The ayatollahs are also released. A deal could pave the way for the return of a million barrels a day of Iranian crude, although it is a process that will take several months. Add to that China’s zero Covid strategy, which reduces the use of jet fuel, and it’s possible to see our way through this crisis. The rest will have to come from de facto rationing.
Vladimir Putin cannot easily transfer his surplus oil to China. “The infrastructure is in the wrong place: the Transneft pipelines go to the Baltic and the Black Sea, and then you have to find someone who agrees to take them over. The Chinese don’t have the tankers,” said Professor Alan Riley of the Atlantic Council.
Professor Riley said the combination of central bank sanctions, the ejection of the Swift payment system and an energy embargo could push the regime to the brink. “We could get to the point where Putin can’t even pay his troops anymore,” he said.
Russian oil is almost unsaleable. Shell is in public disgrace after picking up barrels of “blood” no one else would touch for a $28 discount. Two-thirds of Russian oil is blocked. Tankers will not go to Black Sea ports at all. Spot oil transactions have ceased.
“To make a cash sale, you need a letter of credit, and nobody has letters of credit. We are literally seeing millions of unsold barrels piling up. Russia has no port or inland storage, so production will be shut down,” Citigroup’s Ed Morse said.
Putin could retaliate by cutting off gas from Europe in a last-ditch attempt to unbalance the West, but that weapon has lost potency after weeks of good weather and copious deliveries of American liquefied natural gas. European gas storage was dangerously low in the New Year after months of manipulated flows from Gazprom. Today, it has returned to its historic range.
Frans Timmermans, head of the EU’s energy transition, told German television on Sunday evening that Europe’s gas supply was no longer under threat this spring and that by next winter, the Europe will have other defenses in place. The EU is strengthening at a remarkable speed for a new era of “zero gas” from Russia.
Poland is pushing for Europe to impose an embargo. France, Germany and Italy are expected to line up once NATO’s three Anglo-Saxon powers have taken the lead. To do otherwise is politically untenable.
Canada has already acted. The United States is about to do so under pressure from Capitol Hill. In my view, the UK should join them immediately and get ahead of the diplomatic curve. Shell and BP have already swallowed Russia’s loss. The UK does not depend on Russian oil for its refineries.
There is no point in calibrating messages to the Kremlin at this point or looking for ways to help Putin save face. We are past that stage. Putin’s operation must be shut down immediately before he razes more Ukrainian cities.
Yes, it could respond to an energy embargo by switching to nuclear weapons, just as Tojo Japan responded to Roosevelt’s 1941 oil embargo by bombing Pearl Harbor. But it is just as likely that he will again threaten to use such weapons in the future if he is allowed to prevail today on the Dnieper.
Sometimes you have to do the right thing and drop the chips where they can. What is clear is that Western democracies no longer find it morally defensible to finance Putin’s war machine with purchases of oil, gas and coal. They want to see him behind bars in The Hague.
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This notice was published: 2022-03-07 17:08:35