Up is Down, Roublegas Edition: EU Sanctions vs. Russia Failed, so next comes: Polish Intervention in Ukraine, I suppose

Reuters (of all places) reports on German gas importers paying in Roubles--and then selling the gas to Poland, which will drive inflation there, leaving the gov't only one offramp: foreign adventurism

And now this is happening: Reuters, of all places, reported on a crucial, if not existential, development with respect to the viability of the EU. From their piece, dated 9 May (oh, the irony):

Germany’s VNG will transfer euro payments for Russian gas to Gazprombank in the future and expects no problems during a conversion to roubles, it said on Monday, meeting Moscow’s key demands under a fresh payment scheme.

This is the opening paragraph, and it’s a bombshell admission.

Now, you may say: ‘meh’? Please allow me to explain, with references to specifics.

As you all know, Russia is the most-sanctioned country ever, in history, etc. You also know that these sanctions are a safe and effective way to deter Russian aggression (which, somehow, followed the Maidan coup as the Kyiv régime’s proclivity to main and kill its Russian-speaking citizens ramped up in the 8+ years since February 2014).

Be that as it may, in not so recent memory, the Russian Federation had announced it will accept payment in Roubles only, hence a lot of histrionics, huffing, and puffing among the juste milieu of especially Western Europe.

Now we know who one that game of chicken: Mr. Putin.

Here’s more from hat Reuters piece (my emphases):

VNG’s first detailed comments on the matter come as European buyers of Russian gas have to navigate a new set of rules Moscow has imposed to pay for its most precious commodity, most notably a demand to pay in Roubles via an elaborate scheme.

European gas buyers are concerned that adopting the new measures, under which they have to open accounts at Gazprombank for future payments, could breach sanctions law and that rejecting them could trigger major gas supply disruptions.

You see, the problem is entirely (wo-) man-made: Russia continues to sell its gas to EUropean customers, despite the latter being particularly ‘offended’ by Moscow’s course of action.

Here’s a thought, dear EU Commission: if you don’t have a good, and if your neighbour is selling it, it’s perhaps a good idea to haggle or negotiate with said neighbour instead of calling him names, eh? (Also, I guess this particular insight into ‘international relations’ makes me a viable candidate for public office, as I seem to know more about that notion than the current bunch of morons…)

So, what Reuters is telling anyone who cares to listen is (again, my emphases):

VNG, which is majority-owned by German regional utility EnBW, said it was taking all necessary measures, in line with existing sanctions law, to continue to ensure supply and therefore economic stability in Germany.

‘We will pay the invoice amount, which will continue to be denominated in euros, into the accounts at Gazprombank in accordance with the planned procedure, so that timely payment to our supplier is ensured on our part’, VNG said in an emailed statement.

‘We also assume that the conversion into Roubles will not cause any difficulties. At least the opening of the account went completely smoothly.’

What is that ‘planned procedure’, you might ask? It’s depositing €, which Gazprombank will re-denominate into Roubles. It’s magic, that thing banks can do these days, even though I wonder if they have to use magic fairy dust to do that.

So, let’s summarise briefly: German—and by extension other EU authorities—determined to accede to the new rules set out by Moscow. Now the Petrodollar has finally gotten a sibling, Roublegas.

What’s the rub, you may ask? In a nutshell:

Reverse Gas Flow, Once Again

Well, there’s a long backstory that revolves around something that’s known as ‘reverse gas’ (I wrote about this in detail back in autumn of last year, hence the abridged plot will do):

Every now and then, the government in Kyiv threatens to cut off the pipelines that run across its territory. This is done mainly to blackmail the EU to fork over some more ‘assistance’ to Kyiv. Were this to happen, Europeans go cold and hungry as their energy supply drops.

It’s also good for virtue-signalling, though, as the EU gov’ts in question that might refuse to take Russian gas in exchange for Roubles—as Poland and Bulgaria have elected to do—will still have to get energy somehow.

And that somehow is called ‘reverse gas flow’. It works like this:

• Country A doesn’t want to buy Russian gas but needs it dearly.

• Country B still imports Russian gas and may sell it to Country A.

• Corollary: Country B—or the importing company—may impose a surcharge for ‘services rendered’.

As a thought experiment, substitute ‘Country A’ with Ukraine in 2015, ‘Country B’ with Hungary’, and ‘the importing company’ with ‘Naftogaz’. Voilà: the Biden grift has been explained (from my above-linked piece):

Since 2015, Ukrainian energy company Naftogaz has been buying reverse gas from ‘European’ providers, by which are meant businesses incorporated in the E.U. According to a long interview with Aleksandr Onishenko, adviser to former Ukrainian president Petro Poroshenko (in office 2014-19), conducted by independent journalist Thomas Röper, the following was revealed:

Naftogaz ‘earned’ a surcharge of up to 100$ per 1,000 cubic metres of ‘European’ gas, which resulted in handsome ‘profits’ worth many billions of $ over the years. The key players behind this ‘business plan’ were, according to Onishenko, Ukraine’s new ‘best friends forever’, Amos Hochstein in his capacity as then-VP Biden’s energy advisor and Victoria ‘F*** the E.U.’ Nuland. On Naftogaz’s side, the key factor was Andrej Kobolev, in whose portfolio fell oversight over these lucrative shenanigans.

Onishenko later fell out of Poroshenko’s favour (during the latter’s power struggle with then-PM Arseni Jazenjuk) and had to leave Ukraine in 2016. After Trump became president in 2017, Mr. Hochstein too changed his job—and joined the board of Naftogaz, of all companies.

Fast-forward to early 2021. Mr. Hochstein had re-joined the U.S. government after the election of his prior benefactor and returned to the scene, this time as special advisor for energy security (read: contra NordStream 2), as reported by Russian media. His former partner, Mr. Kobolev had remained in place to ensure compliance of the Ukrainian government.

Of Winners and Losers

As always, there are those win and those who lose: here, the winners are those energy companies that—certainly I cahoots with their governments—continue to buy Russian gas.

Losers include Poland and Bulgaria, for they are now in the ‘Country A’ position. It’s utterly predictable that Polish energy prices (and hence ‘inflation’ for everything) will rise drastically now: German importers buy Russian gas, which they then sell to Polish importers via ‘reverse gas flows’: what a wonderful business opportunity.

At the same time, the Polish population might get angry as everything becomes more expensive virtually overnight. How do you think Polish élites may respond to increasing domestic pressures? As every gov’t in history has ever done: adventurism abroad.

As explained by Douglas MacGregor in his piece published, incidentally, on 10 May, raises the spectre of a Polish-led intervention in Western Ukraine, which raises the probability of a Russian-Polish clash. This might goad the US into calling for NATO action under Art. V of the NATO Treaty, but then again, this might be intentional on part of the swamp critters.

Please also read Bernhard’s analysis over at Moon of Alabama.

Back to the puny and pathetic EU Commission: they had already determined that paying for Russian gas in Roubles wouldn’t breach the mother of all sanctions imposed on Moscow, yet the very fact that ‘European gas buyers’ are now ‘navigating [the] new set of rules’ boils down to this:

• Sanctions on Russia have failed, because when faced with the ‘choice’ of energy supplies vs. no energy (which means: angry, cold, and hungry citizens), European governments have folded.

• Yet, sanctions cannot be perceived as failed, for then European governments and the EU might be seen as paper tigers. Hence, sanctions must continue, even though Mr. Putin appears to have offered European governments a way out of this situation by offering gas in exchange for Roubles.

So, what’s the problem?

Agency in all of these matters doesn’t rest with the EUroklatura.

They are helpless to do anything, and they probably know that, too.

This is a recipe for disaster, in particular as the swamp masters in DC won’t hesitate a nanosecond to sacrifice anyone’s hides in the pursuit of their own interests.

In short: the EU is caught between a rapprochement with Russia, which also includes a clear and binding delineation of ‘spheres of vital interests’, and their DC overlords.

We all knew this day was coming, and now that it is here, watch the words and actions carefully to find out what is going to happen next. Odds are, it won’t be pretty.