Tuesday, September 27, 2022

"Who Did It?"

"Who Did It?"
by Brian Maher

"What - or who - did it? That is: What… or who… blasted holes in the Nord Stream pipeline today? AP News reports the particulars: "Explosions rattled the Baltic Sea before unusual leaks were discovered on two natural gas pipelines running underwater from Russia to Germany, seismologists said Tuesday… The first explosion was recorded early Monday southeast of the Danish island of Bornholm, said Bjorn Lund, director of the Swedish National Seismic Network. A second, stronger blast northeast of the island that night was equivalent to a magnitude-2.3 earthquake. Seismic stations in Norway and Finland also registered the explosions. “There’s no doubt this is not an earthquake,” Lund said."

If definitely “not an earthquake,” we wonder, what then jolted the seismometers? We had our men ransack the technical literature. They informed us that the likelihood of two accidental detonations - two near-simultaneous accidental detonations - nears zero. Eurasia Group analysts Henning Gloystein and Jason Bush are with our men. They observe that undersea pipelines are engineered to a very high state of robustness. These tubes are not ruptured easily, they affirm. Moreover, leaks as these are vanishingly rare.

Meantime, Nord Stream AG operates the Nord Stream pipeline apparatus. They insist that "the destruction that happened within one day at three lines of the Nord Stream pipeline system is unprecedented.” These and other pipeline savants therefore lean toward one solitary explanation:

Sabotage. Something did not simply go awry. Someone dynamited holes in the Nord Stream pipeline, purposely and intentionally. That is also the conclusion of Poland’s Prime Minister Mateusz Morawiecki. “We can clearly see that this is an act of sabotage,” he fumes. Meantime, Denmark’s prime minister declared: "It is now the clear assessment by authorities that these are deliberate actions. It was not an accident."

Just so. Yet two critical questions immediately present themselves: Who is responsible?… and why did they do it? Our men hunted up one potential clue…A rival pipeline to Nord Stream - the Baltic Pipe by name - begins conducting Norwegian natural gas to Poland days from now, Oct. 1. The new pipeline could make good some of the energy shortages Europe confronts this winter. A certain Anders Puck Nielsen, with the Royal Danish Defense College, labels the blasts’ timing “conspicuous.” He suggests they were carried out “to send a signal that something could happen to the Norwegian gas.”

Yet the question lingers in the air: Who did it? This Puck Nielsen fellow fingers Russia: "The arrow points in the direction of Russia. No one in the West is interested in having any kind of instability in the energy market… I think if we look at who would actually benefit from disturbances, more chaos on the gas market in Europe, I think there’s basically only one actor right now that actually benefits from more uncertainty, and that is Russia." Many others likewise suspect Russian vandalism.

Incidentally - or not incidentally…The German magazine Der Spiegel reports today that the Central Intelligence Agency warned German authorities weeks ago of possible sabotage against the Nord Stream pipeline. We cannot confirm the report… yet we have put our spies on the case. Yet why would Russia blast holes in its own pipeline?

Mr. Simone Tagliapietra is energy analyst with Belgium’s Bruegel “think tank.” He suggests Russia orchestrated the sabotage to telegraph that it is “breaking forever with Western Europe and Germany” as Poland starts up its pipeline with Norway. AP News reports some believe Moscow dynamited its own pipeline “out of spite” or to remind the West of pipelines’ vulnerabilities.

Yet we are not half so convinced. Media sources have habitually informed us that the Nord Stream pipeline was Russia’s carrot and stick. A carrot in that Russia would open the taps and deliver Europe its desperately natural gas - if Europe would merely abandon its sanctions… A stick in that Russia would choke off Europe in event Europe did not abandon sanctions. In brief, the Nord Stream pipeline represented Russia’s “leverage” over Europe.

Why then would Russia lift its hand from the lever - and shortly before winter - when its leverage is greatest? And if Russia wished to squeeze Europe good… why not simply wreck the new pipeline from Norway to Poland? Europe would do a lot of yelling but how could they prove the Russians did it? Vladimir Putin need only shrug his shoulders in bafflement and denial. He could then remind them that the Nord Stream pipeline is ready to meet their energy needs if only they capitulate - another dangle of the rewarding carrot. And what fresh sanctions could Europe impose on Russia that haven’t already been scheduled?

These are some of the questions flogging our overlabored and sore-beset brain this day. Here is another: Who - besides the Russians - may have executed the sabotage? Who do you think was responsible? Let us know: feedback@dailyreckoning.com

Then read on. Below, Jim Rickards takes apart the media spin to give you the real state of the war in Ukraine. Has Ukraine’s latest offensive turned the tide against Russia? Read on."
"Ukraine: Separating Fact From Fiction"
By Jim Rickards

"How many stories have you read recently about the turning point in the War in Ukraine? The narrative says that the Ukrainian Armed Forces launched a successful counterattack across a broad front south of Kharkiv and extending across the borders of Donetsk and Luhansk. Russians were not only pushed back but they retreated in disarray. Vehicles were abandoned, Russian deserters were everywhere, and Russian morale was low. Ukraine was poised to regain much of the territory it had lost earlier in the war. Putin was under threat at home and might soon be replaced in a coup d’├ętat.

All that was needed was more money and more advanced weapons from the U.S. and its NATO allies and the Russians could be pushed back to Russian territory. Almost every aspect of this narrative is false. Here’s the real story…Ukraine did launch a counteroffensive and it did regain some territory. None of the territories was critical in terms of natural resources, industrial capacity, or logistics nodes except for one relatively minor junction.

The Russian troops who rolled back were not regular army or even mercenaries but something like a local police force organized by the Russians to patrol the villages and towns on the perimeter of Russian control. Those forces were mostly withdrawn safely; very few engaged in an actual confrontation with Ukrainian forces and casualties were light.

The Russians quickly consolidated along interior lines and the stalemate on the Donbas front continues. Except now the Russians have mobilized 300,000 fresh troops and will quickly reinforce and expand their presence in Ukraine. The Ukrainians suffered large casualties in the aftermath of the offensive as a result of Russian artillery barrages.

The Russians will wait for colder weather when their experience and equipment will give them a decisive edge and then push back the line and prepare for new objectives such as Odessa. Meanwhile, the winter will bring Russia’s energy advantage to the fore as Western Europe has to shut down industry, turn down thermostats, and face popular unrest at the high cost of supporting the Ukrainian oligarchs and neo-fascists.

The Ukrainian offensive was little more than a show intended to spin up Western media and open the door for more money to be sent to the oligarchs (much of which gets recycled as campaign contributions to Democrats ahead of the midterm elections). That’s the real story. But you won’t find it in the mainstream media.

Meanwhile, Russia’s been busy on the economic front, and continues its plans to move away from the dollar. We need to confront the reality that the sanctions were a blunder from the start. But the “hate Russia” crowd was so blinded by their contempt for Putin that they plowed ahead regardless. Now the unforeseen consequences are emerging and they’re even worse than the critics imagined.

The globalist elites and Western politicians pursue their fantasies of windmills and solar modules while serious countries like Russia and Iran gain a lock on the only energy supplies that will really matter for the foreseeable future - oil and gas.

Instead of sanctions hurting Russia, it’s making over $21 billion per month from its energy exports. That’s far more than they made before the war, and the Russian ruble is stronger than it was before the war. In fact, the head of the Central Bank of Russia recently cut interest rates because the ruble was too strong. Of course, all the “experts” said that sanctions would cripple the ruble.

Meanwhile the U.S. is in a recession, inflation is at 40-year highs, interest rates are rising and gas and food prices have doubled in the past year. In Europe it’s worse with energy and food shortages looming in the months ahead.

By weaponizing the U.S. dollar, freezing Russia’s assets and ejecting Russia from the global payments systems, the U.S. has forced Russia to consider alternative payment currencies, alternative payment channels and possibly a new global reserve currency including new digital currencies backed by a basket of commodities including gold.

I’ve written a lot lately about efforts to derail the dollar as a leading payment currency. That continues to be an active arena for Russia and others. Any discussion of this requires a careful separation of the roles of a payment currency and a reserve currency. The term reserve currency is applied to the currency of denomination of reserves (usually bonds) held by central banks and finance ministries as the chosen store of value for a country’s net cash accumulation from trade and direct foreign investment. The reserves are not in the form of currency deposits. They are held as bonds, notes, sometimes stocks and other assets predominately denominated in dollars.

Becoming a reserve currency or dislodging an existing reserve currency is a long-term undertaking. It requires a large liquid bond market, and associated features of a bond market such as bank dealers, repo facilities, auctions, and derivatives that can be used for hedging purposes. Above all, it requires a good rule of law so investors can rely on the credit of the bond issuer and seek recourse if that credit is impaired in any way.

A payment currency is different and much easier to implement. It requires a unit of account (which could be Russian rubles, Chinese yuan or even baseball cards), two or more countries willing to accept the payment currency in trade, and reliable payment channels. This is where Russia is making significant progress. Russia has doubled its efforts to create an alternative to the SWIFT payments messaging system from which Russia was ejected last spring.

The new channel is called the System for Transfer of Financial Messages (SPFS in the Russian acronym), which currently has 440 members, including 100 outside of Russia. Russia is also developing the Mir system, which issues bank credit cards. These are an alternative to MasterCard and VISA, which also banned Russia.

These new systems won’t reach full scale overnight, but Russia’s progress suggests they will be more widely used sooner than later. It also means that once these systems become large and liquid enough, there will be no turning back and the dollar will be permanently displaced to the extent users prefer SPFS and Mir. And this is how new reserve currencies eventually emerge - slowly at first, then suddenly."

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