Beyond financial sanctions: How to cripple the Russian death machine for good.
It's really underrated how much shifting to generic 'electricity' rather than fossil fuels enhances security. Each country can choose the method of generation that it can rely on either internally or from its allies. You can't put export controls on hydroelectric dams or geothermal vents after all.
I do wonder though whether there will be a comprehensive re-evaluation of import vulnerabilities. Sure, Russia relies on the West for high-tech parts, but the West relies on a lot of imported minerals to build those parts, creating a potential vulnerability a little further down the chain. I can definitely see the world moving to a US/EU vs. China/Russia economies that can essentially function without the other in the event of war. Most interesting question will be where India lands, and whether a new non-Aligned movement will emerge (as would probably be advantageous for Africa for example).
"Yes, there’s going to be a bit of economic pain, but this is the inevitable result of decades of complacency in which European countries allowed themselves to become dependent on Russian hydrocarbons."
I think it's important to emphasize the role of complacency and previous policy when discussing the economic impact of sanctions on Germany. I've seen a lot of coverage that makes it seem like Germany was blindsided by their reliance on Russian hydrocarbons and that it's unfair for them to pay a short-term economic penalty. The situation is pretty self-inflicted (like IP theft from firms that outsourced large portions of their supply chain to Chinese firms despite seeing previous IP theft), and we shouldn't be overly sympathetic (although we should obviously make sure that nobody goes without heat or electricity).
I am very much hoping that this invasion is the shock the US (and the rest of the west) need to start modernizing their economies to sideline the autocracies, much as Sputnik kicked off a technological arms race the USSR couldn't keep up in and which eventually bankrupted it.
We need energy supply systems for upgraded energy grids as well. (I'm sweating thinking about how long it will take to decide on a long term investment strategy along these lines.) MIC shareholders make lots of money in the war economy while all of us pay for economic warfare with our hard-earned credit and coins. (yes, with our lives also.) Perhaps people in WEIRD countries can afford it but what about the rest of the world?
This is the best.
Noah, have you read Kamil Galeev's threads on this?
This was a particular enlightening post. I’m interested in how the economic dimensions interact with the military, geographic, cultural, historical, and even moral aspects of the situation. Thanks for pulling it all together, Noah.
I wanted to believe that the atrocities in the Ukraine were committed by a few rogue Russian soldiers, but it appears those acts were more calculated and systematic. I will be in Poland in a few weeks, then Hungary, and it will be interesting to learn what the mood is in that part of the world. I have been reading about Auschwitz in preparation for my visit there, and keep thinking that could not have really happened, it’s too horrible, and here we are again.
As the only Eurasian power bridging the steppes from West to East, Russia has always exploited its geography to bolster its military and economic prowess. If the EU backs off, if NATO expands, Russia will turn to China for economic and military support. But as Paul Krugman has argued in a New York Times opinion piece, the problem for Russia is two-fold: it risks becoming a client state of China, a veritable pygmy next to a Giant (similar to Canada next to the USA); as well transport costs work against a China/Russia bloc. Unlike the Canada/USA relationship in which most Canadian manufacturing and energy processing is within a 100 miles of the USA, the distance from the Chinese industrial heartland and Western Russia west of the Urals is vast.
Shouldn't aluminum be considered a dual-use material? And why is the EU still exporting aluminum oxide to Russia?
Oleg Deripaska's RUSAL owns the largest alumina refinery in Europe. It's on the west coast of Ireland and mainly refines bauxite from RUSAL-owned mines in Guinea. Now that the company's largest refinery (in Mykolaiv, Ukraine!) is out of commission and Australia has stopped exporting alumina to Russia, the plant in Ireland has become a critical source of supply.
As best I can tell, the EU has exempted alumina exports from its Russian sanctions regime because they want to protect a few hundred jobs in County Limerick. That seems like a mistake.
I feel like there's an assumption here that winning the long term economic war against Russia will lead to a positive global outcome, and I'm not sure that's the case.
As you mentioned, economic sanctions don't lead to regime change and instead harden a populace into an us-vs-them mindset.
Now that Russia appears to be conceding militarily, I think the West is better off running out the clock: ease economic warfare and wait for Putin to croak.
Hold on a minute. Do you mean to tell me that this whole time we could have been making a big dent in Russia's nuclear arsenal by cutting off high-tech exports? I want to read an entire piece on this. I have so many questions:
- Was this impossible during the Cold War because the USSR had enough technical know-how
and supplies on their own to sustain that era's nukes, or because trying to denuclearize them nonconsensually would have triggered a first strike / doomsday? Do those factors not apply today?
- If we did this now, how much of their arsenal could Russia maintain using imported technology from China plus their domestic capabilities?
- If this is so, how can North Korea, a much much poorer smaller country, maintain its nukes?
- If Russia had dramatically fewer nukes, would China change their own rate of nuclear weapons construction?
- If Russia were to turn to technical kludges to maintain its nuclear arsenal, is there any chance that would increase the probability of accidental discharge or security breaches/theft by nonstate actors? (I know nothing about this whatsoever but it seems like an important question to ask.)
- and a technical question just for clarification: Once nukes become duds from lack of maintenance, are they totally unrevivable?
So, your thoughts on glenn greenwald?
I like the article very much, but one thing is plainly wrong: the worst-case scenario for Germany is not a 2.2% decline of GDP. The debate among German economists is extremely heated (and emotional as it may never have been before). Bachmann et al. is one of the extremely optimistic voices (Leopoldina is another), but there are also pessimistic voices predicting things 6% decline, a damage of 230 billions euro, 4 million people unemployed, and hard shortages of drugs, fuels, and some other basic goods.
Personally, I go with people like Hüther, head of the IW institute, or Kaczmarczyk, who say that assumptions like a generic elasticity and more general all prognoses about a gas embargo for Germany are plainly dubious. "The idea of economy that we predict the future from experience in the past. We don't have any experiences with gas embargos." (Kaczmarczyk)
And looking beyond such generic assumption, it does get more worrisome. For example, it's far from clear how much LNG transports to Europe can be raised. Not because of supply, but because of distribution issues. Spain has the most LNG terminals in Europe, but this doesn't help at all. The pipelines from Spain to the rest of Europe are already operating at maximum capacity. Likewise, in Germany it is not trivial to just re-allocate gas from the southern part to, say Eastern Germany, where it would be most scarce. And so on.
Just as an example for doom scenarios that are not so unrealistic, let us look at what might happen to the chemical complex of BASF in Ludwigshafen in a gas shortage. This complex is one of the largest (or the largest?) in the world, and it's the chemical heart of Europe. If this should be shut down, then this could mean an actual humanitarian crisis in Europe. According to BASF CEO, if they get 30% less gas, that would be manageable. They would stop producing ammonia and acetylene, which consumes huge amounts of gas. Those are really important stuff, but probably could be compensated by imports. (Though of course there would be consequences. Fertilizer was already scarce before the Russian war, and it's made from ammonia. But Europe could buy the supplies from Africa, so the hunger crisis would be in Africa, not in Europe.)
If the complex gets 50% less gas, production of some synthetic gases would be stopped. Depending on the scenario, we would get shortage of plastics, drugs, pesticides, cosmetics, cleaning agents, construction materials, fuels, and/or packaging materials. If supply falls below 50%, then the whole complex must be shut down, and Western Europe would see a humanitarian crisis. According to the CEO, it's not possible to just switch the complex off partially beyond this point, because it's not just a collection of independent production sites. It's so highly interwoven that diagrams can turn you mad. Not just in term of chemicals, but also in term of energy that is piped from one part to others.
Now, this is a doomsday scenarios. But it is not completely made of thin air. I am not saying that we really know how likely such scenarios are, and that it tells us what would be the right thing to do. But if gas shortage means that the BASF complex would shut down, then these are losses that Europe would and could not bear. It would mean that Europe had to surrender, period. Perhaps none of this happens. But claiming that a worst case scenario is a mild to moderate recession, that is not true. That would be the best-case scenario, and no one knows which scenario will or would happen.
> Weaning Europe off of Russian gas
control-F heat pump, no hits. :(
If this war is a big deal -- and I think it is -- we should be doing a massive movement of installing heat pumps all throughout Europe.
Biden should do a national address, tonight, to announce it. We are going to manufacture as many of them as we can and send them across the ocean.
Send installers across, too, if that is a blocking factor. (Although there are window-unit heat pumps that a normal homeowner can install.)
Every day this doesn't happen is another day I'm disappointed in this country. Apparently "let's start planning for the cutoff in the summer" is the height of our forward thinking and no one's really in charge of actually fixing things.
I always enjoy reading these. Btw, thank you for joining the Bulwark livestream that one night. It was a pleasure to have you, and I definitely gained additional perspective on Russia that night.
At one point Nordstream (which has now been cancelled) was competing for viability with a proposal for Nabucco, a pipeline that avoids Russian control.
I don't understand why an immediate priority would not be to greenlight and expedite the approval and construction of this project. Steve Levine wrote a really good book called 'The Oil and the Glory' about the construction of the Baku-Tblisi-Ceyhan pipeline (Fiona Hill and Bill White had a saying in the Clinton White House: 'Happiness is multiple pipelines') and it seems to me that that agenda very much still holds, as well as increasing diversity of energy sources from renewables, nuclear etc