Vladimir Putin’s real ‘nuclear bomb’; read Thomas Friedman’s article

As the Russian army continues to fail in Ukrainethe world worries about the possibility of Vladimir Putin use a tactical nuclear weapon. Perhaps — but for now I think Putin is triggering another weapon, an oil and natural gas bomb that he is assembling right before our eyes and with our inadvertent help — and he could easily detonate it this winter.

If Putin does so, it could send home heating oil and gasoline prices skyrocketing. The political fallout, Putin certainly hopes, will split the Western alliance and make many countries — including the United States, where both Trumpist Republicans and progressives voice concerns about the rising cost of conflict in Ukraine — seek a dirty deal with the man in the Kremlin; readily.

In short: Putin is currently fighting a land war to break Ukrainian lines and an energy war on two fronts to break the resolve of Ukraine and its allies. He’s trying to annihilate the Ukrainian electricity system to foist a long, icy winter, while putting himself in a position (in ways I’ll explain later) to raise the costs of all of Ukraine’s allies. And because we — the United States it’s the Western — we don’t have an energy strategy in place to mitigate the impact of Putin’s energy bomb, the prospect is frightening.

An image of Vladimir Putin is projected onto a screen at Rosneft, Russia's state-owned oil company, during the International Economic Forum in Saint Petersburg, May 25, 2018
An image of Vladimir Putin is projected onto a screen at Rosneft, Russia’s state-owned oil company, during the International Economic Forum in Saint Petersburg, May 25, 2018 Photograph: Sergei Karpukhin / Reuters

When it comes to energy, we want five things that are incompatible — and Putin knows that.

We want to decarbonize our economy as quickly as possible to mitigate the very real dangers of climate change.

Continues after advertising

We want the lowest possible prices for gasoline and heating oil, so we can drive our cars as much as we want, as fast as we want, and never have to wear warm clothes indoors or do anything to save energy.

We want to say to petrodictators in the Willat Venezuela and on Saudi Arabia it’s time to leave.

We want to be able to treat American oil and natural gas companies like pariahs and dinosaurs who should take our side in the current oil crisis and go to hell later; and allow solar and wind sources to take over.

Oh, and we don’t want any new oil or gas pipelines, or wind or solar power transmission lines spoiling our gardens.

I understand why people want these five things — and now. I want all five of these things! But they involve trade-offs that few of us want to acknowledge or debate. In an energy war like the one we are involved in right now, we need to be clear about goals and priorities. As a country—and as a Western alliance—we don’t have any ladder of energy priorities, only competing aspirations and magical thoughts that we could have it all.

If we persist with this, we will live in a world of suffering if Putin detonates the energy bomb he thinks he is setting up to explode at Christmas. Here’s what I think his strategy is: It starts with making the US use its Strategic Petroleum Reserve, which is an immense stock of oil in gigantic caves, which we can use in an emergency to compensate for any cut in domestic production or our imports. Last Wednesday, President Joe Biden announced the use of an additional 15 million barrels of the reserve in December, completing a plan it had previously outlined to use a total of 180 million barrels in an effort to keep consumer gasoline prices as low as possible — ahead of midterm elections. (He didn’t mention this last part, nor did he need to).

Continues after advertising

According to a report by the Washington Post, the reserve contained “405.1 million barrels as of October 14. This corresponds to around 57% of its maximum authorized storage capacity of 714 million barrels.”

US President Joe Biden arrives at Ben Gurion International Airport near Jerusalem on July 13, 2022. American went to Middle East to try to agree on oil and control prices
US President Joe Biden arrives at Ben Gurion International Airport near Jerusalem on July 13, 2022. American went to Middle East to try to agree on oil and control prices Photograph: Doug Mills/NYT

I sympathize with the president. People really suffer from a $5 or $6 gallon of gas. But using the reserve — which is designed to protect us in the face of some sudden cut in domestic or global production — to produce a $0 discount, 10 or 25 cents a gallon of gas before the election is a gamble, even if the president has a plan to replenish the reserve in the coming months.

Putin wants the US to fully deplete its protective Strategic Oil Reserve now — the same way the Germans gave up on nuclear power, only to get addicted to Russia’s cheap natural gas. And when Russian gas supplies were cut off because of the war in Ukraine, Germany’s homes and factories they had to desperately reduce consumption and resort to more expensive alternatives.

Next, Putin watches European Union gearing up to ban maritime imports of Russian oil, which will begin on December 5th. That embargo — along with the move by Germany and Poland to cease imports via pipelines — is expected to cover approximately 90% of the European Union’s current imports of Russian oil.

As a recent report by the Washington-based Center for Strategic and International Studies noted: “Crucially, the sanctions also prohibit EU companies from providing freight insurance, brokering services, or financing Russian oil exports to other countries.”

The U.S. Treasury Department and the European Union believe that without such insurance, the number of buyers of Russian oil will decline dramatically — and so they tell the Russians that they are able to insure their oil tankers with the few Western insurers that dominate the sector only. if Russia lowers the price of the oil it exports to a level set by the Europeans and Americans.

Continues after advertising

Saudi Arabia, Russia’s OPEC+ partner, is certainly not interested in seeing a price ceiling precedent set.

My sources in the oil industry say they seriously doubt that this Western-imposed price cap will work. Saudi Arabia, Russia’s partner in OPEC+, is certainly not interested in seeing such a price cap precedent set. Also, the international oil trade is full of obscure characters — does the name Marc Rich remind you of anything? — that thrive on market distortions. Oil tankers carry transponders that track their locations. But vessels involved in shady activities turn off their transponders and reappear days later after doing some ship-to-ship transfer or before transferring their cargo to storage tanks somewhere along the way. Asia for re-export, in effect laundering the Russian oil they transport. Just one oil tanker is capable of carrying the equivalent of $250 million worth of oil, so the motivations for this scheme are not huge.

Now add one more elusive player to the mix: the China. The Chinese have all kinds of long-term fixed-price contracts to import liquefied natural gas from Middle East at an approximate value of US$ 100 per barrel of oil equivalent. But because of the president’s crazy strategy Xi Jinping to contain the covid — in recent months around 300 million citizens have lived under total or partial lockdowns — the Chinese economy has slowed considerably, as has its gas consumption. As a result, oil industry sources tell me, China is taking some of the LNG it buys under fixed-price contracts for domestic use and reselling it to Europe and other gas-hungry countries at $300 a barrel of oil equivalent.

Now that Xi has secured his third term as general secretary of the Communist Party, many expect him to ease his lockdowns. If China goes back to consuming the gas it used to normally consume and stops re-exporting surpluses, the global gas market will be even more frighteningly heated.

Oil and gas tanks in the port of Zhuhai, China, on October 22, 2018. The country has reduced energy consumption and started to resell it to Europe
Oil and gas tanks in the port of Zhuhai, China, on October 22, 2018. The country has reduced energy consumption and started to resell it to Europe Photograph: Aly Song/Reuters

Finally, as I noted, Putin is trying to destroy Ukraine’s ability to generate electricity. Today more than a million Ukrainians are without power and, as a Ukrainian lawmaker tweeted last week: “Total darkness and cold are on the way.”

So add it all up and then suppose: December arrives, and Putin announces that he is ceasing all Russian oil and gas exports to Ukraine-supporting countries for 30 or 60 days, instead of submitting to the EU price cap about Russian oil. He could afford it for a while, however short. That would be Putin’s Christmas bomb in the West. In this restricted supply market, the price of a barrel of oil could rise to US$ 200, with a proportional increase in the price of natural gas. We’re talking about a gallon of gasoline at $10 or $12 for the American consumer.

Continues after advertising

The beauty for Putin of an energy bomb is that, unlike an atomic bomb, the explosion of which would unite the whole world against him, exploding oil prices would drive the West away from Ukraine.

Of course, I’m just guessing at what Putin is up to, and if the world goes into recession, the crisis could drive down energy prices. But it would be wise to have a counter-strategy ready, especially since, while some countries in Europe have managed to stock up on some gas for this winter, rebuilding those inventories for 2023 without Russian gas and with China returning to normal could be very expensive.

If Biden wants the US to be the arsenal of democracy, to protect us and our democratic allies — and not make us beg Saudi Arabia, Russia, Venezuela or Iran to produce more oil and gas — we need a robust energy arsenal as much as the military arsenal. Because we are in an energy war! Biden needs to make a big speech, making it clear that in the near future we will need every source of energy we have. American investors in the oil and gas industry need to know that as long as they produce as cleanly as possible, invest in carbon sequestration and ensure that any new oil or gas pipelines they build are compatible with hydrogen transport, which is likely to be the best clean fuel for the next decade, they are welcome in America’s energy future, along with the producers of clean energy — solar, wind, hydro and other sources — that Biden heroically pushed forward with his environmental legislation.

I know, it’s not ideal. This is not where I expected us to be in 2022. But here we are, everything else is just magical thinking — and the person who is least wrong about it is Vladimir Putin. / TRANSLATION BY GUILHERME RUSSO

Source link

About Admin

Check Also

At least 8 die from landslide in Italy – News

At least eight people have died in a landslide caused by heavy rains on the …

Leave a Reply

Your email address will not be published. Required fields are marked *