Whose Bubble Will Burst First, The Banks Or The Bolsheviks?

“Fight Against Stupidity And Bureaucracy”

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As 2014 ended, the Russian Rouble was in free fall and so were crude oil prices. Both affected the Russian economy and not in a good way. From a position of great strength Vladimir Putin is now under pressure due to the combined effect of lower oil prices and the sanctions imposed by the west because of the situation in the Ukraine and Crimea.

In the West there have been two notable effects of the drop in oil.

One is good in so far as consumers have to spend a lot less to run their vehicles and heat their homes.

The other, however, is bad – for the banks (tee-hee-hee) although they will no doubt pass on their pain to us.

The reason the banks are in trouble (AGAIN) is because they have lent billions of dollars to fracking operations where oil explorers use expensive techniques to extract oil from underneath American and Canadian soil.

The drop in oil prices means that you can now buy oil on the open market for a lot less than it costs to extract it in the US and Canada.

Therefore the oil exploration companies that obtained these huge loans from the banks, and other money men on Wall St, have little or no chance currently of paying them back.

If the position continues through 2015 expect payment defaults and huge debts written off again by the banks.

Will the government step in (AGAIN) to bail them out by printing more money?

I don’t know. I hope not. It’s time these bankster idiots paid for their own mistakes instead of us having to continually foot the bill.

Don’t count on it though.

So whose bubble do you think will burst first, the banks or the Bolsheviks?

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They’ve Got It Wrong AGAIN!

“Fight Against Stupidity And Bureaucracy”

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The Sunday Sermon

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I wrote a short post the other day on the subject of failure. I think it was a success 🙂

What hasn’t been a success, however, is America’s foreign policy. I’ve also written about this many times in the past. I find it very annoying that a country as great as America and with so many brilliant people within it can neither elect a smart politician, or even a not so smart politician but one who has enough brains to hire smart advisers.

The current President, Barack Obama, has continued the trend of failure. Particularly with regard to foreign policy, at which he has not only failed but added indecision and procrastination to the mix.

The examples are many, but the latest foreign policy debacle is the leading role America has taken in the imposition of sanctions against Russia. Sanctions that may have been aimed against Russia but which are already starting to backfire against the US.

I noted in another post that sanctions have been imposed in regard to Russian oil and natural gas, which Europe (particularly Germany and France) needs, but America doesn’t; but that the sanctions were not imposed on nuclear fuels, which America does need.

Believe me, the hypocrisy of that has not been lost on the European governments or its public.

And the hypocrisy does not end there.

On the one hand there have been hyped up media statements telling everyone that Rosneft, Russia’s largest oil company, and its head Igor Sechin, have been targeted in the sanctions.

But what hasn’t been trumpeted so loudly is the fact that British oil company BP, owns almost 20% of Rosneft, and has confirmed that it would not be severing ties with the Russian firm.

Similarly, Norway’s Statoil is continuing its partnership with Rosneft to search for oil in the Norwegian section of the Barents Sea.

And France’s major oil and gas company, Total, has announced that it is seeking financing for its next gas project in –  where else? –  Russia. When they get that financing, amounting to something in the region of $27 billion, it will be in Roubles or maybe even Yuan, but certainly not in US dollars – again thanks to the ill thought out sanctions.

This will set a trend for similar deals that will also exclude the US dollar, inevitably lowering its standing as the world’s reserve currency. I expect more such deals to be done with the Russians by German companies in particular as the sanctions fail to bring the promised results and as a consequence start to fall apart.

But it gets worse.

Before any of the US Senators or Congressmen stand up and start to call names at the Brits or the Norwegians or the French for backtracking on sanctions, they would be better to take a look nearer home.

It now seems that American Companies are not paying attention to the sanctions either.

For example, ExxonMobil, America’s largest oil company, has continued drilling offshore in the Russian Arctic, also with Rozneft.

If the sanctions were anything more than a bit of public posturing by Obama, ExxonMobil shouldn’t (and wouldn’t) be doing any more work with the Russians in Russia. But using the excuse that it is environmentally safer to complete the well than to allow the Russians to do it alone, ExxonMobil got permission to continue.

No doubt the company will express its gratitude when the next round of electioneering fund raising comes along! (Gosh, I’m such a cynic!)

Now, if Obama and his advisers had thought for a moment about the consequences of sanctions, they would have realized that, in cases like this, companies such as ExxonMobile had not really got a choice. If they hadn’t continued to work with Rozneft, the Russian company would simply have gone ahead without them with a consequent dilution of ExxonMobile’s return if/when the well is a success.

In addition to that, if the Russian company did need other help you can be sure there would have been a Chinese energy company there ready and willing and eager to take up the slack.

Whilst Obama and his predecessors have been blundering around the world pissing off friend and foe alike, the strategy of the Russian President has been to cultivate new friends and thereby new markets and customers for his country’s vast energy reserves.

It has been a clever move.

Sanctions or not, game to Putin this time I think.

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What’s That Smell?

“Fight Against Stupidity And Bureaucracy”

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Last week I wrote a post about the resurgence of the Cold War. I called it “Anyone Feel A Chill?” (click here if you would like to read it.)

But, politicians being politicians, they cannot even have a mock war like a Cold War without the stench of hypocrisy attached to it.

For example, the United States blames Russia for interfering in the internal affairs of Ukraine, as indeed it is currently doing. But at the same time it attaches no blame to itself for also interfering in the Ukraine’s internal affairs, which it also did – in the process helping to create the mess we now see on our TV screens.

Now, not content with that, America has been coercing Europe to go along with it in imposing economic sanctions on Russia. And by and large Europe has meekly and unthinkingly followed the US lead.

It started with foodstuffs and freezing bank accounts and assets, which Putin has managed to shrug off without too much trouble.

Now they’ve upped the ante and imposed sanctions on Russia’s supply of energy which is it’s big wealth earner and which given time will no doubt hurt a bit. I say “a bit” because any long term shortfall in energy revenue from Europe will be more than made up for by energy hungry customers like China, India and the rest of Asia. China, for example, recently closed a $400 billion natural gas deal with the Russians.

As a matter of fact, with winter approaching, the sanction game may well end up hurting Europe a lot more that it does Russia.

You see, the thing is, the energy sanctions imposed by the US and Europe are on the sale of oil and gas. These are the things that Europe desperately needs, but are things on which America does not rely on Russia for at all.

Wait a minute, there’s that smell again.

Worse than that, the US did not invoke sanctions on the sale of Russian nuclear fuel, which America does rely on Russia for, since it just happens to power 10% of all American homes.

Now do you smell it?

At the moment it looks like this Cold War is going to get very cold in Europe and very expensive as the cost of heating increases with the shortfall in supplies.

America will be fine though.

So will Russia.

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