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Here Is Why Europe Just Launched The "Nuclear Option" Against Russia
Europe's leaders, we assume under pressure from Washington, appear to be making a big weather-related bet with their taxpayers' lives this winter. As they unleash funding sanctions on Russia's big energy producers, Europe has pumped a record volume of natural gas into underground inventories in an effort to 'outlast' Russia and mitigate any Napoleonic "Winter War" scenario. The plan appears to be to starve Russian energy firms of cashflow - as flows to Europe are already plunging - and remove their funding ability, potentially forcing severe hardship on Russia's key economic drivers. There appears to be 3 potential problems with this plan...
As Bloomberg reports,
Europe’s reliance on Russian natural gas shipments via Ukraine is declining after the region pumped a record volume of the fuel into underground inventories, minimizing the risk of shortages during the coming winter.
The blue line above shows average daily flows at Velke Kapusany on the Slovakian-Ukrainian border, the biggest single entry point for Russian gas into the European Union, last month fell to a record, according to data from Slovak grid operator Eustream AS going back to 2011. The red histogram shows the 28-nation bloc has pumped a record volume of gas into storage, according to Gas Infrastructure Europe, a lobby group in Brussels.
Natural gas flows from Russia to the EU haven’t been affected in the current crisis. Storage sites in Slovakia, which had to seek emergency imports after its supplies were cut in 2009, were 92 percent full on Sept. 4, according to Gas Infrastructure Europe.
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So Europe is stocking-up - which makes perfect sense - just in case Russia pulls the plug... but has now taken the situation to "11" on the Spinal Tap amplifier of escalating tensions by planning sanctions on Russia's energy providers.
The plan appears clear:
stock-up now (to survive the winter)...
starve Russian firms of cashflow (thanks to stockpiles)...
cut off their funding source (sanctions)...
force Putin's economy into a tailspin...
Putin folds and it all ends happily ever after
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There appears to be 3 problems with this plan...
1) What if the weather is considerably colder than normal this winter? (i.e. they need more supply)
Central based El Nino's seem to be associated with much colder European winters than eastern based El Nino's. Temperature anomalies come out on average 2-3c colder than a "normal" European winter.
With a central based El Nino forecast for winter 2014/2015 this would suggest a chance of some brutal cold moving much of central and northern Europe at times this winter.
For the United Kingdom and Ireland a central based El Nino does suggest a colder than average winter as well - Because of our proximity to the Atlantic Ocean the negative anomaly is much less extreme for Great Britain than it is for central Europe and Russia. Nevertheless, with the temperature anomaly coming out at 1c colder than average, the UK would still have a greater chance of a colder than average winter than an eastern based El Nino.
2) Russia has already committed to supporting the sanctioned firms (and we would hardly be shocked if China chipped in)
The Russian government, according to Bloomberg, is ready to provide 1.5 Trillion rubles financing to Rosneft to support production at current level, Prime Minister Dmitry Medvedev says in Vedomosti interview.
Details, ways of support are under review
Support wouldn’t be in one yr; needed to sustain output because Rosneft is budget’s main taxpayer
and furthermore, Gazprom appears to be quickly funding before the sanctions are actually put in place...
As Bloomberg reports, European banks may organize new borrowing for Gazprom, Interfax reports, citing people familiar it doesn’t identify.
The company's board to consider some loans Sept. 23, no details yet, news service reports
Gazprom spokesman Sergei Kupriyanov declined to comment when reached by Bloomberg
3) What happens in Spring? German industrials need energy?
It appears that Putin is a patient man... why not wait till the stockpiles have dwindled, winter is over, and then press...?
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It appears Europe's short-term plan to mitigate the "Winter War" may have bigger boomerag consequences than they seem to believe (and bear in mind the consequences of cold, pissed off Europeans in the past).
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We point out that planned sanctions are on Gazprom Neft will be sanctioned (not the gazprom nat gas entity) as Europe appears to be focused on the crude oil side of things for now.
New European Union sanctions on Russia will expand the number of Russian companies unable to raise money in the bloc's capital markets to include three state-owned oil companies, according to documents seen by The Wall Street Journal.
The documents show the EU seeking to hit Russian oil companies, but leaving unscathed those involved in gas production and export, which are critical to many European countries' energy supplies.
...
Under a modest expansion of sanctions introduced in late July, the three oil companies - Gazpromneft, the oil-production and refining subsidiary of OAO Gazprom, oil transportation company Transneft, and oil giant Rosneft - will be forbidden from raising funds of longer than 30 days' maturity.
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So jab at oil companies, and mitigate natural gas restriction blowback?
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no, no, we need more nitwits extolling Obummer as uhhh whatever.
lead the charge mate. LOL
i think Obummer and AmeriKan Patriot are the same account
who is "we" please?
PNAC? IPAC? Neocons?, Wallstreet? Tel-Aviv?
what we dont need is more cocaine addled brains like yours here
It is hard not to extoll Putin when his EU counterparts come up with a plan that boils down to We will store as much Russian gas as we can and then place sanctions so if Putin cuts us off we will still have gas. ....and a month or two down the road burn the furniture to keep warm?
spring brings war
Russia did not confirm the order for 500 MAN trucks, at MAN factory in Austria.
2000 of 2500 workers will be sent home for 5 months.
http://kurier.at/wirtschaft/unternehmen/russland-auftrag-weg-kurzarbeit-...
Well, why not to buy the chinese trucks?
Meh, Russia should just reverse the compressor pumps and start sucking the gaz back out of the pipelines!
I'm sure Putin will drown in natural gas with no one to sell it to. Ass clowns are still using the dollar as a weapon and it's time is past precisely because of how it has previously been used as a weapon. Never have I seen a more detached ruling class in my lifetime.
Hopefully they will get the kind of detachment that Marie Antoinette got.
Good point, but it's not just about the determination of ruling classes; it's also about the determination of regular people.
On the ground in Ukraine it boils down to which foot soldiers are willing to laugh death in the face and keep fighting, and which ones forget why they're there and just try to save their asses.
In the economic war, it will be the same. The Russian people, from left to right and across almost all social classes, are being kept well informed and grounded in their real history (not just the past 20 years or the past 100 years), apparently understand the global stakes and strategy and have confidence in their leadership. They know what could be coming and they know how to work together and survive whatever's thrown at them.
The people of Europe, whose history is a hundred years of loud-mouthed calls to war and glory followed by bitter and disgraceful defeats, are experiencing one humiliation after another as they watch their leaders kow-towing to the Empire and repeating the words put into their mouths.
Who do you think is going to break first if it's to be a trial by hardship this winter?
Winter for Brussels & Kiev is be colder than Siberia for 2014-2015.
EU gas reserves are high this year because
they had one of their mildest winters ever
in 2013/2014, and thus ended up with
substantially more gas remaining in storage--
which is why storage is now approximately 25%
above last year...this "excess" could easily
be wiped out in a cold winter, or if the winter
is mild like last year, there will be substantial
leftover storage inventory in the spring.