When readers ask “How high are oil and natural gas prices going?” I respond with “Tell me what Putin does…”
So today, I do the unthinkable. I try to look past the propaganda and political talking points that provide the narrative “Ukraine good!!! We stand with Ukraine” and “Putin is a monster! Putin’s war at the pump” to figure out what Putin is up to. I include all the links and research material so you can go on your own spelunking adventure if you choose, but I try to include the most important quotes from the source material.
To evaluate Putin’s objectives, one must start with one fact and one assertion. The fact is regardless of our emotions on the matter, Russia HAS invaded Ukraine and is willing to let her sons and daughters die while the world looks on in horror. As part of that horror, Europe and the US has responded by imposing economic sanctions to stop them and thus far has rejected any military intervention, including imposing a no fly zone. In the end of this war, someone is going to lose significant face, so thinking in terms of win-win to lose the least face is probably most appropriate.
The assertion I make is Vladimir Putin isn’t dumb. He may be wrong that he can win and the costs may ultimately be too high, but whatever his objective, it was thought out. Russia is not the United States or a country in Europe. It has a different history. A different structure. And different values. So while “we” may look at the humanitarian element, a large part of the world simply doesn’t see it through the same lens as we do. In 1959, Mao was quoted as saying in Shanghai "When there is not enough to eat people starve to death. It is better to let half of the people die so that the other half can eat their fill." In the book Mao's Great Famine: The History of China's Most Devastating Catastrophe, 1958–62, by Frank Dikötter, the key premise is that the Government knew it was starving it’s people. One can debate the magnitude of the intent and scale of the deaths, as critics do, but it presents the case that in different parts of the world, their are different versions of “trade offs” or “the greater good.” I think it’s clear that Putin falls in the Maoist camp of “the greater good.”
As you will see at the end of this article, my defense of Putin is that I believe he will succeed in the military conflict in Ukraine because US and European parents aren’t willing to send their kids to fight in this war to stop him. Importantly too, I don’t believe the sole objective of this campaign was about Ukraine. I believe the primary objective is to bring India, Pakistan, China, Saudi and Iran closer together and thus, to demonetize the US dollar as the world’s reserve currency. As Danielle DiMartino Booth said on my podcast in 2020, the only way a reserve currency changes is with a war. Well, we have it and the US made a strategic error (in my humble opinion) to freeze Russia’s US based reserve currency and force it to default on it’s debt this week.
The enemy of my enemy is my friend and a lot of eyes are looking at the aging man in the White House with low approval numbers and an exhausted American public questioning “Is now the time to make our move?”
In 2005, the New York Times penned an article by the same name and 16 years on, it raises many of the same issues we see today.
[It][ needs to be remembered that from the outset of the post-Communist era, Russia's lot was made infinitely worse by the deluge of bad Western advice, with free-market dogmatists on one side and human rights militants on the other, all pressing for high-speed liberalization and instant democracy. The predictable outcome was a monstrous power vacuum rapidly filled by the mafia and by staggering concentrations of monopoly wealth.
[D]espite these obvious delinquencies is it such a clever idea to alienate a country that happens to supply around a third of Western Europe's daily gas requirements and matches Saudi Arabia in oil output?
In 2022, European reliance has only increased with 20% of the coal, 20% of the oil and 40% of the natural gas imported into Europe comes from Russia. I think this cartoon says it best.
So for all the bravado and discussion in Europe and the United States about including oil and natural gas in the sanctions, there are practical considerations, as helpfully pointed out by the Germans.
Germany has warned that an immediate boycott of Russian gas and oil supplies could hurt its own population more than Vladimir Putin, bringing mass unemployment and poverty.
“If we flip a switch immediately, there will be supply shortages, even supply stops in Germany,” the economic and energy minister Robert Habeck told public broadcaster ARD on Sunday, as Europe’s largest economy intensely searches to diversify its energy supplies in the medium term.
The Green party politician predicted “mass unemployment, poverty, people who can’t heat their homes, people who run out of petrol” if his country stopped using Russian oil and gas.
It’s predicted the German economy could shrink by as much as 6% which would be slightly more than the impact of the 2020 COVID lockdowns. So, oil and gas will continue to flow. As I argued yesterday, it should flow at full capacity for the greater good (195,000,000 vs. 40,000,000).
Was NATO the Instigator
Earlier this month, Biden sent a team of senior U.S. officials, led by CIA Director William J. Burns, to Russia to meet with officials there. After the meeting, Burns called Ukraine president Volodymyr Zelensky to assure him of U.S. support. The U.S. also made it a point to have Assistant Secretary of State for European and Eurasian Affairs, Dr. Karen Donfried, visit Kyiv “to reaffirm our strategic partnership, the U.S. commitment to Ukraine’s sovereignty and territorial integrity, and cooperation to advance Ukraine’s Euro-Atlantic integration.”
In his own meeting with Ukraine officials today, National Security Advisor Jake Sullivan “emphasized the United States’ unwavering commitment to Ukraine’s sovereignty and territorial integrity.” - Heather Cox Richardson, Nov 10 2021
Some academics and geopolitical wonks point to NATO expansion as the reason for Russians discomfort. Peter Zeihan calls these people “not wrong, but stupid.” So here’s a link to his video where he discusses this and a map that shows NATO expansion through time. You be the judge.
China Impact
Senior Chinese officials told senior Russian officials in early February not to invade Ukraine before the end of the Winter Olympics in Beijing, the New York Times reported, quoting Biden administration officials and a European official who cited a Western intelligence report.
Thus far, India and Pakistan have abstained from the vote to suspend Russia’s membership in the UN Human Rights Council and China moved from “abstained” to “no”. Year over year, Chinese trade with Russia has increased 12% and trade accounts for 18% of Russia’s total.
From the substack of Quoth the Raven:
[T]he Kremlin said that sanctions against Russia would “accelerate the erosion of confidence in the dollar and Euro”. Russian propaganda or not, I think they’re right.
Russia, China and the rest of the world - having seen billions in FX reserves essentially seized without due process globally - now understand they must get off the same monetary system as the rest of the world. Russia and China, in my opinion, will be leading the charge, once again, to a new era of sound money that I believe is going to bring the U.S.’s Keynesian experiment to its knees.
Meanwhile, China has effectively locked down the city of Shanghai’s 26 million residents as COVID cases have “surged” to 20,000+ against China’s “zero covid” policy. With 90% of the country vaccinated and experience around the world that this is totally unnecessary, it begs the question:
To quote the Raven here:
Something Is Rotten In The State Of Shanghai’s Latest Covid Lockdowns
China is overshooting the mark, even for a unilateral state run communist government, and it feels like something odd is afoot.
Putin is not dumb. He also has no real way to save face, and as we’ve learned from COVID policy to climate change, one’s reputation seems to be more important that finding the truth. So Putin is pot committed to whatever objective he has. One has to believe he has China’s support, and India and Pakistan are looking on with a lot of interest. I have no way to summarize the article from Maajid Nawaz on the pressure the US has applied to Pakistan and India to “make them see the light and change their votes to YES” but regime change in Pakistan did occur 2 days ago so I’ll simply strongly encourage you to take the time to read it. Bottom line, with US meddling in China, Russia, India, Pakistan, Iran and Saudi, perhaps Putin feels he has a group of strange bedfellows to support his objectives.
History
Ukraine was a cornerstone of the Soviet Union until 1991 when it declared sovereignty in the shadow of the collapse of the USSR. While Nikita Khrushchev transferred Crimea from Russia to Ukraine in 1954 to strengthen the “brotherly ties between the Ukrainian and Russian peoples”, Putin annexed Crimea in 2014 and has been active supporting separatists in Donbas. From the Council of Foreign Relations:
By seizing Crimea in 2014, Russia solidified its control of a strategic foothold on the Black Sea. With a larger and more sophisticated military presence there, Russia can project power deeper into the Mediterranean, Middle East, and North Africa, where it has traditionally had limited influence. Some analysts argue that Western powers failed to impose meaningful costs on Russia in response to its annexation of Crimea, which they say only increased Putin’s willingness to use military force in pursuit of his foreign policy objectives. Until its invasion in 2022, Russia’s strategic gains in the Donbas were more fragile. Supporting the separatists had, at least temporarily, increased its bargaining power vis-à-vis Ukraine.
In July 2021, Putin authored what many Western foreign policy experts viewed as an ominous article explaining his controversial views of the shared history between Russia and Ukraine. Among other remarks, Putin described Russians and Ukrainians as “one people” who effectively occupy “the same historical and spiritual space.”
Throughout that year, Russia amassed tens of thousands of troops along the border with Ukraine and later into allied Belarus under the auspices of military exercises. In February 2022, Putin ordered a full-scale invasion, crossing a force of some two hundred thousand troops into Ukrainian territory from the south (Crimea), east (Russia), and north (Belarus), in an attempt to seize major cities, including the capital Kyiv, and depose the government. Putin said the broad goals were to “de-Nazify” and “de-militarize” Ukraine.
To be clear, I am not supporting Putin. I fully denounce any war crimes that occur and I feel for the people of Ukraine. However, I don’t take at face value anything our Government (and media by extension) tells me. Propaganda works on both sides and as I asked in an article I wrote in late February: I would not send my sons to fight in this conflict. Therefore, I wouldn’t send anyone’s sons or daughters to either. The US went to Vietnam. Afghanistan. Iraq. We have implicitly and explicitly supported regime change around the world. We have “done something to do something” when I would argue “less is more.” And Putin isn’t dumb. That should tell you the only until you are willing to send your kids to war, he wins. And that’s his defense. He timed it perfectly.
One thing the West either can't or won't understand is Russia's extremely deeply ingrained intolerance to nazism. When we, non-Russians, say we hate or are afraid of or can't abide nazism, we're like toddlers not liking eggplant compared to Russia in its attitude to any far-right/left ideology, especially when it's at its doorstep or, as Russia sees it, in its back yard. They have not forgotten the Great War (that's how they call WWII) and they have made sure their children never forget it. For this, I can only salute them. The rest of Europe seems all too eager to forget inconvenient parts of history and that will have a boomerang effect at some point.
Once again, DRW, great points that more people should be considering. And the fact is, why have Russia and China been hoarding and buying gold so heavily for years? Maybe to offer a bundled reserve currency backed by something more than faith in a less than faithful government body? Removing the now weaponized dollar as the sole world reserve currency has been a goal for a long time. Maybe Justin Trudeau showed a reason to expedite those moves.