They are drops of oil

(To Gino Lanzara)
14/03/22

There is no chessboard that with its 32 pieces does not bring to mind strategy and conflict; going beyond the surface, the symmetries of defensive and offensive movements such as castling add their texture to the unexpected asymmetries aimed at freeing oneself from dangers or hindrances such as the horse's move. The Ukrainian chessboard is no exception, and its boxes bear the most classic questions: who did what and, above all, who is to blame for a war in which kings and queens, seemingly distant, hide behind pawns. It is inevitable; and, mind you, we will find everything again.

Undoubtedly it can be said that there is no one who can claim to have no responsibility: the war gives to everyone. Object of kinetic actions on which international war law will have to work for a long time, as well as the laboratory of choice for the improvement of the asymmetric warfare of the Gerasimov model, Kiev found itself in the middle of a economic warfare, so violent as to prevent even agreement between allies.

The economy, combined with the cognitive warfare in the field of the infosphere, shifts the balance of power from the military to the geo-economic one, the favorite of Luttwak and his logic of war expressed in grammar of a business that liberalism cannot calm down. Duties and sanctions selectively block trade, the analysis of macroeconomic data makes it possible to predict their effect and then hit the best targets; their value is related to the geo-economic weight of those who impose them, as all war instruments are fraught with risks, such as the loss of market shares or the weakening of effectiveness in the presence of a system of alliances.

Darwin taught it: either you innovate by adapting or you die

Energy is shaking the markets right now, with the price of oil set to rise with swings that predict extreme peaks of USD 200 per barrel. The seriousness of the American intentions, aimed at blocking energy imports, the fundamental Russian sources of income, is indisputable.

Who is really affected by these sanctions? Who can afford to give up Russian energy resources with markets under the threat of further cost leaps? Is a political entity credible that threatens to nationalize the assets of companies that have abandoned its territory?

A geopolitics of oil has taken shape conditioned by decisions induced by the need not to grant further market shares to American competitors with the fracking and shale oil which, before 2020, Daniel Yergin had already identified as a powerful political and economic lever that Washington cannot afford the luxury of losing. It is worth remembering the problem of the steep declines that OPEC +, an enlarged version of the oil economic cartel, had to face not long ago, with the triggering of a price war with Riyadh unable to convince Russia to reduce production. of crude oil, according to a logic designed to tackle the drop in demand, based on Moscow's conviction that the containment of production would favor the Americans in the production of shale oil. How time goes by when you're having fun ...

Now Saudi Arabia and the UAE, called to increase production, are not even answering calls from an American president who, perhaps, will be wondering where he was wrong with allies he should never have lost.

Small note to Italic and anxious benefit on Libyan production: with which of the governments apparently in office will we need to have energy relations?

Let's go back to the USA as an export and to the small share of Middle Eastern crude oil (12%) imported by them and compared to the changed demand and supply for Europe, a complex and not without surprises. The move of Washington's horse, which leaves uncovered (novelty?) the opponent Guaidò supported so far, saw a high-level delegation received by Venezuelan President Maduro, both to negotiate the release of 9 US citizens detained by Caracas, and to investigate issues relating to energy security; The attempts at liaison with Iran, which in Vienna is playing its cards for the JCPOA in Vienna, are not to be considered extraneous to this initiative, an agreement that can only be successful with the withdrawal of sanctions, and which is destined to create further strategic problems vis-à-vis Israel, which is committed to strengthening the ties resulting from the Abrahamic Agreements with the UAE. The elimination of sanctions against Tehran, in addition to giving oxygen to an asphyxiated economy, however, raises the doubt that Russia, engaged in 5 + 1 negotiations, can blow up the agreement to avoid competition. It would be desirable that, in the wake of the emergency, it would not be forgotten that Iran is enriching uranium around 60%, a percentage that borders on military uses.

If Qatar aims to double its LNG production no earlier than 2027, the possible cooperation between China and Iran on natural gas should not be overlooked, which would lead to an Iranian LNG surplus. How many chances of success the anti-Russian rapprochement attempts may have is not easy to predict, given both the policies recently entertained by Maduro and Raisi towards the Kremlin, and the abstention of both countries in condemning Moscow, and resolute in identifying the Born the main cause of the crisis. However, it is very likely that both Iran and Venezuela, a Russian ally, will encounter difficulties in rejecting the American courtship for a long time, given the economic weight of energy exports. What dialectical artifice the Americans will employ to justify the new policy is part of the gods entertainment that, for some years now, US policy has been proposing, together with test tubes, smoking guns and fault points between the US and the EU.

Il ban now invoked by the US against Russian oil products, it cannot fail to take into account the very scarce quantities of Russian hydrocarbons consumed in America, compared to 41% of gas and 25% of oil imported into Europe; what is certain is that the current stars and stripes leadership does not seem to fully realize what is happening and will happen on European soil, starting with the inflationary storm1 which is already about to collapse, with the markets already conditioned by the assault on the safe haven asset par excellence, gold. But this too is unfortunately not new, as is Libya docet.

While India has no intention of diversifying the energy basket shared with Moscow, Russia reserves the right to retaliate against the German block of Nord Stream 2 in order to widen the rift that separates Eurasia from the Americans, hoping to pour the unsold goods onto the Asian markets, controlled by an unpredictable Dragon, in the face of a Europe guilty unprepared for the umpteenth time and grappling with superficial and à la page.

How useful is an exhausted Russia, on the way to stagflation, for China? What added value can a country with a poorly diversified economy have? How much can and does China want to get involved now?

The answer is little, which does not mean May; among other things, the hypothesis, obviously to come, of one should not even arouse astonishment recovery Nord Stream, with two conditions; the first concerns the overwhelming European hunger for energy, the second the changed and more favorable sales conditions by a country that has been hit hard. The Russian stock market is effectively closed, commercial shipments stopped, coupon payments in rubles blocked due to the ban on liquidity transfers abroad, bank assets frozen, crude oil offered at a discounted price unsold: this is the picture of a default.

There was a lack of castling everywhere, there was a lack of defense, there was no farsightedness of good governance; there was a lack of a broad-spectrum European vision that envisaged the geopolitical use of gas by the Russian side with the side offered by Germany to the Kremlin to implement a strategy aimed at weakening the already weak cohesion on the energy side of the EU, still too distracted by the future frosts politically and ecologically correct to consider the current ones.

For the moment the ideas are like the dreams of Cinderella's mice: wishes. The price of Brent, reaching the highest values ​​ever recorded since 2014, could perhaps induce some Gulf countries to commit themselves to maintaining a difficult balance, also given the fragmented diplomatic situation in which the area capitals do not intend to compromise maintenance. of relations with Moscow, in the face of the American retreat in MO, another long-standing bipartisan diplomatic flop.

Privileging economic interests over political implications, refraining from supporting the US, does not mean taking the side of the Kremlin, it just means keeping in mind that business is business, and that making sharp judgments can demand duty at the worst possible moment, given what happened with the Khashoggi case and with the lack of support in recognizing the Houthi rebels as terrorists. All that remains is a quick and embarrassing restorative visit to Riyadh accepting, obtended neck, to speak directly with Mohamed Bin Salman, director of the Saudi economic diversification attempts.

Given the proclamations that follow one another from all over the world, what was lacking was a rough and sincere economic energy forecast with Washington, which is starting to grapple with the rise in prices and with a not unlikely stop of the transport sector. But the political-electoral contingencies weigh: vaccines, inflation, Afghanistan, elections of the midterm, relations with China, loss of consensus, make their voices heard. And countries short of crude oil will also make it feel, with the Biden administration ready to shift responsibility to the Yankee producers of shale oil, guilty of not increasing production enough. The problem is that companies do not want to be involved, as has already happened, in another cycle boom and bust, with an expansive phase of demand followed by another of contraction. In summary, the fault is always someone else's, even when the president ordered the Keystone XL pipeline to be shut down2 by imposing severe limits on extraction with a poorly supplied market with few stocks; it is no coincidence that several producers believe that the slow recovery in production is to be attributed to restrictive ecological policies that are difficult to implement, as well as to Russia.

But if the US has been the top producers of crude oil since 2018, they are not its top exporters, an unparalleled record that belongs to Saudi Arabia and Russia, with a restricted market in terms of supply and demand even before the war. This is linked to (Hasta Maduro Siempre?) the attempts to make contact with Venezuela, which is also experiencing serious technical production difficulties after years of neglect, and the Gulf States, with insufficient overproduction and too much to come. The problem lies in large part precisely in the USA, where private initiative conditions a political will that first focused on the energy transition, and now asks for a surplus for which obvious long-term guarantees are needed to protect today's investments tomorrow, without moreover, to ensure tax protection and dividends.

Let's be honest: under current conditions, a change of pace is impossible. As already mentioned, the responsibilities, obviously to varying degrees, are however divided among the different actors. Regarding energy, it must be noted that (Europe would like - would ask for it) the EU has in fact opened the taxonomic dossier, relating to green investments, on the use of nuclear energy which, with natural gas, is considered as a means to facilitate the transition towards a (hot?) future based on renewables. It is a fact, just as it is a fact that being devoid of valid alternatives, in the face of an event now demode like war, it is helping to drive us into recession. Of course, not even in the Kremlin they can get upset: the economic collapse that is about to hit the Russian system will be something worse than that suffered in 1998.

What to expect? Oil prices above USD 100 per barrel, at least as long as the war continues; for 2022, an increase in the price of gas by at least 50%; increase in the price of base metals3; increase in the price of agricultural raw materials4; interruption of commercial routes; increase in inflation.

It is inevitable to think that, even in the most materialistic and secret chambers of Moscow power, someone is thinking of a white knight who, whether oriental or not, it doesn't matter, takes the bear out of the trap it has gone into. Oh, pedestrians should be spared: they could come in handy ...

1 Italian inflation is set to rise to reach 8,4% in June (Unimpresa Study Center). The forecast is based on inflation with the price of crude oil up to $ 150 per barrel by June; with oil at $ 120, the cost of living could be 7,5%.

2 Keystone Pipeline System, a pipeline system in Canada and the USA, from March 31, 2020, of the Alberta government.

3 aluminum, titanium, palladium and nickel

4 wheat, corn, barley