Putin’s war is economic suicide

Historians believe that Russian President Vladimir Putin’s fatal miscalculation was his belief that Europe would succumb if he invaded Ukraine, due to Russia’s over-reliance on energy. I would write. But overdependence works both ways. Europe depended on Russian oil and gas, while Russia depended heavily on European energy markets.

Given this codependence, Putin has recommended postponing his looting of Ukraine and his customers in the West until he has secured comparable energy markets in the East. I did. Worse, his energy weaponization forced Europeans to find new energy suppliers and alternatives to fossil fuels. Now they are signing long-term energy contracts and Russia cannot replace these customers.

If Russia were a corporation, it would be headed for bankruptcy. For years Russia has built pipelines to Europe (Ukraine, Belarus, Poland, Turkey, through under the Black and Baltic Seas), but the Russian oil or gas fields and the world’s largest energy purchaser and has not built a single direct pipeline to China, the world’s largest energy buyer. its open ally. President Putin’s bombastic pre-war statement about a massive Siberian pipeline to China is years away from completion. And given the post-war sanctions of the West and the mass protesting withdrawal of oil and gas companies from Russia, such a project would be impossible. It was these foreign companies and their expertise that financed the military build-up. will hinder. On top of that, countries such as China are buying Russian energy, but demanding steep discounts.

Putin is ignorant about running the economy. Russia has more natural gas reserves than any other country on earth, at about 19.9% ​​of the total. However, they were unable to take advantage of the liquefied natural gas (LNG) revolution underway around the world, making it possible to transport gas anywhere in the world. When the gas cools to minus 162 degrees Celsius, it liquefies, shrinking its volume by a factor of 600 to a non-toxic liquid that is easy to store and transport.

One LNG carrier, more than three football fields long and equipped with five cryogenic tanks, can carry the equivalent of three days’ worth of gas flows from Russia’s largest gas pipeline . An estimated 657 of these tankers now crisscross the seas relentlessly, and all oil and gas producing countries need gas to regasify LNG for customers around the world. We are rapidly building liquefaction plants and export terminals. But Russia is years behind other countries.

With just 6.7% of global gas reserves this year, the United States has become the world’s largest LNG exporter. This is partly due to increased shipments to Europe since the war began. In fact, the US has overtaken Russia in her LNG shipments to China this year, with a market share of about 11% compared to Russia’s 6%. Australia, Qatar, Malaysia and Indonesia hold large shares of her LNG market in China.

Post-war Europe will be completely alienated from Russian energy. This is because Putin’s ploy of intimidation and price shocks has caused disastrous price hikes and inflation, undermining its reputation as a reliable supplier. European countries now have 36 of his LNG ports and since the war began he has seen a 50% increase in his LNG intake from other suppliers. Dozens more LNG terminals are under construction and major gas supply contracts have been signed with European countries, Azerbaijan, Algeria, Saudi Arabia, the United States, Australia, Qatar, Nigeria and Norway.

The European Commission recently launched an emergency plan to cut gas use by 15% this winter and eventually replace all Russian fossil fuels. Savings and alternatives are being rolled out, reducing the use of petrol, home heating, public transport, street lighting, air conditioning and factory work. It will also have shelter available to residents in case Russia’s gas cuts are threatened.

On the supply side, Germany will burn its own coal again, French and German nuclear facilities will either be released from shutdowns or will be expanded, and LNG from the United States, North Africa, Central Asia and the Middle East will become permanent within a few years. will be supplied to Replace Russian gas.

Russia’s restraint on gas volumes over the past year to boost prices has given Russia extra cash flow during the war, boosting the ruble’s value. But this gain will be short-lived as Europe weanes itself from Moscow’s fossil fuels and punitive Western sanctions, combined with an outflow of brains and capital, cut through Russia’s economic future. With more than 1,000 major Western companies shutting down, Russian oligarchs hiding assets and themselves abroad, hundreds of thousands of educated young Russians and an estimated 15,000 Russian billionaires will be offshore this year. is expected to move to

Frankly, Putin’s war is economic suicide. The late Senator John McCain (R-Arizona) once denigrated Russia as merely a “gas station masquerading as a nation,” and now it’s even worse. Putin will kick out all the gas station customers and employees and go out of business completely sooner than he imagines.

Diane Francis is a Non-Resident Senior Fellow of the Atlantic Council’s Eurasia Center. She is the editor of Canada’s National Post, a columnist for the Kyiv Post, and the author of ten books. She writes a bi-weekly newsletter about America on her Substack.

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