The historic US-Saudi relationship cannot bounce back

April 25 2023

US imports of Saudi oil are at historic lows, Chinese purchases of Saudi oil continue to grow, and Russian-Saudi energy interests have fully converged. If it’s ‘all about the economy,’ then Saudi-US ties may never quite recover.

Photo Credit: The Cradle

By Mohamad Hasan Sweidan

“Our allies in the Gulf no longer honor the deal that was made decades ago even though we still have a big physical military presence in the Gulf, bigger than ever before, and we keep giving Gulf nations a pass on human rights violations. Too often our Middle East allies act in conflict with our security interests.”

– Chairman of the Subcommittee on Near East, South Asia, Central Asia, and Counterterrorism of Committee on Foreign Relations in the US Senate, Senator Chris Murphy, July 2022.

The war in Ukraine and the intensification of Great Power competition have cast a shadow over global markets and prompted some surprising changes in the foreign policies of states. The Kingdom of Saudi Arabia is among those countries, and its relationship with the US is currently passing through a very critical period. Today, Riyadh seeks a more conditional relationship with Washington, one that takes into account converging Saudi interests with non-western states.

There are many reasons why the kingdom is adopting a more pragmatic foreign policy. One of the key factors is energy relations, particularly as Riyadh seeks to preserve and grow its mutual interests with other major powers, such as China and Russia.

The birth of the petrodollar

The “Nixon Shock” in 1971 marked a shift in economic policy for the US, which sought to prioritize its own economic growth and stability over that of other states. This led to the end of the Bretton Woods Agreement and the convertibility of US dollars into gold. Washington moved instead to establish a new system in which the US dollar was pegged to a commodity with global demand in order to maintain its position as the world’s dominant reserve currency.

In 1974, the petrodollar agreement was struck, in which Saudi Arabia agreed to sell oil exclusively in US dollars in exchange for US military, security, and economic development assistance. The deal effectively tied the value of the US dollar to global demand for oil and ensured its continued dominance as the world’s primary reserve currency.

US dependence on Saudi oil

After the petrodollar agreement, Saudi oil exports to the US surged, making Saudi Arabia’s security all the more critical for Washington. By 1991, the US imported 1.7 million barrels per day (bpd) of Saudi oil, a sharp increase from 438,000 bpd in 1974.

This represented 29.5 percent of the total US oil imports in 1991, and 26.4 percent of the total Saudi oil exports – further emphasizing for Washington the importance of maintaining Saudi Arabia’s security and stability. But the staggering dependence on foreign – and Saudi – oil imports also created political blowback in the US, which launched plans to reduce its imports and ramp up domestic oil production.

This was motivated by several factors, including the potential negative impact of any energy market shocks – such as the decline in Iranian oil exports after the 1979 Islamic Revolution – on the US economy, the potential impact of geopolitical disputes on West Asian oil exports, and technological advances that facilitated increased oil production in the US.

Over the following decades, Washington was able to successfully reduce its oil imports from Saudi Arabia: In 2020, the US only imported 356,000 bpd of Saudi oil, which accounted for just 6 percent of all US oil imports and 4.8 percent of all Saudi oil exports.

Changing oil market dynamics

In this process, Saudi Arabia lost much of its value as a market for the Americans, and the US is no longer dependent on Saudi Arabia as a significant oil source. Furthermore, the US’ significant increase in shale oil production created a major new competitor in the energy market, which raised concerns in Riyadh about its declining influence as a strategic supplier of oil to the world.

To diversify its oil export options, Saudi Arabia began turning eastward to China, the world’s largest oil importer. Over the past two decades, Saudi Arabia has gradually become China’s primary source of oil, with Chinese oil imports from Saudi Arabia increasing by 16.3 percent between 1994 and 2005, reaching 1.75 million bpd in 2022.

Strengthening economic and diplomatic relations with Beijing has become a necessity for Riyadh, which derives 70 percent of its export revenues from oil. The same applies to China, a global power that actively seeks to diversify its oil sources to prevent reliance on a single country.

In recent years, Russia has also emerged as an essential oil industry partner for the Saudis. The creation of OPEC+ was a response to falling crude oil prices caused partly by the substantial increase in US shale oil production since 2011.

Russia and Saudi Arabia are the world’s top oil exporters, and their cooperation has proven vital for controlling prices by coordinating the quantities of oil pumped into the markets. This led to the 2016 expansion of OPEC – which is controlled by Saudi Arabia – and the establishment of OPEC+ to include Russia.

OPEC+ cooperation after price war

After the negative consequences of the 2020 price war among key oil producers, both Riyadh and Moscow recognized the importance of cooperation to safeguard their energy interests.

In March of that year, OPEC+ had convened in Vienna to address the decline in oil demand caused by the COVID-19 pandemic. At the meeting, Saudi Arabia, the organization’s largest producer, proposed reducing production to stabilize prices at a reasonable, higher level, while Russia, the largest non-OPEC producer in OPEC +, opposed the cuts and moved to increase its oil production.

In response to Moscow’s move, the Saudis increased their own production and announced unexpected cuts in oil prices ranging from $6 and $8 per barrel for importers in Europe, Asia, and the US. This announcement triggered a sharp drop in oil prices, with Brent crude plummeting by 30 percent – marking the biggest decline since the 1991 Gulf War – while the WTI benchmark fell by 20 percent.

On 9 March, global stock markets experienced significant losses, and the Russian ruble declined by 7 percent against the US dollar, reaching its lowest level in four years.

The oil price war lasted for approximately a month before OPEC+ members reached a new agreement in April that included historic oil production cuts of 10 million bpd. This experience marked the beginning of uninterrupted energy cooperation between Moscow and Riyadh.

Saudi Arabia: prioritizing its interests

Since the outbreak of the Ukraine war in February 2022, the US has pressured its allies to comply with western sanctions against Russia. Washington has sought to persuade OPEC leader Riyadh to increase oil production to curb the price hike caused by the conflict, but so far, the Saudis have refused these demands.

This has led to heightened US-Saudi tensions, which prompted US President Joe Biden’s unsuccessful visit to Jeddah in July 2022 to try to convince Crown Prince Mohammed bin Salman (MbS) to raise oil production levels.

Furthermore, western attempts to establish a price ceiling on Russian oil served only to alarm Saudi Arabia, as it would open the door for customers to impose oil prices on sellers. Despite aggressive attempts to undermine Russia’s energy sector, the US-European western alliance has been unable to do so, and in fact, led to an increase in Russian energy exports to Europe, China, and India last year.

A number of countries, including Saudi Arabia, have helped buoy Russian energy exports by purchasing Russian oil and re-exporting it to needy European markets – or using it locally to boost their export revenues. As Russia is the second-largest exporter of oil worldwide, its isolation from the markets would otherwise have significant repercussions, especially for oil-exporting states.

The war in Ukraine demonstrated that Riyadh is prepared to confront Washington when it feels its energy interests are under threat. Today, the US is no longer an energy partner for Saudi Arabia, but rather a competitor. In its stead, Beijing and Moscow have risen to become essential partners for Riyadh, and the mutual energy interests are a major factor behind MbS’ efforts to diversify his country’s foreign policy options.

The US and Saudi Arabia: No longer energy allies

Since the Cold War era began, oil has been a key pillar of the Russian (and former Soviet) economy. It has long been a US priority to be able to influence prices as a pressure tool against Moscow. Since Saudi Arabia is considered an oil superpower, Washington’s cooperation with Riyadh – despite its own dramatically reduced Saudi oil imports – is at the heart of US economic strategies to counter Russia.

For example, in the mid-eighties, during the Soviet invasion of Afghanistan, the US asked the Saudis to flood oil markets in order to lower prices and undermine the oil revenue-reliant USSR. In 1986, oil prices dropped by two-thirds, from $30 per barrel to nearly $10 per barrel, ultimately crippling the Soviet economy and its geopolitical reach.

But attitudes have sharply altered during the intervening 37 years. Saudi Arabia now views the US as an energy market competitor due to Washington’s increased shale oil production and disinterest in boosting oil imports.

Between 2010 and 2021, US shale oil production grew from approximately 0.59 million bpd to 9.06 million bpd. Riyadh’s response to this new geo-economic development was to raise oil production in 2016, with the aim of lowering prices to undercut the US shale industry, which operates at significantly higher costs.

The Saudis indeed fear a declining role as a strategic supplier of global oil, in large part due to expanded US shale production and energy self-sufficiency. This has driven the Saudis to try and reimpose their oil superiority by lowering prices to undercut competitors with higher production costs – despite the short-term domestic damage caused by increased Saudi oil production.

To this day, Saudi Arabia continues to present an obstacle to US energy interests, and has instead found most common ground with Washington’s main adversaries – Russia, China, Iran – with whom Riyadh’s energy interests intersect.

Contrary to expectations since the outbreak of the Ukraine war in February 2022, all US efforts to persuade Riyadh to flood global oil markets have failed, and the Russians have managed to maintain both their exports and their economy. It has become manifestly clear to Washington’s decision-makers that Saudi Arabia today is not the Saudi Arabia of 1985, willing to undermine its own revenues and energy interests in order to serve a US geopolitical agenda.

Discussions in Washington today have likewise turned to the feasibility of maintaining the US commitment to Saudi Arabia’s security, particularly since Riyadh neither provides Americans with energy nor follows its political diktats.

Some believe that the US’ role of acting as a security guarantor in the Persian Gulf merely serves Beijing’s interests by securing China’s main energy sources. Yet others argue that a US military withdrawal from the Persian Gulf will create a vacuum filled by Beijing, which will keenly seek to ensure its own energy security.

The one point of clarity, however, is that US-Saudi energy interests are no longer synergistic and that Riyadh’s interests line up far more closely with those of Beijing and Moscow. This remains a key factor driving Saudi Arabia’s foreign policy and economic diversification today.

What remains to be seen is how far the Saudis – deeply and historically bound to western interests – will be willing to challenge the US’ regional hegemony as their goals diverge and Riyadh finds common cause with Washington’s rivals.

The views expressed in this article do not necessarily reflect those of The Cradle.

Author

Mohamad Hasan Sweidan

@mhmdsweidan

Keywords

Chinaenergy sectoroil pricesoil production cutsOPECPersian Gulf securitypetrodollarRussiaSaudi ArabiaUS

Virtual Russia, virtual Russian Armed Forces, bad information, bad planning, bad outcomes.

May 15, 2022

Please visit Andrei’s website: https://smoothiex12.blogspot.com/
and support him here: https://www.patreon.com/bePatron?u=60459185

Europe´s mad ban on Russian oil

May 08, 2022

Source

By Jorge Vilches

Ursula von der Leyen

Cognitive scientists would concur in that the current performance of European leadership could be diagnosed as either myopic ignorance or — most probably — full intellectual blindness. In the case of so far happy-go-lucky Ursula von der Leyen there is no doubt it´d be the latter… but only if we first dismiss her warm on-the-record support for Bundeswehr colonial policies and military involvement… plus her praise of Third Reich famous general Field Marshall Erwin Rommel, Commander of the Führer Headquarters. But leaving that possible Nazi whiff aside, full ´intellectual blockage´ is the only kind way to dare explain a most strategic project as foolish and doomed to fail as banning Russian oil sales worldwide. Why so you may ask ? Ref #1 https://www.wsws.org/en/articles/2017/06/20/vond-j20.html

asymmetrical retaliation

The short answer is massive — ´Russian´ massive – unmitigated “asymmetrical non-military retaliation” through surgical and divisive optional sales of natural gas – and other key commodities – just leaving EU sanctioned Russian oil for sale to and re-sale by third parties. And, oh yes, weaponization is not limited to any particular means as various European war schools should have internalized already. War means war and pretty much anything is fair game. But apparently, it´d be as if through the centuries, uppity European leaders – most especially German, French, Swedish, British and Poles — have not learned a single thing despite the über-high costs already paid for by their nations large-caliber warfare experiences most especially with Russia. By the way, the UK also has the additional ( unsolvable? ) burden of its current Brexit ballast… Ref # 2 https://www.zerohedge.com/energy/eu-proposes-ban-russian-oil-imports

Ursula´s softball

May I call you Ursula ? Thank you. “We will make sure that we phase out Russian oil in an orderly fashion [… a phenomenal bad joke of sorts… ] in a way that allows us and our partners to secure alternative supply routes and minimises the impact on global markets” you said. Question: will the Russians just idly watch you trying to execute such enormity at the EU´s preferred speed and political and geopolitical sequencing? And the Russians would never dare to strike back with natural gas or other restrictions no? For starters, what about nickel, uranium, and lithium? Not having them would be like trying to prepare tasty food without salt, pepper or mustard. Without uranium no nuclear power is possible, did you know? [ more on that later ]. Ursula, your pink unicorn wishful thinking is unfathomable gal.

EU kelpers

This mad-ban requires EU approval with conditional support from Hungary, Greece, and others. So some special EU members will be exempted while regular EU ´kelpers´ will not. Now could that lead to serious friction ? How many years will it take all of Europe to reconvert its industry and supply chains? “This is why we will phase out Russian supply of crude oil within 6 months and refined products by the end of the year.” Okay, so Aunty Ursie you believe the Russians are dumb enough to let you phase this idea out nice and easy at your own pace and whenever you decide to act per your own special EU schedule. No market dynamics involved as Europe plays everybody else´s pieces too as grandpas would do with 3-year-old grandkids. Ref # 3 https://www.rt.com/business/555065-russia-oil-ban-exemption-eu/

Russian DNA

No way Ursula, the Russians play world-class professional chess while you play elementary school checkers, not even being good at that either. The instant Russia perceives the initial execution of your game plan regarding banning of Russian oil, they´ll make their moves, not yours. And those Russian moves will not be nice and pretty. For one, Europe will not have anywhere nearly ready its own diesel refining capacity by the end of 2022 while the middle distillate market is ever much tighter everywhere as demand recovers from the Covid pandemic. So the EU “plan” is to frantically search for hard-to-find or simply non-existent substitutes while investing tons of time, money, effort and risk. Well, the Russians know that already even before you start. Diesel is already in critically short supply in the EU.

Furthermore, Europe will continue buying Russian oil and distillates via third countries once it introduces any embargo only that at much higher prices than today. Such old, quick and dirty business is known as “triangulation” Ursula.

Russian hardball

The existential threat imposed on Russia by the EU with its macabre “Ukraine Plan” and sanctions has not left Russia any way out other than playing hardball for keeps. Furthermore, the Russian non-military retaliation domain is actually unlimited due to the full-scale and open-ended addiction that Europe has developed for Russian imports of different sorts including commodities of any and every imaginable type. Without such, Europe will cease to exist as we know it in a matter of a very few months, if not weeks. As Francis Fukuyama should posit, Europe´s dependency on Russian commodities is the end of its own history. The unipolar world is dying, admit it Frank. Hint: write a new book guy.

Ref # 4 https://www.zerohedge.com/energy/trump-was-right-putins-gas-strategy-gives-germany-only-bad-worse-choices

Ref # 5 https://www.rt.com/business/554968-moscow-toughens-response-western-sanction

not your dog

It seems that Ursula von der Leyden has convinced the EU that feeding a refinery or a chemical plant is pretty much like feeding your dog. But nothing can be further from the truth. Chemical plants and refineries are very closely matched and subtly calibrated to very specific supply feeds very difficult to substitute. Changes can and have been made, but it requires lots of time, effort, money, dedicated facilities, experimentation, specific expertise, risk, and most important fixed, unchanging feeds always complying with specs. This means that Russia today supplies Europe with exclusive unreplaceable oil & gas grades of very specific chemical content (even coal grades) that would be impossible to get from third parties fast enough and cheap enough. So it´s a very delicate and tight matching already achieved between European facilities and Russian fuels and other inputs that cannot be altered or replaced that easily, let alone all at the same time !! Are EU countries aware of all this ? Ref #6 https://www.ifo.de/en/node/69417

expensive divorce

So maybe after investing years, money, expertise, trials & errors, risk and lots of hard work Europe may possibly and eventually be able to partially switch from current to dirtier or far more inefficient options. But that would be (a) against the EU´s Green Deal compliance and (b) a very short-term non-sustainable “solution” (c) against the whole world.

So how can Europe transition to a 0% Russian supplies end-point as swiftly and safely as Chinese plate spinners?  Ref # 7 https://www.rt.com/business/555087-energy-warning-russia-sanctions/

No minimally informed no-nonsense mindset has thought out the foolish idea of coordinating the whole European continent in this self-destructive mission. Taking matters to an extreme, let´s assume that Europe completely weans itself – or is cut off — from Russian oil & gas imports tomorrow morning and everything else sourced in Russia. In that hypothetical case, Moscow may feel the financial problem possibly within 6 months… or maybe never. But if such event were to happen, the timing would be quite different as the EU would necessarily start imploding in 6 days and would achieve full implosion in 6 weeks. With the oil mad-ban Europe would badly need to find substitutes for Russian imports. The problem is such need cannot ever be satisfied fast enough and right enough no matter how it is diced or sliced. Triangulation means Europe will buy quality Russian imports via third countries only that at much higher prices

plug & play (not)

No, it is not anywhere near “plug & play” either. No. Several EU landlocked countries can only import nat-gas thru existing Russian pipeline unless a nightmarish and highly risky sea-land supply lines are established by different means going across complicated mountain ranges sometimes, a project which no one wants to entertain. Replacing Russian feeds & supply lines is an incommensurable task that Russia will not help out with either. Once Russia withstands the “ban Russian oil” idea, Europe will find itself in the worse of both worlds not being able to rewind back.

tit-for-tat ?

Also, the impact of the Russian reaction may most probably result to be disproportionate to the damage inflicted by an EU worldwide ban on Russian oil. Hence, ´asymmetrical´, simply because an exact ´tit-for-tat´ result is impossible to calculate for and let alone effectively achieve. If ever implemented, the unintended consequences of a haphazard decision such as proposed will necessarily mean for the EU either to (1) instantly back-pedal to square one or (2) finally suicidal Europe would follow through and achieve its goal. I kid you not. Other commodities could be included.

human food

And food for thought, as Europe would face famine in-its-face if grains from Ukraine, Belarus, Russia and elsewhere are tied up or absent by Russian retaliation or impossibility to deliver. And the lack of cheap diesel and natural gas from Russia means that farmers everywhere face sharply increased costs, whereby fertilizer is either not available at all, or too expensive to use, and thus crop yields will fall worldwide increasing the price of food products. Greenhouse producers in many parts of Europe have already shut down over high energy costs as prices stand today, not even thinking of the possibility of having Russian oil banned worldwide. Banning Russian oil from Europe can only back-fire.

Ref # 8 https://www.zerohedge.com/commodities/worlds-largest-fertilizer-company-warns-crop-nutrient-disruptions-through-2023

Russian leverage

It´s impossible to approach all aspects involved at once, so let´s briefly touch upon part of Russia´s bargaining power.

1. Russia does not want, let alone need, to defeat all of Europe. Just turning Germany — or Poland for that matter — into a messy mess would be more than enough for the whole EU to focus and reason out basic stuff.
2. No uranium from Russia means the 3 remaining German nuclear power stations cannot be re-commissioned. Not having already scheduled substitute delivery of finely-tuned Russian uranium means an adaptive retro-fit with newly-sourced feed, which technically is risky and mission almost impossible which would take years.
3. China + India + Brazil have ´free-patent-IP´ investments plans in Russia kicking off an entirely new ball game
4. 60% of German gas consumption is Russian. Today German industry would not survive without Russian gas.
5. A partial or total reduction of Russian nat-gas and coal supply in retaliation for banning Russian oil would negatively and instantly impact Europe in many ways and the rest of the world with irregular market dynamics.
6. If not delivered to the EU, the Russian nat-gas can be vented or flared at well-heads as there is plenty more.
7. Russian oil can be sold elsewhere and/or stockpiled relatively rapidly and easily, or production can be slowed down without damaging reservoirs or wells. Russia will actually increase its “drill baby drill” policy.
8. Paraphrasing former US Secretary of Treasury John Connally “Sorry, Russian commodities, your problem”
9. Russia´s market is 85% of the world population largely under growth and just as fed up with the US-dollar reserve currency system. The EU trade embargo on Russia does not work per parallel imports from 3^rd parties
10. The defiant Russian economy is doing just fine, the Ruble is as strong as ever. US President Biden vowed “to make sure the pain of our sanctions hits the Russian economy, not ours” as if he were getting the picture…
11. China and others definitely back Russia while the rest of the world de-dollarizes and does not sanction Russia
12. There are $ 500 billion worth of physical Western assets in Russia that can be confiscated at any time.

Ref # 9 https://www.rt.com/business/555076-moscow-allows-foreign-goods/

Ref # 10 https://www.rt.com/business/553038-russia-lifts-ban-parallel-imports/

Ref # 11 https://www.newyorker.com/news/daily-comment/russia-and-china-unveil-a-pact-against-america-and-the-west

Ref # 12 https://www.lexology.com/library/detail.aspx?g=39ef25c3-1bf0-4029-bac2-de0ac11965da

Ref # 13 https://www.rt.com/business/555097-russia-sanctions-recession-economist/

Ref # 14 https://www.rt.com/business/555119-russia-india-oil-sales-increase/

eyes wide shut

Agreed, it´s a multi-variable environment in a context of constant change with plenty of moving parts interacting on each other. But, for starters, no ( or less) Russian nat-gas and no Russian oil means many unsolvable things for the EU today. We´d also need to add the impact of having no oil, coal, or gas substitutes fast enough in large enough quantities. All of that put together means no (or less) refined products, no intermediate distillates, no heavy-duty machinery (think mining) no nickel nor aluminum, cobalt or lead or magnesium, no neon, no grains or edibles at large, wheat, corn, barley, rye, soybeans, timber, paper, titanium, rocket engines, nitrogen fertilizer, crop nutrients, potash, less petrochemicals, iron ore, minerals and rare-earths, uranium for nuclear power plants, lithium for batteries, no inputs for production of metals, plastics, fabrics, pharmaceuticals, fertilizer, chemicals, etc., no manganese, chromium, platinum, essential palladium for catalytic converters, copper, tin, mica, wolfram, bismuth, kaolin, talcum, tungsten, diamonds, phosphates, sulphur… and even no gold. By the way, as we should all know, none of these can be printed.

Russian vacations

By the way, fewer distillates such as diesel and fuel oil means that private and public transportation and freight would slow down lots, also affecting heavy-duty vehicles, industrial machinery, and airplane travel. Also far lower tourism. So might as well shut down the EU and go away on vacation to beautiful Russia right? You won´t find that much food or heating or A/C either, just new massive unheard of migrations all around you. With less Russian imports, very huge German industrial giants run the certainly serious risk of shutting down otherwise continuous year-round processes which cannot be re-started and would mean irreparable harm & negative impact on the German economy and the rest of the world. And it’s not only Russian produce that would be missing. Also from Belarus and Ukraine itself + the Stans

mission impossible

Only mediocre light-brained European leadership can propose such suicidal move 100% guaranteed to blowback in-their-face much harder and faster than their original strike. It´d be like poking a bear ( sound familiar ? ) with a sharply pointed pole and pretending the beast to continue munching fish unbothered by the aggression itself and the presence of the aggressor, both. Not even young unexperienced teen-aged urban Canadians would think of doing such a thing. Of course, they would know that the bear will necessarily focus attention first ( already done that… ) then would rise on his hind legs and swing his sharp deadly paw wide and fast sooner than the EU can react to what just happened.

It isn´t European David vs. Russian Goliath either. It´s a well-fed and rested Russian Goliath with hypersonic weapons under his arm vs. a worn-out underweight European David with a worn-down sling and lots of very small stones…

to “Schwedt” or not to “Schwedt”

Schwedt is a key refinery for which the German government better find fast good & reliable sources of substitute Russian oil. If Schwedt does not deliver as usual, problems will be felt throughout Germany, Poland, and elsewhere.

But one problem is that Schwedt is majority-owned by Rosneft, the Russian state oil company which has control.

Now supposedly Schwedt has already dramatically reduced its dependence on Russian oil. But there´s a rub.

data laundromat

The rub is that EU member countries are very good at data laundering practices since inception of EU membership acceptance proceedings. Don´t trust me, ask Goldman Sachs they should know. So, for example, if imported Russian oil stays stationary in an EU depot for a couple of months it is “nationalized” and it is no longer considered to be ´Russian´.  Also, the official oil inflow figures cheat, as for partial mixtures of Russian oil 45%+ 55% ´oil from somewhere else´ it is considered to be non-Russian, see? So Russian oil import substitution is a topic not yet anywhere close to being solved. And if Russian oil is banned right here, well Russians might deny delivery of either Russian oil or Russian gas – or whatever — over there. They defend their interests, not the EU´s. Ref # 15 https://www.rt.com/business/555059-europe-needs-russian-gas/ Ref # 16 https://www.rt.com/business/555022-germany-petrol-shortages-russia-oil/

two to tango

Which brings us to the fact that the EU cannot dream of moving its pieces in a vacuum as if the Russian enemy were not there also playing in the same theater scenarios and moving its pieces alternatively. The instant the EU makes any headway whatsoever regarding the possible banning of Russian oil, then Russia will respond in kind or possibly before so as to carry out a pre-emptive deterrence sort of like a taste of things to come such as in Poland and Bulgaria

“We have every right to take a matching decision and impose an embargo on gas pumping through the [existing] Nord Stream 1 gas pipeline. So firstly, Russia may reduce or cut off its gas exports if the West goes ahead with a ban on Russian oil”. Understand? The EU attacks Russian oil and Russia counter-attacks reducing or cutting off Russian natural gas, etc. In other words, asymmetric non-military retaliation. Ref # 17 https://www.bbc.com/news/58888451

Prices

If the Russian oil ban attempt goes ahead, agreed that the first thing that Russia may do is reduce or cut off nat-gas supplies – or other key commodities — with the stroke of a keyboard.. And it would be impossible to find replacements for Russian oils fast enough also. It would take years of adaptation and readjustments and it will still be much more expensive for European consumers. Russian Deputy Prime Minister Alexander Novak left on record that a “rejection of Russian oil would lead to catastrophic consequences for the global market causing oil prices to more than double to $300 a barrel”…possibly up to $ 500 pundits say assertively in specialized blogs. Be it $300 or $500 does the EU actually want that ? And Russia would end up earning much more by exporting far less. Trust US Treasury Secretary Janet Yellen, she said it, not me. And the higher the price, the higher the inflationary pressure and the higher the prices at the supermarkets already at approx. 35% p.a.. I can´t believe having to explain all this, really…

Ref # 18 https://www.bbc.com/news/business-60656673

Despite sanctions, Russia has almost doubled its monthly earnings from selling fossil fuels to the EU, according to the Centre for Research on Energy and Clean Air. The EU has imported about $23 billion dollars of fossil fuels per month from Russia since March 2022 as oil and gas prices have soared, compared with an average of about $ 12 billion in 2021. Meanwhile, transfers of oil between tankers have surged as buyers take advantage of discounted Russian crude. Different crude blends shipped from Russia may also contain oil from elsewhere which would also be affected.

logistics & freight

Banning Russian oil also means a logistics major reversal from-East-to-West to from-South-to-North. Such cardinal change is costly and risky. New shipping freighters are unprepared for unknown delivery schedules and product specs. Ports and oceans are different, shipping lanes are different, climate is different, seasonal availability of product and ship size and type are also different. That also involves lots of negotiating time, coordination, money, expertise, risk, permanent costs, and new dependencies with yet unknown trade and business partners, new modus operandi, brokers, insurance companies, etc. That is why every EU government has failed to build a realistic energy strategy that does not depend on Russia. Continuity, LNG & LPG terminal bottlenecks, and processing, availability, cost, no weather restrictions when needed. Pipe delivery is safe, dependable, and cheap, sea freight is risky and cost-prohibitive

nuclear blues

Germany had 15 nuclear plants in operation. The last 3 operating nuclear plants in Germany were scheduled to be decommissioned permanently in 2022. Part of the “Green Agenda” in the EU is to eliminate nuclear plants. France does not approve this, but is having technical trouble with its nuclear plants. France has said it will shut down 50% of its nuclear plants for critical maintenance this year at the worst possible timing imaginable.

Ref # 19 https://www.bbc.com/news/business-61298791

military impact

No readily available fuels of the right type (careful) mean no deployment no planes or other aircraft which means pretty much being stuck. Bad logistics, less food, no (or less) supplies, no heating to speak of. The European conventional military dependence on Russian fuels is beyond overwhelming, close to checkmate. Fuel imports are not anywhere near a military solution, just a way for civilians to survive if and when available and at a terribly high price.

“So the EU better be prepared to continue paying (many) billions of euros each week to Russia, supporting the Ruble and subsidizing its military in the process. It’s not just a short-term problem, either. If Germany manages over time (many years ?) to find adequate replacements for Russian natural gas, oil and coal, it will be at (tremendously) much higher prices. The era of cheap-Russian natural gas fueling the German economy is over. German energy-intensive companies, like its chemical giants, could not compete in the global market. Germany will face painful choices about the future of its industrial economy”. So without very specific and unreplaceable exclusive Russian grades of natural gas and oil and coal the European military are pretty much game-over.

Ref # 20 https://www.zerohedge.com/energy/trump-was-right-putins-gas-strategy-gives-germany-only-bad-worse-choices

unmanageable world finances

The camel is 990% overloaded and this one foolish decision may break its back. The world already rides on a wild $ 600+ trillion of a derivatives tiger that can only survive provided the corresponding counterparties do not fail.

“ Clearly, central banks in conjunction with their governments will have no option but to rescue their entire financial systems, which involves yet more central bank credit being provided on even greater scales than seen over Covid, supply chain chaos, and the provision of credit to pay for higher food and energy prices. It must be unlimited.”

Ref # 21 https://www.goldmoney.com/research/goldmoney-insights/financial-war-takes-a-nasty-turn?gmrefcode=gata

So unless something dramatically favorable happens very soon, economic-financial considerations will have highly negative socio-political impact driving the crisis to a high-pitch climax with the pitchforks roaming about European streets. Per Rabobank: “ When the ´food system´ breaks down, everything will break down with it”.

Per The Guardian, “…Come October, it’s going to get horrific, truly horrific … a scale beyond what we can deal with”.

Europe´s mad ban on Russian oil is just another perfect example of sheer Anglo-Saxon European puppeteering.

Ref # 22 https://www.theguardian.com/business/2022/apr/19/energy-chiefs-fear-40-of-britons-could-fall-into-fuel-poverty-in-truly-horrific-winter

Ref # 23 https://www.zerohedge.com/markets/rabobank-when-food-system-breaks-down-everything-will-break-down-it

Andrei Martyanov: They are terrified when seeing this banner

April 28, 2022

Please visit Andrei’s website: https://smoothiex12.blogspot.com/
and support him here: https://www.patreon.com/bePatron?u=60459185

OPEC to EU: No Alternative to Russian Oil

April 12 2022

By Staff, Agencies

Current and future sanctions on Russia could spawn one of the worst oil supply shocks in history, OPEC Secretary General Mohammed Barkindo warned EU officials on Monday, adding that it would be impossible to replace the volume of oil lost in such an event.

Some seven million barrels of Russian oil per day are leaving the world market as a result of sanctions and other restrictions on Russian trading, Barkindo explained.

The OPEC official also told the EU that the current volatility in the market is due to “non-fundamental factors” beyond OPEC’s control and that it is the responsibility of the EU to promote a “realistic” approach to energy transition.

The EU has announced that it plans to join the US and UK in instituting an embargo on Russian energy products. However, unlike the US and UK, Europe imports a majority of its energy supplies from Russia, and experts have warned that attempting to cut off the supply could have catastrophic results.

In particular, Germany is anticipating the collapse of entire industries, while the head of Austrian energy giant OMV has declared it would be “impossible” for his country to quit buying Russian gas.

While the US has promised to step up and fill the gaps with its more expensive liquefied natural gas exports, most of Europe’s LNG terminals are already operating at capacity, meaning there would be no place to store the fuel. Other countries are eager to use the crisis as an opening to push into renewable fuels.

Nevertheless, the European Parliament demanded last week an immediate and total embargo on Russian imports of oil, coal, natural gas, and nuclear fuel, and it is expected to have a significant negative impact on European standards of living if followed through.

Some countries, such as Hungary and Slovakia, have made clear they plan to ignore the ban in the interests of self-preservation, though others have warned their citizens to tighten their belts and get ready for lean times ahead.

Oil and gas aren’t the only commodities whose supply is drying up amid the war in Ukraine. Russia and Ukraine together produce about a third of the world’s wheat exports, and both countries are also major exporters of sunflower oil and fertilizer. As a result, food prices have hit historic highs, and many countries and NGOs are warning of food shortages looming in the near future.