history.

2,000 years later, Emperor Diocletian of the failing Roman Empire issued his Edict on Wages and Prices. The ancient Athenians tried (and failed) to set grain prices, and even had a small army of regulators to oversee the price controls. So did the the Zhou dynasty in ancient China.

Today you can see various forms of wage and price controls all over the world– from the blatant (Argentina) to the subtle.

Major farm subsidies in the United States, for example, are a form of price controls. Monetary policy (especially keeping interest rates at effectively zero) are a form of price controls.

Yet today President Obama is set to lauch another far more obvious form.

The central planner-in-chief is going to sign an Executive Order to require employers to expand overtime pay in the Land of the Free. This, on top of his recent proposal to increase the minimum wage 39% to $10.10 per hour (not that there’s any inflation).

Obviously this ‘decree by executive order’ strategy shows the political system for what it is: there is no republic, there are no checks and balances, there is no adherence to the Constitution.

They do whatever they want, however they want, with total immunity.

The troubling part about this executive order (aside from being yet another soon-to-fail wage control) is that it essentially abrogates millions of work contracts across the country.

Employers and their workers have long since agreed to terms of employment that may or may not include overtime pay.

Today President is unilaterally voiding any specific provisions about overtime pay in existing employment contracts, all in his sole discretion, and all without Congressional oversight.

The rule of law means nothing.

And even though any high school economics student can tell you that wage and price controls don’t work, the government is pressing ahead with vigor, damn the consequences.

Given their continued destruction of the middle class, perhaps it’s time we bring back ‘an eye for an eye, a tooth for a tooth.’

Which European Countries Will Suffer The Most If Russia Turns Off The Gas | Zero Hedge

Which European Countries Will Suffer The Most If Russia Turns Off The Gas | Zero Hedge.

With the Sunday Crimean referendum seemingly unstoppable now, its outcome certain, it is set to unleash a chain of events that is not entirely predictable but is at best, ominous, as it will involve the launch of trade, economic and financial sanctions against Russia (despite China’s stern disapproval), which will lead to a “symmetric” response in kind by Moscow. And in a worst case escalation scenario, should game theory completely collapse and everyone starts defecting from a cooperative equilibrium state, the first thing to go will be European gas exports from Russia, anywhere from one day to indefinitely. So which European countries are most exposed to the whims of Gazprom? The following map from the WSJ, shows just how reliant on Russian gas exports most European countries are.

One wonders just how “stern” any sanctions these countries support and enforce against Russia will truly be. Then again, as the WSJ reports, Europe somehow believes that despite its massive reliance on Ukraine for energy, it can weather a storm:

Mr. Oettinger says Europe is now in a stronger position to withstand possible disruptions in supplies, thanks in part to a mild winter, more storage capacity and pipeline infrastructure that allows more gas to flow from west to east.

But he has also said that the EU should reach out to other gas exporters and build more terminals for liquefied natural gas, and that countries should also start exploratory work on shale gas.

“The Russians are now more dependent on our money than we are on their gas,” said Mr. Wieczorkiewicz, adding that around half of Russia’s revenues are derived from oil and gas sales. “The EU could also explore ties to Norway, Algeria and Qatar as alternative suppliers, increase the use of coal and import LNG.”

But in the short term, others argue that the EU is short of options if it wants to use energy as a tool against Moscow. “Russia remains the largest exporter of gas to the EU; there’s no way of [quickly] sourcing those amounts of gas elsewhere,” said Simon Pirani of the Oxford Institute for Energy Studies.

“Europe has to ask itself how important is the economic relationship with Russia, which provides that cheap energy, and how important is the political protest that it wants to make” about Crimea, he said.

So who wins in the end: the provider of the commodity, or the buyer who pays with infinitely dilutable fiat, especially if any further escalation by the west against Russia will merely bring China and Russia together even closer. Somehow we think our money is on the KGB spy instead of the clueless and insolvent European bureaucrats.

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