Below is our translation of a Chinese-language article from hainaxinwen.com, with commentary by Vince Dhimos.
Not long after Trump took office, I came to the alarming realization that the expectations of voters that a successful business man would have the necessary skills and experience to manage the US economy effectively were false because the ability to game the capitalist system to one’s own advantage does not teach anyone about macroeconomics and Trump’s clumsy handling of the economy was a sure sign of this. This was compounded by the fact that Trump does not consult with experts, believing that he is the only competent person on the planet. His own failures as a CEO leading to 6 bankruptcies was a harbinger of things to come.
On the other hand, due to the mental disease that has long affected Washington, Congress is all too eager to slap killer tariffs on China, and these lawmakers’ motivation has nothing to do with economics. They don’t care a fig about economics or the US economy – which is doing well only if you believe that the stock bubble currently being blown is not a stock bubble. Their goal is to harm China at all costs in order to weaken it. After all, they know Trump can spin a tornado into a nice day.
Back in the 80s when Congress was debating granting Most Favoured Nation status to the PRC, one of the talking points was the possibility of bringing China into the Western sphere of influence as a means of driving a wedge between that country and Russia, and I had the impression then that Russia was in fact the target, not so much China. US think tanks had for years imagined scenarios wherein Russia and China were at odds with each other over this or that issue but it was mostly wishful thinking, the product of their overheated fantasies. I suspect that now, after decades of denial, much of the US Establishment has finally realized that this imaginary wedge never existed and never will. It should have been obvious considering all the vicious US aggression toward both countries that could not but have driven them together in an effort to escape US fury. So now at long last, the psychopaths in Washington are conspiring to bring down China by various means: the sanctions on Huawei, inducing Google and other tech giants to stop doing business with the company, and now the absurd, crippling tariffs that, as the author of our translated article points out, are rejected by every sector of US society. As is shown here and elsewhere, the tariffs and counter-tariffs are costing US businesses and households billions (I just read this a.m. that the global tech markget is down cool trillion). Yet Trump and his cronies in Congress plough ahead with no signs of relenting. Their goal is the same as in Venezuela and Iran – make the economy scream to trigger the overthrow of the government and achieve a pro-US government in China. The mood among the Chinese grassroots suggests this will not happen.
A series of Reuters Interviews on the Chinese street show that some of the people are developing hostility toward the US and some refuse to buy US products:
A Pew survey shows the Chinese see US power as a major threat
“A survey by the Washington-based Pew Research Centre revealed 45% of Chinese people consider US power and influence to be a ‘major threat’”
A CNBC poll shows Trump’s trade war is not well accepted nationwide and is so unpopular in key states that it could cost him re-election in 2020.
The articles on this topic in the US press are surprisingly open and straightforward and almost all indicate the world economy is in for a shaky ride, but, for example, the soybean farmers they interview, whose livelihoods have been ruined, are generally clutching at straws in order to keep believing in Trump – who many Evangelicals believe was appointed by the Almighty – saying things like “I understand what Trump is trying to do but I think he is using the wrong method.”
Pain of Tariffs Tests Farmers’ Faith in Trump: ‘How Long Is Short-Term?’ (from 5-24!!)
The trade dispute with China has cost growers their No. 1 buyer, but they say the president is on the right course.
So let me get this straight: they understand that he wants to destroy the world economy but don’t agree with his method?
The Chinese reports are a little less forgiving, quoting farmers who have already given up on their trade thanks to Trump. They aren’t being nice any more.
The harm to the US economy from added tariffs has caused strong opposition from all walks of life
Abstract: Adding tariffs to harm the US economy - American society strongly opposes raising tariffs on China's exports to the US. The US Trade Representative Office announced on May 8 that it will start tariffs of US$200 billion worth of Chinese exports to the US from May 10. 10% increased to 25%. Sino-US economic and trade consultations are still in progress, and all sectors of the American society strongly oppose the US government to raise tariffs, thinking that this will only hurt
American consumers’ pocket book “crushed”
The American Soybean Association issued an announcement on the 7th, urging the US government to cancel the plan to impose tariffs on Chinese goods, and expects the US government to establish better trade relations with China through negotiations. Rick Huffenberg, president of the American Apparel and Footwear Association, said raising tariffs would only hurt American families, American workers, American companies and the US economy. Gary Shapiro, president of the American Consumer Technology Association, said that suddenly raising tariffs to 25% would "disturb the market and damage US companies."
Mr. French senior vice president of government relations, said that the sudden increase in tariffs will seriously hit US companies, especially those with limited resources that cannot mitigate the impact, "American consumers will face higher prices, and employment opportunities in the US will be reduced."
A study by the US-based business consultancy Global Trade Partnership in Washington showed that a 25% tariff on US$200 billion worth of Chinese exports to the US, along with an existing 25% tariff on US$50 billion in Chinese goods and the addition of tariffs on imported steel and aluminium products will result in a reduction of 934,000 jobs per year in the United States and a cost of living increase of $767 for a family of four.
Consumers’ pocket books will be “crushed”
The increased impact of tariffs on American consumers is real, and the people’s pocket book will be “crushed.” The Wall Street Journal reported that the addition of higher tariffs would have a huge impact on the average US consumer because it involved a range of consumer goods, including groceries, textiles, clothing, sporting goods, soap, lamps and air conditioners.
The US Chamber of Commerce opened a special page on its website called "Trade Works, Tariffs Don’t" last year, arguing that American companies and consumers are experiencing the impact of trade wars and marking the ongoing damage caused by trade wars to US states and businesses using shades of red from light to dark. Click on any state to find out the impact of trade disputes on the state's major businesses. The most severe damage, in dark red on the map, covers nearly 40 states.
Recently, a joint study by the University of Chicago and the Federal Reserve Board used the "example of washing machines" to prove the impact of increasing tariffs on consumer goods. The results show that since the United States imposed tariffs on imported washing machines in January 2018, the average price of washing machines has increased by 12%. The annual spending of American consumers on washing machines and dryers has increased by 1.5 billion US dollars. For $86, each dryer costs $92 more.
A study by economists at the Federal Reserve Bank of New York, Columbia University, and Princeton University found that the tax burden from US government tariffs—including tariffs on steel, aluminium, solar panels imported from China falls entirely on US consumption, costing US consumers and businesses at least $1.4 billion per month.
American farmers are experiencing "hard economic times"
American farmers have also been hit and their livelihood has been severely affected. In 2018, US net agricultural income fell by 12%. Soybeans, pork, dairy products and wheat prices suffered a precipitous decline, while equipment prices rose, resulting in a sharp drop in profits.
Lovi Nezl, a fourth-generation farmer of Bismarck Farms in Kansas, told this reporter that his farm has experienced "tough economic times" since last year because of tariffs. Last year the US government announced the issuance of $12 billion in agricultural subsidies to help American farmers who were damaged in trade disputes provoked by the United States. Nezl said that the subsidy money was obtained, but compared to the lost market and the reduced income, "this subsidy is not nearly enough."
Dr. Dar Fjell, Director of the Research Management Department of the Kansas Corn Association, told this reporter that most of the farmers' income has been invested in agricultural machinery, not only because of the increase in tariffs, but also because of the decline in sales, the decrease in income, and the increase in equipment costs. The construction of warehouses for the placement of agricultural machinery and equipment requires the use of iron, aluminium and other raw materials, which are subject to heavy taxes due to the trade wars, resulting in rising costs in this area. "I don't know how long this situation will last. The farmers have been waiting for good news, but they are waiting only to be disappointed again and again," he said.
Looking at the major media in the United States, examples of American farmers being affected by tariff increases are everywhere. Jim Tapon, a grain farmer in Kansas, said: "We have survived the difficult times of the 1970s and 1980s, but we are not making it this time." The family had to give up their farms after nearly 100 years of operation. Iowa’s pig farmer Howard Hill is losing money. He said: “We have patience, but we don’t have unlimited patience.” John Boyd, a farmer who grows soybeans, corn and wheat in Virginia, can't afford the equipment he needs, "I didn't buy anything"... The US Department of Agriculture's Bureau of Economic Research said that the trade war may have reduced the US agricultural trade surplus in FY 2019 to its lowest level since 2007, in part because "exports to China are expected to drop sharply."
Trade frictions between the world's two largest economies have also raised concerns about global economic growth. The International Monetary Fund, the World Bank and other institutions recently lowered their expectations for world economic growth. The World Trade Organization lowered its global trade growth forecast for 2019 from 3.7% to 2.6%, the lowest level in three years. Gian Maria Milesi-Ferretti, deputy director of the International Monetary Fund's research department, said in an interview with this reporter that the increase in trade barriers due to US trade policy and the trade tensions it creates will undermine the global supply chain and are one of the major threats to the current world economic outlook.
(This newspaper, Washington, May 9th)
Vince Dhimos answered a question in the Spanish language sector of Quora
In the 80s there was a heated debate in the American Congress over whether to grant China Most Favoured Nation status, allowing it to trade freely with the US. One of the points mentioned by a lawmaker during these debates was that if China were able to trade freely with America, that country could be pulled away from the sphere of influence of Russia and into the American sphere of so-called "freedom and democracy." For many decades, American think tanks and politicians believed that Russia and China could be forced apart by clever machinations on the part of Americans. The problem is, the US leadership continued to harass Russia and China in various ways, including with military threats against these countries. This hostile behaviour had the effect of driving them closer together.
American leaders are exceptionally dull witted and the poor things don't learn quickly. It took them about a half-century to conclude that Russia and China would always be partners in economic and strategic matters and that neither one would allow itself to be influenced by the US or pulled into its sphere of influence. They understood that all the nations that had allowed themselves to be manipulated by Washington had become little more than colonies.
Now for the first time, the Establishment seems to have finally understood this (even though a normal person could easily have seen it).
So now the US is taking another tactic, that of destroying China's economy and simultaneously courting Russia. Of course, the American officials are so obtuse that they have no idea how to go about this, and therefore, it is clear to both countries that they definitely need each other now more than ever. Perhaps within another half-century the US will devise a better plan.
If they don't, the US economy will continue to slide into irrelevance. So far, the US consumer and businesses have lost billions of dollars as a result of the American tariffs and China's retaliatory tariffs.
Soybean and pig farmers in the US are losing a lot of money because China has stopped buying American soybeans and pork. Despite the fact that the American government has meanwhile begun paying emergency subsidies to farmers, some of them have been forced out of business because the subsidies are insufficient. (How foolish for the government to destroy a farmer's livelihood and then force the tax payer to pay him for its mistake).
China was once a very big market for American natural gas (LNG), and in fact, several companies have built expensive LNG terminals and specially equipped ships for selling gas to China. But now that Trump has started his foolish trade wars, China is refusing to buy the American gas (it is incredible that the US Establishment could not foresee that China would impose retaliatory tariffs on American exports). The big winner is Russia, which is now finishing the pipeline from Siberia to China and will be selling to China all the gas that the US would have sold to that country had it treated other countries fairly.
The problem with Trump is that he never weighs the possible adverse consequences of his actions. This is the personality flaw that has caused him to declare bankruptcy 6 times in his personal businesses, and that should certainly have been a red flag for Americans.
A recent study by the US Chamber of Commerce shows that his disastrous tariffs on China have cost billions of dollars in various states that are key to his re-election as a result both of increased costs of the goods subject to the tariffs and of China’s retaliatory tariffs, which anyone with normal foresight could have anticipated.
Some would call Trump a failed business man. Will he fail as president?
Below is our translation from RIA Novosti. with commentary by Vince Dhimos.
All bets are off now that China has officially declared a “people’s war” on the US economy. As the comments section at the above-linked RIA site indicate, China is in a delicate position now. As the PRC admits, things will get very rough for both the US and China now that the economic war is on. But the bottom line for them is that the Chinese have a higher pain threshold. I think they may be thinking in terms of the 2020 elections. They know China can survive but are betting on Trump losing to a Democrat (they are hoping it will be Biden) thanks to the devastating effects of the Chinese gamble on the US economy. Presidents presiding over famines generally don’t get re-elected. Author Ivan Danilov assumes that, as a major offensive in this war, the Chinese will be ditching their Treasuries, with a devastating effect on the US dollar. I suspect that there may be a domino effect, with other nations joining in and ditching their Treasuries as well. After all, Trump has not been nice to his allies either.
Finally, here's a thought. Suppose China goes ahead with the dirty deed and ditches its Treasuries, and at that point, the dollar experiences some sort of slump as a result -- as one would expect -- and then reminds Saudi Arabia that, since the USD has taken a hit and will decline, it might be a good time to get out of the US dollar and start using the yuan. They could remind Saudi that China doesn't hold enough dollars any more to buy oil in USD. And then supposing the Saudis agreed. We have already seen that the Saudi-US relationship is souring and that Putin stands to become the head of a restructured OPEC. Just speculating of course, but it occurs to me that perhaps China has already had that chat with MBS. This could explain why Xi is feeling his oats right now.
China declares a "people's war" on the American economy
May 16, 2019
Judging by the reaction of the official Chinese media, Beijing does not expect a speedy or peaceful resolution of the economic conflict with Washington. Changes in the tone of the official media position of the Celestial Empire were noticed even in the USA: “China promises a “people's war,” since the trade conflict has taken a nationalist turn,” writes the US business news agency Bloomberg. It is noteworthy that the “people's war,” about which the Chinese state-owned foreign policy publication Global Times writes in its editorials, is not only a departure from the restrained and diplomatic rhetoric that was used before, but also a de facto recognition that, intentionally or not, the conflict with the United States is leaving (or has already left) the purely economic plane.
Global Times editor-in-chief Hu Xijin, [胡锡进Húxījìn] sometimes referred to in the US social network as a “Chinese oracle” because of his good knowledge of the state of US-China relations, explained on Twitter what the essence of the changed political and public discourse is: “China’s decision to raise tariffs and the fall of American stocks inspired Chinese society. Being tough with the United States, achieving peace through struggle, is the consensus of most Chinese. The US is planning new tariffs. “The state has reached a peak."
It should be recalled that the day before, Hu Xijin hinted: Chinese experts are actively discussing specific options for dumping the Chinese portfolio of US government bonds "onto the market," which caused a slight panic in the American financial media. The latter were quick to come to the conclusion that either China would not dare to take such a measure, or the use of such a radical measure would ultimately play into the hands of Donald Trump, although it would cause serious damage to ordinary Americans. “If China sells its bonds to the United States, Trump will win. The sale will weaken the dollar, which will help reduce the US trade deficit with China,” writes Bloomberg. This is an overly optimistic assessment that does not take into account how badly such an action by the PRC would undermine the US financial markets and how much harder the Chinese action would make it to build up US government debt, which is necessary to maintain American economic stability.
Peter Schiff, head of the investment fund Euro Pacific Capital, believes that the logical continuation of the current conflict does not bode well for the American economy, while many in the United States refuse to face the truth: The ignorance of the true nature of Sino-U.S. relations is staggering. China has been subsidizing the US economy for decades by lending us money and supplying us with manufactured goods. When China withdraws its support, our credit based service sector economy will implode!” he writes on Twitter.
However, one should not assume that it will be a painless process for China. Quite the contrary: the Chinese economy has been growing for decades, thanks in part to preferential access to American technology, capital and markets, and its “disconnection” from the American system (if it comes to total embargoes and “dollar sanctions”) cannot but inflict quite sensitive damage on China that will have to be stopped by long-term and difficult reforms. It is not for nothing that representatives of the Chinese official point out that in Chinese social networks, the confrontation between the USA and China is described as a conflict between two books, ie, “The Art of the Deal” (by Donald Trump) and a collection of Mao’s speeches on the theory and practice of “protracted guerrilla war.” Roughly speaking, the Chinese leadership is making a public bet that the Chinese system in general and Chinese citizens in particular have a “pain threshold” much higher than that of the American opponents. And that they can withstand difficulties that would simply break the American political system and American society.
The Chinese strategy is to "tolerate what the United States will not tolerate." This did not go unnoticed at the White House, but Donald Trump and his team took the information in a rather specific way, reducing it to Beijing’s supposed bet that the next president of the United States in 2020 will be a Democrat and ex-vice president under Obama Joe Biden. Trump stated in plain language that China had abandoned the agreements already reached, since he expects to agree later with Biden or "one of the very weak democrats." A pro-Trump press began active promotion of conspiracy theories of a relationship of his Biden’s son with Chinese business. The American tabloid The New York Post writes that immediately after the then US Vice President’s visit to China, Hunter Biden’s (Joe’s son) firm received a contract for a half billion dollars with a Chinese state bank. And it is precisely this that allegedly explains the very soft position of Biden himself on the economic war with China.
Regardless of how true the above charges are, you can safely bet that Trump, his entourage, some American security officials and even some of the “system politicians” from the Democratic and Republican parties intend to “push China to the brink. At this time, in their opinion, the question of whether the United States will maintain its status as a world hegemon in the 21st century is really being resolved.
Here you can trust the assessment of Trump’s chief campaign strategist Stephen Bannon, who told CNBC that there are “no chances” for the US president’s retreat in a trade war. If a month ago there were grounds for believing that Trump would agree to some kind of "truce" and certain (albeit temporary) concessions on issues important to the United States, now he is likely to really be escalating until the negative consequences are unbearable for either China or the United States itself.
The role of Russia in the context of the growing conflict between the US and China (as well as the role of the European Union, and other countries that can "shift the balance of power" in the struggle between two rivals of comparable strength) will only increase. Moscow got rid of its American bond package in time (for if it sold after China, it would have had to take losses), and now its hands are completely untied to gain maximum benefits from reorganizing the global economic and political system.
[COMMENTS AT THE RIA NOVOSTI SITE]
Let’s not deceive ourselves. China falls short of the United States in many respects. The Chinese economy is focused on exporting its goods to the USA and its allies. In terms of military power, China loses significantly to the US. In its potentials of operational control and transfer of troops, the United States now has no equal in the world.
China will collapse immediately if the entire US debt is sold, their entire economy is based on this, as is ours on oil!
The following is our translation of an article from Ria Novosti with commentary and notes in [brackets] by Vince Dhimos. As I was reading the article before it was translated, I had to chuckle at Boris Martsinkevich’s ironic style, a style quite common in Russian commentaries on Western silliness. It is nothing new. Mikhail Zoshchenko was a Soviet satirical short story writer who similarly poked fun at Soviet silliness, which differed little from today’s Western bureaucracies seeking to restructure the minds of their citizens with a heavily censored press and a social media where certain topics are avoided to prevent a plague of citizenry running around with its own thoughts not approved by the Establishment. Homo americanus is the new Homo sovieticus.
Like Zoshchenko, today’s Russian authors view with amusement the antics of Western “experts”, politicians, officials and the like, who take their own incompetent scolding, threats and sanctions oh so seriously. For these Russian observers, the West is a big comedy show, and the overpaid bunglers who run it are an endless source of mirth, especially when they put forth enormous effort to “punish” Russia and wind up costing themselves money and embarrassment while inadvertently benefitting the rogue state they worked so hard to bring under their control.
The salient example is the sanctions that Washington forced Europe to slap on Russia that wound up costing Europe $20 billion in lost revenues due to the creative Russian countersanctions that wound up diversifying Russian industry, agriculture and arms. The Europeans acted like the Keystone cops, diligently trying to please the police chief but falling over their own feet in the process while the perpetrators they hoped to bring to justice eluded them and wound up actually enriching themselves at every turn. So much absurdity. So much juicy material for the satirist.
Likewise, the bungling attempt to punish China wound up punishing the US with the biggest trade deficit on record. And the embargo of Rusal almost obliterated the US aluminium industry until Trump, was forced to call off the embargo with his tail between his legs. It’s all rollicking fun to the tongue-in-cheek Russian observer.
Sweden’s shutdown of its last nuclear reactors is based on “green” ideology, but as I always say, ideology does not solve problems, it creates them. Winters in Sweden are harsh, as the author reminds us. Yet Sweden puts politics ahead of practicality, leaving the country at risk of shivering this winter. The stuff of bitter satire.
Some of the subtle humour will not be readily grasped by Western readers, but it will make a Russian reader chuckle.
For example, the author writes:
“...the country [Sweden] began to buy electricity wherever it could - even in mighty shale-oil burning Estonia.”
The author couldn’t help taking a swipe at tiny Estonia, which, under the influence of Washington, has morphed from a Russia-friendly Warsaw Pact state in Soviet times to a fashionably Russophobic NATO member that proudly pays its full dues and, from behind the skirts of the Pentagon, snarls dutifully at Moscow, holding military drills right at Russia’s doorstep. Indeed it is a mighty country -- in its dreams. The EW system Murmansk BN can paralyze the entire NATO deployment on land, on sea and in the air, in less than a minute, as by Vince Dhimos we posted here just a few days ago.
And who benefits from all this politically correct silliness? Why Russia, of course, the world’s foremost expert in the decommissioning of nuclear power plants. You ban ‘em, we dismantle ‘em. With Britain, Switzerland, Spain and Germany coming off line next, they’ll be busy for a while and making money hand over fist. And then, when reality slaps these countries hard in the face, they may well wind up building the plants back up again.
You might call this genre of Russian commenting the crying-all-the-way-to-the-bank style.
Russia deprives Sweden of cheap energy. Next in line are Germany and Britain
On 29 April in Sweden, a call for tender was issued for dismantling two reactor vessels of the first and second power units of the Oskarshamn nuclear power plant and two buildings at the Barsebäck nuclear power plant. The tender was not the first. In January 2019, the consortium General Electric Hitachi completed the dismantling of the internal installations of the reactors of the Oskarshamn nuclear power plant, so that the winner of the next competition will continue the work begun. But before we talk about the new consortium, let us recall what the Swedish nuclear project is and what the Swedish energy sector looks like.
Sweden has the fifth largest area of any country in Europe, but the population there is less than Moscow’s, only ten million people. It is a large and sparsely populated country, in the bowels of which geologists have not been able to find enough coal, oil and gas. However, nature understands irony. There are several uranium ore deposits in Sweden. In such an amazing scenario, the country, of course, could not pass up nuclear energy.
But the Swedes did not invite any of the recognized majors to build nuclear power plants. The company AB Atomenergy [Swedish] has developed its own projects of boilers with nuclear reactors. Now installations of this type are not deemed the safest, but construction proceeded from 1964 to 1980, a time of romance for atomic physics, when experts were still not fully aware of the risks posed by the atom. Over 16 years, five nuclear power plants had been built in Sweden, with 15 reactors operating there. As a result, the country became the second on the continent in nuclear power: NPPs provided 40% of its total electricity generation. And this turned out to be sufficient, since almost the entire remainder of power is generated by hydroelectric power plants, and the Swedes very carefully and competently use their hydro resources. Hydroelectric power stations and nuclear power plants have nothing burning inside them, and there are no thermal emissions, so Sweden is rightfully considered one of the "greenest" countries on earth.
True, there are exceptions to this rule. In the south of the country, where there are not many good rivers, in the town of Karlshamn, the thermal power plant of the same name still operates, fired by fuel oil. Solar and wind power stations, though fashionable and eco-friendly, cannot satisfy all the needs of the citizens. Still, Sweden is not Spain or Portugal. The winters there are quite severe.
However, let's get back to the Swedish nuclear project. Its fate clearly shows what is going on in the minds of the Europeans. Until the end of the 70s, the Swedes were rightfully proud of their atomic successes: reactors of their own design, built domestically, clean air and plenty of electricity. But in 1979, the first of the three nuclear power plant accidents occurred - at the American Three Mile Island in Pennsylvania. Pennsylvania is quite a distance from Sweden, but in 1980 a Swedish national referendum was held, and it was decided to phase out nuclear power. Construction that was already underway was completed, but no new plants were started. Radioactive cesium, blown to Sweden from Chernobyl in 1986, only intensified anti-nuclear sentiment, with the result that in 2005, both Barsebäk reactors were shut down.
However, as time went on, the initial panic gave way to mathematical calculations, which showed that even if all the rivers of Sweden were dammed, there still wouldn’t be enough to satisfy the needs of households and industry. Environmental sentiment in northern Europe is very strong. The Swedes didn’t want to build new gas or coal fired power plants - and in 2010 parliament repealed the 1980 law. The Swedes began to resume the program to build nuclear power plants, and even the accident at Fukushima in Japan did not deter them.
True, ten years have passed, and there are still no new nuclear power plants in Sweden. This is because in 2014, the government included representatives of the Green Party, who faint upon hearing the words “nuclear power.” Since shutting down all the country's reactors would have been tantamount to death, the "greens" took a different turn. The owners of nuclear power plants were assessed an environmental tax of 33% of the cost of the electricity produced. This instantly made the Swedish nuclear generation unprofitable, and the country began to buy electricity wherever they could - even in mighty oil-shale burning Estonia.
To capture the new market, foreign suppliers dropped prices, and Uniper had no choice but to close two power units of the Oskarshamn nuclear power plant in 2015. How the Swedish government will deal with this is not quite clear. Already in 2017, following a tender, GE Hitachi consortium began dismantling everything inside the reactor vessel. In 2019, Estonia announced that, according to the requirements of the European Commission, it was forced to close part of the Narva power plants, causing Sweden to lose 25% of its capacity, and this is only the beginning. In other words, this energy import source for Sweden is closing down.
The dismantling of the internal equipment of the power units of the Swedish nuclear power plants was only the first stage. Now they have to dismantle the buildings themselves. The job has been awarded to two German companies, Uniper Anlagenservice and Nukem Technology. Both companies are recognized majors in their industry. For example, the Bavarian Nukem Technology has already decommissioned nuclear power plants in Germany and France, a research reactor and a fuel plant in Germany, and facilities in Spain, China, South Africa, Bulgaria, the Czech Republic, constructed a radioactive waste storage facility in Chernobyl, and decommissioned the Ignalina nuclear power plant in Lithuania.
And now for the main point. Since 2010, Nukem Technology has had exactly one owner - 100% of the company's shares belong to the Russian state corporation Rosatom. As a result of this transaction, Russia was able to ignore any sanctions, and German specialists now have access to the production capacity of unique equipment.
Let me explain. Nukem Technology, winning a public bid, faced the same problem every time: after developing a project for dismantling, they had to look for manufacturers able to create the necessary equipment - not serial, but piecemeal. The search took time, the lack of experience and qualifications of contractors generally put contracts on the verge of failure. But now the German engineers no longer have outsource equipment manufacturers, and there is no need to waste precious time: the nuclear industry of Russia can cope with any task.
Of course, in Sweden, everyone is well aware of who owns Nukem Technology, but its Russian roots don’t bother anyone. Anti-Russian sentiments and other sanctions are one thing, but the need to work with a radioactive object as safely as possible, efficiently and in time is quite another.
By the way, the Swedish contract is quite significant for Russia and Rosatom - the European market for decommissioning nuclear power facilities is estimated at several hundred billion euros. A number of countries have decided to shut down their nuclear power industry: Germany, Spain, Switzerland, and also Britain, are closing their second-generation nuclear power plants. The geography is vast, and here we have a clear opportunity to work and make money.
Relevant from New Silk Strategies:
RUSSIA: THE MOST STABLE AND HEALTHY OF ALL INDUSTRIAL ECONOMIES
How is Google Translate doing these days?
First, I need to say that GT is one of the most amazing feats of software engineering ever and it is a boon to translators who know how to use it wisely. Kudos to the unsung heroes of Google who developed it.
Of course, it operates on non-human principles, so naturally, it doesn’t think like a human translator. Here is an example from the above text:
Sweden is the fifth largest in Europe, but there are only ten million people in Moscow.
Human translator, same text:
In terms of surface area, Sweden ranks fifth in Europe, but its population is less than Moscow’s, totalling 10 million in all.
По площади Швеция — пятая в Европе, а вот населения тут меньше, чем в Москве, всего десять миллионов человек.
Although hard to consider given how tense things are between the U.S and Chinese along with Russia, how effective do you think they would be as allies and who would the U.S work better with? (for example like counter-terror operations)
Vince Dhimos, Editor-in-Chief at New Silk Strategies (2016-present)
At this point in time, the US cabal is stuck in a negative economic strategy that obviously will never work out in the long run. Their attitude toward Russia and China is juvenile and not worthy of adults. They appear to think — God knows why — that if they can bring down these two countries, they will somehow benefit, perhaps even prosper. And yet there is no rational reason to expect that, quite to the contrary. The fact is, if they could just stop this childishness, the US could make money by joining China’s Belt and Road Initiative.
A few years ago when China opened its Asia Infrastructure Investment Bank (AIIB), 14 European states joined and so did most US allies in Asia such as India, Malaysia and Indonesia, the South Pacific, such as Australia and N. Zealand and many more for a total of 97 member states at this point. It was symbolic that Saudi Arabia – on which the US had once pinned its hopes of propping up the dollar – was one of the first to join. Everyone saw the growth opportunities. Everyone except the self-proclaimed Exceptional Nation. Obama warned that the AIIB lacked "safeguards." What he apparently meant was that unlike the IMF, this Chinese bank was liable to lend even to countries that did not have cross dressers in uniform. It was just weirdness and stubbornness, very much like a debilitating mental disease. At this point, the US does not seem capable of admitting that it could benefit from any kind of business relationship with Russia and China as long as the founders of the business venture are either of these two countries. The US response to Russia’s incursion into Arctic oil exploration, for example, was to plan the construction of military bases there. For what purpose? Would making Russia poorer make the US richer? Wouldn’t it have been more rational to offer cooperation with US oil companies?
The US insists on being the big cheese and getting all the attention but it won’t listen to anyone that is not a worshipper. Frankly, it is never of any benefit to pass up a business opportunity, especially something like China’s Belt and Road Initiative (BRI), which is the biggest infrastructure enterprise even undertaken and is intended to involve all continents. There is nothing any bigger or potentially more lucrative that the US could invest in. But the US would rather lose than not be in the driver’s seat. If this attitude doesn’t cease at some point, the US will find itself eating the dust of Russia and China as the dollar drops in value and loses its hegemonic reserve status. It’s really a crying shame, all that wasted potential. I have never seen any other country with so much potential throw it all away just for the sake of false pride. I mean, if the cabal in Washington and Wall Street wants to commit suicide, that is their prerogative, but they are dragging down the whole country and there are people in the US who don’t deserve this.
I sensed the wind direction years ago when the Saudis joined the AIIB, and sure enough, just a few weeks ago, Saudi was baring its fangs and claws at the US, signalling the end of the honeymoon, as I reported here:
I suspect this kind of scenario may be the end stage of all democratic experiments in environments where a premium is placed on freedom. After all, democracy must by its nature focus on politics, not technically sound solutions, and eventually, the politics and the technically sound solutions must diverge fatally. I'd have to say we are there.
Maybe this whole process is like the life cycle of the sequoia, whose propagation is said to depend in part on a forest fire that helps open up the tough seed coat so it can sprout. At any rate, it looks more and more likely that destruction will come before redemption.
Russia: the most stable and healthy of all industrial economies
Vince Dhimos answered a question in German at Quora. Translation below.
Question: What are some wrong assessments about Russia?
Almost everything we think that we know about Russia in the Western world is false. This is because our “information” comes from the US and the US-led NATO. After the Soviet Union collapsed in 1991, NATO lost its raison d’etre and frantically sought to find another reason for amassing arms made in USA and holding a monstrous army. Otherwise a lot of warlike bureaucrats would have been out of a job. The dictum “war is good for the economy” makes sense. As long as the wars do not destroy infrastructure or kill people.
Since Russia had been the enemy before, Washington decided it could continue to be our enemy. But in order for that to happen, Russia had to be portrayed as a dangerous enemy but, in addition, as a weak state to provide a pretext for regime change actions and also to make Westerners think it could be easily defeated as long as NATO remained resolute and received massive injections of cash. But what fool would believe that the West has a dangerous but weak enemy? It turns out that the average bloke on both sides of the Atlantic swallowed this steaming pile of nonsense whole, without bothering to question it.
One of the most influential propagandists against Russia was Senator John McCain, who once said “Russia is just a big gas station.” He meant that the only source of revenues for the country was crude oil.
This suggests that Russia has a weak economy. However, a comparison with the US economy paints a different picture. The following is from wikepedia (not known to be a Russian troll factory):
agriculture: 4.7%, industry: 32.4%, services: 62.3%
agriculture: 0.9%, industry: 18.9%, services: 80.2%
It appears that the US economy is 80.2% services, ie, non-productive, while the Russian one is only 62.3% services but 32.4% industry, ie, more productive. The US economy is only 18.9% industry.
According to this site:
Russia’s debt to GDP ratio was only 11.793% in 2018, an amazingly low ratio indicating virtually no risk at all of default.
Compare this to Germany with a debt/GDP ratio of 63.9% (almost 6 times higher), France with 98.5%, almost ten times higher, UK with 87.4%, almost 8 times higher, and 105.4% for the US (well over GDP and growing like a cancer) at last count. Japan's debt was 236% of GDP at last count. And the trouble with these oversized debt piles is that the countries that have accrued them are no longer producer nations and their GDPs contain a high proportion of government spending that is mostly non-productive, such as military spending, which does not generate non-tax revenues.
In fact, Russia’s external debt in 2017 was $US 529.6 billion but its gold reserves were $US 487.8 billion and its cash (Forex) reserves were 490 billion, so that together, its gold and Forex more than cover the entire debt. From that perspective it could be said to have a negative debt. No other developed country can boast that kind of situation.
In fact, if we want to be perfectly honest, the Western economy has terminal cancer, beyond the shadow of any doubt.
From these important standpoints, no other developed country has such a healthy and secure economy in the world as Russia! Why would the Russians reject a president who had worked this miracle? They love Putin and he loves them right back!
Below is our translation of an article from rueconomics.ru generally concerning the most important financial movement of our time, namely, the de-dollarization of world trade, actively pursued by Russia, China and now Europe, all of which are plotting schemes to circumvent the US dollar in trade settlements to avoid sanctions and other restrictive measures by the US. The widespread use of sanctions and other punitive measures, including cutting states like N. Korea and Iran off from the SWIFT payment system, has contributed mightily to the quest for ways to avoid the US dollar, and to innovative mechanisms towards this end. Here comes another step in this movement. Commentary and notes in [brackets] are by Vince Dhimos.
Investors and financial experts are still catching up to the multipolar financial environment taking shape all around us. When I post at Quora on this subject, there is often a response from someone maintaining that the dollar will be the currency hegemon of world trade and reserves for many years to come. That could well be true, but these commentators are probably depending for their information on the Western press, which sees it as its mission first to assuage all fears of investors – or in other words, con them into continuing to buy and hold Treasuries and US stocks and bonds, and, secondly, or not at all, telling them the unvarnished truth about events that will impact world finance in the future.
Recently, however, we have seen three seemingly minor events that should serve as a warning to those who are counting on the perpetuation of US-dominated financial business as usual.
I am referring to
1) to Saudi oil minister Khalid al-Falih’s warning to the US against sanctions on Russia;
2) the fact that OPEC is considering a restructuring that would make Russia the head of a new OPEC-like organization. WSJ reports:
“Saudi Arabia and its Persian Gulf allies are backing a formal partnership with a 10-nation group led by Russia to try to manage the global oil market, according to OPEC officials, in an alliance that would transform the cartel.” [my highlighting];
3) a Reuters report based on confidential sources indicating that Saudi is prepared to drop the dollar in its oil trade in the event the House and Senate pass the NOPEC bill that would eliminate immunity of OPEC to lawsuits.
“They said the option [referred to as the nuclear option] had been discussed internally by senior Saudi energy officials in recent months. Two of the sources said the plan had been discussed with OPEC members and one source briefed on Saudi oil policy said Riyadh had also communicated the threat to senior U.S. energy officials.”
If at any time, Saudi decides to accept payments in yuan for its oil, this would stand global power politics on its head. Confidence in the US dollar would slide not because the dollar really needs Saudi (China and Japan each have twice the amount in Treasury holdings as Riadh), but because Saudi is seen as symbolic of the petrodollar’s reserve and world trade status and a sign of the trust investors have in the petrodollar. Investors would lose confidence in the USD and it would be even more difficult to find buyers for the Treasuries that support the utterly senseless US-instigated and initiated wars and regime changes that continue to erode trust in the US and heap on more unpayable US debt. All of that would change, hopefully in a non-destructive way.
The Western press is also becoming more open about the de-dollarization efforts of China and Russia, and more recently, Europe. The dam has burst in financial news and the cat is out of the bag.
Yale Global in fact uses the term multipolar (popularized by Putin) several times in its article and throws all caution to the winds saying when, not if in this key sentence:
“When Saudi Arabia decides to accept yuan for oil sold to China, the United States – already perceived as turning inward – will unintentionally make political room for Beijing in assuming a greater leadership role worldwide.”
This article is absolutely brazen compared to the milquetoast manners of the run-of-the-mill Western financial reporting which does its best to tone down, or ignore, unpleasant financial news that might spook investors.
De-dollarization discussions tend to appear more often in publications of think tanks (eg, the Atlantic Council) and official organizations like the EU, which are written by and for experts and hence somewhat insulated from the public. But the information is now out there and investors can read it and act accordingly.
Finally, I don’t see any other journalists out there putting together all the pertinent details on the threat to the petrodollar as I have with the 3 items listed above. Just saying.
The transition of banks to SWIFT analogues is the "anti-dollar response" of Russia and China to US sanctions
March 27, 2019
Russia and China are promoting the idea of settling reciprocal trade in national currencies. The next step in the “anti-dollar response” to US sanctions was the connection of Russian banks to the Chinese SWIFT analogue. According to Andrei Karneev, Deputy Director of the Institute of Asian and African Countries at Moscow State University, the decision to use SWIFT analogues makes it possible to protect trade and economic cooperation from political pressure from third countries.
Chinese and Russian SWIFT analogues
A number of Russian banks have already connected to the Chinese alternative to SWIFT to facilitate mutual settlements between the Russian Federation and China. The head of the department for relations with foreign regulators of the International Cooperation Department of the Russian Central Bank, Vladimir Shapovalov, announced this during the Russia-China international forum. This solution, he said, has already made it possible to simplify the procedure for routing payments.
As Shapovalov recalled, the Bank of Russia earlier unveiled its counterpart to SWIFT, the Financial Reporting System (Russian acronym: SPFS), and now the Russian regulator is actively promoting it around the world, including in China. The representative of the Russian Central Bank expressed the hope that Chinese banks will more actively consider the possibility of its use.
“When analogues of SWIFT are used, accounts in dollars, euros and other currencies of western countries are not handled. For the dollar, there are systems created in the United States. The transition of banks to SWIFT analogues should be seen as a kind of new experience for the Russian Federation and China. While both countries have the technological potential for the independent creation of such systems, although at first they will play only a supporting role.
Most payments in dollars, euros, yen, Swiss francs and British pounds will continue to go through SWIFT. Nevertheless, a positive movement is observed that may be useful in the current environment. It helps to protect trade and economic cooperation from the political pressure on third countries and helps step up cooperation in the area of trade,” explains the expert to FBA Economy Today.
Use of national currencies
Earlier, presidential adviser Sergei Glazyev drew attention to the need for Russia and China to have an interface of the payment systems to integrate the financial markets of the two countries. An active transition to accounts in national currencies of the Russian Federation and China, in his opinion, is possible by [some time in] 2019. Moreover, without this measure, it is unlikely that our reciprocal trade could be achieved.
A similar statement was made by representatives of the Chinese side. The rejection of the dollar by Russia and China will help reduce the negative impact of Western sanctions, which today cause a number of enterprises difficulties in making payments, said Zhou Liqun, head of the Union of Chinese Entrepreneurs.
“In the past, the volume of trade between the Russian Federation and China set a historical record, breaking the bar of $100 billion for the first time. Of course, our task is to increase direct payments in national currencies. It is clear that this will not happen immediately, but the movement towards wider use of the national currency is already happening. There has clearly been positive momentum. The more business and banking contacts between the representatives of the two countries, the more new opportunities are created, and the palette of tools expands,” adds Andrei Karneev.
Now it is the banking sector that is taking the most active steps towards the transition to national currencies. In the Far East since the end of last year, VTB Bank has been conducting up to 22% of trade operations with China in roubles, and another 8% in yuan. In the future, the volume of such operations should increase, but a lot depends on how much interest the Chinese side has in such transactions.
Experts associate another area of cooperation with the creation of a single payment space through agreements with China on the use of a co-badge system based on UnionPay and Mir cards.
Author: Andrey Petrov
Below we include details on the Russian-Chinese co-badged credit cards.
RRDB starts issuing co-badging cards UnionPay-Mir
Russian Regional Development Bank (RRDB) started issuing co-badging cards of “Mir” and UnionPay payment systems. The main feature of the cards is the possibility of their use in the entire acceptance network of UnionPay cards around the world. Operations on cards made in Russia are serviced as operations on cards of the “Mir” payment system, and operations performed abroad are serviced through the UnionPay payment system.
Cardholders will also be granted privileges from both payment systems: the cashback service of the “Mir” payment system with the possibility to return up to 20% of the funds spent on the card for purchases from service partners, as well as discounts and special offers from UnionPay.
The launch of the joint co-badging project of RRDB with the “Mir” and UnionPay payment systems allows to expand the capabilities of bank’s customers. They will be able to use the usual national payment card not only in Russia, but also when settling abroad.
UnionPay payment system, founded in China in 2002, is the fastest developing network in the world. In circulation there are more than 7 billion bank cards, which are accepted for payment in 169 countries. The UnionPay card service network exceeds 2.57 million ATMs and more than 51 million trade and service companies around the world.
“Mir” payment system - is the Russian national payment system. Its participants are 344 banks almost all of them are already accepting and servicing the “Mir” cards in their devices network. More than 150 banks are engaged in the issuance of “Mir” cards. Up to date, more than 37 million cards have been issued. Cards are accepted abroad due to co-badging programs with international payment systems.
China UnionPay kicks off European expansion with UK launch
World’s biggest payment card issuer challenges US rivals Visa and Mastercard
China UnionPay cards are accepted by more than 41m merchants and 2m ATMs in 170 countries © Reuters
Martin Arnold in London and Gabriel Wildau in Shanghai SEPTEMBER 16, 2018
China UnionPay, the world’s biggest payment card issuer, is preparing to launch branded cards in the UK, the first step in a wider European expansion plan to challenge its US rivals Visa and Mastercard in one of their key markets.
The move comes as UnionPay faces intense competition in its home market from digital payments groups Alipay and WeChat Pay. It is also likely to add to the frustration of its US rivals, which have spent years trying to enter the Chinese market.
The Chinese state-controlled group will team up with a UK company as early as next month to start issuing virtual pre-paid cards for British corporate clients to give to their staff for use via a mobile wallet when travelling in Asia.
This will be followed by more deals to issue UnionPay branded credit cards elsewhere in Europe as early as December. “In Europe we want to target local customers in the domestic market, not only people travelling to Asia” said Zhihong Wei, head of UnionPay in Europe.
Founded under a charter from the People’s Bank of China in 2002, UnionPay has a virtual monopoly on bank card payments in its domestic market, where it has issued 6bn cards — more than Visa and Mastercard combined.
The Chinese group has been expanding internationally in recent years, mostly in Asia, and its cards are accepted by more than 41m merchants and 2m ATMs in 170 countries.
It first moved into Europe a decade ago to provide access for Chinese tourists and its cards are now accepted by 60 per cent of merchants and ATMs in the region. It has offices in Paris, London, Madrid, Milan, Frankfurt and Budapest, with another set to open in Stockholm.
Mr Wei said it did not need a licence for its European expansion plan as its cards will be issued by third parties, such as banks, and its transactions will be handled by payment processing groups.
Six years after the World Trade Organization ruled that China discriminates against foreign payment groups, Visa and Mastercard have applied to Beijing for licences to clear renminbi payments but are awaiting approval.
UnionPay operates with a business model similar to Visa and Mastercard, earning a commission on each card swipe. The currency-printing unit of the PBoC is its largest shareholder, with the remaining equity mostly held by state-owned financial institutions.
But the rise of mobile payments in China — dominated by Ant Financial’s Alipay and Tencent’s WeChat Pay — has dislodged UnionPay from its dominant position in electronic payments. Beyond the loss of fee income, the group is also losing access to valuable transaction data from consumers who have switched from plastic to mobile phones.
However, Mr Wei said UnionPay was regaining ground on its digital rivals with its QuickPass system, which uses Near Field Communication (NFC) chips of the type used at subway turnstiles around the world and contactless card payments in the US and UK.
The move to issue UnionPay-branded cards in Europe comes seven years after London department store Harrods became one of the early UK retailers to install a UnionPay point-of-sale terminal, prompting a spike in sales from Chinese students and tourists who were able to spend directly from their Chinese bank accounts.
Below is our translation of an article from rueconomics.ru with commentary by Vince Dhimos.
This is just one of many commentaries in Russia on US hysteria. Let’s take a look at the Anglo-Saxon press on this topic (in EN):
U.S. military warns against Russian Arctic expansion
In statements made before the Armed Services Committee of the U.S. Senate, military commanders for the U.S. Pacific Command and the U.S. European Command warned about Russia’s growing influence in the Arctic, its military build-up, and the United States’ inability to counter Russia’s activities. Similarly, the Commandant of the U.S. Coast Guard, Admiral Zukunft, expressed concern about “a mounting Russian footprint” in his 2018 State of the Coast Guard address earlier this month.
So the message to Russia from the US military is: We are warning you to back down because we are impotent to counter you! This is getting to be the style of all US “warnings.” Like when Trump told Venezuela’s interim first lady “the Russians need to leave” and then quickly said “next question” for fear she would ask “how will you make them leave?”
I just want to say to Admiral Zukunft: why in heaven’s name does the US have to counter everything the Russians do? Why the obsession? Let the US military get a life of its own. You know, folks, the Russians didn’t go to the far north with its military to set up bases. They went with engineers, built ice breakers to help ships pass through the Arctic Ocean (something like the dream of the Northwest Passage) as part of a new potentially lucrative transportation project, and prepared to set up oil and gas extraction systems, and then sent the military to defend and protect their projects. The US has no projects there so the US military wants to go only to stop the Russians. US economic theory can be boiled down to: we can only prosper by making others poor. If we can stop the Russians and Chinese we will be prosperous again. Taking this to its logical end, the US would reach peak prosperity by nuking Russia and China! Do they have mush for brains?
From the content of our translated article, it looks like the Europeans are using common sense in their relations with Russia, joining them instead of threatening them. They are no doubt motivated to cooperate with Russia to show the US they won’t be pushed around any more. You may recall that the US ambassador had the unmitigated gall to tell Germany not to complete the Russian gas pipeline Nord Stream 2 asserting it was a threat to European “energy security” because it gave Russia power to pressure Europe. But the Europeans are waking up to the fact that the only country pressuring Europe has been the US, and the Europeans are getting sick of it. Trump is making great changes in the world with his bullying, but not the kind he and his followers imagined. A recent poll shows that the US has lost respect in the eyes of the rest of the world, even as Americans vainly dream that, as another poll shows, they are loved now more than ever.
EU is interested in cooperation with Russia on Arctic projects
April 8, 2019
The European Union is interested in cooperation with Russia on Arctic projects. This was stated by the EU Ambassador at Large for Arctic Affairs Marie-Anne Coninsx during a meeting with St. Petersburg Vice Governor Eduard Batanov.
On Monday, April 8, in Smolny, there was a meeting of the EU Ambassador for Special Assignments for the Arctic, Marie-Anne Coninsx, with the Vice-Governor of St. Petersburg, Eduard Batanov. Representatives of the EU delegation were also present at the meeting.
Coninsx arrived in the Northern capital to participate in the International Arctic Forum "The Arctic: Territory of Dialogue," which will open at Expoforum on Tuesday, April 9.
In her opinion, St. Petersburg plays a special role in the development of the Arctic. At the same time, the EU Ambassador stated with confidence that the joint projects of the EU and Russia will continue their active development in this area.
The European Union understands how important the economic development of the Arctic region is.
In turn, the vice-governor of St. Petersburg Edward Batanov said that the city is now designing and creating unique energy equipment and marine equipment. In addition, they prepare personnel for specialized enterprises.
In this regard, St. Petersburg is now presenting itself as a kind of coordinator of Arctic research, and is also a platform for the promotion of Arctic projects.
Author: Irina Sintsova
Our translation of an article from gazeta.ru appears below. Commentary by Vince Dhimos.
Ok, Trump keeps saying he wants low oil prices, and certainly, high prices at the pump are not a good harbinger of re-election.
Yet, Trump has made all the right moves for raising oil prices, particularly with Iran and Venezuela, two countries that are essentially forbidden to do business because Trump wants to please the voters who want a president who, unlike Obama (or so they believe), knows how to put his foot down. But what good is acting like a bully when it screws up the economy so thoroughly that, as in the case of the Rusal sanctions (as I pointed out here), you wind up having to reverse course and wind up with egg on your face. A very elementary fact of economics is that when a commodity becomes scarce, its price rises. There is no better way to make oil scarce than preventing two major oil-producing countries from producing and selling their oil.
Gaddafi’s curse: the oil market is about to explode
Oil prices went up amid the crisis in Libya and US sanctions
Ekaterina Katkova 04-12-2019
The head of the National Oil Corporation of Libya warned of a possible cessation of production due to military aggravation in the country. Up to 300 thousand barrels per day may exit the market. Given the decline in deliveries from Venezuela and the sanctions risks for Iranian oil, quotes in the coming weeks could go to $75-80. OPEC is already preparing a plan to contain prices.
Every time oil prices skyrocket, analysts think about how the pendulum will swing and how fast it will head in the opposite direction. So far, however, the rapid decline of quotations foretells nothing.
According to the data at 22:00 Moscow time on April 12, the price of Brent crude for delivery in June rose in price almost one percent, to $71.54, since opening. For almost three and a half months, oil has shown positive dynamics with varying success, adding almost 40% since the beginning of the year, following a slight decline.
The balance of supply and demand is already beginning to shift towards a shortage of supplies, and world reserves of raw materials are declining, notes the main analyst at BCS Premier, Anton Pokatovich. According to the analyst, this suggests that by this summer a full-fledged supply shortage may develop in the oil market.
It is possible that the deficit will occur earlier: the head of the National Oil Corporation of Libya (NOC), Mustafa Sanalla, warned that the escalation of the conflict in the country could lead to a complete halt in oil and gas production. It may be necessary to evacuate workers from the country's largest oil fields, he said in an interview with the Financial Times (FT).
The civil war in Libya has been going on since 2011, when after the overthrow and murder of the former leader of the country, Muammar Gaddafi, the opposing forces failed to form a unified government. Libya is still divided into several warring clans that govern different parts of the country. Periodically there is an escalation of the conflict between the parties, including near the zones of oil production.
Thus, in early April, Field Marshal Khalifa Haftar, head of the Libyan National Army, announced an attack on Tripoli. The first clashes of his army with the troops of Fayez al-Sarraj - the head of the Libyan Government of national unity – began almost immediately. Sarraj responded by announcing the start of a military operation against the Libyan National Army.
At that point, the country's energy sector faced the most serious threat since the beginning of the civil war, points out Mustafa Sanalla.
“I am afraid the situation may be much worse than in 2011 due to the number of forces that are involved today,” he said. Sanalla has repeatedly stressed that it is important to keep production independent of the different groups.
Experts believe that this time the escalation of the conflict in Libya could cause significant damage to the country and actually destroy oil production.
Last year, oil production in Libya was about 900 thousand barrels per day (b/d), but now during the period of military operations, this figure may be reduced by half, said Gaydar Hasanov, an expert at the International Financial Centre.
Libyan oil deliveries mainly go to Europe, to countries such as Italy, France, and Germany, Denis Lisitsyn, director of the asset management department of ERARIUM Group.
According to Lisitsyn, theoretically, Libya can be covered by Saudi Arabia - one of the few countries with the technological ability to quickly increase production.
However, Riyadh itself is now more than ever interested in high oil prices and to achieve them even over-fulfils the plan to reduce production within OPEC+. According to the cartel, in March, production of Saudi Arabia decreased by 324 thousand b/d - to 9.8 million b/d.
Sanctions, electricity, cartels
Not everything is going smoothly with Iran. The country, and with it the entire world community, is anxiously awaiting May, when Washington may tighten the sanctions pressure on Tehran and impose those very restrictions on Persian oil, the anticipation of which kept the market in suspense throughout the third quarter of last year.
Recall that at that time only a few, not the largest buyers, refused to buy Iranian oil, and a number of countries, including China, India, South Korea, and Japan, received an exemption for the purchase of Iranian oil for 180 days. According to the latest OPEC report, oil production in Iran in March averaged 2.7 million b/d.
It is difficult to say how many “sanctions” will be removed from the market: it is not known how the restrictions will be tightened and whether there will be exceptions this time. In any case, this market situation is now viewed as another uncertainty factor.
Here you can add Venezuela, where the crisis - economic, political, humanitarian, and for some time even energy - is only aggravated. According to OPEC, in March alone, production in the country fell by 289,000 b/d, to 0.73 million b/d. Recall that in January Washington imposed sanctions on Venezuelan oil, while the United States itself temporarily stopped purchasing hydrocarbons from the Bolivarian Republic.
They add fuel to the fire and technical problems with electricity outages in Venezuela, which affects not only the lives of citizens, but also the ability to ship oil.
In addition, the OPEC+ cut-off agreement continues in effect. At the end of last year, the OPEC and non-OPEC countries agreed to reduce production by 1.2 million b/d from the level of October 2018. According to the International Energy Agency (IEA), only OPEC countries in March reduced production by 1.24 million b/d (against the promised 812 thousand b/d), meeting their obligations by 153%.
World oil demand may be increased by another 10 million b/d, with more than half coming to China, said Gaidar Hasanov. Whereas supply in the market is declining, and therefore oil prices will continue to grow, and in the second half of the year we can already see $75-79 per barrel, the expert believes.
Anton Pokatovich is confident that the fundamental basis and geopolitics in the coming weeks will contribute to the formation of oil prices in the range of $70-75.
Meanwhile, according to Reuters, citing sources in OPEC, the cartel may begin to increase production since July. Highly inflated oil prices threaten a new round of speculation and a downturn in the market, as had occurred several years ago, and therefore in the long run a high-amplitude “swing” is not beneficial to anyone.
According to one of the spokespersons of the agency, OPEC will increase production if prices reach $85 per barrel, the other does not exclude such a development of events at $80 per barrel. The next OPEC meeting will take place on June 25 and 26.
How much faster could the United States develop infrastructure-wise if it followed the Chinese model?
Vince Dhimos, Editor-in-Chief at New Silk Strategies (2016-present)
Answered just now
No one can say how much faster it would develop but it would develop better. Democracy and economics don’t mix. The Chinese system is geared to get results, not votes. That is the difference in a nutshell.
Trump’s efforts are not aimed at developing the economy but only to satisfy voters who, like Trump, have zero understanding of macroeconomics. And without that understanding, no country can survive indefinitely.
Example: Trump naively thought he could improve the trade deficit by slapping tariffs on China and most of US trading partners, even friendly ones like Europe. His constituents loved that he was "tough on China."
The result? After a year of this ham-handed approach, the trade deficit grew to a record level in 2018!
On top of that, US soybean farmers are sliding into bankruptcy because, surprise (!), the Chinese can play this game too, and they stopped buying US beans. Also stopped buying US pork. Trump screwed up US agriculture big time.
US tariffs on Russian aluminium (from Rusal) also nearly ruined the US aluminium industry. You see, US politicians know nothing about the industries they mess with. It turns out that US secondary aluminium manufacturers rely on primary aluminium (ingots for the most part), and those who bought this from Russia lost their ability to produce. US Al manufacturers almost went bankrupt until Congress woke up from its opiate sleep and restored US trade with Rusal
Trump also supports US shale oil production, but US investors in shale oil are learning that the expensive fracking process used in this oil extraction is too expensive to be profitable and they are paring back their investments.
The kind of errors described above occur a lot less in countries like Russia and China because these countries don’t have to worry as much about getting votes and can therefore actually have people with technical knowledge manage the economy.
Finally, the biggest business in America is arms manufacture, which is controlled by the myth that more spending makes you more secure. This factor alone accounts for much of the excessive debt that threatens to destroy the US economy. China and Russia spend only what they need to and they spend wisely. The US often spends on boondoggles to repay arms makers for their generous donations to politicians.