Authored by Jorge Vilches,

Cognitive scientists would concur in that the current performance of European leadership could be diagnosed as either myopic ignorance or - most probably - full intellectual blindness.

Ursula von der Leyen

In the case of so far happy-go-lucky Ursula von der Leyen there is no doubt it´d be the latter… but only if we first dismiss her warm on-the-record support for Bundeswehr colonial policies and military involvement… plus her praise of Third Reich famous general Field Marshall Erwin Rommel, Commander of the Führer Headquarters. But leaving that possible Nazi whiff aside, full ´intellectual blockage´ is the only kind way to dare explain a most strategic project as foolish and doomed to fail as banning Russian oil sales worldwide. Why so you may ask ?

Ref #1 https://www.wsws.org/en/articles/2017/06/20/vond-j20.html

asymmetrical retaliation

The short answer is massive — ´Russian´ massive – unmitigated “asymmetrical non-military retaliation” through surgical and divisive optional sales of natural gas – and other key commodities – just leaving EU sanctioned Russian oil for sale to and re-sale by third parties. And, oh yes, weaponization is not limited to any particular means as various European war schools should have internalized already. War means war and pretty much anything is fair game. But apparently, it´d be as if through the centuries, uppity European leaders – most especially German, French, Swedish, British and Poles — have not learned a single thing despite the über-high costs already paid for by their nations large-caliber warfare experiences most especially with Russia. By the way, the UK also has the additional ( unsolvable? ) burden of its current Brexit ballast…

Ref # 2 https://www.zerohedge.com/energy/eu-proposes-ban-russian-oil-imports

Ursula´s softball

May I call you Ursula ? Thank you. “We will make sure that we phase out Russian oil in an orderly fashion [… a phenomenal bad joke of sorts… ] in a way that allows us and our partners to secure alternative supply routes and minimises the impact on global markets” you said. Question: will the Russians just idly watch you trying to execute such enormity at the EU´s preferred speed and political and geopolitical sequencing? And the Russians would never dare to strike back with natural gas or other restrictions no? For starters, what about nickel, uranium, and lithium? Not having them would be like trying to prepare tasty food without salt, pepper or mustard. Without uranium no nuclear power is possible, did you know? [ more on that later ]. Ursula, your pink unicorn wishful thinking is unfathomable gal.

EU kelpers

This mad-ban requires EU approval with conditional support from Hungary, Greece, and others. So some special EU members will be exempted while regular EU ´kelpers´ will not. Now could that lead to serious friction ? How many years will it take all of Europe to reconvert its industry and supply chains? “This is why we will phase out Russian supply of crude oil within 6 months and refined products by the end of the year.” Okay, so Aunty Ursie you believe the Russians are dumb enough to let you phase this idea out nice and easy at your own pace and whenever you decide to act per your own special EU schedule. No market dynamics involved as Europe plays everybody else´s pieces too as grandpas would do with 3-year-old grandkids.

Ref # 3 https://www.rt.com/business/555065-russia-oil-ban-exemption-eu/

Russian DNA

No way Ursula, the Russians play world-class professional chess while you play elementary school checkers, not even being good at that either. The instant Russia perceives the initial execution of your game plan regarding banning of Russian oil, they´ll make their moves, not yours. And those Russian moves will not be nice and pretty. For one, Europe will not have anywhere nearly ready its own diesel refining capacity by the end of 2022 while the middle distillate market is ever much tighter everywhere as demand recovers from the Covid pandemic. So the EU “plan” is

to frantically search for hard-to-find or simply non-existent substitutes while investing tons of time, money, effort and risk. Well, the Russians know that already even before you start. Diesel is already in critically short supply in the EU.

Furthermore, Europe will continue buying Russian oil and distillates via third countries once it introduces any embargo only that at much higher prices than today. Such old, quick and dirty business is known as “triangulation” Ursula.

Russian hardball

The existential threat imposed on Russia by the EU with its macabre “Ukraine Plan” and sanctions has not left Russia any way out other than playing hardball for keeps. Furthermore, the Russian non-military retaliation domain is actually unlimited due to the full-scale and open-ended addiction that Europe has developed for Russian imports of different sorts including commodities of any and every imaginable type. Without such, Europe will cease to exist as we know it in a matter of a very few months, if not weeks. As Francis Fukuyama should posit, Europe´s dependency on Russian commodities is the end of its own history. The unipolar world is dying, admit it Frank. Hint: write a new book guy.

Ref # 4 https://www.zerohedge.com/energy/trump-was-right-putins-gas-strategy-gives-germany-only-bad-worse-choices

Ref # 5 https://www.rt.com/business/554968-moscow-toughens-response-western-sanction

not your dog

It seems that Ursula von der Leyden has convinced the EU that feeding a refinery or a chemical plant is pretty much like feeding your dog. But nothing can be further from the truth. Chemical plants and refineries are very closely matched and subtly calibrated to very specific supply feeds very difficult to substitute. Changes can and have been made, but it requires lots of time, effort, money, dedicated facilities, experimentation, specific expertise, risk, and most important fixed, unchanging feeds always complying with specs. This means that Russia today supplies Europe with exclusive unreplaceable oil & gas grades of very specific chemical content (even coal grades) that would be impossible to get from third parties fast enough and cheap enough. So it´s a very delicate and tight matching already achieved between European facilities and Russian fuels and other inputs that cannot be altered or replaced that easily, let alone all at the same time !! Are EU countries aware of all this ?

Ref #6 https://www.ifo.de/en/node/69417

expensive divorce

So maybe after investing years, money, expertise, trials & errors, risk and lots of hard work Europe may possibly and eventually be able to partially switch from current to dirtier or far more inefficient options. But that would be (a) against the EU´s Green Deal compliance and (b) a very short-term non-sustainable “solution” (c) against the whole world.

So how can Europe transition to a 0% Russian supplies end-point as swiftly and safely as Chinese plate spinners? 

Ref # 7 https://www.rt.com/business/555087-energy-warning-russia-sanctions/

No minimally informed no-nonsense mindset has thought out the foolish idea of coordinating the whole European continent in this self-destructive mission. Taking matters to an extreme, let´s assume that Europe completely weans itself – or is cut off — from Russian oil & gas imports tomorrow morning and everything else sourced in Russia. In that hypothetical case, Moscow may feel the financial problem possibly within 6 months… or maybe never. But if such event were to happen, the timing would be quite different as the EU would necessarily start imploding in 6 days and would achieve full implosion in 6 weeks. With the oil mad-ban Europe would badly need to find substitutes for Russian imports. The problem is such need cannot ever be satisfied fast enough and right enough no matter how it is diced or sliced. Triangulation means Europe will buy quality Russian imports via third countries only that at much higher prices

plug & play (not)

No, it is not anywhere near “plug & play” either. No. Several EU landlocked countries can only import nat-gas thru existing Russian pipeline unless a nightmarish and highly risky sea-land supply lines are established by different means going across complicated mountain ranges sometimes, a project which no one wants to entertain. Replacing Russian feeds & supply lines is an incommensurable task that Russia will not help out with either. Once Russia withstands the “ban Russian oil” idea, Europe will find itself in the worse of both worlds not being able to rewind back.

tit-for-tat ?

Also, the impact of the Russian reaction may most probably result to be disproportionate to the damage inflicted by an EU worldwide ban on Russian oil. Hence, ´asymmetrical´, simply because an exact ´tit-for-tat´ result is impossible to calculate for and let alone effectively achieve. If ever implemented, the unintended consequences of a haphazard decision such as proposed will necessarily mean for the EU either to (1) instantly back-pedal to square one or (2) finally suicidal Europe would follow through and achieve its goal. I kid you not. Other commodities could be included.

human food

And food for thought, as Europe would face famine in-its-face if grains from Ukraine, Belarus, Russia and elsewhere are tied up or absent by Russian retaliation or impossibility to deliver. And the lack of cheap diesel and natural gas from Russia means that farmers everywhere face sharply increased costs, whereby fertilizer is either not available at all, or too expensive to use, and thus crop yields will fall worldwide increasing the price of food products. Greenhouse producers in many parts of Europe have already shut down over high energy costs as prices stand today, not even thinking of the possibility of having Russian oil banned worldwide. Banning Russian oil from Europe can only back-fire.

Ref # 8 https://www.zerohedge.com/commodities/worlds-largest-fertilizer-company-warns-crop-nutrient-disruptions-through-2023

Russian leverage

It´s impossible to approach all aspects involved at once, so let´s briefly touch upon part of Russia´s bargaining power.

1. Russia does not want, let alone need, to defeat all of Europe. Just turning Germany — or Poland for that matter — into a messy mess would be more than enough for the whole EU to focus and reason out basic stuff.

2. No uranium from Russia means the 3 remaining German nuclear power stations cannot be re-commissioned. Not having already scheduled substitute delivery of finely-tuned Russian uranium means an adaptive retro-fit with newly-sourced feed, which technically is risky and mission almost impossible which would take years.

3. China + India + Brazil have ´free-patent-IP´ investments plans in Russia kicking off an entirely new ball game

4. 60% of German gas consumption is Russian. Today German industry would not survive without Russian gas.

5. A partial or total reduction of Russian nat-gas and coal supply in retaliation for banning Russian oil would negatively and instantly impact Europe in many ways and the rest of the world with irregular market dynamics.

6. If not delivered to the EU, the Russian nat-gas can be vented or flared at well-heads as there is plenty more.

7. Russian oil can be sold elsewhere and/or stockpiled relatively rapidly and easily, or production can be slowed down without damaging reservoirs or wells. Russia will actually increase its “drill baby drill” policy.

8. Paraphrasing former US Secretary of Treasury John Connally “Sorry, Russian commodities, your problem”

9. Russia´s market is 85% of the world population largely under growth and just as fed up with the US-dollar reserve currency system. The EU trade embargo on Russia does not work per parallel imports from 3rd parties

10. The defiant Russian economy is doing just fine, the Ruble is as strong as ever. US President Biden vowed “to make sure the pain of our sanctions hits the Russian economy, not ours” as if he were getting the picture…

11. China and others definitely back Russia while the rest of the world de-dollarizes and does not sanction Russia

12. There are $ 500 billion worth of physical Western assets in Russia that can be confiscated at any time.

Ref # 9 https://www.rt.com/business/555076-moscow-allows-foreign-goods/

Ref # 10 https://www.rt.com/business/553038-russia-lifts-ban-parallel-imports/

Ref # 11 https://www.newyorker.com/news/daily-comment/russia-and-china-unveil-a-pact-against-america-and-the-west

Ref # 12 https://www.lexology.com/library/detail.aspx?g=39ef25c3-1bf0-4029-bac2-de0ac11965da

Ref # 13 https://www.rt.com/business/555097-russia-sanctions-recession-economist/

Ref # 14 https://www.rt.com/business/555119-russia-india-oil-sales-increase/

eyes wide shut

Agreed, it´s a multi-variable environment in a context of constant change with plenty of moving parts interacting on each other. But, for starters, no ( or less) Russian nat-gas and no Russian oil means many unsolvable things for the EU today. We´d also need to add the impact of having no oil, coal, or gas substitutes fast enough in large enough quantities. All of that put together means no (or less) refined products, no intermediate distillates, no heavy-duty machinery (think mining) no nickel nor aluminum, cobalt or lead or magnesium, no neon, no grains or edibles at large, wheat, corn, barley, rye, soybeans, timber, paper, titanium, rocket engines, nitrogen fertilizer, crop nutrients, potash, less petrochemicals, iron ore, minerals and rare-earths, uranium for nuclear power plants, lithium for batteries, no inputs for production of metals, plastics, fabrics, pharmaceuticals, fertilizer, chemicals, etc., no manganese, chromium, platinum, essential palladium for catalytic converters, copper, tin, mica, wolfram, bismuth, kaolin, talcum, tungsten, diamonds, phosphates, sulphur… and even no gold. By the way, as we should all know, none of these can be printed.

Russian vacations

By the way, fewer distillates such as diesel and fuel oil means that private and public transportation and freight would slow down lots, also affecting heavy-duty vehicles, industrial machinery, and airplane travel. Also far lower tourism. So might as well shut down the EU and go away on vacation to beautiful Russia right? You won´t find that much food or heating or A/C either, just new massive unheard of migrations all around you. With less Russian imports, very huge German industrial giants run the certainly serious risk of shutting down otherwise continuous year-round processes which cannot be re-started and would mean irreparable harm & negative impact on the German economy and the rest of the world. And it’s not only Russian produce that would be missing. Also from Belarus and Ukraine itself + the Stans

mission impossible

Only mediocre light-brained European leadership can propose such suicidal move 100% guaranteed to blowback in-their-face much harder and faster than their original strike. It´d be like poking a bear ( sound familiar ? ) with a sharply pointed pole and pretending the beast to continue munching fish unbothered by the aggression itself and the presence of the aggressor, both. Not even young unexperienced teen-aged urban Canadians would think of doing such a thing. Of course, they would know that the bear will necessarily focus attention first ( already done that… ) then would rise on his hind legs and swing his sharp deadly paw wide and fast sooner than the EU can react to what just happened.

It isn´t European David vs. Russian Goliath either. It´s a well-fed and rested Russian Goliath with hypersonic weapons under his arm vs. a worn-out underweight European David with a worn-down sling and lots of very small stones…

to “Schwedt” or not to “Schwedt”

Schwedt is a key refinery for which the German government better find fast good & reliable sources of substitute Russian oil. If Schwedt does not deliver as usual, problems will be felt throughout Germany, Poland, and elsewhere.

But one problem is that Schwedt is majority-owned by Rosneft, the Russian state oil company which has control.

Now supposedly Schwedt has already dramatically reduced its dependence on Russian oil. But there´s a rub.

data laundromat

The rub is that EU member countries are very good at data laundering practices since inception of EU membership acceptance proceedings. Don´t trust me, ask Goldman Sachs they should know. So, for example, if imported Russian oil stays stationary in an EU depot for a couple of months it is “nationalized” and it is no longer considered to be ´Russian´.  Also, the official oil inflow figures cheat, as for partial mixtures of Russian oil 45%+ 55% ´oil from somewhere else´ it is considered to be non-Russian, see? So Russian oil import substitution is a topic not yet anywhere close to being solved. And if Russian oil is banned right here, well Russians might deny delivery of either Russian oil or Russian gas – or whatever — over there. They defend their interests, not the EU´s.

Ref # 15 https://www.rt.com/business/555059-europe-needs-russian-gas/ 

Ref # 16 https://www.rt.com/business/555022-germany-petrol-shortages-russia-oil/

two to tango

Which brings us to the fact that the EU cannot dream of moving its pieces in a vacuum as if the Russian enemy were not there also playing in the same theater scenarios and moving its pieces alternatively. The instant the EU makes any headway whatsoever regarding the possible banning of Russian oil, then Russia will respond in kind or possibly before so as to carry out a pre-emptive deterrence sort of like a taste of things to come such as in Poland and Bulgaria

“We have every right to take a matching decision and impose an embargo on gas pumping through the [existing] Nord Stream 1 gas pipeline. So firstly, Russia may reduce or cut off its gas exports if the West goes ahead with a ban on Russian oil”. Understand? The EU attacks Russian oil and Russia counter-attacks reducing or cutting off Russian natural gas, etc. In other words, asymmetric non-military retaliation.

Ref # 17 https://www.bbc.com/news/58888451

Prices

If the Russian oil ban attempt goes ahead, agreed that the first thing that Russia may do is reduce or cut off nat-gas supplies – or other key commodities — with the stroke of a keyboard.. And it would be impossible to find replacements for Russian oils fast enough also. It would take years of adaptation and readjustments and it will still be much more expensive for European consumers. Russian Deputy Prime Minister Alexander Novak left on record that a “rejection of Russian oil would lead to catastrophic consequences for the global market causing oil prices to more than double to $300 a barrel”…possibly up to $ 500 pundits say assertively in specialized blogs. Be it $300 or $500 does the EU actually want that ? And Russia would end up earning much more by exporting far less. Trust US Treasury Secretary Janet Yellen, she said it, not me. And the higher the price, the higher the inflationary pressure and the higher the prices at the supermarkets already at approx. 35% p.a.. I can´t believe having to explain all this, really…

Ref # 18 https://www.bbc.com/news/business-60656673

Despite sanctions, Russia has almost doubled its monthly earnings from selling fossil fuels to the EU, according to the Centre for Research on Energy and Clean Air. The EU has imported about $23 billion dollars of fossil fuels per month from Russia since March 2022 as oil and gas prices have soared, compared with an average of about $ 12 billion in 2021. Meanwhile, transfers of oil between tankers have surged as buyers take advantage of discounted Russian crude. Different crude blends shipped from Russia may also contain oil from elsewhere which would also be affected.

logistics & freight

Banning Russian oil also means a logistics major reversal from-East-to-West to from-South-to-North. Such cardinal change is costly and risky. New shipping freighters are unprepared for unknown delivery schedules and product specs. Ports and oceans are different, shipping lanes are different, climate is different, seasonal availability of product and ship size and type are also different. That also involves lots of negotiating time, coordination, money, expertise, risk, permanent costs, and new dependencies with yet unknown trade and business partners, new modus operandi, brokers, insurance companies, etc. That is why every EU government has failed to build a realistic energy strategy that does not depend on Russia. Continuity, LNG & LPG terminal bottlenecks, and processing, availability, cost, no weather restrictions when needed. Pipe delivery is safe, dependable, and cheap, sea freight is risky and cost-prohibitive

nuclear blues

Germany had 15 nuclear plants in operation. The last 3 operating nuclear plants in Germany were scheduled to be decommissioned permanently in 2022. Part of the “Green Agenda” in the EU is to eliminate nuclear plants. France does not approve this, but is having technical trouble with its nuclear plants. France has said it will shut down 50% of its nuclear plants for critical maintenance this year at the worst possible timing imaginable.

Ref # 19 https://www.bbc.com/news/business-61298791

military impact

No readily available fuels of the right type (careful) mean no deployment no planes or other aircraft which means pretty much being stuck. Bad logistics, less food, no (or less) supplies, no heating to speak of. The European conventional military dependence on Russian fuels is beyond overwhelming, close to checkmate. Fuel imports are not anywhere near a military solution, just a way for civilians to survive if and when available and at a terribly high price.

“So the EU better be prepared to continue paying (many) billions of euros each week to Russia, supporting the Ruble and subsidizing its military in the process. It’s not just a short-term problem, either. If Germany manages over time (many years ?) to find adequate replacements for Russian natural gas, oil and coal, it will be at (tremendously) much higher prices. The era of cheap-Russian natural gas fueling the German economy is over. German energy-intensive companies, like its chemical giants, could not compete in the global market. Germany will face painful choices about the future of its industrial economy”. So without very specific and unreplaceable exclusive Russian grades of natural gas and oil and coal the European military are pretty much game-over.

Ref # 20 https://www.zerohedge.com/energy/trump-was-right-putins-gas-strategy-gives-germany-only-bad-worse-choices

unmanageable world finances

The camel is 990% overloaded and this one foolish decision may break its back. The world already rides on a wild $ 600+ trillion of a derivatives tiger that can only survive provided the corresponding counterparties do not fail.

“ Clearly, central banks in conjunction with their governments will have no option but to rescue their entire financial systems, which involves yet more central bank credit being provided on even greater scales than seen over Covid, supply chain chaos, and the provision of credit to pay for higher food and energy prices. It must be unlimited.”

Ref # 21 https://www.goldmoney.com/research/goldmoney-insights/financial-war-takes-a-nasty-turn?gmrefcode=gata

So unless something dramatically favorable happens very soon, economic-financial considerations will have highly negative socio-political impact driving the crisis to a high-pitch climax with the pitchforks roaming about European streets. Per Rabobank: “ When the ´food system´ breaks down, everything will break down with it”.

Per The Guardian, “…Come October, it’s going to get horrific, truly horrific … a scale beyond what we can deal with”.

Europe´s mad ban on Russian oil is just another perfect example of sheer Anglo-Saxon European puppeteering.

Ref # 22 https://www.theguardian.com/business/2022/apr/19/energy-chiefs-fear-40-of-britons-could-fall-into-fuel-poverty-in-truly-horrific-winter

Ref # 23 https://www.zerohedge.com/markets/rabobank-when-food-system-breaks-down-everything-will-break-down-it