How Russia Could Strike Back Against US Sanctions In 4 Simple Maps

Authored by George Friedman, Xander Snyder, and Ekaterina Zolotova via MauldinEconomics.com,

The US Congress has passed new sanctions targeting Russia’s energy companies. Among the other notable aspects of the sanctions is that they take some authority away from the US president (who used to be able to implement some measures but not others at his discretion) and give it to Congress.

Recognizing that a vital sector in its economy has even less chance of relief than it once had, Russia has retaliated. It has reduced the number of diplomats it has in the US and has seized property used in Russia by US diplomats.

Energy sales are an important source of revenue, of course, but for Russia they are more than that: They are an instrument of geopolitical power. They give Moscow considerable influence over the countries whose energy needs are met by Russian exports. If Russia intends to retaliate further against the US, its energy supplies, especially those it sends to Europe, may be its best option to do so.

Deliberate Dependence

But exactly how much oil does the rest of the world import? How can Russia use this to its advantage?

Collectively, the European Union imports 53% of the energy it consumes. This includes 90% of its crude oil and 66% of its natural gas—a higher percentage than most other regions of the world, including North America, East Asia (but not Japan), and South Asia. All told, energy accounts for 20% of all EU imports.


Click to enlarge

Individually, some countries rely more on energy imports than others. Most European countries import more than 30% of the energy they consume. Norway provides roughly 35% of these imports, while Russia provides roughly 40%. Germany, which boasts the largest economy in the EU, imports more than 60% of the energy it consumes, and France, which boasts the third-largest economy, imports about 45%.

Some Eastern European countries are even more dependent on foreign energy. Hungary, Austria, and Slovakia import approximately 60–65% of their energy needs. Bulgaria, the Czech Republic, and Romania, however, import less (37%, 32%, and 17%, respectively). In the Baltics, Lithuania imports roughly 75% of the energy it consumes. Latvia imports 45%, and Estonia imports 9%.


Click to enlarge

Most of this energy comes from Russia. In fact, Russia provides more than 70% of the oil and natural gas used in Bulgaria, Latvia, Lithuania, Hungary, Slovakia, and Finland. It provides 62% of the natural gas and 56% of the oil used in the Czech Republic, and 53% of the natural gas and 90% of the oil used in Poland.

Cultivating this dependency is a conscious move on behalf of Russia. Russia’s core security imperative is to maintain a buffer space between it and Western Europe that would help it repel any invasion, which it accomplished during the Soviet era by invading and occupying countries. Russia is not as powerful as it used to be, but it has developed economic leverage that enables it to exert pressure over countries that could pose a danger to it by threatening their energy security.

Aware of how dangerous a dependence on Russia can be, these countries are trying to diversify their energy sources accordingly. Poland and Lithuania, for example, have begun to import liquefied natural gas from the United States. This is a longer-term solution, however, since importing LNG requires the development of specialized infrastructure to receive and transport it.

The Best Bet

France and Germany—the de facto, if often irreconcilable, leaders of the European Union—illustrate how Russian energy can shape foreign policy. France may rely heavily on foreign energy, but most of its oil and natural gas comes from Algeria, Qatar, Saudi Arabia, and Libya—not Russia. France can therefore afford to be more aggressive and supportive of sanctions against Russia.

Not so with Germany, which receives 57% of its natural gas and 35% of its crude oil from Russia. Berlin must therefore tread lightly between its primary security benefactor, the US, and its primary source of energy, Russia.

This is one reason Germany has been such an outspoken critic of the recent US sanctions, which penalize businesses in any country that collaborate or participate in joint ventures with Russian energy firms. Germany supports the construction of Nord Stream 2, a pipeline that would run through the Baltic Sea, circumventing Ukraine—the transit state through which Germany currently receives much of its energy imports. The pipeline would help to safeguard German energy procurement, since it would allow Russia to punish Ukraine by withholding shipments of natural gas without punishing countries such as Germany further downstream.

Of course, Germany may try to diversify its energy sources, which include Libya, Nigeria, Kazakhstan, Norway, and the Netherlands, but it would struggle to do so. Germany relies heavily on pipelines for its energy, particularly Russian natural gas. It has four cross-border crude oil pipelines, four domestic pipelines, and three oil ports in the North and Baltic seas. But Germany has fewer options for natural gas and no major LNG facilities. Simply put, Germany is beholden to the countries with which its pipelines have a connection—something that makes it vulnerable to retaliation.


Click to enlarge

But there is only so much Russia can do. Its geopolitical interests in Ukraine, for example, align with Germany’s energy interests. Germany would benefit from Nord Stream 2 by getting a new natural gas route, and Russia would benefit by gaining more leverage over Ukraine. But Washington wouldn’t want Moscow to halt energy flows through Ukraine at its leisure. The US needs to try to manage the Ukraine situation in a way that prevents a greater general German-Russian alignment.

Russia, moreover, cannot bully the United States with its energy exports. Washington doesn’t need them. But Russia could influence US allies if it chose to retaliate more than it already has. Since the US is far more powerful than Russia, divide and conquer may be Moscow’s best bet.

Comments

PrometeyBezkrilov armada (not verified) Sun, 08/06/2017 - 03:43 Permalink

Exactly right. Not to mention that this joonetwork forgets that the wellbeing of petrodollar depends on higher prices of oil and the volumes of oil sales in dollars. The price of oil is down, the volume of oil sales in dollars is down, since yuan is slowly replacing dollars. Moreover Russia Bank (not to confuse with Central Bank of Russia) is actively converting yuans to gold thru Shanghai Gold Exchange. So the joodollar is tosted regardless of the propaganda of fake news sources.

In reply to by armada (not verified)

el buitre BetaGap Sat, 08/05/2017 - 19:51 Permalink

This article is another turd on the plate.  Russia has outlawed all GMO crops and food imports.  Putin intends that Russia is to become the healthy food basket of the planet.  The sanctions have been a godsend to the development and diversification of Russian industry.  They are being forced to manufacture much more of the stuff they used to import and the rest comes from China or other east Asian countries.  The German industrialists are furious with Frau Merkel as Russia fills in their missing industrial needs from east Asia, and the German market share plummits.  Russia says that the German stuff is somewhat higher quality but the Asian stuff is very price competitive.  The Fascists States of America in trying to isolate its "axis of evil" will isolate itself until we reach Jim Willie's scheiss dollar, domestic only, because the rest of the world will not accept FRN's in trade.  

In reply to by BetaGap

keep the basta… el buitre Sun, 08/06/2017 - 01:51 Permalink

agreed, a turd on a plate. "allow Russia to punish Ukraine by withholding shipments of natural gas" . Russia has a pipeline across Ukr who was to receive cheap  energy for the transit and for maintaining the line. Instead they stole, did not pay for that supplied, after the coup upped charges hugely for the transit and did not maintain the line which was said several years ago to be likely at breakdown point when the agreement with UKr finished (soon). Russia was concerned to give energy not have the UKrainians suffer.  propaganda article. Presumably if UKr will pay Russia will supply to them, but not supply gas to transit across.

In reply to by el buitre

Itinerant keep the basta… Sun, 08/06/2017 - 08:15 Permalink

Exactly right. Propaganda.Unmentioned are the fact that the Ukraine has turned off the gas multiple times, does not pay bills, and pilfers. The Ukraine is corrupt and erratic.Nordstrom is not a gambit to get leverage over the Ukraine, but simply an attempt to cut out an unreliable middle man. Leaving out the biggest single fact of the story means the entire article is bunkem. For Russia energy is trade and income. It is the US that is meddling in EU pipelines (in the North and the South) as well as in the Middle East. It is the US that uses energy as a geo-political weapon. The whole Pacific war with Japan was about oil: the US and Britain had squeezed the oil trade to Japan. The Japanese responeded by grabbing Manchuria and Indonesia, in the first instance, oil provinces. Europe did not get hooked on oil until after the American occupation in WW2. Only afterwards did Europe slowly switch completely to imported oil (and later gas).If Russia strikes back, it will not be by shooting itself in the foot, and ruining its energy trade: It might be a boycot on uranium fuel of which it is the main processor in the world, or something similar.

In reply to by keep the basta…

keep the basta… el buitre Sun, 08/06/2017 - 01:51 Permalink

agreed, a turd on a plate. "allow Russia to punish Ukraine by withholding shipments of natural gas" . Russia has a pipeline across Ukr who was to receive cheap  energy for the transit and for maintaining the line. Instead they stole, did not pay for that supplied, after the coup upped charges hugely for the transit and did not maintain the line which was said several years ago to be likely at breakdown point when the agreement with UKr finished (soon). Russia was concerned to give energy not have the UKrainians suffer.  propaganda article. Presumably if UKr will pay Russia will supply to them, but not supply gas to transit across.

In reply to by el buitre

el buitre Bes Sat, 08/05/2017 - 19:40 Permalink

Joe Kennedy certainly did.  Joe Jr. was killed in action against the Germans and Jack almost killed against the Japanese.  Elliot Roosevelt claims to have been in the same action which killed Joe Jr.  but the records cannot validate this.  The official story is that GHW Bush was shot down in the Pacific but this may have been a fake news hoax.  So the answer is that some of them saw dangerous action, but those days are over.

In reply to by Bes

not dead yet el buitre Sun, 08/06/2017 - 02:59 Permalink

The US was packing planes with explosives and guiding them by remote control sending them after Nazi targets in Europe. The procedure was the plane was piloted until it was over a designated area when the pilots flipped a switch to arm the explosives and then bailed out. Rescue crews were waiting to pick them up. In Joe Jr's case when they armed the payload the plane blew up.

In reply to by el buitre

not dead yet Gardentoolnumber5 Sun, 08/06/2017 - 03:51 Permalink

The US figured an attack was coming but figured it would come in the Phillipines which were attacked the next day. The US forces in the Phillippines should have been on high alert after the Pearl Harbor attack but most of the American Air force there was destroyed on the ground.When events are fresh they are subject to errors. As time goes on and more information becomes available most errors get corrected. When a lot of time passes there are those with an agenda that try to rewrite history after the historians that wrote the stuff and those that lived that history are dead. Like the current effort to paint Hitler as a sweet guy who was misunderstood and was really looking out for all of us in the western world and was forced to do what he did. Hitlers own writings, private conversations, and speeches confirm that the terrible things he did were done intentionally. He made no secret that he hated communists and slavs, called them subhumans, and the German nation "living room" which meant getting it from Russia.There are some that claim the US tracked the Japanese fleet all the way from Japan to Hawaii by intercepting their radio transmissions. The Japanese Navy was a top notch organization and they would not be so stupid as to chatter away and get tracked. Every radio operator has a certain way they do things, know as a hand, in Morse code and other experienced people can identify this. The Japanese left their experienced operators at home who kept up a normal routine of traffic misleading the US into thinking the warships were still in home waters when they identified the "hand" and verified the location. They also took the far northern route where it was dark most of the time and stormy and far away from the shipping lanes.Is all this fact or fiction? Believe what you want. I have no doubt Roosevelt wanted the Japanese to attack the US but he figured the Japanese wouldn't have the balls to attack Pearl Harbor or the west coast. After all long before the US went to war with Germany the US had many of their warships accompanying convoys to Britain and under orders to attack if German subs attacked the convoy. The Japanese attacked the US to cripple it's fleet so they could do their thing in the far Pacific Islands and Asia. Big mistake as it roused the blood lust of the isolationist American public. IMHO if the US was never attacked and the Japanese left our possessions alone they could have run rampant in their area and we wouldn't have done a thing to stop them as the American people enmasse would march on DC to put FDR's head on a platter. Even if the US tried and got bloodied in a few battles the people, like now, would have demanded a stop to the nonsense. In the history of the world attacking Pearl Harbor has to be one of the biggest blunders ever.All this talk over the years of the world going to hell because the US was isolationist. The American people were isolationist but the US government never was. The US didn't join the League of Nations, Wilsons pet project, because it didn't want any other nations getting in the way of US ambitions. The US joined the UN but made sure it controlled the UN not the other way around.

In reply to by Gardentoolnumber5

Soundgardener Bes Sun, 08/06/2017 - 16:34 Permalink

Kim Jong Un spent seven years studying in Switzerland, the prime location for educating aspiring Oligarchs...speaks Swiss German (I learned a bit, back in the day). Makes me wonder how much of current events is pantomine...guess time will tell:https://www.youtube.com/watch?v=L3xB0viMc14Bowie's Blackstar is illuminating: "I'm not a filmstar, I'm not a popstar, I'M A BLACKSTAR".Something funky going on in Switzerland; if you haven't seen the opening cermony for the Gotthard Tunnel, you should. It's as bad as a fucking Lady Gaga video.https://www.youtube.com/watch?v=zW5gklIKcDg

In reply to by Bes

East Indian Bes Sat, 08/05/2017 - 23:30 Permalink

the wealthy does just fine in the third world No. They have to live behind a big wall; move around with bodyguards; afraid of the government tax raids; outside their walls it is a filthy, inhuman world waiting to devour them any moment; they dread the day when their security detail is bought over. A farmer in the interior America lives a better life than a third-world billionaire. That is why our billionaires run away to America. If only America bans these fellows !

In reply to by Bes

NiggaPleeze East Indian Sun, 08/06/2017 - 01:21 Permalink

 You are partly right.  That's why cities like Paris and Milan will always be nice - the oligarchs themeleves love them.But the "walls" (more like:  robots with machine guns, radar, night vision, etc.) will keep the riff-raff out.  Just like countries do now.  Heck even in NYC you can go a few blocks from a nice area to a dangerous one.Reason the oligarchs let the "West" develop technoogically is that they want that technology but are incapable to develop it themselves.  Once they have their immortality (not far off) and gene modification and robots who will look human and serve their every need, tney'll no longer have need for a developed West.   Read:  expect a massive economic collapse (could be caused by war, drought, plague, etc.) affecting the 90% harshly in the next years.

In reply to by East Indian

Bemused Observer NiggaPleeze Sun, 08/06/2017 - 14:03 Permalink

I hear this all the time. But you do realize that the world we are accustomed to, this world you claim they want to destroy, is the only reason those folks ARE wealthy to begin with? What do you think happens once they 'pull the plug'?  It doesn't matter how many 'robot slaves' they build...once the global supply chains collapse, and population densities go below the level needed to RUN a modern society, those robots are only a few years away from the scrapheap. Those elites simply will not be able to repair and keep them running, not in the numbers needed to support their sorry asses. In a decade, you'd visit their 'colonies' and find a humbled, chastened people trying desperately to eke a living out of the ground, with implements made from all those long dead robots. Give them another decade, and you'll find them sacrificing their children to vengeful deities they imagine are running their miserable lives.

In reply to by NiggaPleeze

NiggaPleeze Bemused Observer Sun, 08/06/2017 - 14:24 Permalink

once the global supply chains collapse, and population densities go below the level needed to RUN a modern society

Once we have 3-D printing (atom-by-atom more or less) and AI you no longer need a supply chain.  All you need is raw materials which robots can mine more easily than humans.  Basically you need 3D printing to be good enough to print more 3D printers and to print the robots.Also I think they will keep some percent (say 10%) of the current population around.  Just in case.

In reply to by Bemused Observer

keep the basta… roadhazard Sun, 08/06/2017 - 01:36 Permalink

"seized property used in Russia by US diplomats." bullshit article. CORRECTY STATED: Russia told the US to vacate 2 properties they used without paying rent. The other diplomatic buildings  are also used by the US in Russia without paying rent. The only seizure was by the US who seized property OWNED by USSR now Russia  for decades and without the US paying compensation. Maybe Putin should ask for fair rent for the properties.. magnificent.. occupied by the US 

In reply to by roadhazard

Lea roadhazard Sun, 08/06/2017 - 10:04 Permalink

Right you are. Russia will never stops its gas deliveries to Europe, because her YUGE asset is her reliability/trustworthiness. She strictly adheres to the deals she's signed.Which is why Europe will carry on buying Russian gas. Energy security is a must for any country. 

In reply to by roadhazard

JohninMK Genby Sat, 08/05/2017 - 19:23 Permalink

Russia honours its contracts so no existing contract for anything is likely to be at risk but renewing them could be interesting.The really big one is the gas transit contract through Ukraine that ends in Dec 2019 and Russia has said that it will not renew it.This is the massive pressure point on the EU missed by the article. Time is running out for NordStream2 and TurkStream upgrade if they are to be the new supply routes. The EU seems to be just ignoring the problem thinking that Russia will just give in.By complete co-incidence 2019/20 happens to be when the new gas pipelines to China start to come on stream giving Russia a financial backstop.

In reply to by Genby

wesson Sat, 08/05/2017 - 17:17 Permalink

Never underestimate German's ability to stubborness, at the point of going as far as commiting suicide Germans will never deal with Russia. they've tried to genocide them twice !

geno-econ wesson Sat, 08/05/2017 - 18:26 Permalink

Nonsense .  Germany and Russia have had a healthy trade relationship for many years---raw materials for heavy machinery, chemicals etc.  Old saying  " Behind every piece of machinery in Russia stands a German" meaning they depend on Germany for technology.  Suggest studying trade statistics.  As far as genocide comment, Germany invaded Russia to gain access to agricultural land, raw materials, coal and steel for war effort.  Result was genocide.  Therefore peacefull trade a better alternative. 

In reply to by wesson

chosen (not verified) Sat, 08/05/2017 - 17:18 Permalink

If Russia wants to cut off gas and oil to Europe, fine.  They won't do it because that is about their only source of income.