Poland slams new Russian-German pipeline

Poland’s conservative president on Tuesday slammed a deal between Russia’s Gazprom energy giant and several leading Western firms to build a second gas pipeline under the Baltic Sea, saying it ignores Polish interests.

“Considering that an agreement was concluded on building Nord Stream-2, which completely ignores Polish interests, one must seriously question unity” in the 28-member European Union, President Andrzej Duda told delegates to an economic forum in the southern Polish mountain resort of Krynica, dubbed Central Europe’s “Davos”.

In June, Gazprom agreed with Anglo-Dutch Shell, Germany’s E.ON and Austria’s OMV to build the new gas pipeline – dubbed Nord Stream-2 – to Germany, bypassing conflict-torn Ukraine but also EU neighbour Poland.

The route under the Baltic Sea from Russia would have a capacity of 55 billion cubic metres per year and would double the flow of the existing Nord Stream pipeline currently linking the two countries.

No timeframe was given for the deal that will boost Germany as a distribution hub for Russian gas in Western Europe but undermines Poland’s role as a transit state.

Polish politicians from across the political spectrum have long opposed Nord Stream, claiming it undermines Poland’s energy security stemming from its role as a transit country for Russian gas via the Yamal-Europe pipeline.

The Nord Stream-2 announcement comes as Moscow seeks more gas delivery routes to the EU that bypass Ukraine, despite the EU’s insistence that it wants to cut its dependence on Russia.

Russia and the West are locked in a bitter standoff over the Kremlin’s role in Ukraine and a gas dispute between Kiev and Moscow has threatened energy supplies to the EU.

Source: AFP

Russia offers Greece loans, gas discount

Russia may offer Greece a discount on gas deliveries and new loans when Greek Prime Minister Alexis Tsipras visits Moscow this week, the Kommersant business daily reported on Tuesday, citing one source in the Russian government.

A Kremlin spokesman said last week that Russian President Vladimir Putin and Tsipras planned to discuss economic ties and EU sanctions on Moscow when they meet for talks, which Kommersant said would take place on Thursday.

“We are ready to consider the issue of a gas price discount for Greece,” the newspaper said quoting an unnamed Russian government source.

Russia’s state-controlled producer Gazprom declined to comment. The Energy Ministry also declined to comment.

The source said that in exchange for the discount and some unspecified loans, Russia would want access to Greek assets. The source did not name any specific assets.

In recent weeks, the gas price charged by Gazprom has fallen, tracking lower oil prices. Gazprom said it wanted to acquire DEPA in 2013 but dropped its bid after failing to receive enough guarantees over DEPA’s financial position.

Source: Reuters

Putin heads for Hungary

Vladimir Putin has chosen Hungary for his first state visit to an EU state since the beginning of the Ukrainian crisis a year ago. Energy issues are expected to top the agenda, yet the Russian leader usually has an ace up his sleeve.

The Russian president’s visit to Hungary is keeping EU officials in Brussels guessing about what sort of deals exactly are going to be signed in Budapest.

Putin is visiting Prime Minister Viktor Orban at a time of unprecedented confrontation between the western world and Russia over the bloody conflict in Ukraine.

The EU has broadened its anti-Russian sanctions on Monday, expanding the blacklist with 19 more people and nine new companies. The EU blacklist now includes 151 citizens of Russia and Ukraine’s self-proclaimed eastern republics, as well as 37 Russian companies.

The Kremlin press service said that talks of the Russian and Hungarian leaders will focus on bilateral economic and trade relations, and in particular the nuclear energy deal signed in December.

Under a deal worth up to €10 billion, Russia’s Rosatom will build a 2,000 megawatt addition to Hungary’s state-owned nuclear power plant MVM Paksi Atomeromu.

Orban is famous for his skeptical attitude towards many European Union’s policies, particularly Brussels’ siding with the US in the sanctions against Russia, a campaign that damages ailing European economies.

Despite all the accusations, Orban’s Fidesz party won last year’s general election with a landslide victory, receiving practically 45 percent of votes and securing Orban’s third term as the Hungarian prime minister.

Prime Minister’s supporters view his action as defending Hungary’s national interests against agendas of international corporations and foreign governments. Among the biggest successes of the Orban government was the law that forced conversion of mortgages denominated in Swiss francs, which saved Hungarian borrowers from suffering a debt cost hike after Switzerland unpegged their currency from the euro, which resulted in sharp 20 percent gain in value.

Soviet-style reactors struggling with US nuclear fuel

Ukrainian energy sector workers are facing technical problems with American nuclear fuel loading into the Soviet-type reactors

China is ready to sell fuel for nuclear power plants in Ukraine and Eastern Europe, a China National Nuclear Corporation (CNNC) source told TASS on Friday on the sidelines of the World Nuclear Spotlight forum.

According to the source, Chinese companies intend to sell the fuel to the countries that operate various types of Soviet-and Russian-made NPPs. Aside from Ukraine, China is viewing the possibility of exporting nuclear fuel to Hungary and Romania.

The source said Ukrainian energy sector workers are facing technical problems with American nuclear fuel loading into the Soviet-type reactors.

At the moment China is actively buying uranium mines with a view to exporting uranium to other countries in the foreseeable future.

Asked about Russia’s possible claims to the Chinese manufacturers of nuclear fuel, he said that “there are no special restrictions.” “Despite the related agreements, the Russian side is unlikely to stop the supplies,” said the CNNC representative.

Russia and China have been actively developing co-operation in the nuclear sphere for many years. For example, State Atomic Energy Corporation Rosatom and CNNC signed a protocol to launch the discussion of possible formats of co-operation in the sphere of construction of nuclear power plants in third countries.

Russia cuts off gas to six European countries

Vladimir Putin ordered the Russian state energy giant Gazprom to cut supplies to and through Ukraine amid accusations, according to The Daily Mail, that its neighbor has been siphoning off and stealing Russian gas.

Due to these “transit risks for European consumers in the territory of Ukraine,” Gazprom cut gas exports to Europe by 60%.

The EU raged that the sudden cut-off to some of its member countries was “completely unacceptable,” but Gazprom CEO Alexey Miller later added that Russia plans to shift all its natural gas flows crossing Ukraine to a route via Turkey; and Russian Energy Minister Alexander Novak stated unequivocally, “the decision has been made.”

Russia’s decision plunged the continent into an energy crisis ‘within hours’ as a dispute with Ukraine escalated.

Six countries reported a complete shut-off of Russian gas shipped via Ukraine today, in a sharp escalation of a struggle over energy that threatens Europe as winter sets in.

Bulgaria, Greece, Macedonia, Romania, Croatia and Turkey all reported a halt in gas shipments from Russia through Ukraine.

Source: Zerohedge

Russia, China sign second mega deal

Russia’s President Vladimir Putin and China’s President Xi Jinping have discussed the possibility of using the yuan in mutual transactions in different fields of cooperation, Kremlin spokesman Dmitry Peskov said on Sunday.

“Much attention has been paid to the topic of mutual payments in diverse fields … in yuans which will help to strengthen the yuan as the region’s reserve currency,” Peskov said commenting on the meeting held between Putin and Xi on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in Beijing, RIANovosti reported.

On October 13, Russian Economic Development Minister Alexei Ulyukayev announced that Russia was considering Chinese market to partially substitute access to the financial resources of the European Union and the United States.

The European Union and the United States have imposed several rounds of economic sanctions on Russia over its alleged involvement in the Ukrainian crisis, a claim Moscow has repeatedly denied. The restrictions prohibit major Russian companies from seeking financing on western capital markets.

Since the deterioration of Russia’s relations with the West, Moscow has increased its economic cooperation with the BRICS, Asia-Pacific and Latin America.

During the Asia-Pacific Economic Cooperation forum taking place this weekend in Beijing, Russia and China signed 17 documents on Sunday, greenlighting a second “mega” Russian natural gas to China via the so-called “western” or “Altay” route, which as previously reported, would supply 30 billion cubic meters (bcm) of gas a year to China.

Among the documents signed between Russian President Vladimir Putin and Chinese leader Xi Jinping were the memorandum on the delivery of Russian natural gas to China via the western route, the framework agreement on gas supplies between Russia’s Gazprom and China’s CNPC and the memorandum of understanding between the Russian energy giant and the Chinese state-owned oil and gas corporation.

“We have reached an understanding in principle concerning the opening of the western route,” Putin said. “We have already agreed on many technical and commercial aspects of this project, laying a good basis for reaching final arrangements.”

With the increase of deliveries via the western route, the total volume of Russian gas deliveries to China may exceed the current levels of export to Europe in the medium-term perspective.

China has now eclipsed Europe as Russia’s biggest, and most strategic natural gas client.

Texans ban fracking in its birthplace

Voters approved a ban on hydraulic fracturing in the north Texas town of Denton on Tuesday, making it the first city in the Lone Star State to outlaw the oil and gas extraction technique behind the U.S. energy boom.

The vote in the city of 123,000 was highly symbolic because hydraulic fracturing, better known as fracking, is widely used in Texas, the top crude producer in the United States.

“Denton, Texas is where hydraulic fracturing was invented,” said Bruce Baizel, Earthworks energy program director. “If this place in the heart of the oil and gas industry can’t live with fracking, then who can?”

Green groups said the result served as a wake-up call to the industry.

Groups like Frack Free Denton won even though they were outspent by a margin of 10 to one, according to organizers and local media reports.

The Texas Oil & Gas Association, the state’s energy lobby, on Wednesday quickly filed for an injunction.

“A ban on hydraulic fracturing is inconsistent with state law,” Thomas Phillips, a former head of the Supreme Court of Texas who now represents the trade group, said.

In a frack job, a mix of pressurized water, sand and chemicals is used to unlock hydrocarbons from rock. Operators claim it is safe but many environmental groups oppose the practice – calling it wasteful, polluting, dirty and noisy.

Fracking was pioneered at the Barnett shale formation where Denton is located. Exxon Mobil’s XTO unit honed its shale expertise in the natural gas-rich Barnett. Most of the crude output in Texas comes, however, from the growing Eagle Ford and Permian fields to the south and west.

The Denton referendum pitted oil and gas operators and mineral rights owners against residents who say their homes and lives are being encroached on by work that can be noisy, soak up scarce water supplies and overwhelm roads with heavy truck traffic.

“It’s essentially a ban on all drilling,” said Ed Ireland, executive director of the Barnett Shale Energy Education Council, a group aligned with producers. “No one would try to drill a well if they can’t frack it.”

Source: Reuters

 

Russia opens Europe’s largest natural gas exchange

Russia launched a new and independent natural gas exchange that will reside in St. Petersburg, and will make the facility the largest market for natural gas trading in all of Europe.

Known as the St. Petersburg International Mercantile Exchange (SPIMEX), this trade facility will allow for international and domestic gas operations to sell their products in Russia and in a centralized location, and will become part of the growing Eurasian Economic Zone that is emerging in the East as global trade moves away from the dollar and away from U.S. hegemony.

The importance of this independent market exchange is that natural gas can work towards a complete separation from oil, which under the current system tends to price both commodities on similar scales and in dollar denominations. It will also open up the market for new buyers who are solely interested in natural gas, and help facilitate a new pricing structure that will allow Russia and other gas producers to eventually remove the energy source from the petro-dollar and from U.S. control over the monetary component in gas trading.

“Russia, the world’s second-largest producer of natural gas, has launched its first auction of natural gas on Friday at the St. Petersburg International Mercantile Exchange (SPIMEX). It will be Europe’s largest natural gas trading post.

The project is intended to create a more competitive market for natural gas prices, which at present are more-or-less tied to oil. Now, independent producers will have access to a broader range of buyers.

The exchange will facilitate up to 35 billion cubic meters of gas annually, with Gazprom, Russia’s largest producer, maintaining the right to sell a half of that, and independent producers the remaining 17.5 billion cubic meters.” – RT

It is interesting to note that the SPIMEX is beginning operations just two days after the tragic and highly suspect death of Total CEO Christophe de Margerie, who was in Russia to discuss energy topics with government and oil industry leaders. And with de Margerie being a staunch advocate of taking oil and energy off the antiquated petro-dollar system, it is very likely Total will be intrinsically involved in this new exchange.

With economic sanctions, and secret oil deals with Middle Eastern producers causing dire financial consequences to Russia’s currency and energy industries, the best way to circumvent external attacks is to simply bypass the recognized market structures and create your own platforms of trade, and in currencies that are beneficial to the well being of your economy. And while it may take some time before natural gas is completely segregated from oil and the petro-dollar, the introduction of the largest natural gas exchange in Europe will eventually allow Russia to establish price discovery for the commodity, and change the way customers are allowed to purchase this crucial form of energy for their natons and industries.

Source: examiner.com

How to start a war and lose an empire

By Dmitry Orlov

A year and a half I wrote an essay on how the US chooses to view Russia, titled The Image of the Enemy. I was living in Russia at the time, and, after observing the American anti-Russian rhetoric and the Russian reaction to it, I made some observations that seemed important at the time. It turns out that I managed to spot an important trend, but given the quick pace of developments since then, these observations are now woefully out of date, and so here is an update.

At that time the stakes weren’t very high yet. There was much noise around a fellow named Magnitsky, a corporate lawyer-crook who got caught and died in pretrial custody. He had been holding items for some bigger Western crooks, who were, of course, never apprehended. The Americans chose to treat this as a human rights violation and responded with the so-called “Magnitsky Act” which sanctioned certain Russian individuals who were labeled as human rights violators. Russian legislators responded with the “Dima Yakovlev Bill,” named after a Russian orphan adopted by Americans who killed him by leaving him in a locked car for nine hours. This bill banned American orphan-killing fiends from adopting any more Russian orphans. It all amounted to a silly bit of melodrama.

But what a difference a year and a half has made! Ukraine, which was at that time collapsing at about the same steady pace as it had been ever since its independence two decades ago, is now truly a defunct state, with its economy in free-fall, one region gone and two more in open rebellion, much of the country terrorized by oligarch-funded death squads, and some American-anointed puppets nominally in charge but quaking in their boots about what’s coming next. Syria and Iraq, which were then at a low simmer, have since erupted into full-blown war, with large parts of both now under the control of the Islamic Caliphate, which was formed with help from the US, was armed with US-made weapons via the Iraqis. Post-Qaddafi Libya seems to be working on establishing an Islamic Caliphate of its own. Against this backdrop of profound foreign US foreign policy failure, the US recently saw it fit to accuse Russia of having troops “on NATO’s doorstep,” as if this had nothing to do with the fact that NATO has expanded east, all the way to Russia’s borders. Unsurprisingly, US–Russia relations have now reached a point where the Russians saw it fit to issue a stern warning: further Western attempts at blackmailing them may result in a nuclear confrontation.

The American behavior throughout this succession of defeats has been remarkably consistent, with the constant element being their flat refusal to deal with reality in any way, shape or form. Just as before, in Syria the Americans are ever looking for moderate, pro-Western Islamists, who want to do what the Americans want (topple the government of Bashar al Assad) but will stop short of going on to destroy all the infidel invaders they can get their hands on. The fact that such moderate, pro-Western Islamists do not seem to exist does not affect American strategy in the region in any way.

Similarly, in Ukraine, the fact that the heavy American investment in “freedom and democracy,” or “open society,” or what have you, has produced a government dominated by fascists and a civil war is, according to the Americans, just some Russian propaganda. Parading under the banner of Hitler’s Ukrainian SS division and anointing Nazi collaborators as national heroes is just not convincing enough for them. What do these Nazis have to do to prove that they are Nazis, build some ovens and roast some Jews? Just massacring people by setting fire to a building, as they did in Odessa, or shooting unarmed civilians in the back and tossing them into mass graves, as they did in Donetsk, doesn’t seem to work. The fact that many people have refused to be ruled by Nazi thugs and have successfully resisted them has caused the Americans to label them as “pro-Russian separatists.” This, in turn, was used to blame the troubles in Ukraine on Russia, and to impose sanctions on Russia. The sanctions would be reviewed if Russia were to withdraw its troops from Ukraine. Trouble is, there are no Russian troops in Ukraine.

Note that this sort of behavior is nothing new. The Americans invaded Afghanistan because the Taleban would not relinquish Osama Bin Laden (who was a CIA operative) unless Americans produced evidence implicating him in 9/11—which did not exist. Americans invaded Iraq because Saddam Hussein would not relinquish his weapons of mass destruction—which did not exist. They invaded Libya because Muammar Qaddafi would not relinquish official positions—which he did not hold. They were ready to invade Syria because Bashar al Assad had used chemical weapons against his own people—which he did not do. And now they imposed sanctions on Russia because Russia had destabilized and invaded Ukraine—which it did not do either. (The US did that.)

The sanctions against Russia have an additional sort of unreality to them, because they “boomerang” and hurt the West while giving the Russian government the impetus to do what it wanted to do all along. The sanctions infringed on the rights of a number of Russian businessmen and officials, who promptly yanked their money out of Western banks, pulled their children out of Western schools and universities, and did everything else they could to demonstrate that they are good patriotic Russians, not American lackeys. The sanctions affected a number of Russian energy companies, cutting them off from Western sources of technology and financing, but this will primarily hurt the earnings of Western energy companies while helping their Chinese competitors. There were even some threats to cut Russia off from the SWIFT system, which would have made it quite difficult to transfer funds between Russia and the West, but what these threats did instead was to give Russia the impetus to introduce its own RUSSWIFT system, which will include even Iran, neutralizing future American efforts at imposing financial restrictions.

The sanctions were meant to cause economic damage, but Western efforts at inflicting short-term economic damage on Russia are failing. Coupled with a significant drop in the price of oil, all of this was supposed to hurt Russia fiscally, but since the sanctions caused the Ruble to drop in tandem, the net result on Russia’s state finances is a wash. Oil prices are lower, but then, thanks in part to the sanctions, so is the Ruble, and since oil revenues are still largely in dollars, this means that Russia’s tax receipts are at roughly the same level at before. And since Russian oil companies earn dollars abroad but spend rubles domestically, their production budgets remain unaffected.

The Russians also responded by imposing some counter-sanctions, and to take some quick steps to neutralize the effect of the sanctions on them. Russia banned the import of produce from the European Union—to the horror of farmers there. Especially hurt were those EU members who are especially anti-Russian: the Baltic states, which swiftly lost a large fraction of their GDP, along with Poland. An exception is being made for Serbia, which refused to join in the sanctions. Here, the message is simple: friendships that have lasted many centuries matter; what the Americans want is not what the Americans get; and the EU is a mere piece of paper. Thus, the counter-sanctions are driving wedges between the US and the EU, and, within the EU, between Eastern Europe (which the sanctions are hurting the most) and Western Europe, and, most importantly, they drive home the simple message that the US is not Europe’s friend.

There is something else going on that is going to become more significant in the long run: Russia has taken the hint and is turning away from the West and toward the East. It is parlaying its open defiance of American attempts at world domination into trade relationships throughout the world, much of which is sick and tired of paying tribute to Washington. Russia is playing a key role in putting together an international banking system that circumvents the US dollar and the US Federal Reserve. In these efforts, over half the world’s territory and population is squarely on Russia’s side and cheering loudly. Thus, the effort to isolate Russia has produced the opposite of the intended result: it is isolating the West from the rest of the world instead.

In other ways, the sanctions are actually being helpful. The import ban on foodstuffs from EU is a positive boon to domestic agriculture while driving home a politically important point: don’t take food from the hands of those who bite you. Russia is already one of the world’s largest grain exporters, and there is no reason why it can’t become entirely self-sufficient in food. The impetus to rearm in the face of NATO encroachment on Russian borders (there are now US troops stationed in Estonia, just a short drive from Russia’s second-largest city, St. Petersburg) is providing some needed stimulus for industrial redevelopment. This round of military spending is being planned a bit more intelligently than in the Soviet days, with eventual civilian conversion being part of the plan from the very outset. Thus, along with the world’s best jet fighters, Russia is likely to start building civilian aircraft for export and competing with Airbus and Boeing.

But this is only the beginning. The Russians seem to have finally realized to what extent the playing field has been slanted against them. They have been forced to play by Washington’s rules in two key ways: by bending to Washington’s will in order to keep their credit ratings high with the three key Western credit rating agencies, in order to secure access to Western credit; and by playing by the Western rule-book when issuing credit of their own, thus keeping domestic interest rates artificially high. The result was that US companies were able to finance their operations more cheaply, artificially making them more competitive. But now, as Russia works quickly to get out from under the US dollar, shifting trade to bilateral currency arrangements (backed by some amount of gold should trade imbalances develop) it is also looking for ways to turn the printing press to its advantage. To date, the dictat handed down from Washington has been: “We can print money all we like, but you can’t, or we will destroy you.” But this threat is ringing increasingly hollow, and Russia will no longer be using its dollar revenues to buy up US debt. One proposal currently on the table is to make it impossible to pay for Russian oil exports with anything other than rubles, by establishing two oil brokerages, one in St. Petersburg, the other, seven time zones away, in Vladivostok. Foreign oil buyers would then have to earn their petro-rubles the honest way—through bilateral trade—or, if they can’t make enough stuff that the Russians want to import, they could pay for oil with gold (while supplies last). Or the Russians could simply print rubles, and, to make sure such printing does not cause domestic inflation, they could export some inflation by playing with the oil spigot and the oil export tariffs. And if the likes of George Soros decides to attack the ruble in an effort to devalue it, Russia could defend its currency simply by printing fewer rubles for a while—no need to stockpile dollar reserves.

So far, this all seems like typical economic warfare: the Americans want to get everything they want by printing money while bombing into submission or sanctioning anyone who disobeys them, while the rest of the world attempts to resist them. But early in 2014 the situation changed. There was a US-instigated coup in Kiev, and instead of rolling over and playing dead like they were supposed to, the Russians mounted a fast and brilliantly successful campaign to regain Crimea, then successfully checkmated the junta in Kiev, preventing it from consolidating control over the remaining former Ukrainian territory by letting volunteers, weapons, equipment and humanitarian aid enter—and hundreds of thousands of refugees exit—through the strictly notional Russian-Ukrainian border, all the while avoiding direct military confrontation with NATO. Seeing all of this happening on the nightly news has awakened the Russian population from its political slumber, making it sit up and pay attention, and sending Putin’s approval rating through the roof.

The “optics” of all this, as they like to say at the White House, are rather ominous. We are coming up on the 70th anniversary of victory in World War II—a momentous occasion for Russians, who pride themselves on defeating Hitler almost single-handedly. At the same time, the US (Russia’s self-appointed arch-enemy) has taken this opportunity to reawaken and feed the monster of Nazism right on Russia’s border (inside Russia’s borders, some Russians/Ukrainians would say). This, in turn, makes the Russians remember Russia’s unique historical mission is among the nations of the world: it is to thwart all other nations’ attempts at world domination, be it Napoleonic France or Hitleresque Germany or Obamaniac America. Every century or so some nation forgets its history lessons and attacks Russia. The result is always the same: lots of corpse-studded snowdrifts, and then Russian cavalry galloping into Paris, or Russian tanks rolling into Berlin. Who knows how it will end this time around? Perhaps it will involve polite, well-armed men in green uniforms without insignia patrolling the streets of Brussels and Washington, DC. Only time will tell.

You’d think that Obama has already overplayed his hand, and should behave accordingly. His popularity at home is roughly the inverse of Putin’s, which is to say, Obama is still more popular than Ebola, but not by much. He can’t get anything at all done, no matter how pointless or futile, and his efforts to date, at home and abroad, have been pretty much a disaster. So what does this social worker turned national mascot decide to do? Well, the way the Russians see it, he has decided to declare war on Russia! In case you missed it, look up his speech before the UN General Assembly. It’s up on the White House web site. He placed Russia directly between Ebola and ISIS among the three topmost threats facing the world. Through Russian eyes his speech reads as a declaration of war.

It’s a new, mixed-mode sort of war. It’s not a total war to the death, although the US is being rather incautious by the old Cold War standards in avoiding a nuclear confrontation. It’s an information war—based on lies and unjust vilification; it’s a financial and economic war—using sanctions; it’s a political war—featuring violent overthrow of elected governments and support for hostile regimes on Russia’s borders; and it’s a military war—using ineffectual but nevertheless insulting moves such as stationing a handful of US troops in Estonia. And the goals of this war are clear: it is to undermine Russia economically, destroy it politically, dismember it geographically, and turn it into a pliant vassal state that furnishes natural resources to the West practically free of charge (with a few hand-outs to a handful of Russian oligarchs and criminal thugs who play ball). But it doesn’t look like any of that is going to happen because, you see, a lot of Russians actually get all that, and will choose leaders who will not win any popularity contests in the West but who will lead them to victory.

Given the realization that the US and Russia are, like it or not, in a state of war, no matter how opaque or muddled, people in Russia are trying to understand why this is and what it means. Obviously, the US has seen Russia as the enemy since about the time of the Revolution of 1917, if not earlier. For example, it is known that after the end of World War II America’s military planners were thinking of launching a nuclear strike against the USSR, and the only thing that held them back was the fact that they didn’t have enough bombs, meaning that Russia would have taken over all of Europe before the effects of the nuclear strikes could have deterred them from doing so (Russia had no nuclear weapons at the time, but lots of conventional forces right in the heart of Europe).

But why has war been declared now, and why was it declared by this social worker turned national misleader? Some keen observers mentioned his slogan “the audacity of hope,” and ventured to guess that this sort of “audaciousness” (which in Russian sounds a lot like “folly”) might be a key part of his character which makes him want to be the leader of the universe, like Napoleon or Hitler. Others looked up the campaign gibberish from his first presidential election (which got silly young Americans so fired up) and discovered that he had nice things to say about various cold warriors. Do you think Obama might perhaps be a scholar of history and a shrewd geopolitician in his own right? (That question usually gets a laugh, because most people know that he is just a chucklehead and repeats whatever his advisers tell him to say.) Hugo Chavez once called him “a hostage in the White House,” and he wasn’t too far off. So, why are his advisers so eager to go to war with Russia, right now, this year?

Is it because the US is collapsing more rapidly than most people can imagine? This line of reasoning goes like this: the American scheme of world domination through military aggression and unlimited money-printing is failing before our eyes. The public has no interest in any more “boots on the ground,” bombing campaigns do nothing to reign in militants that Americans themselves helped organize and equip, dollar hegemony is slipping away with each passing day, and the Federal Reserve is fresh out of magic bullets and faces a choice between crashing the stock market and crashing the bond market. In order to stop, or at least forestall this downward slide into financial/economic/political oblivion, the US must move quickly to undermine every competing economy in the world through whatever means it has left at its disposal, be it a bombing campaign, a revolution or a pandemic (although this last one can be a bit hard to keep under control). Russia is an obvious target, because it is the only country in the world that has had the gumption to actually show international leadership in confronting the US and wrestling it down; therefore, Russia must be punished first, to keep the others in line.

I don’t disagree with this line of reasoning, but I do want to add something to it.

First, the American offensive against Russia, along with most of the rest of the world, is about things Americans like to call “facts on the ground,” and these take time to create. The world wasn’t made in a day, and it can’t be destroyed in a day (unless you use nuclear weapons, but then there is no winning strategy for anyone, the US included). But the entire financial house of cards can be destroyed rather quickly, and here Russia can achieve a lot while risking little. Financially, Russia’s position is so solid that even the three Western credit ratings agencies don’t have the gall to downgrade Russia’s rating, sanctions notwithstanding. This is a country that is aggressively paying down its foreign debt, is running a record-high budget surplus, has a positive balance of payments, is piling up physical gold reserves, and not a month goes by that it doesn’t sign a major international trade deal (that circumvents the US dollar). In comparison, the US is a dead man walking: unless it can continue rolling over trillions of dollars in short-term debt every month at record-low interest rates, it won’t be able to pay the interest on its debt or its bills. Good-bye, welfare state, hello riots. Good-bye military contractors and federal law enforcement, hello mayhem and open borders. Now, changing “facts on the ground” requires physical actions, whereas causing a financial stampede to the exits just requires somebody to yell “Boo!” loudly and frighteningly enough.

Second, it must be understood that at this point the American ruling elite is almost entirely senile. The older ones seem actually senile in the medical sense. Take Leon Panetta, the former Defense Secretary: he’s been out flogging his new book, and he is still blaming Syria’s Bashar al Assad for gassing his own people! By now everybody else knows that that was a false flag attack, carried out by some clueless Syrian rebels with Saudi help, to be used as an excuse for the US to bomb Syria—you know, the old “weapons of mass destruction” nonsense again. (By the way, this kind of mindless, repetitive insistence on a fake rationale seems like a sure sign of senility.) That plan didn’t work because Putin and Lavrov intervened and quickly convinced Assad to give up his useless chemical weapons stockpile. The Americans were livid. So, everybody knows this story—except Panetta. You see, once an American official starts lying, he just doesn’t know how to stop. The story always starts with a lie, and, as facts emerge that contradict the initial story, they are simply ignored.

So much for the senile old guard, but what about their replacements? Well, the poster boy for the young ones is Hunter Biden, the VP’s son, who went on a hookers-and-blow tour of Ukraine last summer and inadvertently landed a seat on the board of directors of Ukraine’s largest natural gas company (which doesn’t have much gas left). He just got outed for being a coke fiend. In addition to the many pre-anointed ones, like the VP’s son, there are also many barns full of eagerly bleating Ivy League graduates who have been groomed for jobs in high places. These are Prof. Deresiewicz’s “Excellent Sheep.”

There just isn’t much that such people, young or old, can be made to respond to. International embarrassment, military defeat, humanitarian catastrophe—all these things just bounce off them and stick to you for bringing them up and being overly negative about their rose-colored view of themselves. The only hit they can actually feel is a hit to the pocketbook.

Which brings us all the way back to my first point: “Boo!”

Dmitry Orlov is currently working on a new book that will be out later this year. Orlov says, “The new book is about communities and what makes them resistant to adverse events such as financial collapse.” Orlov adds, “The U.S., as a whole, is not resistant to shocks, but some parts of America are.” You can find Dmitry Orlov at ClubOrlov.com.

Putin visits Berlusconi

Russian President Vladimir Putin perhaps couldn’t resist an invite from his Italian chum, former Premier Silvio Berlusconi, in the early hours of Friday to his mansion in Milan, according to the WSJ.

A Russian presidential spokesman said Mr. Putin visited “his old friend” Mr. Berlusconi following an invite from the Italian politician. Mr. Berlusconi heads Italy’s biggest opposition party.

President Putin, 62, must have felt the need to relax after his meeting with Ms. Merkel at 1.36 a.m. CET on Friday. He drove off with a large police escort, which included dark limousines, to Mr. Berlusconi’s house and stayed there until roughly 3 a.m.

Putin is in Italy for peace talks with European Union leaders after Ukraine threatened the flow of natural gas. The government in Kiev wants to divert fuel for domestic use as it cannot pay for gas, Bloomberg reported.

“There are big transit risks,” Putin said yesterday in Belgrade, Serbia. If Russia sees its Ukrainian partners “are starting to siphon off our gas from the export pipeline network, we will respond by reducing flows by the amount stolen.”

Italy is the major terminal for South Stream.

The Italian EU presidency is in favour of the Russian pipeline, South Stream, which would circumvent Ukraine to bring gas to south-east Europe.

“We think South Stream should go ahead, as it would improve the diversification of gas routes to Europe,” Italy’s state secretary for EU affairs Sandro Gozi said in July during a press event in Brussels.

He echoed statements made by Italian foreign minister Federica Mogherini who visited Moscow in the same month and met with her Russian counterpart.

South Stream would deprive Ukraine of transit revenues from the gas pipelines that cross its territory and bring about 80 percent of Russian gas exports to EU countries.

It would also enable it to cut off supplies to Ukraine to exert political pressure, without affecting its EU gas clients.

Michael Gonchar, a former executive at Ukraine’s gas distribution firm, Naftogaz, told EUobserver, that, together with Nord Stream, Russia’s recently-built pipeline to Germany, South Stream would give Moscow “a 100 percent monopoly on shipments of gas to Europe from the east”.

He added that it would make it less likely that the EU will ever build a gas pipeline to the Caspian Sea, the so-called Southern Corridor, to diversify supplies.

Putin stresses importance of unblocking South Stream

It is important to unblock the situation around the South Stream gas pipeline that will make a weighty contribution to Europe’s energy security, Vladimir Putin said on Wednesday in an interview with the Serbian newspaper Politika.

“I feel confident this project will contribute considerably to the comprehensive energy security of Europe,” he said. “Everyone stands to gain from it – Russia and the European consumers including Serbia as well.

The problem of gas transit via Ukraine is still in place and its obvious solution is to diversify gas supply routes, Putin said.

“If we speak about further prospects of Russian gas exports to Europe, obviously, the problem of transit via the Ukrainian territory still exists,” he said. “One of the evident solutions is to diversify supplies routes.”

He stressed that Russia was ready to “continue constructive talks on those subjects”.

Also Putin hopes the European Commission (EC) will soon settle the issue of using the OPAL gas pipeline to full capacity.

“We hope that the European Commission will finally settle the issue of the full-capacity use of the OPAL gas pipeline,” he said in an interview with newspaper Politika.

South Stream gas pipeline project is expected to bring new investment to Serbia and to beef up its energy security, believes Russian President Vladimir Putin.

He said it on Wednesday in an interview with the Serbian daily Politika on the eve of his official visit to Belgrade.

“Implementation of the South Stream project should bring in no less than 2 billion to Serbia in the form of new investment and to beef up its energy security considerably,” Putin said.

South Stream is a global infrastructural project steered by Russia’s major producer and exporter of natural gas, OAO Gazprom. The pipeline that is destined to have a throughput capacity of 63 billion cubic meters /bcm/ will stretch across the floor of the Black Sea to reach the countries of Southern and Central Europe.

Its land-surface part will cross the territories of Bulgaria, Serbia, Hungary, Slovenia, and Austria.

In autumn 2013, the European Commission launched what it called an antitrust investigation targeting the South Stream, which it said stood at variance with the norms of the EU’s “third energy package”.

Earlier on Wednesday, Putin’s aide Yuri Ushakov said the South Stream project would come under discussion at the talks in Belgrade and preparations for building the Serbian section of the future pipeline were underway.

“The Serbs are making it clear that implementation of the project without consent from Brussels will be impossible in principle although they are fully ready for this /implementation/ and the project is of big interest for them,” Ushakov said.

Russian President Vladimir Putin hopes that Russian-Serbian trade will reach 2 billion dollars this year.

He said that a free trade regime existing between the two countries was contributing to steady development of Russian-Serbian economic ties.
“Our reciprocal trade turnover grew by 15% to reach 1.97 billion dollars in 2013. It grew by another 16.5% to reach 1.2 billion dollars in the first half of 2014. We hope to reach the figure of 2 billion dollars this year” Putin stressed.

Positive dynamics can be seen in the sphere of investments. The total volume of Russian capital investments in Serbia has exceeded 3 billion dollars, the bulk of which was channeled into the strategically important energy sector, Putin told Politika.

“The Naftna Industrija Srbije (NIS) oil company is a graphic example of our successful cooperation. It was a loss-making company that has turned into the main donor to the Serbian state budget,” Putin stressed.

The Russian head of state also said that the Russian Railways Company and the Russian credit support were enabling Serbia to modernize its railway infrastructure.

“I am glad that Serbian businessmen are active conquering the Russian market. For example, they are supplying quality agrarian and industrial products,” Putin stressed.

Earlier this month, Serbia suggested introducing a free trade regime for food products. According to Serbian Foreign Minister Ivica Dacic, Russia is thinking of lifting import duties for sugar, cigarettes, alcohol and poultry meat. The Russian Agriculture Ministry is considering a possibility of granting preferences to agricultural imports from Serbia.

Russia continues to regard Europeans as partners despite statements from Brussels, Russian foreign minister Sergei Lavrov said.

Source: ItarTASS

Whatever happened to shale gas?

In certain circumstances, no news is good news. Sometimes, though, it tells its own story, especially when it we are experiencing something akin to a news blackout on an issue which should be constantly in the public eye.

That issue is shale gas, the great white hope of the energy market which, supposedly, was going to rescue our economy with the promise of massive volumes of cheap energy. By now, we should be getting some idea of the scale of the bonanza in the UK, but there have been no public reports following early test drilling.

The most recent media report, however, might give some clue as to why we are hearing so little. This is from the South China Morning Post which tells of China’s shale gas ambition facing a “reality check”. Commercialisation of the mainland’s rich shale gas resources, the paper says, is proving difficult. Challenging geology, shortage of water near the drilling sites and high population densities are all conspiring to make drilling more expensive and less certain than predicted.

Last April, the BBC had already pre-empted the language of the South China Morning Post, proclaiming that the “shale industry faces global reality check”.

It told us that Poland was seen as the poster boy for European shale gas but, according to Stuart Elliott, managing editor at the industry information provider Platts, “the Polish experiment has been a failure to date”. Enticed by seemingly abundant reserves and a government keen to kick-start production, US energy majors moved in, hoping to replicate their domestic success on foreign shores.

Thirty to 40 wells were planned for 2013. To date, there is just one well producing enough gas to be economically viable. Earlier, we had news of companies deserting Poland. Exxon Mobil, Talisman and Marathon have all pulled out, while Chevron, Conoco Phillips and San Leon are persevering.

In the UK, alarm bells have been sounding for some time, and for some of the same reasons. Chatham House in December 2013 was telling us that knowledge of the geology of shale plays in the United Kingdom was in its infancy.

Not only are shale plays notoriously different, so too are wells on the same play, it said. Costs also change as the shale gas operations move along the learning curve. This uncertainty is compounded by the uncertainty over the externalities of environmental damage that may be associated with shale gas operations.

In March of this year, the Financial Times was also sounding less than enthusiastic, starting off by setting up John McGoldrick, chief executive of unconventional gas company Dart Energy, to say: “The shale gas potential is enormous here, even if we just get one percent of the in-place estimates”.

But just because gas is recoverable, it doesn’t mean it makes economic sense to do so, the paper said. Explorers must drill wells to discover natural gas flow rates. Cuadrilla was the only company to have fracked in the UK and no wells had been fracked since an 18-month moratorium had been lifted more than a year preciously.

Exploration is expensive and it is easy to spend more on drilling a well than the value of gas that comes out of the ground. Drilling costs are significantly higher in the UK than the US. The nascent supply chain and long licensing process were largely to blame.

“At the minute, the economic equation is negative”, said Alex Grant at investment bank Jefferies. “It’s costing [UK explorers] well over $10m to drill a well – compared to say $4m in the US – and the gas they can get out is worth a lot less than that. If this is the best they can do then the equation doesn’t work on a per well basis and it doesn’t matter that they have huge amounts of gas”, he said.

And seriously expensive it was turning out to be, with a report in April telling is that the investment needed to bring 4,000 wells into action would cost £33 billion. By then, though, Bill Powers in Forbes was “popping the shale gas bubble”. America’s shale gas resources and reserves have been grossly exaggerated and today’s level of shale gas production is unsustainable, he was saying.

In fact, he said, due the distortions of zero interest rates and other factors, an enormous shale gas bubble has developed. Like all bubbles, this one will pop sooner than expected and when it does, the aftermath will be very unpleasant.

From a standing start a dozen years ago, shale gas production had grown to account for nearly 50 percent of America’s gas production. However, the shale gas boom was rapidly maturing and it was quickly approaching a point where shale gas production was heading into decline. In fact, the majority of shale gas basins in America were already exhibiting declining production.

This had long been picked up by industry sources, and even Bloomberg had been warning of it earlier in the year. Freshly fracked wells had sent US oil production soaring 39 percent since 2011, it said. That had been the steepest climb in history, and if production had continued apace, the US had been set to become the world’s biggest source of oil by 2015. The problem, though, was that the production was declining faster than expected.

The average flow from a shale well drops by about 50 percent to 75 percent in the first year, and up to 78 percent for oil, we were told by Pete Stark, senior research director at IHS Inc. “The decline rate is a potential show stopper after a while,” said Stark. “You just can’t keep up with it”.

The industry has so far been able to live with the decline curve problem because operators have been able to scratch out better initial production in wells, Stark said. “If you don’t have that improvement, then you get stuck after a while and have to drill more and more wells just to stay even”, Stark said. As depletion rates increased, an FT correspondent described the problems as “crippling”.

Exactly the same problems are being found with gas production and the New York Times has been on the case for years – with caveats.

By May this year, though, the House of Lords select committee on economic affairs was saying that exploration and appraisal was urgently needed to establish the economic potential of the UK’s shale gas and oil resource. And there lies as neutral an assessment as you can get. There are currently no official reserve estimates. The UK reserves could be anywhere from zero to substantial. And without those estimates, the commercial scale of shale gas extraction cannot be forecast.

Still the questions on the US scenario abound. “The staying power of the American shale boom is limited by natural, macroeconomic, and microeconomic factors, none of which will disappear on the strength of unconstrained enthusiasm”, said Dajahi Wiley of Oilprice in June. And in September, the situation was once again being called this decade’s version of the dotcom bubble.

Already in July, the Telegraph had been warning that the British shale industry had a very long way to go, making any investment extremely high-risk. It may be impossible to get the shale gas out of the ground economically and there had been no well tests that had proven the resources was commercially viable, this paper said. Yet, in Poland, it is estimated that about 150-300 drills will be needed to produce enough data to estimate the size of shale gas deposits.

However, even if UK shale gas reserves are zero, or the industry fails to be economically viable, it may not matter. Another potential source is coming up fast – methane hydrate, which potentially exists in such quantities that it can keep the world supplied for 1,500 years.

For sure, it would be preferable to have indigenous supplies of gas, but the prospect of the world running out of gas any time soon is looking increasingly remote. What we cannot do, though – at this stage, at least – is rely on UK-produced shale gas as a policy option. The UK shale revolution may happen, but it may not.

Source: http://eureferendum.com/

Nuclear trumps shale and gas

The signing in Vienna – at the margins of the 58th session of the International Atomic Energy Agency General Conference – of a strategic nuclear partnership between Russia and South Africa, has met with criticism from the mining sector.

The agreement lays the foundation for a large-scale nuclear power plant procurement and development programme of South Africa based on the construction of new nuclear power plants with Russian VVER reactors with a total installed capacity of up to 9,6 GW or 8 units.

These will be the first based on the Russian technology to be built on the African continent.

The signed agreement provides for comprehensive collaboration in other areas of nuclear power, including the construction of a Russian-technology based multipurpose research reactor, assistance in the development of South African nuclear infrastructure, and education of South African nuclear specialists.

The creation of new highly-skilled workplaces will also allow South African companies to further participate in Rosatom’s projects in third countries.

South Africa’s industry will become dependent on sources other than shale and coal, critics say. While industry and certain role players obsess about shale and gas, Mozambique’s gas resources will also need expensive infrastructure.

The questionable benefits that shale gas might offer, will be short-lived, unlike nuclear.

This agreement would naturally limit South Africa’s importation of energy from Namibia or Mozambique.

Also, this will probably mean an end to preferential electricity contracts that offer power at a rate far below the level other industrial users pay, to companies like BHP Billiton.

The R9,5bn lost in embedded derivatives, as reported by Eskom, is the cost of the remaining time on these preferential electricity contracts, some of which still have years to run.

Other energy sources will be hydroelectric power from the future Inga III dam in the Democratic Republic of Congo.

South Africa’s nuclear power ambitions had attracted several proposals.

French group Areva, which built South Africa’s only nuclear plant at Koeberg, had proposed to provide the country with its new generation of EPR reactors.

Government had also solicited an offer from the US-Japanese group Westinghouse.

Russia signs second gas contract with China

Russia plans to sign a 30-year gas supply contract with China via the western route, Russian energy giant Gazprom’s CEO Alexei Miller told President Vladimir Putin on Wednesday. The route to supply gas to China via western Siberia may be implemented faster than the eastern route, through which Moscow has agreed to ship the fuel to its Asian neighbor in May.

“Gazprom plans to sign a contract to supply China with 30 billion cubic meters of natural gas via western route over thirty years,” Miller said.

The China-Russia West Route natural gas pipeline project connects gas deposits in Western Siberia and the northwestern part of China via Russia’s Altai region, securing the world’s top energy user a major source of cleaner fuel.

The potential of this route is “enormous”, the Gazprom CEO told the Russian President.

“It is even greater than in Eastern Siberia and, without a doubt, we can increase the volume of gas supplies very quickly via the western route, depending on the growth in demand in the Chinese market,” said Miller.

Gazprom is to sign the 30-year contract with China National Petroleum Corporation (CNPC) in November. The deal will directly link Russia’s huge gas fields to Asia’s booming market for the first time.

Miller also said Gazprom might consider more than doubling the volume of supply.

“We plan to sign a contract for a volume of 30 billion cubic metres for 30 years, though the talks have also looked at other figures for new contracts concluded for the western route. We are looking at the possibilities for supplying 60 billion cubic metres or up to 100 billion cubic metres of gas to China,” Miller told Putin in Moscow.

China and Russia signed a $400-billion gas supply deal in May this year, opening up a new market for Moscow as it risks losing European customers over the Ukraine crisis.

The Russian part of the joint venture pipeline, officially dubbed “Power of Siberia”, will be built by Gazprom with a total investment of $55 billion.

Construction of the China- Russia East Route natural gas pipeline started this month in this eastern Siberian city of Yakutsk.

Source: The BRICS Post