The EU stepped up its sanctions today after forcing all the ducks in line
with the position of president Obama. Russia immediately responded in kind
with actions on cars, clothes, and energy.
The Financial Times reports Russia Threatens to Cap Western Car and Clothing Imports.
Russia threatened to escalate a growing trade dispute
between the Kremlin and the EU, saying it could cap western car and clothing
imports.
The fresh warning came as EU diplomats ended a week-long deadlock on Thursday
over a new round of sanctions against the Kremlin, and agreed to trigger
measures to block Russia’s largest state-owned oil companies from raising money
on European capital markets.
Forcing Ducks In Line
The measures were due to go into effect at the start of
the week, but several EU countries balked, arguing they needed more time to
assess whether the Kiev-brokered ceasefire would take hold.
Diplomats said the decision by EU ambassadors to press ahead came after
Herman Van Rompuy, the European Council president, held a conference call on
Thursday with the leaders of the four European countries in the Group of
Seven leading industrialised nations – Germany’s Angela Merkel, France’s
François Hollande, Britain’s David Cameron and Italy’s Matteo Renzi – to
finalise the measures.
Russia's Response
Speaking after the EU announcement, Vladimir Chizhov,
Russia’s permanent representative to the EU, told Russian newswires: “Russia
has no other choice but to go for certain countermeasures.”
Russia Tightens Gas Supplies to Poland
Also consider Russia Tightens Gas Supplies to Poland.
Poland’s state gas group PGNiG said on Wednesday that
Gazprom had delivered 20 per cent less gas on Monday and 24 per cent less gas
on Tuesday than it was contracted to supply. Kiev confirmed Poland had been
forced to stop re-exports to Ukraine in response to these cuts.
Igor Prokopiv, head of Ukraine’s gas pipeline operator, confirmed the
knock-on effect in Ukraine.
“At 2pm Poland stopped reverse gas flows to Ukraine which had been in the
range of 4m cubic metres,” he told journalists in Kiev. “Today Poland put in
an order for 11 mcm a day, and Russia confirmed orders for 7mcm. Those 4mcm
are our reverse flows.”
Energy supplies are one of Ukraine’s most serious vulnerabilities. It is one
of the world’s least efficient energy consumers and its supply crunch is
being compounded by falling coal production in the Donbass region, which has
been affected by conflict. Ukraine needs to import about half of its
consumption of about 50 bcm annually and analysts reckon it would be hard to
weather the winter without imports of 5bcm to 10bcm
The volumes of reverse-flows are modest in comparison with Ukraine’s needs.
Slovakia is exporting some 21 mcm/d, Hungary can supply 16 mcm and Poland can
send 4 mcm.
Priorities vs. Solidarity
Ukraine complained last month that reverse flows were
running at far less than potential capacity; Hungary for example is sending
only about 3 mcm, because its priority is to fill its own storage facilities
in readiness for a stand-off with Russia.
Gas Pains
The above statements sum up the position quite nicely, don't they? In essence
it's a big F*You to Ukraine.
Better Ukraine to be totally without gas than for the rest of Europe to
suffer from any gas pains.
Sanctions Never Work
As a result of previous sanctions, and counter-sanctions fruit is rotting in
the fields, and European GDP is under pressure. Please consider
Small Price Theory
Who cares if history says sanctions don't work? Who cares if a recession
ensues? Not to worry, it's a "small price to pay" say sanction
supporters.
I encourage everyone to read my previous discussions on the absolute
silliness of the "small price" theory.
Air Flight Restrictions
On September 8 I noted Russia threatens to block commercial air traffic over
Russian airspace. Costly re-routes on the way. See EU Threatens New Sanctions; Russia Responds with Threats on
Natural Gas and Airspace Flight Restrictions.
Mentality of Jackasses
In the above article I commented ...
Why EU and US economic-jackasses think sanctions will
accomplish anything positive or change Russia's behavior one bit is at first
glance a bit of a mystery.
However, economic-jackasses by definition are going to do stupid things, so we
should expect more and more of the same failed tactics.
Reader Terry responded "I’m astounded that you, a
libertarian, belittle the EU for economic sanctions. The EU has nothing but
economic sanctions to make Russia pay any kind of price for invading its
neighbors."
Sanction Irony - Putin's Popularity Hits 87%
I am amused by the silliness of Terry's comment. For starters, no Libertarian
would ever be in favor of sanctions.
Invariably, the average citizen ends of paying the price. And that holds true
for both sides.
Time Magazine explains how sanctions really work: Putin’s Popularity Soars to 87% in the Face of Adversity
Expect Putin to cave in on account of sanctions? Think again. The bigger the
sanctions, the greater the hardships on those who impose them.
Nonetheless, the EU and President Obama want to "do something". So
they do. And to get support, they flash the "patriotism card".
Unthinking sheep fall in line every time.
Fishing for Trout With Rope and Mashed Potatoes
In spite of the fact that sanctions are counterproductive, the "EU
has nothing but sanctions to try" so that's what they do. Next,
mainstream media parrots fall in line. Ultimately, and under the guise
of patriotism, the sheep and ducks fall in line as well.
The sanction approach is similar to fishing for trout with rope and mashed
potatoes because that's all you have to fish with.
Actually, sanctions are far worse.
Fishing for trout with mashed potatoes and rope only wastes time and
potatoes. Sanctions waste more time, a tremendous amount of money, and the
bigger the sanctions, the greater the loss of jobs and economic output.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
