You wanna be Uncle Sam's bitch? Pay the price! by THE SAKER

You wanna be Uncle Sam's bitch? Pay the price!

Dear friends,

I just took a short break from my life in "meatspace" to comment upon the great news of the day:  Russia is introducing a full 12 months embargo on the import of beef, pork, fruits and vegetables, poultry, fish, cheese, milk and dairy products from the European Union, the United States, Australia, Canada and the Kingdom of Norway.  Russia is also introducing an airspace ban against European and US airlines that fly over our airspace to Eastern Asia, namely, the Asia-Pacific Region and is considering changing the so-called Russian airspace entry and exit points for European scheduled and charter flights. Furthermore, Russia is ready to revise the rules of using the trans-Siberian routes, and will also discontinue talks with the US air authorities on the use of the trans-Siberian routes.  Finally, starting this winter, we may revoke the additional rights issued by the Russian air authorities beyond the previous agreements.  This is such an interesting and major development that it requires a much more subtle analysis than just the crude calculation of how much this might cost the EU or US.  I will attempt no such calculation, but instead I would point out the following elements:

First, this is a typically Russian response.  There is a basic rule which every Russian kid learns in school, in street fights, in the military or elsewhere: never promise and never threaten - just act.  Unlike western politicians who spent months threatening sanctions, the all the Russians did was to say, rather vaguely, that they reserve the right to reply.  And then, BANG!, this wide and far-reaching embargo which, unlike the western sanctions, will have a major impact on the West, but even much more so on Russia (more about that in an instant).  This "no words & only action" tactic is designed to maximize deterrence of hostile acts: since the Russians do not clearly spell out what they could do in retaliation, God only knows what they could do next! :-)  On top of that, to maximize insecurity, the Russians only said that these were the measures agreed upon, but not when they would be introduced, partially or fully, and against whom.  They also strongly implied that other measure were under consideration in the pipeline.

Second, the sanctions are wonderfully targeted.  The Europeans have acted like spineless and brainless prostitutes in this entire business, they were opposed to sanctions from day 1, but they did not have the courage to tell that to Uncle Sam, so each time they ended up caving in.  Russia's message to the EU is simple: you wanna be Uncle Sam's bitch?  Pay the price!  This embargo will especially hurt southern Europe (Spain, France, Italy, Greece) whose agricultural production will greatly suffer from it   These countries also happen to be the weakest in the EU.  By hitting them, Russia is maximizing the inevitable friction inside the EU over sanctions against Russia.

Third, not only will EU carriers suffer from much higher costs and flight times on the very important Europe to Asia route, but the Asian carriers will not, giving the latter a double competitive advantage.  How is that for a way to reward one side while hurting the other?  The EU got one Russian airline in trouble over its flights to Crimea (Dobrolet) and for that the entire EU airlines community could end being at a huge disadvantage vis-à-vis its Asian counterparts.

Fourth, Russia used these sanctions to do something vital for the Russian economy.  Let me explain: after the collapse of the USSR the Russian agriculture was in disarray, and the Eltsin only made things worse.  Russian farmers simply could not compete against advanced western agro-industrial concerns which benefited from huge economies of scale, from expensive and high-tech chemical and biological research, which had a full chain of production (often through large holdings), and a top quality marketing capability.  The Russian agricultural sector badly, desperately, needed barriers and tariffs to be protected form the western capitalist giants and, instead, Russia voluntarily abided by the terms of the WTO and then eventually became member.  Now Russia is using this total embargo to provide a crucially needed time for the Russian agriculture to invest and take up a much bigger share on the Russian market.  Also, keep in mind that Russian products are GMO-free, and that they have much less preservatives, antibiotics, colors, taste enhancers, or pesticides.  And since they are local, they don't need to be brought in by using the kind of refrigeration/preservation techniques which typically make products taste like cardboard.  In other words, Russian agricultural products taste much better, but that is not enough to complete.  This embargo now gives them a powerful boost to invest, develop and conquer market shares.

Fifth, there are 100 countries which did not vote with the US on Crimea.  The Russians have already announced that these are the countries with which Russia will trade to get whatever products it cannot produce indigenously.  A nice reward for standing up to Uncle Sam.

Sixth, small but sweet: did you notice that EU sanctions were introduced for 3 months only, "to be reviewed" later?  By introducing a 12 months embargo Russia also sends a clear message: who do you think will benefit from this mess?

Seventh, it is plain wrong to calculate that EU country X was exporting for Y million dollars  to Russia and to then conclude that the Russian embargo will cost Y million dollars to EU country X.  Why is it wrong?  Because the non-sale of these product with create a surplus which will then adversely affect the demand or, if the production is decreased, this will affect production costs (economies of scale).  Conversely, for a hypothetical non-EU country Z a contract with Russia might mean enough cash to invest, modernize and become more competitive, not only in Russia, but on the world market, including the EU.

Eighth, the Baltic countries have played a particularly nasty role in the entire Ukrainian business and now some of their most profitable industries (such as fisheries), which were 90% dependent on Russia, will have to shut down.  These countries are already a mess, but now they will hurt even more.  Again, the message to them is simple: you wanna be Uncle Sam's bitch?  Pay the price!

Ninth, and this is really important, what is happening is a gradual decoupling of Russia from the western economies.  The West severed some of the financial, military and aerospace ties, Russia severed the monetary, agricultural and industrial ones.  Keep in mind that the US/EU market is a sinking one, affected by deep systemic problems and huge social issues.  In a way, the perfect comparison is the Titanic whose orchestra continued to play music while the sink was sinking.  Well, Russia is like a passenger who is told that the Titanic's authorities have decided to disembark him at the next port.  Well, gee, too bad, right?

'clock' by Josetxo Ezcurra

Last, but most definitely not least, this trade-war, combined with the West's hysterical russophobia, is doing for Putin a better PR campaign than anything the Kremlin could have dreamed of.  All his PR people need to tell the Russian population is the truth: "we did everything right, we played it exactly by the book, we did everything we could to deescalate this crisis and all we asked for was to please not allow the genocide of our people in Novorussia - and what was the West's response to that? An insane hate campaign, sanctions against us and unconditional support for thegenocidal Nazis in Kiev".  Furthermore, as somebody who carefully follows the Russian media, I can tell you that what is taking place today feels a lot like, paraphrasing Clausewitz, the "a continuation of WWII, but by other means", in other words a struggle to the end between two regimes, two civilizations, which cannot coexist on the same planet and who are locked in struggle to death.  In these circumstances, expect the Russian people to support Putin even more.

In other words, in a typical Judo move, Putin has used the momentum of the the West's Russia-basing and Putin-bashing campaign to his advantage across the board: Russia will benefit from this economically and politically.  Far from being threatened by some kind of "nationalistic Maidan" this winter, Putin's regime is being strengthened by his handling of the crisis (his ratings are higher than ever before).

Yes, of course, the USA have shown they they have a very wide array of capabilities to hurt Russia, especially through a court system (in the US and EU) which is as subservient to the US deep state as the courts in the DPRK are to their own "Dear Leader" in Pyongyang.  And the total loss of the Ukrainian market (for both imports and exports) will also hurt Russia.  Temporarily.  But in the long wrong, this situation is immensely profitable for Russia.

In the meantime, the Maidan is burning again, Andriy Parubiy has resigned, a the Ukies are shelling hospital and churches in Novorussia.  What else is knew?

As for Europe, it is shell-shocked and furious.  Frankly, my own Schadenfreude knows no bounds this morning.  Let these arrogant non-entities like Van Rompuy, Catherine Ashton, Angela Merkel or José Manuel Barroso deal with the shitstorm their stupidity and spinelessness have created.

In the USA, Jen Psaki seems to be under the impression that the Astrakhan region is on the Ukrainian border, while the Russian Defense Ministry plans to "open special accounts in social networks and video hosting resources so that the US State Department and the Pentagon will be able to receive unbiased information about Russian army’s actions".

Will all that be enough to suggest to the EU leaders that they have put their money on the wrong horse?

The Saker 

PS: have to leave again.  Will be back on Saturday afternoon.

Obama's 'strategy' against 'pariah' Russia By Pepe Escobar

THE ROVING EYE Obama's 'strategy' against 'pariah' Russia By Pepe Escobar The Barack Obama administration seems to love the sound of unilateral sanctions in the morning. It must feel like "victory". Real, hardcore sanctions, if ever applied, would be devastating mostly for North Atlantic Treaty Organization poodles, not Moscow. Meanwhile, (energy) adults continue to do business as usual. There's no way to understand Cold War 2.0 without a flashback to November 2010, when Vladimir Putin directly addressed German business/industry, proposing an economic community fromLisbon to Vladivostok. German interest in this key strategic relationship has been reciprocal. Amplified to other nations, that implies in the long run a full European Union-Russia economic/trade integration, and, in the bigger picture, a step closer to Europe-Asia integration. Which translates as absolute anathema for the embattled, Monopoly-addicted hyperpower/hegemon. For all of US Think Tankland talking and theorizing, breathlessly, about "containment" of a "rogue state" - which in itself is laughable, as if Russia was Somalia - the Obama administration's overarching "strategy" is really in a class by itself. This masterpiece of juvenile delinquent diplomacy boils down to "ignore Putin". Call it the "I don't like you; I don't wanna talk to you; I just wish you'd die" school of diplomacy. How come Talleyrand never thought if it? Well, with advisers such as the astonishing mediocrity Ivo Daalder, a former ambassador to NATO, no wonder Obama does not need enemies. All we need is Lavrov  The sanctions hysteria is designed to force President Putin to bow to the hegemon's whims, as part of the overall "strategy"; forging an "international consensus" to "isolate" Russia and turn it into a "pariah state". "Pariah states" that do energy mega-deals, as in here and here. Still, the predominant wishful thinking revolves around the economic strangulation of Russia - as it was relentlessly attempted against Iran (and bravely resisted by Iranians). Inside their bubble, the wishful thinkers even believe Beijing will be on board, oblivious to the fact that Beijing clearly sees the sanction hysteria/ignore Putin "doctrine" as a branch of the "pivoting to Asia" - which is essentially military containment of China. In the end, the Kremlin has also reached a similar conclusion: it's useless to talk to Washington. After all, the hegemon's laundry list remains the same - the Kremlin is not allowed to support popular protests in eastern and southern Ukraine; everyone must submit to the neo-nazi/neo-fascist-allied regime changers in Kiev; and Crimea must be "returned" - to NATO - so NATO can kick Moscow out of the Black Sea. Washington's ultimate wet dream would be to interrupt gas shipments by Gazprom from Russia to the EU - in fact trade sabotage, which Moscow would undoubtedly interpret as an act of war. Meanwhile, Washington/NATO's "Plan A" remains to lure the Kremlin into an "invasion" - so Putin can be (in fact already is) denounced as "the new Hitler" and the ultimate threat to the EU. So much for the "containment/isolation" martini cocktail of arrogance, ignorance, impotence and irresponsibility. Diplomatic finesse? Forget it. In terms of a real diplomat at work, feel free to admit "All We Need Is Lavrov". Go back to Game of Thrones Moscow has so many ways to retaliate real hard against the hegemon: in Syria; on the Iran nuclear dossier; on NATO's ignominious withdrawal from Afghanistan via the Northern Distribution Network, which goes through Russia; on the future of Afghanistan. If the White House and the US State Department really wanted to listen to how Putin frames the relationship between the West and Russia, that has been voiced repeatedly by the Kremlin. Russia expects respect from "our Western partners", who since 1991 have treated it not as "an independent, active participant in international affairs", with "its own national interests that need to be taken into account and respected", but as a backward or dangerous nation to dismiss and "contain". The historical record clearly shows Washington does not respect the national interests of anybody; the only thing that matters is that they should always be subordinated to Washington's interests. The Kremlin, in a nutshell, has invited Washington to play realpolitik. Not Monopoly. The Obama administration, at best - and we are being very lenient here - plays checkers. Moscow plays chess. A mad drive to instill chaos in Russia's western borderlands while "ignoring" Putin won't change the Kremlin's defense of what it perceives as Russia's national interests. Let's say the "project" was to seize Ukraine, kick Moscow out of the Sevastopol base, and thus from the Eastern Mediterranean; and then take over Syria, so Qatar - and not Iran-Iraq-Syria - may get "its" share of Pipelineistan via Jordan and a Sunni-ruled Syria towards EU markets. The "project" is miserably failing. Yet the sanctions game will persist (like it did with Cuba, Iraq, Iran). The White House is already concocting more of the same. No adults in Europe will follow. Even poodles are able to sniff that the Obama administration does not even qualify to play Game of Thrones on PlayStation 3. Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009). He may be reached at pepeasia@yahoo.com.

THE ROVING EYE - Russian sanctions as war and farce - By Pepe Escobar

THE ROVING EYE Russian sanctions as war and farce By Pepe Escobar If we come to a minefield, our infantry attacks exactly as if it was not there - Marshal Georgy Zhukov Let's start with the serious stuff. As Russia's Federation Council ratifies a treaty with Crimea, concluding the formal annexation, Ukraine signs the political chapters of an association agreement with the European Union (EU). The signing of the full EU agreement will only happen later in 2014. These are the facts on the ground. Now let's turn to comedy hour - also known as the sanctions war. The oh-so democratic EU has punished the democratic Crimea referendum by sanctioning 33 Russians and Crimeans with asset freezes and travel bans, according to that Magritte-style walking fiction, European Council President Van Rompuy. The EU also canceled the EU-Russia summit in Sochi on June 3. And the vast, Kafkaesque bureaucracy of the European Commission (EC) has taken time out from subsidizing European cows to prepare for "possible economic sanctions", according to German Chancellor Angela Merkel. The EU is irretrievably split on what to do. Whatever it does, Moscow's capacity to make the EU badly hurt is stronger. There may be another meek set of sanctions next week, as Merkel advertised. But that's it. European poodle action mirrors His Master's Voice - as in US President Barack Obama solemnly imposing, by executive order, further sanctions on "senior officials of the Russian government." Other US targets are private businessmen close to Russian President Vladimir Putin. Only exceptionalist logic legally allows sanctions on private individuals deemed responsible for political steps taken by the country they live in. International lawyers should have thought about sanctioning the entire US population for the Bush-Cheney junta's disaster. Well over 60% of Americans and Europeans are against a New Cold War against Russia. Putin's approval rating in Russia is around 75% - and arguably similar all across the developing world. Still, no one will lose money betting on the juvenile amateurism of the Obama administration. As if they and selected European minions could intimidate Moscow with some cosmetic "message". The American sanction religion, imposed with a conquistador/slave owner fury, did destroy Iraq for years - and was supposed to destroy Iran as well. But Russia is not Iraq or Iran. I love a man in sanction uniform Sanctioned Russians are not exactly quaking in their made-in-London brogues. After all, the practical impact of these sanctions is exactly zero. And most people targeted have minimal direct links with the US. The original American list included Deputy Prime Minister Dmitri Rogozin and presidential aide Vladislav Surkov. They laughed it off, loudly - adding it felt like a badge of honor. The expanded list includes key Putin advisers and even some of his friends. Obama, Iran-style, sanctioned the Bank of Russia - a minor player (less than US$10 billion in assets; compare it with giant Sberbank at $528 billion). But Bank of Russia is used by some Gazprom subsidiaries for some low-key deals - even as Gazprom owns its own bank, GazpromBank. The "message" here is that Washington is watching Gazprom. Chief of Presidential Administration Sergei Ivanov is a key adviser on Ukraine and a top negotiator with the US, the EU and NATO. The - counterproductive - "message" implied here is that Moscow and Washington are not talking anything substantial in the immediate future. So much for the West's "diplomatic efforts". Then there's Yuri Kovalchuk, a board member of the Bank of Russia, a key business adviser and - allegedly, no conclusive evidence - Putin's personal banker. The message here is of the "I'm gonna git you sucka" kind. Finally, among the notables, there's Gennady Timchenko, who has absolutely nothing to do with Ukraine. He's an energy deal operator, controlling oil and natural gas trading firm Gunvor. In this case, the "message" is that the US will target Russia's energy deals. Message void, because the EU - which needs Gazprom badly - is not inclined to sanction Timchenko. Other sanctioned include the head of the Federal Drug Control Service Viktor Ivanov, Chief of Military Intelligence Igor Sergun and Russian Railways President Vladimir Yakunin. They are all part of the Russia-US team involved in the Northern Distribution Network - the long, across-Central Asia highway that will allow NATO to flee Afghanistan. A swift Moscow counter-attack would be to leave the Americans and Europeans hanging dry - or to close the NDN altogether. I want to be sanction-free Moscow, predictably, struck back. The Russian Foreign Ministry has "repeatedly" stressed that using sanctions is a "double-edged thing" and it will have a "boomerang" effect against the US. Already barred from entering Russia is a nasty bunch including the senile John McCain, plus Robert Menendez, Daniel Coats, Mary Landrieu, Harry Reid, John Boehner and Obama advisers such as the cosmic mediocrity Ben Rhodes. Vicky "F**k the EU" Nuland has not made the list - yet. Moscow is playing it cool because it may choose among a staggering array of counterpunches. It enjoys the support of the BRICS group of emerging powers, the non-aligned movement (NAM) and the Shanghai Cooperation Organization (SCO). Composing with the US, Moscow agreed to impose sanctions on Iran, and is a key player in the P5+1 nuclear negotiations. If the sanction comedy goes on, Moscow has already announced it will play hardball with the P5+1, will cease to sanction Iran, and may even, finally, weaponize Tehran with jewels of the S-400 variety. Moscow - the number one oil and gas exporter on the planet - can also play further hardball with Europe's dependency on Gazprom; clinically target US companies working in Russia; speed up the BRICS-coordinated escape from the US dollar, as in a new international payment system in a basket of currencies for the BRICS as well as other emerging markets; and even activate the ultimate economic nuclear bomb - which is to accept payment for Russian oil and gas in ruble, yuan, euros or gold, thus delivering a terminal blow to the petrodollar. And that, ladies and gentlemen, will be the end of the comedy hour. Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009). He may be reached at pepeasia@yahoo.com.