Russia has not defaulted on its sovereign debt after all. Nor is it likely to do so under the current sanctions regime, and as long as Europe continues to finance Vladimir Putin’s military state with purchases of gas, oil, and coal.
The whole idea that these people could sanction the country that provides them with fuel and other natural resources was so stupid that it deserved to be mocked and ridiculed right from the very start. Oil is to the economy what food is to people. Starve a country of oil and you starve it of economy. If Europe gets 25% of their oil from Russia, and that gets shut off, they now get to produce 25% less stuff.
But it’s even dumber than that. While the transportation of oil brings with it many costs and impracticalities, which is why pipelines are so important, oil is also a commodity. To the extent that Europe could start buying oil elsewhere, that simply changes the final destination for Russian oil, not the net world demand. While it would be more expensive to transfer oil to these new markets, the same would be true of the oil coming into Europe, so the price of oil would go up, somewhat covering the additional costs.
The uninterrupted flow of fossil revenues – at windfall prices – is enough to cover interest service costs and redemptions. Goldman Sachs even thinks that the central bank will be able to relax capital controls gradually.
All of which is irrelevant anyway, since Europe is just buying Russian oil. Which makes the entire sanctions thing hilariously dumb. Europe is dependent on Russia being nice to them and selling them oil, not the other way around.
The rouble has not collapsed. It has stabilised after a 40pc devaluation, a manageable drop for a semi-autarkic closed economy. The fall is less than the currency slide in Turkey over recent months, which few even noticed outside specialist circles.
It’s almost like autarky is massively more resilient to hostile actions by foreign governments than globalism. But if we said no to billionaires shipping our jobs overseas to make more money for themselves than they wouldn’t be able to buy their own private islands. Will nobody think of these rich, oppressed billionaires?
Yes, Russia is having to sell some crude oil at a steep discount but the gap is already narrowing as shippers learn to navigate the political reefs.India and others are competing for bargain supplies, cutting the discount to $20 this week from $28 a barrel after the invasion of Ukraine. If Europe is still buying Russian oil, how can distant states in Asia be persuaded to desist?The Kremlin is still earning almost $100 a barrel at today’s global prices ($118), twice the average of the last eight years. The Russian current account is in rude good health. Clemens Grafe from Goldman Sachs expects the surplus to top $200bn this year as imports of western consumer goods are slashed.
In other words, Russia is making more profit on oil than even two years ago. I don’t know what their net profit is per barrel of oil, but at around 10 million barrels/day, they’re making about $1B per day in revenue. Oh yeah we’ve really got them on the ropes.
Russia has enough usable foreign currency to stay afloat for a long time. Western sanctions against the central bank are not proving to be the killer blow supposed at first, and nor is the ejection of some Russian banks from the SWIFT nexus of global payments. There are too many deliberate exemptions.Goldman’s deep-dive into the effect of sanctions ought to end all wishful thinking. The US investment bank forecasts that the Russian economy will contract by 10pc this year, a bad recession but not an economic breakdown. Growth will then recover to 2.4pc next year and 3.4pc in 2024 as the country adjusts. Exports will be back to 98pc of prior levels by early next year. If so, Putin is not going to lose sleep over this.Russia’s trade will mostly be diverted rather than destroyed. There may even be some short-term growth stimulus as Russia replaces western goods with home-made manufactures. Putin has been building a fortress economy ever since the annexation of Crimea. Net foreign funding is negligible. Total public debt is 18pc of GDP, one of the lowest ratios in the world.
Russia already, mostly due to oil, has a large trade surplus, as seen in the graph above. This is yet more reason why these sanctions are so ridiculous. Russia has more leverage over Europe and the rest of the world, and could destroy the European economy by refusing to sell them oil. That would have knock on effects for us as well, since Europe would start bidding up the price of oil in order to get some, which would incentivize domestic manufacturers to start shipping it to them.
Beyond that, GDP is just a number, but even if taken at face value, 10% contraction for one year, followed by 3% average growth is totally fine, especially if that contraction is stock market imaginary value. For the average, everyday Russian, this will actually provide benefits, since manufacturing jobs tend to be high paying, and bringing them back to Russia will only be good for them. It’s bad for financiers and billionaires, but fuck ’em.
Over four-fifths of GDP come from sectors that import just 15pc or less of their inputs, falling to 7pc in the mining industry. This is a radically different economic structure from western states such as Poland.“If Russia were fully integrated into global supply chains, restrictions on imports and exports would be immediately destructive. However, Russia largely exports goods that are almost fully produced locally,” said Mr Grafe.Iran endured tougher sanctions without buckling. Cornell professor Nick Mulder, author of The Economic Weapon, said the country settled into a new equilibrium within a couple of months. “If Iran’s experience is any guide, Russia will survive and return to lacklustre growth,” he said.
Economics is a bullshit field full of bullshitters. It doesn’t need to be that way, but look at who writes the cheques. As a result, there’s all this bullshittese about “muh GDP,” and “muh stock market,” that obfuscates some basic observable reality.
Imagine we had a colony on Mars that was thriving. In fact imagine there were lots of different planet colonies across the stars. Earth would not need to trade with a single one of them. Earth could be self-sufficient. We know this is true, because Earth is currently self-sufficient, and doesn’t trade with any other planets.
The ease with which raw materials can be found and gathered differs from country to country, but that is the only compelling reason you would ever have to trade with a potentially hostile country. There is no reason why a country as large as Russia, blessed with an abundance of pretty much every natural resource, needs to trade with anyone for anything. They can manufacture their own smartphones, to say nothing of the worthless garbage fostered on consoomers under Freedom Democracy.
The way people are told to think about the economy is intentionally retarded. If you are producing enough food, electricity, and natural resources, you can have a modern economy with zero trade. That other countries will be naturally able to produce certain goods cheaper is entirely irrelevant. While theoretically maximizing your wealth would involve trade with these countries, in practice this means billionaires exploiting lower labour costs by shipping out our jobs so they can profit off of the difference, at our expense. That’s the thing about viewing countries as one cohesive unit, it ignores that billionaires are parasites that exist at the expense of the people.
As Earth is doing just fine not trading with Mars, we could do just fine not trading with anyone. There is no sane military that would trade the security of autarky for the theoretically higher production supplied through trade. And frankly, for a country as populous, and flush with natural resources as Russia, said higher production through international trade is probably quite low anyway. It’s a different story for tiny countries that lack basic necessities, like oil or iron.
European ministers once again grappled with a hydrocarbon embargo – the fifth package of sanctions – at an EU meeting on Monday. Once again the proposals ran into resistance from Germany, with Italy and others happy to tuck in behind.There is a pervasive fear of a gilets jaunes uprising across Europe, a suspicion that a fickle public will not tolerate a cost-of-living shock once the horrors of Ukraine lose their novelty on TV screens – but that is to abdicate leadership.
Gilet Jaunes just means Yellow Vests, and they most certainly do not want another of those. The absolute nightmare scenario for our Privileged Class is some actually populist party arising, and crossing that magical 10-15% support where they are seen as a viable party in a first past the post electoral system. What they most certainly do not want is someone like me out there pointing out that when Israel murders Palestinian Children, or US Servicemen aboard the USS Liberty, our treasonous politicians bloviate about them being “our greatest ally,” yet they destroy our quality of life at the beck and call of George Soros because they don’t like that Putin doesn’t allow pedophiles access to Russian Children. The very idea that the WMD Liars ought to be taken seriously when they sanctimoniously lecture us from a position of assumed moral superiority while they rub their hands together and squeal with joy when Palestinian three year olds get their legs blown off by bomb shrapnel so that jews can steal their land is so utterly absurd that to acknowledge the premise is to in some way legitimize it.
The business-as-usual lobbies in Germany have dusted down a catastrophe scenario known as Lükex 18, a report by the German civil defence agency (BBK) painting a portrait fit for Hieronymous Bosch of what might happen if gas supplies were ever cut off.It is to throw sand in our eyes. We are already in late March. The winter is over and Europe will have enough gas to last deep into the late autumn. It has sufficient spare import capacity for liquefied natural gas to rebuild some of its depleted storage with shipments of LNG from the US and Qatar over the summer months.
Good. Eat shit faggot. That these EU politicians aren’t going along with destroying their economy for George Soros’ jew-pedo alliance brings me euphoric pleasure.
Professor Moritz Schularick from Bonn University said an immediate halt to all purchases of Russian gas, oil, and coal, would cut German GDP by 3pc this year and cost around €120bn but is perfectly feasible. “The world wouldn’t end,” he said.
Oh but apparently Moritz over here thinks this would cut GDP by just 3%. According to him, having 25% less oil imports cuts GDP by just 3%. That doesn’t seem very likely, let’s see how he bullshits his way out of this one.
The possible measures are by now well known. Every one degree cut in home heating saves 10 billion cubic metres (BCM) of gas. If Europe dialled down from an average of 22 to 19 degrees, which happened in some states in the 1973 crisis, it could already cover one fifth of total Russian supply. Targeted sections of heavy industry can be rationed with a small loss of GDP.
So if Europeans freeze their asses off even when inside they can replace… one fifth of the oil that they’re losing. That’s pretty much the definition of lower quality of life, and we’re only 20% back to where we started. To get the other 80% back, we need to target some “heavy industries.” No, Moritz does not elaborate on what that means. Apparently you can just have industries starved of fuel and they’ll be totally fine. According to this one guy and no one else.
As for oil, the International Energy Agency has just cut its forecast for global demand this year by 1.3m barrels a day (b/d). It has issued a 10-point plan for rapid cuts that could shave a use by a further 2.7m b/d without causing an economic crisis, chiefly by a string of temporary measures such as lowering speed limits by 10 km/h, car-free Sundays, and less air travel. Together these savings add up to 4m b/d, equal to most of Russia’s oil exports to Europe.
Is this satire? So “all” you need to do is not be allowed to drive on Sundays, have already low speed limits lowered further, assuming that everyone actually drives said speed limit, and have “less” air travel, where the theoretically quantifiable fewer air travel is not actually specified. Oh yeah I’m sure nobody will even notice those incredibly annoying changes.
The issue is no longer whether it can be done but whether Europe has the political courage to try. What is clear is that western sanctions policy is the worst of all worlds. We are suffering an energy shock that is further inflating Russia’s war-fighting revenues.
Maybe I shouldn’t have a laughing image here, because shit like this enrages me. When the WMD Liars say “political courage to try,” they mean “oppress your peasants harder.” Make no mistake, our privileged class will continue to jet set around the world, flying to their faggot festivals on global warming, despite Covid-19 proving to everyone that a fucking zoom call would have done just fine. Neither “muh global wahming,” or “muh oil cutbacks,” are going to apply to the Justin Trudeau’s and Michael Bloombergs of the world. In fact, were this to actually happen, I would not be surprised if they increased the heating of their humble abodes as a status symbol.
While it is hard to separate the effect of sanctions from war disruption and market psychology, the current situation is intolerable. We are allowing Putin to exploit Russia’s leverage as a full-spectrum commodity superpower.The spot price for ammonia in Europe has risen sevenfold this year, deliberately pushed higher by a Kremlin ban on fertiliser exports that has no other purpose than causing maximum chaos and probably a global food shortage over the next year. Shortages of nickel, palladium, and other metals are becoming critical.
This is exactly what I mean when I say that Russia has more economic leverage over us. They can sit back and decide which of the many items they export, nickel, cobalt, titanium, oil, fertilizer, etcetera, that they feel like banning to utterly cripple our economy. That’s because some finished products require tons of raw materials and other product to build.
For example, imagine you made it impossible for a country to acquire any ball bearings. That would destroy their ability to make an enormous amount of finished products, far in excess of the value of the ball bearings themselves. Russia can sit back, and decide which items cost them the least to not export, and yet which cause us the most harm to not be able to import. They’ve thus far gone with fertilizer, but who knows what they’ll go for in the future. That’s the thing about sanctioning a country that sells you tons of raw materials you need to build things, it’s fucking stupid.
As matters now stand, the sanctions have failed to achieve anything. It is Ukrainian resistance, and military kit mostly provided by the Anglo-Saxon powers of Nato and frontline EU states, that have so far held the line. Core Europe has done little more than bleat on the margins.
And they will continue to do so due to material reality not changing merely due to the whining of the Epstein Killed Himself Liars.