Category: Geopolitics

Saturday Soother – December 24, 2022

The Daily Escape:

Santas on the Grand Canal in Venice 2017 photo via WSJ

(This column is late coming to you since the big storm left the Mansion of Wrong with no internet for two days, due to a large tree falling across our road. The high winds prevented crews from working to remove it for 24 hours. It also may be Wrongo’s last column until Jan. 4th.)

The New Year will continue to bring us the chaos that we’ve sadly become accustomed to. The 118th Congress and its Republican House majority will again test America’s norms. The 2024 presidential election is going to bring an extra silly season of political news, so take a real break if you can.

One thought for year end is to set out a framework for thinking about America’s commitment to Ukraine.

We know that a significant number of Republicans and some Democrats want to pull the plug on our support for Ukraine in its war with Russia. For now, the majority think it should remain a “whatever it takes, for as long as it takes” situation. Implicit in the second viewpoint is that American soldiers are never going to be combatants in Ukraine, and that we’re not talking about another 20-year war like in Afghanistan.

A few things to think about. Do we have a choice to support Ukraine, or is supporting them a necessity? We have talked about the difference between “wars of choice” and “wars of necessity” throughout Wrongo’s adult life. Two of our worst military experiences were in wars of choice: Vietnam and Afghanistan. We didn’t have to intervene in either, but our political leaders decided that America’s national security had a true connection to both conflicts. The clear wars of necessity for America were the US Civil War, and the two World Wars. All threated the existence of the US homeland.

Somewhere in between wars of choice and necessity is Ukraine. It isn’t an ally where we are obligated by a treaty, like we have with Europe via NATO. We are obligated to defend any NATO member who is attacked. For example, that would mean a war against Latvia is a war against the US.

We spent 20+ years fighting in Afghanistan. Given what we learned there, would America ever spend a minute fighting for Latvia? When Trump was president he flirted with saying we wouldn’t immediately commit to defending just any NATO country, and he wasn’t alone in that thinking.

That means we could consider choosing not to defend NATO at all, or not to defend individual NATO countries.

We’re facing Cold War II with China and Russia. Our new Omnibus budget allocates 10% more money to national defense than last year, largely because of the possibility of fighting both countries at great distances from home. The budget implies that our national security is threated by both of them.

Russia’s invasion of Ukraine could become a generation-long rolling war between Russia and the small NATO countries that border either Russia or Belarus, if Ukraine loses. Would America then rally and support NATO? Where would we draw the red line? Support for Germany but not for Poland? Ok, we’ll support Poland, but not Latvia?

We need to think through our priorities. We fought in Afghanistan because we believed fighting a far enemy (al-Qaeda) was better than waiting and fighting them as a near enemy. That is also the basis of why we created and remain a member of NATO: Fighting Russia over there was smarter than fighting it nearby, like in Cuba.

Neither China nor Russia are presently our near enemies. If China invades Taiwan, direct involvement by the US would be another war of choice with a far enemy. Ukraine represents a war of choice with a different far enemy, but one in very close proximity to our treaty partners, an enemy that could cross NATO’s trip wire at any time.

Our history suggests that the American people will agree to wage wars of choice if they are relatively cheap and short in duration. What we call a cheap war is mostly a partisan political question. But talking about the cost of a war of choice is a proxy for how Americans value the country that we’re intent on supporting.

Ukraine is a proxy war of choice. We have very few people on the ground and none in a direct combat role. The twin goals are to preserve Ukrainian independence and to bleed Russia of its conventional military capability. Americans need to consider the following implications for national security:

  • Since our resources are limited, should we choose between containing Russia or containing China?
  • What is the goal of containing either or both?
  • How important are the small NATO counties to our national security?
  • If Ukraine loses its fight with Russia, would our national security be weakened?
  • If yes, can we live with that, or should we be doing more now?

On to a Saturday that’s also Christmas Eve! Forget tree-trimming and the last-minute Amazon shopping for a few minutes. It’s time to unplug and land on a small oasis of soothing in the midst of all of the chaos.

Gaze out at the last few leaves on the trees, and listen to the late Greg Lake, of Emerson, Lake, and Palmer, perform 1985’s “I Believe in Father Christmas”. Although most people think of it as a Christmas song, Lake wrote the song to protest the commercialization of Christmas. Here Lake, along with Jethro Tull’s Ian Anderson on flute perform it live at St. Bride’s Church, in the City of London along with the church’s choir:

The last line of the song says: “The Christmas you deserve is the Christmas you get.”

That might be considered harsh in some circumstances, but it might also be true. Anyway, Merry Christmas, Happy Festivus, Happy Chanukah, Happy Kwanzaa, and Happy New Year to all. Let’s hope the deep divisions in our country can be somehow healed by a seasonal miracle.

Facebooklinkedinrss

Russia’s New Ukraine Strategy

The Daily Escape:

Dune Evening Primrose, Anza Borrego Desert SP, CA – November 2022 photo by Paulette Donnellon. This flower only blooms at night.

The war in Ukraine has entered a new phase. Early predictions that Russian forces would roll over token Ukrainian resistance didn’t last long. Confidence grew in a possible Ukrainian victory after Kyiv took advantage of America’s HIMARS artillery and other highly capable Western equipment began to degrade the Russian logistics and command systems.

Then, Ukraine launched a series of counter-offensives that have liberated formerly Russian occupied territory. November’s evacuation of Kherson by Russia showed that Moscow hasn’t yet found a way to stabilize its front lines in the face of Ukrainian military ground tactics.

But the ground has now shifted. The newest Russian commander, General Sergei Surovikin, in October began a bombing campaign on Ukrainian utilities throughout the country. It soon became clear that Russia is attempting to take out as much of Ukraine’s electrical grid as it can.

The WaPo said in late October:

“Russia’s ongoing attacks on Ukraine’s energy infrastructure have been so methodical and destructive that administration officials say they are being led by power experts who know exactly which targets will cause the most damage to Ukraine’s power grid.”

Tactically, Ukraine’s weapons and ammunition can be replaced by the west. Troops can be trained to use new systems; cash can be transferred from Washington and/or Brussels. But the electric grid infrastructure cannot be easily fixed with replacements or money. There isn’t a large inventory of Soviet-era power generating and transmission gear laying around Europe that can be marshaled to fix the Ukrainian grid.

The grid destruction is taking place primarily by precision missile strikes launched from aircraft flying within Russia. We’ve seen that Russia continues to struggle in the land battle, but they have much more latitude to strike against Ukraine’s society and economy from within their own country.

We may have to refine our viewpoint about who is winning and losing this war. The US and NATO have focused on the land battle, which now favors Ukraine. But Russia seems willing to use air bombing to grind western Ukraine into a wasteland. The precision bombing of infrastructure can go on all winter, while the movement of ground forces will largely come to a halt as winter deepens.

Russia could make western Ukraine so close to uninhabitable that many of its citizens leave for Europe. No electric power in western Ukraine also means no water. That would mean the only people who could continue to live there would be the hardiest.

Russia can do all of this while the ground war is literally frozen in place. Russia can do this without a major commitment of additional troops, tanks, or new logistics paths into Ukraine.

If this is Russia’s plan, it makes sense. It’s incremental, has flexibility and fully utilizes Russia’s current advantages, including control of its own airspace. And since NATO and the US haven’t supplied Ukraine with weapons that could reach Russian soil or airspace, Russians are invulnerable to sustained Ukrainian attack.

Russia isn’t acquiring and defending new territory; it’s degrading much of Ukraine instead. Whether this is a winning strategy or not, it’s evidence of new and higher quality military thinking on Russia’s part.

It isn’t necessarily a winning strategy if the west supplies Ukraine with better air defense weaponry or with weapons that have the range to reach into Russia. There are two types of weapons to consider. Those that have a range that could strike behind Russian lines, and those that could reach into Russia itself.

Longer-range weapons raise concerns that the conflict could escalate to include NATO. But at the currently underway Bucharest NATO meeting, Lithuanian Foreign Minister Gabrielius Landsbergis said  that Ukraine should be free to strike military sites inside Russia as it fends off attacks on its critical infrastructure. Washington has previously denied Kyiv’s request for the 185-mile range ATACMS missile, which can reach into Russia.

America is at a similar point in the Ukraine war to where it was in the Afghan war: The enemy is striking it from another country, and our policy is not to pursue them inside their political borders.

The difference is that America was doing the fighting in Afghanistan and Ukraine is doing the fighting inside Ukraine. But in both cases, the US policy is strategically flawed. Russia must be made to pay real costs if they are going to use stand-off weapons to grind Ukraine into dust.

The challenge for NATO’s and America’s generals is to recognize that the Russian war strategy has changed, and to adapt to it. Russia wants to make it into a war of attrition. Ukraine wants to retake its lands.

How should Biden and NATO respond? Can the West sustain Ukraine in a prolonged existential conflict like this without changing its strategy?

Facebooklinkedinrss

Saturday Soother, Nordstream Clues Edition – October 1, 2022

The Daily Escape:

Sunrise, Kalalau Valley Lookout, Waimea Canyon, Kauai, HI – September 2022 photo by Alex Skoz

Who sabotaged the Nordstream pipelines? We’re forced to speculate, but it’s a near certainty that the US Navy knows who did it. In perusing Stratfor’s publication this week of where in the world US Navy fleets are located, Wrongo saw this map:

The map breaks the Navy’s fleets into Carrier groups (four in orange) and LHA and LHD Amphibious Assault groups (two in blue). The map shows the location of these groups over the last four weeks. The one of interest is LHD3. It spent most of the past four weeks in the Baltic Sea, including a great deal of time very near the Nordstream pipelines.

LHD3 is the designation of the USS Kearsarge, what the Navy calls a Multiple Purpose Amphibious Assault Ship, shorthand for a small aircraft carrier. The Kearsarge left the Baltic Sea a few days ago. Part of the reason the Kearsarge was in the Baltic was to participate in Baltops 22:

“This year, more than 45 ships, over 75 aircraft, and 7,000 personnel are tasked to execute a series of complex events throughout the two-week exercise.”

Seapower Magazine reported that one element of the Kearsarge operations in the Baltic was to test special sub-sea mine destruction technologies: (emphasis by Wrongo)

“A significant focus of BALTOPS every year is the demonstration of NATO mine hunting capabilities, and this year the US Navy continues to use the exercise as an opportunity to test emerging technology….Experimentation was conducted off the coast of Bornholm, Denmark….”

Bornholm is where the first breaches of Nordstream Two were discovered. Stratfor reports that:

“On Sept. 26, the Norwegian Petroleum Safety Administration warned of potential ”deliberate attacks” after energy companies reported multiple cases of unidentified drones flying near offshore oil and gas installations. Just a few hours later, officials in Denmark warned they had found a gas leak along a section of the Nord Stream 2 pipeline off the coast of the Danish island of Bornholm.”

The following day, the Swedish Maritime Administration announced it also detected two gas leaks on the Nordstream One pipeline in a nearby area. A fourth leak was discovered subsequently. While the Baltops 22 operation finished in July, the US Sixth Fleet didn’t begin leaving the Baltic Sea until September 22.

So it’s highly likely the Navy knows what happened and maybe who did it.

A head-scratching question is why would anyone do this? Damaging Nordstream is a direct terror attack on both Russia, and the EU, Germany, and the western European nations indirectly connected to the pipelines.

It is impossible to believe that it was done undetected. This type of clandestine operation requires deep water explosives, submersibles, divers and digging through the sea mud to attach explosives to the concrete shell that surrounds the steel pipeline.

Let’s take a brief look at the leading characters. Western governments say Russia did it, but why would it? One benefit to the Russians is that it forced the price of natural gas even higher (it went up 7%). It might have propaganda value; Russia can blame the US and thereby further turn Russian civilians against the West.

One old myth may apply: According to legend, Spanish conquistador Hernán Cortés ordered his men to “Burn the boats” as they began their conquest of the Aztec empire in 1519. The idea was that there would be no opportunity to retreat, and winning the battle was all that mattered. For Putin, could it be he purposefully destroyed billions of dollars of Russian energy infrastructure and their “cash cow”, believing that Europe will never again want Russian gas? If so, that means Putin intends to win WWIII.

Could it be China? Closing Nordstream means China would get all the gas it needs, and possibly at even cheaper prices. Rendering Nordstream useless forces the Russians to tie their currency more tightly to the Chinese Yuan. And the newest Chinese submarines might be able to do the deed.

Could it be the US? We have the technology and were in the area. But what goal of our foreign policy would be served by drastically hurting our NATO allies? If we did it, we’ve gone from a passive participant arming Ukraine to an active participant, possibly engaging in an Act of War.

Could it be a smaller state in the rabid anti-Russian west such as Poland?  The US Navy knows. Will they tell anyone?

On to the weekend, where we ignore what Gini Thomas told the Jan. 6 Committee or, whatever Judge Aileen Cannon is thinking about Trump’s documents. It’s time for our Saturday Soother! Start by brewing up a hot steaming mug of Kahiko ($47.95 for 8oz: expensive, no? Thanks Biden) from Hawaii’s Hula Daddy Kona Coffee. It is said to be richly chocolaty, harmoniously juicy, and bright.

Now, grab a seat by a south-facing window and listen to George Gershwin’s “Lullaby for Strings”, written in 1919, although it was first performed as an orchestral piece in 1967. It’s played here by the New York Philharmonic String Quartet in 2016:

BTW: Stop watching cable news.

 

Facebooklinkedinrss

Russia, Iran Form Energy Cartel

The Daily Escape:

Sunset, Lookout Point, Harpswell, ME – August 2022 photo by Rick Berk Photography

Good strategy is supposed to include a look at what the logical outcomes may be, once you’ve implemented your strategic plan. Was that done when the US and the EU decided to sanction Russia about its Ukraine invasion after having sanctioned Iran, well, for being Iran?

When you treat much of the world as your enemy, you should expect them to eventually find common cause and fight back. We’re speaking about the world’s supply of natural gas (NatGas). There is a new alliance between Russia and Iran on NatGas. At Oil Price, Simon Watkins says that a new energy cartel is forming: (brackets and emphasis by Wrongo)

“The US $40 billion memorandum of understanding (MoU) signed last month between [Russia’s] Gazprom and the National Iranian Oil Company (NIOC) is a steppingstone to enabling Russia and Iran to implement their long-held plan to be the core participants in a global cartel for gas suppliers in the same mold as the Organization of the Petroleum Exporting Countries (OPEC) for oil suppliers.”

The article describes how Russia and Iran are creating a NatGas OPEC. The two countries are first and second respectively in holding the world’s largest NatGas reserves. Russia has just under 48 trillion cubic meters (tcm) and Iran has nearly 34 tcm, so the two countries are in an ideal position to form a cartel.

NatGas is a vital commodity. It is widely seen as the optimal product in the transition from fossil fuels to renewable energy. And controlling the global flow of it will be the key to energy-based power over the next 10 to 20 years. This has already been demonstrated in Russia’s hold over the EU through its NatGas supplies.

From a top-down perspective, this Russia-Iran alliance might also draw other Middle East gas producers, who have tried to be neutral between the Russia-Iran-China axis or the US-EU-Japan axis.

Qatar has long been seen by Russia and Iran as a prime candidate for this kind of gas cartel because it shares its gas field with Iran. Iran has exclusive rights over 3,700 sq.km of the well-known South Pars field (containing around 14 tcm of gas), with Qatar’s North Field comprising the remaining 6,000 sq.km (and 37 tcm of gas).

If they can enlist Qatar, this new cartel would control 60% of world gas reserves, allowing them to control NatGas prices globally. It would be logical for prices to rise, given the growing demand for NatGas in the coming decades.

America can dodge this bullet for a few years because proven gas reserves in the US amount to about 13.5 tcm. So, at the current level of production we can produce sufficient NatGas for another 13-15 years.

But this means that in a decade or so, the US, Europe, and Asia will all be more dependent on imports from Russia, Iran, and Qatar, while competing with the rest of the world for our share in order to maintain our economy and lifestyle.

So, strategy can be a bitch. By creating a global political and economic environment that pushes Russia, Iran, and Qatar into a cartel, we’ve created a significant future economic vulnerability.

There are immediate NatGas cost implications in the US today. Bloomberg’s article, A ‘Tsunami of Shutoffs’: 20 Million US Homes Are Behind on Energy Bills, paints a picture:

“…about 1 in 6 American homes…have fallen behind on their utility bills. It is, according to the National Energy Assistance Directors Association (NEADA), the worst crisis the group has ever documented. Underpinning those numbers is a…surge in electricity prices, propelled by the soaring cost of natural gas.”

That’s 16% of American homes for the math challenged. Winter in the US may not be as big a disaster as in the UK and Europe, (better insulation). But plenty of people here will have to choose between food and heat.

The world is sorting itself out into blocks of countries aligned with each other. Russia, China, Iran and perhaps India, want their own commodity-based financial system to reduce their exposure to the political impacts from the West’s corporate/state “free” market system, which has used trade as a weapon for the past few decades.

There are two ways of looking at this. We could just build this energy vulnerability into our economic planning and prepare to devote a growing share of our GDP to paying the cartel for more NatGas.

Or, we could immediately start seriously building out our renewable energy capacity. There’s a model. Europe is attempting to pivot away as quickly as possible from its dependence on Russia.

We could do the same thing.

That could reduce our exposure to imported NatGas because it’s largely a bridge from coal to renewables. Massive investing in renewables would give Russia and Iran a shorter bridge than they think they’re getting.

Facebooklinkedinrss

Sunday Cartoon Blogging – August 7, 2022

The Labor Department on Friday reported that the economy added a seasonally adjusted 528,000 jobs in July, far more than the 258,000 economists expected to see. And the headline rate of unemployment  fell to 3.5%, back to the multi-decade low we experienced just before the start of the pandemic.

With the upward revisions to the last two months, there are now 22,000 more jobs than there were just before the pandemic. Further, the mix of these new jobs skews away from the lower paying sectors toward higher paying ones. The WSJ reports that in July, there were about a million more jobs combined in the so-called goods-producing sectors—manufacturing, construction, mining and logging—plus the retail trade and warehousing and transportation sectors, than in February 2020. And there were about a million fewer jobs in the remaining service-sector industries.

Leisure and hospitality jobs, which were the most hard-hit during the pandemic, rose by 96,000, but are still -7.1% below their pre-pandemic peak. And within the leisure and hospitality sector, food and drink establishments added 74,100 jobs, but are still about 635,000, or -5.1% below their pre-pandemic peak.

But it wasn’t all good news. The number of people employed as a share of the working-age population was 60% last month, below February 2020’s 61.2%. If it could return to that percentage, there would be millions more Americans working. An interesting fact in the employment report was that there were 656,000 more people out sick last month than in July 2019. On to cartoons.

The Kansas vote dropped on the wicked witch:

What Kansas taught us this week:

Pelosi sparks a flame:

Alex Jones finally grabbed by his appendage:

The US kills another al-Qaeda leader, but nothing changes in Afghanistan:

RIP Bill Russell:

Facebooklinkedinrss

Saturday Soother, Taiwan Edition – August 6, 2022

The Daily Escape:

El Morro National Monument, NM – monsoon rains have turned the brown landscape green – July 2022 photo by Kirk Shoemaker

We need to talk about Taiwan. China said that they wouldn’t tolerate a visit to Taiwan by House Speaker Nancy Pelosi (D-CA), and that there would be severe consequences if she failed to heed China’s warning. But she ignored China, and went anyway.

China then launched a comprehensive set of war games, showing clearly how they might invade and take over Taiwan militarily at some point in the future. China then announced it sanctioned Pelosi and her family. Now, according to the BBC, China has said all dialogue between US and Chinese defense officials would be cancelled, while co-operation on returning illegal immigrants, climate change, and on investigating international crime would be suspended.

You know the broad outline of the issues: China viewed Pelosi’s visit as a challenge to its claims of sovereignty over Taiwan, even though Taiwan is self-ruled, and sees itself as distinct from the mainland.

As China has become a global leader, their abilities and ambitions have shifted. A 1997 trip to Taiwan by then US House Speaker Newt Gingrich, was met with little opposition, while the Speaker Pelosi visit has been met with missiles. This is a complicated issue. China doesn’t control Taiwan; it doesn’t issue travel visas for it, either. In April, a group of US Senators visited Taiwan. At the time, China’s Foreign Ministry condemned the visit in a series of tweets and press statements, but nothing more.

The US has wanted to keep Taiwan in its orbit at least since the 1950’s when General Douglas MacArthur, then the Supreme Commander of allied powers in Japan, sent a top secret “Memorandum on Formosa” to President Truman (Back then, Formosa was the name of Taiwan). To contain communism, MacArthur insisted that Truman consider the strategically located Formosa (Taiwan) as a counterbalance to the Soviet and Chinese regional expansion:

“Formosa in the hands of the Communists can be compared to an unsinkable aircraft carrier….”

He argued that Taiwan should instead be an unsinkable US aircraft carrier, projecting American power in the Pacific. As China grew in power and importance, the US adopted a policy of strategic ambiguity with respect to the two countries, wanting good relations with both and wanting to finesse the question of political control of Taiwan.

But lately, the US has been slowly walking away from the doctrine of strategic ambiguity, increasingly signaling to China that it considers Taiwan a core US interest in North Asia. That’s why the Chinese reacted so strongly to a high level politician like Pelosi visiting Taiwan.

It’s also true that the South China Sea and the Taiwan Straits are among the world’s busiest seaways, and that’s where China’s military exercises are now taking place:

Source: Bloomberg. The dots are vessels, the polygons are China’s military drill areas

The NYT’s Tom Friedman connected Pelosi’s trip to the Biden administration’s previous efforts to keep China from getting involved in Ukraine on Russia’s side:

“There are moments in international relations when you need to keep your eyes on the prize. Today that prize is crystal clear: We must ensure that Ukraine is able, at a minimum, to blunt — and, at a maximum, reverse — Vladimir Putin’s unprovoked invasion…”

Biden had held a series of tough meetings with Xi, trying to keep Beijing out of the Ukraine conflict. Friedman says that Biden told President Xi that if China entered the war in Ukraine on Russia’s side, Beijing would be risking access to its two most important export markets — the US and the EU. More from Friedman:

“By all indications…China has responded by not providing military aid to Putin — at a time when the US and NATO have been giving Ukraine intelligence support and a significant number of advanced weapons that have done serious damage to the military of Russia, China’s ostensible ally.”

So why mess with Biden’s Ukraine power play, Nancy? That’s Friedman’s question. OTOH, everyone knows that the minute we bend a knee to China is when we lose our ability to defend Taiwan and hold on to the unsinkable aircraft carrier.

China hasn’t proven itself capable of dealing with Taiwan except through threats since Chiang Kai-Shek left the mainland and took over in Taiwan in 1950. If China wants to control Taiwan without a fight, it has to stop threatening to rape her if she doesn’t want to date. Every Chinese threat increases Taiwan’s separate national identity, and decreases the chance of a peaceful Chinese takeover.

Time to leave geopolitics behind, it’s time for our Saturday Soother, where we focus on clearing our minds for the week to come. Here on the fields of Wrong, we have a crew rebuilding a stone wall by the road that was hit by a large truck a few years ago.

Let’s start by finding that one last can of nitro cold brew in the back of the refrigerator and grab a seat by a large window. Now put on your wireless headphones and listen to “Danse Bacchanale” by Camille Saint-Saëns from his opera “Samson et Dalila”, played here by the Orquesta Sinfónica Juvenil de Caracas, Venezuela in 2010:

This is played at a very quick tempo, and with passion!

Facebooklinkedinrss

The US Jobs Market and The EU vs. Russia

The Daily Escape:

Sunset, Lake Sammamish, Issaquah, WA – June 2022 photo by Gary Hamburgh

Two pieces of news to think about today.

First, you can always tell when an economic boom is nearing its end, because the jobs market begins to get shaky. That seems to be starting. The WSJ reports that:

“Businesses in several different industries are rescinding job offers they made just a few months ago, in a sign the tightest labor market in decades may be showing cracks.”

No need to panic just yet, the labor market remains strong, with an unemployment rate at 3.6%, near a half-century low. But signs of retrenchment in hiring shows that executives are having trouble predicting the economy over the next 12 months.

And when companies revoke job offers, it indicates their view of the future business outlook has changed so quickly that it’s undoing hiring plans made only a few weeks before.

Many hiring managers say signing up new recruits remains highly competitive. The WSJ reports on a Gartner survey of more than 350 HR executives conducted in May that found around 50% thought the competition for talent would increase over the next six months. Nearly two-thirds said they hadn’t made any changes to their hiring practices or HR budgets in response to economic volatility.

But it seems there are changes afoot. Country wisdom says that a storm rarely hits us without warning. The skies turn dark, the wind picks up, the birds go quiet. It’s possible to see the signs before the storm hits if you know what to look for. We’re seeing signs now of what’s to come.

Second, there’s an adage, attributed to Trotsky, but difficult to verify, that says: “You may not be interested in war, but war is interested in you.” Those words are apt in today’s situation between Europe and Russia. CNN is reporting about an emerging flashpoint between Russia and the EU:

“Tensions are mounting around…the Russian exclave of Kaliningrad, an isolated but strategically significant territory on the Baltic coast…Russia has reacted furiously after Lithuania banned the passage of sanctioned goods…into Kaliningrad. But Lithuania says it is merely upholding European Union sanctions, and the European bloc has backed it.”

Kaliningrad is Russia’s westernmost territory and it has no land connection to Russia. It’s the only part of Russia that is completely surrounded by EU states. Here’s a map:

Estonia, Latvia, Lithuania, and Poland are all members of NATO, surrounding Kaliningrad militarily. Since Russia invaded Ukraine, experts have feared that Kaliningrad might become the next flashpoint in tensions between Moscow and Europe.

Russia says that Lithuania’s sanctions on goods transit is a blockade in violation of a 2002 agreement to allow goods to flow between Kaliningrad and Russia. Sanctions apply to about 50% of Russian shipments. The sanctioned products include construction machinery, machine tools and other industrial equipment. But food and personal travel are not sanctioned.

Since the Baltic freezes during the winter, resupplying Kaliningrad will become particularly difficult in about six months. Lithuania has also closed its airspace to Russia. A Berlin-style airlift could prove problematic as well.

Lithuania has spent years building a liquid natural gas (LNG) port and the infrastructure necessary to connect to Nordic and EU grids. She was therefore able to shut off Russian oil, gas, and coal quickly and is in a better position to do without Russia’s gas than the rest of the EU.

Lithuania imports 70% of its electricity from Sweden through a dedicated underwater cable. Sweden’s power is nuclear and hydroelectric, thus independent of Russia as well. Lithuania is also in a position to supply gas to Latvia, Estonia, and Poland through their LNG terminal.

So is Europe at a flashpoint? There’s little Moscow can do to Lithuania beyond threaten.

Is it just a matter of time before NATO and Russia are in a shooting war? Doubtful. Russia could try cutting off all oil, gas, and coal exports to the other NATO countries. Russia could then say they would sell to any countries that left NATO. That might not pop NATO’s balloon, but it might take some of the air out of it.

If Russia decided to do that, it would have to find a way to transport it’s oil, gas, and coal to alternate customers. That can’t happen quickly. Given that the adversarial relationship between Europe and Russia may last a decade or more, Russia will probably have to find alternative customers regardless.

Neither side wants to undertake drastic changes in energy supply too precipitously.

Wrongo doubts the Kaliningrad situation will lead to war, but each provocation and escalation increases the odds. We’re playing in a very high stakes game, given the nuclear weapons on all sides. But Europe and NATO can’t automatically bow to Russia’s threats.

NATO can’t be unwilling to fight, but there’s a difference between that and provoking a war. Right now, it’s difficult to see a peaceful end game between the US, NATO, and Russia

Facebooklinkedinrss

Monday Wake Up Call – May 9, 2022

The Daily Escape:

Sunset, Lynden, WA – May 2022 photo by Randy Small Photography

A final thought about our radical Supreme Court: They should give up their black robes. White robes would be much more appropriate.

But for today, let’s talk about the Victory Day celebrations in Russia. This year marks the 77th anniversary of the end of World War II, and Russia observes it every year with military parades and patriotic messages.

Wrongo is publishing this before we learn exactly how Putin will mark the celebration. Certain pundits think that Putin will use the occasion to escalate his war in Ukraine.

UPI reported that in remarks Putin made to commemorate Victory Day, he blasted what he described as “Nazi filth” in Ukraine. He also sent congratulatory messages to the Russian-appointed figureheads of the Donetsk and Luhansk regions of eastern Ukraine, which together make up the Donbas region, for “fighting shoulder to shoulder for the liberation of their native land.”

That certainly doesn’t sound like he’s backing down on his currently stalemated war.

Others think that Putin is more likely to make the political choice to declare victory, or partial victory in the “special military operation”. They think that Putin will postpone any decision regarding mobilizing more troops, which could be politically difficult. Pat Lang, a former US intelligence officer, worries about Russia using a tactical nuclear weapon against the steel plant in Mariupol, a frightening possibility for the world.

Despite the speculation, let’s spend a few moments thinking about how the Ukraine war might end.

“Tell me how this ends” is what General Petraeus famously asked in 2003 at the outset of the Iraq War. It lasted until 2011, and then morphed into the war on ISIS, that lasted until 2017.

Since the Russian war hasn’t resulted in a clear victory, certain US and British officials are talking more openly about a “victory” in Ukraine, meaning that the West decisively degrades the Russian military’s capability. Also, there’s some talk about regime change in Moscow.

A more likely scenario is that we’ll see an extended standoff between Ukraine and Russia, without an agreed end to the war, but where neither side wishes to continue active combat. In this case, Western sanctions would continue. Russian forces would occupy all or most of the Donbass region and control a land corridor linking Crimea with the Donbass and Russia.

This outcome would have few rules of engagement, since most of the guardrails that would be part of a negotiated settlement wouldn’t exist. The US and Europe would face years of instability and the constant threat of a military miscalculation causing a spillover in Europe. A forever war in Ukraine also runs the risk of eroding support for Kyiv in the US. America isn’t emotionally able to endure another grinding military conflict, even with no troops on the ground.

Finally, there may be a negotiated settlement. But what is the compromise that all parties can live with?

Zelensky has indicated that Ukraine might agree to be a neutral country; but only on condition of stringent security guarantees, the terms of which both the US and Russia might find objectionable.

Ukraine has understandably ruled out territorial concessions, but Putin would almost certainly not agree to any settlement in which Russia were forced to leave the Donbass and Mariupol. And separatist groups there would be unhappy living under Kyiv’s rule after years of war. Also, it’s hard to see Putin compromising unless the US and Europe ease economic sanctions as part of a settlement. Removing sanctions without a Ukraine “victory” might be a difficult political pill for Biden in particular, to swallow.

We like to think that all wars end, and eventually, they do. Remember that may not happen quickly or completely. The surrender of the Confederate Army at Appomattox didn’t settle hostilities, or political and cultural tensions in the US. It didn’t resolve the related racial prejudices and political differences, which still linger today.

It shouldn’t surprise anyone that in the Ukraine war, there may not be a discrete moment marking the war’s end for many years. A protracted war would be a favorable outcome for Moscow. It would certainly be a terrible outcome for Ukraine, which is already devastated as a country.

Time to wake up, America! What’s our strategy in Ukraine? Are we even following a strategy in the Ukraine war? To help you wake up, listen to Jon Batiste perform McCartney’s “Blackbird” on The Late Show in 2016:

Note Batiste’s overture on piano which McCartney originally wrote for guitar, was inspired by Johann Sebastian Bach’s Bourrée in E minor, a well-known lute piece.

Facebooklinkedinrss

Saturday Soother – April 2, 2022

The Daily Escape:

The Devil’s Churn, Yachats, OR – 2022 photo by Bobbie Shots Photography

The war in Ukraine has brought with it a difficult information environment. We’ve had a hard time sorting the facts from the misinformation. When Biden said in his State of the Union that Russia is “isolated from the world,” that wasn’t exactly misinformation. But it wasn’t exactly true since much of the rest of the world doesn’t see it our way.

The sanctions on Russia are limited largely to the EU and NATO members plus a few other close allies like Australia, Japan, and South Korea. Other countries are much more open to continuing to trade with Russia. That was demonstrated this week by Russian Foreign Minister Sergei Lavrov’s visits to India and China.

China and India have refused to condemn Russia’s invasion outright. Both abstained from voting on UN resolutions demanding Moscow immediately stop its attack on Ukraine. At that vote in March, 144 countries condemned the invasion, but few world leaders other than those in the West have openly criticized Vladimir Putin since then.

After visiting China, where Beijing reiterated that its relationship (which is now even more vital for Russia due to the sanctions) “has no limits”, Lavrov traveled to India. US Commerce Secretary Gina Raimondo criticized India for discussing a rupee-ruble trade arrangement with Russia, which could undermine Western sanctions:

“Now is the time to stand on the right side of history, and to stand with the United States and dozens of other countries, standing up for freedom, democracy and sovereignty with the Ukrainian people, and not funding and fueling and aiding President Putin’s war,”

Visiting India is quite fashionable just now. Earlier this month, leaders from Japan and Australia held summits with their Indian counterparts. And this week, diplomats from Germany and the European Union are visiting Delhi. Lavrov’s visit coincides with a visit by Britain’s Foreign Secretary Liz Truss.

Russia has been critical to India’s increased weapons procurement. In 2018, it signed a $5 billion weapons deal with Russia for air defense missile systems. Some Western estimates say that 50% of India’s military equipment now comes from Russia.

Meanwhile, despite US pressure to increase oil production, the OPEC countries are standing by their deal with Russia. Reuters reported that when asked about Russia’s war with Ukraine at the OPEC meetings, Saudi Energy Minister Prince Abdulaziz bin Salman said that when they hold meetings:

“….everybody leaves his politics at the door”.

Japan also announced that it isn’t pulling out of the Sakhalin-1 offshore oil joint venture it has with Russia. Japanese officials have stressed since Russia’s invasion of Ukraine that the Sakhalin-1 project is crucial for Japan’s energy security.

Everyone knows that Russia is a top global exporter of energy, weapons, and wheat, so many countries are trying to say that Putin’s War isn’t their fight. These nations are all concerned about possible boomerang effects of Russian sanctions on their own economies.

Other nations including Brazil, Pakistan, and South Africa, are also staying on the sidelines.

The US spin is that these countries are actively undermining the effort to bring Russia to heel in Ukraine, but each of them has economic reasons for trying to steer a middle course on the conflict. Americans may see that as morally reprehensible, but they see it as enlightened self-interest.

Enough about geopolitics and whether countries should back the US play with Russia. It’s time for our Saturday Soother, where we try to forget about why Republicans are against capping the price for Insulin.

Or why they seem to be suddenly against what they’re calling “sportsball”. Apparently sports have become so woke that NBA, NFL and college teams are doing things like having woke slogans on their uniforms. That’s making Republicans like Ben Shapiro feel like he’s lost his safe space.

That won’t stop Wrongo and Ms. Right from watching both the men’s and women’s Final Four basketball championships this weekend.

Anyway, it’s time to let go of the internet and find a safe space of our own for a little relaxation. Let’s start by brewing up a mug of Big Trouble coffee ($16/12oz.) from Durham, NC’s Counter Culture Coffee.

Now grab a seat by a south-facing window and listen to the late Julian Bream play “The Miller’s Dance” from Manuel de Falla’s ballet. “The Three-Cornered Hat”. This performance was filmed in La Posada del Potro in Córdoba, Spain in 1985. Bream was one of the most distinguished classical guitarists of the 20th century. He also played a significant role in reviving interest in the lute:

Facebooklinkedinrss

Will Sanctions Hurt the Dollar’s Role in Trade?

The Daily Escape:

Cherry Blossoms, Univ of Washington, Seattle, WA – March 2022 photo by Erwin Buske Photography

One of the most important elements in the undeclared war between the West and Russia is how sanctions are changing both international trade and the international payments system.

The West has basically frozen Russia out of both. First, by taking Russia out of the SWIFT payments messaging system, and second, by sanctioning Russian banks and the Russian Central Bank. Third, by seizing Russia’s currency reserves that were held in the West.

All of this means that Russia can’t easily accept dollar/euro payments for exports and then convert them into rubles for use at home. By losing access to the international currency markets, it’s become impossible for Russian businesses exporting their energy, goods, or commodities to get paid. This may be a historic moment in economic history.

By freezing hundreds of billions of dollars of Russian reserves, the Russians no longer can access those dollars or euros. Sanctions mean that even the dollars and euros they could create through trade cannot buy much in the countries that support the sanctions.

Naturally Russia is looking for work-arounds for this dilemma. Selling the West anything in dollars or euros no longer makes sense: They can’t use them at home without exchanging them for rubles. And sanctions make that very difficult, since they’re closed out of our banking system.

There are two ways around this. Either use Russian banks that are not banned from SWIFT or go through an informal third-country currency exchange. Russia’s first effort is to only accept payment in rubles for its exports to “hostile nations”. That is, those nations who have imposed sanctions because of Ukraine.

In order to buy Russian oil and gas which they desperately need, Europeans will have to pay in rubles. That means either selling dollars/euros for rubles or selling them for yuan (China) or rupees (India), two countries that are not part of the sanctions regime.

The West’s move has the potential to upend the world’s trading system which today relies on payments in dollars. The dollar has been the world’s principal reserve currency since the end of World War II and is the most widely used currency for settling international trade. The dollar represents about 62% of global trade, down from much higher levels before the euro was established. The other important currencies are the euro at 20.1% and the Japanese yen at 5.7%. China’s yuan is at just 2.0% of trade settlements.

It is increasingly likely that Russia’s move will result in a further “de-dollarization” of trade. Recently, there have been new attempts to abandon the dollar. Saudi Arabia and China are planning to use the yuan in a new oil deal. Russia and India are negotiating to pay for trade in rupees.

China’s energy trade with Russia uses the dollar. Chinese energy imports from Russia soared 47.4%, an increase of more than $52.9 billion from 2021. This accounts for more than 65% of China’s total imports from Russia. Since the sanctions, both countries have stated their intention to move more of this trade to yuan.

A new multilateral financial system is emerging before our eyes. Who the participants will be, and what rules they will follow, are up in the air. The dollar will remain primary between the US and its allies, but alongside it, there could develop Russia-yuan, Saudi-yuan and India-yuan arrangements for trade in oil, minerals, and industrial products. Shifting just part of the global oil trade into the yuan is potentially huge. Oil is the world’s most traded commodity, with an annual trade value of around $14 trillion, roughly equivalent to China’s GDP last year.

We’re likely to see more trade occurring in more currencies, probably on a number of exchanges. We will see the world realign into different trading and monetary blocs, like there were in the past.

However the Ukraine war is settled, the Russian claims that the US has shot itself in the foot about the dollar’s dominating role in trade has a ring of truth. In the past, the US took Iran’s reserves after the Shah was overthrown. We froze Afghanistan’s foreign reserves earlier this year and now the West has done the same to Russia. A few years ago, the UK froze Venezuela’s gold in the Bank of England.

These systems are built on trust, and for the next few decades, trust may be lacking. So we’re looking at the possibility that there will be two quite different geo-political philosophies operating as trading partners as the non-US world develops its alternatives to the dollar as the world’s dominant trading currency.

Facebooklinkedinrss