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Memo To Putin – To Punish You, We Will Pay More For Oil, Gas And Gold

Politics / GeoPolitics Mar 03, 2014 - 01:43 PM GMT

By: Andrew_McKillop


Push Down the Ruble, Push Up Oil, Gas and Gold Prices

True to its self-assigned role of gung-ho promotion of the New World Order (whatever that is) the 'Wall Street Journal' of Rupert Murdoch led its Monday March 3 edition with the news that “The U.S. and its European allies vowed Sunday to isolate Russian president Putin and punish his nation's economy, demanding he withdraw what they called an occupation force from Ukraine's Crimean region”.

On the ground, things looked different, very different.

The Russian ruble was for sure and certain attacked by FX traders with gung-ho zeal – while their oil market lookalikes talked up prices with the same frenzy. Russia is the second-biggest oil producer in the world.  March 3 in early trading oil advanced as much as 2.2 percent to $111.41 a barrel on the ICE Futures Europe exchange.

Natural gas for UK next-month delivery surged the most in more than 17 months, rising as much as 10.3 percent, despite record-warm winter temperatures, large gas storage volumes and continuing decline of industrial end-use gas. Russia is the largest supplier of gas to Europe.

No better way than that for “punishing Putin”, he will cower at that!

One Scandinavian energy trader based in Singapore was quoted by Bloomberg, March 3, as saying “Russia controls the gas into Ukraine, which in turn has pipelines into Europe, the Europeans are heavily dependent on Russia in terms of gas. They are looking for alternatives, but can’t find them easily.” Nicely said.

Another Scandinavian energy trader, this time based in Copenhagen was quoted by Bloomberg as forecasting that the Ukraine crisis would add a risk premium of as much as $5 a barrel to crude prices for Urals blend shipped from the Baltic – and from Black Sea ports not so far from Crimea. Anything is good for talking up oil prices and handing Mr Putin (and OPEC) more revenues!

Russia, which is estimated by PMG and natural resource analysts such as SRAS as holding 25%-40% of the world's remaining unmined gold, and in 2012 was the world's fourth-largest producer of gold (about 205 tonnes per year), will also be somewhat “unpunished” by the surge of gold prices. Monday March 3, gold prices in early European trading were up $28 per ounce for a 1.8 percent gain.

The European energy and gold traders, and their lookalikes in the US and Asia will carry on their speculative kneejerk action which benefits themselves and Mr Putin for as long as they can - while politicians spout one-liners about “punishing Putin”. When or if US and European politicians dare to take any concrete action, starting with economic sanctions – Putin can cut off all gas and oil supplies to Europe, and see which piglet screams first!

Die for the Crimea

In what might soon have to be called “the first Crimean war”, of the 1850s, this brutal and bloody three-year non-nuclear war waged by the British, French and Turkish Ottomans partly-aided by Germany, against Russia, was itself at least 60 years too late. In 1783 the Crimea had been annexed by Catherine the Great, but realpolitik and geopolitics made the 1853-1856 war “rationale and necessary”. For the Brits, this gave their media Florence Nightingale and the Charge of the Light Brigade, but the economic benefit of the war was strictly zero.

As David Stockman ironically remarks in his blog on the rather feeble and confused attempts by American and European politicians to crank up a new Crimean war, for the next 171 years after Catherine the Great's annexation of Crimea it was an integral part of Russia. Stockman adds in his “Memo to Obama” that this was a span that exceeds the 166 years which elapsed since California was annexed from Mexico by the then 70-year-old USA operating an exactly similar “thrust of Manifest Destiny” on the North American continent, as Catherine the Great operated in the disputed triangle of the Balkans, western central Asia, and northern Muslim-majority regions of the Ottoman Empire. The USA's land grab of California triumphantly provided its Navy with its own warm-water port, in San Diego. The land grab excited patriotic passion in the US, historians tell us.

Apparently, Putin is also attached the idea of warm-water ports to the western side of his embattled “empire”, perhaps because Russia's Pacific ocean access is not warm enough, or he does not have confidence in Russia's mostly 1970s-vintage ICBMs (ballistic missiles), or whatever. Such are les folies de grandeur, highly comparable with successive US and European politicians feeling they have Manifest Destiny in Iraq, Afghanistan and even such obscure corners of the world as Mali and the Central African Republic. The cost of these folies, and zero or small economic benefit are well known.

At the time of the Crimean war (or first Crimean war), which was obviously a non-nuclear conflict which the second Crimean war will be – if it is held – this war did however limit or contain Russian geopolitical reach and power. Immediately following it, in 1855, Czar Alexander II annexed Sevastopol as a bargaining chip for the February 1856 Paris Treaty negotiations with the other belligerants of the war – which included the State of Sardinia! After this Treaty (called unequal by Russia as well as the others), Russia essentially isolated itself.

The basic reason was simple. There was no strict economic benefit from occupying or controlling Crimea at any level of intensity beyond keeping Black Sea pirates and brigands from attacking shipping. State-approved historians, in all countries involved in the Crimean war (even the State of Sardinia's approved historians) of course produced alternate readings of this bottom line.

As Stockman well says in his “Memo to Obama” the essential worthlessness of these chunks of disputed territory makes them none of our business. He says:  “Should the local population now choose fealty to the Grand Thief in Moscow over the ruffians and rabble who have seized Kiev, what’s to matter!  Worse still, how long can Americans survive the screeching sanctimony and mindless meddling of Susan Rice and Samantha Power?”. He forgot to add McCain and the Tea Party Lady, who are already preaching “We told you so”, hinting that Detroit will be next in line for Putin's push westward to seize and hold bankrupt nations and cities run by organized crime.  As we already said, les folies de grandeur dictate such things. Detroit-Semferopol, same conflict!

By Andrew McKillop


Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2014 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

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