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August 11, 2022
Ukraine Open Thread 2022-127

Only for news & views related to the Ukraine conflict.

The current open thread for other issues is here.

Comments

Ukraine thread because all of this is sanction blowback. Sanctions levied because of Ukraine and SMO…..
#energy @ twitter
> Germany’s first LNG import terminal will come online “early next year,” says Chancellor Scholz. Germany rushes to start floating import plants this winter to cut dependence on Russia. LNG supply in winter will be tight as Europe boosts imports.
> I don’t think there will be unrest” in the months ahead, says Scholz, as the nation faces an energy crisis and the prospect of fuel rationing.
[translation: hope….]
> Germany’s leader essentially says the nation will pay any price to secure enough LNG. Competition with Asia (home to the world’s top LNG importers) is heating up, and is slated to accelerate as winter draws near.
>> SCHOLZ: It is expensive to get LNG due to global market, but we will always get enough.
>>>”We will do everything we can to ensure that citizens get safely through this period,” Scholz said, adding that “it will get difficult.” 
The government working on another relief package, as Germany scrambles to deal with surging energy prices.
>>~>> In case you wonder what all this means on the ground: the family I rent to is asked to pay about 550€ monthly from october on, for natural gas. So far the usual monthly payment was 100€. The new levy for Uniper will increase the burden and isn’t even included in that.
>The dwindling water levels at Europe’s most important rivers ….is compounding the region’s energy woes.
Benchmark German power prices jumped to a new record on Wednesday European natural gas and coal futures also surged.
> Fitch Solutions “substantially” lifted coal price outlook due to:
-The EU’s ban on Russian coal will boost demand for imports from other countries like Indonesia.
-Plans to replace Russian pipeline gas with LNG will leave less fuel for other nations, forcing more use of coal.
> OUCH! German power prices just hit another fresh ATH. 1y ahead electricity price jumps >€450/MWh, has now gained 280% ytd.
> OUCH! Costs of moving diesel by barge in #Germany are rocketing due to low Rhine water levels.
> Nat gas is about to make new highs right when everyone thought inflation was over. This is perhaps the most important macro development happening today. [Aug12] Wait until this turns into another domino effect for other commodities to rise.
@zerohedge Europe bracing for apocalypse
~>French, German 1yr fwd electric prices. [graph]
> “High electricity using businesses […] could see further relief under new proposals to help subsidise their electricity costs. UK Government is consulting on the option to increase the level of exemption for certain environmental and policy costs from 85% of costs up to 100%.”
>> That’s the sound of the dam cracking. The bail outs are just starting. Expect European governments to spend billions of euros (or pounds) this winter. And also, to water-down (or even suspend) lots of environmental levies applied to industries.
> GOLDMAN SACHS: We see gasoline above $5 and Brent at $130/barrel by the end of the year. [US].

Posted by: Melaleuca | Aug 12 2022 13:28 utc | 201

Baron | Aug 12 2022 12:38 utc | 198
You’ve wandered into the wrong bar.
But stick around…. You’ll learn things about how the world really works that will blow your unfettered naivety.

Posted by: Melaleuca | Aug 12 2022 13:32 utc | 202

This is the funniest thing this week:
Estonian Ministry of Defense: We are negotiating with Finland on the creation of a common missile defense system to close the Gulf of Finland to the ships of the Russian Navy, the Baltic Sea will become an internal sea of NATO

Posted by: rk | Aug 12 2022 13:56 utc | 203

I am utterly confident the Russians would never shell or bomb a nuclear plant, at least not a nuclear plant located in Ukraine.
They have nothing to gain out of it and everything to loss.
In contrast, ukronazis might gain something (maybe) and everyday they have less to loss…

Posted by: Arganthonios | Aug 12 2022 15:53 utc | 204

Brimstone missiles were used in the latest attack on Zaporozhye NPP.

Posted by: rk | Aug 12 2022 16:49 utc | 205

The whole discussion of the size of Russia’s budget deficit betrays immense economic ignorance. As the issuer of currency, the Government of Russia can never run out of money and can fund every single social requirement it faces. It is impossible for there to be a limit on the capacity of a sovereign government to pay debts denominated in its own currency.
For the economy as a whole, in any accounting period, total income must equal total expenditures. The only requirement is, regardless of how many sectors we choose to divide the whole economy into, the sum of the sectoral financial balances must equal zero. For example, if we divide the economy into three sectors – the domestic private (households and firms), government, and foreign sectors – the following identity must hold true:
Domestic Private Sector Financial Balance + Fiscal Balance + Foreign Financial Balance = 0
Note that it is impossible for all three sectors to net save, i.e. run a surplus, at the same time. Some sector has to be issuing liabilities. This is an accounting identity, not a theory. If it is wrong, then five centuries of double entry book keeping must also be wrong.
Those who worry about deficit spending are setting up an entirely false constraint. A sovereign government that issues its own currency faces no inherent financial constraints. It cannot produce a financial imbalance. It can buy ANY resources that are for sale in terms of its own currency by using key strokes. That does not mean it should try to buy all the resources, as it can produce inflation in certain circumstances and it can leave too little resources to fulfill the private purpose.
Government needs to use its sovereign power to move just the right amount of resources to serve the public purpose while leaving enough for the private purpose. However, that balance is entirely POLITICAL, not driven by financial need.

Posted by: Thomas Bergbusch | Aug 12 2022 16:51 utc | 206

Posted by: Thomas Bergbusch | Aug 12 2022 16:51 utc | 206
Russia specific clarifications:
Russia has unusually high proportion of export taxes in the budget, if I recall, on oil, it is half of the difference between export price and 40 USD/bbl (probably updated for inflation).
The accounting of “frozen assets” presumably does not show in this surplus.
A little mystery where the budget surplus is kept. My guess is in India, big importer recently, one that may use extra loans etc. The discount India gets decreased allegedly, but the banks can be happy with deposits and India is getting decent stimulus. The cumulative effect of stimulus and discount emboldens India to face irritation from USA and vassals. A guess estimate is that Russian economy is small enough relative to India a major part of the surplus can be deposited, while India economy is small enough that this makes a macro difference.

Posted by: Piotr Berman | Aug 12 2022 20:26 utc | 207

Governments always run deficits during times of war. It’s how wars have been financed since the Middle Ages. Obsessing about borrowing money for that purpose reveals a deficit of historical knowledge.

Posted by: Rob | Aug 12 2022 21:53 utc | 208

The Russian refusal to take possession of the turbine supporting Nord Stream 1 makes perfect sense.
* Legally enforceable sanctions against Russia are in force, which means that fulfilling contracts under sanction are not legally enforceable in Germany and Canada.
* Therefore, the German Chancellor’s pleas for Russia to take possession of the turbine (that is violate German sanctions with German consent) would involve Russia taking possession of a multi-million dollar turbine essential to Nord Stream 1 without the protection of an enforceable contract.
* Therefore, Russia would have no recourse if the CIA (in collusion with MI6) sabotaged the turbine (dirty tricks) to further motivate Germany to cut economic ties with Russia … giving Germany no choice but to fall back on the American economy for higher-priced energy.
The American narrative: “It’s Russia’s fault that the turbine [allegedly] repaired in Canada didn’t work to restore natural gas flows to Germany and other states in the EU. The damn Russians, as we all know, are duplicitous and unreliable.” (In private among themselves: “The Russians would be damn fools to fall for this.”)
The Russian narrative: “In light of events, how can we accept the good faith of the Americans, Canadians, and Germans who encourage us to accept the turbine and make reciprocal contractual commitments to them that are not enforceable in courts of law? Only idiots would walk into that trap.” QED

Posted by: GoDark | Aug 12 2022 22:32 utc | 209

Posted by: Thomas Bergbusch | Aug 12 2022 16:51 utc | 206
——-
Thanks Thomas. Well said.

Posted by: financial matters | Aug 12 2022 22:48 utc | 210

Posted by: GoDark | Aug 12 2022 22:32 utc | 209
All of that is nice and logical, but one should pay attention to the basic factor of pipeline reliability: it sharply decreases when the power that controls the ground under the pipeline is less that pleased with its operation. Then you get human errors, act of God, malfunctions, explosions, obstructing bureaucrats etc.
That said, acts of God, like unusual weather patters, seem to favor Russia more than the West.

Posted by: Piotr Berman | Aug 13 2022 2:10 utc | 211

Russia shelled the plant.
https://www.romania-insider.com/ukraine-export-energy-romania-june-2022
Ukraine, ready to export energy to Romania at massively discounted price
The Russians stated if “Kiev’s attacks didn’t stop”. They didn’t say “Kiev’s attacks on the plant.
They may be tapping out and sending a warning to the US that it’s almost nuke time.
I guess they may have just wanted to disconnect the EU from the grid.

Posted by: OhhCanada | Aug 13 2022 2:24 utc | 212

Re American sentiment:
1) The US populace is deeply divided between the rational and the irrational, a demarcation that transcends party lines.
2) A second, more easily overcome division is between the informed and uninformed. The latter group including both those who don’t care about anything beyond their personal lives and those who care but have been thoroughly propagandized over decades of mind control via the educational system and mass media. Although this division also transcends the political spectrum, an increasingly greater percentage of conservatives are informed.
3) The third division is generational. Again, there exist significant segments of both of the two divisions mentioned above on both sides of the generational divide.
4) Race, qua race, is a less significant division, as is economic strata. However, those are precisely the divisions that the elites have attempted to manipulate.
My opinion only, based only on my own observations and with no statistically significant support.
Posted by: Ciaran | Aug 11 2022 15:23 utc | 31
————-
IMHO, this is a total misrepresentation. One could posit that the most fundamental division in USA is between Navaho and non-Navaho. For starters, they are actually different… A valid counter argument is that there are too few Navaho to matter.
So consider rational sector. Is it really more numerous? Proceed to informed people. Actually, people are increasingly informed. It used to be that to avail yourself to discounts in supermarket you had to locate, collect and clip coupons, quite a chore, so either you were passing on that information, or were so exhausted that no energy was left to find information on anything else. Now finding sales is much, much easier. With renewed vigor, populations knows much more about other stuff, like intimate details from the life of celebrities — now known wider and more extensively. In the process, folks get info of positive value, and, alas, negative.
Recall the clash of Titans that was election year 2018. On one side, one and only Donald Trump who brilliantly entered politics on the following issue: the real (as opposed to phony) birth certificate of Obama. On the other side, Hillary Clinton was running on Russia Gate. The main division in 2022 was if balloting by mail (actually, properly prepared envelope drop to a special box, with some allowances for unreliable USPS) is evil (i.e. “un-American”) or not. One candidate gave example to mail voters by campaigning from his basement, the other was much more mobile… Birth certificate was forgotten in favor of fresher b..t, but on the other side Russia gate was weighing. Navaho elders wisely did not comment on any of this, at least not in English.
There exist divisions which could be related to rationality, but aren’t. Global Warming. I am old enough to recall cooler summers and more snowy winter of my younger years, so on physics I am inclined to believe in Global Warming caused by CO2 emissions, and it is grimly amusing to read various pieces of anti-GW pseudo science. But are policies advocated by GW party (parties) rational? Let me put in this way: do they offer the best CO2 reduction per trillion dollars of devoted spending? I do not think so, but that may be material for another longish post.
Finally, Israel, a “divisive” issue. Big majority of GOP-ers think (according to polls) that Administration is not friendly enough, obviously on general principle that the is no topic subject to discussion that Administration is right about. By the way of contrast, 57% of Democrats does not know enough to make a judgement of “too friendly/just right/not friendly enough”. And they are happy about it (my guess, they did not declare themself as Independent to poll workers). BTW, Trump was the only candidate in 2018 primaries who did not solemnly promise to call Israeli PM before any decision that could affect Israel. Why should he if the father in law of his daughter can do it better? In any case, this is a very arcane topic to voters, both Dems and GOP. Are GOP-ers aware that Israel has “socialized medicine”, practically, a Communist country (to them). In summary, on this issue, Dem hoi polloi is more rational and informed (to the point that they are aware when they do not know), but effectively, it is a gigantic non-issue. Phonecalls or conferences in person, through father in laws or trusted intermediaries of dual nationality, effects are the same.
Generational divisions and racial. The net effect is like with Israel issue.

Posted by: Piotr Berman | Aug 13 2022 4:00 utc | 213

the Baltic Sea will become an internal sea of NATO
Posted by: rk | Aug 12 2022 13:56 ut
Small dogs yapping to their masters command!

Posted by: Jpc | Aug 13 2022 12:44 utc | 214