Category Archives: energy war

In War there is No Law

by John Helmer

A survey of ancient, medieval and modern historians of Europe has so far failed to produce a single example of a war successfully prosecuted on the battlefield when back at staff headquarters the treasurer, banker and auditor were each and all against the army. By contrast, there are many examples of financiers who have been tolerated for playing both sides in war, and who managed to keep their heads and fortunes, even in revolutionary France, the Napoleonic wars, and Adolf Hitler’s Germany.

It is also obvious that the Wall Street bankers and US Treasury officials who have devised the Russian sanctions schemes since 2014, and especially since February 24, don’t aim to attack the Russian oligarchs, bank robbers and grand larcenists who have turned coat and switched sides against the Kremlin. Starting with Mikhail Khodorkovsky, they comprise a long list — Sergei Pugachev, Andrei Borodin, Boris Mints, the Ananiev brothers, Vadim Belyaev, Vladimir Chernukhin, Leonid Lebedev; the list goes on.

The latest to do a runner, fleeing Moscow for his seaside villa on the Ligurian riviera, in Italy, and then residence and citizenship in Israel, is Anatoly Chubais; he was the state treasurer, banker, and auditor all in one for President Boris Yeltsin. He is reported in the Moscow press to be currently under prosecutors’ investigation of offshore bank accounts with stolen state funds suspected of amounting to billions of dollars. Ahead of Chubais’s departure, Moscow reporters have uncovered details of property title transfers for his $3 million Moscow apartment and his $50 million country estate at Odintsovo, outside the city. These have been papered in the names of nominees associated with a steel and pipemaking oligarch in Chelyabinsk. For more details of how Chubais arranged the acquisition of property through a Swiss company cut-out, which then faced court claims for disputed money from Boris Mints and his family, read this. For Chubais’s financial tie to the pipemakers of the Urals, read this.

Chubais is not sanctioned by the US, nor is his protégé, the former finance minister, opponent of defence spending, US candidate for prime minister, and currently the state auditor, Alexei Kudrin.

Read more: http://johnhelmer.net/

Kudrin’s successor as finance minister, still in the job since 2011, is Anton Siluanov; he is under US sanctions, and so are the heads of the state banks, German Gref of Sberbank, Andrei Kostin of VTB, Andrei Akimov of Gazprombank; and Igor Shuvalov of VEB.

Except for his two years of conscription in the Soviet Army in 1985-87, Siluanov has been a finance ministry official since he graduated from the state finance academy at the age of 22. He worked his way up the ranks under ministers Yegor Gaidar, Boris Fyodorov, Alexander Livshits and Chubais – all advocates of the free market reorganization of the Russian economy and unrestricted capital outflow.

In US bureaucratic terminology, Siluanov is more US Office of Management and Budget than US Treasury. He was deputy head of the budget department of the ministry between 1992 and 1997, when he supervised the dismantling of the Russian social welfare and defence budgets required by the IMF’s borrowing terms; delayed payment of pensions and public sector salaries to paper over the revenue shortfall; and dollarized Russian public finance in place of the ruble. In 1998, when the commercial banks were unable to meet their foreign exchange wagers and the Central Bank declared a default on repayment of ministry bonds to service foreign loans, Siluanov was the ministry’s overseer of banking and macro-economic policy; he reported to Kudrin who was first deputy minister at the time. Their roles in the 1998 default and the simultaneous disappearance of several billion dollars in IMF money, have never been disclosed.

In 2011, when Kudrin was attempting to cut the defence budget and publicly trying to replace then-Prime Minister Dmitry Medvedev, he was dismissed and Siluanov replaced him.

Since the military operation commenced on February 24, Siluanov has made few public statements. In one he corrected his record, as well as Kudrin’s, during the 1998 default crisis, and declared the suspension of his own budget balancing rule. “There are huge funds [in the state budget] for pension provision – 600 billion [rubles] this year, one trillion next year, and the same amounts in the future. Money for the special operation — huge resources are also needed. Citizens also need money to support the economy, the total amount of the so-called budget stimulus that we have launched into the economy is 8 trillion rubles. Huge funds. We need these resources to support the economy, to support our citizens.”

Siluanov has also assured foreign bond holders that Russia will remain a “reliable borrower” and continue servicing its foreign state debt without defaulting. His method, he told the Moscow business newspaper Vedomosti this week, is to bypass the US Treasury’s ban on repayment in either the frozen reserve dollars or in unfrozen reserve funds, by invoking the bond contract provision to allow the Russian treasury to pay in any currency other than the US dollar in the event of “a court decision, an order of a court of any jurisdiction or any other decision”. In order to collect their bond coupon payments, Siluanov said, creditors will be able to do so through opening special state bank accounts in rubles.

The heading in the May 29 report of Siluanov’s interview with Vedomosti reads: “Russia will use the scheme of payments for gas in rubles for settlements on the national debt -- Investors will have to open accounts in Russian banks and give instructions for the purchase of currency” – source: https://www.vedomosti.ru/

The domestic critics of Siluanov fault him for this technical approach in wartime, and for his career commitment to following orders, the domestic and foreign ones. “He’s the purser of the Titanic totting up the crew wage bill as his ship goes down,” comments a politician active in the Donbass. “He has no image of the future, so all he can do is to plan for the past. He cares about the image of Russia the reliable borrower which he’s spent thirty years administering as an apparatchik. He believes this is important in the world, because he has no other vision of the financial world other than the US and IMF-dominated global order.”

“By reliable borrower, Siluanov means not only and not so much the Russian Federation as he means himself. There are a lot of people in Moscow, not only Siluanov, who still can’t realize there is now no old world left. The old ‘rules based order’ is being used to destroy Russia. Siluanov is trying the impossible – to defend with the weapons of the other side. The sorry thing is that Siluanov has no conception of the future. He is waiting for Biden to lose, and for the Republicans to come to power when sanctions will begin to be lifted and everything will be the same again.”

There is no US sanction for Elvira Nabiullina, head of the Central Bank. In April the Canadian government had placed her on their sanction list; the Australian government had done the same a few days earlier. The New York Times then followed with a ringing endorsement of Nabiullina by a string of international banking officials and academics, all of them hostile to Russia and in favour of removing Putin. She was reported by the newspaper to be “an important beacon of stability for Russia’s financial system”, “the very model of a modern central banker”, “never been suspected of any corruption”, “personable, focused, always well-prepared, an advocate of market forces (despite her Soviet-era economics education)”, and finally “she is actually doing something that she didn’t sign up for.”

Left to right: Anton Siluanov, state treasurer; Alexei Kudrin, state auditor; Elvira Nabiullina, state banker.

The Financial Times, which now reports on Russia from Riga, Latvia, has never published an interview with Siluanov, nor a direct comment by him; it hasn’t mentioned Kudrin since 2019. Nabiullina continues to take the newspaper’s direct calls and was last reported in print on April 29.

On April 13, just days after the New York Times promotion, the Wall Street Journalpublished a feature on Nabiullina. “I did reach out for an interview with Nabiullina,” said Alexander Osipovich, a Wall Street Journal reporter in New York who has also published in the Moscow Times. “I was told that her schedule is very busy right now and they did not have time to have me sit down with her. I have spoken to a lot of different economists, people who are both inside Russia and out of it, people who have known Nabiullina over the years, and tried to assemble this portrait of her. Of course, the biggest thing is when you can’t get a direct interview is you don’t really know what people think and what’s driving them. And one of the questions that I have that I tried to address, but I don’t think I could fully address was what does she think about the war? What is her take on the invasion, all these awful things that are happening? Does she see herself as abetting it? Does she see her own role in it? I can ask these questions. I can speculate about it, but I don’t really know.”

“ I do think that a lot of people who are from her, sort of her set, her educated kind of Moscow background, economists, academics, people like that, many of them are horrified by the war and very much against it. Those who have gotten out of Russia are open about this. Those who have stayed in Russia generally have kept quiet about it because if you speak up about it nowadays you’ll get arrested…There were a lot of rumours shortly after the war started that she wanted to leave and had submitted her resignation. We were able to confirm that she had tried to resign, but under not fully clear circumstances it seems to have been denied.”

“Clearly, Putin wants to have her around. He seems to believe that she is an effective crisis fighter. She’s good at keeping down inflation. She is a good manager of the economy. And he wants to have her around for longer. I think that basically if she were to leave and some new unknown person were to come into place, that could be another cause of Russian economic instability, which is probably the last thing that Putin wants right now. [Question: What tools does she have to work with given that this economic crisis is caused by factors related to the war, like sanctions?] Her tools are limited. There are only so many things that the Central Bank can do in a situation like this. Russia is facing very big problems, and it will be beyond her power to fix them. But she is definitely going to be part of the team of people trying to fix them… I think that she has sort of cast her lot with Putin for now. She will be there for the foreseeable future, and she has her work cut out for her because Russia’s facing an economic crisis. She is going to be a big part of the efforts to deal with that, but it’s going to be tough.”

The Moscow Times, a Dutch Foreign Ministry-sponsored publication, has published a sharp attack on Nabiullina for remaining loyal. The writer, Anders Aslund, was a protégé of Chubais and for many years on the payroll of Victor Pinchuk, a Ukrainian oligarch. Aslund is currently living in Washington where he is associated with a foundation financed by the US and UK governments, George Soros, and state sources in Kiev.

According to Aslund, “the high interest rates [Nabiullina] has set have not been responsible for relatively low inflation — the major currency crises played a significant role in that — and the Russian population has suffered from her extreme austerity policies. For some reason Western economists who condemn Germany’s comparatively mild austerity policy praise Russia’s far more severe policy.”

“At Putin’s behest, Nabiullina built up Russia’s international currency reserves to $640 billion, while the Russian people have suffered from her extreme austerity policies. It is clear now that this was not a sensible economic policy but preparation for war.”

“Putin’s war in Ukraine has finally shaved off the halo from Nabiullina. By building up the large currency reserves, she effectively allowed Putin to start the war. She did not understand that the reserves could be frozen by the West, although it had done so to several other countries, such as Iran and Libya. When the Western sanctions hit on Feb. 28, she lost her nerve and doubled the Russian interest rate to 20 percent, aggravating the financial panic. She closed down all financial markets for one month. When they opened partially, they were heavily regulated. She has also ended the convertibility of the ruble.”

“Instead of securing macroeconomic stability, she has participated in Putin’s return of the Russian economy to Soviet times and destroyed the CBR. It is widely rumoured that she wants to resign, but that Putin has not accepted her resignation. It might be better for all if he did.”

India Buying Up Cheap Russian Oil and Selling it to the West at Huge Profits

by Chris Menahan
InformationLiberation

India is buying up cheap sanctioned Russian oil, refining it, then selling it to the US and EU for huge profits, according to a report in the Wall Street Journal.

The US has reluctantly given India permission to buy Russian oil because India has threatened to ditch their alliance with America and ally with China if the US dares to sanction them.

While Americans and Europeans are being forced to pay record prices for gas as “the cost of standing up for freedom,” the free nation of India is buying oil from Russia for a whopping $35 off a barrel and selling it back to us in a hilarious arbitrage scheme.

From WSJ, “Russian Oil Producers Stay One Step Ahead of Sanctions”:

Europe just targeted Russian crude with its toughest sanctions yet, but shippers and refiners are getting the oil to market by obscuring its origins. Some fuels believed to be partially made from Russian crude landed in New York and New Jersey last month.

The cargoes were brought through the Suez Canal and across the Atlantic from Indian refineries, which have been big buyers of Russian oil, according to shipping records, Refinitiv data and analysis by Helsinki-based think tank Centre for Research on Energy and Clean Air.

[…] [India’s] imports have skyrocketed to 800,000 barrels a day since the war began, compared with 30,000 barrels a day previously, according to commodity-markets data company Kpler.

[…] A refinery owned by Indian energy giant Reliance Industries Ltd. bought seven times more Russian crude in May, compared with prewar levels, making up a fifth of its total intake, according to Kpler.

Reliance chartered an oil tanker to carry a cargo of alkylate, a gasoline component, departing from the nearby Sikka port on April 21 without a planned destination. Three days later, it updated its records with a U.S. port and sailed over, discharging its cargo on May 22 in New York.

“What likely happened was Reliance took on a discounted cargo of Russian crude, refined it and then sold the product on the short-term market where it found a U.S. buyer,” said Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air. […]

Reliance didn’t respond to a request for comment. Its joint chief financial officer, Srikanth Venkatachari, said in a May 6 briefing that the company has minimized feedstock cost by sourcing “arbitrage barrels.”

Indian refined oil-product exports, beefed up by cheap Russian supplies, have grown sharply since the beginning of the war. Daily shipments to Europe have risen by a third and by 43% to the U.S. on a quarterly basis.

We are truly the suckers of the world.

Full article at InformationLiberation.

Energy War Not in West’s Favor

I think that we will see a much greater integration of Iran with Russia, recent actions point to this – Iran increasing imports from Russia, and this movement on the North-South transport corridor. There is also the coordination and agreement about the resources under the Caspian Sea. If the JCPOA is reinstated and Iran sanctions lifted, Iran can also build the pipeline through Pakistan and also the northern route to China (Iran, through Afghanistan or the other Stans to China).

I find it ridiculous that the West thinks that they can make up for the potential loss of Russian gas supplies to Europe by going nice on some of the nations that they have previously bullied mercilessly. They seem to forget that the Chinese demand for natural gas will probably double in the next decade, sucking up any available new sources. India and Pakistan can also very significantly increase natural gas usage in the next decade.

This story gives some good background information, wrt to natural gas:

  • Germany imports 142 billion cubic metres (bcm) of natural gas each year, all by pipeline; 55% from Russia, 30% Norway, 13% from Holland (see Groningen field closure below – this source will soon disappear)
  • Germany has no LNG terminals, and its domestic gas production of about 6 bcm is near depletion
  • Germany plans to close its remaining nuclear and coal based electricity production, increasing the demand for natural gas (the whole reason NS2 was built!)

  • Europe imports a total of about 168 bcm per year from Russia, about 45% of gas imports – the balance mostly from Norway.

  • The Groningen field in Holland is already down to about 10 bcm / year and will be closed within the next few years due to land subsidence issues. German domestic natural gas production of 6 bcm/yr close to depletion.
  • The move to renewables, and to reduce CO2 emissions, will increase the demand for natural gas across Europe
  • Norway is pretty much maxed out, its actually pumping more than normal to help Europe out but must reduce that for required maintenance etc. It supplies about the same amount of gas to Europe as Russia.

  • Qatar currently exports about 106bcm of LNG per year, which will double by 2025. Most of this gas is used in Asia, a market which has a rapidly growing level of demand.

  • Iran has the second largest natural gas reserves in the world, but it also has a population of 90 million and an industrial sector that use pretty much all of that natural gas. It only exported about 17 bcm of natural gas in 2020. Also, why would Iran want to help out the Europeans who didn’t help it when the US walked away from the JCPOA. Iran also has a huge energy for investment trade deal with China.

Basically Europe is planning to cut itself off from Russian gas supplies at exactly the time when (i) its own gas production is finishing (ii) Norway is maxed out (iii) its own policies will significantly increase the demand for gas (iv) demand from Asia is set to expand substantially.

LNG tanker supplies are fundamentally more limited than pipeline supplies, and more expensive due to the cost of gassification/degassification and transport. The US may be able to supply more gas to Europe, but this will lead to increased domestic gas prices as domestic consumers compete with exports. Another hit to US consumers who are already paying the costs of increased oil prices and the sanctions on China.