by Mike Whitney
"Rejection of Russian energy
resources means that Europe will become the region with the
highest energy costs in the world.
This will seriously undermine the
competitiveness of European industry which is already losing the
competition to companies in other parts of the world...
Our Western colleagues seem to
have forgotten the elementary laws of economics, or simply
prefer to ignore them."
President of the Russian Federation
On Tuesday, Russia announced a 40%
reduction in the flow of natural gas to Germany through the Nord
The announcement, that was made by
Gazprom officials, sent tremors through the European gas market
where prices quickly soared to new highs.
In Germany - where prices have tripled
in the last three months - the news was met with gasps of horror.
With inflation already running at a
40-year high, this latest reduction in supply is certain to tip the
German economy into recession or worse. All of Europe is now feeling
the impact of Washington's misguided sanctions on Russia.
Here's more from Oil Price website:
"Russia's Gazprom said on Tuesday
that it would limit natural gas supply via the Nord Stream
pipeline to Germany by 40 percent compared to planned flows
because of a delay in equipment repairs...
The lower supply of gas via Nord
Stream to the biggest European economy, Germany, sent Europe's
gas prices surging by double digits...
Russian gas deliveries to
Europe... have already been down after Ukraine stopped last
month flows from Russia to Europe at... one of the two transit
points... thus supply was cut off for a third of the gas
transiting Ukraine onto Europe."
Gas Prices Surge 13% As Russia Reduces Nord Stream Flow",
The United States and its European
allies have imposed more sanctions on Russia than any country in
But Tuesday's announcement helps to
illustrate who is actually suffering from the sanctions and who is
not. Russia is not suffering, in fact, Russia does not seem
particularly perturbed at all.
It has calmly brushed aside
Washington's attacks as one would whisk-away a fly at a family
Even more surprising is the fact that
the sanctions have strengthened the ruble, increased revenues from
raw materials, sent Russia's trade surplus into record territory,
and pushed gas and oil profits into the stratosphere.
By every objective standard, the
sanctions appear to be benefiting Russia which, of course, is the
opposite outcome that was expected.
Washington's Economic Sanctions on
Russia - Success or Failure?
currency (the Ruble) has rallied to a five-year high
commodities are raking in windfall profits
trade surplus is projected to hit a record high this year
oil and gas sales have risen sharply
There's no evidence that Washington's
sanctions have achieved the objective of "weakening" Russia or
damaging its economy.
There is, however, considerable proof
that the sanctions have backfired and inflicted a heavy toll on
their supporters and their people. And while it's hard to quantify
how much damage has actually been done, we've tried to identify
specific categories where the impact has been most dramatic.
The sanctions have:
sharp rise in food and energy prices. (soaring inflation)
major disruptions in global supply-lines (Deglobalization)
increased food shortages and the likelihood of famine
Precipitated a severe slowdown in the global economy
So far, Russia has withstood these
attacks patiently and without any retaliatory response.
But we must assume that the sudden 40%
reduction in gas flows to energy-dependent Germany is intended to
send a message.
Keep in mind,
Nord Stream 2 was a massive
multi-year, $10 billion project to which Russia was fully committed
'pulled the rug out from under Putin' at the eleventh
Germany proved that - when push comes
to shove - Berlin will always march in lockstep with Washington
rather than fulfill its business agreements or act in the interests
of its own people.
What Germany is discovering now,
however, is that acting as Washington's poodle comes at a very high
Here's more from Reuters:
"Gazprom said on Tuesday it has
curbed supplies via the Nord Stream 1 undersea pipeline to
Germany to up to 100 million cubic metres (mcm) per day, down
from 167 mcm, citing the delayed return of equipment that had
been sent for repair...
Gazprom no longer exports gas
westwards through Poland via the Yamal-Europe pipeline following
Russian sanctions against EuRoPol Gaz, which owns the Polish
Flows via Yamal-Europe continue
eastwards from Germany to Poland.
"Due to the delayed return of gas
compressor units from repair by Siemens... and technical
engines' malfunctions, only three gas compressor units can
currently be used at the Portovaya compression station," Gazprom
"Due to the sanctions imposed by
Canada, it is currently impossible for Siemens Energy to deliver
overhauled gas turbines to the customer.
Against this background we have
informed the Canadian and German governments and are working on
a viable solution," the company said."
"Nord Stream gas capacity constrained as sanctions delay
Naturally, the media is going to point
to a maintenance snafu as an excuse, but,
How credible is that?
often is supply of a vital resource cut by nearly half due to a
Russia is sending a simple but
poignant message to Germany:
"You made your bed, now sleep in
it." Russia's reaction is perfectly normal after having been
"stabbed you in the back."
And, Germany's travails are just
beginning because it has no way to make up for the energy shortfall
it will face in the near future; a shortfall that will precipitate
rolling blackouts, freezing homes, and a relentless strangulation of
its domestic industry.
As the German government is
discovering, there is no viable substitute for Russian hydrocarbons
which is neither readily available nor does the quality fit
Germany's particular requirements.
In other words, the US has led Germany
down the primrose path believing that they could simply switch to
other energy suppliers and everything would be just dandy.
That is certainly not the case.
As it happens, Germany and all of
Europe are going to pay more for their energy than any region in the
world which will severely undermine the EU's competitiveness.
This, in turn, will lead to a sharp
decline in living standards as well as growing social unrest. Here's
more from the Wall Street Journal:
"For decades, European industry
relied on Russia to supply low-cost oil and natural gas that
kept the continent's factories humming.
Now Europe's industrial energy
costs are soaring in the wake of Russia's war on Ukraine,
hobbling manufacturers' ability to compete in the global
Factories are scrambling to find
alternatives to Russian energy under threat that Moscow could
abruptly turn off the gas spigot, bringing production to a halt.
Europe's producers of chemicals,
fertilizer, steel and other energy-intensive goods have come
under pressure over the last eight months as tensions with
Russia climbed ahead of the February invasion.
Some producers are shutting down
in the face of competition from factories in the U.S., the
Middle East and other regions where energy costs are much lower
than in Europe.
Natural-gas prices are now nearly
three times higher in Europe than in the U.S."
European Factories, Long Dependent on Cheap Russian Energy, Are
Shutting Down - Industrial energy costs are soaring in the
wake of Russia's war on Ukraine, hobbling European
manufacturers' ability to compete globally"
The Wall Street Journal would like you
to believe that Russia is responsible for Europe's poor choices,
but, it's not true.
Putin didn't raise prices.
in response to the EU's increased demand due to shortages brought on
by the sanctions.
How is that Putin's fault?
And the same goes for the EU
officials who accused Putin of "blackmail", a claim for which there
was no basis whatsoever. When that accusation was made, the price of
gas in the EU was one-third of its price today.
Is that how blackmail works, by
charging less than the market price?
Of course, not. It's ridiculous.
Europe was getting a great price on a scarce resource until they
decided to take Uncle Sam's bad advice and ruin it for themselves.
Now they're paying through the nose,
and they can only blame themselves.
Did you know that EU leaders are
already making plans to ration energy this winter?
Europe has agreed to become
another basket-case US lapdog in order to faithfully execute
Washington's ambitious global strategy.
Here's the story:
"Europe could be forced to start
rationing energy this winter, starting with industrial uses of
natural gas, especially if the winter is cold and China's
economy rebounds, the Executive Director of the International
Energy Agency (IEA), Fatih Birol, told the Financial Times in an
'If we have a harsh winter and a
long winter... I wouldn't exclude the rationing of natural gas
in Europe, starting from the large industry facilities,' Birol
The world faces a "much bigger"
energy crisis than the one of the 1970s, Birol told German daily
Der Spiegel last month.
'Back then it was just about oil,'
Birol told the news outlet.
'Now we have an oil crisis, a gas
crisis and an electricity crisis simultaneously,' said the head
of the international agency created after the 1970s shock of the
Arab oil embargo."
"IEA: Europe Could See Energy Rationing This Winter", Oil
She's wrong, isn't she?
We don't have
"an oil, gas and electricity crisis".
What we have is a political
All of these shortages can be easily
traced back to the foolish choices that were made by incompetent
politicians doing the bidding of neocon fantasists who think they
can turn the clock back to the heyday of American global primacy.
But those days are over, and everyone
seems to know they're over except the insulated group of
self-deluded fanatics at the Washington think tanks and their
political spawn at 1600 Pennsylvania Avenue.
We all would have been much better
off listening to Kissinger who advised his pals at the
Economic Forum (WEF) to wrap up the Ukrainian war pronto before
Russia made changes that could not be reversed.
Unfortunately, Kissinger's appeal fell
on deaf ears and Putin has already started redirecting his energy
Check out this eyepopping excerpt from
an article at oilprice.com:
"The biggest reshuffle of oil
trade flows since the Arab oil embargo of the 1970s is underway
- and things may never return to normal.
The Russian invasion of
Ukraine and the sanctions on Russian oil exports are changing
global oil trade routes. Over the past nearly five decades, oil
flowed more or less freely from any supplier to any customer in
This free energy trade is now
over, after... the Western sanctions that followed, plus
Europe's irreversible decision to cut off its dependence on
Russian energy at any cost...
By the end of this year, Europe
expects to have effectively banned 90% of all its imports of
Russian oil before the war...
For oil going to Europe, crude
from the Middle East will now travel longer distances to
European ports compared to the shorter routes to India and
For Europe, the choice of oil
supply is now political, and it will be willing to pay a premium
to procure non-Russian oil. This will tighten supply options and
continue to support elevated oil prices for months to come.
Commenting on the EU's embargo on
Russian seaborne oil imports, Fitch Ratings said last week:
"This ban will have a
significant impact on global oil trade flows, with about 30%
of EU's imports needing replacement from other regions,
including the Middle East (Saudi Arabia and the UAE have
sustained production spare capacity of about 2MMbpd and
1MMbpd, respectively), Africa and the US."
"The Biggest Reshuffle Of Oil Flows Since The 1970s",
What does it mean?
It means that inflation will
continue to rise as Russia's prodigious crude supplies are
It means that Washington has
abandoned its 30 year-long 'pet project',
Globalization, and splintered
the world into rival blocs.
It means that the dollar, the bond
market, the western financial system and the so-called
"rules-based order" - all of which are inseparably linked to
economic growth that depends almost-entirely on the availability
of cheap energy - will begin to creak-and-groan beneath the
weight of feather-headed policy decisions that have brought
certain ruin to the nations of the west and their people.
We're going to pay a heavy price for
Washington suicidal power-grab...