Month: June 2022

UK Foreign Secretary Liz Truss has made her perhaps most provocative comments yet aimed at both Russia and China. It’s sure to result in swift protest and condemnation from Beijing, given she invoked the Taiwan comparison while expressing regret over not sending more weapons to beleaguered Ukraine sooner.

She said Wednesday that the West needs to learn the lessons of Putin’s Ukraine invasion and apply them to Taiwan: “We should have done things earlier, we should have been supplying the defensive weapons into Ukraine earlier. We need to learn that lesson for Taiwan.” 

Her words before MPs strongly suggested that Russia’s “special operation” in neighboring Ukraine has emboldened Xi Jinping in pursuing a military invasion and occupation of Taiwan. China’s government has consistently and forcefully rejected any comparisons between the Ukraine and Taiwan situations.

In the briefing she delivered before the Foreign Affairs Committee, Truss continued, “There’s always a tendency, and we’ve seen this prior to the Ukraine war, there’s always a tendency of wishful thinking, to hope that more bad things won’t happen and to wait until it’s too late.”

Part of her rationale was the lengthy and costly amount time it takes from the moment the decision is made to send in weapons, to the time they can actually get deployed by the Ukrainians on the battlefield:

“Every piece of equipment we have sent takes months of training, so the sooner we do it the better,” she said.

This week UK Prime Minister Boris Johnson appeared to argue something similar, however without wading into the controversy of Taiwan independence: 

Speaking to reporters on the plane to the Nato summit in Madrid, Boris Johnson said: “I just think it’s very important that countries around the world should not be able to read across from events in Europe and draw the conclusion that the world will simply stand idly by if boundaries are changed by force.

“That’s one of the most important lessons that we pick up from Ukraine.”

Some Britons on social media angrily sounded off as Truss is apparently eyeing military aid to Taiwan at a moment the UK’s own stockpiles are already being shipped overseas in large numbers and depleted, in order to prop up Ukraine’s defenses:

Boris just Pledged another £496 Million to Ukraine. Now Liz Truss wants the UK Taxpayer to ‘Arm Taiwan’ in case china invades. These LUNATICS are Destroying this Country as every day passes! pic.twitter.com/mtxIP1P35K

— Holly Christmas (@HollyChristma1) June 29, 2022

Like the US, the UK at least officially holds to the ‘One China’ policy and thus doesn’t have diplomatic or defense pacts with Taipei. Beijing officials are more than likely to see these latest ultra-provocative Taiwan comparisons as a severe violation of the spirit of One China.

As for the Russia-Ukraine conflict, it remains anything but certain whether if the West armed Kiev earlier this would have made a significant difference in the trajectory of the war. There’s lately been increasing acknowledgement among Western pundits and the clear momentum is with Russia as it slowly gobbles up Donbas territory. President Zelensky is asking billions more in aid from the West as a summit of NATO heads gather in Madrid this week.

By John Kemp, senior energy analyst at Reuters

With global inventories steadily falling and spare capacity eroding, the oil market resembles a geological fault line in which stress is quietly accumulating and will eventually be relieved by an earthquake of as yet unknown magnitude.

The most likely stress relief will come from a deceleration in oil consumption as a result of a recession or mid-cycle manufacturing slowdown in the major oil consuming economies of North America, Europe and Asia.

Economic growth is already slowing in the United States and faltering in Europe and China under the combined impact of accelerating inflation, rising interest rates and coronavirus controls. Financial conditions are tightening rapidly as central banks raise interest rates and commercial banks enforce tougher lending standards.

Unlike previous cyclical slowdowns, central banks are likely to continue tightening financial conditions as the economy slows to snuff out inflation.

The alternative is for a sharp acceleration of production ― meaning more output from OPEC members, U.S. shale producers, other non-OPEC suppliers, or currently sanctioned countries. Most OPEC members are already producing at full capacity, with the exception of Saudi Arabia and the United Arab Emirates.

The precise amount of spare capacity available in Saudi Arabia and the United Arab Emirates is disputed given the secrecy which surrounds their production systems. But it is unlikely to be much more than around 1 million barrels per day (bpd) based on historic production rates (“Can Saudi Aramco Meet Its Oil Production Promises?”, Bloomberg, June 29).

U.S. shale producers are already increasing drilling rates, which will translate into higher production over the next 6-12 months, once the wells have been drilled, fractured and linked up to pipeline systems.

The largest shale producers remain committed to restraining output growth to avoid flooding the market and return capital to shareholders, which is likely to limit growth from this source.

Non-OPEC non-shale producers (NONS) are expected to increase production by under 1 million bpd in both 2022 and 2023 (“EIA forecasts growing liquid fuels production in Brazil, Canada and China”, EIA, June 17).

The only other source of increased production would come from easing sanctions on Venezuela, Iran or Russia, which could add several million barrels daily to the market depending on which sanctions were relaxed.

ACCUMULATING STRESS

Brent’s spot price and calendar spreads are sending contrasting signals about the tightness of oil supplies, implying the market is storing up volatility which is likely to be unleashed over the next few months.

Front-month futures prices are high, but not extremely so once adjusted for inflation, lying in the 85th percentile for all months since 1990 and the 78th percentile for all months since 2000.

The implication is the market is short of petroleum but the shortfall is not (yet) critical and expected to be resolved relatively easily by an increase in production, a reduction in consumption, or both.

But Brent’s six-month calendar spread, usually seen as a clearer signal about the balance between production, consumption, inventories and spare capacity, is trading near record levels.

Brent spreads are signalling the market is already exceptionally tight, with shortages becoming critical and difficult to relieve without a massive increase in output, a recession-driven fall in consumption, or both.

Other calendar spreads, including the very short-term dated Brent spreads for cargoes scheduled to load in the next few weeks, and Murban crude futures, the benchmark in Asia, are already at record levels. The tightness in some of these short-term spreads is likely exaggerated by squeezes, so the price structures should be interpreted with care, but squeezes would not be possible if the market was not under-supplied.

Critical calendar spreads are signalling an extreme shortage of crude – even though the U.S. Strategic Petroleum Reserve (SPR) is discharging 1 million barrels per day until the end of October.

Spreads signal the production-consumption balance is expected to be far tighter than in either 2012-2014 or 2007-2008, the last time that real oil prices were this high.

The contradiction between spot prices and spreads must eventually be resolved, which will likely induce significant volatility: either spot prices must rise to align with tightness implied by the calendar spreads, or the spreads must soften to match the more evenly balanced market implied by spot prices.

TIME TO CHOOSE

The oil market is confronting policymakers with a menu of options. But each of them carries a high cost in terms of diplomacy, domestic politics, the economy, or all three, making them unpalatable for decision-makers. This explains why “clever” technical solutions that appear to avoid these hard choices are so popular at the moment in the United States and the European Union.

The proposed price cap on Russia’s petroleum exports is designed to reduce Russia’s revenues without reducing oil supply, raising prices, increasing the need for a recession, or relaxing sanctions on Iran or Venezuela. But the feasibility of these technical solutions falls as their complexity increases.

It is like going into a restaurant, ordering all the items on the menu, and then being surprised the eventual bill is so high.

In the recent past, stringent U.S.-led sanctions on Iran between 2012 and 2015 contributed to the period of very high real prices between 2012 and 2014. Sanctions have invariably driven up energy prices for consumers unless there are alternative supplies readily available to make up the deficit (“Energy sanctions and the impact on prices for consumers”, Kemp, June 2022).

In the current market, there is very limited spare capacity, unless and until a recessionary slowdown in the global economy and oil consumption creates some more slack.

U.S. and EU policymakers must therefore choose – tougher sanctions on Russia; easier sanctions on Venezuela and Iran; faster production growth from Saudi Arabia and the UAE; faster growth from U.S. shale; or a deeper recession.

Prince Charles years ago stopped accepting bags full of cash from Gulf royalty and won’t do it again, a senior royal source told BBC on Wednesday. 

The odd assurance follows an explosive report by The Times of London that the former prime minister of Qatar gave Charles suitcases and shopping bags filled with cash on three occasions between 2011 and 2015. 

The money came from billionaire Sheikh Hamad bin Jassim bin Jaber Al Thani, whose term as Qatar’s prime minister—2007 to 2013—partially overlapped with the time in which the gifts were made.

In 2017, Hamad bin Jassim said his government “maybe” funded the al Qaeda spin-off al Nusra Front in Syria. British media have called him “the man who bought London,” as he owns or has a stake in many of the city’s most prestigious addresses and businesses. 

The senior royal source said the sheikh’s gift to the Prince of Wales “was passed immediately to his charity and it was his charity who decided to accept” the stacks of cash said to be worth over $3 million. The transfers took place in private meetings at Clarence House, the prince’s official residence. The money was variously handed over in a suitcase, duffel bag or shopping bags from upscale London department store Fortnum & Mason. 

“Everyone felt very uncomfortable about the situation,” a former advisor to Charles told The Times. “[The] only thing we could do was to count the money and make a mutual record of what we’d done. And then call the bank.”

The chairman of the Prince of Wales Charitable Fund, Sir Ian Cheshire, told BBC that today’s money laundering regulations further make it unlikely that such a cash donation would be accepted again.   

As the New York Post reports, the assurance that the money promptly went to the prince’s charity was insufficient to prevent concerned ripples throughout the UK: 

The revelation fueled talk of a “cash-for-access culture” surrounding Prince Charles — coming just months after his longtime aide, Michael Fawcett, was bounced from the charity amid allegations he used his position to help a Saudi billionaire receive a “golden visa” and high royal honors.

In that episode, wealthy Saudi Mahfouz Marei Mubarak bin Mahfouz paid tens of thousands of dollars to receive a visa that could enable him to achieve UK citizenship, and to be granted an honorary title that has a bit of an 80’s Keanu Reeves ring to it: Commander of the Most Excellent Order of the British Empire. 

Authored by Julianne Geiger via OilPrice.com,

In the first quarter of next year, the countries of the European Union will have to cut their usage of natural gas by up to 30% in preparation for a complete stoppage of Russian gas flows, according to the International Energy Agency (IEA). 

IEA Director Fatih Birol on Tuesday said that “a complete cut-off of Russian gas supplies to Europe could result in storage fill levels being well below average ahead of the winter, leaving the EU in a very vulnerable position.” 

“In the current context, I wouldn’t exclude a complete cut-off of gas exports to Europe from Russia,” he stated. 

Citing technical issues related to the Nord Stream pipeline, Russia earlier in June cut flows of gas to Germany by 60%. 

Plans to boost natural gas storage filling in Europe would not withstand a full Russian cut-off if it were to happen between now and the fourth quarter of this year. 

By the first of November, the European Union should have its gas storage filled to 90%; however, a complete Russian cut-off would reduce that significantly, leading to another surge in natural gas prices, which have already tripled year-on-year, according to Bloomberg, citing figures from the ICE Endex. 

European natural gas prices remained steady from Monday to Tuesday, in part due to a resumption of the flow of Russian gas through the TurkStream pipeline, which was undergoing maintenance. The pipeline has a 31.5-billion-cubic-meter capacity, Bloomberg reports. 

On Tuesday, Dutch front-month gas futures dropped 0.2% at the close. 

Also steadying natural gas prices in Europe on Tuesday were new estimations for demand, which could see a drop due to sunnier weather that can better support solar energy. 

[ZH: Wednesday saw European NatGas re-accelerate as fears grew after Sweden and Finland were formally invited into NATO. EU NatGas is now trading at a 100% premium to US NatGas (in oil barrel equivs)…]

This is not enough to calm nerves in Germany. Last week, German officials warned that the country is under threat of having to ration gas usage, which would have a devastating effect on the economy. German Minister for Economic Affairs Robert Habeck said the country had entered the “second alert level” of its emergency gas plan.

“Even if we don’t feel it yet, we are in the midst of a gas crisis. From now on, gas is a scarce asset,” Habeck said in a statement, Fortune reported. 

Following Moscow threatening to retaliate and escalate, it seems the European Union is seeking to rapidly defuse tensions after earlier in June giving Lithuania the go-ahead to block all rail and road transit of Russian goods going to Russia’s exclave of Kaliningrad. Some one million Russian citizens of Kaliningrad Oblast have been cut off from normal and vital reception of goods through neighboring EU-NATO member Lithuania since June 17 due to enforcement of EU sanctions against Moscow.

But Reuters is reporting Wednesday that Brussels is ready to climb down quickly from its hard line sanctions enforcement stance, after last week the Kremlin warned Lithuania that “Russia will certainly respond to such hostile actions.” A statement from Nikolai Patrushev, the Secretary-General of Russia’s Security Council, at the time threatened: “The consequences will have a serious negative impact on the population of Lithuania.” But now EU leaders are said to be seeking compromise.

The EU is now talking sanctions exemptions rather than enforcing them over an area that will only ensure escalation with Moscow.

European officials are in talks to exempt the area from sanctions that have so far hit industrial goods like steel and pave the way for a deal in early July if EU member Lithuania drops its reservations, the people who refused said Not to be credited because the discussions are private.

This despite all the talk of a unified front and “resolve” to not only enforce existing anti-Russia sanctions but ramp up further punitive measures over the Ukraine invasion at both the G7 and NATO summits held this week.

Russia has said it would for the time being ferry goods across the Baltic Sea to its territory of Kaliningrad. At the same time, Russia’s military nearer to the start of the Kaliningrad ‘blockade’ initiated missile exercises in the Baltic Sea, which featured anti-ship missile ‘live fire’ against targets. The Defense Ministry even publicized and promoted footage of the threatening drills.

And more crucially, there are emerging reports of further fresh Russian missile deployments to Kaliningrad’s Baltic Sea coast. “Analysis of satellite imagery shows that Russia has now positioned advanced anti-ship missiles on the Kaliningrad coast,” a fresh report in the global maritime monitoring site Naval News finds. “The systems are deployed to the Mys Taran headland, a prominent landmark mid-way along the exclave’s short coastline.” According to details in the report:

The missile systems are two types which are often deployed together. The first, 3K60 Bal system (NATO: SSC-6 Sennight), is loosely equivalent to the Harpoon. It shoots the Kh-35 missile, known by the NATO reporting name SS-N-25 Switchblade. This is the same missile that Ukraine’s Neptune system is based on. Each Bal TEL (transporter erector launcher, read ‘launch truck’) can carry 8 missiles. This is more than most other comparable coastal defense systems.

Bal has an effective range of around 70 nautical miles, with an improved version increasing this to 160 nautical miles.

New Evidence Shows Russia Has Deployed Powerful Missiles To Kaliningrad Coast https://t.co/mTwoIG0XEk via @NewsNowUK

— BlueSky (@AirSpecInt) June 29, 2022

The recent drills have given way to fears that Russia could exercises a ‘military option’ if overland goods to Kaliningrad, which is sandwiched on two sides by NATO states, continue to be blocked, per the Reuters report:

If the traditional route for Russian goods to Kaliningrad, first via allied Belarus and then Lithuania, is not restored, the Baltic state fears Moscow could use military force to plow a land corridor through its territory, the person said.

Germany, meanwhile, has troops stationed in Lithuania and could be drawn into a confrontation with its NATO allies if that were to happen.

Moscow has also in the recent past not hesitated to position short-range Iskander missiles in its Kaliningrad exclave.

Meanwhile, there are some surprisingly blunt admissions coming out of Western officials over the Kaliningrad crisis, such as the following in Reuters:

“We have to face reality,” said one person with direct knowledge of the EU discussions, calling Kaliningrad “sacred” for Moscow.

“(Putin) has a lot more influence than we do. It’s in our interest to find a compromise,” he said, acknowledging that the eventual result might seem unfair.

Some of the particular forms of compromise could involve freight traffic being exempted on the basis that it wouldn’t count as “international” trade according to the ‘letter’ of EU sanctions policy (given the exclave is already Russia’s), or issuing waivers on a “humanitarian” basis; however, Lithuania appears in a mood to “stand up” to Russia and not make significant concessions.

Given the Russian escalation and possible missile build-up in the Baltic region, it is looking like goods could flow normatively to Kaliningrad within a few days, according to officials cited in Reuters.

Authored by Caitlin Johnstone via Medium.com,

Turkey’s President Erdoğan has officially withdrawn Ankara’s objection to the addition of Finland and Sweden to NATO membership, with the three countries signing a trilateral memorandum at a NATO summit in Madrid.

The removal of Erdoğan’s objection was reportedly obtained via significant natsec concessions from the other two nations largely geared toward facilitating Turkey’s ongoing conflict with regional Kurdish factions, and it removes the final obstacle to Finland and Sweden beginning the process of becoming NATO members. Finland’s addition will more than double the size of NATO’s direct border with Russia, a major national security concern for Moscow.

“Sweden and Finland moved rapidly to apply to NATO in the wake of Russia’s invasion of Ukraine, reversing decades of security policy and opening the door to the alliance’s ninth expansion since 1949,” Axios reports.

So the western empire will be expanding NATO again in response to a war that was predominantly caused by NATO expansion. Brilliant.

Biden Says US Will Beef Up Military Presence in Europe as NATO Summit Begins in Madrid
NATO is set to agree on an expansion of its forces in Eastern Europe
by Dave DeCamp@DecampDave #NATO #NATOSummit #Ukraine #Russia #Europe https://t.co/JBMKIQh9UI pic.twitter.com/EkBjhvym9m

— Antiwar.com (@Antiwarcom) June 28, 2022

At the same NATO summit, President Biden announced plans to ramp up US military presence in Europe in response to the Ukraine war.

“Speaking with Spanish Prime Minister Pedro Sánchez, Biden said the US will increase the number of US Navy Destroyers stationed at a naval base in Rota, Spain, from four to six,” Antiwar’s Dave DeCamp reports.

“The president said that this was the first of multiple announcements the US and NATO will make at the summit on increasing their forces in Europe, steps being taken in response to Russia’s invasion of Ukraine.”

This news comes out as a new CNN report tells us that the Biden administration does not believe Ukraine has any chance of winning this war, yet still won’t encourage any kind of negotiated settlement to end the bloodshed.

From CNN:

White House officials are losing confidence that Ukraine will ever be able to take back all of the land it has lost to Russia over the past four months of war, US officials told CNN, even with the heavier and more sophisticated weaponry the US and its allies plan to send.

Advisers to President Joe Biden have begun debating internally how and whether Ukrainian President Volodymyr Zelensky should shift his definition of a Ukrainian “victory” — adjusting for the possibility that his country has shrunk irreversibly. US officials emphasized to CNN that this more pessimistic assessment does not mean the US plans to pressure Ukraine into making any formal territorial concessions to Russia in order to end the war.

This would confirm what I and many others have been saying since Russia invaded: that this proxy war is being waged not with the intention of saving Ukrainian lives by delivering a swift defeat to Moscow but with the intention of creating a costly, gruelling military quagmire to weaken Russia on the world stage.

This is further confirmed by a new Politico report that British Prime Minister Boris Johnson has discouraged France’s President Macron from facilitating a negotiated peace settlement between Moscow and Kyiv, which would support an earlier Ukrainian media report that Johnson had discouraged President Zelensky from such a settlement during his visit to Kyiv in April.

Confirms that Ukrainian Pravda story from a couple of months ago. Angloid political elites don’t want this war to end until they’re satisfied enough Russians are killed to kneecap Russia as a rival—no matter how many dead Ukrainians it takes to do so.https://t.co/alKLzwy7DF

— Mark Ames (@MarkAmesExiled) June 27, 2022

These revelations emerge in the wake of western officials admitting that Ukraine is crawling with CIA personnel and special forces operatives from the US and other NATO countries.

“As usual it appears that the administration wants to have it both ways: assure the American people that it is being ‘restrained’ and that we are not ‘at war’ with the Russians, but doing everything but planting a U.S. soldier and a flag inside Ukraine,” writes Responsible Statecraft’s Kelley Beaucar Vlahos of this admission.

“The Russians may not see the distinction and consider this news as further evidence that their war is more with Washington and NATO than with Ukraine.”

The empire is guided by so little wisdom in its escalations against Russia that the US congress is now pushing expensive ship-launched nuclear cruise missiles on its naval forces even as the US Navy tells them it doesn’t want those weapons and has no use for them.

Like hey, just take the nukes anyway. What’s the worst that could happen?

Today in our extremely rational Pentagon budget: Congress funds nuclear weapon the Navy doesn’t even want https://t.co/aOndUGdqDI

— John Carl Baker (@johncarlbaker) June 28, 2022

We need to really start taking seriously the possibility that a nuclear weapon could detonate as a result of misunderstanding or malfunction amid the chaos and confusion of all these frenzied, foolish escalations and lead to an exchange which ends our entire world. This nearly happened on multiple occasions in the last cold war, and there’s no rational reason to believe we’ll get lucky again.

The only sane course of action here is de-escalation and detente, and all the major players in these escalations are pointed in the exact opposite direction.

This is so much more dangerous than most people are letting themselves consider. It’s being sustained by psychological compartmentalization, emotional avoidance, and a profound lack of wisdom.

As David S. D’Amato recently remarked, “If our species does find a way to survive into the distant future, our descendants will look at right now as the near miss; they’ll think, ‘Wow, that was close.’ How do we convince people in power to preserve that future?”

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