"Enormous Costs"?

Does he even understand what those costs could be? 

He still lives in the la-la land of the Desert Storm, where the US operated essentially unopposed in its assembly areas, but even in Vietnam, the US Army never experienced a fire impact (maybe Khe Sanh) which would compare to daily "deliveries" Iran can provide against any troops. These will not be some artillery and mortar impacts, that will be stand-off weapons, some of them with warheads measuring in hundreds of kilograms. This is a different game, and then there are recon and targeting ... but I said it before--the US doesn't have relevant experience with this. 

 

So, what COULD be the "costs" if the US decides to do "ground operation"? Depending on the scope (the US doesn't have required resources for large scale op, McCaffrey should know this) it will range anywhere between 10,000 + KIAs within limited scope op to hundreds of thousands KIAs if the US bogs down (which it will) in case of the "full scale" invasion of Iran in the first couple-three years. Vietnam War will look damn good compared to this. 

Basic Economics.

As in REAL economy, not this Wall Street financial BS. I already had a short exchange with Dillon yesterday on this matter, but before we get to particulars, let's recall, if one can, 1998 and default in Russia. One of the effects of major inflation which was unleashed by this default was devaluation of Ruble to US Dollar. While I omit here all this bankster mambo-jumbo, one of the effects of the weakened Ruble was the fact which at that time Judy Woodruff of CNN, being Moscow correspondent (remember when CNN was an actual news corporation?) reported with amusement: the fact that while Russian financial "markets" (financial "market" is akin to hairy baldness) were being slaughtered, Russia's industry, especially food processing, became very competitive with the flow of Western products young "Russian" so called "reformers", in reality robber barons and criminals, directed towards Russian market thus making Russian producers fight for own survival. Default corrected that and since then Russian producers never looked back. Even when hard times of 2008 or massive sanctions of 2014 happened. 

It is an economic truism that in the international economic relations a weaker domestic currency makes goods produced domestically more competitive on the international arena. That is, THAT IS, if you have the ability to produce those goods. Jamaica may weaken its Dollar whatever it wants, it changes absolutely nothing for its goods because Jamaica basically produces nothing, well, not exactly nothing (wink, wink) and weakening of its currency, in fact, makes life harder because Jamaica would have to buy more hard currency to buy goods which it really needs. It is simple as that--let's say Jamaica (or any other minor player) wants to buy a regional commercial aircraft (something like Embraer or Bombardier) for 20 million USD. For the sake of discussion let's assume Jamaican Dollar being 5 to 1 USD. In this case, for Jamaica, to buy such a plane it must have 20 million x 5 = 100 million Jamaican Dollars. But what if Jamaican Dollar weakens two fold, now it is 10 to 1 USD (exchange rate), and that means that for the same plane Jamaica will have to have 20 million x 10= 200 million Jamaican Dollars. You see how it works? Of course, Jamaica may go and mortgage a shitload of its assets for this tremendously disadvantageous rate, but no matter what Jamaica does, it needs 200 million Jamaican Dollars. 

Now comes this teeny-weeny country of Russia, which produces pretty much everything on its own, ranging from shoes and toilet paper to space ships, commercial aircraft, cars, what have you. So, say I want to buy in Russia Lada X-Ray Cross in January of 2019 for (let's round) 660, 000 ₽--I go to dealership and pay 660,000 OR $10,000 per existing exchange rate between Ruble and US Dollar then. Now, let's fast forward to March 2020. Say, I decide to buy this model now. Today exchange rate between Ruble and USD is 81 to 1. So, what would I pay for Lada today? Well, same 660,000 ₽, or....drum roll... 660,000/81= $8,148. Compare: $10,000 in December of 2019 to $8,148 in March 2020. So, Lada X-ray (and other Ladas) which, actually do sell quite well in Europe and elsewhere may drop their price in USD thus making these well-made cars even more competitive. What is going on, one may ask. Very simple explanation--unless you buy something abroad for hard currency, such as Russia buying some pharmaceutical products and pays higher price in USD (or EURO) for them due to weakening Ruble and the prices on those grow in Rubles too for domestic market, everything else what is produced home pretty much remains more-or-less unchanged. 

So, yesterday some "brainiaks" from Oilprice.com discover basic math and economic for themselves:

While the ruble is now at its lowest level against the dollar in four years, the cheaper ruble has a silver lining for Russia’s oil producers in the oil price war for market share with Saudi Arabia. The collapse of the OPEC+ deal and oil prices has hit Russia’s financial markets and currency, leading to a sharp drop in the ruble versus the U.S. dollar. The lower the ruble slides against the U.S. dollar, the lower the production costs of Russian oil companies in U.S. dollars are. To be sure, a crumbling ruble is not the preferred outcome of the oil price collapse for Russia’s monetary system and foreign currency reserves. Still, it could help Russian oil firms to have lower costs in U.S. dollars for their operations. According to calculations by Reuters, the lifting cost per barrel of oil equivalent of Russia’s largest oil producer, state-controlled Rosneft, is now lower than the costs of Saudi Arabia’s oil giant Aramco. And this is due to the falling ruble against the dollar. On the other hand, Saudi Arabia’s currency, the riyal, is pegged to the dollar at a fixed exchange rate, so the dollar costs for Saudi Aramco are the same before and after the oil price collapse and the collapse of the OPEC+ coalition. Last year, the average lifting cost in dollars per barrel of oil equivalent of Rosneft was $3.10. This compared to a $2.80 cost per barrel for Saudi Aramco, as per company financials cited by Reuters. The crumbling ruble has now cut Rosneft’s cost to $2.50 per barrel, while Aramco’s cost is the same because of the fixed exchange rate with the riyal peg to the dollar, Reuters calculations show.

Okey-dokey, boys and girls from Oilprice--back to school to study basic facts and please change the stupidest title of the article: Russia’s Unexpected Advantage In The Oil Price War. There is nothing, zilch, nada "unexpected" in this "advantage". It was planned all along and that is why "crumbling Ruble" didn't create any panic in Russia. Yes, overall global situation and the most acute crisis of liberalism will, of course, impact Russia--I already presented one example with medical supplies--but for the country which was re-industrializing like there is no tomorrow since 2007-08, this impact will be limited because not only Russia doesn't have to spent huge volumes of Rubles to buy hard currency but it makes Russia's exports extremely competitive be that selling S-400, SU-35C, Ladas or food, or, of course, hydrocarbons, especially oil. Anyone wants to fight Russia's oil? Good luck with that--costs do matter. So, they begin to suspect something in D.C.

(Bloomberg) -- The Trump administration is pressing Saudi Arabia to dial back its plan to flood the oil market after a price war with Russia sent crude prices crashing to their lowest levels in almost two decades. The U.S. wants Saudi Arabia to hold back on a plan to supply a record 12.3 million barrels a day next month, people familiar with the situation said. It’s asking for the Saudis’ help in bringing oil prices back to where they were before the market cratered in early March, one of the people said. Oil prices have plummeted since Russia and Saudi Arabia failed to reach a deal to cut back production in response to an unprecedented decline in crude demand brought on by the coronavirus pandemic. The market collapse has imperiled hundreds of thousands of jobs, wiped out tens of billions of dollars in capital spending and is threatening to force as many as 70% of U.S. shale drillers into bankruptcy.

My question in this case is this: didn't you, guys, see that coming? Have anyone in D.C. tried to mitigate the problem by engaging Russia, not Saudis, who is in real control of situation? Any diplomacy, any quid-pro-quo? No? Well, then I guess you have only yourself to blame for not having a faintest clue about Russia. Continue chest beating, while Russia will put Saudis on their knees and then will give the United States, yet another, chance to save face and come to the negotiating table. Mnuchin, as we all know, already got the message. But this activity could have been enough 4-5 years ago. Now, it doesn't go too far. Russians do not care about this Saudi shithole, but the United States for Russia are different--Russians know that for the American elites Russia is the most important and deadliest enemy which must be annihilated. So, the framework for any negotiations, thus, changes dramatically. As this Covid-19 spectacle demonstrated so well--only economically self-sufficient countries, with massive REAL sector--yes, manufacturing nearly everything they need for own existence--are the real players on the global arena who have options of escalation, both economically and militarily. Simple as that, because it is basic economics (however grossly simplified here for the sake of example). In related news:

The number of Americans filing for unemployment benefits skyrocketed to a record-breaking 3.283 million for the week ended March 21. Consensus expectations were for 1.64 million claims. The previous record was 695,000 claims filed the week ended October 2, 1982. Initial jobless claims for the week ended March 14 was revised higher to 282,000 from 281,000 and was the largest single-week increase since the Great Recession.

This is just the beginning. It is also yet another demonstration of utter incompetence and ignorance of US "elites" who long ago lost any touch with geopolitical, economic, military and any other realities. But I warned about that for years, yet, this is not the occasion on which I would have satisfaction of being right, because it is not easy to see the old world departing, knowing that for me, and others, there still were some joys and dreams. 

$14.5 Billion Is A Large Chunk Of Money.

But this is precisely the sum India allotted for buying Russian-made weapons. It is a lot. As big defense sales (for Russia) honcho Dmitry Shugaev characterized  (in Russian) this portfolio: it is a breakthrough. As it is known well, India was under non-stop pressure by the United States trying to block India's purchase of S-400 systems. Something tells me, however, judging by the scale of this portfolio that new nuclear powered subs and, ahem, future 5th generation fighters are going to be the part of this whole deal. 

One has to keep in mind that India's contract for French Rafale attracted attention of some serious forces inside India. 

New Delhi: Parliament’s Public Accounts Committee (PAC), headed by Congress’ Adhir Ranjan Chowdhury, has picked up the Rafale jet purchase and the related CAG audit report among 107 subjects shortlisted for scrutiny. Other controversial subjects chosen by the PAC for its scrutiny include the Goods & Services Tax (GST) and its tax collection network GSTN. 

Rafale is an excellent fighter but the deal between France and India whose value is estimated at 7.8 billion Euros was for....36 fighters. This would make Rafale's cost, ahem, roughly 217 million euros a pop, or $240 million a plane. Of course, there were all kinds of caveats, including France investing 50%  of a contract into India's related sectors. The problem with all this is that even if to reduce Rafale's cost by 50%, one gets a price tag of $240/2=120 million a fighter. Rafale is a great aircraft, but it is not that great as to have a price tag of $120 millions. For "fly away cost" Rafale's in 2013 went for around 79 million Euros, or $87 million. Still very high but nowhere near $120 mils. Enter those nasty Russkies. 

Rumor has it that SU-35, which is a monster of a fighter-plane, goes on the market for roughly $65 millions as a base price. Russian-Chinese contract for the regiment (24 planes) of SU-35S is valued at $2 Billion, which makes the cost per single SU-35S (Russian, full capability, version) at around $83 million--still less than Rafale under the most favorable conditions. The math is really simple here. I am not going to go into fanboys' comparison of Rafale and SU-35S, both are superb fighter planes, with Sukhoi having one obvious edge over French fighter--super-maneuverability. But then again, it holds this edge over any aircraft in the world. And, of course, now a juicy SU-57 is towering behind SU-35S and India finds herself in a conundrum. Truth is, Indians love Russian-made weapons. They always did, since good ol' Soviet times and, facing now a true revolution in military affairs, (needless to say India knows this through Joint Russian-Indian Venture Brahmos really well), India wants those technologies. If Turkey can have them (some of them), India for sure, having a long record of friendly relations with USSR/Russia, have more than a fair shot at upgrading herself to cutting edge weapon systems. After all, India is a genuine candidate for crossing into the hypersonic paradigm, with her Brahmos, sometime next decade. 

What else was discussed with Indian side in terms of weapons I don't know and cannot know but the sum of announced portfolio is really gigantic and we all may state pretty confidently that India does it not just for obvious geopolitical considerations towards China and Pakistan, but also having some thoughts about the United States which becomes increasingly unpredictable and, certainly, views Indian Ocean SLOCs, or, rather, their interdiction, as crucial in curtailing China's BRI project. India, meanwhile, wants to view Indian Ocean as India's Lake and that requires even larger investment into the modern navy. Enter those damn Russkies again, wink, wink, who know that India needs ships and, most importantly, subs. And all that, as you may have guessed it already, requires all those enablers, those sensors, combat management systems and other pretty expensive things going under C4ISR moniker.  And then, of course, there are all kinds of joint ventures possible for joint manufacturing of... a lot. So, let's put it this way, Prime Minister Modi had a very fruitful visit to Moscow. 

Armata, Costs And Reality. Again....

When Main Battle Tank T-14 Armata debuted at Moscow's Victory Day Parade in 2015, let's be honest, it created a global media furor. No doubt, together with praises, a truck load of doubts was also dumped on Armata and the main of them all was the issue of costs. Few people argued with the fact that it is the most advanced tank in the world today, but what price? Initial speculations were that the cost will be so high that Russia as a whole may go bankrupt and dissolve after producing 5, 6....8 Armatas tops. Of course, how could it be any other way when "Russian scholars" (mostly from uber-liberal think-tanks, a euphemism for NATO shills) said so.  

Well, realities on the ground, however, are such that 20 Armatas are already serving with Russian Army's regular tank units and undergo what is called "troop trials", a term somewhat related to IOC: Initial Operational Capability. This is after a year since debut at the Red Square. To add insult to injury, or rub the salt into the wounds, of all kinds of Western Russia's ever ignorant "military experts", the CEO of famed Ural Vagon Zavod (Ural Train Cars Factory--yes, Russians love their military technologies pass as train cars or baby food) Oleg Sienko in his recent interview to National Defense magazine confirmed what many suspected all along, that Armata is exactly three times less expensive to produce than Abrams. That means only one thing: if to believe Abrams' (or Leopard's) cost to be $8.62 million, then Armata is $2,87 million. So, does it mean that Russian Army will receive planned 2300 Armatas by 2025 (initially it was stated to be 2020)? It sure as hell looks like it.      

               

Will there be delays, rescheduling, adjustments etc.? Absolutely! It already happened due to economic and geopolitical circumstances.  No state-of-the-art technology ever was procured without that and it is quite normal. But there is no doubt that Russia, yet again, was able to complete a full cycle--from R&D to procurement--of the cutting edge military technology which in the West would have cost....cough...F-35. This technological gap with the West will continue to grow, especially so if Putin will finally make a decision which a whole nation waits from him now. If not, somebody else, not Putin, will be making those decisions but that is a separate matter and a discussion. Meanwhile, Sukhoi T-50 (aka PAK FA) is getting ready to hit serial production in 2017, with new T-50 specific engines to be installed starting from 2018. 

It is not only inevitable but warranted to observe a somewhat peculiar reaction of Western MSM on a stream of real news from Russia. Behind this reaction (Russophrenia) is their never realized but, oh so palpable, "secret" desire to see Russia implode economically and Russians starve and crawl to the West on their knees. Yet, Russia somehow makes more money exporting grain than she does exporting weapons and now is world's leading exporter of wheat, still builds nuclear and diesel ice-breakers, produces micro-processors, launches satellites, builds nuclear power stations and, generally, is not willing to get scared. I guess this costs factor and ability to produce one of, if not the world's best weapons in quantities that deter any aggression is a huge part of the answer. In Russia it is always Si Vis Pacem, Para Bellum and rightly so--this is reality of Russia's history.

Short Bypass (Military Power Related).

Me and others speak constantly on the "bang for a buck" issue of the national military power. Here is an example of real economy translating directly (or almost directly) into the military power. I want to express, before elaborating on the issue, my deepest gratitude to all those OSINT naval enthusiasts from famous Balancer's Air Base Forum for doing a yeomanry work in squeezing out all available open information on Russian Navy. Enter second in Project 11356 class frigates, Admiral Essen. 

She was fully completed and ready to be transferred to Russian Navy two days ago. Thanks to our enthusiasts and, obviously, 1st Federal TV Channel Rossiya, we have a glimpse into the main document which finalized the completion of this ship. Here it is:

                    

One doesn't have to know Russian to see that the final cost of this frigate is 13,650,240,000 Rubles. Let us do some very simple and not so prudent economic math. The exchange rate for Ruble today is 66.2 Rubles for 1 US Dollar. Let's see how much in US Dollars Admiral Essen's cost will be? We divide:

  

      13,650,240,000 ÷ 66.2 ≈ 206,196,978 US Dollars.

Yes, my friends, this ship of 4,000 ton displacement, packing a serious long range and anti-shipping punch in a form of now very well known Kalibrs, having impressive medium range air defense system, robust ASW capability (including 1 ASW helicopter), state of the art sensor and processing suite, good guns, excellent sea keeping properties etc. For 200 million bucks? Yes, exactly--you are not mistaken. Mind you, this is the cost, or, rather, value which will be calculated by all kinds of monetarists, Western and domestic-alike, when "calculating" Russia's GDP. In this case, irresistible and highly warranted question arises--how much such kind of ship would cost in NATO? Well, that is an interesting question. If we are talking about US Navy's LCS, also known as self-propelled 57-mm gun, a single ship of this class, whose combat capabilities compared to Admiral Essen are puny, to put it mildly, costs....drum roll...362 million US Dollars. 1.8 times more for a platform which in the case of Surface Warfare scenarios will not even see what hit it and will have no means of defending itself, forget strike missions. Yet, Admiral Essen (as well as Admiral Grigorovich) is totally capable to strike to a strategic depth and is capable to sink any ship with a single strike with, possibly, one exception of US Navy's massive aircraft carriers. 

You may say, comparison with LCS is not correct (it is, but for the sake of argument), let's see what are the costs of something really comparable, something more frigatish. OK, let's take a look at so called FREMM frigate by France. First, the ship with the displacement in excess of 6,000 tons is not really a frigate, Italy's version of FREMM has a 6,700 ton displacement. Really? How about calling this thing a DDG, not FFG. After all, it is almost twice the standard displacement of Admiral ESSEN. But let's see what this FREMM really packs. It has a very respectable Air-Defense complex and a more advanced, phased array antenna, it also has a very robust ASW suite. It also carries long-range land-attack missile SCALP whose long-range capabilities of about 1,000 km are not even in the same universe as those of Kalibr's  3M14T whose range is 2,500 km. Anti-shipping weapons are represented by venerable subsonic Exocet Block 3 missile, whose range is about 97 nautical miles (180 km). Here, FREMM, whose cost is 670 million Euros (that is 758 million US Dollars) loses massively on both costs and on some very crucial combat capabilities. In the end, anti-shipping version of Kalibr, 3M54T out-ranges Exocet by 480 km while reaching Mach=3 in its terminal phase. 

So, my friends, here we are--a very short review of a bang for a buck. We, of course, could delve into the all kinds of actual coefficients of combat effectiveness, combat stability, probabilities etc. But I suspect, that in the average model of ship to ship engagement of similar FFG classes, Admiral Essen will come out on top most of the time. For a fraction of a price, mind you. But then, of course, we could also compare more expensive, but still way more affordable, Project 22350 Admiral Gorshkov class frigates--here, the combat advantage becomes even more startling while the cost gap narrows somewhat. 

    

               

        

What does it all mean, then? Well, it means only one thing about which I was talking since the inception of this blog--Russia simply produces better weapons for a fraction of the cost and it is true for all of them. This also demonstrates what a pile of steaming shit all those GDP "calculations" are by all kind of international financial shyster organizations. While the relation between exchange rates and costs is, of course, more complex--this simple comparison is more than valid, none the less. Russia can afford to sell state-of-the-art SU-35 for 65 million US Dollars and make a killing, while, US is forced to sell F-35, a wreck of a plane, for....well, judge for yourself. In general, Russia's economy is much smaller than that of, say, US but:

1. It is not as smaller as many try to convince us. In reality the gap, while still fairly large, is not as dramatic;

2. Realities of Russia's economy allow Russia to compete directly in weapons and fields related to them with the combined West and, in fact, beat it in very many fields. As per famous coefficient combat effectiveness/cost--the combined West is not even a real competitor here. 

3. Why it is so--the answer is in Russia's 20th century history, a real one. Learning it is beyond the grasp of most "experts" in the West. But we knew that all along, didn't we?