Wednesday, October 10, 2018

It Is The Devil You Know.

I wanted to post it a week ago, when it just came out but I got overwhelmed with work. Now is as good of a time as any. Listen attentively to what Putin has to say at 5:55 at Russia's Energy Week summit. The whole piece is worthy of attention but what Putin says about sanctions is massively important in a grand-strategy framework:

Fact is, for a leader of a nation to state that it is preferable to be under the most severe simultaneous actions, since it unties the hands, is a wowser of a statement and it gives some insight into Russia's political and economic kitchen. Well, this plus Putin speaking in the beginning (from 2:00) about failing to comprehend why the United States destroys the US Dollar. I too, to be frank, fail to understand from a basic rational position why the US works so hard to finish off the last vestige of its power--the trust in US Dollar. But that is if one uses basic principles of rationality. But, of course, Putin does know why and I, at the risk of sounding as an arrogant a-hole, also have an idea. Obviously not as comprehensive of an idea as Putin has (after all--he has one of the best, if not the best, intelligence-analytical apparatuses in the world working for him), but an idea nonetheless.    

Only sublime people (or morons) would deny that today we face a gigantic geopolitical shift and global turbulence--all that, the resulting effect of an implosion of a liberal capitalism (aka globalism) which has no national and cultural attachment other than to itself and to the process of making money, while increasingly failing to deliver an actual value. Indeed, consumerism ran into the most horrifying (for shareholders) financial wall--it reached consumer plateau. People, some people, either "overate" in developed countries or will never be able to afford standard of living so well "presented" in commercials--it does not work like this anymore and the American Dream is, frankly, dead. It was dead for sometime. I know, I remember America of 1990s and I can compare. The contrast is startling and not for good reasons. Fact is, I have all reasons to suspect that the situation is even grimmer than it is being reported.

So, is there any chance that America will improve? Some think so, by applying the very same methods that are in the foundation of collapse of liberalism. One of them is, in Russian-American case, the fight with competition for the markets by means of sanctions against Russia. This is not to mention a rabid Russophobia of Western elites, which helps them commit irrational and suicidal acts. One of those suicidal acts is precisely squandering of own reputation as business entity worthy of trust. All that is in the past for the US and the same is approaching US Dollar.

Consider $5.43 billion Russian-Indian contract for S-400s. Let us be frank here and I understand that it may sound harsh but in simple language the US has nothing comparable to S-400. Not even close. In other words--US wants India as US own market but has nothing competitive to offer.  So, what does it do? US does "convincing" (well, blackmailing) of other nations to not buy Russian weapons. It is pretty much the same situation as to offer a car buyer with $40, 000 budget a brand new top of the line Toyota or used Tesla with broken batteries. It is kinda obvious what normal rational people would choose. The same goes for Russian-Indian other aerospace projects and technology transfers. Absolutely the same situation is with energy supply with US being in a constant bipolar state threatening and then recanting, then threatening again and recanting yet again, to impose sanctions on Nord Stream 2. Any companies which want to cooperate with Russia on extraction are under the threat of sanctions. Good for Russia, since she was able to substitute key imports in hi-tech extracting and gas liquefaction equipment with Russian-made equally good analogues. 

So, not only Russia remains immensely competitive on gas market, she continues to supply the US with LNG. Thus the question: are they that dumb in D.C. that they do not understand that sanctioning half-of-the-world left and right they exhibit not US power but ultimate weakness to compete and doing so destroy reputation of US (well, it has been destroyed) as a reliable partner? With Russia in particular, the US is not competitive anymore across the whole spectrum of crucial military (and not only) technologies. In some, US simply has nothing, zero, to offer--such as non-nuclear submarines, cutting edge missile technologies and it increasingly falls behind in combat aviation. Now comes this MC-21 "thingy". 

One of the massive fields in which the United States remains highly competitive and a global leader is commercial aviation. I do like Boeing commercial aircraft, I will be missing a beauty and a queen of the skies B-747 once it is removed from the passenger service, I recall warmly B-727 and I have no problems with taking ever-reliable B-777 over Atlantic. In other words, I am a fan and admirer of the American (primarily Boeing) commercial aviation. But the juiciest part of Boeing's commercial contracts is medium range B-737 and it is precisely this segment where main money to be made. Now get this: Boeing fights with Airbus (with its A-320 series) for this immense market. Russia is not Boeing's significant market but Russian carriers surely bought many B-737s. Enough to take a look at Aeroflot fleet--42 B-737s, fewer than A-320-1, but still. But the rightmost column of Aeroflot shows 50 of Sukhoi Super Jet 100s which increasingly begin to fly (there are other carriers operating them) routes which used to be serviced by Boeing and Airbus mid-range aircraft. Here is Russian carrier Azimuth flying its SSJ -100 from St. Petersburg to Krasnodar. So, the shorter mid-range routes in Russia already see SSJ-100s substituting Western mid-range aircraft (B-737, A-320+1). Now imagine what happens when MC-21, especially with Russian PD-14 engine makes it to market? Yes, the removal of B-737s and A-320s will start in earnest. 

MC-21 is enormously competitive and it is significantly cheaper that either B-737 or A-320. So, the Russian state will have to do very little convincing of Russian carriers to buy MC-21. In fact, Russian commercial aviation is in full anticipation of this aircraft which was created specifically for this purpose--to compete with Western mid-range commercial aircraft and, eventually, come out on the global market. 

This video gives a pretty good feel about advantages of MC-21 over its direct B-737 Max competitor. It is very clear that MC-21 will have home field advantage in Russia, but MC-21's potential global appeal where the real danger to Boeing and Airbus monopoly is. How? Very simple: start from Iran and then, even despite own COMAC-919 (very slow and troubled development) there will be takers (possibly) in China and even in Europe. After all, nobody took SSJ-100 seriously too, initially. Now this aircraft flies in Europe and Mexico and people love it.

MC-21 is a much more serious competitor for a much bigger market segment and latest sanctions on Russian companies involved in MC-21 program are just a first salvo. But at this point, one has to understand why Putin wishes all sanctions, all of them severe, now. Russia, it seems, has already found or is very close to an economic model which works and this one has nothing in common with liberal capitalism. This model has no title yet but it is clearly some kind of fusion between state capitalism, socialism and free enterprise and it will be very interesting to see how this model will evolve. But all seems to point to the fact that it is already largely in place. After all, Russia openly proclaimed she will become number one arms supplier in the world and this, ladies and gentlemen, is as high tech and cutting edge as it comes. Ah, yes--dedolarization is in full swing, while President Trump threatens (in Russian--fresh) India and Russia. Evidently they have no idea of effects of a quicksand in D.C. For some odd reason this comes to mind:

To Be Continued...

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