Dienstag, 5. August 2014

Zen of Poland’s fruits and veggies

Ignore the thug for the present and instead thrash his sidekick to send across the message first — that’s a moribund cold-war era method, which Russia may just have resuscitated by notifying that it is suspending the import of fruits and vegetables from Poland with effect from today, while similar measures are being contemplated against the European Union countries as a whole. 

Russia says sanitary conditions have been violated, but if Voice of America suspects, here, that Moscow is deliberately targeting the US’ sidekick, it cannot be faulted in reading such a message. Moscow’s decision amounts to a kick in the groins for Poland, which exports two-thirds of its worldwide export of these food items to Russia. 
Indeed, this becomes a Zen moment for President Barack Obama. A staunchly loyal sidekick is being thrashed badly, and the thug is watching helplessly. It’s unlikely Washington can afford to offer to Warsaw that it will financially compensate its loss of income. Obama will likely advise Warsaw to turn to Brussels for compensation. Is a vicious sanctions cycle beginning? 
It’s hard to tell who will be the victor and the likelihood is that there aren’t going to be any winners. All accounts suggest Russia is in a defiant mood.  The EU will have to factor in that Moscow will very soon begin to roll back the preferential treatment (without levying customs duty) it has been giving to Ukraine’s exports to the Russian market. 
The reports say Moscow is preparing necessary regulations. The EU has a problem here because the US is tight-fisted when it comes to money matters and will expect Europe (read Germany) to compensate Ukraine for any such loss of income, which virtually means salvaging that country’s economy, because without the exports to Russian market, Ukrainian industry will fold up.
However, in this developing story, all eyes are on the template of the Tier Three sanctions involving transfer of ’sensitive technologies’ in the oil sector to Russia. The impression conveyed by Obama in his speech on Tuesday while announcing the sanctions is that Russian oil exploration and oil production will be badly hit. But Reuters has different story to tell in an insightful analysis on the state of play in the oil market, which suggests that it is a complicated story and Obama may have scored a self-goal. 
The three main conclusions drawn by the Reuters analysis: a) Russia has traditionally depended on Western technology as a matter of convenience, but will now be compelled to take the hard route and develop technologies on its own, which will only incrementally lead to an erosion of the West’s existing monopoly over such technology; b) China in particular will cash in on the situation and may turn out to be a wholesome winner here ultimately, and, c) The Russia sanctions may well come to signify the end of the West’s technology leadership in the oil sector. (here). 
Curiously, oil experts have also questioned the basis of Obama’s hype. Let me quote at some length the expert opinion at the respected Peak Oil News: 
“The foreign policy wonks at the State Department may not understand that Russian oil production has just hit a post-USSR peak and will be declining anyway. The effect of the [US-EU] sanctions will be to speed the Russian decline, forcing up world oil prices as soon as US tight oil maxes out and goes into its inevitable nosedive in the 2017-2010 time frame. Russia, which will still be an oil exporter then, will benefit from higher prices (perhaps nearly enough to compensate for the loss of production resulting from the sanctions). But the US, which will still be one of the world’s top oil importers, will face a re-run of the 2008 oil shock that contributed to its financial crash. 
“No doubt State Department policy experts sincerely believe the recent hype about America as a new energy superpower capable of supplying Europe with oil and gas to replace Russia’s exports. Maybe the Europeans are foolish enough to have fallen for this delusion as well. But these will prove to be ruinous high-stakes bets. One can only hope that all the players will stir from these hallucinations before the game turns really ugly.” 
Quite obviously, the Europeans are not foolish. They put their foot down and insisted that Russian gas must be exempted from the sanctions package Obama proposed. The point is, European economies simply cannot do without Russian gas. (WaPo). 
Arguably, the shoe is on the other foot today. Will Russia retaliate by cutting off gas to Europe? Morgan Stanley analysts estimate, here, that Moscow might choose such an option. Hmm. Getting goose bumps? 
To my mind, however, there is no need to fear that. For one thing, the income from gas exports to Europe is good money for Russia, and, secondly, Moscow understands perfectly well that the major European countries — except Britain, perhaps — really don’t have their heart in what the thug is pressing them to do, but have gone along only because blood is, after all, thicker than water. 
This also seems to be Moscow’s understanding of the matrix. The most detailed Russian reaction to the Tier Three sanctions has come from Foreign Minister Sergey Lavrov at a media briefing in Moscow on Tuesday. Lavrov gave a cogent, lengthy resume of what really is going on behind the shadow play over Ukraine, underscoring that the US is deliberately calibrating the tensions by torpedoing all incipient peace tracks. 
He disclosed that Russia’s European partners have privately conveyed to Moscow their own misgivings about Obama’s game plan. Lavrov assessed in measured words that the European attitudes on sanctions against Russia are “artificial”. 
Interestingly, Britain’s Independent newspaper has also carried an exclusive report, evidently based on high-level Western sources, that Berlin and Moscow were actually on the verge of striking a deal on Ukraine but were forced to put it on the back burner following the shooting down of the Malaysian aircraft in eastern Ukraine. 
To quote from the report, “insiders who are party to the discussions said yesterday that the “German peace plan is still on the table and the only deal around. Negotiations have stalled because of the [Malaysian] MH17 disaster but they are expected to restart once the investigation has taken place.”  
Well, well. That raises a tricky question pregnant with possibilities: Why on earth would a rational man like President Vladimir Putin do something bizarre like undermine his own peace deal, which he has been painstakingly negotiating with Chancellor Angela Merkel by shooting down the aircraft of a friendly country like Malaysia, with which Russian even had defence cooperation? 
That being the case, did someone try to undermine the German-Russian peace deal? Can it be that the Russians have a point in hinting that there is more to the MH17 disaster in eastern Ukraine than meets the eye? (Lavrov also touched on this.) Curiously, the Russian Foreign Ministry’s latest statement singles out US, UK and Lithuania for “shamelessly” resorting to stalling tactics in the UN Security Council apropos the moves to conduct an international investigation over the MH17 episode. 
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