Yves here. This article confirms something reported by Alexander Mercouris: that most if not all Russian oil is transported by Russian ships. And since Russian ships were already being rejected docking at ports in the Europe and the US, it begged the question of why Biden bothered banning Russian oil…since it was already banned.
But the rapid action to shun Russian output and break commercial ties to Russia…based largely on the sanction of the Russian central bank and the designed-to-be-leaky-and-specifically-oil-sparing sanctions. Other key industries in Europe wanted to be exempted. Recall Colonel Smithers’ list from a well-networked lobbyist on February 24:
Banking: Opposed by Austria, France, Germany and Italy. France exposed directly and via Italy.
Energy: Opposed by most member states.
Luxury goods: Opposed by France and Italy. France exposed directly and via Italy.
Diamonds: Opposed by Belgium and the Netherlands.
Railway infrastructure: Opposed by France and Italy.
Yet the lead story in today’s Financial Times is G7 moves to end normal trade relations with Russia. Key sections:
The G7 nations said they would end normal trade relations with Russia on Friday as part of a series of new measures to inflict economic punishment on Moscow for its invasion of Ukraine.
The joint step, first announced by US president Joe Biden, includes revoking Russia’s “most-favoured nation” status, which allows it to trade goods on preferential terms with many western countries under rules set by the World Trade Organization. The move will lead to higher tariffs on many Russian exports.
The G7 agreed on other measures as well, including stopping Russia from obtaining any financing from international institutions such as the IMF and the World Bank…
While the sanctions differ by country, the US and EU said they would ban exports of luxury goods to Russia and impose further curbs on members of Russia’s elite. The US will also create the legal authority for bans on investment in any sector of the Russian economy, beyond energy.
First, the obsession with Russia’s oligarchs is un and potentially counter-productive. The West is under the mistaken impression that they wield political power in Russia, like American billionaires. My understanding is that Putin has cut them down to size in terms of the influence (after all, this would be a necessary condition to prevent further looting, which he does appear to have curbed). So in Russia, the oligarchs are perceived as parasites who got to keep their ill-gotten lucre. Making their lives unpleasant would go over well in Russia.
Moreover, to the extent that these super-rich can sell their non-Russian assets, some if not many would repatriate them if can find a route (likely). The rouble is at a bargain basement level. The withdrawal of Western firms along with Russia’s plan to install new management may create investment opportunities. Many have halted operations yet are still paying staff and rent, but that might not be good enough for the Russian government since the aren’t buying supplies. From a March 10 publication from the Kremlin:
Our core goals include protecting the domestic market and ensuring uninterrupted functioning of enterprises by eliminating disruptions in logistics and production chains and, of course, maintaining employment. It is important to help the people and businesses quickly adapt to the changing circumstances.
Two sets of draft laws with anti-sanction measures as the top priority, that’s about 20 draft laws in all, and the Government acts that are necessary to implement them, have been promptly prepared. They include specific proposals for stabilising financial markets, supporting a number of industries, ensuring sustainability of the domestic private sector, and also proposals for the return of capital to Russia’s jurisdiction.
A draft law to prevent manufacturing shutdowns has been prepared. If foreign owners shut down their facilities without reasonable grounds, the Government is proposing the introduction of external management. Depending on the owner’s decision, this will determine the future of the company. In the process, the key goal will be to maintain profile corporate activities and jobs. Most companies are announcing temporary suspension of operations while preserving jobs and salaries. We will carefully monitor this situation.
Second, there’s no question this move will hurt Russia. But quite honestly, why should Russia be selling goods in dollars when it’s being barred from using them? The West might as well be paying in cowrie shells. And even though Russia clearly needs some products from the US and Europe, like auto and aerospace parts, the West needs Russia’s commodities even more. Oh, and does the removal of most favored nation status means they’ll be subject to tariffs and if so, cost even more? How clever would that be?1
Reader Alphonse provided a persuasive theory yesterday as to why this punitive reflex, which is well into the terrain of being counterproductive, has taken hold:
I posted about this yesterday. An interview with John Robb on the topic is well worth listening to. He directly links with TDS.
Robb says he advised the U.S. government with how to deal with insurgents during the Iraq war. He has a theory of what he calls “open source” insurgency and warfare conducted by distributed networks rather than directed hierarchically. Rather than coordinating with one another, individual actors choose to contribute to a plausible goal (I forget the exact term he uses). Often they are motivated by empathy triggers (again I forget the term).
He says that the reaction of so many companies and organizations sanctioning Ukraine within just a few days could not have been organized by the U.S. government. The network (or swarm) emerged spontaneously in response to empathy triggers coming out of Ukraine. Because of his theory, he says he was tracking this from early days and saw that the first to promote the cancellation were members and organizations of the Resistance to Trump.
The problem with the network is that it has no limits. Regardless of whether Russia gives in, its demands will increase until they include deposing Putin and disarming Russia of its nuclear weapons. Which will never happen: but the network also lacks a sense of its own mortality, so in its monomaniacal focus on punishing Russia it takes no heed of collateral damage and risk, like the risk of nuclear war.
I think this connects with TDS – and also with social justice cancellations and in the persecution of the unvaccinated. The bottom-up emergence of a mass that pursues the destruction of a victim is theorized by Rene Girard in his theory of mimesis and scapegoating, by Mattias Desmet in his theory of mass formation (made famous around Covid), by Hannah Arendt in some of her work on totalitarianism, and some are apparent in the work of Byung-Chul Han, who described the digital swarm of social media. I talk about a bit of this in my comment from yesterday.
I think we are in a very dangerous situation where a non-human entity – the swarm – is pivoting from and attempting to destroy one target after another, pulling our institutions (governments, firms, NGOs) behind in its wake. There is no-one in charge. Even if we avoid blowback from its actions against Russia, the fundamental problem and danger will not go away. Not only do we have no way to establish control or limits over this phenomenon: most of us are not even aware that it is happening, even as we become wrapped up in the mania.
And now to the details on tankers, which confirms Alphonse’s self-sanctioning theme.
By Tsvetana Paraskova, a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. Originally published at OilPrice
Several Russia-owned tankers have been idle at sea for more than a week along European and North American coasts as countries have either banned imports of Russian oil or Russian vessels docking at their ports, all this while many traders and buyers refuse to deal with Russian crude.
As many as nine mid-sized vessels, Aframaxes, owned by Russian state tanker fleet operator Sovcomflot have been idle around North America and Europe for over a week, while a typical idle time for a tanker is a day or two, Bloomberg reported on Friday, quoting ship-tracking data it has compiled.
Many Western countries and companies are not risking touching Russia-linked crude shipped by Sovcomflot, which is majority held by the Russian government.
Sovcomflot, with a total fleet of 110 tankers, owns 52 Aframaxes, which makes it the world’s largest owner of those type of vessels, according to data from Clarksons Research Services cited by Bloomberg.
After the Russian invasion of Ukraine, several countries banned Russian ships from their ports and waters. Canada and the UK were the first. On March 1, Canada prohibited Russian ships and fishing vessels from entering Canadian ports and internal waters. The UK banned on the same day from it ports any vessels “owned or operated by anyone connected to Russia” and said that authorities would also gain new powers to detain Russian vessels.
Two days after the Canadian ban, two Sovcomflot-owned oil tankers rerouted from their destinations in Canada.
In the UK, port workers at a terminal on the River Mersey, from where oil is pumped to Stanlow Oil Refinery, refused last week to unload Russian oil from a Germany-flagged ship.
While Sovcomflot’s tankers in the Pacific do not appear to be idling like the ones near Europe or North America, the problem for the Russian tanker owner could become much worse from now on, considering that a growing number of traders and buyers in Europe will likely be shunning Russia-related crude due to “self-sanctioning” and reputational risks.
1 The G7 action is inconsistent with the results of a summit of EU leaders in Versailles on Thursday, where they were reported as drawing back from further financial sanctions and barring Russian energy.