Opinion from a Libertarian ViewPoint

EU Sanctions on Russia Equal ‘Suicide by Cop’

Posted by M. C. on February 28, 2022

Europe is staring at a complete collapse of its economy if they sanction Russia’s energy sector and shut down her ability to do business with their banks. The question no one is asking is, “Did they provoke this fight on purpose to do exactly this?” From where I’m sitting, it looks to me like their insistence on zero diplomatic concessions to Russia led directly to this outcome. So, the answer to my question is ‘Yes, it was deliberate.’

The EU has unveiled its first tranche of economic sanctions on Russia for its invasion of Ukraine. EU leadership looks even more angry about this outcome than US leadership does. Here’s the article covering this tangled mess by Sputnik News.

We know that the EU is very dependent on Russian energy and the existing sanctions have hampered EU-Russian trade for years now. Europe is incredibly vulnerable here to any form of supply/demand shocks as their financial system teeters on the edge of the abyss.

There is no solidarity between the US and the EU on these matters, as I’ve pointed out in post after post here. So, the question now is, if Europe is targeting Russian energy exports and the ability of EU banks to do business to buy Russian gas and other export commodities why would they pick this fight?

The answer must be that this is exactly what they wanted in the first place.

In the US we call this ‘suicide by cop,’ which is exactly how I framed it when asked by Sputnik for my thoughts on the subject this morning. I was asked on Monday before Putin’s intervention in Ukraine, to answer the following questions. Events moved beyond them, obviously, but I publish them here anyway because they are still of some value. {current editorial comments in brackets}

According to recent research, US liquefied natural gas export capacity will be the world’s largest by the end of 2022. Could it be that part of the whole game around Ukraine was about the US petroleum sector benefitting from the current standoff in Ukraine?

Of course. That is a sub-plot in this very complicated story.  There are many factors that went into this standoff over Ukraine, which Russia is now accelerating towards an end-game state {boy howdy was that an understatement 12 hours later}.  LNG exports from the US is certainly one of them, but I think the bigger issues concern the future of NATO, the security architecture of Europe and who controls it.

I see this as much as a fight between the US/UK and the EU over security as much as it is about the US’s long-standing antipathy to Russian energy exports.  These issues are, of course, all intertwined.

Is the current political battle over Ukraine just a pretext for the US to earn money via the energy sector, increasing supplies?

No, it isn’t.  It’s much deeper and nuanced than that.  There are future weapons contracts for US and UK military contractors at stake here, as well as France’s desires to become a major player in European arms sales. 

Russia, I believe, is being used as a bogeyman to advance internal European and ‘Anglo’ political agendas having more to do with shifts in foreign policy focus than just the ‘follow the money’ angle here.  ‘Following the energy and arms money’ is an important consideration but I think they are now downstream of a much different security landscape in Europe by 2030.

The European Union is looking for ways to assert its independence from Washington D.C.  Downing St. is pushing everyone into conflict for its own selfish and historical reasons, clinging to outdated political theories about controlling the ‘World Island’ and driving a wedge between Russia and China, which is achieving the exact opposite result.

How likely is it that the US might now try to establish control over transit routes going through Ukraine? Will the “Russian invasion” narrative be used as a pretext for doing so?

The transit routes through Ukraine in the minds of the Russian leadership fully depreciated assets that they unfortunately still continue to subsidize.  Putin mentioned the cost to subsidizing a hostile regime in Kiev during his speech announcing the recognition of the Donbass, $250 billion over 30 years. 

If the US wants control over those transit routes, that’s fine.  Russia will happily shut off the gas through them, since it costs Gazprom money to ship gas through them at this point.  Putin has ordered Gazprom to keep those pipelines filled as a fig leaf to Europe who has continually bitten his hand. 

I expect he won’t care to re-up the transit contract with Ukraine when it expires in December 2024.

So, if DC wants this, Putin will oblige and then stop transit all together, citing conflicts with Ukraine.

To what extent can the US indeed provide energy security for Europe by supplying resources?

The total US LNG output according to the EIA for 2022 is 11.5 bcf per day, which is 115 bcm per year, or roughly the capacities of Nordstream 1 and 2 combined. 

Is there 55 bcm of spare capacity (the size of NS2) in the US system to feed a new market in Europe?  No, not with demand rising at more than 6% annually and accelerating as the world comes out of COVID-19 lockdowns.

The demand for European LNG is so high that US and Russian suppliers both have massive market opportunities there.  So, this isn’t about the money, in the end.  With most of Europe ending its COVID-19 restrictions in a desperate attempt to stave off political unrest, demand is only going to rise further.

Moreover, US LNG is far more expensive than Russian piped gas.  This is simply a fact.  And with the Biden administration working with Davos to lean on banks to retard investment into new oil and gas projects, long-term supply of energy to Europe from the US is limited anyway.

US exports will go to where the bid is the highest and with Europe’s terrible future prospects, massive debt overhang and lack of economic dynamism they will not be capable of outbidding other global customers for gas.  That’s been the reason for the insane prices in Europe this winter, competition for limited gas supplies driving prices up, despite rising global capacity.

Can Europe survive without Russian energy supplies, if they were to be disrupted now due to the standoff and sanctions?

See the rest here

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