Sit Back and Watch Europe Commit Suicide

Photo Credit: The Cradle

Pepe Escobar

The Cradle

The stunning spectacle of the European Union (EU) committing slow motion hara-kiri is something for the ages. Like a cheap Kurosawa remake, the movie is actually about the US-detonated demolition of the EU, complete with the rerouting of some key Russian commodities exports to the US at the expense of Europeans.

It helps to have a 5^th columnist actress strategically placed – in this case astonishingly incompetent European Commission head Ursula von der Lugen – with her vociferous announcement of a crushing new sanctions package: Russian ships banned from EU ports; road transportation companies from Russia and Belarus prohibited from entering the EU; no more coal imports (over 4.4 billion euros a year).

In practice, that translates into Washington shaking down its wealthiest western clients/puppets. Russia, of course, is too powerful to directly challenge militarily, and the US badly needs some of its key exports, especially minerals. So, the Americans will instead nudge the EU into imposing ever-increasing sanctions that will willfully collapse their national economies, while allowing the US to scoop everything up.

Cue to the coming catastrophic economic consequences felt by Europeans in their daily life (but not by the wealthiest five percent): inflation devouring salaries and savings; next winter energy bills packing a mean punch; products disappearing from supermarkets; holiday bookings almost frozen. France’s Le Petit Roi Emmanuel Macron – perhaps facing a nasty electoral surprise – has even announced: “food stamps like in WWII are possible.”

We have Germany facing the returning ghost of Weimar hyperinflation. BlackRock President Rob Kapito said, in Texas,“for the first time, this generation is going to go into a store and not be able to get what they want.” African farmers are unable to afford fertilizer at all this year, reducing agricultural production by an amount capable of feeding 100 million people.

Zoltan Poszar, former NY Fed and US Treasury guru, current Credit Suisse grand vizir, has been on a streak, stressing how commodity reserves – and, here, Russia is unrivaled – will be an essential feature of what he calls Bretton Woods III (although, what’s being designed by Russia, China, Iran and the Eurasia Economic Union is a post-Bretton Woods).

Poszar remarks that wars, historically, are won by those who have more food and energy supplies, in the past to power horses and soldiers; today to feed soldiers and fuel tanks and fighter jets. China, incidentally, has amassed large stocks of virtually everything.

Poszar notes how our current Bretton Woods II system has a deflationary impulse (globalization, open trade, just-in-time supply chains) while Bretton Woods 3 will provide an inflationary impulse (de-globalization, autarky, hoarding of raw materials) of supply chains and extra military spending to be able to protect what will remain of seaborne trade.

The implications are of course overwhelming. What’s implicit, ominously, is that this state of affairs may even lead to WWIII.

Rublegas or American LNG?

The Russian roundtable Valdai Club has conducted an essential expert discussion on what we at The Cradle have defined as  Rublegas – the real geoeconomic game-changer at the heart of the post-petrodollar era. Alexander Losev, a member of the Russian Council for Foreign and Defense Policy, offered the contours of the Big Picture. But it was up to Alexey Gromov, Chief Energy Director of the Institute of Energy and Finance, to come up with crucial nitty-gritty.

Russia, so far, was selling 155 billion cubic meters of gas to Europe each year. The EU rhetorically promises to get rid of it by 2027, and reduce supply by the end of 2022 by 100 billion cubic meters. Gromov asked “how,” and remarked, “any expert has no answer. Most of Russia’s natural gas is shipped over pipelines. This cannot simply be replaced by Liquified Natural Gas (LNG).”

The risible European answer has been “start saving,” as in “prepare to be worse off” and “reduce the temperature in households.” Gromov noted how, in Russia, “22 to 25 degrees in winter is the norm. Europe is promoting 16 degrees as ‘healthy’, and wearing sweaters at night.”

The EU won’t be able to get the gas it needs from Norway or Algeria (which is privileging domestic consumption). Azerbaijan would be able to provide at best 10 billion cubic meters a year, but “that will take 2 or 3 years” to happen.

Gromov stressed how “there’s no surplus in the market today for US and Qatar LNG,” and how prices for Asian customers are always higher. The bottom line is that “by the end of 2022, Europe won’t be able to significantly reduce” what it buys from Russia: “they might cut by 50 billion cubic meters, maximum.” And prices in the spot market will be higher – at least $1,300 per cubic meter.

An important development is that “Russia changed the logistical supply chains to Asia already.” That applies for gas and oil as well:  “You can impose sanctions if there’s a surplus in the market. Now there’s a shortage of at least 1.5 million barrels of oil a day. We’ll be sending our supplies to Asia – with a discount.” As it stands, Asia is already paying a premium, from 3 to 5 dollars more per barrel of oil.

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Via https://thecradle.co/Article/columns/8853