Streetwise Professor

July 22, 2015

Vlad’s Pivot to Oblivion

Filed under: China,Commodities,Economics,Energy,Politics,Russia — The Professor @ 7:09 pm

This story is a Sino-Russian twofer:

The contract between Russia and China for gas supplied via the western route known as Power of Siberia-2 is being delayed indefinitely, Vedomosti cited Russian officials. They say China is reviewing its energy needs due to the economic slowdown.

The demand growth for gas in China is slowing, at the same time access to liquefied natural gas (LNG) is becoming more available in the country, for example from Australia, due to the fall in oil prices, Sberbank CIB analyst Valery Nesterov told Vedomosti on Wednesday.

Repeat after me: Gazprom finalizes about one out of a hundred of the vapor deals it announces. This is especially true where China is involved.

There are three basic problems. First, the pipeline is expensive, primarily because the Russians insist on building it. After all, how else could they tunnel out money? And if they can’t tunnel out money, what the hell is Gazprom good for?

“Gazprom offers CNPC a high price, explaining this by the high cost of the Power of Siberia – 2 construction. China is ready to build the pipeline at a cheaper cost and at public tender, so its companies could participate and for the construction price to be transparent,” the president of the Russia-China analytical center Sergei Sanakoyev said.

Second, the pipeline would go to the western part of China, which is convenient for Gazprom, but it isn’t where China needs the gas.

Third, China doesn’t need as much gas period, because (a) new (LNG) supply is coming on line in Australia, and (b) despite the happy talk of official statistics, every indication is that the Chinese economy is slowing:

The demand growth for gas in China is slowing, at the same time access to liquefied natural gas (LNG) is becoming more available in the country, for example from Australia, due to the fall in oil prices, Sberbank CIB analyst Valery Nesterov told Vedomosti on Wednesday.

So how’s that pivot to Asia working out, Vladimir? Timing is everything in life, and Putin is counting on China precisely when China has its own issues to deal with. If China was continuing to power forward, Putin’s pivot would have turned him into China’s pilot fish. Now even being a pilot fish looks out of reach.

To all those who hyperventilated at the announcements of huge Sino-Russian gas deals: when will you people learn to discount virtually anything Gazprom says down to just above zero? That’s especially true when there was a huge political reason for Putin to hype such a deal. I guess suckers never learn.

The second part of the twofer here is the further evidence it provides of China’s economic troubles. Look at the commodity carnage going around: oil, copper, iron ore, gold, platinum, you name it are in the dumper. China put them there. This is just another pixel in the image.

 

 

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July 12, 2015

Gazprom Struggles. And There Was Much Rejoicing.

Filed under: Commodities,Economics,Energy,Politics,Russia — The Professor @ 7:18 pm

Surprise, surprise, surprise. The vaunted Russia-Turkey gas pipeline deal is not really a deal. The reason-brace yourself against the shock-is that the two sides can’t come to an agreement over price:

Russia’s plan to build a new $15 billion pipeline to Turkey is at risk of delay because of a fight over gas prices, according to people with knowledge of the matter.

State-run OAO Gazprom and its Turkish counterpart Botas had a six-month period to agree on prices for gas supplies between the two countries, which expired on Monday. The Ankara-based company now has the right to take the matter to international arbitration, three of the people said, asking not to be named because the information is private.

The dispute over prices means there’s no immediate prospect of signing a binding pact for the new pipeline, the second between Russia and Turkey. An agreement could now be delayed until at least October, two more people said, also asking not to be identified.

I was about as surprised about this as I was to see the sun rising in the east this morning.

Remember: Gazprom consummates maybe one percent of the “deals” that it announces. And the deals founder on price. Almost every time.

By the way, this totally demolishes the alleged pipeline deal between Russia and Greece, because the Grecian pipeline was intended to carry gas that Russia had shipped to Turkey on to Europe.

Not that the $2-odd billion pipeline deal would have been more than spit in the ocean of Greece’s debt problem: the Greek government would only realize a fraction of the $2+ billion, many years from now. And as things look now, never.

In other Gazprom news, apparently the company is stiffing Turkmenistan:

Turkmenistan, irked by falling natural gas exports to Russia, hit out at Moscow’s gas export monopoly Gazprom on Wednesday, saying the energy giant had not paid for gas purchased from the Central Asian country so far this year.

“Since the beginning of 2015, OAO Gazprom has not paid for its debts to state concern Turkmengas for the shipped volumes of Turkmen natural gas,” Turkmenistan’s Oil and Gas Ministry said in a statement on its official website (www.oilgas.gov.tm).

Could be worse. Gazprom could have blown up the pipeline.

This suggests that Gazprom is having some major cash flow problems.

And who says there is no good news?

 

 

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July 2, 2015

Though I’ve Been Away, I Keep a Weather Eye on Putinsanity

Filed under: Economics,Military,Politics,Russia — The Professor @ 6:50 pm

Apologies for the light posting. Some travel (to Sweden, Denmark and London), work, and a need to decompress for a bit account for the absence.

I have kept a watch on things, though, and some Putinsanity has caught my eye.

For instance, VVP has accused cursed furriners of luring, Pied Piper-like, talented Russian youth away from the glorious Motherland:

A network of [foreign] organizations has ‘rummaged’ through the schools in the Russian Federation for many years under the guise of supporting talented young people. In reality, they simply hoover everything up like a vacuum

Note to Vlad: the reason that “talented young people” want to leave in droves is less that “foreign organizations” attract them, but that the state and society that you have constructed repel them.

Note the rampant insecurity here. I think that Putin knows that Russia has little to offer. But he can’t admit that, so he rages agains the West.

Item two: Surprise, surprise, surprise. The Russia-Turkey gas pipeline project is stalled because of a failure to communicate on price. Don’t say I didn’t tell you so:

Russia’s plan to build a new $15 billion pipeline to Turkey is at risk of delay because of a fight over gas prices, according to people with knowledge of the matter.

State-run OAO Gazprom and its Turkish counterpart Botas had a six-month period to agree on prices for gas supplies between the two countries, which expired on Monday. The Ankara-based company now has the right to take the matter to international arbitration, three of the people said, asking not to be named because the information is private.

The dispute over prices means there’s no immediate prospect of signing a binding pact for the new pipeline, the second between Russia and Turkey. An agreement could now be delayed until at least October, two more people said, also asking not to be identified.

The Russians think that you are stupid enough to believe that this is due to Erdogan’s defeat in the recent parliamentary elections, but that’s just a face saving cover story. Truth be told, the Russians are masters of vapor agreements. By my rough estimate, two of the last 100 announced gas deals have come to completion. And I’m being generous.

Anyone who believes anything Russia/Gazprom say about any pipeline project, deal, contract, etc., please contact me! Have I got a deal for you!

(As an aside, Erdogan and Putin are doppelgängers in a competition for the coveted titled of Most Insane Wannabe Autocrat Obsessed With Restoring Lost Imperial Greatness. May the best nut win!)

Next comedic moment: the Russia-Greece pipeline vapor deal, which is effectively contingent on a (non-existent) Russia-Turkey pipeline vapor deal. (BTW: Why is everybody freaking out about Russia courting Greece? Let Putin have them! Just what he needs. Another economic basket case, to join Abkhazia, Transnistria, South Ossetia, Donetsk, Luhansk. May the Orthodox nations enjoy every happiness! They deserve one another!)

Item three: Russia blasts the new US defense doctrine, which (realistically) identifies Russia as a threat to the sovereignty of its neighbors due to its willingness to use force as “confrontational.”

This is a perfect illustration of Pirrong’s Principle of Putinist Psychological Projection. Whatever the Russians say about the US is a pitch-perfect description of what the Russians are doing. They are the masters of projection.

This leads to my last observation: what will Putin do in Ukraine? He can’t go back: that would be a humiliating climbdown which he is psychologically incapable of, and which could actually threaten his power. Maintaining the status quo is the lowest risk, but offers the least potential for gain, and creates the real potential for a creeping collapse as the economic drain of sanctions and militarization saps the economy. Going forward and attacking Ukraine presents serious risks. Ukraine might be able to deny him a quick victory and impose serious losses. Even if he prevails operationally, the costs of occupation will be steep. These include the direct costs, which will be especially high if Ukrainians resort to historical precedent and wage a grueling guerrilla war (remember the Greens?). They also include the indirect costs of almost certainly escalated sanctions.

He’s in a fine mess, and I don’t know how he will react. Time is running out for a summer offensive, but time is not on his side generally. My fear is that he will follow Eisenhower’s dictum: “If a problem cannot be solved, enlarge it.” The question is: where? The Baltic-Finland, Sweden, Denmark, as well as the Baltic States-is a real possibility. Putinsanity is hard to predict, but nothing is beyond the realm of possibility.

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June 6, 2015

The Russian World Cup Bid Was So Clean They Just Had to Destroy Their Computers

Filed under: Politics,Russia,Sports — The Professor @ 6:17 pm

Russians from Putin on down are freaking out about the possibility that the FIFA corruption scandal will cause the 2018 World Cup to be wrested from them. But never fear. The head of Russia’s organizing committee, Alexei Sorokin, claims that the Russian bid was “clean”:

The head of the organising committee for the Russia 2018 World Cup has insisted that the bid was clean, transparent and “done in accordance with all the practices that are in place in Fifa”.

Well that’s sort of the problem, Alexei. A “clean and transparent bid done in accordance with all the practices that are in place in Fifa” is an oxymoron. The practices in place in Fifa are dirty and opaque.

And of course, it was precisely because its bid was so clean, transparent, etc., that Russia destroyed the computers its committee had utilized:

But it was the lack of evidence provided by the bid team which was of most concern, according to the author of the summary, Fifa’s head judge, Hans-Joachim Eckert.

He wrote: “The Russia 2018 bid committee made only a limited number of documents available for review, which was explained by the fact that the computers used at the time by the Russia bid committee had been leased and returned to their owner after the bidding process.

“The owner has confirmed the computers were destroyed in the meantime. The bid committee also attempted to obtain access to the Gmail accounts used during the bidding process from Google USA. However, the Russia bid committee confirmed Google USA had not responded to the request.”

The head of Russia’s 2018 organising committee, Alexey Sorokin, told Sky Sports News: “We rented the equipment, we had to give it back, then it went back – we don’t even know where it went – to some sports schools, so quite naturally other people used it.

“Whatever we could supply, everything we could supply to the investigation we did. But we have to bear in mind that four years have passed since then, so some of the information we could just forget, naturally.”

Sorokin’s response there is priceless, isn’t it? It reminds me of the punchline to Steve Martin’s How to Make a Million Dollars and Not Pay Taxes bit. 1. Make $1 million. 2. Don’t pay taxes. 3. When the IRS confronts you, say (theatrically) “I forgot.” Presumably the Russians will react to an indictment or a revocation of the WC with “well excuuuuse me!

Perhaps the Russians destroyed the computers because definitive documentation of their clean, transparent and honest dealings would ruin their reputations.

No doubt the Russians are hoping that others who sent or received emails from them were as solicitous in their document non-retention policy as Russia.

What’s more, with all the arrests and indictments, those involved are threatening to talk. Most notably so far, Trinidad’s Jack Warner threatens to unleash “an avalanche of secrets” implicating Blatter.

I am far less interested in learning about the payees of the bribes, than the payers. Eventually someone, or someone’s computers, will blab. And that’s what has Putin (and Russians generally) losing it.

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June 5, 2015

Is the NSA Spying on Foreign Government Hackers? I Sure As Hell Hope So

Filed under: Military,Politics,Russia,Snowden — The Professor @ 7:08 pm

The latest expose from Putin’s little monkey, Edward Snowden, desperate to maintain his relevance, is that the NSA monitors addresses and cybersignatures linked to foreign hackers, and specifically, foreign government-connected hackers:

In mid-2012, Justice Department lawyers wrote two secret memos permitting the spy agency to begin hunting on Internet cables, without a warrant and on American soil, for data linked to computer intrusions originating abroad — including traffic that flows to suspicious Internet addresses or contains malware, the documents show.

The Justice Department allowed the agency to monitor only addresses and “cybersignatures” — patterns associated with computer intrusions — that it could tie to foreign governments. But the documents also note that the NSA sought permission to target hackers even when it could not establish any links to foreign powers.

To which I say: I sure as hell hope so.

It is more than a little ironic that this article appeared almost simultaneously with the revelation that some foreign organization or government hacked into US government computers, and stole the personal information of millions of government employees. It’s hard to imagine a more telling, vivid contrast between the highly abstract and limited treat to American’s personal privacy posed by the measures described in the NYT article, and the very real threat to that privacy posed by the target of those measures.

This all points out the utter asininity of the Snowden fanatics (who, alas, include some members of Congress and at least one presidential candidate), who appear completely unwilling or unable to think of trade-offs and real world choices, but instead focus monomaniacally on the threat to their personal privacy posed by the US government, while ignoring other more serious threats that (unlike the NSA) operate subject to no legal constraint or oversight whatsoever. Yes, the USG can be abusive, at times to the point of being tyrannical. But we need to speak of specific cases.

Tell me. Whom do you believe is a bigger threat to your privacy? The NSA or hackers, foreign hackers in particular?

There is a pronounced whiff of narcissism from those who think that the NSA really gives a damn about them and their precious online secrets. Sorry to break it to you, but it doesn’t, unless perhaps you have had a bad breakup with an NSA employee. It hoovers up vast amounts of information, but is focused on filtering out the noise to get at intelligence-relevant signals. And believe it or not, the hours you spend on Tinder are nothing but noise.

Hackers, on the other hand, find your information quite fascinating, precisely because they can monetize that information. They can turn ethereal bytes into solid gold.

So there is a real trade off, and when you conceive of it as a trade off the choice becomes pretty obvious. At the cost of allowing the NSA to touch a highly limited sliver of your personal data, you can increase the odds of detecting or deterring a truly malign hack. Or, you can protect your address and cybersignature from the prying eyes of the NSA, and dramatically increase the odds of having your most valuable personal information fall victim to hackers. That’s the trade-off. That’s your choice. Deal with that reality. Those who choose to let the hackers run riot rather than have a few limited pieces of information reside on an NSA-controlled server deserve to have Died of a Theory as their financial epitaph.

(Regarding the hack of the US Office of Personnel Management, the administration pointed the finger at China with unseemly haste. Perhaps. But this seems more like a Russian MO than a Chinese. The Russians are interested in information they can monetize, the Chinese less so. Perhaps China is the culprit, but I wouldn’t rush to judgment.)

The NYT/PP article makes it clear that the DOJ only asked the FISA court for authority to collect the data from intruders connected to foreign governments. The NSA wanted a broader mandate,  including the ability to collect from foreign intruders not reliably tied to a government, but DOJ didn’t ask for it.

That’s too bad. Non-Government hackers, mainly operating from Russia, other FSU countries, and China, are arguably a bigger threat to personal privacy than governments. The non-government hackers have mercenary motives, and your data is particularly attractive to them. Most of the major hacks of valuable personal information have been executed by foreign criminal organizations with no demonstrable connections to foreign governments (though in the case of Russia, they likely operate under Russian government protection) So again looking at the trade-off, I’d prefer that the NSA have the broader authority. That would give me more privacy, and more information security.

With regards to Snowden, isn’t it interesting that Snowden’s organ grinder-Putin-would be one of the main beneficiaries of a restriction on the NSA’s authority to track foreign government hackers? Surely just a coincidence, right, because little monkeys never dance to their master’s tunes, do they?

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May 11, 2015

Merkel in Moscow: A Laudable Sentiment, A Misguided Message, and a Lost Opportunity

Filed under: History,Military,Russia — The Professor @ 7:17 pm

Angela Merkel tried to walk a thin line on VE Day. She traveled to Russia, but did not attend the atavistic, militaristic, and jingoistic parade on the 9th. Instead, along with Putin, she laid a wreath at the Tomb of the Unknown Soldier on the 10th. She also met with Putin, and criticized him for Crimea and Donbas.

Merkel said this to explain her visit:

“We cannot close the book on our history,” Ms. Merkel said in her weekly video message May 2. Despite deep differences with Russia over Ukraine, she said, “it is important for me to lay a wreath on May 10 together with the Russian president in remembrance of the millions of dead for which Germany is responsible from World War II.”

Those are laudable sentiments, but she could have done things differently, and better. Indeed, her Russian-centric approach is deeply flawed, and has implications for current events.

Ukraine and Belarus suffered far more, proportionally, than did Russia during WWII. Not that Russia got off lightly. Clearly not. But in terms of loss of life, and in terms of German war crimes, Ukraine and Belarus were ground zero.

Merkel could have and should have gone to Kiev to participate in Ukraine’s far more restrained and somber commemoration. She should have laid a wreath there, in remembrance of the millions of dead in Ukraine for which Germany is responsible. Then she could have gone to Moscow on the 10th.

By going to Moscow only, and not Kiev, she implicitly accepted Russia’s assertion that it is the heir to the Soviet Union; that to Russia is due the honor and the glory for defeating the Nazis; and that Germany owes apologies to Russia, or that at least Russia accepts apologies on behalf of all other ex-Soviet peoples. This implicitly subordinates Ukraine, Belarus and other former-SSRs to Russia. By going to Russia only, she implicitly stated that Russia is the first among nations spawned from the collapse of the USSR, and that the others are inferiors.

This is a particularly dangerous message to be sending now, when Russia is quite explicitly attempting to subordinate these other nations by force, economic pressure, and subversion. Merkel is effectively validating Putin’s belief that Ukraine is not a “real country,” and that Ukraine’s independence is illegitimate and a historical injustice.

By visiting Kiev, Merkel could have sent a very different message. She could have paid homage to those that Germany victimized from 1941-1945, while also saying that the lesson and legacy of the Second World War should be that large aggressive nations should not dominate small and weak ones.  Should could have implicitly upbraided Putin, given support to those he wants to dominate, and made amends for wrongs that Germany inflicted on non-Russians.

Merkel walked a thin line, but she could have walked a much better one.

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Gazprom Agonistes

Filed under: Commodities,Economics,Energy,Politics,Russia — The Professor @ 12:26 pm

It has been a hellish few months for Gazprom. It’s profits were down 86 percent on lower prices and volumes and the weak ruble. Although the ruble has rebounded, the bad price news will persist for several months at least, given the lagged relationship between the price oil and the price of gas in the company’s oil-linked contracts. The company has been a die-hard defender of the link: another example of be careful what you ask for.

Moreover, the EU finally moved against the firm, filing antitrust charges. Although many of the European Commission’s antitrust actions, especially against US tech firms, are a travesty, the Gazprom brief is actually well-grounded. At the core of the case is Gazprom’s pervasive price discrimination, which is made possible by its vertical integration into transportation and contractual terms preventing resale of gas. Absent these measures, a buyer in a low-price country could resell to a higher price country, thereby undercutting Gazprom’s price discrimination strategy.

It is interesting to note that the main rationale for Gazprom’s vertical integration is one which was identified long ago, based on basic price theory, rather than more elaborate transactions cost economics or property rights economics theories of integration. Back in the 1930s  economists identified price discrimination as a rationale for Alcoa’s vertical integration. There was some formal work on this in the 70s.

Gazprom is attempting to argue that as an arm of the Russian state, it is not subject to European competition rules. Good luck with that. There is therefore a decent chance that by negotiation or adverse decision that Gazprom will essentially become a common carrier/have to unbundle gas sales and transportation, and forego destination clauses that limit resale. This will reduce its ability to engage in price discrimination, either for economic or political reasons.

The company is also having problems closer to home, where it is engaged in a battle with an old enemy (Sechin/Rosneft) and some new ones (Timchenko/Novatek), and it is not faring well.

Gazprom and Putin have always held out China as the answer to all its problems. There were new gas “deals” between Russia and China signed during Xi’s visit to the 70th Victory Day celebration. (Somehow I missed the role China, let alone the Chinese Communists, played in defeating the Nazis.) But the word “deal” always has to be in quotes, because they never seem to be finalized. Remember the “deal” closed with such fanfare last May? I expressed skepticism about its firmness, with good reason. There is a dispute over the interest rate on the $25 billion loan that was part of the plan. Minor detail, surely.

Further, Gazprom doesn’t like the eastern route agreed to last year. It involves massive new greenfield investments in gas fields as well as transportation. It has therefore been pushing for a western route (the Altai route) that would take gas from where Gazprom already has it (in western Siberia) to where China doesn’t want it (its western provinces, rather than the more vibrant and populous east). The “deal” agreed to in Moscow relates to this western route, but as is almost always the case, price is still to be determined.

If you don’t have a price, you don’t have a deal. And the Chinese realize they have the whip hand. Further, they are less than enamored with Russia as a negotiating partner. Who could have ever predicted this? I’m shocked! Shocked!:

Chinese and Russian executives and advisers said that in addition to the challenge of negotiating prices acceptable to both sides, energy deals between the countries have also been hampered by mutual distrust and Chinese concerns about antagonising the US.

“The Russians are unreliable. They are always flipping things around for their own interest,” said one Chinese oil executive.

Who knew?

Putin is evidently losing patience with the company, and its boss Alexei Miller, is far less powerful than Sechin and Timchenko. When it was a strategic asset in Europe, and offered real possibilities in Asia, it could defend itself. Now that leverage is diminishing, its future is much cloudier.

The impending new supplies of LNG coming online in the US and Australia dim its future prospects further.

In sum, Gazprom is beset by many agonies. Couldn’t happen to a better company.

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April 20, 2015

A Russian Troll Trolls From the Land of Trolls

Filed under: Climate Change,Military,Politics,Russia — The Professor @ 2:22 pm

Trolls are characters from Scandinavian folklore who inhabit desolate islands, so it only seems fitting that Rogozin the Ridiculous trolled Nato from a desolate Norwegian island. Rogozin, who is banned from traveling to Norway due to sanctions, showed up on Svalbard (formerly Spitsbergen), which is sovereign Norwegian territory (though Russians have residence and commercial rights there under the Svalbard Treaty). Rogozin obnoxiously (but I repeat myself) tweeted that “the Arctic is Russian Mecca.” The Norwegians are not amused. Nor should the US. But we seem unfazed.

Wouldn’t you know, the United States is assuming the chairmanship of the Arctic Council from Canada. In the face of Russia’s quite in-our-face assertion of control over the Arctic (of which the Ridiculous One’s “Russian Mecca” Tweet is just an example), and its dramatic increase in its military activities and presence in the Arctic, what is John Kerry’s priority for the Council? You guessed it: climate change. You know, for the polar bears.

Back to Rogozin, last seen here performing so marvelously in his role as commissar of the Vostochny Cosmodrome. His intervention into the management of the troubled project (including threats to “rip off the heads” of those holding up construction) has worked wonders. Well, mainly, it has resulted in a spread of strikes protesting lack of pay. And to save costs, the construction of infrastructure to support manned launches is being deferred, resulting in at least a two year delay in the use of the facility for such purposes. Well played, Bozo! The mind boggles at the thought of what you’ll accomplish in your icy Mecca.

Believe it or not, Rogozin has intense competition for the title of most insane Russian official today. His competition is Nikolai Rogozhkin, Putin’s representative in the Siberian Federal District. (Hey. Rogozin, Rogozhkin: pretty similar! Lame attempt at a pseudonym? Or is “Rogoz” a Russian prefix meaning “moron”?) Siberia is beset by wildfires already, and there are fears that this summer will make 2010 look like child’s play. So whom does Rogozin-sorry, I mean Rogozhkin-blame? Saboteurs, of course! Wreckers! Fifth Columnists! Oppositionists! As for his reasoning, check out the most outrageous flouting of Occam’s Razor I have ever seen:

Rogozhkin said he had flown in a helicopter and seen fire sites in “places where a normal person cannot go, even one who is well-prepared.”

“A specially trained person would be needed for this, and it would take at least 24 hours,” he said.

So rather than reason: “It is nearly impossible for a normal person to set these fires, so they must have a natural cause”, Rogozhkin the Almost as Ridiculous concludes that it isn’t a normal person after all. It is a specially trained person.

You literally cannot make up this stuff.

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April 18, 2015

Alfred E. Obama

Filed under: History,Military,Politics,Russia — The Professor @ 2:37 pm

Obama reacted in his best Alfred E. Newman “what? me worry?” fashion to Putin punking him by selling S-300 missiles to Iran. Short version: “What took you so long, Vova?”:

President Obama said that he was “not surprised” Russia sold an advanced missile system to Iran in the midst of his negotiations with the Ayatollah to prevent Iran’s nuclear facilities from making a bomb. He went even further to say that he expected the deal to happen a lot sooner than it did.

“I’m frankly surprised that it held this long given that they were not prohibited by sanctions from selling these defensive weapons,” President Obama said on Friday.

Another example of the flexibility that Barry promised Vladimir via the whisper to messenger boy Dmitri.

Correct me if I’m wrong, but supposedly the big payoff to the Reset was Russian cooperation on Iran. But apparently Obama believes that the sell-by date of that cooperation has long passed. Or , he doesn’t really give a damn about keeping Iran in a box.

And look at what he did there. He totally buys the Russian and Iranian line that these are “defensive weapons”, and hence pose no problem: again, “what? me worry?” Is he that stupid? Does he not realize that a strong shield protects those who wield the sword? These AAMs dramatically undercut the credibility of any military response to Iran’s developing nuclear weapons: they thereby undercut the credibility of Obama’s vaunted deal. (Although that presumes that Obama actually intends to deprive Iran of the bomb. His actions repeatedly cast doubt on that presumption.)

If defensive weapons as so benign, why doesn’t Barry supply them to Ukraine? Indeed, the defensive weapons (e.g., ATGMs) that Ukraine is pleading for cannot serve the same strategic function as the S-300s supplied to Iran. They are truly useful only in local defense, particularly by an army like Ukraine’s that is hard pressed to hold its own ground, let alone attempt to project power. They can help make a Russian invasion too costly for Putin to undertake, but cannot provide a shield behind which an aggressive power can develop the means to carry out its expansionist schemes. So Obama should shove Putin’s words about the benignity of defensive weapons back in his botoxed face. “What’s good for Iran is good for Ukraine, Vlad.”

But instead, Obama (and the feckless Europeans) cringe before Russia’s freak outs about providing one bandolier, bullet, bayonet or trainer to Ukraine, or stationing one tank in the Baltics. Indeed, the Russians also went ballistic (figuratively) by threatening to go literally ballistic over Nato ABM systems.

Ponder the hypocrisy here. It is a thing to behold. Russia told Israel to lie back and enjoy it because S-300’s are purely defensive. But any Nato defensive missiles in Europe have become “objects of priority [Russian] response [i.e., they are now nuclear targets].” (General Dempsey has Obamaitis, apparently, saying that he’s “not surprised” by Russia’s rhetoric. This guy is becoming a daily embarrassment.)

Obama also channeled good old Alfred E. when he downplayed Khamenei’s insistence that sanctions would be eliminated immediately upon reaching an agreement, and that military sites were completely out of bounds to inspectors:

“It’s not surprising to me that the supreme leader or a whole bunch of other people are going to try to characterize the deal in a way that protects their political position,” Obama said in a news conference Saturday at the Summit of the Americas in Panama.

Talk about projection! What the hell has Obama been doing in the past three weeks other than “try[ing] to characterize the deal in a way that protects [his] political position”?

Obama is also demonstrating that his vaunted flexibility is not limited to Russia, saying that he is open to “creative” approaches to lifting sanctions early. He claims that he insists on “snapback” capability, but anyone who believes sanctions can be snapped back is out of his bleeping mind. Or is a liar that is “characteriz[ing] the deal in a way that protects his political position.” That is, saying anything to protect a deal that he wants, hell or high water.

If Obama is Alfred E. Newman, I am definitely not. Me worry. In particular, me worry that we are bumping against the limits of the amount of ruin in a nation that Adam Smith wrote about.

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A Greek Gas Farce

Filed under: Commodities,Energy,Financial Crisis II,History,Politics,Russia — The Professor @ 11:44 am

Der Spiegel reported that Greek officials claim that the country is on the verge of signing a deal with Russia that would give the Greeks €5 billion upfront, to be repaid from transit fees on a yet-to-be-built Turkish Stream pipeline: the Russians deny any deal. The quoted (but anonymous) Greek official said that this would “turn the tide” for Greece.

Really?

Some thoughts off the top.

First, Greece owes €320 billion, including payments of €30 billion in 2015 alone. It is “scraping the bottom of the barrel” by borrowing from various state entities (e.g., the public transport system) to meet April payroll. It has a budget deficit of €23 billion. Deposits at Greek banks fell by about €20 billion last week. This creates a liability for the Bank of Greece to Target2 (i.e., to the members of the ECB). A measly €5 billion will buy it a few weeks time, at best.

Second, it’s not as if creditors (e.g., the EU and the IMF and Target2 members) are going to give Greece discretion over how to spend this money. And they have many levers to pull. So it would set the stage for more arguments between the creditors and the debtor.

Third, the Russians are likely to write terms that secure the debt and give it priority over other creditors (at least with respect to any future transit fees). (Just remember how tightly the Russians crafted the Yanuk Bonds.) The Euros will flip out over any such terms. This would set up an epic The Good, The Bad, and the Ugly three-way standoff.

Fourth, this initiative would be directly contrary to European energy policy, which is finally attempting to reduce dependence on Russia and limit vulnerability to Russian gasmail and the use of energy as a wedge to create divisions within the EU.

Fifth, what are the odds that the pipeline will get built? The Europeans are against it. It requires the Greeks and the Turks to play well together, and we know how that usually works out. It requires additional investment in infrastructure in Turkey, which is problematic. Further, the Russian track record on these sorts of projects leaves much to be desired.

So what happens if the pipeline isn’t built, or is delayed significantly. No doubt the Russians will anticipate this contingency in the debt agreement, and write things in such a way that they have security or priority, which will just spark another battle with Greece’s European creditors.

In sum, such a deal would hardly be a solution to Greece’s problems. Indeed, it only escalates conflicts between Greece and the EU.

Which may be Putin’s purpose, exactly. Exacerbating Greek-EU conflict over a matter involving Russia directly at a time when Greece could scupper the extension of sanctions against Russia suits Putin perfectly. The fact that the pipeline is as much pipe dream as realistic project doesn’t matter a whit. This is all about stirring trouble. And that’s Putin’s speciality.

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