The Unbearable Unseemliness of Partnership

Uncle Volodya says, “However, remember this: They hate you because you represent something they feel they don’t have. It really isn’t about you. It is about the hatred they have for themselves. So smile today because there is something you are doing right that has a lot of people thinking about you.”

Well, sometimes the faster it gets
The less you need to know…

The Tragically Hip, from “Blow at High Dough”

Jim Hoagland, at The Washington Post, is upset. Not furious, or anything – it would never do to get angry at such a solid, reliable and inspirational ally as Germany. No, it’s more….miffed. The kind of vague disquiet you feel when a good friend suddenly reveals a side of themselves you didn’t know existed. It’s kind of like Germany got sloppy drunk at an international party and threw up on the carpet, or in the punch bowl. The kind of embarrassing performance that will probably fade with time, but good friends should step in immediately and set Germany straight, in case there’s a deeper problem that foreshadows, say, a precipitous descent into alcoholism. That’s kind of how Mr. Hoagland views Germany’s unseemly insistence that going into business on a pipeline deal with Russia is just a straight commercial arrangement (thanks for the tip, Warren).

Pardon me while I segue sharply away from this subject for just a moment, but I promise all will be made clear. In the sidebar to the referenced article, from the very same newspaper, is a piece entitled, “It’s Time to Curb this Widely-Committed Journalistic Sin“. The sin referred to is the contempt in journalism for the requirement that disputable assertions be backed by reasoned argument or reference to a reputable source. Use of the passive voice, such as “it is widely believed” is not good enough on its own and is often a cover for something the author would devoutly love to be true, but cannot prove is true. Curiously, the author goes on to assert, in the very next paragraph, that a statement such as “it is widely believed that MH17 was shot down by a surface-to-air missile fired by Russian-backed separatists” is an example of a reasonable statement…because almost everyone believes it. The author does not touch upon this widely-held belief being the direct result of a massive campaign of deliberate disinformation, and an investigation in which a major suspect was allowed unrestricted access to all of the evidence and a seat on the investigation.  But we can only do so much in one post, and we simply can’t take that one on right now.

Anyway, where I wanted to go with that is to appoint you all members of a sort of jury panel. We’re going to look at Mr. Hoagland’s piece, and I want you to watch for examples of occasions in which Mr. Hoagland makes a disputable assertion that is not backed up by facts – just an “ask anyone” kind of substantiation. Ready? Let’s go.

Oh; just a bit of stage-setting first – Mr. Hoagland is part of a growing lobby group which is putting pressure on Germany to back out of its deal with Russia’s Gazprom and other shareholders to twin the Nord Stream gas pipeline, which would double the available supply of Russian gas to Germany, making Germany a significantly more-important gas hub for Europe. It would also result in Russia sending only domestic supply through Ukraine’s pipeline network, for Ukrainians’ use so long as they pay in advance, and not subject to transit fees. Every article on the subject mentions that Ukraine reaps $2 Billion annually from Russia for transit fees for basically doing nothing except letting Russia use its pipes, and Washington and Brussels are becoming increasingly worried that this payment might be lost to the Ukrainian economy. This is at the heart of their objections to the new pipeline capability and the deal with Germany. The Anglosphere knows it is useless to appeal to Gazprom, and so is concentrating a full-court press on Germany.

While it’s true that Germany has earned the world’s respect for its overall performance since World War II, I’m going to draw the line at “repeatedly taking the moral and political high ground”. Is that so? Was the Siemens scandal, in which the company – which was German last time I looked – paid €2.5 billion in fines for bribery a good example of the moral high ground? How about Deutsche Bank’s £840,000 fine plus £1.5 million in compensation for funneling mortgage loans exclusively through mortgage brokers to people with poor credit history, and then wiping them out with made-up fees when they fell into arrears? I’m sure even those of us with the shortest memories can recall Volkswagen’s deliberate installation of test-cheating software in over 11 million cars which would sense when a test was being conducted and supply bogus emission figures which made it compliant with regulations, but otherwise would allow the engine to emit as much as 40 times the allowable pollutants – which have been linked to respiratory illnesses such as bronchitis and emphysema – in the interests of achieving better mileage. Pretty hard to see that as an example of the moral high ground, what? Nobody is dumping on the Germans, and every country has an element which is more interested in making money than just about anything else you can name, but Germany no more fits the mold of gilded saint than anyone else.

So why is Germany ‘risking its hard-earned reputation’? As an aside, that is kind of comical coming from the country which systematically blew the basement out of its international reputation in the past 5 years with its deliberate and open instigation of rebellions in countries around the world as an excuse to send in the western military to sack and ruin those countries – Ukraine and Syria are only the most recent examples. But let’s leave that for the moment. The implication – hell, it’s spelled out – is that if Germany persists with this deal, it will sacrifice its international reputation for decency. That’s not even close to true, and it is laughable for Hoagland to suggest the rest of Europe is going to look down its nose at Germany when it is Germany who underpins the European Central Bank, which bails out European spendthrifts and idiots who cannot manage their own money. Pack yer bags; we’re goin’ on a guilt trip! No, we’re not. Don’t even think about it. Yes, Washington will be pissed off to see its own efforts to control the European gas distribution network come to naught, but is that something that should keep Germany awake nights? Where’s the substantiation for his statement that “the vast changes in the global energy markets of the past year have made the Russian deal obsolete, as well as damaging to European unity”? Ukraine is not part of the European Union, and it is Ukraine which is squalling loud and long for Europe to help it because Russia is about to take it out of the gas-transit business. How is the ‘Russian’ deal (the pipeline is actually owned by five major international shareholders, of which Gazprom is one, and Gazprom itself is owned by the Russian state just to a sufficient degree to constitute a majority, 50.002%) ‘obsolete’? Is Europe now in a position to do without Russian gas? It certainly is not. What are Hoagland’s grounds for saying “the pipeline deal with Vladimir Putin is seemingly corrupt”? What is Putin’s involvement in the pipeline? Zero. What makes it “seemingly corrupt”? Ask anyone. Everybody knows it is. Lastly, why should the United States government get involved – at the Presidential level, no less – in a business deal between Germany and Russia to which it is itself not a party? Let me ask you this, Mr. Hoagland – is there anything, anything in the wide world that the United States considers not its business?

We have a pretty good idea why Washington objects to a new pipeline deal which will bring gas to Europe, and not even more of it (twinning Nord Stream will replace Ukraine’s transit, not augment it), which is the whole point – Washington and Brussels want Russia to be on the hook for subsidizing Ukraine to the greatest degree possible, because every dollar that doesn’t come from Russia has to come from the IMF or other western donors. Similarly, for so long as Ukraine is Russia’s buffer transfer zone between it and its European gas markets, Russia has to care to some extent for Ukraine’s well-being. It can’t let Ukraine fail. Whereas if Ukraine is no longer necessary to Russia’s gas operations, it is totally a western responsibility to heal the shattered country whose civil war the west cheered so enthusiastically, and no skin off Russia’s nose if it collapses into complete ruin. Also just by the bye, the United States government still nurtures a dream whereby it will itself become a major supplier to Europe of gas through LNG tankers and terminals. I’m not going to go into detail again on what a stupid idea that is, I did so here more than a year ago. Forcing Russia to continue supplying gas to Europe through Ukraine forces Russia to take an interest and an active hand in stabilizing and rebuilding Ukraine, although Europe means to keep it forever within its own sphere of influence.

Anyway, let’s get back to Mr. Hoagland at The Washington Post, before this turns into a book. Here we go again, with “Putin’s objective”. Is there any detail about the conduct of business in Russia that Mr. Putin does not run personally? Granted, producing far, far less of the resource you depend on to heat and light your homes, power your industries and a thousand other things means that you are going to have to come to terms with whoever has it for sale, and in Europe’s case it boils down to either Russia or the creaking Frankenstein’s monster the United States is trying to cobble together, which is a combination of ocean-transit LNG by tanker and a pipeline from devoted toady ally Qatar through Syria to Turkey, which the current stubborn clinging to the seat to which he was elected by Mr. Assad makes moot.

And at this point, my friends, Mr. Hoagland stepped off the edge of reason. Indulge me, for a second. Journalists regularly consult experts, it gives their copy authenticity. It seems reasonable they must have lists, in descending order of reliability. In the case of economists, the first page should be headed, “Reliable Economists”. Anders Aslund will not be found on this list. Page 2 could be headed “Less Reliable Economists”. Anders Aslund will not be found on this list. The third page could be titled, “Idiots Who Can Barely Add, But Who Are Nonetheless Convinced That They Are Smart”. Anders Aslund will not be found on this list. The last page could be headed, “Disturbed Whiny Attention Whores Who Are To Economics What The Reverend Jim Jones Was To Organized Religion”. Anders Aslund is on this list. More correctly, Anders Aslund is this list. Who is the economist Mr. Hoagland relied upon to underpin his case? I rest mine – Anders Aslund.

Anders Aslund tells Mr. Hoagland that the Nord Stream pipeline does not make economic sense. Why not? Well, because “Consumption of natural gas in the European Union has fallen by 21 percent over the past decade, and the existing Gazprom pipeline under the Baltic Sea is now operating at half capacity. And Gazprom is no ordinary state corporation. It pursues Russia’s geopolitical goals, cutting supplies or raising prices when the Kremlin wants.”

I sometimes wish I were King Henry, so that all I had to do was shout “Who will rid me of this troublesome economist???”, and some knights would ride off to Georgetown University and hack off his head with a sword (although in light of its dense wooden composition, a bow saw might be more practical). Then his chowderheaded foolishness would be stilled forever. It seems that the bigger a coruscating DayGlo neon megawatt idiot you are, the more anxious journalists are to draw upon and broadcast your elitist ramblings, or perhaps he is the only one who will do it for free.

Yes, Anders, you bright spark, you – EU consumption of natural gas overall decreased; in 2014, by 10.7%. Does that mean the EU is importing less gas? Well, no, actually, you effing hammerhead, it does not – in fact, over the same period, reliance on imported gas increased 2.8%. How can those two realities coexist? Why, because EU domestic production fell by 10.6% in 2014. The decline in some countries was abrupt and dizzying; in France it dropped by 96.1%, in Spain the decline was 58.2%, in Bulgaria by 35.3%, a drop of 18.7% in The Netherlands and 14.3% in Germany. Only the Czech Republic and Romania increased production. The ‘energy boom’ in Norway – a major producer of EU supplies – passed its peak in 2009 and is in rapid decline. EU overall consumption may have declined, but not as rapidly as domestic production, which means the EU is more reliant on imported energy than ever. You can rearrange pipelines and delude yourself as much as you like, but you will not change that fact. Of course, it doesn’t impact your pontificating one bit, because you don’t see it. Aslund, lest we forget, is the author of “How Ukraine Became a Market Economy and Democracy“. Has been since 2009, apparently. Let’s skip over a few highlights, shall we? “Ukraine is today an undisputed independent state. It is a democracy and has transformed into a market economy with predominant private ownership.” I’ll say – 70% of its GDP is controlled by its oligarchs. “Ukraine’s postcommunist transition has been one of the most protracted and socially costly, but it has taken the country to a desirable destination.” I don’t quite know what to say to that. Not without resorting to the worst kind of profanity. In fact, Aslund’s vision is quite a bit like a hypothetical situation in which the west captured a former hardcore fascist country, didn’t change a God-damned thing except the leader, and then assured the citizenry that its former practices were actually signs of democratic progressiveness. A big feature – in terms of publication by Ukraine, not numbers of attendees – of the Holiday Season in Ukraine this year was torchlight parades celebrating the birthday of Nazi collaborator Stepan Bandera. How many other European market democracies held similar celebrations? The idea that Ukraine is closer today to a desirable destination than it was in 2009 stupefies comment.

Why is Nord Stream operating at half capacity? Anders Aslund and several of his fellow dunderheads would have you believe it is because of a declining appetite for Russian gas, and they say as much. I guess that would be reflected by a decline in Gazprom’s exports to Europe. Uh, oh – I see a problem. Gazprom’s exports to Europe in 2012 were 149.9 BCm. In 2013 they were 172.6 BCm. That was the highest over a 9-year period – almost the decade that Aslund describes, in which the EU is allegedly consuming less gas. And it is: just not less Russian gas, and the reliance on the figure which shows declining consumption is a classic bait-and-switch. The EU is using less gas because it has less gas. You can also see why the UK is among the countries attracting hysterical western pushback for stonewalling on the Nord Stream deal; exports by Gazprom to the UK went from 3.8 BCm in 2005 to 16.6 BCm in 2013.

In 2014, Putin addressed a letter to the heads of Europe, in which he highlighted the growing unreliability of Ukraine as a transit country – this should have been seen as a direct warning that Russia intended to eliminate further risk of transit through Ukraine, as Gazprom has indicated on previous occasions. About 50% of Russia’s gas exports to Europe as a whole go through Ukraine. When Ukraine is taken out of the equation, not only will Nord Stream need every cubic centimeter of capacity, it will need more than the current pipeline can handle. And then there is the absurd European Third Energy Package requirement that any company which owns the pipeline cannot also own the gas that goes through it, and must reserve 50% of its capacity for “competitors”; the EU is okay for a single company to build a pipeline at its own expense, but then wants that company to give its competitors a free ride.  Gazprom got around that by forming an international consortium, which will build and own the pipeline. Gazprom is a shareholder. Nord Stream II should not fall under the Third Energy Package, as it is a supplement to an existing and already-approved line, although Donald Tusk continues to insist the pipeline must comply with every European regulation he can find plus whatever he can make up. The Poles, for obvious reasons, are very supportive of an independent and prosperous Ukraine – because they will be pressured to take a significant share of the economic refugees if it collapses. But the signal from Merkel – AKA “The Chancellor of the Free World” – looked pretty clear in her reply to Putin’s letter, which read (in part), “There are many reasons to seriously take into account this message […] and for Europe to deliver a joint European response. When we take all these steps, we can be sure that we have reached a joint response for the countries that face this problem because they are getting gas from Gazprom. European states would like to be good clients but we would also like to be sure Russian gas supplies are not interrupted.”

But there’s another fly in the ointment, one that is not mentioned in polite circles: over 50% of Ukraine’s domestic gas supply comes from Russia, and Ukraine’s own supply peaked years ago. It has been in steady decline ever since. There was never a question of who would pay for that so long as Europe’s supply went through the same pipes. Ukraine regularly stalled on payment, argued over the price after it had already taken the gas, and when Russia said “no more for you until you pay”, just laughed and siphoned off gas intended for European customers for its own use. So long as European gas goes through Ukraine, Ukraine has Russia over the proverbial barrel, as already discussed. But it is important to note that once Europe’s supply no longer goes through Ukraine, Russia has no incentive to keep Ukraine from economic collapse. That means that if Ukraine can’t pay for its own domestic supply, up front, then it’s a hard old world, Ukraine. The latest western democracy project will be caught between the loss of its transit fees, loss of its tax-free preferred-trading-partner status with Russia as a potential member of the Eurasian Union (and with it, its Russian markets), a cratering currency, loss of a third of its tax base, and a partnership with a multinational entity that insists on reforms and the adoption of grinding austerity policies in exchange for lending it anything more than emergency starvation cash.

And Ukraine, indisputably, is an unreliable partner. Part of that is not its fault, because its western sponsors encourage it to hate and cheat Russia at every opportunity which presents itself, and it openly gloats over its achievements when it rips off Russians, rationalizing that they are all thieves themselves and too drunk to notice. Kiev protests that it only cheats Russians, and is otherwise as honest as the day is long, but it is easy to see that it considers anyone fair game who does not support their vision of Ukraine. The “Soyuz” main pipeline supplying natural gas to Hungary and Croatia from Russia via Belarus and Ukraine blew up a couple of days ago, inside west Ukraine, and there is good reason to believe it was a deliberate act of sabotage by Ukrainian activists, who have threatened before on repeated occasions to attack pipelines carrying Russian gas. If they were indeed responsible, it was a bit of an own goal, since that’s the line that is used to reverse-flow gas to Ukraine from Hungary. Ukrainian activists recently blew up some of the power pylons carrying nearly the entire electrical supply to Crimea, apparently frustrated by the country’s inability to achieve a military victory in the civil war against its own eastern regions.

From Brussels and Washington’s point of view, it is essential that Russia participate in the rehabilitation of Ukraine as a prosperous monument to NATO expansion. Because it frankly cannot be done without it. Russia is understandably unwilling to cooperate under those circumstances, the scenario being what it is. Ukraine will therefore be taken off the board as a transit country, and its entire livelihood is now in peril. The west is trying to rectify its enormous blunder by bullying Russia into continuing to send European gas through Ukraine, and it is not working. One of Ukraine’s greatest failings is its inability to see who is leading it into ruin, because it is so much fun to stick out its tongue at Russia and pull faces. Have fun, Ukraine.

Anybody want to sum that up in a couple of trenchant lines? Oh, look: Jarod Kintz, author of “The Titanic Would Never Have Sunk if it were Made Out of a Sink“, would like to.

“The only gift I have to give, is the ability to receive. If giving is a gift, and it surely is, then my gift to you is to allow you to give to me.”