Putin Loses Key Ally After Gas Deal In Milano (Oct 2014); BUNGA, BUNGA.
Amazing that this story is not getting more attention over here: TOTAL CEO de Margerie is killed by drunken proletarian snow plow operator (Monday night), as his capitalist corporate jet was taking off during Moscow's first snow of season. [Moscow has ZERO interest in talks to curb Global Warming. NYET.] Of course, easy to understand why a French (Napoleonic) industrialist would be in a hurry to exit Moscow before it snows!
1) Drinkie, drinkie: TOTAL is biggest French oil company ($230B in revenues; $37B in profits), and de Margerie was in Gorki attending a government forum (not a private meeting) on investment INTO Russia, amid sanctions over Ukraine / Crimea mess.
2) GeoPolitics of Energy: de Margerie was an outspoken critic of the sanctions, comparing them to "erecting another Berlin Wall". "All it will do is chase Russia further into Asia's arms." So, de Margerie was a big time industrial capitalist in the West that Putin needs to operate his regime.
3) No Borcht for you!! This week Russia cancelled another bond offering as rates on Red 10-year bonds spiked above 10% (USA is at 2-2.5%). With oil plunging below $90, Russia lacks the cash to operate going into the tough winter season. Putin's State Capitalist autocracy is running out of cash. Warning: Russia might have trouble fulfilling negotiated gas contracts with Ukraine and Europe over the next year. Delivering oil and gas to market requires DAS KAPITAL. Lots of it.
Russia has skipped 19 bond auctions this year (gulp!). The ruble has deteriorated 14% to the dollar in ten months and Moscow stocks are off 25%. It's a crash.
4) Pass the coffee: Earlier this week Putin was at huge Euro-Asia summit in Milan with Merkel, Hollande, and 50+ other heads of state. The big deal was agreement between Putin and Poroshenko on a gas deal at $385 per cubic meter (or $11 per MBtu; "same price as for China"). But, Ukraine cannot PRE-PAY on the gas (terms set by Gazprom; no credit !!) -- so France and Germany stepped in to help prepay the gas, "because there is no other option". Combine this with big ECB buying of bonds this month, and EU is printing Euros to buy Russian gas for Ukraine.. ! To avoid war.
Basic economics: you go into debt to finance assets, not consumables. EU is amplifying more systemic risk just to finance short term fossil addictions in East Europe. EU is addicted also to Quantitative Easing because it forestalls a reckoning for another month of talks. They are not even floating bond issues. The ECB is just printing Euros to finance addictions going into Winter. [Yes, US Treasury does the same thing -- that's the point! We remain on the same train of addiction]. Jefferson said the greatest threat to Democracy, "is when the people realize they can just raid the Treasury."
Putin, now a bachelor, took time out for a midnight visit to mansion of Bunga Bunga buddy Berlusconi, presumably to celebrate the deal. He stated later that talks with Berlu were "constructive, even uplifting..." Like pumping for oil, apparently. Two State Capitalist pigs. What a Socio-Political exclamation point. How do you say "oink" in Russian? "Hrgu, hrgu". [rhymes with bunga, bunga]
5) From Russia with ice: The situation in Ukraine for winter will barely hold over. With TOTAL CEO killed by drunken snow plow driver (a poignant metaphor for the withering work force in Russia!!), Putin lost a "gran plus" industrial ally to maintain his now rickety regime. By 2040 Russian population will slump from 140m to 110m drunk mediocre hockey players, ice dancers and gymnasts. No one wants to emigrate to Russia and do internet in Cyrillic. Drunk Zamboni equipment operators and Siberian gas field workers are not making babies. So Putin is playing RISK board game and trying to annex warm water real estate with Russians already on that land. This will not end well; the script is too near a tragic Russian novel. Implosion... or Revolution.
Let's see... yep, it's October!
Americans are chided often for playing Checkers while Russia plays Chess... fitting.
But, Czar "Putin the Great" doesn't have all his pieces; he's down to pawns. Guess it's time for bunga, bunga.
Big Picture: Europe WAS the lead tent pole in the climate talks, limping out of "Brokenhagen" (2009)... now that tent pole is bending to continental geopolitics over fossil fuels. Plus ca change!!! [The more things change, the more they stay the same].