Notes from the Upside-Down IV: The Lights Are Going Out in Europe (before too long)

Germany won't (can't) embargo Russian energy, which means: NATO is a dead letter, the EU will likely change in the same direction, and prices will continue to rise: prepare for shortages

So, now this happened: Russia officially declared it might stop supplying Europe with energy as a part of its counter-sanctions. I expect the leading countries in EUrope to make an abrupt about-face with respect to the current mess in Ukraine rather sooner than later—lest they want to freeze in the dark.

In my part of the world, food, energy, and many other prices are increasing rapidly, and since a picture is worth a thousand words, here’s an unfriendly reminder of what gas prices were last Saturday in rural Norway (they were 10% higher yesterday):

So, gasoline or diesel fuel north of 20 Norwegian crowns (divide by 10 to arrive at the € and $ prices) comes down to $10+ per gallon of fuel in US measurements and prices. Look, I remember some 20+ years ago when I first received my driver’s licence that you could buy a litre of diesel fuel in Vienna, Austria, for less than 70 (€) cents—and this means two things:

• European fuel prices have roughly tripled in the past 20 years, and

• The annualised increase of fuel prices over the past 20 years was around 3.5%.

Such is the (terrifying) ‘beauty’ of compounding. For comparison, the price for a bag of firewood was around $7.5 two months ago; it’s $10 now, a 33% increase in the few weeks since the Christmas break.

Even though my gut feeling is that those places with ludicrously high prices before Covid (e.g., Switzerland, Norway) will be able to withstand these pressures a tad longer than other places in Europe, the end result will be the same: cold and hungry people who feel betrayed.

This isn’t going to end well, in particular now as Russia holds all the cards in this shitshow, so, let’s not despair (yet), and instead let’s try to look at the world as it is, and not as we might wish it to be.

Q: where are we with the Russian-Ukrainian conflict, and where may I find information that’s more helpful than ‘Western’ legacy media?

First, I think that the military operations (as in ‘major combat operations’) will quite certainly come to a close before too long, and I think so for two main reasons: on the one hand, the mud season is soon upon the area (check out ‘Rasputsitsa’), and while it won’t be as bad for the Russian forces in 2022 relative to the German Wehrmacht in the early 1940s, it’s still placing considerable logistical and operational constraints on heavy machinery.

On the other hand, there’s considerable diplomatic movement, and while that may or may not mean something, it’s certainly a (kind of) break with the past two weeks. Mr. Zelensky has called for direct talks with Mr. Putin, and both foreign ministers will meet in Antalya, Turkey, before too long, at the ‘initiative’ of Mr. Erdogan.

In combination with the impending military defeat of the (para-) Ukrainian forces in the Donbass and the continued advance of Russian troops towards Odessa and the Moldova-Transnistria border, the opportunities for organised Ukrainian resistance are receding by the hour.

Second, here’s a couple of sites that I find quite informative, but keep in mind that these must consulted with care, as the fog of war is considerable; still, they are—in my opinion—more trustworthy than ‘Western’ legacy media of both the state and non-state garden varieties:

• The Saker, a Swiss-Russian expat living in the US who’s running of the most insightful weblogs on all matters Russia vs. ‘the collective West’ (as he calls it); note the author’s clear pro-Russian ‘bias’ (which I’d consider patriotism)

• Andrei Martyanov, a former Soviet submarine officer and author of a large number of books on military strategy, hardware, and 21st-century operations; note that the same ‘caveat’ as for The Saker apply

• Patrick Armstrong, a former Canadian diplomat-and-national security official, now retired, who also writes, albeit from a more decidedly ‘Western’ perspective about many chances missed in ‘the West’s’ relationship with Russia

• Moon of Alabama, a long-running weblog on many different things, but its author, Bernhard, frequently writes about Russian affairs

Q: great, thanks, I shall at least check these out. Now, in your header, you alluded to British FM Grey’s statement on the occasion of the UK’s declaration of war against Germany in August 1914—are we that close to WW3?

First of all, I shall hope not. I still hope (which dies last) that sanity will prevail, but clear-headed thinking appears in such short supply among esp. Western ‘leaders’ that I won’t rule out some enormous mistake.

When I wrote that header, I was more or less thinking about recent statements all over the internet, made by the EU’s industrial core—Germany’s business class—that further sanctions against Russia would be, well, a game of ‘Russian Roulette’ (pun intended), but every new round of sanctions would be akin to the removal of an empty chamber. It’s not a question of ‘if’ EUrope will run into serious problems, but a question of ‘when’.

For ‘proof’, here’s a couple of legacy media items from yesterday, all collated from Austrian left-liberal daily Der Standard. Let’s start with German backpedalling:

Despite calls from Ukraine and pressure from Washington, the German federal government maintains its objections to a cessation of Russian energy products…Finance Minister Christian Lindner went on the record and ruled out these sanctions: ‘At this point in time, it would appear unwise to do so, lest we lose our ability to sustain the sanctions.’ He was seconded by Economic Minister Robert Habeck (Greens) who added that an energy embargo might threaten the social peace.

Plain English: no way we’re going to squeeze the trigger of the gun we placed at our own head, with riots very much as an opportunity. Note that Germany, much like Austria (the former’s sidekick, but part and parcel of the EU’s manufacturing core), is dependent on Russia for about 80% of their hydrocarbon energy needs.

Virtually as soon as the above snippet ran, ‘Austrian experts’ (sic) seconded the Germans:

Wolfgang Urbanitsch, CEO of the Austrian energy regulator E-Control, and energy analyst Johannes Benigni consider the discussed embargo on Russian oil and gas impossible.

The add that, yes, one would have to eventually reduce the dependence on Russia, but this cannot be done from one day to another, at least not without massive dislocation, Mr. Urbanitsch said on national public radio…Mr. Benigni added that domestic manufacturing would be massively impacted because first there would need to be alternative delivery options…which would mean thousands of lost manufacturing jobs…Mr. Benigni went on to call [Energy] Minister Elisabeth Köstinger’s recent press statement—she stated Austria’s intent to substitute Russian gas with LNG from Abu Dhabi—‘lunacy’ [Schwachsinn]

Plain English: like their German peers, the Austrian business elites are calling out the government in no uncertain terms over their actions (I won’t call that ‘policy’, it’s stupid activism).

Q: ah, interesting, please answer my question about WW3.

Sure, you see, my line of thinking goes like this: all EUropean countries have some hydrocarbon reserves (buffer), which will probably allow for the temporary extension of a limited, and over time decreasing, number of services. Most manufacturing and, after a couple of weeks, also military capabilities (such as they still exist) will similarly cease to be operational.

The one thing we all should be concerned about is a nuclear exchange between Russia and the U.S., but I suppose if that happens, it’s probably too late to do anything about it.

So, don’t despair, I think that for all the follies and lunatic things esp. ‘Western’ leaders are doing, I suppose that they are not suicidal. At least, there’s a reasonable amount of hope left that ‘Western’ leaders will not go to these extremes.

Q: o.k., so, any thoughts about Ukraine triggering massive blackouts in EUrope?

Well, just yesterday the Kremlin announced that they are considering a cessation of hydrocarbon energy to EUropean customers. If it comes to this, see my above answer.

Q: is it time to panic, then?

Not quite, for panic makes for bad advice in times of distress.

If possible, do what you can to be prepared; here’s a helpful piece by Robert Malone (yes, of mRNA fame) on this, but keep in mind that your preparations must be tailored to your personal situation. Stocking up on durable ingredients (rice, beans, chick-peas, etc.) as well as a moderate supply of drinking water, flashlights (incl. batteries), and candles is a good idea. If you’re dependent on a car, keep the gas tank filled. Prices for everything will continue to rise, and it’s certainly better to be prepared a year early than to start a day late.

Above all, try not to panic.

Q: alright, let’s return to ‘the bigger picture’ for a moment, then. Recently, you linked to Michael Hudson’s piece and indicated that the Ukrainian situation is more about Germany (and the EU’s manufacturing core) than it is about that unhappy place. Did you change your mind about this?

Generally, no. I would add, though, given the above-linked utterances of dissent against the Masters in DC, that we’re inching closer to a turning point. I think it’s fair to state that both Covid and the Ukrainian situation, if viewed together, constitute the ‘formal’ end of the post-1945 world. As a consequence, I’d argue that this period we’re living in is the end of ‘globalisation’ as we know it since the WW2.

That means, though, that there’s a lot of (new) variables in play now, ranging from the drastic re-imagination, if not outright end, of NATO, and the EU (in their current configuration), which will have significant impacts on, say, the U.S. troops stationed abroad, the future security architecture in Europe and, by logical extension, elsewhere, but in particular in the Americas and East Asia.

Q: interesting take, please explain your thoughts.

Well, when Mr. Hudson wrote his piece in late February, the situation he described—the US pushing Ukraine to poke the Russian Bear to do in Germany (and the EU’s manufacturing core, by extension)—held quite true, I think. Now, however, the major change I perceive is that the EUropeans, submissive to anything the Swamp Masters in DC say and do, are beginning to have second thoughts.

You know, there was a lot of dissent and protests in 2019, i.e., ‘before Covid’, and the two years in-between appear to me as a kind of distraction. I’m not saying the ‘pandemic’ was orchestrated by certain players (if so, we should not bother with trials, I think), but I’m saying it certainly came in quite handy. We’re apparently ‘returning’ to the pre-Covid era of instability, protests, and, yes, régime change I wrote about back in October 2020 (see here).

The immediate future might actually bring régime change in a number of European countries, but basically there’s only one or two that really matter: Germany and, to somewhat lesser degrees, France. Sustained embargoes on Russian energy will lead to mass protests by cold and hungry masses, which they governments—that, remember, couldn’t really manage the fallout from the Covid crisis—are incapable of suppressing. That leaves foreign intervention as the only alternative, by which is meant: U.S. troops stationed, quite ‘conveniently’, in virtually all NATO and EU members. I don’t think you’d need me to spell out how such a course of events will play out once the U.S. troops run out of ammunition.

Q: dark musings, no doubt, but uncomfortably close to (potential) reality. Would you care (dare) a forecast for the next couple of weeks?

Well, emptor beware, but sure, why not. I suppose the Russian-Ukrainian meetings will come to nothing, hence the ‘Koreanisation’ of Ukraine is becoming more and more likely. Perhaps there will be a ‘rump Ukraine’, consisting of its north-western regions, with a kind of militarised line of contact separating the area from the Russian-dominated areas.

Given the short time-frame mentioned, I don’t think it’s helpful to muse about whether there will be more Russian-affiliated ‘peoples republics’, one larger client state of ‘New Russia’, or outright occupation/annexation by Moscow.

I would expect that major combat operations will soon be over; there’s not much of a Ukrainian army left anyways, and Russia will switch to containment (of ‘Western’ Ukraine) and mop up the remaining Neo-Nazi resistance.

At that point, it’s quite likely that the EU’s core, led (sic) by Germany and France, will seek to make public their back-channel attempts to mend relations with Russia. Given their electronic warfare and espionage capabilities, I suspect the US knows about these efforts, but I fail to see what else they could do about it—that is, short of staging colour revolutions in Berlin and Paris to instal more compliant vassal régimes (which would be hilariously difficult to achieve given the sell-outs that govern either country).

The breaking point is nigh, I suspect, and more, not less, change is coming. Things that can’t go on—such as the EU’s manufacturing core without Russian energy—won’t, and there’s not much runway left for the Transatlanticists running both NATO and the EU.

As the saying goes, at some point, everyone will sit down at a banquet of consequences, which in the EUropean sense will probably bring to power rabidly anti-Russian nationalists. This, in turn, promises to only widen the gap between governments and the people, which will not end well.

Bottom line: both NATO and the EU in their present configuration will end. If we’re fortunate, the fall-out (no pun intended) from these momentous political changes will not be too extreme.

Q: last word about the economy: recession or depression?

As to economic dislocations, well, I mentioned this before—the current moment is quite something, but it’s certainly not unique in historical terms. What we’re going through are the motions as more and more realise that the post-WW2 order is done.

Who’s going to invest, operate, or expect a sensible return on investment under these conditions? I mean, Covid has all but vanished, thanks to the epidemiological prowess of Mr. Putin (/sarcasm), but who’s going to do some long-term, capital-intensive investment in, say, hydrocarbon energy projects if ‘lockdowns’ due to whatever variant may appear, could occur at a whim’s notice? What about long-distance supply chains, which stand to be disrupted even further by geopolitical events?

We’ll see a massive re-shoring of essential production etc., which means higher prices due to higher labour costs, on top of higher energy costs. This means no more vacation for most people in EUrope, hence the (temporary) ‘easing’ of Covid mandates etc. might actually not really matter, as most peoples’ discretionary spending power is eroded by higher prices for everything. Think—the ‘splinternet’, but writ large.

Bottom line: as politics might return to the national or regional scene, so will economic activity. Yes, there will be international trade, but certainly on a much lower scale and with much less intensity (which, by the way, also calls into question the Chinese economic model, and they are certainly trying to reduce their export dependency by creating a consumer economy).

In short: neither recession or depression, it’ll be both, followed by a new world.

That’s it for now, please let me know what you think in the comments below.

Take care, and remain calm.