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Russia Strikes Back Where It Hurts: American Oil | The American Conservative

Posted by M. C. on March 23, 2020

https://www.theamericanconservative.com/articles/russia-strikes-back-where-it-hurts-american-oil/

Russia Strikes Back Where It Hurts: American Oil

Amid mounting sanctions aimed at crippling Moscow’s economy, Putin seems resolved to do the same to Trump’s re-election.

Russia and Saudi Arabia are engaged in an oil price war that has sent shockwaves around the world, causing the price of oil to tumble and threatening the financial stability, and even viability, of major international oil companies.

On the surface, this conflict appears to be a fight between two of the world’s largest producers of oil over market share. This may, in fact, be the motive driving Saudi Arabia, which reacted to Russia’s refusal to reduce its level of oil production by slashing the price it charged per barrel of oil and threatening to increase its oil production, thereby flooding the global market with cheap oil in an effort to attract customers away from competitors.

Russia’s motives appear to be far different—its target isn’t Saudi Arabia, but rather American shale oil. After absorbing American sanctions that targeted the Russian energy sector, and working with global partners (including Saudi Arabia) to keep oil prices stable by reducing oil production even as the United States increased the amount of shale oil it sold on the world market, Russia had had enough. The advent of the Coronavirus global pandemic had significantly reduced the demand for oil around the world, stressing the American shale producers. Russia had been preparing for the eventuality of oil-based economic warfare with the United States. With U.S. shale producers knocked back on their heels, Russia viewed the time as being ripe to strike back. Russia’s goal is simple: to make American shale oil producers “share the pain”.

The United States has been slapping sanctions on Russia for more than six years, ever since Russia took control (and later annexed) the Crimean Peninsula and threw its weight behind Russian separatists in eastern Ukraine. The first sanctions were issued on March 6, 2014, through Executive Order 13660, targeting “persons who have asserted governmental authority in the Crimean region without the authorization of the Government of Ukraine that undermine democratic processes and institutions in Ukraine; threaten its peace, security, stability, sovereignty, and territorial integrity; and contribute to the misappropriation of its assets.”

The most recent round of sanctions was announced by Secretary of State Mike Pompeo on February 18, 2020, by sanctioning Rosneft Trading S.A., a Swiss-incorporated, Russian-owned oil brokerage firm, for operating in Venezuela’s oil sector. The U.S. also recently targeted the Russian Nord Stream 2 and Turk Stream gas pipeline projects.

Russia had been signaling its displeasure over U.S. sanctions from the very beginning. In July 2014, Russian President Vladimir Putin warned that U.S. sanctions were “driving into a corner” relations between the two countries, threatening the “the long-term national interests of the U.S. government and people.” Russia opted to ride out U.S. sanctions, in hopes that there might be a change of administrations following the 2016 U.S. Presidential elections. Russian President Vladimir Putin made it clear that he hoped the U.S. might elect someone whose policies would be more friendly toward Russia, and that once the field of candidates narrowed down to a choice between Donald Trump and Hillary Clinton, Putin favored Trump.

“Yes, I did,” Putin remarked after the election, during a joint press conference with President Trump following a summit in Helsinki in July 2018. “Yes, I did. Because he talked about bringing the U.S.-Russia relationship back to normal.”

Putin’s comments only reinforced the opinions of those who embraced allegations of Russian interference in the 2016 U.S. Presidential election as fact and concluded that Putin had some sort of hold over Trump. Trump’s continuous praise of Putin’s leadership style only reinforced these concerns.

Even before he was inaugurated, Trump singled out Putin’s refusal to respond in kind to President Obama’s levying of sanctions based upon the assessment of the U.S. intelligence community that Russia had interfered in the election. “Great move on delay (by V. Putin) – I always knew he was very smart!” Trump Tweeted. Trump viewed the Obama sanctions as an effort to sabotage any chance of a Trump administration repairing relations with Russia, and interpreted Putin’s refusal to engage, despite being pressured to do so by the Russian Parliament and Foreign Ministry, as a recognition of the same.

This sense of providing political space in the face of domestic pressure worked both ways. In January 2018, Putin tried to shield his relationship with President Trump by calling the release of a list containing some 200 names of persons close to the Russian government by the U.S. Treasury Department as a hostile and “stupid” move.

“Ordinary Russian citizens, employees and entire industries are behind each of those people and companies,” Putin remarked. “So all 146 million people have essentially been put on this list. What is the point of this? I don’t understand.”

From the Russian perspective, the list highlighted the reality that the U.S. viewed the entire Russian government as an enemy and is a byproduct of the “political paranoia” on the part of U.S. lawmakers. The consequences of this, senior Russian officials warned, “will be toxic and undermine prospects for cooperation for years ahead.”

While President Trump entered office fully intending to “get along with Russia,”  including the possibility of relaxing the Obama-era sanctions, the reality of U.S.-Russian relations, especially as viewed from Congress, has been the strengthening of the Obama sanctions regime. These sanctions, strengthened over time by new measures signed off by Trump, have had a negative impact on the Russian economy, slowing growth and driving away foreign investment.

While Putin continued to show constraint in the face of these mounting sanctions, the recent targeting of Russia’s energy sector represented a bridge too far. When Saudi pressure to cut oil production rates coincided with a global reduction in the demand for oil brought on by the Coronavirus crisis, Russia struck.

The timing of the Russian action is curious, especially given the amount of speculation that there was some sort of personal relationship between Trump and Putin that the Russian leader sought to preserve and carry over into a potential second term. But Putin had, for some time now, been signaling that his patience with Trump had run its course. When speaking to the press in June 2019 about the state of U.S.-Russian relations, Putin noted that “They (our relations) are going downhill, they are getting worse and worse,” adding that “The current [i.e., Trump] administration has approved, in my opinion, several dozen decisions on sanctions against Russia in recent years.”

By launching an oil price war on the eve of the American Presidential campaign season, Putin has sent as strong a signal as possible that he no longer views Trump as an asset, if in fact he ever did. Putin had hoped Trump could usher in positive change in the trajectory of relations between the two nations; this clearly had not happened. Instead, in the words of close Putin ally Igor Sechin, the chief executive of Russian oil giant Rosneft, the U.S. was using its considerable energy resources as a political weapon, ushering in an era of “power colonialism” that sought to expand U.S. oil production and market share at the expense of other nations.

From Russia’s perspective, the growth in U.S. oil production—which doubled in output from 2011 until 2019—and the emergence of the U.S. as a net exporter of oil, was directly linked to the suppression of oil export capability in nations such as Venezuela and Iran through the imposition of sanctions. While this could be tolerated when the target was a third party, once the U.S. set its sanctioning practices on Russian energy, the die was cast.

If the goal of the Russian-driven price war is to make U.S. shale companies “share the pain,” they have already succeeded. A similar price war, initiated by Saudi Arabia in 2014 for the express purpose of suppressing U.S. shale oil production, failed, but only because investors were willing to prop up the stricken shale producers with massive loans and infusion of capital. For shale oil producers, who use an expensive methodology of extraction known as “fracking,” to be economically viable, the breakeven price of oil per barrel needs to be between $40 and $60 dollars. This was the price range the Saudi’s were hoping to sustain when they proposed the cuts in oil production that Russia rejected.

The U.S. shale oil producers, saddled by massive debt and high operational expenses, will suffer greatly in any sustained oil price war. Already, with the price of oil down to below $35 per barrel, there is talk of bankruptcy and massive job layoffs—none of which bode well for Trump in the coming election.

It’s clear that Russia has no intention of backing off anytime soon.  According to the Russian Finance Ministry, said on Russia could weather oil prices of $25-30 per barrel for between six and ten years. One thing is for certain—U.S. shale oil companies cannot.

In a sign that the Trump administration might be waking up to the reality of the predicament it faces, Treasury Secretary Steve Mnuchin quietly met with Russia’s Ambassador to the U.S., Anatoly Antonov. According to a read out from the Russian Ministry of Foreign Affairs, the two discussed economic sanctions, the Venezuelan economy, and the potential for “trade and investment.” Mnuchin, the Russians noted, emphasized the “importance of orderly energy markets.”

Russia is unlikely to fold anytime soon. As Admiral Josh Painter, a character in Tom Clancy’s “The Hunt for Red October,” famously said, “Russians don’t take a dump without a plan.”

Russia didn’t enter its current course of action on a whim. Its goals are clearly stated—to defeat U.S. shale oil—and the costs of this effort, both economically and politically (up to and including having Trump lose the 2020 Presidential election) have all been calculated and considered in advance. The Russian Bear can only be toyed with for so long without generating a response. We now know what that response is; when the Empire strikes back, it hits hard.

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An End to the World as We Know It?, by Philip Giraldi – The Unz Review

Posted by M. C. on December 26, 2019

Congress and the White House compete in year-end stupidity sweepstakes.

The U.S., to be sure, has been adept at turning adversaries into enemies and disappointing friends, and it is all done with a glib assurance that doing so will somehow bring democracy and freedom to all.

https://www.unz.com/pgiraldi/an-end-to-the-world-as-we-know-it/

At the end of the nineteenth century, Lord Palmerston stated what he thought was obvious, that “England has no eternal friends, England has no perpetual enemies, England has only eternal and perpetual interests.” Palmerston was saying that national interests should drive the relationships with foreigners. A nation will have amicable relations most of the time with some countries and difficult relations with some others, but the bottom line should always be what is beneficial for one’s own country and people.

If Palmerston were alive today and observing the relationship of the United States of America with the rest of the world, he might well find Washington to be an exception to his rule. The U.S., to be sure, has been adept at turning adversaries into enemies and disappointing friends, and it is all done with a glib assurance that doing so will somehow bring democracy and freedom to all. Indeed, either neoliberal democracy promotion or the neoconservative version of the same have been seen as an overriding and compelling interest during the past twenty years even though the policies themselves have been disastrous and have only damaged the real interests of the American people.

The U.S. relationship with Israel is, for example, driven by a powerful and wealthy domestic lobby rather than by any common interests at all yet it is regularly falsely touted as being between two “close allies” and “best friends.” It has cost Americans hundreds of billions of dollars in subsidies for the Jewish state and Israeli influence over U.S. policy in the Middle East region has led to catastrophic military interventions in Afghanistan, Lebanon, Iraq, Syria, Mogadishu and Libya. Currently, Israel is agitating for U.S. action against the nonexistent Iranian “threat” while also unleashing its lobby in the United States to make illegal criticism of any of its war crimes, effectively curtailing freedom of speech and association for all Americans.

Far more dangerous is the continued excoriation of the Kremlin over the largely mythical Russiagate narrative. Congress has recently approved a bill that would give to Ukraine $300 million in supplementary military assistance to use against Russia. The money and authorization appear in the House of Representatives version of the national defense authorization act (NDAA) that passed last week.

The bill is a renewal of the controversial Ukraine Security Assistance Initiative that Donald Trump allegedly manipulated to bring about an investigation of Joe Biden’s son Hunter. The new version expands on the former assistance package to include coastal defense cruise missiles and anti-ship missiles as offensive weapons that are acceptable for export to Kiev. It also authorizes an additional $50 million in military assistance on top of the $250 million congress had granted in last year’s bill, “of which $100 million would be available only for lethal assistance.”

Ukraine sought the money and arms to counter Russian naval dominance in the Black Sea through its base at Sevastopol in the Crimea. One year ago the Russian navy captured three Ukrainian warships and Kiev was unable to push back against Moscow because it lacked weapons designed to attack ships. Now it will have them and presumably it will use them. How Russia will react is unknowable.

Dmytro Kuleba, Ukraine’s Deputy Prime Minister for European and Euro-Atlantic Integration, has been in Washington lobbying for the additional military assistance. He has had considerable success, particularly as there is bipartisan support in Congress for aid to Kiev and also because the Trump Departments of Defense and State as well as the National Security Council are all on board in countering the “Russian threat” in the Black Sea. President Trump signed the NDAA last week, which completed the process.

Far more ominously, Kuleba and his interlocutors in the administration and congress have been revisiting a proposal first surfaced under Bill Clinton, that Ukraine and Georgia should be admitted to the NATO alliance. Like the $300 million in military aid, there appears to be considerable bipartisan support for such a move. NATO already has a major presence on the Black Sea with Bulgaria, Romania and Turkey all members. Adding Ukraine and Georgia would completely isolate the Russian presence and Moscow would undoubtedly see it as an existential threat.

The NDAA also provides seed money to initiate the so-called Space Force, which President Trump inaugurated by describing it as “the world’s newest war-fighting domain. Amid grave threats to our national security, American superiority in space is absolutely vital. We’re leading, but we’re not leading by enough, but very shortly we’ll be leading by a lot. The Space Force will help us deter aggression and control the ultimate high ground.”

If that isn’t bad enough, the new defense budget ominously also requires the Trump administration to impose sanctions “with respect to provision of certain vessels for the construction of certain Russian energy export pipelines.” Last week the House of Representatives and Senate approved specific sanctions relating to the companies and governments that are collaborating on the construction of the Nord Stream 2 pipeline that will cross the Baltic Sea from Vyborg to Greifswald to connect Germany with Russian natural gas. President Trump has signed off on the legislation.

The United States has opposed the project ever since it was first mooted, claiming that it will make Europe “hostage” to Russian energy, will enrich the Russian government, and will also empower Russian President Vladimir Putin to be more aggressive. Engineering companies that will be providing services such as pipe-laying will be targeted by Washington as the Trump administration tries to halt the completion of the $10.5 billion project.

Now that the NDAA has been signed, the Trump administration has 60 days to identify companies, individuals and even foreign governments that have in some way provided services or assistance to the pipeline project. Sanctions would block individuals from travel to the United States and would freeze bank accounts and other tangible property that would be identified by the U.S. Treasury. One company that will definitely be targeted for sanctions is the Switzerland-based Allseas, which has been contracted with by Russia’s Gazprom to build the offshore section of pipeline. It has suspended work on the project while it examines the implications of the sanctions.

Bear in mind that Nord Stream 2 is a peaceful commercial project between two countries that have friendly relations, making the threats implicit in the U.S. reaction more than somewhat inappropriate. Increased U.S. sanctions against Russia itself are also believed to be a possibility and there has even been some suggestion that the German government and its energy ministry might be sanctioned. This has predictably resulted in pushback from Germany, normally a country that is inclined to go along with any and all American initiatives. Last week German Foreign Minister Heiko Maas asked Congress not to meddle in European energy policy, saying “We think this is unacceptable, because it is ultimately a move to influence autonomous decisions that are made in Europe. European energy policy is decided in Europe, not in the U.S.”

German Bundestag member Andreas Nick warned that “It’s an issue of national sovereignty, and it is potentially a liability for trans-Atlantic relations.” That Trump is needlessly alienating important countries like Germany that are genuine allies, unlike Israel and Saudi Arabia, over an issue that is not an actual American interest is unfortunate. It makes one think that the wheels have definitely come off the cart in Washington.

The point is that Donald Trump, Mike Pompeo, Mike Pence and Mike Esper (admittedly too many Mikes) wouldn’t know a national interest if it hit them in the face. Their politicization of policy to “win in 2020” promoting apocalyptic nonsense like war in space has also reinforced an existing tunnel vision on what Russia under Vladimir Putin is all about that is extremely dangerous. Admittedly, Team Trump throws out sanctions in all directions with reckless abandon, mostly aimed at Russia, Iran, North Korea and, the current favorite, Venezuela. No one is immune. But the escalation going from sanctions to arming the Kremlin’s enemies is both reckless and pointless. Russia will definitely strike back if it is attacked, make no mistake about that, and war could easily escalate with tragic consequences for all of us. That war is perhaps becoming thinkable is in itself deplorable, with Business Insider running a recent piece on surviving a nuclear attack. New homes in target America will likely soon come equipped with bomb shelters, just like in the 1950s.

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‘America Says’ Game Show Cleared For Fall Syndication ...

 

 

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