Tom Arms’ World Review – 13 March 2022

Back in the halcyon days of the Cold War both sides accepted a nuclear strategy called Mutual Assured Destruction which was gifted with the appropriate acronym of MAD. It had a simple basis: Both sides (the West and the Soviet Union) possessed enough nuclear weapons to wipe out the other (and the rest of the world). Therefore it was in neither’s interest to use their nuclear weapons. As mad as MAD sounds, it worked. No nuclear weapons by either the US or Soviet Union, or Britain or France were used throughout the Cold War. There were some almost incidents, such as the Cuban Missile Crisis, but Armageddon was always averted as a MAD sanity prevailed. However, the problem with MAD is that it is built on the premise that the leadership in Washington and Moscow is led by rational people. Now the people in the West are seriously concerned because of doubts about Putin’s sanity. Three years ago there was concern about the mental stability of Donald Trump who famously said: “I can’t understand. If we have nuclear weapons, why don’t we use them? It appears that there is a growing need for a failsafe chain of command among the nuclear powers to avoid the problems of hubris-driven mental instability leading to a disastrous button-pressing incident.

Russia, according to the White House, has prepared chemical weapons for use in Ukraine. Moscow claims that Ukraine has done the same. Ridiculous say both Washington and Kyiv. If the latter are to be believed then Putin is preparing a false flag operation whereby Russians claim they have been attacked by Ukrainian chemical weapons and respond with chemical guns blazing. But what chemical weapons? The Soviets at one time had the world’s largest biological and chemical weapons store. In fact, an estimated 65,000 were employed in the deadly business. Then along claim the 1973 Biological Weapons Convention and the 1993 Chemical Weapons Convention which banned these instruments of mass destruction. At the time, Russia had nearly 40,000 tons of chemical weapons. In 2017 the Organisation for the Prevention of Chemical Weapons (OPCW) reported that Moscow had destroyed its “declared” weapons stock. Then came the 2018 Novichok attack in Salisbury on former GRU agent Sergei Skripal and his daughter followed by a similar murderous attempt in 2020 on Russian dissident Alexei Navalny. In 2021, the CIA reported that Russia was back in the chemical weapons business, or, it had never really left it. This week’s White House announcement about the spectre of Russian chemical weapons leaves an important unanswered question: Is Russian use of chemical weapons a red line for NATO? If not, why mention it?

In other Russian news, Vladimir Putin has signed a decree increasing payments to retirees and pensioners in order to secure the backing of that crucial section of the population where most of his support lies. It is not coming from the young and middle classes who continue to demonstrate. There are reports that 10,000 protesters have been arrested. Duma this week has passed a law threatening 15 year prison sentences for anyone who spreads “fake news” which is basically defined as anything not approved by the Kremlin. They have also blocked all Western media. Companies such as the BBC are resorting to short wave radio broadcasts. Both Aerofloat and foreign air carriers have stopped all international flights into and out of Russia. The rouble has lost half of its value. Foreign companies are severing their links in droves and the government is on the verge of defaulting on its loans for the first time since the end of the First World War. The Iron Curtain is falling again.

Meanwhile, there are reports that Putin is furious at the progress of the war and looking for scapegoats. He has allegedly sacked eight generals and claiming that he was fed fake intelligence by the FSB. Sources within Russia are saying that a frightened FSB fed him the intelligence he wanted. A rambling twitter feed from an alleged FSB agent named Igor Suslov, claimed that Putin has led the country to disaster; it was on the brink of collapse and predicted famine by summer.

On Tuesday President Biden announced that the US was banning imports of Russian oil and gas. Canadian Prime Minister Justin Trudeau had already said the same and Britain’s Boris Johnson said it would cease Russian imports by the end of the year. In itself this is not a big deal. The three countries are not big users of Russian energy. That honour falls to continental Europe which buys anywhere between 30-50 percent of its energy from Russia. If they banned Russian oil and gas their economies would overnight grind to a half. The Anglo-American-Canadian move is more political optics—a gesture to show that they are tightening sanctions on Russia’s big exports as a substitute for the no fly zones requested by Zolodomyr Zelensky. Biden and co are giving their publics an opportunity to make sacrifices for Ukraine, which according to Congress and opinion polls they want to do. But for how long. The pandemic and political instability energy prices were rising before Putin attacked. Since the Russian tanks crossed the border they have soared. This affects cars, air travel, rail travel, food prices—the entire worldwide economy.

Oil and gas prices are set internationally. There are alternative sources, but they will take at least six months to come on stream and in many cases several years. Saudi Arabia, Qatar and the UAE have spare capacity. But they are allied with Russia at the moment and angry with Biden’s withdrawal of support for their war in Yemen. The UAE ambassador in Washington appeared to break with his OPEC ministers when he announced on Thursday that the emirates would start boosting production. But there are reports that he is in conflict with his oil minister. Oil could flow from Iran but is being held up by the Iran Nuclear Accord. The West may have to reach an accord with Maduro’s Venezuela to tap into that country’ massive resources. Norway, Libya and Azerbaijan may also be persuaded to increase their production. The US can increase its production but not enough to fill the gap on its own. Britain has a few drop of oil left in the North Sea. All these alternatives will take time to negotiate new agreements, alliances, arrange shipping contracts and build infrastructure. Tighten the belt. Turn down the thermostat. Mothball the car. It is going to be tough.

The British are being simultaneously lauded and panned for their response to the Ukraine Crisis. When Zolodomyr Zelensky—the Western world’s new icon of democratic freedom—addressed the Mother of Parliaments by cyber link this week he personally thanked Prime Minister Boris Johnson. The reason was that the UK has led the West in supplying weapons to Ukraine before and after the invasion. Something like $390 million worth of military aid has been despatched so far to Kyiv. To date these have included small arms, body armour, anti-tank missiles, javelin missiles and personnel to train Ukrainians in their use. This week Defence Secretary Ben Wallace said Britain was also sending Starstreak laser-guided surface to air missiles designed to shoot down enemy aircraft. At the same time Home Secretary Priti Patel is under heavy attack from the public and every political party (including her own) for what is being described as a heartless bureaucratic muddle related to allowing Ukrainian refugees into Britain. While the rest of Europe is waiving visa requirements, Britain started off by saying they would admit 200,000 refugees and then constructed so many obstacles that their refuge offer became a sad joke. Priti Patel has been reluctantly dragged towards a more open door policy for the refugees, but it still falls far short on what is on offer from the EU.

* Tom Arms is foreign editor of Liberal Democrat Voice and the author of “The Encyclopedia of the Cold War” and the recently published “America Made in Britain” that has sold out in the US after six weeks but is still available in the UK.

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6 Comments

  • Brad Barrows 13th Mar '22 - 10:13am

    I expect this war to turn badly against Ukraine in the next two or three weeks, leading to immense pressure on the Ukrainians to agree terms. While the world pays attention to the siege of Mariupol and fears similar situations playing out in larger cities including Kyiv, Russian forces are gradually executing a pincer movement south from Kharkiv and north from Mariupol designed to cut off and envelope Ukrainian forces in the East. The Ukrainian leadership may shortly have to choose to withdraw their forces before this happens, relinquishing control of a huge area of Ukraine, to do nothing are watch the destruction or surrender of huge numbers of soldiers, or to negotiate terms before a choice between the previous two options has to be made. So Ukraine faces not only the destruction of its cities with tens of thousands of civilian casualties but also a major military defeat in the East. Faced with this, Ukraine may choose to make concessions to end the war…and Putin may choose to accept a deal that gives him concessions he wants and may end sanctions. If things play out in this way, Putin and most Russians will think it a win, boosting Putin’s popularity at home, while the Ukrainian leadership will be accused of selling out and lose popular support. Let’s hope I am wrong on this.

  • Nato is actively engaged in this conflict including the provision of real-time intelligence of Russian military dispositions, training of the Ukrainian military and provision of weapons. The transfer of Mig fighter jets and air defense systems to the Ukrainian air force seems a logical step as does the establishment of a protected humanitarian area in the Lviv Oblast of Western Ukraine where refugees can shelter from air, missile and artillery attacks.
    It may be that Russia will temporarily occupy parts of Eastern Ukraine together with the Black sea ports and Ukraine may be forced to make concessions to end the fighting. However, the sanctions should stay for the long-term as long as any part of Ukraine remains occupied. Ultimately, Russia will need to be forced to make reparations to Ukraine and hand over Putin to the International criminal court before any sanctions are lifted.

  • Heaven forbid that Russia overwhelms all Ukraine but we must be prepared for it. Then we might see a guerilla/partisan movement develop that will seek sustenance from NATO and EU territories like Poland or Rumania. What then will Russia think? We must recognize that we are in a new world where re-armament will be called for. Support for Moldova Georgia and Finland must also be publicly made.

  • Oil and gas prices are set internationally.

    Most gas is consumed in the region or country where it’s produced. Just over 10% is exported by pipeline and a similar amount as LNG. Although traded internationally there is no global price. Currently, the US spot price at Henry Hub is $4.60 per million BTU while the UK NBP price is currently $40.70 – almost nine times higher

    Henry Hub Natural Gas Spot Price:
    https://www.eia.gov/dnav/ng/hist/rngwhhdW.htm

    UK NBP NATURAL GAS (USD/MMBTU):
    https://www.tradingview.com/symbols/NYMEX-NBP1!/

    NBP = National Balancing Point, a virtual location in the UK pipeline network where demand and supply balance at the quoted price.

    MMBTU = Million British Thermal Units.

    Obviously, there’s potential for large arbitrage profits to be made. However, cooling and compressing gas requires a lot of energy and is expensive. Currently, US terminal capacity is limited and a shortage of available LNG tankers means daily leasing rates are eye-wateringly expensive. Market forces should resolve these limitations over the next few years as more terminal facilities and tankers are built.

    ‘LNG carrier rates top $260,000 per day as arbitrage profits exceed $100m’ [October 2021]:
    https://lloydslist.maritimeintelligence.informa.com/LL1138547/LNG-carrier-rates-top-260000-per-day-as-arbitrage-profits-exceed-100m

    ‘Flex LNG says arbitrage profit of $108m per cargo will boost spot rates’ [October 2021]:
    https://www.tradewindsnews.com/gas/flex-lng-says-arbitrage-profit-of-108m-per-cargo-will-boost-spot-rates/2-1-1075769

  • Peter Hirst 16th Mar '22 - 1:57pm

    The government is attempting to deflect the blame for not seeing Russia’s invasion of Ukraine with its implications for energy earlier. If we’d continued with the climate change measures introduced by the coalition government we would be in a much better position. We need to rank up renewable energy, home insulation and carbon neutral transport so we are not dependent on any nation for our energy needs.

  • Newnight was broadcast from in Helsinki last night and tonight will be in Berlin. The invasion of Ukraine has completely upended the cultural and political reintegration of modern Russia with the rest of Europe.
    The Russian state under Putin has suffered complete rejection by the United Nations general assembly. International diplomats have shown what they think of Sergei Lavrovs blatant lying by walking out on his speech to the UN Human Rights Council meeting in Geneva.
    Putin has today made a speech warning Western counties of the economic impact that sanctions will have on their own counties including on much higher energy and food prices and on Russia’s ability to freeze the assets of Western companies in its territory.
    It is hard to know what is happening in Crimea. It looks to have become a police state (much like Russia itself) with any political opposition or dissent crushed by beatings and imprisonment. The separatist areas of Donbass likely do see the Ukrainian military as the aggressors as they are being shelled by the Ukrainian forces. It will be a tricky negotiation for President Zelensky to bring about a peace settlement that preserves the sovereignty of Ukraine. If the Donbass issue can be settled along the lines of the Minsk agreement it is still possible that some small good may be achieved from this conflict.

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