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Page added on July 30, 2014

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New Russia Sanctions: Washington, Delusional About US Energy Capacity, Lashes Out

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The New York Times reports that “The United States and Europe kicked off a joint effort on Tuesday intended to curb Russia’s long-term ability to develop new oil resources.” The new sanctions would deny Russia access to western technology needed to access polar oil and deepwater oil, as well as tight oil produced by hydrofracturing and horizontal drilling.

It’s good to know that a lot of Russian oil is likely to stay in the ground rather than being burned in Russian, Chinese, and European car and truck engines, adding to global climate change. But that’s not really the intent of the sanctions; evidently the purpose is merely to punish Vladimir Putin for resisting Western attempts to surround his nation with NATO bases and missiles. For some reason intelligible only to neoconservatives, nuclear-armed Washington seems intent on provoking a major confrontation with nuclear-armed Russia. As justification, we Americans are told in no uncertain terms that Russia was behind the downing of Malaysian Airlines flight 17—despite a remarkable lack of actual evidence to that effect (as veteran journalist Robert Parry points out here).
The foreign policy wonks at the State Department may not understand that Russian oil production has just hit a post-USSR peak and will be declining anyway. The effect of the sanctions will be to speed the Russian decline, forcing up world oil prices as soon as US tight oil maxes out and goes into its inevitable nosedive in the 2017-2020 time frame. Russia, which will still be an oil exporter then, will benefit from higher oil prices (perhaps nearly enough to compensate for the loss of production resulting from the sanctions). But the US, which will still be one of the world’s top oil importers, will face a re-run of the 2008 oil shock that contributed to its financial crash.
No doubt State Department policy experts sincerely believe the recent hype about America as a new energy superpower capable of supplying Europe with oil and natural gas to replace Russia’s exports. Maybe the Europeans are foolish enough to have fallen for this delusion as well. But these will prove to be ruinous high-stakes bets. One can only hope that all the players will stir from these hallucinations before the game turns really ugly.

Post Carbon Institute 



20 Comments on "New Russia Sanctions: Washington, Delusional About US Energy Capacity, Lashes Out"

  1. CAM on Wed, 30th Jul 2014 11:37 am 

    And of course all that Russian polar and deepwater oil isn’t going anyplace. It will still be there in the future for Russia to exploit, and at even higher world prices. Meanwhile, the US continues to burn through its reserves as fast as humanly possible. Doesn’t seem like this is going to work out well at all!

  2. louis wu on Wed, 30th Jul 2014 11:41 am 

    Does anyone think that Russian scientists and engineers are actually to stupid to figure out the technology themselves if they have to?

  3. Davy on Wed, 30th Jul 2014 11:55 am 

    The delusional thinking at least concerning energy is with both sides. Russia cannot grow their energy sector without global help. We are talking damaging the number 2 global producer from the point of view of Europe and the Americans. NR must be right about his TPTB having a plan because surely they know the numbers. I have yet to hear the business community squawk much. I did read an article that Boeing is concerned about titanium supplies. I imagine when the CEO’s start crying we will see some kind of rethink, or course, after it is too late.

  4. Arthur on Wed, 30th Jul 2014 12:30 pm 

    I’m pretty sure that Heinberg knows exactly what a neocon really is. And since he is a closet 9/11 truther, he has little trouble seeing through the fog of propaganda around the MH17 tragedy/scam. If I were a future president Snowden, I would make Heinberg head of the DoE.

    Hmmm, and I see he believes in The North as well. Excellent! Douze points, as they say in Eurovision songcontest circles.

    http://dreamsend.blogspot.nl/2005/11/who-is-richard-heinberg-we-jump-rather.html

  5. Northwest Resident on Wed, 30th Jul 2014 2:14 pm 

    Russia shouldn’t be wasting time or rubles anyway trying to extract polar oil, deepwater oil or tight oil produced by hydrofracturing and horizontal drilling. The return on investment is small and that’s if everything goes according to clockwork. The fact that America and Europe are trying to implement new sanctions that would deny Russia access to western technology needed to access those oil sources is just more proof that the whole Russian/European/American war of words is just that, and lends credibility to my suspicion that this whole thing is being staged for mass consumption.

  6. Arthur on Wed, 30th Jul 2014 2:42 pm 

    Russia is retaliating promptly and announced to increase energy prices… for Europe:

    http://www.spiegel.de/politik/ausland/sanktionen-russland-droht-europa-mit-hoeheren-energiepreisen-a-983698.html

    Meanwhile der Spiegel has closed down comment sections for articles concerning Russia and mh17, too much criticism, insults and threats.lol Der Spiegel is under strong attack from all sides for it’s conflict mongering with Russia. The majority of Germans hates the current development and it is out of the question they are going to be motivated to wage war on Russia. It is going to be a race against time who is going to break the status quo first and leave NATO and the West: Germany or France. Perhaps both, simultaneously.

  7. Northwest Resident on Wed, 30th Jul 2014 3:01 pm 

    Arthur — Maybe that is the ultimate goal — to break up NATO and force European (minds and attitudes) into a cozy relationship with Russia. What good is NATO going to be for the Europeans anyway four or five years down the road when post-economic collapse America is mired in its own issues and can no longer afford to support NATO? Europeans and Russians are going to have to learn to get along without America. Asian countries are going to have to learn to get along with China, dreaded though that prospect may be, without the USA there to hold hands and insure “fair play”. And America? Damn! We’re stuck with those pesky Canadians to the North and with all those third-world folks in the South — and even worse yet, they’re stuck with us! Without plentiful supplies of affordable oil/gas, we’re all going to become much more geographically isolated again, just like the “good old days”.

  8. Makati1 on Wed, 30th Jul 2014 9:26 pm 

    NWR, I concur with your reasoning.

    First: from what I read, the West is not touching Russia’s petrochemical corporations. BP and family would not allow that. As for tech, if the Russian’s don’t have it, certainly the Chinese do. No problems there. Ditto for the cash to fund the enterprise.

    Too many assume that Russia and China are not as educated and intelligent as the West. At this point in history, I would say that the reverse is true.

    Russia takes OUR people to the space station in THEIR shuttle. China has the fastest super computer and is able to shoot down satellites, much to the dismay of the US. Both countries have advantages not available to the West. The ‘marriage’ between Russia and China may be shaky, but the US is forcing it to strengthen quickly.

    At this point there is no logical reason for the world to be in such chaos except for the meddling of the DC Mafia over the last 15 years or so.

  9. MKohnen on Wed, 30th Jul 2014 11:27 pm 

    Maybe someone could enlighten me on this. I did some “back-o-the-napkin” calculations. Let’s say Russia decided to have some “technical mishaps” and cut back their current 10mbpd production by 20%. Now let’s say that drove the price of Brent up to $120. With Brent Crude currently at 105.99, for a four month period that would net out for Russia at approx. a 12 billion loss. I don’t know what percentage the Russian govt gets on oil sales, but let’s say 50%. That means it would cost the Russians 6 billion for 4 months. Conversely, with Europe consuming 14mbpd, the rise in price would cost the EU approx. 24 billion for that four month period. So playing the sanctions game, who would have to give up the quickest?

  10. markisha on Thu, 31st Jul 2014 12:18 am 

    ‘ to my suspicion that this whole thing is being staged for mass consumption.’
    I am having the same thought

  11. Northwest Resident on Thu, 31st Jul 2014 12:42 am 

    Makati1 — I’m no expert, but I’m pretty sure that neither the Russians or the Chinese have anywhere near as sophisticated equipment and expertise as America does when it comes to polar, deepwater or tight oil production. And I think you might be missing the main point which is, the sanctions being put on Russia in this case are not meant to actually hurt them because the Russians probably aren’t all that eager to expand into polar, deepwater or tight oil anyway due to the significant investment required and the high probability that they’d just end up losing their asses on the gamble anyway as so many American companies have. So if the “sanctions” aren’t meant to actually hurt them, then what are they for? A show, a drama for mass consumption? Inquiring minds want to know.

  12. Makati1 on Thu, 31st Jul 2014 2:38 am 

    NWR, sanctions are to make it look like DC and the ‘West’ still have some power in the world. Putin is laughing at them. He knows he has all the aces in this game. He can pull the plug on 30% of Europe’s NG at the spin of a wheel, or the electronic equivalent.

    Loss of trade between Russia and the West is not going to be tolerated by the corporations that are involved, and there are a lot of them. As for the personal sanctions on some of the Russian billionaires: I suspect that Putin is secretly happy that they are slowly being forced to bring their wealth back to Russia. Something that Putin could not easily do on his own. Russia will be the only safe, or at least, the safest place for it when this is over.

    So many threads in this global fabric that we may never see or understand them all, even when it is over.

  13. Arthur on Thu, 31st Jul 2014 2:47 am 

    It would be in the long term interest of Russia to slow down production of oil. Every barrel that is not sold now, will be sold at a higher price in the future. Higher energy prices in Europe would open the door for acceleration of introduction of renewables, precisely what you want: being in energy safety as quickly as possible. The quicker we abandon the illusion of BAU, the better it is. Now there is still some fossil fuel left to do the transition.

  14. Davy on Thu, 31st Jul 2014 7:18 am 

    Art, that sounds great except for the fact that Russia is a basket case Bric economy running on resources and little else with an economy diving into recession from a pseudo dictator bent on world adventurism. So what you are saying is remove more income from a country that is already in financial difficulties. Remember that unfortunate systematic condition called diminishing returns. Putt is already facing significant economic difficulties I doubt self-imposed pain is a smart addition.

  15. Dredd on Thu, 31st Jul 2014 8:16 am 

    Russia now has Black Sea reservoirs to exploit.

  16. J-Gav on Thu, 31st Jul 2014 3:14 pm 

    Makati – I don’t think Putin will ‘pull the plug on Europe’ for gas supplies. He’ll just raise the price and find out who wants to put up, shut up or freeze.

  17. MKohnen on Thu, 31st Jul 2014 3:53 pm 

    Davy,

    This is war! It’s already an economic war, and could easily turn into a physical one. Putin can’t be measuring his actions by trying to maintain a comfort zone. He is having to react to economic aggression. If he just plays things the way the US would like, Russia will be slowly whittled away, the US will transfer the pain of its war to the EU, and the US eventually regain the same kind of total control of Russia they had under Yeltsin. If Russia is a “basket case”, it’s in no small part to the wild capitalist orgy the US sponsored in Russia just after the USSR dissolved. When one talks of corruption in Russia, remember it was primarily the US who created the Russian oligarchs. Putin most certainly hasn’t forgotten that, and he knows very well what Russia has to lose if it succumbs to the US. My bet is that he’s prepared to do anything required to keep that from happening. From the US perspective, he should just relent. After all, the party they had there was a lot of fun. Maybe they’ll let him in on it while they’re creating a whole new set of oligarchs. I’d say that if anyone thinks Russia won’t pull out all the stops to prevent a re-annexation, they have absolutely no understanding of Russia’s history.

  18. Davy on Thu, 31st Jul 2014 5:01 pm 

    MK, there is a point where Putt’s economic actions will be catastrophic for Russia. The Russian economy is not big enough and diversified enough to weather a fight against the whole west. Russia’s links with the Brics especially China will take years to realize with a positive return. He is already pushing the limits of his economy and military with his latest adventurisms. Russia still has Crimea to digest. You don’t just annex a large area and all is well it takes money and resources to administer. The Russians have a large deployment to pay for on the Ukrainian border. What about Putt’s commitment in Syria. I am not going to argue politics and who was wrong or right before. My discussion is strictly numbers. He does not have the strength to do all that he is taking on. I will also say the US/EU are taking a big gamble forcing a Nuk power into a corner and trying to damage the 2nd largest oil producer. This at a time when we here know that oil supply is teetering on a knife edge of a catastrophic decline. I say catastrophic because it will not take much of a decline to spook the markets.

  19. MKohnen on Fri, 1st Aug 2014 12:10 am 

    “MK, there is a point where Putt’s economic actions will be catastrophic for Russia.”

    I agree, and that’s why I wonder why so many people seem to think that Putin will choose an all or nothing approach. He’s a chess player. Russia has already started to attack back. Putin knows you can’t attack the US head-on, either economically or militarily. So he’ll start by picking off the weakest, say, Poland and the Ukraine. To try to realize their ambitions of NATO expansion, the EU and US will have to bolster these weak economies. If Putin scales back either crude or NG output, he can ride the wave of less production/higher prices for a while. That’ll hurt the EU vastly more than Russia. Keep in mind that, in a street fight, the biggest man certainly doesn’t always win, it’s the craftiest fighter.

  20. Arthur on Fri, 1st Aug 2014 3:16 am 

    Indeed MKohnen, Poland is for 100% dependent on Russian fuel. Nice target to start with, if I were Putin and save Germany for the last.

    http://deepresource.wordpress.com/2014/06/25/polish-fm-sikorski-us-polish-ties-worthless/

    Sanctions are in the advantage of Russia. Less deliveries, higher prices. Zero sum game for Russia, high price for Europe… until the breaking point is there and Europe is forced to change sides, under the pressure of the public and industry. NWO exit. The problem is the exceptional weakness of European politics, that let’s it’s relations with Russia be defined by Washington, where it should deal with Moscow directly and give the Nulands the boot. Basketcase Ukraine is not worth a fight with nuclear armed Russia. The entire crisis is manufactured by Washington that wants to pull the Ukrainian rug from under Putin’s feet, so they can install missiles in the Ukraine.

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