The Duran 12/3/22.
AC: let's talk about oil price caps - I think the current figure to get agreement is $62/bbl (screencap shows $60), Poland wanted $30. I read a report this morning that an energy CEO in France said that people should brace for rolling blackouts. It's the first week of December and we're just getting into winter so we're going to have 3 mo. of this? But before you get into that, I read in WSJ about European efforts to seize Russian assets, going off of Ursula von der Leyen's statements tying the seizure in with criminal prosecution. Per WSJ the EU has been getting pushback from member states. Portugal for one said that freezing is one thing but seizing is something they cannot do as it's unlawful. But some member states have said it's unlawful unless there are criminal convictions or indictments. It seems to me they have no other angle to use to get these assets.
AM: That might be what they're trying to cobble together but it's a complete violation of well-established international law and I understand that the legal community collectively has been giving that advice. Even freezing assets is legally dubious but it's been done many times and there's some logic to doing it. But you simply can't seize a country's assets in this way.
There's one fundamental reason for this, this extremely well-established doctrine of state sovereignty immunity, that what a state owns cannot be seized by another state.
Talking about criminal convictions - criminal convictions of whom, exactly? You can't put a country on trial. Criminal conviction of the Russian central bank? On what grounds? Of Russia's leaders? Putin also has sovereign state immunity. The only way you could put him on trial is to declare war on Russia and win it, forcing Russia to surrender unconditionally. Only then could you put the Russian leader on trial, which is what happened with the German leaders at Nuremberg. And if you look at the decisions of the Nuremberg tribunal, they made that process very clear, that it was entirely based on Germany's unconditional surrender.
So what Ursula is talking about is absolute legal nonsense and she's been told this. But you can see she's trying to find a way to do something she wants to do in spite of the legal consensus.
There's another fundamental problem with this that goes to the root, not just of international law but of law generally. What jurisdiction does an EU tribunal have? There are international tribunals already, so the EU setting up its own war crimes tribunal? Putting that aside, doing all these things looks like an exercise in retrospective justice, trying to set up a legal machinery that would allow you to seize these assets. That's not how the law is supposed to work - i.e., you have the legal machinery in place; you have the laws in place; you use the laws to start the legal machinery, in accordance with accepted legal practices.
The concept of retrospective justice has been rejected by every Western legal system going all the way back to the Romans as something that's abhorrent and profoundly wrong. Having said all that, it's not going to prevent Ursula from doing it.
AC: and it's going to do a ton of damage to the EU, people are going to start moving their money out. The EU is destroying itself without Russia's help, which brings us to the oil price cap, another decision that is going to boomerang back on the EU.
AM: It's a crazy idea from the start, we've discussed this many times. If a cap on the price of a commodity is effective, it guarantees that commodity will be in short supply. And in fact, it's unenforceable - the Indians, Chinese, Turks, Indonesians, Saudis all oppose the idea, recognizing that it could set a precedent allowing the EU to place price caps on their commodities.
We've said from the beginning it's a bad idea and except for a few holdouts like the Poles and Baltic states, everyone else realizes this as well. But they committed themselves to it some time ago.
So they're talking about it but finding that whatever price they come up with - whether it's $30/bbl as the Poles want or $70/bbl like the Greeks and Cypriots have suggested - you can't set a price on a commodity that everyone needs and whose trade you do not control.
So they're thrashing around for a price and you get the sense they're trying to pitch it at such a high price because Russian oil already trades at a discount and it won't make a difference, or so they think (it will).
AC: and Russia has said they won't sell to any country or trade bloc that tries to put a price cap.
AM: no sovereign country in its senses that produces a commodity would agree to such a thing because it would mean you no longer control the price of your product.
What they're most likely to do is cut oil production. I read a piece in the Daily Telegraph saying Russia could cut its oil production by 3 million bbl a day and it would not affect their oil infrastructure but it would push up prices. Which would be more profitable for Russia but more costly for the West.
I think Russia would only cut production if the OPEC countries agreed, but it's possible they might agree because they don't like this price cap either. So if the Russians cut production and oil prices went up, why would the Saudis be unhappy about that?
AC: two quick stories to wrap up video. The Russians along with China, BRICS, India are trying to put together a global payment system to go up against Visa/Mastercard, trying to use the strength of the MIR card, of the Chinese payment system for union pay and other things, India's rupee, Brazil's ELO I believe it's called - consolidating these into a single payment card, your thoughts on this?
And I've read an article that Russia is looking to create some sort of "gas union" with Kazakhstan and Uzbekistan. So they've got Turkey and Turkstream, now they're working on Eurasia, we had the meeting between Putin and Tokayev (president of Kazakhstan) just a few days ago. So Russia is moving pieces and so is all of BRICS.
AM: Let's start with that, it goes back to what you said earlier about the French starting to worry about blackouts. Despite all the happy reports from the EU that they had accumulated ample reserves of gas, what's happening is that they're now having to draw on them much faster than they can replenish them. This is normal for any winter period but in the old days when the pipeline gas was coming steadily you could replenish it.
They won't be able to do this. As we previously discussed, they were only able to build up these reserves by buying large amounts of gas from the Russians over the Spring and Summer.
France is in particularly dire straits because it relied heavily on nuclear power, and their nuclear power industry is apparently in a mess, half their power stations aren't working. They tried to get more gas from Algeria but Algeria can't supply any more; Qatar is about to ink a deal with China and seems to be less interested in Europe; and LNG from the US is proving to be very expensive.
If we're talking about blackouts in parts of Europe I think gas prices are going to start going up again, I think in the Spring and that it will result in escalating inflation.
And in the meantime Russia is making big moves, building gas hubs with Turkey and moving to set up gas unions. Remember that last year there was that crisis in Kazakhstan and the Russians moved to quell the protests and support Tokayev. There were theories and suggestions that Tokayev was actively double-dealing with the Russians, but when he went to Russia he called it his key strategic partner; and they agreed to set up a gas union, i.e., a gas OPEC. And it's clear they been discussing this with another major gas producer, Uzbekistan, another former Soviet republic. So 3 key gas producers coming together to protect the gas price.
There are two other former Soviet republics that are big gas producers, Azerbaijan and Turkmenistan; Turkmenistan is said to be under heavy Russian influence so it's likely to join at some point. Azerbaijan is close to Turkey, which has agreed to the gas hub idea with Russia, and logically they will want to join, too.
It was Qatar that first floated the idea of a gas union about five years ago and suggested it to Russia. At the time, Russia wasn't interested because it had long-term deals with Europe. Now that Europe has cut all those deals, Qatar may want to join the new gas union.
One other Arab country is a major gas producer, Algeria, a friend to Russia and also a member of OPEC. Why shouldn't they join? Why shouldn't Egypt join if they become a major gas producer, which is quite likely.
Perhaps the gas union will be established over the next few years and it won't be just the Russians the EU has to deal with in negotiating gas prices, it will be the entire consortium.
AC: and put an alternative payment system on top of all of that and start to build a whole different economic architecture.
AM: And it's clear that Russia and China are the key countries. RNB, the Chinese currency, is now 1/3 of all foreign currency transactions in Russia, and this is expanding fast. So MIR cards, union pay, link all of that up, link up the messaging systems, seems inevitable. India now a major importer of Russian oil and is expanding its trade with Russia - why shouldn't they? They're also BRICS member states. China is India's biggest trade partner, why shouldn't they eventually link up, too? There are big political issues between them but there are also obvious economic interests.
If you get all these big countries involved, why wouldn't other countries want to be involved? Like Brazil, like Japan (which has its own messaging system BTW).
Recently Japan has been quietly tip-toeing away from the G7. They're apparently opening hot lines between the Japanese and Chinese militaries; the Chinese and Japanese leaders are due to meet.
BRICS reserve currency coming along; Xi Jinping going to Saudi Arabia - turns out he's not just meeting MbS, all the Saudi leaders will be there; China's just cut a deal with Qatar for gas. Logical to have payments made in the BRICS reserve currency that's coming and for the money transfers to be made through this unified messaging system that is also coming.
Will it happen? We know the US will do everything in its power to obstruct it but this is the most concerted attack on the Western financial system, on Western dominance of international trade that we've seen since the 16th century.