Putin's War on the US

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Sertorio
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Putin's War on the US

Post by Sertorio » Mon Mar 16, 2020 3:56 am

Putin Unleashes Strategic Hell on the U.S.
by Tom Luongo - March 15, 2020

https://www.strategic-culture.org/news/ ... ell-on-us/

I am an avid board game player. I’m not much for the classics like chess or go, preferring the more modern ones. But, regardless, as a person who appreciates the delicate balance between strategy and tactics, I have to say I am impressed with Russian President Vladimir Putin’s sense of timing.

Because if there was ever a moment where Putin and Russia could inflict maximum pain on the United States via its Achilles’ heel, the financial markets and its unquenchable thirst for debt, it was this month just as the coronavirus was reaching its shores.

Like I said, I’m a huge game player and I especially love games where there is a delicate balance between player power that has to be maintained while it’s not one’s turn. Attacks have to be thwarted just enough to stop the person from advancing but not so much that they can’t help you defend on the next player’s turn.

All of that in the service of keeping the game alive until you find the perfect moment to punch through and achieve victory. Having watched Putin play this game for the past eight years, I firmly believe there is no one in a position of power today who has a firmer grasp of this than him.

And I do believe this move to break OPEC+ and then watch Mohammed bin Salman break OPEC was Putin’s big judo-style reversal move. And by doing so in less than a week he has completely shut down the U.S. financial system.

On Friday March 6th, Russia told OPEC no. By Wednesday the 11th The Federal Reserve had already doubled its daily interventions into the repo markets to keep bank liquidity high.

By noon on the 12th the Fed announced $1.5 trillion in new repo facilities including three-month repo contracts. At one point during trading that day the entire U.S. Treasury market went bidless. There was no one out there making an offer for the most liquid, sought-after financial assets in the world.

Why? Prices were so high, no one wanted them.

Not only did we get a massive expansion of the repo interventions by the Fed, but it was for longer duration. This is a clear sign that the problem is nearly without an end. Repos longer than three days are in this context a rarity.

The Fed needing to add $1 trillion in three-month repos clearly means they understand that they are looking out to the end of the quarter as the next problem and beyond that.

It means, in short, the world financial markets have completely seized up.

And worse than that…. It didn’t work.

Stocks continued to slide, gold and other safe-haven assets were hit hard by a reversal of capital outflows from the U.S. In the first part of the aftermath of Putin’s decision the dollar got whacked as European and Japanese investors who had piled into U.S. stocks as a safe-haven sold those positions and brought the capital home.

That lasted a few days before Christine Lagarde put on her dog and pony show at the European Central Bank and told everyone she didn’t have any answers other than to expand asset purchases and continue doing what has failed in the past.

This touched off the next phase of the crisis, where the dollar begins to strengthen. And that is where we are now.

And Putin understands that a world awash in debt is one that cannot withstand the currency needed to repay that debt rising sharply.

That puts further pressure on his geopolitical rivals and forces them to focus on their domestic concerns rather than the ones overseas.

For years Putin has been begging the West to stop its insane belligerence in the Middle East and across Asia. He’s argued eloquently at the U.N. and in interviews that the unipolar moment is over and that the U.S. can only maintain its status as the world’s only super power for so long. Eventually the debt would undermine its strength and at the right moment would be revealed to be far weaker than it projected.

This doesn’t sit well with President Trump who believes in America’s exceptionalism. And will fight for his version of “America First’ to the last using every weapon at his disposal. The problem with this ‘never back down’ attitude is that it makes him very predictable.

Trump’s use of sanctions on Europe to stop the Nord Stream 2 pipeline was stupid and short-sighted. It ensured that Russia would be merciless in its response and only delay the project for a few months.

Trump was easy to counter here. Sign a deal with Ukraine, desperate for the money, and redirect the pipe-laying vessel back to the Baltic to finish the pipeline.

And with natural gas prices in Europe already in the gutter from oversupply and a mild winter, there isn’t much time or money lost in the end. Better to take the world oil price down well below U.S. production costs which ensure that Trump’s prized LNG stays off the European market as the myth of U.S. energy self-sufficiency vanishes in a puff of financial derivative smoke.

Now Trump is facing a market meltdown well beyond his capacity to fathom or respond to. While Russia is in the unique position to drive costs down for so many of the people while riding out the shock to the global system with its savings.

Because money flows to where the best returns on it come, high oil and gas prices stifle development of other industries. Lowering the oil price not only deflates all of the U.S.’s inflated financial weapons it also deflates some of the power of the petroleum industry domestically. This gives Putin the opportunity to continue remaking the Russian economy along less focused lines. Cheap oil and gas means lower return on investment in energy projects which, in turn, opens up available capital to be deployed in other areas of the economy.

Putin just told the world he’s not riding his country’s oil and gas resources like a cash cow but rather as an important part of a different economic strategy for Russia’s development.

It’s like watching someone playing the first half of a game implying one strategy and making a critical shift to a different one halfway through, taking advantage of their opponents’ carelessness.

It rarely works, but when it does the results can be spectacular. Game, Set, Match, Putin.
If this analysis is correct, Putin has about KO'ed Trump and the US. Will this lead to the end of American adventurism around the world, and to sustainable peace? Let's hope so...

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Doc
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Re: Putin's War on the US

Post by Doc » Mon Mar 16, 2020 7:15 pm

https://www.washingtontimes.com/news/20 ... edium=push


Russia and China flood web with coronavirus outbreak lies blaming U.S.; State Dept. fights back

State Department combats China's attempt to reshape narrative, blame Washington
“"I fancied myself as some kind of god....It is a sort of disease when you consider yourself some kind of god, the creator of everything, but I feel comfortable about it now since I began to live it out.” -- George Soros

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Sertorio
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Re: Putin's War on the US

Post by Sertorio » Tue Mar 17, 2020 3:13 am

Doc wrote:
Mon Mar 16, 2020 7:15 pm
https://www.washingtontimes.com/news/20 ... edium=push


Russia and China flood web with coronavirus outbreak lies blaming U.S.; State Dept. fights back

State Department combats China's attempt to reshape narrative, blame Washington
It's sort of funny. The US is constantly and falsely accusing Russia of all sorts of misdeeds, but is outraged at being the target of similar propaganda by other countries. Unfortunately some past actions by the US makes some people think that accusations against the US may not be lies...

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Doc
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Re: Putin's War on the US

Post by Doc » Tue Mar 17, 2020 11:07 am

Sertorio wrote:
Tue Mar 17, 2020 3:13 am
Doc wrote:
Mon Mar 16, 2020 7:15 pm
https://www.washingtontimes.com/news/20 ... edium=push


Russia and China flood web with coronavirus outbreak lies blaming U.S.; State Dept. fights back

State Department combats China's attempt to reshape narrative, blame Washington
It's sort of funny. The US is constantly and falsely accusing Russia of all sorts of misdeeds, but is outraged at being the target of similar propaganda by other countries. Unfortunately some past actions by the US makes some people think that accusations against the US may not be lies...
Really? What about the Italians?
“"I fancied myself as some kind of god....It is a sort of disease when you consider yourself some kind of god, the creator of everything, but I feel comfortable about it now since I began to live it out.” -- George Soros

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Sertorio
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Re: Putin's War on the US

Post by Sertorio » Sat Mar 21, 2020 5:03 am

The Inevitable Outcome Of The Oil Price War
By Simon Watkins - Mar 19, 2020, 8:00 PM CDT
https://oilprice.com/Energy/Oil-Prices/ ... e-War.html

One might reasonably posit that when Crown Prince Mohammed bin Salman (MbS) signalled that Saudi Arabia was once again going to produce oil to the maximum to crash oil prices in a full-scale oil price war, Russian President Vladimir Putin probably fell off the horse he was riding bare-chested somewhere in Siberia because he was laughing so much. There is a phrase in Russian intelligence circles for clueless people that are ruthlessly used without their knowledge in covert operations, which is ‘a useful idiot’, and it is hard to think of anyone more ‘useful’ in this context to the Russians than whoever came up with Saudi’s latest ‘plan’. Whichever way the oil price war pans out, Russia wins.

In purely basic oil economics terms, Russia has a budget breakeven price of US$40 per barrel of Brent this year: Saudi’s is US$84. Russia can produce over 11 million barrels per day (mbpd) of oil without figuratively breaking sweat; Saudi’s average from 1973 to right now is just over 8 mbpd. Russia’s major oil producer, Rosneft, has been begging President Putin to allow it to produce and sell more oil since the OPEC+ arrangement was first agreed in December 2016; Saudi’s major oil producer, Aramco, only suffers value-destruction in such a scenario. This includes for those people who were sufficiently trusting of MbS to buy shares in Aramco’s recent IPO. Russia can cope with oil prices as low as US$25 per barrel from a budget and foreign asset reserves perspective for up to 10 years; Saudi can manage 2 years at most.

A key reason why Russia can survive for so much longer than Saudis is actually thanks to MbS himself. Underlining this – and the fact that the Russians do have a very impish sense of humour, as they do – was that Russia’s Energy Minister, Alexander Novak, last week praised the co-operation of the OPEC+ grouping over the past three years, which, he added “had earned Russia 10 trillion rubles [US$140 billion].” Presumably just to highlight the irony of this further, Russia’s Finance Ministry then helpfully chipped in that the accumulated funds from the previous OPEC+ agreements will help Russia to support the ruble and will also help Russia to cope with oil prices as low as US$25 per barrel for up to 10 years. The metaphorical icing on the cake, though, was Novak adding that “we may reach new agreements [with OPEC] if needed”. In practical terms this means that if, in fact, it takes longer than originally thought by Russia for Saudi to go bankrupt and it starts to have any negative impact on Russia, then Moscow will just click its fingers together and Riyadh will come running to sign a new OPEC+ output cap deal.

But surely, some may say, Saudi stands no chance of going bankrupt? In fact, as highlighted above, Saudi will absolutely go bankrupt if it continues this oil price war. As Saudi Arabia’s own deputy economic minister, Mohamed Al Tuwaijri, stated unequivocally in October 2016 last time that the Saudis tried this exact same ‘strategy’ from 2014 to 2016: “If we [Saudi Arabia] don’t take any reform measures, and if the global economy stays the same, then we’re doomed to bankruptcy in three to four years.” That is to say, that if Saudi kept overproducing to push oil prices down – just as it is doing right now, yet again - then it would be bankrupt within three to four years. The timeframe has halved for a variety of reasons outlined in my recent piece on this very subject here.

But what has Russia to gain from Saudi going bankrupt? Economically, it means that Saudi will default on sovereign and corporate debt, will not be able to service its key industries, and will be unable to meet the requirements for its major oil and gas contracts. Simply having less Saudi oil and gas competing in the same space as Russia and its allies – notably Iran and Iraq – would be benefit enough for Russia but there are even bigger added benefits too. One of these is the destruction of the already strained relationship between the U.S. and Saudi Arabia that has endured since 1945. At that time, as analysed in depth in my new book on the global oil markets, the deal that was struck between the then-U.S. President Franklin D. Roosevelt and the Saudi King at the time, Abdulaziz, onboard the U.S. Navy cruiser Quincy in the Great Bitter Lake segment of the Suez Canal was that the U.S. would receive all of the oil supplies it needed for as long as Saudi had oil in place, in return for which the U.S. would guarantee the security both of the country and of the ruling House of Saud.

Support in the U.S. for the continuation of this relationship has already diminished markedly in the past few years. This change in attitude began in earnest when it came to the U.S. public’s attention that 15 of the 19 hijackers who flew the aeroplanes involved in the ‘9/11’ terrorist atrocity on the U.S. were Saudi nationals. The extent of the Saudi government’s involvement in funding such terrorism appeared front and centre following the overriding on 28 September 2017 by the U.S Congress of former President Barack Obama’s veto of the Justice Against Sponsors of Terrorism Act. That made it possible for families of the victims of the ‘9/11’ terrorist attack to sue the government of Saudi Arabia for damages. Within a short space of time after this reversal, there were seven major lawsuits in federal courts alleging Saudi government support and funding for the ‘9/11’ attack, and more lawsuits are expected.

Subsequent events have not softened this negative view, with ongoing pressure from the U.S. Congress over the Saudi-led war in Yemen, the cosying up of Saudi to Russia in the OPEC+ grouping, and Lebanese President Michel Aoun’s allegation in 2017 that then-Prime Minister Saad al Hariri had been kidnapped by the Saudis and forced to resign. Matters grew worse with the murder of dissident Saudi journalist, Jamal Khashoggi, on 2 October 2018 at the Saudi consulate in Istanbul, Turkey, which even the CIA concluded was personally ordered by MbS. Such was the shift in sentiment away from Saudi over these years that the U.S. Presidential Administration has come under growing pressure to finally implement the ‘No Oil Producing and Exporting Cartels Act’ (NOPEC). This bill – which can still be implemented, incidentally (apparently something else that MbS has not taken into consideration) - would make it illegal to artificially cap oil (and gas) production or to set prices, as OPEC and Saudi Arabia do.

The bill would also immediately remove the sovereign immunity that presently exists in U.S. courts for OPEC as a group and for its individual member states. This would leave Saudi Arabia open to be sued under existing U.S. anti-trust legislation with its total liability being its estimated US$1 trillion of investments in the U.S. This, and all of the other aforementioned events, resulted in MbS being completely unable to find any international listing destination for the Aramco IPO. As highlighted ahead of the IPO in previous articles published in OilPrice.com, Aramco shares are now haemorrhaging value for precisely the key reason cited: that the company would be used as an instrument of government policy - however ill-considered - regardless of the considerations of shareholders.

Moreover, at the weekend, Aramco posted figures showing a 21 per cent fall in 2019 ‘due to a drop in oil prices’ – and this is before the new price-crashing strategy was put in place by MbS! After the ‘strategy’ announcement, the shares were trading at 15 per cent less than the offer price. In addition, again making a lie of its previous statements, it emerged at the end of last week that, despite its proven ridiculous claims by the Kingdom to boost supplies to levels never before even vaguely attained. Aramco rejected at least three Asian refiners’ (one Korean, one Taiwanese, and one Chinese) requests for additional crude for April, on top of their long-term supply deal.

So Russia, with Saudi Arabia either in the oil price war or better still bankrupt, benefits either way. The long-term goal of Russia is to control directly or indirectly all of the key players in the Shia crescent of power in the Middle East, including most immediately Lebanon, Syria, Iraq, Iran, and Yemen (via Iran). All of these countries have vast oil and gas reserves and/or useful coastlines for Russian military and commercial needs (Mediterranean access or access to the Arabian Sea). To do this, Russia’s core foreign policy strategy is to create chaos and then project Russian solutions and therefore power into that chaos. In this respect, again, MbS is being very ‘useful’ to the Russians.
Either the US caves in, or it will suffer very substantial losses, including the loss of influence in the ME. In the end, Russia wins, and we will all win with that.

neverfail
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Re: Putin's War on the US

Post by neverfail » Sat Mar 21, 2020 5:49 am

Sertorio wrote:
Sat Mar 21, 2020 5:03 am


Either the US caves in, or it will suffer very substantial losses, including the loss of influence in the ME. In the end, Russia wins, and we will all win with that.
You falsely suppose that Saudi Prince Salman is doing this at the behest of the USA whereas I see him more like a loose cannon doing his own thing. I am sure that privately Trump would like to strangle him as prolonged low oil prices threaten to bankrupt America's heavily indebted shale oil producers - and Trump would not be the only one.

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Sertorio
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Re: Putin's War on the US

Post by Sertorio » Sat Mar 21, 2020 6:04 am

neverfail wrote:
Sat Mar 21, 2020 5:49 am
Sertorio wrote:
Sat Mar 21, 2020 5:03 am


Either the US caves in, or it will suffer very substantial losses, including the loss of influence in the ME. In the end, Russia wins, and we will all win with that.
You falsely suppose that Saudi Prince Salman is doing this at the behest of the USA whereas I see him more like a loose cannon doing his own thing. I am sure that privately Trump would like to strangle him as prolonged low oil prices threaten to bankrupt America's heavily indebted shale oil producers - and Trump would not be the only one.
I meant the US caving in on what concerns the US anti-Russia policies. If the US stops trying to undermine Russia's economy, Russia could help the US with higher oil prices...

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