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Russia Is Slowly Turning The NatGas Tap Off To Europe | Zero Hedge

Russia Is Slowly Turning The NatGas Tap Off To Europe | Zero Hedge.

While Naftogaz (Ukraine’s gas pipeline operator) states that all gas transportation from Russia to Europe is running normally, Bloomberg reports that Russian natgas exports to Europe are declining.Shipments are down over 4% from the prior week and also lower to Ukraine. This ‘adjustment’ follows increased sanctions by the West as Medvedev’s notable statement this morning that Ukraine owes Russia $16bn.

NatGas output is tumbling

The good news:

Gazprom today said natgas transit to Europe via Ukraine, supplies for Ukrainian consumption  

But Pay Up…

Ukraine owes Russia $11b after collapse of 2010 deal, Russian Prime Minsiter Dmitry Medvedev says to President Vladimir Putin at Security Council meeting, according to transcript on Kremlin website.

 

Medvedev adds $3b Ukraine bonds bought in Dec., ~$2b debt to Gazprom for natgas supplies

 

NOTE: In 2010, Russia agreed to sell natgas at discount in exchange for extending lease to Black Sea naval port of Sevastopol in Crimea to 2042 from 2017

Or Else…

Russian natgas exports to Europe and Turkey, excl. former Soviet Union, declined to 405.3mcm as of March 22,  according to Bloomberg calculations based on preliminary data from Energy Ministry’s CDU-TEK unit.

 

Avg daily exports to region were ~457mcm in March, lower than yr earlier: calculations based on CDU-TEK data

 

Shipments March 16-22 were 3.04bcm, 4% decrease vs level in week ended March 15

It is too early to see a trend, but for now, the direction is not hopeful for Europe.

Furthermore, Gazprom has cut its Diesel output by the most in 7 months…

 

and then… (via NY Times),

Russia is now asking close to $500 for 1,000 cubic meters of gas, the standard unit for gas trade in Europe, which is a price about a third higher than what Russia’s gas company, Gazprom, charges clients elsewhere.

 

Russia says the increase is justified because it seized control of the Crimean Peninsula, where its Black Sea naval fleet is stationed, ending the need to pay rent for the Sevastopol base. The base rent had been paid in the form of a $100 per 1,000 cubic meter discount on natural gas for Ukraine’s national energy company, Naftogaz.

And if that’s not clear enough…

Russia Is Slowly Turning The NatGas Tap Off To Europe | Zero Hedge

Russia Is Slowly Turning The NatGas Tap Off To Europe | Zero Hedge.

While Naftogaz (Ukraine’s gas pipeline operator) states that all gas transportation from Russia to Europe is running normally, Bloomberg reports that Russian natgas exports to Europe are declining.Shipments are down over 4% from the prior week and also lower to Ukraine. This ‘adjustment’ follows increased sanctions by the West as Medvedev’s notable statement this morning that Ukraine owes Russia $16bn.

NatGas output is tumbling

The good news:

Gazprom today said natgas transit to Europe via Ukraine, supplies for Ukrainian consumption  

But Pay Up…

Ukraine owes Russia $11b after collapse of 2010 deal, Russian Prime Minsiter Dmitry Medvedev says to President Vladimir Putin at Security Council meeting, according to transcript on Kremlin website.

 

Medvedev adds $3b Ukraine bonds bought in Dec., ~$2b debt to Gazprom for natgas supplies

 

NOTE: In 2010, Russia agreed to sell natgas at discount in exchange for extending lease to Black Sea naval port of Sevastopol in Crimea to 2042 from 2017

Or Else…

Russian natgas exports to Europe and Turkey, excl. former Soviet Union, declined to 405.3mcm as of March 22,  according to Bloomberg calculations based on preliminary data from Energy Ministry’s CDU-TEK unit.

 

Avg daily exports to region were ~457mcm in March, lower than yr earlier: calculations based on CDU-TEK data

 

Shipments March 16-22 were 3.04bcm, 4% decrease vs level in week ended March 15

It is too early to see a trend, but for now, the direction is not hopeful for Europe.

Furthermore, Gazprom has cut its Diesel output by the most in 7 months…

 

and then… (via NY Times),

Russia is now asking close to $500 for 1,000 cubic meters of gas, the standard unit for gas trade in Europe, which is a price about a third higher than what Russia’s gas company, Gazprom, charges clients elsewhere.

 

Russia says the increase is justified because it seized control of the Crimean Peninsula, where its Black Sea naval fleet is stationed, ending the need to pay rent for the Sevastopol base. The base rent had been paid in the form of a $100 per 1,000 cubic meter discount on natural gas for Ukraine’s national energy company, Naftogaz.

And if that’s not clear enough…

Putin Signs Crimean "Absorption" Law As Visa, MasterCard Halt Payment Services For Bank Rossiya | Zero Hedge

Putin Signs Crimean “Absorption” Law As Visa, MasterCard Halt Payment Services For Bank Rossiya | Zero Hedge.

Moments ago the “absorption” of Crimea into the Russian Federation was completed after Putin signed the final previously passed by parliament. And with that, in less than a month, the Crimean “question” has been answered. The only question is whether Putin will stop here or will the ease with which he just expanded the Russian political map leave him hungry for more.

In other news, as part of the Western escalations against Russia, Bank Rossiya, the one bank exclusively identified in the sanctions list, announced that Visa and MasterCard have stopped, without notification, providing services for payment transactions for clients. Another bank that saw the drop of merchant credit card services was SMP bank, co-owned by brothers Boris and Arkady Rotenberg, who were also on the latest U.S. sanctions list.

SMP bank said in a statement that it considered the credit card giants’ move unlawful, because the U.S. sanctions targeted shareholders and not the bank itself, Reuters reported Friday.

Earlier in the day, Bank Rossiya said it was working in a “stable regime” and was taking all the necessary legal measures to defend its rights and its clients’ rights and legal interests.

“In connection with the information about U.S. sanctions being imposed on Rossiya we can report that the bank is working in a stable regime. The bank is meeting and will, without a doubt, fully meet all its obligations to its clients and partners,” the bank said in a statement.

“The management of Rossiya understands the difficulties of clients in the current situation and will do all it can to solve them,” the bank said in a statement.

These moves in turn promptly led to Putin announcing that he wants to open an account with the Bank Rossiya. From Moscow Times:

“I don’t have an account there, but I will certainly open one there on Monday,” Putin said Friday, while speaking at a Security Council meeting, Interfax reported.

Putin later asked for his salary to be transferred to Bank Rossiya and ordered Russia’s Central Bank to take the sanction-hit lender’s clients under protection and provide all possible assistance to them, The Associated Press reported.

U.S. President Barack Obama on Thursday announced that Washington was levying a new round of sanctions affecting 20 Russian officials and businessmen, but also Bank Rossiya, which is chaired and part owned by businessman Yuri Kovalchuk, who is one of the 20.

Why was the bank singled out?

The United States Treasury Department stated that Bank Rossiya is used by senior Russian officials and that its shareholders include members of Putin’s inner circle.

Putin Signs Crimean “Absorption” Law As Visa, MasterCard Halt Payment Services For Bank Rossiya | Zero Hedge

Putin Signs Crimean “Absorption” Law As Visa, MasterCard Halt Payment Services For Bank Rossiya | Zero Hedge.

Moments ago the “absorption” of Crimea into the Russian Federation was completed after Putin signed the final previously passed by parliament. And with that, in less than a month, the Crimean “question” has been answered. The only question is whether Putin will stop here or will the ease with which he just expanded the Russian political map leave him hungry for more.

In other news, as part of the Western escalations against Russia, Bank Rossiya, the one bank exclusively identified in the sanctions list, announced that Visa and MasterCard have stopped, without notification, providing services for payment transactions for clients. Another bank that saw the drop of merchant credit card services was SMP bank, co-owned by brothers Boris and Arkady Rotenberg, who were also on the latest U.S. sanctions list.

SMP bank said in a statement that it considered the credit card giants’ move unlawful, because the U.S. sanctions targeted shareholders and not the bank itself, Reuters reported Friday.

Earlier in the day, Bank Rossiya said it was working in a “stable regime” and was taking all the necessary legal measures to defend its rights and its clients’ rights and legal interests.

“In connection with the information about U.S. sanctions being imposed on Rossiya we can report that the bank is working in a stable regime. The bank is meeting and will, without a doubt, fully meet all its obligations to its clients and partners,” the bank said in a statement.

“The management of Rossiya understands the difficulties of clients in the current situation and will do all it can to solve them,” the bank said in a statement.

These moves in turn promptly led to Putin announcing that he wants to open an account with the Bank Rossiya. From Moscow Times:

“I don’t have an account there, but I will certainly open one there on Monday,” Putin said Friday, while speaking at a Security Council meeting, Interfax reported.

Putin later asked for his salary to be transferred to Bank Rossiya and ordered Russia’s Central Bank to take the sanction-hit lender’s clients under protection and provide all possible assistance to them, The Associated Press reported.

U.S. President Barack Obama on Thursday announced that Washington was levying a new round of sanctions affecting 20 Russian officials and businessmen, but also Bank Rossiya, which is chaired and part owned by businessman Yuri Kovalchuk, who is one of the 20.

Why was the bank singled out?

The United States Treasury Department stated that Bank Rossiya is used by senior Russian officials and that its shareholders include members of Putin’s inner circle.

Washington Has Set The World On A Path To War — Paul Craig Roberts – PaulCraigRoberts.org

Washington Has Set The World On A Path To War — Paul Craig Roberts – PaulCraigRoberts.org.

Washington Has Set The World On A Path To War

Paul Craig Roberts

Why is Washington so opposed to Crimean self-determination? The answer is that one of the main purposes of Washington’s coup in Kiev was to have the new puppet government evict Russia from its Black Sea naval base in Crimea. Washington cannot use the government Washington has installed in Ukraine for that purpose if Crimea is no longer part of Ukraine.

What Washington has made completely obvious is that “self-determination” is a weapon used by Washington in behalf of its agenda. If self-determination advances Washington’s agenda, Washington is for it. If self-determination does not advance Washington’s agenda, Washington is against it.

The Washington-initiated UN Security Council resolution, vetoed by Russia, falsely declares that the referendum in Crimea, a referendum demanded by the people, “can have no validity, and cannot form the basis for any alteration of the status of Crimea; and calls upon all States, international organizations and specialized agencies not to recognize any alteration of the status of Crimea on the basis of this referendum and to refrain from any action or dealing that might be interpreted as recognizing any such altered status.”

Washington could not make it any clearer that Washington totally opposes self-determination by Crimeans.

Washington claims, falsely, that the referendum cannot be valid unless the entire population of Ukraine votes and agrees with the decision by Crimeans. Note that when Washington stole Kosovo from Serbia, Washington did not let Serbians vote.

But overlook Washington’s rank hypocrisy and self-serving double-standards. Let’s apply Washington’s argument that in order to be valid any change in Crimea’s status requires a vote on the part of the population of the country that it departs. If this is the case, then Crimea has never been a part of Ukraine.

Under Washington’ s interpretation of international law, Ukraine is still a part of Russia. When Khrushchev transferred Crimea (but not Sevastopol, the Black Sea base) to Ukraine, Russians did not get to vote. Therefore, according to Washington’s own logic it is invalid to recognize Crimea as part of Ukraine. That also goes for other parts of Russia that Lenin transferred to Ukraine. Under the logic of Washington’s UN resolution, large parts of Ukraine are not legitimately part of Ukraine. They have remained parts of Russia, because Russians were not allowed to vote on their transfer to Ukraine. Thus, there is no issue about “Russia annexing Crimea,” because, according to Washington’s logic, Crimea is still a part of Russia.

Do you need any more proof that the Ukrainian crisis is made up out of thin air by schemers in Washington who created the entire crisis for one purpose–to weaken Russia militarily?

No one was surprised that the New York Times published on March 14 the warmongering rant, written by neoconservatives for John McCain, which described Washington’s aggression in Ukraine as Russia’s aggression. The US government overthrows an elected democratic Ukrainian government and then accuses Russia of “invading and annexing Crimea” in order to divert attention from Washington’s overthrow of Ukrainian democracy. There is no elected government in Kiev. The stooges acting as a government in Kiev were put in office by Washington. Who else choose them?

What surprised some was Rand Paul joining the hysteria. Rand Paul wrote his propagandistic rant against Russia for Time. Rand Paul claims, falsely, that Putin has invaded Crimea and that it is an affront to “the international community.” First of all, the decision of Crimea to leave Ukraine is a decision of the Crimean population and the elected government, not a decision by Russia. But, for the sake of argument, let’s take Rand Paul’s lie as the truth: Is “Vladimir Putin’s invasion of Ukraine a gross violation of that nation’s sovereignty and an affront to the international community” like Washington’s invasions of Iraq and Afghanistan, and Washington-sponsored invasions of Libya and Syria, and Washington’s ongoing slaughter of Pakistanis and Yemenis with drones, and Washington’s violation of Iran’s sovereignty with illegal sanctions, and Washington’s violation of Ukrainian sovereignty by overthrowing the elected government and imposing Washington’s stooges?

If Putin is behaving as Rand Paul ignorantly asserts, Putin is just following the precedents established by Clinton in Serbia, by Bush in Afghanistan and Iraq, and by Obama in Afghanistan, Libya, Syria, and Ukraine. Washington’s argument is reduced to: “We, the exceptional and indispensable nation can behave this way, but no other country can.”

As some Americans have misplaced hopes in Rand Paul, it is just as well that he revealed in Time that he is just another fool prostituting himself for the neoconservative warmongers and the military/security complex. If Rand Paul is the hope for America, then clearly there is no hope.

As I have been pointing out, the propaganda and lies issuing from Washington, its European puppets, New York Times, Time, and the entirety of the Western media are repeating the path to war that led to World War 1. It is happening right before our eyes.

What Happens After Sunday's Crimea Referendum Vote? | Zero Hedge

What Happens After Sunday’s Crimea Referendum Vote? | Zero Hedge.

Given this morning’s UN vote declaring the Crimea referendum invalid (and Russia’s obvious veto – along with China’s abstention), and on the heels of Lavrov’s words Friday that Russia would decide how to respond to the Crimean vote after the referendum had been held, it is thought-provoking to consider Putin’s options given the vote’s outcome is a near-certainty voting in favor of accession to the Russian Federation (especially in light of this morning’s images across Crimea). Europe’s Council on Foreign Relations notes “not knowing Vladimir Putin’s strategy makes it hard for Europe and the West to come up with meaningful and workable responses. In a way, we are all speculating and trying to get a glimpse into Putin’s soul. The five points below attempt to reinforce or refute some aspects of the conventional wisdom that has emerged from all this speculation.”

 

Via CEFR,

1. Has Putin always wanted to invade Crimea?  

Russian diplomats (who probably hate their jobs these days) have made elaborate attempts to demonstrate that no international law has been broken in Crimea. But the breach is blatant and the pretext used to justify invasion is thinner than thin – and Moscow knows it.

It is true that some hawkish groups in Moscow probably could not care less about international law. They would approve of any means to reunify Slavic lands. However, the bulk of the establishment has in fact always maintained a different position. For example, the Russian foreign ministry has traditionally adhered to a rigidly legalistic view of world affairs: in effect, post-1945 international law, with its strict emphasis on state sovereignty, non-interference in the internal affairs of other countries, and the inviolability of borders. Newer and softer concepts, such as the responsibility to protect, are alien to them.

Putin himself has always passionately belonged to that legalistic camp, as evidenced by his positions on Libya, on Syria, and on multiple other issues. Therefore, deciding to invade Crimea cannot have been easy for him. He must consider that something extremely important is at stake. The corollary is that in defending his conception of what is at stake, he may well be ready to go further than many of us assume.

2. Is Putin out of touch with reality?

Angela Merkel’s statement that Putin is out of touch with reality, which was leaked to the New York Times, gave rise to a considerable amount of conjecture and comment. Some people concluded that Putin has gone mad. In fact, while he may be living in his own version of reality, it looks like Putin’s world has actually been around for a long time.

Putin seems to sincerely believe that dangerous extremist groups have taken power in Kiev. He may genuinely not realise that the events in Kiev represented a classic popular revolution. As pointed out by Fiona Hill, it is possible that the whole concept of popular revolutions is alien to Putin. In the late 1980s and early 1990s, when Russia was having its own revolution, Putin was not there – he was serving the KGB in Dresden. He did not personally witness the fact that a massive number of people were involved in the overthrow of the Soviet Union. His being abroad for these pivotal events, as well as his KGB schooling and worldview, may have made it easy for him to see the collapse of the Soviet Union as the result of a conspiracy by a few combined with betrayal by others.

Similarly, Putin may see current events in Ukraine as a conspiracy by the West, which was definitely his view of the Orange revolution of 2004. Or he may see the situation as the result of recklessness: actions along the same lines as Western involvement in Libya and Syria. As Putin sees it, in both places the West has supported marginal and extremist groups against legitimate leaders, in a naïve hope that democracy will somehow take root in the ruins of the old regimes. It may well be that he saw the West applying the same logic to Ukraine and decided that he could not allow anything of the kind to happen in Ukraine.

Added to this, he likely feels a sense of betrayal over the West’s (as he sees it) geopolitical incursion into Ukraine, and over the West’s failure (as he sees it) to support Viktor Yanukovych after the agreement of February 21. All this comes together to form the reality in which Putin lives.

This means that what we are seeing as Putin’s revisionism may still be inspired largely by his conservatism. Also, much of his reality is indeed based on false premises. But understanding this does not make it easier to set the record straight and make Putin see sense – as multiple Western interlocutors have by now discovered.

3. Does Putin want to use Crimea as leverage over Ukraine? 

Some analysts assume that Russia will stop short of incorporating Crimea, but will instead keep it in a Transnistria-style legal limbo in order to use it as leverage over Kiev. It seems likely that obtaining leverage over all of Ukraine, as opposed to just Crimea, is Moscow’s real goal. But it is hard to predict exactly what Moscow will see as sufficient and reliable leverage.The government that came to power in Kiev in late February is weak. Contrary to Moscow’s claims, it is not illegitimate – it is as legitimate as it can be under the circumstances. However, it still does not represent the whole of society in the ways that a government should. In theory, it would have been easy for Moscow to gain leverage over the new government by using a mixture of legitimate and more shady means. But Moscow did not even make the attempt.

By now, it is unclear just how much the “Transnistrianisation” of Crimea would add to Moscow’s leverage. Kiev is now considerably less amenable to making a deal with Moscow than it would have been less than a month ago. Many in the nationalist camp may be secretly relieved to see Crimea go, taking with it its two million Russian voters and Russian base.

As recently as a week or so ago, Russia could probably have counted on the West to put pressure on Kiev. The West is terrified by what Moscow is doing and it does not know how to respond. So, many would have been relieved if, instead of annexing Crimea, Russia stopped at “Transnistrianisation”. The West would have been ready to put pressure on Kiev to accept Moscow’s conditions – thereby, of course, contributing to prolonged bad governance in Ukraine and, consequently, to more trouble down the road. But Moscow did not try to use the West either – and now it could be too late for that as well. The build-up of Russian troops at Ukraine’s borders has probably made the West more determined to counter Russia and less likely to go for unholy compromises. And, likewise, the massing of troops could indicate that Moscow is not interested in making use of Western pressure. The sort of control over Kiev that the Kremlin has in mind may be of a much harder sort than mere co-option and coercion.

4. Is Putin acting only in response to domestic pressures?

Some analysts claim that the whole Crimea affair was begun in order to impress the domestic public, who have increasingly fallen out of love with Putin. Others, even those who do not share that interpretation, claim that Putin cannot back down because of domestic pressures. It is true that the invasion has boosted Putin’s ratings. And the domestic media-propaganda machine has created a powerful momentum for annexation, which has the support of many in Russian society. But it is still hard to believe that any of this constitutes serious limitations of action for Putin, especially given that he does not have to face the ballot box any time soon.

Russian society has no capacity for an informed and critical discussion about foreign policy. The state-controlled media is masterful in justifying the regime’s actions, whatever they may be. Portraying a climb-down as a victory would be easy. (This kind of method is described well in an old Soviet joke about a 100-metre race between Ronald Reagan and Leonid Brezhnev: after Reagan’s win, the Soviet news agency reported that “in yesterday’s race between the heads of state the General Secretary of the Communist Party of the USSR achieved a precious second place. The president of the Imperialist United States finished second-last.”)

In short, for the moment at least, Putin is in no way hostage to his domestic constituency. But that does not mean that he will want to de-escalate or back down.

5. Will sanctions stop Putin?

Different people see different logic behind Western sanctions on Russia. Some hope that sanctions, or the threat of them, will force Moscow to back down. Others hope that sanctions will alienate Russian elites from Putin and leave him with little domestic support. Others simply believe that people who were instrumental in acting against sovereignty and territorial integrity deserve to be punished. And some look at the situation from a long-term perspective and think that sanctions should be applied to erode the economic foundations of an increasingly aggressive regime.

Much of this reasoning seems accurate and justified. But even so, the calculation that sanctions will make Putin reverse course does not ring true. Ever since the domestic protests of 2011-2012, Putin has lost trust in the members of his elite who keep their money in the West and so are vulnerable to Western pressures. Losing their support, therefore, does not really matter to him. They have no leverage over him. In any case, “repatriating money” has been an unofficial policy for quite a while.

Sanctions, as well as Putin’s growing alienation from Russian elites, may well have effects in the medium term. But they will not stop Putin on Sunday or in the days ahead. Even so, this does not mean that sanctions are futile or unnecessary – especially because it seems more and more likely that we are now facing a longer-term battle between Russia and the West.

What Happens After Sunday’s Crimea Referendum Vote? | Zero Hedge

What Happens After Sunday’s Crimea Referendum Vote? | Zero Hedge.

Given this morning’s UN vote declaring the Crimea referendum invalid (and Russia’s obvious veto – along with China’s abstention), and on the heels of Lavrov’s words Friday that Russia would decide how to respond to the Crimean vote after the referendum had been held, it is thought-provoking to consider Putin’s options given the vote’s outcome is a near-certainty voting in favor of accession to the Russian Federation (especially in light of this morning’s images across Crimea). Europe’s Council on Foreign Relations notes “not knowing Vladimir Putin’s strategy makes it hard for Europe and the West to come up with meaningful and workable responses. In a way, we are all speculating and trying to get a glimpse into Putin’s soul. The five points below attempt to reinforce or refute some aspects of the conventional wisdom that has emerged from all this speculation.”

 

Via CEFR,

1. Has Putin always wanted to invade Crimea?  

Russian diplomats (who probably hate their jobs these days) have made elaborate attempts to demonstrate that no international law has been broken in Crimea. But the breach is blatant and the pretext used to justify invasion is thinner than thin – and Moscow knows it.

It is true that some hawkish groups in Moscow probably could not care less about international law. They would approve of any means to reunify Slavic lands. However, the bulk of the establishment has in fact always maintained a different position. For example, the Russian foreign ministry has traditionally adhered to a rigidly legalistic view of world affairs: in effect, post-1945 international law, with its strict emphasis on state sovereignty, non-interference in the internal affairs of other countries, and the inviolability of borders. Newer and softer concepts, such as the responsibility to protect, are alien to them.

Putin himself has always passionately belonged to that legalistic camp, as evidenced by his positions on Libya, on Syria, and on multiple other issues. Therefore, deciding to invade Crimea cannot have been easy for him. He must consider that something extremely important is at stake. The corollary is that in defending his conception of what is at stake, he may well be ready to go further than many of us assume.

2. Is Putin out of touch with reality?

Angela Merkel’s statement that Putin is out of touch with reality, which was leaked to the New York Times, gave rise to a considerable amount of conjecture and comment. Some people concluded that Putin has gone mad. In fact, while he may be living in his own version of reality, it looks like Putin’s world has actually been around for a long time.

Putin seems to sincerely believe that dangerous extremist groups have taken power in Kiev. He may genuinely not realise that the events in Kiev represented a classic popular revolution. As pointed out by Fiona Hill, it is possible that the whole concept of popular revolutions is alien to Putin. In the late 1980s and early 1990s, when Russia was having its own revolution, Putin was not there – he was serving the KGB in Dresden. He did not personally witness the fact that a massive number of people were involved in the overthrow of the Soviet Union. His being abroad for these pivotal events, as well as his KGB schooling and worldview, may have made it easy for him to see the collapse of the Soviet Union as the result of a conspiracy by a few combined with betrayal by others.

Similarly, Putin may see current events in Ukraine as a conspiracy by the West, which was definitely his view of the Orange revolution of 2004. Or he may see the situation as the result of recklessness: actions along the same lines as Western involvement in Libya and Syria. As Putin sees it, in both places the West has supported marginal and extremist groups against legitimate leaders, in a naïve hope that democracy will somehow take root in the ruins of the old regimes. It may well be that he saw the West applying the same logic to Ukraine and decided that he could not allow anything of the kind to happen in Ukraine.

Added to this, he likely feels a sense of betrayal over the West’s (as he sees it) geopolitical incursion into Ukraine, and over the West’s failure (as he sees it) to support Viktor Yanukovych after the agreement of February 21. All this comes together to form the reality in which Putin lives.

This means that what we are seeing as Putin’s revisionism may still be inspired largely by his conservatism. Also, much of his reality is indeed based on false premises. But understanding this does not make it easier to set the record straight and make Putin see sense – as multiple Western interlocutors have by now discovered.

3. Does Putin want to use Crimea as leverage over Ukraine? 

Some analysts assume that Russia will stop short of incorporating Crimea, but will instead keep it in a Transnistria-style legal limbo in order to use it as leverage over Kiev. It seems likely that obtaining leverage over all of Ukraine, as opposed to just Crimea, is Moscow’s real goal. But it is hard to predict exactly what Moscow will see as sufficient and reliable leverage.The government that came to power in Kiev in late February is weak. Contrary to Moscow’s claims, it is not illegitimate – it is as legitimate as it can be under the circumstances. However, it still does not represent the whole of society in the ways that a government should. In theory, it would have been easy for Moscow to gain leverage over the new government by using a mixture of legitimate and more shady means. But Moscow did not even make the attempt.

By now, it is unclear just how much the “Transnistrianisation” of Crimea would add to Moscow’s leverage. Kiev is now considerably less amenable to making a deal with Moscow than it would have been less than a month ago. Many in the nationalist camp may be secretly relieved to see Crimea go, taking with it its two million Russian voters and Russian base.

As recently as a week or so ago, Russia could probably have counted on the West to put pressure on Kiev. The West is terrified by what Moscow is doing and it does not know how to respond. So, many would have been relieved if, instead of annexing Crimea, Russia stopped at “Transnistrianisation”. The West would have been ready to put pressure on Kiev to accept Moscow’s conditions – thereby, of course, contributing to prolonged bad governance in Ukraine and, consequently, to more trouble down the road. But Moscow did not try to use the West either – and now it could be too late for that as well. The build-up of Russian troops at Ukraine’s borders has probably made the West more determined to counter Russia and less likely to go for unholy compromises. And, likewise, the massing of troops could indicate that Moscow is not interested in making use of Western pressure. The sort of control over Kiev that the Kremlin has in mind may be of a much harder sort than mere co-option and coercion.

4. Is Putin acting only in response to domestic pressures?

Some analysts claim that the whole Crimea affair was begun in order to impress the domestic public, who have increasingly fallen out of love with Putin. Others, even those who do not share that interpretation, claim that Putin cannot back down because of domestic pressures. It is true that the invasion has boosted Putin’s ratings. And the domestic media-propaganda machine has created a powerful momentum for annexation, which has the support of many in Russian society. But it is still hard to believe that any of this constitutes serious limitations of action for Putin, especially given that he does not have to face the ballot box any time soon.

Russian society has no capacity for an informed and critical discussion about foreign policy. The state-controlled media is masterful in justifying the regime’s actions, whatever they may be. Portraying a climb-down as a victory would be easy. (This kind of method is described well in an old Soviet joke about a 100-metre race between Ronald Reagan and Leonid Brezhnev: after Reagan’s win, the Soviet news agency reported that “in yesterday’s race between the heads of state the General Secretary of the Communist Party of the USSR achieved a precious second place. The president of the Imperialist United States finished second-last.”)

In short, for the moment at least, Putin is in no way hostage to his domestic constituency. But that does not mean that he will want to de-escalate or back down.

5. Will sanctions stop Putin?

Different people see different logic behind Western sanctions on Russia. Some hope that sanctions, or the threat of them, will force Moscow to back down. Others hope that sanctions will alienate Russian elites from Putin and leave him with little domestic support. Others simply believe that people who were instrumental in acting against sovereignty and territorial integrity deserve to be punished. And some look at the situation from a long-term perspective and think that sanctions should be applied to erode the economic foundations of an increasingly aggressive regime.

Much of this reasoning seems accurate and justified. But even so, the calculation that sanctions will make Putin reverse course does not ring true. Ever since the domestic protests of 2011-2012, Putin has lost trust in the members of his elite who keep their money in the West and so are vulnerable to Western pressures. Losing their support, therefore, does not really matter to him. They have no leverage over him. In any case, “repatriating money” has been an unofficial policy for quite a while.

Sanctions, as well as Putin’s growing alienation from Russian elites, may well have effects in the medium term. But they will not stop Putin on Sunday or in the days ahead. Even so, this does not mean that sanctions are futile or unnecessary – especially because it seems more and more likely that we are now facing a longer-term battle between Russia and the West.

Pro-Russian Protesters Storm Kharkiv City Administration Building; Klitschko Calls For General Mobilization | Zero Hedge

Pro-Russian Protesters Storm Kharkiv City Administration Building; Klitschko Calls For General Mobilization | Zero Hedge.

Even as Russia has officially deployed its military to the Ukraine, its unofficial involvement in The Crimean was well known for days. A much more notable development would be if protesters in the pro-Russian eastern part of the country were to seize control of the second largest city in the Ukraine, Kharkiv, located just miles from the Russian border as this would quickly give Russia a foothold into the east of the nation with the tactical escalation abilities such a takeover would entail. Which is why the following clip of pro-Russian protesters storming the city administration in Kharkiv is of importance: should Ukraine lose control of the city, or is forced to use troops against the people, it would be just the pretext Russia needs to “defend” citizens in this part of the country, the same argument it used for military intervention in the Crimean.

And in other news, Ukrainian boxer, vocal leader of the EuroMeidan opposition movement and potential future president, Vitali Klitschko just called for a general mobilization. After all he has the most to lose if the countercoup quickly sweeps away from power those who organized the original coup in the first place. From Reuters:

Vitaly Klitschko, a senior Ukrainian politician and likely presidential candidate, called on Saturday for a “general mobilisation” following Russian parliament’s decision to approve deploying troops in Ukraine’s Crimea region.

 

“Klitschko calls for a declaration on a general mobilisation,” the retired boxing champion’s political party UDAR (Punch) said, making clear he favoured a military mobilisation.

Finally, the world’s most useless organizations, the UN and European finance ministers, are pretending to be relevant:

  • UN SECURITY COUNCIL TO MEET 2PM TODAY TO DISCUSS UKRAINE
  • EUROPEAN FOREIGN MINISTERS TO HOLD EMERGENCY MEETING ON UKRAINE IN BRUSSELS ON MONDAY -EU DIPLOMAT

Time for another Obama appearance to explain just what the “costs” that he mentioned are in his opinion. Because Putin seems to have missed the message.

Pro-Russian Protesters Storm Kharkiv City Administration Building; Klitschko Calls For General Mobilization | Zero Hedge

Pro-Russian Protesters Storm Kharkiv City Administration Building; Klitschko Calls For General Mobilization | Zero Hedge.

Even as Russia has officially deployed its military to the Ukraine, its unofficial involvement in The Crimean was well known for days. A much more notable development would be if protesters in the pro-Russian eastern part of the country were to seize control of the second largest city in the Ukraine, Kharkiv, located just miles from the Russian border as this would quickly give Russia a foothold into the east of the nation with the tactical escalation abilities such a takeover would entail. Which is why the following clip of pro-Russian protesters storming the city administration in Kharkiv is of importance: should Ukraine lose control of the city, or is forced to use troops against the people, it would be just the pretext Russia needs to “defend” citizens in this part of the country, the same argument it used for military intervention in the Crimean.

And in other news, Ukrainian boxer, vocal leader of the EuroMeidan opposition movement and potential future president, Vitali Klitschko just called for a general mobilization. After all he has the most to lose if the countercoup quickly sweeps away from power those who organized the original coup in the first place. From Reuters:

Vitaly Klitschko, a senior Ukrainian politician and likely presidential candidate, called on Saturday for a “general mobilisation” following Russian parliament’s decision to approve deploying troops in Ukraine’s Crimea region.

 

“Klitschko calls for a declaration on a general mobilisation,” the retired boxing champion’s political party UDAR (Punch) said, making clear he favoured a military mobilisation.

Finally, the world’s most useless organizations, the UN and European finance ministers, are pretending to be relevant:

  • UN SECURITY COUNCIL TO MEET 2PM TODAY TO DISCUSS UKRAINE
  • EUROPEAN FOREIGN MINISTERS TO HOLD EMERGENCY MEETING ON UKRAINE IN BRUSSELS ON MONDAY -EU DIPLOMAT

Time for another Obama appearance to explain just what the “costs” that he mentioned are in his opinion. Because Putin seems to have missed the message.

Commentary: 2014: A Risky Year in Geopolitics? | The National Interest

Commentary: 2014: A Risky Year in Geopolitics? | The National Interest.

What are the biggest political risks for 2014?

There are plenty of potential crises to keep us up at night in 2014. There are tensions between China and Japan in the East China Sea and elite-level executions in North Korea. Violence continues to worsen in the Middle East with a resurgence of a more localized Al Qaeda, a deteriorating security environment in Iraq, and 2014’s biggest geopolitical pivot point: the make-or-break Iran nuclear agreement. If the P5+1 and Iran strike a deal, it would be a huge boon for the Obama administration, but it would leave Iran economically emboldened and looking to backstop Shia initiatives across the region, putting it even more at odds with Saudi Arabia. A deal is, on balance, more likely than not. But if it falls through, it means a spike in oil prices, in addition to the likelihood that Israel strikes Iran before it can sprint to nuclear-breakout capacity. All of these geopolitical concerns are front and center for the coming year.

But above all, two essential questions best categorize the major political risks of 2014. For many of the world’s predominant emerging markets, it’s an internally focused question: How will key developing countries adapt to upcoming elections or implement ambitious agendas—and what does it mean for their behavior beyond their borders? For the United States, the question is externally focused. The international community perceives America’s foreign-policy behavior as increasingly unpredictable. Is the United States disengaging internationally? How will policymakers define the role that the US should play in the world? Much depends on these concerns, as America’s relationships with its allies become increasingly fraught.

When you add these two questions to the more conventional geopolitical security uncertainties, there is one clear answer: the erosion of global leadership and coordination will become more apparent and pronounced in 2014.

How will emerging markets respond to internal challenges?

This year, we will see domestic distractions in emerging markets, from election cycles to unprecedented reform agendas; do not expect them to play a significant role internationally that does not cohere with their more pressing priorities at home. We are in the midst of a new era of political challenges for emerging markets, as slowing growth, sputtering economic models, and rising demands from newly enfranchised middle classes create heightened uncertainty. As recent protests in Brazil, Turkey, Thailand, Colombia, Ukraine and Russia have shown, new middle classes have new demands—and are willing to take to the streets if they go unmet.

It is in this context that six of the world’s largest emerging markets—Brazil, Colombia, India, Indonesia, South Africa and Turkey—will hold national elections in 2014. In all six countries, the incumbent party will have ruled for a decade or more, but since coming to power, few of them will have faced an electoral cycle quite like this. Political, social, and economic dynamics in each of these countries vary immensely, but elections raise the risk of prevote populist policymaking in all of them. As emerging-market growth wanes, many of these countries need to implement economic reforms in order to enhance productivity and continue enriching their citizens. But as elections loom, the fears of politicians grow, and substantive reform of pensions, privatization, labor markets, and taxation will stall. Nor will the outlook improve substantially post-elections. We are likely to see second mandates of weaker leaderships—a political environment that is by no means ideal for big-bang reforms.

While these six emerging markets are the most important players for the global economic community, the emerging market elections story extends much further. A total of forty-four democratic emerging-market countries accounting for 36 percent of the world’s population will hold national elections this year. Growing middle classes across the emerging market space are expecting more and better services precisely as governments’ capacity to deliver (economically and politically) is diminishing. That leaves emerging market governments with their hands full at home.

Among emerging markets, Turkey is especially vulnerable in 2014. The country faces spillover effects from the civil war in Syria and a re-emergence of the Kurdish insurgency. More worryingly, Prime Minister Erdogan’s increasingly aggressive behavior is a huge variable at a time when he is likely to become president. Expect uncertainty and conflict over the division of powers between him and the prime minister.

China, by far the most important emerging market in the world, certainly does not face electoral pressure; in fact, the new leadership under Xi Jinping has consolidated power quickly and efficiently since the leadership transition in late 2012. But China will face demands from its constituents and domestic distractions all the same, as its economy is now undergoing a dramatic shift. The new leadership has embraced far-reaching reform to a greater degree over president Xi Jinping’s first year than we’ve seen in the past two decades. Beijing will prioritize reform over more rapid economic growth in 2014, likely focusing on reforms that address public concerns to bolster its political strength and popular legitimacy. Expect social-policy reform at the forefront, with energy policy as another priority. We could also see financial reform moving more quickly than current consensus would indicate.

These reforms constitute a huge potential positive for China’s investment climate and potential integration into the world economy. Beijing must, however, tread carefully: there are many dangerous moving pieces attached to the reform agenda. There will be losers in the reform process as industries go out of business, officials get purged, and firms come under heavy regulatory scrutiny. If reforms move too quickly, they could destabilize the ruling party from within, as these key stakeholders push back to protect their vested interests. To protect against public and bureaucratic backlash, the leadership is using anti-corruption and reeducation efforts to intimidate reform opponents within the party while using new technologies to mitigate public dissent. But if the reforms fail or are widely perceived to be moving too slowly, political instability and popular protest could grow. That is only magnified by the fact that Beijing is doing this in the context of a fundamentally changed information environment, where the proliferation of information leaves the ruling party more beholden to the demands of its citizens—and where rapid shifts in popular sentiment can arise quickly and unexpectedly. Missteps could undermine the broader reform process and the leadership itself.

If— or perhaps, when— there are bumps in the road, Beijing will try to divert public anger toward foreign targets. Xi Jinping’s first substantial foreign-policy move was to announce an Air Defense Identification Zone in the East China Sea; that caters to widespread anti-Japanese sentiment within China. Should trouble emerge domestically, the Xi government might be willing to deflect attention by playing up this antagonism. On the other hand, in the longer run, if China implements its reform agenda successfully, it could empower the regime to project its regional influence still further.

Russia is one emerging market where, under President Putin’s rule, there is a great willingness to intervene on the international stage—but often in unpredictable ways. Putin remains the single most powerful individual in the world, but two worrying trends are converging: his popularity has slipped, and after a decade of rising expectations, Russia’s economy is stagnating. This makes Russia under Putin, a leader unusually capable of getting big things done quickly, far less predictable at home and abroad.

Is the United States disengaging internationally?

As Putin injects uncertainty by intervening abroad, the United States is doing so as well—but predominantly by disengaging.

Some of this decline in consistent US foreign-policy engagement is determined by structural international changesFirst, there are too many increasingly influential countries that need to be at the table for a negotiation to have global impact, making it more difficult to coordinate effectively at the multilateral level. On top of this, a distracted German-led Europe is focusing inward on economic prerogatives of repairing the eurozone and restoring competitiveness; for foreign-policy engagement, the United States would much prefer the more geopolitically aligned UK and France driving European affairs. Emerging markets, particularly Russia and China, are more willing to challenge US preferences abroad.

Some of this new American foreign policy tack derives from tectonic shifts in the US domestic picture. In the 2012 election, just 5 percent of voters ranked foreign policy as their priority, and widening income inequality is persuading many Americans that they do not share the benefits of US engagement abroad. With a reactive, risk-averse approach to foreign policy along with a weaker second-term foreign-policy team, the Obama administration’s preferences and recent actions have magnified the issue considerably. The White House has made a handful of important missteps in the last year, even if many were at least partially the product of circumstance. The NSA scandal in the wake of the Snowden revelations has undermined the United States around the world. The need for attention at home amidst congressional infighting, a government shutdown, and the Obamacare rollout fiasco has come with significant foreign-policy opportunity cost—perhaps most importantly, Obama’s need to miss the APEC summit. Obama’s vacillation on whether to strike Syria undermined US credibility, and when the chance for a chemical-weapons agreement arose (thanks to an internationally engaged Vladimir Putin…), Obama jumped at the chance to take the deal and chalk it up as a justification for Washington remaining a spectator to the broader civil war.

Add all of these factors together and it seems that a perfect storm of US foreign policy decline is brewing. A poorly defined, more risk-averse US role in the world has allies frustrated with and uncertain about Washington’s longstanding policy preferences and commitments. They are actively questioning some American security guarantees and worrying about Washington’s reluctance to deploy military, economic, and diplomatic capital.

This new period of uncertainty for American foreign policy will impact US relations with countries around the world—but by no means equally. Despite their consternation, America’s closest allies don’t have viable alternatives. Mexico and Canada are far too economically integrated with the US to effectively hedge the relationship with outreach to other major powers. For Japan, Israel and the UK—the United States’ preeminent ally in each of their respective regions—the same is true strategically. As a result, they are particularly exposed in an increasingly leaderless world order.

That’s not the case, though, for the US’s second-tier allies, who have flexibility in structuring their strategic partnerships. This a much larger group, including Germany, France, Turkey, Saudi Arabia, the United Arab Emirates, South Korea, Brazil, and Indonesia. All have governments that consider it unwise to bet too fully on the US, and they are preparing to hedge their position by shifting their international orientation accordingly.

The prime example is the deterioration in US-Saudi relations. In recent months, the Saudi leadership has rejected a seat on the UN Security Council and penned forceful op-eds in Western publications, explaining Saudi consternation with American policy in the Middle East—the Iran nuclear deal in particular—and the need for Saudi Arabia to “go it alone.” The Brazilians and Germans have been particularly vocal in their opposition to NSA practices in the wake of the discovery that their leaders’ personal emails had been monitored by US intelligence.

The implications of these shifting alliances will be stark. US corporations are primed for new challenges. Post-Snowden, American firms that rely on collecting or sharing information, such as telecoms, banks and credit-card companies, may encounter a more hostile regulatory environment in countries like France, Germany and Brazil. US defense companies selling into countries such as Turkey and the Gulf states could also find themselves on the losing end of a tilt away from the United States. And expect Washington’s multilateral agenda to suffer, as “coalitions of the willing” become harder to establish and important trade deals like the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership lose some momentum. Confusion over US commitments will complicate choices for countries balancing security and economic interests between the US and China; some Asian governments may align more closely with Beijing. And as the US is no longer perceived as a credible driver of the single global marketplace, a weakening of international standards is likely in the years to come. We might see faster fragmentation of the Internet, more disjointed financial regulation, a weaker NATO, and an even more fragmented global environment.

But despite its waning foreign-policy engagement, the US is not in economic decline.Investors continue to look past America’s many challenges and bet heavily on the US economy.In fact, driven by an energy revolution, game-changing technologies in diverse sectors, favorable demographics, and strong underlying political and social stability, the American economic story remains among the most dynamic and exciting in the world.The United States may be hamstrung by issues such as its yawning gap between rich and poor and its increasingly ineffectual secondary-education system, but for now at least, corporate investment and international support for the US dollar remain robust. So despite Washington’s inconsistencies on the international stage, America’s allies—and the international community—are set to struggle with it most.

In 2014, as emerging markets look inward and American foreign policy goes wayward, the only certainty is that international coordination is eroding. That will generate a more volatile global landscape and unforeseen crises.

Ian Bremmer is the president of the Eurasia Group, global research professor at New York University and a contributing editor at The National Interest.

Image: Flickr/Beverly Goodwin. CC BY 2.0.

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