I Reiterate.

Amrit wrote excellent post on China in previous discussion board, but here is OPEC data which shows one of a number of vulnerabilities for China's massive industry. And that has a direct impact on China's posture. 

It also explains why Europe is not a superpower combined, forget about viewed separately as nations, and why energy is foundation of everything. Thermodynamics is at play here. Hence a precarious position of China. 

Practical Geopolitcs.

We are already living in a new reality and while everyone's attention is concentrated on Covid-19 or, in many cases, at stock market, life goes on and events no less, if not more, important than coronavirus pandemic, continue to unfold. Russia-Saudi "oil war" is one of those events and there are many POVs on that. Does Russia want to break Saudis? Possible, but most likely Russia's objectives are larger than that and the main target is OPEC as a whole. Behind OPEC is an American shale oil industry and, as Scott Ritter arrived to the conclusion today, could be Trump's Administration itself. Russians have had enough with the United States for a while now and, unless one is a paid operative of US Department of State or numerous US NGOs in Russia, no one exercises any illusions on the subject of the United States being a radical anti-Russian force. Ritter, correctly (almost), notes:

While President Trump entered office fully intending to “get along with Russia,”  including the possibility of relaxing the Obama-era sanctions, the reality of U.S.-Russian relations, especially as viewed from Congress, has been the strengthening of the Obama sanctions regime. These sanctions, strengthened over time by new measures signed off by Trump, have had a negative impact on the Russian economy, slowing growth and driving away foreign investment. While Putin continued to show constraint in the face of these mounting sanctions, the recent targeting of Russia’s energy sector represented a bridge too far. When Saudi pressure to cut oil production rates coincided with a global reduction in the demand for oil brought on by the Coronavirus crisis, Russia struck.

Trump, in the end, turned out to be more hostile anti-Russia POTUS than even Obama. In fact, from the get go Trump surrounded himself with a cabal of professional Russophobes and continued to slap sanctions on Russia non-stop. This is not the way to deal with another superpower, especially when your hand of cards is weak and the only weapon, blunt and inefficient at that, one has is sanctions. I disagree with Ritter here in terms of "negative impact", I said it many times and I can repeat it again--sanctions are good for Russia. Now, this my, and many others', POV is confirmed by none other than Putin himself:

As I warn non-stop: Russians DO NOT count their economy in terms of "capitalization", "foreign investments" and "stock market", in fact, all this Western monetarism is not economic science at all and cannot be applied to Russia. Russians count their economy in terms of what and how was produced, how much did it affect wages, pensions, what are the demographic trends, how to deal with them, how many kindergartens were built, how many new schools etc. Russians count in tangibles. And while Russia IS making Saudi Arabia's life a living hell, pushing it towards insolvency, there is no doubt that doing so Russia keeps US in mind. As Ritter concludes:

Russia is unlikely to fold anytime soon. As Admiral Josh Painter, a character in Tom Clancy’s “The Hunt for Red October,” famously said, “Russians don’t take a dump without a plan.” Russia didn’t enter its current course of action on a whim. Its goals are clearly stated—to defeat U.S. shale oil—and the costs of this effort, both economically and politically (up to and including having Trump lose the 2020 Presidential election) have all been calculated and considered in advance. The Russian Bear can only be toyed with for so long without generating a response. We now know what that response is; when the Empire strikes back, it hits hard.

The reason Russia can do that is because there is no military or, in general, "power" solution for that, because Russia controls escalation as it usually does in military sphere. As Putin was mistranslated in his interview (I posted above), he didn't say "to hell with sanctions", he said "we spit on them". This is exactly Russian attitude today towards the United States. This is the pinnacle of disregard which would give aneurysm to a vast majority of a corps of US Russia "experts" who get paid to develop the most risible narratives about Russia, which even US court system wouldn't be able to take it anymore. US-Russian relations have been damaged beyond repair and Russians, correctly, view the United States as a main culprit. But if the United States also got itself into the fight with China, there are some other news which may give the United States a shiver--it is practical implementation of the transport corridor North-South, with Azerbaijan "spooling up" (in Russian) its cargo transfers, while  Russian view this corridor not only as an alternative to Turkish Straits but as the main trade artery in trade between Russia and India (in Russian). Port Olya near Astrakhan seems to be operating on steroids, increasing it's cargo operations by 145% in 2019. 

But here is another thing. here is the map of this corridor: 

Looking at this map, do any of you ask what is conspicuously absent from this map? Right, China is not there and she is not supposed to be. In fact, this route must have nothing, zero, to do with China and it is rightly so. As I repeat ad nauseam--for all my sincere respect to China--Russia and China are neighbors, they are not strategic allies, in fact, in the future which is emerging as I type this, Russia and China will be competitors. No, I am not against cooperation: CR-929 promises to be a wonderful project, possible Moon Station? Sure, I am all for, but the logic of economic development and emerging new alternative model for the European (whatever will be left of them by then) people comes from Russia, not China--it is a hard, cold fact of culture which cannot be changed. Russia IS creating alternatives as I type this, and those are for facing China, not even hostile West, in the long run. I will refer all of you to Putin's sensational speech at Valdai in 2017--just listen what he is talking about, attentively. West is corrupt and decadent, and is in steep decline, but does it mean that white Christian-root population does not have the right to live? Or to have its own historic realm? West was betrayed and sold out by its elites in a complicated game which is now almost 80 years long. But many European people will, and already do, look to Russia as their last hope. We are at the historic nexus beyond which the future looks fuzzy, hidden in the fog of uncertainties and I am not Third Stage Guild Navigator to see that far, but as often is the case, it seems that the real task of saving European people, not the degenerate and corrupt political and economic systems of the West will fall to Russia. This is 2013, Russian Marines in Greece. People are civilization. Not governments.

That Is Everything You Need To Know.

And it is in the announcement of Russia's Central Bank: 

Russia’s sovereign wealth fund has enough reserves to cover budget deficit for years, even if oil prices stay between $25 and $30 per barrel, the Finance Ministry announced amid a dramatic oil market crash.Despite Monday being a public holiday in Russia, both the Ministry of Finance and the Central Bank were quick to react to the overnight drop in oil prices of nearly 30 percent. The former said that the Russian National Wealth Fund has $150 billion (more than 10 trillion rubles) worth of liquid assets from additional oil and gas revenues, which is enough to offset a possible shortfall from falling crude prices for 6-10 years.

So, if anyone thinks that this whole FUBAR with "markets" (quotation marks are deliberate) is about Saudi Arabia and Russia feuding, they better check the reality. It is way more than that. KSA in this situation is just one of the players and not the biggest ones at that. But most important are these conclusions which must be made and which, most likely, will not be made in the West but we will try:

1. This crisis shows what a house of cards this whole "global economy" is, because markets, as a place where REAL price on commodity is fixed, are a figment of imagination of all kinds of white board "analysts" who still believe in a false gospel of laissez-faire. Modern "markets" are speculation and political pressure machines which have zero in common with actual economic reality on the ground and as such cannot exist anymore in present form. In other words: system of trade imposed by the United States is pretty much done and we see it disintegrating in a front of our eyes;

2. It also shows what a Potemkin Village whole modern US economy is, when economic development is assessed in terms of the stock price and capitalization most of which are driven by stock buybacks and credit infusion. So much for Trump's "achievements" in economy. 

3. We are yet to establish the algorithm of Coronavirus panic being spread globally--it will take some time to figure out the REAL drivers behind this, most likely, grossly exaggerated danger--but it is already clear that the so called US economic sputtering was ongoing long time before any Coronavirus was ever discovered. 

In other words, the crisis is systemic and it cannot be fixed by monetary or any other present so called "market" means precisely because those markets as imagined by theorists do not exist. In general, we are at the precipice of a gigantic geopolitical shift which, indeed, will remove Petrodollar as a viable financial instrument through, first, completely defanging OPEC and then, or, rather, simultaneously deflating the bubble of the US speculative economy. This is my off the calf take on all that. Enjoy the spectacle. Expect more violence.

OPEC Issue.

There is an OPEC issue which popped up in the last couple of days--it is sudden realization that OPEC doesn't mean that much in terms of oil production (or cuts in it) without...yes, Russia. It occurred to Forbes that:

But today OPEC faces Russia, a non-OPEC member who, over the last three years, has managed to obtain for itself a practical veto power over OPEC decisions. Russia has become the second most powerful oil producer in the world, and this is not just because it is the second largest oil producer in the world.

Damn, those Rooskies weaponize everything, from sausage, to cartoons to oil production. But the truth of the matter is that in reality, unlike it was the case with Masha and the Bear, Russia DID "weaponize" oil production because... because... because she can. As Forbes is longing for those higher oil prices to return, it notes, in desperation:

Only Russia can bring those prices back. Only Russia can make a deal. Only Russia can give these powerful oil producers what they want. Russia hold all the cards.

No, Russia is not bringing those prices back, not yet anyway, and there were already events which may testify to a rather grim mood in the Kingdom of Saudi Arabia which is the backbone of OPEC. They uncovered yet another coup conspiracy there. Oh, boy. But what are those proverbial cards Russia holds? Two of them: 

1. Russia's economy, as I, and others, write about for years and years IS NOT hydro-carbons' extraction and export dependent or oriented. Not only Russia's non-hydro-carbons exports was shrinking  relative to Russia's other exports (in Russian), but Russia's military and agricultural exports become increasingly important, together with other high value added exports. This is not to speak of Russia's budget being formed primarily by other, non-raw materials, contributors. But as I repeat ad nauseam, people who calculate economy in US Dollar "values" fail to comprehend this fact--they simply have no frame of reference other than the speculation bubble of financial markets.

2. Russia is military superpower, period. Anyone wants to fight Russia? Well, I am sure there are some lunatics out there but even NATO knows that it stands no chance, despite all chest-beating and posturing. 

So, Russia goes about it her own way: she will continue to extract geopolitical and economic favors for herself while simultaneously pacifying the region, Middle East and adjacent regions that is, because only peaceful and stable region insulated form "activities" from Gulfies' satrapies and the United States allows to form real market there and then shape it as a reliable recipient of Russia's goods, real, tangible ones. Such market must be stable and peaceful. So, that's the message from Russia to OPEC and others. As you can see yourself, investments into real cutting edge weaponry, which is predicated on a development of modern industry (as in manufacturing) is a very wise investment, when one counts own country not as some collection of individuals but as a nation. Raw power matters and it wasn't Russia who established these rules.  

In related news. Russia's Black Sea Fleet and Southern Military District are on the verge of morale and discipline breakdown and Russia is about to abandon Crimea because the United States are supplying Ukraine with mighty Mark VI patrol boats: 

According to CNN, the new assistance package includes counter-artillery radars and armed Mark VI patrol boats, the latter of which is seen as particularly important given Ukraine’s tensions with Russia in the Black Sea and the Sea of Azov.The MK VI designed to fulfill the requirement for an armored boat with greater range, more lethal firepower and sea keeping capabilities that exceeded the Navy’s small boat capabilities. They can conduct missions in the open ocean for protecting defence forces. The versatile patrol vessels can support search-and-seizure operations, maritime intercept operations, theatre security cooperation operations and other clandestine security force activities. They can function as escorts for high-value assets and also take part in mine hunting and fast attack combats. The 85-foot-long vessels averaged a speed of 25 knots, just under 30 mph.

Make no mistake, those are nice boats, it's just that they are good only, once one discards all fluffy Pentagonese descriptions of those, for.... being sunk in case of doing stupid things in the Sea of Azov or Black Sea. It takes single SU-30 SM with anti-ship (ground-attack) package to...well, you know. 

Nice boats, indeed, and you know my soft spot for Mosquito fleet.