Ukraine Revolt/Civil War News, Reports, Data, etc.
- Thread starter Jura The idiot
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There are always trade disputes that could cause problems to ones economy. Sanction on Russia so far has caused more pain on Russia than on European nations. As for energy security, oil and natgas is a fungible commodity that does not depend on one supplier. If you haven't noticed, we have over production of oil right now that has caused prices to collapse everywhere. Oil speculators are putting paying to keep oil in tankers hoping for a bounce in prices (which has happened to some degree). In short, there is no shortage of oil. If you look at the brent wti spread, it's at a 4 year low.
So clearly, none of the sanctions have resulted in higher cost of energy for the Europeans. The Europeans economy is weak for fundamental reasons.
I can see that some pro-Russian posters here would want Europeans to really suffer from these sanctions and see that it's unwise to sanction Russia, but it doesn't reflect reality. If you want to attribute any external factors to European economic malaise, you should blame it on the slowdown of Chinese economy than anything else.
While export to Russia is only a small part of European exports there has been a lot of news these last weeks about sectors of the European economy suffering from the Russian sanctions. Some of those markets will not return. Import of fruit and vegetables from other countries will replace the very extensive exports from the Netherlands and some other EU countries while for some industrial products Russian producers are being set up. The pain the Russians feel from their boycott of European products is according to my Dutch newspaper minimal.
No one is disputing that sanctions has caused more pain to Russian economy than European economy. But one has to admit sanctions have negatively affect exporting and manufacturing industries in EU especially in Germany. In other words, Growth is harder to come by when Russian customers don't buy your products due to counter sanctions. And it's somewhat ridiculous think new customers from US or China would magically appear to take over losses from Russian market.
The point is not about availability of oil which we all know is rather abundant in the world market now. It is rather the availability of cheap oil & gas for manufacturers/firms after factoring in shipping costs. Most Russian oil and gas export to Germany is through pipeline which has the one of lowest shipping costs. There is also other additional costs such as legal, supply disruption costs, associated with switching to new sources on a short notice when sanctions hit. All of them eat into the button line or competitiveness of exporters and manufacturers at the very least in a short term basis.
I don't know about specific price of energy for Europeans consumers since I don't live in EU. But for Europeans firms that had been using Russian oil and gas, it is probably reasonable to say there is somewhat a price increase due to more costly shipping, less bargaining power with new suppliers when other manufacturers are switching as well.
I agree with your assessment that EU economy is weak for fundamental reasons. But sanctions on Russia isn't really helping is it? It's like pouring oil onto a fire.
First Europeans are really suffering from Russian sanctions, at least the 300,000 Germans working for exporters dependent on Russian market from the chart I posted early as well as EU farmers that export to Russia. Europeans are not the only one suffering. My friend who is an oil field worker in Alberta just got laid off from his job due to low oil prices. So the reality is people are suffering. Just because you don't see it doesn't mean it's not happening.
I think your bias is clearly showing when assuming pro-Russian posters want to see EU really suffer. If they are truly pro-Russia, they would want EU to prosper so that Russia can benefit from more trading/businesses with an economically strong neighbor. Russia has nothing to gain from a broken EU.
Again I have to reiterate that I believe no one here, me most of all is attributing EU's economic malaise solely on Russian sanctions. You are making a baseless accusation when stating that I am blaming sanctions for EU's economy trouble. My position has always been sanctions on Russia is impacting EU growth which makes harder for EU to pull itself out of current recession. Whether sanctions are worth it is for Europeans to decide. I believe it's not.
No Tphuang you are missing the point as well.
The trouble is I do not want to go too far off topic, and leave the Ukraine crisis to far behind.
The root of the current economic problems was the culmination of bad US based loans that culminated in the Banking train wreck of 2007. What are we are looking however is the effect of the breakdown in Russo/Western relations at a critical juncture of the post apocalypse reconstruction.
For many European companies (especially German ones) Russia was an important and stable emerging market right on the doorstep with a wealth of natural resources which were ripe for opening and exploiting.
As a consequence, many of these companies did one or more (sometimes all) of the above.
Buy shares in Russian companies (usually project specific)
Buy Russian currency to facilitate local trade activity
Invest in Rights in Russian Raw Materials projects
Invest in Industrial facilities in Russia
Invest in Industrial facilities in Eastern Europe aimed at primary and secondary activities based on projections of growth/development in EU/Russian trade.
The key point here is that you are talking about Billions and Billions of Euros committed/invested on the basis of stable growing trade and relations; both the direct bilateral and the indirect regional knock on.
Then came the Ukraine crisis and sanctions........ and suddenly all that investment looks risky and all those assets are in the very wrong place. Suddenly the projections are junk, sanctions force companies to offload shares and currency at huge loss prices.
Expensive Licenses are revoked or left idle
Expensive and often debt financed Industrial facilities are also idle with the loans still needing to be repaid. Worse still the threat of spreading violence sends Insurance premiums soaring and asset values plummeting.
This means that business that went (often with official encouragement) to East Europe and Russia are now risking rolling and escalating losses caused by:
The legal imperative to divest caused by (increasing) sanctions
The loss of physical trade.
The loss of confidence to invest in East Europe and over exposed companies due to massive unsupported investment debt
Irredeemable trading and subsequent balance sheet losses.
Further banking losses caused by same
Further credit freezes by Euro banks and worker layoffs by affected companies in tandem
All of which can easily push more individual EU nations and eventually the combined EU back into recession and a new fiscal crisis caused to loss in confidence in the Euro on account of the damage caused by new excess debt and low/negative Eurozone growth.
None of this by the way is new and German industry in particular has been saying this since Sanctions were first imposed last year.
What is different is that now Merkel and Hollande are listening and recognising that Putin will not back down and that allowing real further damage is just pointless.
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You are also missing the industries in EU countries that are gaining from this sanction. All the financial institutions or funds that have bet against Ukrainian and Russian currencies are making huge amount of money. Whatever they used to import from Russia can now be purchased from other EU countries.
Germany's slowdown has everything to do with struggling economies in the EU peripheral and in Chinese slowdown. Why don't you look up how much Germany is export to EU peripheral and China?
do you know what the brent oil prices is? The oil prices that Germany can get from Brent which is right next to them is at the lowest it has been in years. The brent-wti spread is at a 5 year low, which means the energy price that Germany get is now at a comparable price to what American companies get. That's a huge benefit to German competitiveness. Why don't you use facts rather than what is logical to you?
it's a good time to read up on these things. Oil is a fungible commodity. Thanks to efficient new oil tankers, the cost of transportation isn't as high as you think. A while ago, Venezuelan gov't commented that shipping to China is $3 per barrel more expensive than shipping to US. Look at where brent is, you can get oil there at almost same price you can get it in Texas.
yes low oil price -> less people employed in this industry. Guess what, that's also lower energy prices which leads to better productivity everywhere else. When did lower prices become a bad thing?
As I said, there are industries that are negatively affected by Russian sanctions and there are industries that are positively affected. You can take a look at any particular part of the economy and make your point. There are real issues affecting EU economy and they start with the weakening economy around the world like China, peripheral EU countries, Australia and Canada. Russia is really a very small part of that. I'm not blaming you, my comment was for SampanViking.
Sure there are many German business suffering and complaining, but that's a small part of the bigger problem that Germany has on its hand. btw, Germany is also not the only country in EU.
Consider this when we think about Germany's commitment to Russia.
German taxpayers are responsible for $41.3 billion via the EFSF, with Target2 liabilities of another $11 billion. That's 52 billion
As for German's foreign trade
Russia does not make the list of top 9 export countries on here (I saw $48 billion euro in another web site), but did import 41 billion euro. So, it was running a trade deficit against Russia.
So, the entire export to Russia is less than Germany's liabilities to one peripheral EU country.
and aside from that, things it imported from Russia can now be imported from other eurozone countries or germany itself. That and lower energy cost can stimulate greater demand from other eurozone countries. Other countries spending less importing energy from Russia will now have more money to buy German import.
German export was at an all time high in October of 2014
Germany posted record trade surplus in 2014
These are facts. I didn't make them up..
That's just avoiding/side stepping the main issue of our discussion. The issue in question is are German exporters and manufacturers suffering losses from Russian markets due to sanctions? If so, does that contributing to less revenue for them, less growth for German economy as a whole assuming there is no change in exports to China and EU peripheral? If the answer is affirmative, it begs the question whether sanctions are wise? Besides it's not like an exporter geared for Russian market can change its products at the drop of a hat.
Following your logic is like a CEO of exporter or manufacturing firm saying I don't mind losing Russian market because my loss to China and EU peripheral is even more this year.
It's not a sound economic strategy to just wish other sectors benefiting from Russian sanctions to pick up the slack when the slack can be avoided in the first place.
I know exactly the prices of Brent crude, Western Taxes Immediate, Western Canada Select are. If you want to talk about facts. Can most manufacturing firms using Brent crude as it is? Do you paid Brent crude or WTI price at the pump for your car?
Current worldwide oil price is only factor in estimating input costs for manufacturers. Do Brent crude price include shipping? Since Russian oil is also priced on the world market just as American oil and North sea oil, would Russian oil be cheaper in total cost compared to north sea oil as there is less shipping cost? Are you saying that it is a well support fact that currently shipping oil with tankers is cheaper than shipping with existing pipeline?
Assuming you are right, what about natural gas, something Germany also import in great quantity from Russia? Are you saying that shipping LNG with tankers is cheaper than pipeline?
So those people in affected industries are actually suffering then? Are they going to feel secure about their future when they have lost their jobs? Can they afford the benefits from better productivities from other industries? Would a rational newly unemployed buy a new car because gas price is cheaper? Lower prices can be an awful thing for individuals that can't afford to take advantage of it.
When 0.1% growth for Germany is considered a huge win. I don't think EU can afford to dismiss any opportunities for growth no matter how insignificant.
More about that huge explosion:
The crater is about 10m (30 ft) deep. It is located on the territory of a chemical factory, but it did not hit any of the main buildings. Whether there was any building at the actual location of the explosion is impossible to tell: the earth is black, all the trees scorched and there is nothing left at all. DNR experts estimate the blast as being the equivalent of 1 ton of TNT. The sound of the explosion was heard 50km away. From the shape of the crater, it doe not appear to be a fuel-air explosive (FAE), but 1 ton of equivalent TNT is way bigger than the 500kg HE warhead the Tochka-U can carry. This leads me to believe that the Ukrainians might have used a new weapon or, at least, a modified one. All we know for sure is that it was not a nuclear device. Also, it makes me wonder what in the world they were trying to hit - maybe the chemicals factory, but if that it the case, then the missed by 1000m or so. At this point, I honestly don't know. I also want to remind everybody that the junta has used White Phosphorus again against its own population:
The crater is about 10m (30 ft) deep. It is located on the territory of a chemical factory, but it did not hit any of the main buildings. Whether there was any building at the actual location of the explosion is impossible to tell: the earth is black, all the trees scorched and there is nothing left at all. DNR experts estimate the blast as being the equivalent of 1 ton of TNT. The sound of the explosion was heard 50km away. From the shape of the crater, it doe not appear to be a fuel-air explosive (FAE), but 1 ton of equivalent TNT is way bigger than the 500kg HE warhead the Tochka-U can carry. This leads me to believe that the Ukrainians might have used a new weapon or, at least, a modified one. All we know for sure is that it was not a nuclear device. Also, it makes me wonder what in the world they were trying to hit - maybe the chemicals factory, but if that it the case, then the missed by 1000m or so. At this point, I honestly don't know. I also want to remind everybody that the junta has used White Phosphorus again against its own population: