By Dimitry Orlov

US and EU Face Deep Economic Quagmire

Joe Biden, tottering on his spindly legs, flew off to Europe to preach unity in the face of Russian aggression in the Ukraine or some such. That was the plan, but then Putin changed it by announcing that Russia will only be selling natural gas for rubles. Coming on the heels of Saudi announcement that it will start selling oil for yuan (a quarter of its exports goes to China) this didn’t sound like good news at all.

You can probably find some expert to tell you that the US, with 20% of world’s oil production, can still call the shots and that ’tis but a scratch. But given enough pre-existing conditions, even scratches can be fatal. First, to present a happier picture, in the US just about any liquid that comes out of a well and isn’t water has been redefined as “oil”—but most of it just isn’t that useful, especially for making jet fuel or diesel; for that, actual real high-quality oil from Venezuela or Saudi Arabia or Russia has to be imported. Second, the US burns an awful lot of oil just driving around its bloated, blighted suburban sprawl, which is more or less all it has at this point except for a few tiny pin-pricks of old urban goodness.

The long and short of it is, the US has managed to cut itself out of the international oil market. First, it refused to import Russian oil because of the special military operation in the (former) Ukraine. Second, Biden sent a high-level delegation to Venezuela, to try to sweet-talk Nicolas Maduro into resuming oil sales to the US. The delegation was told to go talk to Juan Guaidó, whoever he is and wherever he may be. Third—and this is the most painful part—Biden tried phoning Mohammed bin Salman of Saudi Arabia and Mohammed Bin Sayed of United Arab Emirates, and both of them refused to take Biden’s call, which is the diplomatic equivalent of a bitch-slap.

And now Biden lands in Europe all ready to announce even more sanctions against Russia and talk about unity and solidarity with the European leaders. Except the European leaders are now passed out cold from shock because yesterday Putin announced that from now on Russian exports will only be available for rubles, starting with natural gas. If they can’t find a way to start paying rubles for gas they will face industry shutdowns, electric outages and the next heating season simply won’t happen. What makes this situation particularly painful is that they have no right to complain. Who was it that confiscated Russian reserves held in dollars and euros, proving to Russia that these currencies are unreliable? Some people made a feeble attempt to argue that payment in dollars is stipulated in the existing gas contracts; however, the gas in question happens to be on Russian territory, where, according to the Russian constitution, presidential orders and Russian laws take precedence.