Month: April 2023

Iran’s military has claimed a US spy plane violated or at least came close to violating its airspace on Sunday, having flown over Iranian territorial waters. An Iranian navy statement said it tracked the movements of “an American spy plane” that approached Iran without authorization.

“After the US Navy’s EP-3E aircraft entered Iran’s territorial waters, vigilant Navy commanders sent a warning to prevent the aircraft from entering the country’s airspace without authorization,” the statement said.

The incident happened over waters in the Gulf of Oman, and Iranian state media is saying its military chased it away. Navy commanders said the American Navy EP-3E plane returned to international routes after Iran “sent a warning”.

The Pentagon did not immediately confirm or comment on the alleged incident in the hours after the Iranian media reports.

Tensions are high on the gulf region following recent US Navy intercepts of ships said to be carrying ‘illegal’ weapons and fuel in the Gulf of Oman.

The UK military has also lately disrupted alleged smuggling operations out of Iran involving cargo destined for Yemen and the Iran-backed Houthi rebels there who for years have been battling Saudi/UAE forces. Washington has long backed the Saudi coalition, and for a long period of time assisted with airstrikes and aircraft. 

Last month’s Iran-Saudi rapprochement and normalization of ties is expected to have a stabilizing effect in the gulf region, or at least that’s the hope among many officials in the West, but one important factor is that it has put Israel even more on edge. Israel has attacked what it says are ‘Iranian targets’ inside Syria three nights in a row since Thursday, in a significant uptick of aggression. 

Submitted by Leonard Hyman and William Tilles for Oilprice.com,

Last week, Washington, D.C. based Last Energy announced that it had signed agreements in the UK and Poland for thirty four small modular reactors. Frankly, when we first saw the headline we assumed editorial failure by the UK press and moved on. But our initial impression was wrong. These are among the tiniest modular reactor designs we have seen to date, producing a mere 20 MWs of electricity. All of the 34 orders cited above collectively equal about one half of a gigawatt scale power plant regardless of type. By contrast the proposed NuScale reactors produce 77 MWs and the GE Hitachi BWRX 300 reactor under consideration by TVA for its Clinch River site is, as the name implies, 300 MWs. But size is not the only thing that differentiates Last Energy from its more conventional competitors. Last Energy is unusual in that its financial backing comes from libertarian, Silicon Valley funders who typically have been portrayed in the press as “disrupters”. Last’s CEO, Bret Kugelmass, started a Washington D.C. based think tank, the Energy Impact Center, “which sought to answer the ultimate question of our lifetime: how to reverse climate change. Nuclear is the answer.” They also sponsored a podcast, ”Titans of Nuclear”, featuring many experts and issues in the field. Our point here is that this company bears little resemblance to the conventional array of government-backed defense contractors representing most of the other SMR technologies. Given its background, not surprisingly Last Energy sounds to us a bit like Uber or WeWork but for new nukes. Their lofty and worthwhile goal is to reverse the impacts of climate utilizing off the shelf nuclear technology with an innovative delivery mode. Their claim is to “follow the best practices of the renewables industry: scaling of quantity rather than size.”

Their offering is a compact 20 MW, single loop, pressurized water reactor that could sit on a site of ½ an acre. It would use conventional nuclear fuel, 4.95% enriched uranium and standard fuel rods in a 17 by 17 array. The build time is estimated to be just 30 months. But, given the full modularity of all plant structures the estimated actual on site construction time is estimated at just three months. The fuel cycle is a lengthy 72 months with a three month refueling interval. These plants would also be air cooled and the company touted its meager water usage of a mere 8 gallons per minute. This contrasts with the significant water demands of other even relatively small reactors. Like other smaller reactors the Last Energy design would feature a “subterranean nuclear island” and “low profile balance of plant”. Gone are the big reinforced domes or rectangles of previous designs that could withstand whatever hypothetical impact short of an asteroid. They describe their approach as “customer centric” and that “our innovation is simple; leverage only proven nuclear technology, create a replicable, manufacturable power plant, and size for private capital.” The first actual plant installations could occur as soon as 2025 or 2026. No other SMR builder is offering a new plant much before 2029.

In terms of cost, the UK press cited a figure of £100 million or less per 20 MW unit, or about $6,135 per kw. This was for a total of 34 European reactors, 24 in the UK and 10 in Poland. Romania is also considering the design. The company has secured PPAs, purchase power agreements, with 4 industrial partners. In Poland they are partnering with the Katowice Special Economic Zone in southwest Poland. In the UK they have three industrial partnerships only identified as “a life sciences campus, a sustainable fuels manufacturer, and a developer of hyperscale data centers.” Last Energy is unique in that they offer “one stop shopping” for nuclear energy purchasers. They state that, “We cover all aspects of the investment process including design, construction, financing, service, and operation.”

The European Nuclear Energy Agency, which monitors nuclear issues, currently lists no fewer than twenty one promising nuclear technologies on its SMR dashboard. (Last Energy’s PWR 20 is not currently listed.) There are multiple entries in each of the five categories of new, small nuclear technology: water cooled, gas cooled, fast spectrum, micro (which would include Last Energy), and molten salt. The dashboard approach ranks these various technologies on five criteria: licensing, siting, supply chain, engagement, and fuel. None of these technologies has as yet been commercially licensed outside of China and Russia. The NEA stated that less than half of the featured technologies could obtain financing for a first-of-its-kind unit and an even smaller subset would be able to obtain purchase power agreements, which  Last Energy has done.

The one major difference between say the BWRX 300 or NuScale versus Last’s PWR 20 is with respect to licensing. The first two companies go to great lengths to describe and advertise their proximity to regulatory approvals. Last’s website notes that the “Biggest uncertainties (are) posed by the licensing process.” They further state their hope that in terms of design development “we are able to fabricate in parallel with our licensing process”. Regardless of how they describe the regulatory/licensing process, the NEA summarizes the basic process in the US and Europe as consisting of four essential steps: 1) pre-licensing interaction with regulators, 2) design approval, 3) construction, and finally 4) issuance of an operating license and commercial operation. Stated differently, it won’t matter how quickly Last Energy engineers can fabricate and assemble their PWR 20 until various regulators approve their design.

From a commercial acceptance perspective, it is difficult to even hazard a guess about future SMR technology since we’re really talking about a replacement cycle, mostly for aging natural gas power plants in the 2040s. Assuming that a new generation of SMRs begin operating at the end of this decade as planned, there is no reason to believe the market will coalesce around one SMR size or technology much before the mid to late 2030s. Right now all we can say broadly is that there seem to be two markets for SMRs, the almost utility scale reactors producing 300 MWs like the BWRX model and micro reactors in the 5-50 MW range including Last Energy. And that these are being pitched to very different types of customers. Electric utilities have been gravitating towards larger reactors for reasons of cost, bigger is still considered cheaper. Smaller reactors on the other hand have appeal for inside the fence commercial and industrial activities, provision of process steam, and compatibility with district heating systems. And this is where Last Energy seems to be making some inroads. 

In the end, though, neither the technical nor business prowess of Last will prevail if the public becomes uncomfortable with the idea of mini nukes spread over the landscape. These will have to be guarded against terrorists, possibly by weak governments, and whose waste has to be transported through neighborhoods and communities to facilities not yet built. Mini nukes look good on paper. But as they say in automotive circles, “Let’s wait until the rubber hits the road.” Something better might come along while we wait. 

The forced bail-in sale of Credit Suisse to UBS will lead to a staggering number of job cuts, ranging from 20% to 30%, which equates to a reduction of approximately 25,000 to 36,000 positions, as reported by SonntagsZeitung newspaper, quoting insiders.

Earlier this month, UBS agreed to acquire its struggling competitor Credit Suisse for 3 billion Swiss francs ($3.3 billion). Before the takeover, Credit Suisse was already undergoing restructuring, which involved letting go over 9,000 staff members. The expected job cuts after the takeover are now considerably greater than initially estimated.

According to the Swiss newspaper, as many as 11,000 employees may face layoffs in Switzerland. The combined workforce of the two banks topped 125,000 at the end of 2022, with nearly 30% of these employees based in Switzerland. Also, a number of jobs at its US investment bank unit will be affected. 

Although layoffs are imminent, UBS has yet to provide any specific timeline for these cost-cutting measures, which hasn’t stopped anxious Credit Suisse employees from contacting Deutsche Bank AG, Citigroup Inc., and JPMorgan Chase & Co. for new employment opportunities. Meanwhile, Nomura has said it has ‘no intentions‘ of hiring Credit Suisse employees. 

Separately, in a surprise announcement last week, UBS announced its previous head, Sergio Ermotti, will reassume the role of CEO on Wednesday to supervise the merger. We suspect that once Ermotti assumes control of the biggest banks in Switzerland, the firings may begin. 

Authored by Gerardo Femina via Pressenza.com,

Many are surprised by Russia’s sudden and violent reaction, which is to be expected if one pays attention to the processes and not just the details. Already in 2007, in the Europe for Peace declaration, it was said that Europe would be plunged into a serious conflict if it continued to support Washington’s policy.

And today, at this point in the Ukrainian crisis, we see only one winner, the United States, which has achieved several goals:

1. New sanctions against Russia

2. Blocking the Nord stream2 gas pipeline and above all stopping one of the things they fear the most, the collaboration between Europe (Germany) and Russia.

3. To propose itself to Europe as an alternative gas supplier.

4. Validate the narrative that Putin has expansionist aims.

5. Increasing control over Europe.

6. Waging war in Europe by sending only arms and not soldiers. The war against Russia is being waged by Europeans, especially the Ukrainians and Eastern European countries in general.

What we are witnessing is the consequence of 30 years of US aggression against Russia with the support of Europe.

The breach of agreements with Gorbachev in 1990, based on the commitment not to extend NATO to Eastern European countries, was a turning point. The aggression then continued with the so-called star shield and the installation of military bases in Poland and Romania. The US advance continued with the Western-led coup in Ukraine, which brought the country to a government of oligarchs close to Washington. Then, in 2015, the Ride of the Dragons took US troops across Eastern Europe to Russia’s borders; the military manoeuvres were accompanied by a campaign of hate speech against Russians and Putin in particular and, more importantly, numerous economic and financial sanctions designed to weaken an already struggling economy.

For its part, Russia has made the “misstep” that the US provoked and hoped for in order to justify further sanctions. Since the beginning of the crisis, Moscow has tried to reach an agreement by clearly spelling out its demands: that Ukraine not join NATO, as it could not accept US military installations with nuclear missiles within 500 kilometres of Moscow. These demands were described as unacceptable, as if hypothetical Russian missiles in Mexico or Canada on the US border were acceptable.

This, of course, does not justify the use of violence or war, but we understand the overall context in which this decision was taken.

Europe will pay the highest price for this crisis. Not only will bills go up and many companies will be forced to close, but also the price of all products will go up and they will no longer be competitive on the world market. This will also slow down exports. In this situation, European governments, in a kind of hara-kiri, accept Washington’s diktat, inexplicably sacrificing their own interests, when they should be talking to all actors on the ground and finding a peaceful and reasonable solution for all.

Neither Russia, nor Europe, let alone the Ukrainian population will benefit from this war.

That is why the Europe for Peace declaration of 2007 said:

Europe must not support any policy that drags the planet towards catastrophe: the lives of millions of people are at stake, the very future of humanity is at stake.

People want to live in peace, they aspire to cooperation between peoples and are beginning to realise that we are all part of one big human family. The development of science and technology can guarantee a dignified life for all, but the greed of a few is holding back the path of human evolution.

At that point, only strong pressure from citizens on their governments could help turn the tide.

If you don’t want war, stop making it. European leaders are incapable of stopping the avalanche, whereas they would do well to listen to the demands of the people. Instead of fueling this war, they need to resume dialogue now.

However, whatever one’s point of view, interpretations and analyses, this war must stop immediately. War belongs to prehistory. Let us build peace!

Europe for Peace
www.europeforpeace.eu

Authored by Jeffrey Tucker via DailyReckoning.com,

Wall Street Journal has conducted a poll with the most interesting results.

From 1998 to the present, the percentage of Americans who say that patriotism is an important value has crashed from 70% to 38%. The bulk of the fall has happened since 2019.

More results will be discussed in a bit but let’s first focus on this issue of patriotism.

The poll doesn’t define for the respondents what patriotism is but reflect on the word. It can mean love of country and homeland. It’s perhaps true that this has fallen. That’s believable since the U.S. in three years ceased to place freedom as a first principle.

Indeed, there is a growing cultural movement, extending from academia to the mainstream, that encourages loathing of American history and its achievements. No “Founding Father” is safe from being called the worst-possible names. Hatred of this country has risen to be an expected norm.

But the problem goes even deeper.

When you are locked in your home, your business is closed, your church is shut, your neighbors are screaming at you to mask up, then the doctors come at you with shots you don’t want, and you are further prevented from leaving the country to anywhere but Mexico, and the president calls the unvaccinated enemies of the people, sure, one can imagine that affections for the homeland decline.

Americans Have Lost Faith in Their Institutions

But there is another important pillar of patriotism. It is about trust in the civic institutions of the country. These include schools, courts, politics and all the institutions of government at all levels.

Civic trust in these are surely at rock bottom. The courts did not protect us. The schools shut, particularly the public ones, which are supposed to be the crowning achievement of Progressive ideology. Our doctors turned on us.

And let’s say that we consider the media to be part of civic culture. It has been that way since at least FDR’s Fireside Chats. It’s always been the mouthpiece for what we are supposed to be thinking about as a people.

The media too turned on regular people for three years, calling our parties super-spreader events, jeering pastors who held worship services, demonizing live concerts and screaming at everyone to stay home and stay glued to the tube.

Yet at the same time, they encouraged mass protests in the wake of the death of George Floyd. Think about the logic, or lack thereof.

Yes, such evil antics tend to lessen public respect for all the institutions involved, especially when objections to these policies were censored by all the institutions we were supposed to trust with our data and friend networks. They turned out to be wholly owned too.

The New Patriotism

All the while, public support for patriotism was abused to deny fundamental rights and liberties. Patriotism was supposed to mean staying home and staying safe, masking up, social distancing, complying with every random edict no matter how ridiculous and finally getting jabbed once, twice, three times and more forever, despite the lack of medical vulnerability for vast swaths of the public.

The Constitution became a dead letter for a time. It still is, as visitors from other countries cannot even enter our borders lest they too submit to the shots made and distributed by companies that provide half the budget of the agencies requiring everyone to comply.

And this was all supposed to be necessary because of what was obviously a seasonal respiratory infection, a fact we knew at least a month before the lockdowns began. We could read about it in all mainstream venues.

Don’t panic, they said, just trust your doctor. But with lockdowns, they also took away from the doctor the liberty of treating patients with therapeutics known to be effective against exactly this sort of virus.

Instead, we were expected to put all of normal life on hold and wait for the magic antidote that was supposedly on the way. When it didn’t arrive until after the hated president was unseated, it turned out not to be an antidote at all.

At best it was a temporary palliative against severe outcomes. It certainly did not stop infection or spread. All that happened anyway, which makes the point that the huge sacrifices made in the name of patriotism were all for naught.

Lost Faith

We should in no way be surprised that the public these days is not feeling very patriotic. And yes, this is very sad in many ways. But it is also what happens when patriotism is hijacked by the state and industry to shatter our hopes and dreams.

We tend to learn from our errors. So when the pollsters come around and ask if we are feeling patriotic, it’s hardly unusual that people would respond: Not really.

And we could say the same about the other poll result: The importance of religion has fallen from 62% in 1998 to 39% in 2022. Again the bulk of the crash happened after 2019. No question that the nation was already trending secular.

But what are we to think when two successive seasons of Easter and Christmas (or whatever holiday you celebrate) were canceled by the civic elites with full cooperation from the mainstream of religious leaders?

The whole point of religion is to reach outside the mundane world of civic culture into the realm of the transcendent in order to see and live by truth. But when transcendent concerns are replaced by fear and secular compliance, then religion loses credibility.

If you want to find people who still believe, you can in groups that are truly serious about faith: the Hasidim, Amish, traditionalist Catholics and Mormons. But in mainline denominations, not so much. Like media, tech, and government, they turned out to be captured too.

Young People Don’t Even Want Kids Anymore

In the final results of the poll, the importance of having children went from 59% to 39% and the importance of community involvement peaked at 62 at the height of lockdowns to fall to an astounding 27%.

Again, the culprit here seems pretty obvious: it was the pandemic response. All the policies were structured to shatter human relationships. People are nothing but disease vectors. Stay away from everyone. Don’t become a super-spreader by daring to hang around others. Be alone. Be lonely. That’s the only proper way.

Finally, among the only things that are rising concern the importance of money. That’s probably because real income has been declining for the better part of two years and inflation is gutting our standards of living.

Once again, pandemic policies are the culprit. They spent trillions and the money printers matched that spending nearly dollar for dollar, watering down the value of a previously reliable currency.

We Need an Honest Accounting

The trouble with the survey is not the numbers but the interpretation. This is being seen as some weird fog of nihilism and greed that has mysteriously slipped over the population, as if it were an entirely organic trend over which no one has any control. That’s wrong. There is a definite cause and it all traces to the same egregious policies without precedent.

We still do not have honesty about what happened. And until we get it, we cannot repair the grave damage to the culture or the national soul.

We are living in crisis times but that crisis has an identifiable cause and hence solution.

Until we can speak frankly about it, the situation can only get worse.

It’s a good time to be a video game fan. Not only is the gaming industry booming and projected to grow to $320 billion by 2026, but every year is bringing new evolutions in the medium.

2022 saw massive launches in both games (Elden Ring and God of War Ragnarök) and media based on games (the films Uncharted and Sonic the Hedgehog 2). 2023 has already seen the release of major flagship TV series based on a game, HBO’s The Last of Us, and the much-anticipated The Super Mario Bros. Movie is slated to release in April.

But which game is the best, or most successful? That debate may never end, but as Visual Capitalist’s Pallavi Rao reports, from company reports and sales data aggregated by Wikipedia, Samuel Parker’s chart of the most-sold video games as of March 3, 2023 can at least tell us which ones have been the most popular.

Top Ten Video Games Sold in History

The best selling video game didn’t need multimillion dollar budgets, sixty-hour narratives, or celebrity voice actors and ad spots. The independently-developed (indie) Minecraft, with its pixelated blocks, takes the top spot on this list.

Minecraft sold more units than the combined forces of Grand Theft Auto 5 (#2) and Red Dead Redemption 2 (#8), both made by industry giant Rockstar. Its immense popularity has been credited to its simple gameplay (no goals), creative structure (build anything), and engaged community with player-run servers and additional feature creations (known as mods).

Another simple favorite, Tetris, comes in at third place with 100 million units sold of its 2006 re-release. Millennials continue to make up a large chunk of the video game playing demographic which might explain Tetris’ sales.

But newer games are making up the majority of sales records. PUBG: Battlegrounds, a battle-royale shooter game which helped popularize the genre (and eventually its competitor Fortnite) asserts its popularity at #5. That puts it well ahead of the better-known shooter Call of Duty, even despite PUBG being banned in a number of countries for the alleged impact on the mental health of gamers.

The oldest game to make the list is Super Mario Bros. (#7), apt considering it is credited with reviving the video game industry after it crashed in 1983. The original staple side-scroller has sold 58 million copies worldwide.

Developer Dominance

Though the top selling games span various series of games, a few developers managed to repeatedly find success.

Japanese video game titan Nintendo developed three games (Super Mario Bros., Mario Kart, Wii Sport/Fitness) in the top 10 and another eight in the top 20. That’s not including its co-ownership of Pokémon, the world’s highest-grossing media franchise.

American publisher Rockstar Games also managed to score multiple hits, though its longer development cycle necessary to create cinematic games gives it fewer potential candidates. That might change with the much-anticipated GTA 6 reportedly in production.

Best Selling Genres

The most popular genres in the top 10 give players the freedom to impose their will upon the world and pursue objectives at their leisure:

Two games (Minecraft, Terraria) are classic sandbox games, where worlds are procedurally generated and there are no gameplay goals. Another two (GTA 5, Red Dead Redemption 2) are in the adjacent open-world genre, with a combination of sandbox elements and a narrative structure.

However, with new games launching and selling millions of units every year, new entrants to the top 10 list of best selling video games of all-time seems likely. How will these developers, genres, and games fare over time?

Authored by Jonathan Turley,

Below is my column in the New York Post on the level of joy being expressed by many over the indictment of former president Donald Trump, including former FBI Director James Comey.

The thrill kill atmosphere ignores the blatantly political history behind this indictment.

In the Sixteenth Century, the poet John Lyly wrote “The rules of fair play do not apply in love and war.” It also appears equally true “in love and War Trump.”

Here is the column:

James Comey could not contain himself at the news of an indictment of former President Donald Trump.

Comey hopped on Twitter to declare, “It’s been a good day.”

The former FBI director, who has been teaching and speaking on government ethics, joined others in celebrating the upcoming arrest of Trump because nothing says “ethical leadership” like a patently political prosecution.

Comey declined to prosecute Hillary Clinton on her email scandal despite finding that she violated federal rules and handled classified material “carelessly.”

He declared, “Ethical leaders lead by seeing above the short term, above the urgent or the partisan, and with a higher loyalty to lasting values, most importantly the truth.”

Yet now Comey is heralding the effort of Manhattan District Attorney Alvin Bragg, who campaigned on a pledge of bagging Trump for some unspecified crime.

While the actual charges will not be disclosed until the release of the indictment, the underlying theory discussed for months is an effort to revive a dead misdemeanor offense of falsifying business records — years after the statute of limitations expired.

Bragg may try to accomplish this Frankensteinian feat by converting this into a felony.

The long-debated theory in Bragg’s office was whether they could effectively allege a violation of federal election laws even though the Justice Department and the Federal Election Commission declined such charges.

Notably, Bragg’s predecessor declined to bring these charges.

Bragg himself declined to do so, and that led to two of his prosecutors resigning in protest.

Mark F. Pomerantz then proceeded to do what some of us view as breathtakingly unprofessional.

He wrote a book on what he learned in the investigation, which was still ongoing.

He made the case for indicting an individual who had not been charged, let alone convicted.

He continued to engage in this public campaign despite requests from his former office that he was undermining its ongoing investigation.

The public pressure worked.

Bragg caved.

Despite the widespread criticism of Bragg for reducing charges for an array of felonies by Manhattan criminals, he spent months working to convert a misdemeanor into a felony.

Trump would apparently have been better off robbing Stormy Daniels at gunpoint rather than paying her off for a nondisclosure agreement.

And yet Comey is not alone in his praise.

Various professors and pundits have declared that this unprecedented use of New York law would be perfectly legal and commendable.

They largely ignore that the misdemeanor is expired.

Instead, Georgetown Law professor and MSNBC legal analyst Paul Butler declared, “Nobody is above the law, including Donald Trump.

“It doesn’t matter that this is kind of a minor crime compared to some of the other allegations.”

However, the law also protects people from selective prosecution and affords them protection through the statute of limitations.

One can debate whether Trump may have committed this misdemeanor.

That is a good-faith debate.

What is not debatable is that the window for such a prosecution closed years ago.

Unless this indictment reveals a previously undisclosed crime, the use of the long-debated bootstrapped offense would defy the rule of law. Nobody is above the law, but nobody is below its protections … including Donald Trump.

Dozens of criminal counts — it’s been reported there are as many as 34 — will make no difference if they merely replicate the same flaws.

There are reports, for example, that Bragg may bring charges based not only on the Daniels payment but money given to former Playboy model Karen McDougal to kill a story on another alleged affair.

However, that payment (from Trump’s friend at the National Enquirer) was also paid in 2016 and raises the same statute of limitations and other issues.

Bragg is operating directly out of Comey’s handbook on “ethical leadership.”

After all, it was Comey who joked about how he violated department rules to nail Trump national security adviser Michael Flynn.

He delighted audiences with how he told underlings “let’s just send a couple guys over” to trap Flynn.

It was Comey who was fired after former Deputy Attorney General Rod Rosenstein cited him for “serious mistakes” and violating “his obligation to ‘preserve, protect and defend’ the traditions of the Department and the FBI.”

It was Comey who violated federal laws and removed FBI material (including reported classified material) after being fired and then leaked information to the media.

Despite those violations, Comey was heralded by the media and made wealthy on book and speaking tours.

Bragg knows that 62% of people view his case as “mainly motivated by politics,” but (like Comey) he is playing to an eager and generous audience.

The buildup to Trump’s booking has all of the appeals of a thrill kill for Democrats.

It will be another “good day” for Comey and others who put politics above principle in the use of the criminal justice system.

By Jake Lloyd-Smith, Bloomberg markets live reporter and analyst

Well OPEC+ certainly knows how to spring a surprise, especially at the start of the week. The substantial production cut — which totals more than 1 million bpd on paper — will tighten market balances into 2H, reinforcing the impact of an expected increase in demand from China. The combination of lower global supply and higher consumption will put more backbone into prices that just two weeks ago had hit the lowest since 2021.

To gauge the way the market’s pricing in the move’s expected impact it’s instructive to look at some of the favored timespreads, particularly Brent’s December-December differential. This measure — the gap between the futures for the final month of this year versus the end of 2024 — got crushed last month as the banking turmoil spurred a flight from risk. This morning, it spiked by as much as $1.57 a barrel, dwarfing the usual daily move of a few cents.

It’s worth remembering that the latest salvo from OPEC+ comes after the US has already drawn down the nation’s emergency crude stockpile, with the Biden administration unleashing a torrent of oil from the Strategic Petroleum Reserve last year after Russia’s invasion of Ukraine.

Right now, the holdings sit at their lowest since the 1980s, effectively strengthening the hand of OPEC+.

Today OPEC+ woke up and chose scorched-earth war against the Fed.

That’s because while the US central bank is already trapped, and is desperately looking for any excuse to halt its tightening campaign now that inflation is accelerating to the downside not just because regional banks desperately need a lower Fed Funds rate to short-circuit the relentless deposit drain which won’t stop (and will lead to even more bank failures and resolutions) until their deposit rates can at least match those of the Fed, but also because various liberal rags have already thrown Powell, pardon, the “Trump-era holdover” under the bus for the coming recession…

The bus now is headed straight for Jay pic.twitter.com/cfa4GYHKFL

— zerohedge (@zerohedge) March 26, 2023

… OPEC’s shocking shot across the Fed and Biden bow revealed in its intention to keep oil prices high even as central banks push the world into a recession, just made life for the central planners very difficult, as the sordid stench of stagflation is suddenly all over the place.

pic.twitter.com/Uoi7RHJkGT

— zerohedge (@zerohedge) April 2, 2023

But while much will be said about the monetary consequences of OPEC’s action, which may be viewed as sealing the fate of countless small banks in an act that any objective person would deem monetary warfare by the anti-Western alliance of China, Russia, and now Saudi Arabia, the complexity of which can be summarized as follows…

Does bitcoin drop from here because rising oil means more inflation and less cuts, or rise because Fed stuck means more banks fail and bank runs resume.

— zerohedge (@zerohedge) April 2, 2023

… there is a much simpler, if far more impactful geopolitical consequence of today’s post-OPEC news price surge.

Readers may recall that one of the reasons why oil first exploded a year ago, then drifted ever lower before hitting a 16 month low just two weeks ago, is because it only gradually became apparent that despite the bluster and posturing, most Western nations – with the exception of a few truly stupid ones – realized that they never intended to truly sanction Russian  oil exports int he aftermath of the Ukraine invasion. Much to the chagrin of Zelensky, this meant that despite their dramatic, Oscar-worthy anti-Putin monologues, western leaders never actually intended to halt Russia’s commodity exporting machine as the consequences for the west would be far more dire.

That’s why when the Russian $60 export price cap was being debated a few months ago, the US quickly quashed any debate for lowering the cap even more as it would mean truly limiting how much oil Russia could export. You see, $60 was a perfect price: as long as Brent traded around $80, Russian Urals – which has traded with a 25-30% discount to Brent – would be comfortably below the cap and any and all Western countries that needed Russian oil could buy it, in the process explicitly funding the Russian military machine that they so vocally oppose by funneling money to the Kiev regime (knowing very well most of that money will be embezzled and will be never seen again).

But where things get problematic is if and when oil prices jump – like they did today – because a spike in Brent also means that Russian Urals will go right up with it. In fact, if Brent rises above $85 or so, Urals hits $60… and if it goes higher, it’s game over for the farce that has passed for Russian oil export sanctions.

Which brings us to today because as the chart below shows, Urals just hit $60 and any further increases in its price mean that virtually everyone in the anti-Russian west is suddenly cutoff from Putin’s oil.

What happens then? Will western nations follow sanction guidelines and stop buying Russian oil, which means sending the price of all non-Russian oil sharply higher (even as India and China step up and buy whatever western importers no longer desire), or will the anti-Russia alliance splinter?

While we are confident that many governments will do the former even if it means more hardship for their citizens, if only to signal their virtue and keep the US state department happy, some are already showing that the anti-Russian alliance isn’t worth the paper it is written on in carbon credits.

Japan is one such nation.

As the WSJ reports today, one of Washington’s closest allies in Asia is now buying oil at prices above the cap, in effect breaking with the sanctions regime imposed by US allies.

As the note adds, Japan got the U.S. to agree to the exception, saying it needed it to ensure access to Russian energy. The concession shows Japan’s reliance on Russia for fossil fuels, which analysts said contributed to a hesitancy in Tokyo to back Ukraine more fully in its war with Russia. It also shows why the price cap was imposed at a level where it doesn’t actually adversely impact Russian oil exports. But the current price surge means that unless the price cap is lifted, the U.S. alliance is about to shoot itself in the leg.

Going back to Japan, it’s the one country which – at a time when most European countries have at least claimed they are reducing their reliance on Russian energy supplies – has stepped up its purchases of Russian natural gas over the past year. Japan is the only Group of Seven nation not to supply lethal weapons to Ukraine, and Prime Minister Fumio Kishida was the last G-7 leader to visit Ukraine after Russia’s invasion.

In the first two months of this year, Japan bought about 748,000 barrels of Russian oil for a total of ¥6.9 billion, according to official trade statistics. At the current exchange rate, that translates to $52 million, or just under $70 a barrel.

Of course, Japan will never admit that Russia has leverage over its energy needs, and there has been a diarrhea of hollow rhetoric in recent days seeking to dispell speculation the Japan’s New PM Fumio Kishida is Putin’s bitch:

Mr. Kishida has said the G-7 summit he is hosting this May in his hometown of Hiroshima will demonstrate solidarity with Ukraine. Tokyo has said it is committed to supporting Kyiv and can’t send weapons because of longstanding export restrictions the cabinet has imposed on itself.

“We absolutely will not allow Russia’s outrageous act, and we are imposing strict sanctions on Russia in order to stop Russia’s invasion as soon as possible,” said chief government spokesman Hirokazu Matsuno.

But empty rhetoric aside, the oil purchases which have been authorized by the U.S., represent a break in the unity of U.S.-led efforts to impose a global $60-a-barrel cap on purchases of Russian crude oil.

The cap works because oil-buying nations, even if they aren’t aligned with the U.S., generally need to use insurance and other services from companies based in the U.S. or one of its allies. The G-7, the European Union and Australia have agreed to rules forbidding those companies from furnishing services if a buyer of Russian oil is paying more than $60 a barrel.

The nations last year granted an exception to the cap through Sept. 30 for oil purchased by Japan from the Sakhalin-2 project in Russia’s Far East. An official of Japan’s Ministry of Economy, Trade and Industry said Tokyo wanted to ensure access to Sakhalin-2’s main product, natural gas, which is liquefied and shipped to Japan. “We have done this with an eye toward having a stable supply of energy for Japan,” the official said.

He said a small quantity of crude oil is extracted alongside the natural gas at Sakhalin-2 and needs to be sold to ensure liquefied natural gas, or LNG, production continues. “The price is decided by negotiations between the two parties,” he said. Russia accounts for nearly one-tenth of Japan’s natural-gas imports, most of it from Sakhalin-2, and the quantity bought by Japan last year was 4.6% greater than in the previous year.

That marks a contrast with Germany, which relied on Russia for 55% of its natural-gas imports before the war and survived a complete cutoff through a quick remodeling of its import infrastructure. Germany’s economy grew last year faster than Japan’s, bucking forecasts of a German recession triggered by the cutoff of Russian gas. Of course, instead of being as reliant on Russian gas, Germany is becoming far more reliant on US LNG shipments. How long until the undue reliance on US goodwill for a country that is one of China’s largest trading partners comes back to bite it?

“It’s not as if Japan can’t manage without this. They can. They simply don’t want to,” said James Brown, a professor at Temple University’s Japan campus. Prof. Brown, who studies Russia-Japan relations, said Japan should move to withdraw from the Sakhalin projects eventually “if they’re really serious about supporting Ukraine.”

Guess they are not “really serious about supporting Ukraine.”

But they are not alone: and once Urals rises above $60 for all nations that buy the cheap Russian grade, we are about to find out how many other nations are also not serious about supporting Ukraine, and will promptly exit the anti-Russian alliance if it means access to Russian oil at just over $60 or paying Riyadh $80, $90, or $100 (or more) for the exact same cargo.

Japan has almost no fossil fuel of its own and relies on imported natural gas and coal for much of its electricity. Officials have said it would be self-defeating to give up access to the Russian liquefied natural gas because Russia could turn around and sell the LNG to China.

In addition to the price cap, the U.S. and many of its allies have largely banned the import of Russian oil into their own countries.

While US officials had said for months that the cap has been generally successful in pushing down Russia’s oil revenue while stabilizing global oil markets, that is about to change thanks to the surprise OPEC+ (where Russia is a key member) production cut, one which will inevitably lift Urals price above $60, triggering sanctions for anyone who buys it.