Europe Goes "All In": Will Sanction Rosneft, Gazprom Neft And Transneft

Tyler Durden's picture

Until this moment, the main reason why everyone mostly dismissed Europe's sanctions against Russia is that despite all its pompous rhetoric, Europe consistently refused to hit Russia where it would hurt: its energy titans Gazprom, Rosneft And Transfneft. The reason is simple: by imposing sanctions on these core energy exporters, Europe would directly threaten the stability of its own energy imports (Russia accounts for up to 30% of German gas imports), and as winter approaches with every passing day, playing with the energy status quo would seem like economic suicide. This all appears to have changed last Friday, when as the FT reports from a leaked copy, Europe's latest sanctions round will boldly go where Europe has never dared to go before, and impose sanctions on the big three: Rosneft, Gazprom Neft and Transneft.

 

This is what is known in game theory terms as a major defection round.

It also means that suddenly the stakes for Russia, and thus Europe, just got all too real, as Putin will now have no choice but to really ramp up the retaliatory escalation, which following the food ban can only mean one thing: a staggered reduction in gas flow to Europe.

 

It also means something else: recall that it was just ten days ago when we reported that Gazprom would begins accepting payment for oil in Ruble and Yuan.

If today's news is confirmed, Europe's dramatic shift in sanctions strategy means that Europe's embargo of both the US Dollar and the Euro will accelerate as Russia further intensifies its shift away from both the west and the petrodollar. The only and clear winner here: China, which will almost certainly step in to provide the funding Russia needs however on Beijing's terms in effect making the symbiotic link between Russia and China even stronger, forcing Moscow to rely almost exclusively on China for trade and funding relations, and suddenly give Xi Jinping all the trump cards.

What China's president will do, now that he has all the leverage in the world to call shots both to the West, the East, and of course, Africa, remains unknown, although those thousands of tons of gold imports that mysteriously enter the country and are never heard from again, may provide a hint.

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schatzi's picture

Factories run on electricity, heating runs on gas (mostly). Germany is a net electricity exporter (on most days).

Sandmann's picture

CHEMICAL industry needs gas

schatzi's picture

Factories run on electricity, heating runs on gas (mostly). Germany is a net electricity exporter (on most days).

 

With electricity I meant energy sources other than gas.

Made a quick fact check: 10,5% of electricity usage in German industry comes from gas source 2013. Downwards trend. This energy source is mainly used to cover peak demand or for specific industries such as smelters and brickworks.

nowhereman's picture

Schatz, you may be right, I'm getting a little long in the tooth, because I remember furnaces running on gas.  And I seem to recall a move away from Nuclear in Europe, so electricity is either produced by gas or coal.  Could be wrong, I don't profess to be an expert.

Keyser's picture

If the gas were not needed in Germany, it would not be imported in the first place... This may not be a fatal blow to the German economy, but it will have at net effect based on imported volume that is not longer there... 

schatzi's picture

Absolutely.

 

You will find me not once refuting that. Just two things I have said: industrial energy usage is only marginally tied to gas in reply to one post and the other point I made was that this escalation is not an "all in" scenario as Tyler alluded to. It's sensationalistic and hysterical. Gas is still being supplied and has not been sanctioned. Putin will hardly go "all in" just because Tyler Durden wants him to and so far we do not know what Putin will do. How about Tyler sticks to the facts.

css1971's picture

And Putin doesn't have to cut off gas. It would be a mistake. All he has to do is reduce the tap a little and force the price up. It'll affect the whole of europe not just Germany.

schatzi's picture

No, it doesn't work that way.

Nearly every m3 of gas that goes through the pipe is tied to a long term contract and a fixed price.

Most of the gas supplied is unaffected by spot market prices. At least up to a medium term. If Gazprom does not supply the amount agreed to by contract, they are in breach of contract and liable to pay some hefty punitive damages. Then you have the issue of future trust in a company that does whatever it pleases with its side of the contract. Try finding partners for the same conditions in future. Dealing with Gazprom will mean additional risk, which means Gazprom will lose out on future favourable conditions.

So either they stick to the contract or they go full sanctions. Because some half arsed thing is not worth the trouble and the damage it would cause to Gazprom and therefore Russia.

If I'd have to advise Putin, I'd tell him to stay cool, bide his time, keep the illusion of secure energy supply to Europe alive, get the Pipelines to Asia up and running, and THEN put on the screws. Anything radical now is plain stupid.

MeBizarro's picture

'Facts'don't get clicks and web sites hits & duration of viewers.  Every weekend there is a 'featured' Ukraine story that drives traffic.

cowdiddly's picture

So you seem to think what is happening is all tidied up in 6 months?

Winston Churchill's picture

All be over by summer. Christmas was getting a little hackneyed even as propaganda.

Anarchy 99's picture

actually......NO, they can only draw down the reserves to about 50% in order to maintain pressure.

BlindMonkey's picture

You don't get it. Those are strategic reserves for the rainy day. NATO can make it that if they want to sure. Tapping into though is not going to allow for normal business. 6 months of gas will be rationed. Try to expand a factory or other marginal increase in activity and you will find you shouldn't because of risk or just flat can't because of supply.

Tap into that and you are just keeping the lights on as you ramp up for war.

Bemused Observer's picture

Is that 'reserve' of gas similar to their 'reserves' of gold that they thought was at the FED? I seem to remember an issue with Germany being able to actually GET that gold when they wanted/needed it...

Everyone is lying. If Germany says they have 6 months of reserves, figure they ACTUALLY have a couple of pressurized tanks sitting around in a warehouse somewhere.

css1971's picture

You are correct, the problem comes next year as the reserves are refilled over the summer months.

Duc888's picture

 

 

CH1: NATO has gone insane.

I can only guess that they are that desperate for a war.

 

It's just job security, a "reason for being".  nothing more.

Aussie V's picture

No, this is a big move and one which will have major repercussions. The EU has shifted allegiances and Russia is being treated like 'the new snotty nosed kid on the block.'

The Ukraine thing is only going to get bigger, uglier and more bloody too. MOst Novorussians cannot believe that they actually signed the agreement and there are huge calls of traitors in the midst. Oligarchs are stepping in and calling the shots and speaking for groups that no one gave them the right to and the guillotine has already been set up in Donetsk & Lugansk with certain names seared into the frames.

Russia may do a full retard and think 'Fuck it' and step in and take Eastern Ukraine now after all. I mean what the fuck have they got to lose? and, at least Putin convinces his people of a moral victory albeit late.

Victor999's picture

Actually, the Russian people do not want Putin to invade Ukraine at all.  Who in his right mind would want such a country?  Even the East.  The economic hit would be enormous.

Winston Churchill's picture

I've been saying that for six months.Nobody in their right mind would want it.

But I do agree with this bringing us closer to a "fuckit" moment, but it will be

ecobnmic not military. Russia's military is basically defensive. Removing access to capital

markets mean they can be destroyed as a tit for tat, with no real cost.

.This is actually very bad news for the petrodollar, and dumb as a rock, if the strategic goal is

its survival.If you want to destroy it though,its a great move.

7.62x54r's picture

They don't want the whole Ukraine.

Take a good look at where the oil/gas/coal fields are. In the same places that have majority ethn ic Russians. Add to that the Ukraine gov's decision to cut off water to Crimea. Ukraine is going to lose these areas, and a big chunk of the Black Sea coast.

Throw in Right Sector "Punishment" battalions executing ethnic Russians ( and bravely running away before the Uke regular army units protecting them got surrounded ).

Yea, someone gave the Ukrainians advice that pretty much mandated Russian intervention of some kind. A whole bunch of Russian Army folks are on indefinate leave, and they all decided to volunteer to fight in Donetz.

The ethnic Russian militias are no longer being run by a WWII re-enactor, and the Uke army is now surrounded and in deep shit.

ThroxxOfVron's picture

"They don't want the whole Ukraine."

 

Agreed -to a point.   Russia has no nostalgic desire to reaquire Chernobyl and it's surroundings unless vast portions of neighboring lands are ceded as well.  

Estonia however is nicely positioned...the Gulf of Riga, the Baltic Sea...

trulz4lulz's picture

Not a big economic hit actually. Eastern Ukraine IS Ukraine, thats where all the coal, foundries and manufacturing facilities are. Not to mention that would have a secure land bridge to Sevestapol and Crimea if they gained the East. The Western Ukraine woud be fucked however, its more of a Western model of an economy, fast food workers, retail stores and some wheat farms and Hunter Bidens fracking operations. The Western Ukraine would be hella fucked if they loast their bread and butter, Eastern Ukraine.

Volkodav's picture

The farmland

The landbridge to Crimea

The shut of the sea all way to Odessa and control the port

All this is pluses

Would be better to spend on build up these regions than problem of spend defense because enemy on its border

 

TheReplacement's picture

Putin is better off not invading.  Supporting the seperatists in their fight but letting them win with their own blood makes their victory valid, in their eyes.  They will earn their freedom and free they will be.  If Russia invades and does the killing and dying for them they earn nothing.  At least that is the way I hope he sees it.

Russia doesn't need to get a fight started.  They have nukes to defend themselves.  They have oil and gas as offensive weapons.  Europe cannot defeat Russia militarily by attacking Russia.  Russia can defeat Europe and the US economically by being patient.  Time is on Putin's side here. 

Every lash out by the west is more and more obvious to everyone not blindered by western media.  Every rotten event makes the west look worse.  The dollar is coming to a precipice and it is a one way trip.  Starting a shooting war with the west would only provide more life support to the dollar.  No, Putin should not invade.  The beast is flailing and will soon fall on its own.

crazzziecanuck's picture

Eastern Ukraine offers very little for Russia.  It would have, maybe, a year ago before it's been blown up and turned into smouldering ruins by Kiev.

On top of that, if Russia were flooding weapons into the region, then Russia would be LESS intent on taking the territory (because if they annexed such an area, they'd have some fairly well armed guerilla groups).

Putin's best plan, and given his statements, shows he wants a unified Ukraine.  He wants the eastern populations to be a counter agent to Kiev to keep the Ukraine militarily neutral.

As for neutrality, I'm hoping that I can find a group here in Canada to begin advocating that Canada leave NATO.

BlindMonkey's picture

As a dual US-Canuk citizen I support that idea fully.

Victor999's picture

They are NOT sanctioning Gazprom Gas, so this has nothing to do with the gas contracts.  They are sanctioning Gazprom Neft - the oil subsidiary of Gazprom.  So let's not get hysterical here.

But it is true that Putin will now have to significantly escalate the sanctinos on the EU.  Perhaps automobiles and flights over Russian territory?  Whatever they may be, it is the EU which will hurt the most.

SillySalesmanQuestion's picture

Of course, this will probally all be denied today, and by tommorrow, all bets will be off about these sanctions and further denials will say that Europe is still considering "other options". 

nowhereman's picture

I may be a complete moron, but here's what I see.  Europe is in a desparate situation.  Their banking system is collapsing, and their economies are in the toilet.  So, they all get together, point a stick unto the Russian Bear and when he reacts, the EU will blame Russia for all it's problems.  As far as I can see, this is the only scenario that makes sense. 

Anybody else have an explanation for why these imbiciles are acting this way?

himaroid's picture

Probably.

Evil or incompentence?

BOTH.

FeralSerf's picture

The Rothschilds and their ilk stand to benefit handsomely, both with their energy assets that suddenly become more valuable and by having the opportunity to buy assets on the cheap while the blood runs (and the cold kills) in the streets.

It's just another giant transfer of wealth from the "fat" middle class Goyim to the "needy" trillionire Zionists.

XRAYD's picture

Europe does not go to the restroom without permission from Uncle Sam. And does what Uncle Sam asks. All this has to do with NATO expansion into Ukraine!

TheReplacement's picture

Take that up a notch.  Ukraine is not the target or the goal.  Russia is.  This has to do with surrounding and further isolating Russia.  You have to tie in the event in Syria.  Ukraine is just one theatre of operations.

Thom_333's picture

The imbeciles are doing someone elses bidding. The NWO to be precise.

flash338's picture

The NSA has something good on them

Keyser's picture

The EU is being pushed by the US, who are being pushed by the NWO Zionists... They are accelerating their agenda because in their view the entire planet is teetering on the precipice of economic, religious and social collapse... These psychopaths do not realize that it is their actions that is driving the planet into the ground... 

holgerdanske's picture

Nothing makes sense, really. The only thing I am sure of is that the Americans are behind it. And why the Europeans are so stupid as to go along after NSA and all the other shit they have had thrown their way I really can't understand.

I would tell America to go and take a hike!

messystateofaffairs's picture

Because they are a clusterfuck of psychopathic and sociopathic morons gone frantic. So they blame Russia for their collapse, what's new they blaming Putin for everything now anyways. After blaming Russia what next, nuclear war? The coming west collapse is quite obvious, looks to me like Putin is just waiting for it to happen, strenghening his defenses via alternative trade relations, nuclear deterrence readiness, internal Russian cultural pride strengthening, sound economic policies, conventional war jui jitsu, and gentle nudges to the dollar collapse. Keep the touch light, fluid, multifaceted, and wait. Putin is a NWO problem, unless the zio's have some supersecret deal going on with China and Russia. I don't know about anyone else but I'm in no mood to become a NWO zionist slave.

fudge's picture

An old white guy with his fat wrinkled belly exposed and a tanto in his hand would be more appropriate Mr Banzai.

 

 

Amish Hacker's picture

I'm not much of a poker player, but I think it's usually not a good idea to go "all in" when you're bluffing behind a lousy hand and the other players have already seen your cards. Long wool socks and mittens.

css1971's picture

I am long wool socks and mittens. :)

ebworthen's picture

Until the cold sets in, and the gas doesn't flow.

HardlyZero's picture

yes completely agree, and just a reminder...German nuclear plant shutdown plans are proceeding.   So there will probably be a knock-on.

Germany until March 2011 obtained one quarter of its electricity from nuclear energy, using 17 reactors. The figure is now about 18%.

More than half of Germany’s electricity was generated from coal in the first half of 2013, compared with 43% in 2010.

http://www.world-nuclear.org/info/Country-Profiles/Countries-G-N/Germany...

Sean7k's picture

And who will pay the cost? The ones making the decisions? 

This is the product of Government, Law, Banking and the Military. All of which require all of us to support them in taxes, participation and acceptance. 

Would not self government, social mores and agreements, silver and gold and community miltias accomplish the same things? At much less cost in lives and wealth? 

It was one thing when they were an inconvenient nuisance, but when they start killing, poisoning, starving and freezing the people, will we finally say enough is enough? When the State becomes everything and tyranny reigns supreme, why do we continue to capituate? 

Just say no more...

TheReplacement's picture

Judging by the affects of artillery on Ukraine's armored formations, community militias aren't going to cut it.

IridiumRebel's picture

Going all in to get the Plebes angered at the gas being turned off and making support for MOAR WAR. Good luck, Europe.

ekm1's picture

Assuming that is true. then USA must drain USD drastically immediately, otherwise world accelerates USD avoidance for real trade.

 

So, assuming that is true:

Fed will call margin on the system in one way or another very soon, otherwise, bye bye USD