But, so far it looks like Germany will just buy extra (paying in rubles) and ship it to Poland. Me, if I were Putin, I’d refuse to sell Germany more than its usual amount (what is contracted for) and see how long it takes Poland to break. Granted it’s not winter, but so far as I can see Europe can’t switch off Russian natural gas in less than about two years, though perhaps a few countries could (and pay more, since the Russians sell for less than anyone else will.) Natural gas prices (as of this writing) are up about 10% on the news, though it doesn’t mean much.
I remain convinced that sanctions will do far more harm to Europe than to Russia.
Meanwhile, Malaysia has said they will sell Russia semiconductors. They aren’t as good as Taiwanese ones, but they’ll be good enough for now, and China is crashing semiconductor tech anyway, for its own reasons. In a decade, the West and its allies won’t have much of a gap in semis compared to the rest of the world, if any.
Update: seems the news Malaysia would sell semis is probably not correct.
Astrid
EU’s actions is essentially the town goldsmith picking a fight with the town’s only baker/woodsman. EU thinks it will win this because it’s “quality”.
Willy
You’d hope that climate change activists would be cheering this development, to then become suspicious when top fusion scientists suddenly all died together in some tragic nuclear fusion scientist convention accident.
But then I’m the guy who wonders why Putin didn’t just go the way of Norway. Why didn’t they just take up a mixed economy model and apply energy sector profits for the future of Russia? I don’t see Norway as being under neoliberal attack for being so “high taxes socialist”, even if they are a part of NATO.
(As one way to gauge the Russian degree of “socialism”, I checked out their tax rates. They seem to practically mimic those of the USA. Not very Norway.)
Blueberry Hill
More saber rattling.
From the AP:
ptb
About time. EU has been claiming the startlingly unrealistic line that it can somehow expect to continue receiving goods while it confiscates its payment for those goods.
As it is, out of necessity, they’re grudgingly proceeding with the Ruble payments essentially via MICEX – where the Euros, now useless to Russia, will get sold to China for RMB which Russia can readily spend. This btw will slightly reduce Chinese accounting balance vs EU.
Probably won’t be the last of this, as US can of course threaten more secondary sanctions on EU energy firms, and their governments don’t have the backbone to stick up for them.
Lets see in a week if this brings the Dec2023 TTF futures down. They’re already catastrophically high. Also, look for the EU to punish countries with favorable fixed-price contracts with Gazprom, such as Hungary.
Adrian Wong
No, Malaysia did not actually say that they would break sanctions and sell Russia any semiconductors – https://www.techarp.com/business/malaysia-russia-semiconductors/
bruce wilder
I do not understand this “pay in rubles” demand. What does it mean in practice? That you engage with a Russian bank owned by Gazprom to take Euros and the bank pays its parent co Gazprom in rubles on your behalf. How is that different from simply paying in Euros?
Kfish
@ bruce: the Germans pay euros to the Gazprom bank. That bank then purchases rubles on the open market to pay to Gazprom. This new mechanism creates a massive demand for rubles, at least inside Russia. The new deal with India creates more demand for rubles outside Russia.
Russia’s using foreign demand for its gas to bolster its currency.
dbk
@bruce: Basically it means that the money-changers will be having a field day all day every day for as long as the war/sanctions continue.
+ what KFish said re: bolstering the ruble
rkka
Replying to Bruce Wilder’s question on previous thread, since my answer refers to gas.
“ I do not see how Russia keeps this war contained in the space where it has local military superiority long enough to get a “win” that sticks.”
I think the play is to keep supplying gas to the E.U., for Rubles, until the Power of Siberia II pipe through Mongolia to PRC is complete. It’s going to be fed by the same fields on the Yamal Penninsula that NS I & II plus the pipe through Poland is sourced from.
It then becomes a game of “Who wants cheap, reliable pipeline gas from Yamal, and who wants to pay through the nose for LNG?” US Euro vassals, especially Germany, will then have a choice to make, whether to keep their competitive industrial economy by leaving the “Our only actual rule is we get to use armed force in our interest but no one else gets to.” international order or stay with it and burden itself with higher energy costs while the cheap gas goes East.
marku52
Bruce: Also the money is stored in a Russian bank, cannot be confiscated by the west. That’s the whole point.
Ammonite
Germany is the main economic engine within the EU. The German Bundesbank is one of the main reason for the strength of the euro. There are simply no spare coal, oil and gas supplies in the world to replace Russian supplies with the exception of uranium. Stopping gas supplies to German will blow up the German economy and with it the ECB and the Euro .
Germany could face a €220 billion hit to output over the next two years should gas supply be severed immediately, according to a joint forecast of economic institutes, the equivalent of a 6.5% annual output cut, tipping the country into a recession of more than 2% next year. Taking out 40% gas supplies will only result in 6.5% reduction in GDP? The impact will be much more drastic, 6.5% is lowballing
Michael
Poland and Bulgaria refused to pay for their gas. Period. Not in rubles and not in Euros. They wanted it for free. For some reason, Russia was not amused.
bruce wilder
Thank you Kfish.
Another explanation I was offered is that sanctions could put Euro payments off-limits orherwise.
bruce wilder
Another thing that nags at me is the legal basis of sanctioning: particularly the seizure of the real property of named individuals.
Wednesday, the U.S.House voted to urge Biden to sell yachts and such seized from Russian oligarchs and use the money to benefit Ukraine.
Only a handful of the most progressive Dems and the most conservative Reps voted against it — I saw no report of the rationales of their “no’s” on symbolic resolution.
But, the actual seizing of assets of individuals is not symbolic, it’s theft with no semblance of due process. Legislation naming individuals for asset seizure is a bill of attainder and plainly unconstitutional.
Do all these American billionaires not see the precedent?