Some thoughts on Georgia and other Russian actions

When I first went to talk to someone about investing in stocks, it was carefully explained to me that I should not be concerned over daily fluctuations but rather should look at longer-term outcomes of events. So it has been with the recent price fluctuations with fuel, in that I haven’t really been that concerned with the causes of daily, or even weekly ups and downs, since those moves were often in reaction to transient events, but have rather tried to pick out more long-term changes that will have more of a permanent impact. Thus it was just over a month ago that I wrote about a quote from the CEO of Gazprom, which is perhaps (given recent events) worth repeating:

Gazprom forecasts that Russian gas prices will reach 500 U.S. dollars per 1,000 cubic meters by the end of 2008. "If oil prices exceed in the future 250 dollars a barrel, then gas prices will grow to 1,000 dollars per 1,000 cubic meters," Miller said.

I then went on to talk about the visit of the new Russian President to Turkmenistan, Azerbaijan and Kazahkstan to ensure that their supplies of natural gas and oil traveled to the west via Russian pipelines (with appropriate fees along the way) rather than being routed through alternate pipelines, where those fees and the concurrent flow-rate controls would not be available to Russia. If nothing else then, as Gail caught in Open Thread #4 the benefits of investing in alternate pipelines, such as Nabucco for which Turkmenistan gas must first cross the Caspian and then pass through Azerbaijan and Georgia in the Trans-Caspian Pipeline have suddenly become a whole lot less attractive.

It must be born in mind that one does not have to own the initial fuel source itself, if instead one controls the only method by which that fuel can be supplied to the eager customer. This is a lesson that Gazprom has been teaching BP for over a year now. BP discovered, after developing the Kovykta Project that they could not transport the resulting product.
TNK-BP has been locked in conflict with Gazprom over the development of its two major gas projects in Russia as the state seeks to tighten its grip over the energy sector. TNK-BP cannot sell gas from its vast east Siberian Kovykta field or its smaller Rospan unit in western Siberia without Gazprom because of the Russian gas giant's monopoly control over Russia's pipeline network.

The two companies have failed to agree on terms despite numerous offers from TNK-BP for Gazprom to take a substantial stake in both projects. Gazprom has said it is not interested in Kovykta by itself. Russia raised the pressure over the issue last month by declaring TNK-BP to be in violation of its licence to develop Kovykta.

That was in March of last year, and by June 22 an agreement had been signed that brought Gazprom into the picture. However, if BP thought that this was the end of their troubles, they were sadly mistaken. Regulatory pressure and additional pressures from the government have continued

MOSCOW — In another sign of its deepening troubles in Russia, the British oil giant BP has reassigned engineers working at its TNK-BP joint venture to projects outside of Russia.

Most had already left, after police raids, labor inspections and visa complications. But the formal announcement represented another low for BP.

The company is fending off a corporate raid by its Russian partners that is backed by Russian regulatory authorities; part of the strategy has been to expel expatriate staff members from the joint venture.

It is becoming increasingly clear that the joint venture is not wanted in its present format, and that BP will have to renegotiate its dealings in Russia.

The point is made more bluntly by the denial by the Russian authorities of permission for the CEO of the company to work in Russia.

PARIS — The British oil giant, BP, suffered another setback Thursday with its troubled Russian joint venture after a Moscow court disqualified the venture’s chief executive from holding corporate office in Russia for two years.

The chief executive, Robert Dudley, was denied a Russian work visa last month and has been for some weeks in an undisclosed location outside of Russia from which he continues to operate as chief executive. On Thursday, a Russian labor court ruled that he could not work in Russia for two years.

The impact that this is likely to have on BP should not be disregarded.

The TNK-BP venture in the country’s western Siberian oil basin had accounted for nearly all of BP’s reserve growth in recent years, as supplies from Alaska and the North Sea dwindled. The loss of the joint venture would leave its long-term strategy, which had depended heavily on Russia, in tatters.

. . . . . “BP’s long-term strategy was to focus on Russia,” Ms. Tiscareno said. “All of a sudden, it’s like ‘Time for Plan B.’ ”

There is thus, as Mark Twain said, more than one way to skin a cat. However, putting these two together I would first not hurry to dispute Alexei Miller’s projection that oil prices may reach $250 a barrel, and secondly I am going to dust off Michael Klare’s Blood and Oil , although skimming through the section on the Caspian suggests that all that thinking and the policies behind it have suddenly become history.

And on a short anecdotal note, I have been off for three weeks, and at one point in this vacation two cars left Augusta, ME. The first headed down to the airport in Portland, while the second, twenty minutes later left and meandered through Winthrop, up to Canaan in VT (over the covered bridge) for lunch, and then down into Montreal (300-odd miles away). There, after an hour through rush-hour traffic, we reached the airport and waited another hour and a half, before the passengers from the first car arrived. We carried them another 70 miles north, where we attended my niece’s wedding. And, as another anecdote, the bridegroom arrived at the ceremony in a hand-paddled canoe (they had met doing work on coral reefs for some movie that involved Pirates and the Caribbean).

I hope your summer was as much fun as ours, sadly I cannot see that the future will be as promising.

There can be no disputing that Russia is trying to control and monopolize oil transport. Oil and gas are what Russia have, plus nukes and the means to deliver them.

But nor can there be dispute that the US has steadily been taking maximum advantage of the breakup of the former SU to encircle and isolate Russia thru instigating the "color" revolutions, recruiting the pieces in NATO, proposing to place missile sites on their soil, and now instigating the Georgian attack on Ossettia. No matter what the Russians might be up to, the counter-attack was just that, the first instigation that the Russians have firmly rebuffed.

The US no longer has surplus oil (or gas), and is a net importer of oil. Nor is it the industrial powerhouse of yore. And it's financial structure is cracking up. It has only one thing left: a huge world-wide military and intelligence presence. It is the world's superpower, but in decline. I believe that the TPTB are well aware of this decline, and one faction at least believes that this military advantage (real or not, I dread finding out) should be exploited while (and if) it still exists.

The US ruling circles have over and over again employed the tactic of entrapment with various adversaries (and even presumptive allies): Pearl Harbor, Iraq, Afghanistan (Soviets), Panama (Noriega).

The WSJ and other venues are already writing about the mouth-watering taking place among "defense" contractors in the wake of Georgia. The event is being exploited full-scale in US domestic politics. The media, here and in Europe, have shifted very noticably and very rapidly from the first few days of the conflict, where there was some kind of minimum evenhandedness. Now it's a matter of everyone getting on board the "Russia the aggression" train.

It's an extremely dangerous path we are on: a resurgent power that has oil, gas, and nukes, and maybe not too much else, which wants to protect its franchise, v. a declining hyperpower that is deficient in but dependent on oil and gas with little but military brawn.

Think back to WW2. It was the oil and resource starved powers that were the aggressors (not that the "good guys" didn't commit their own retaliatory war crimes in spades, firebombing, nukes, etc.) Despite all pretense to the contrary, the US and Europe are now in a position somewhat analogous to Germany and Japan in WW2.

I dread that you may be right.

This would be short term thinking for TPTB. What would be the objective? Get hold of the resources so they can outlast rival powers by a decade? War is ruinous. This is a time where all efforts should go to peak mitigation and development of alternative energy sources, not war. But while we see signs that leadership understands there is not enough oil production (the Bush quote for instance), we see no sign of mitigation activity that would make sense in the long term.

The only conclusion is their sense of logic is warped.

Exactly right, we must free ourselves of oil dependency as much and as soon as possible:

@ dave
A bit of nitpicking:
Germany was the up-and-coming power, having been put in its place in WWI. Whether it was resource arm or rich had little to do with its upandcomminence. Instead, it had more to do with its new economic power, its tech. prowess, and its demographic dynamics.

Sounds somewhat like China, although we're still waiting for them reaching the tech. cutting edge. Their demog. are also not real dynamic.

Germany had LOTS of coal, making LOTS of steel (cannons, etc..)

Russia might be preparing for "Cold War II", like you suggest, but sadly it has little other than oil. Now it's learning to play this card "right". Hyperpower USA might just have to give up their influence in the Caucasus, for cryin' out loud.

Their logic is power logic, not PO logic. The strategy will be amazingly flexible, once PO is come and gone.

@ holic,
Nice article. However, have you ever tried to tell a child to stop egging on a sibbling / stop letting themselves get egged on, i.e. to get out of the game? The problem with the suggestion is that neither the power brokers in Washington nor in Russia have any plans of getting out of the game.
Power to those that BE is the only game in town...

Cheers, Dom

"Germany had LOTS of coal, making LOTS of steel (cannons, etc..)"

I've been reading William Shirer's Berlin Diary, 1934-1941 recently. He described the hardships the Germans faced in the winter of 1939, 1940 and 1941, with the authorities going so far as forbidding the use of cars and coal, large-scale scrapping of unused iron (including cars from conquered countries) and more.

But you're right, it had a lot to do with the upandcomminence of the people in power, which caught most democracies at the time by surprise (since they desired peace at any cost).

I'm more worried about simply having to collectively bite through hardships, rather than NATO declaring war on Russia.

Russia might be preparing for "Cold War II", like you suggest, but sadly it has little other than oil.

Basides oil, Russia has a very diverse mineral resource base that makes it largely self-sufficient in all metals, natural gas, phosphates, potash, etc. Not to mention having more arable land and fresh water than any other country, both in absolute terms and on a per capita basis (20% of all of the world's fresh water is in just one Russian lake - Baikal). Shrinking population, vast forest resources and extensive electrified rail infrastructure also make it pretty well positioned to survive future resource crises.

Though I agree with your general point, keep in mind that with their generally severe climate constraints, Russia's (Siberia's) vast forest resources are pretty much a one-time windfall. Regrowth rates are generally very slow.

This is true, but less than 20% of Russia's population lives east of the Urals. The regrowth rates in the European part of the country are much faster due to warmer climate and more precipitation compared to Siberia. While on a visit to Russia a few years ago, I had a pleasure to pick wild chanterelles in a forest that only 15 years ago was a Soviet-style collective farm field, now fully overgrown with pine trees. BTW, in Russia forests are largely considered an important food source (mushrooms, berries, hazelnuts, etc. - see Dmitry Orlov), not necessarily a source of wood to be cut and burned. It will be a while before most Russians have to heat their houses with firewood again.

Hey Pete,

I guess I really need to qualify on my appraisal of Russia.
You are most certainly right that Russia has plenty of mineral resources. I won't argue that the trains are a definite advantage.

Now let's look at Japan: Little to no resources (Back then coal and some steel) but success out the kazoo.

Russia's on top of the world and will never be able to change that. It will spend its oil wealth and wonder why it's poor again. It will mine its Uranium under the Siberian dessert and wonder why the US or Japan (ok, probably Europe) is the beneficiary. It will sell its phosphates and potash to those in better climates and buy back the expensive. It will be strong, it will be weak, depending on the long, long business cycle. It will certainly survive.

But will it be a vibrant, dynamic nation like most in Europe, the US and the Far East? For some reason I have my doubts.

I would also warn, that the shrinking population is hardly an advantage, whether world resources are failing or not.

Forests for foraging are different than socio-economic health. My actual statement should be: "Where would Russia be without it's oil and gas wealth?"

Cheers, Dom

What you describe is the economic regime of the 1990s and not today. Russia's GDP is driven mostly by domestic consumption and not raw materials exports. Residential construction in Russia is experiencing explosive growth as is retail. Fossil fuels, Uranium and other minerals are going to be increasingly consumed domestically.

Russia's richness in resources is probably why the communist system survived so long. The land was so rich it could afford the inefficiency of the system. Without the revolution it could have been the World's preeminent economy.

"The only conclusion is their sense of logic is warped."

Not quite. Think it through for a second. It's widely agreed that the US government is bought and paid for by oil-men, right? Heck, they all ARE oil-men... Pretty much the same for all the other world powers. Now, with peak oil, they have a choice: They can throw all their money into alternative technologies decades in advance of peak oil in order to help mitigate the disaster (very few companies survive new technological implementations - look at the airline industry, not one of them has ever made money - ever), in which case they all go bankrupt slowly and lose all their power as the oil companies start to fold one by one OR they can keep the world addicted to oil, so that when the crash inevitably comes, they become far, far richer than they already are as the remaining oil reserves become exponentially more valuable. If you were an oil-man, and had de facto control of the world, what would you do? Bankrupt yourself - or make yourself into a modern-day emperor?

Putin has been reported as suggesting to GW they will start selling US treasury Bonds if the US gets too involved....what a threat with awful consequences.

"Putin has been reported as suggesting to GW they will start selling US treasury Bonds if the US gets too involved....what a threat with awful consequences."

Does that make sense? How many dollars worth of U.S. Treasuries does Russia actually have? How did they get them? Most Russian gas goes to Europe, that is the gas that is not burned inside the borders of Russia or sold to their former sattelites. Russia sells no cars, electronics or aircraft to the U.S., and a small handful of farm tractors. From did all these U.S. Treasuries come?

One would assume that Russia would have a far greater surplus of Euros, and this is indeed interesting. In the U.S. the Euro has often been trumpeted as some sort of "super-currency". There is absolutely NO reason to view the Euro as superior to the dollar, and the Georgian debacle has demonstrated that once more, but I will return to that in a seperate post. But again if anyone will please help, and I will look for it, for the amount of money Russia supposedly has invested in American bonds...thanks,


How many dollars worth of U.S. Treasuries does Russia actually have? How did they get them?

According to the US Treasury, it's about US$60.2 billion, which on its own is not much, since the total is US$2,646.5 billion. Japan, China and the UK are the big ones, but Japan and the UK are unlikely to turn around and shaft the US tomorrow.

Russia got the US money from their oil exports to the US, and also Russian investment; the US has been asking for more Russia investment lately. Yep, the country which "won" the Cold War is asking for a bailout from the one which "lost".

But in currency terms, you'd want to be more worried about China, or the OPEC countries generally; the OPEC countries generally price oil is US$, which makes the US$ an implicitly commodity-backed currency, it used to be gold, now it's oil.

If OPEC were to follow Iran and Venezuela's suggestions and price oil in Euros or else develop their own petrodollar, not only would they have no reason to hold US$170.4 billion in funds, but it'd drop the value of the US$ hugely, since it'd now be backed by... um... debt.

Of course all those countries have substantial investments in the US, the OPEC countries being particularly fond of real estate, so they don't want to tank the US economy, since it'd hurt their own wealth.

Russia could probably do more harm to the US by shutting off their 414,000bbl/day exports to them, this has effectively doubled over five years, making up for drops from the Persian Gulf.

But Russia's real power is over gas and now oil to Europe generally, especially Eastern Europe (about three-quarters Eastern Europe's natural gas comes from Russia). Hurting Europe by turning off or down the tap would hurt Europe directly, and also the US indirectly. If the EU has to pay higher prices for energy, this pushes up the prices of all other goods and services, and leaves the EU with less money to buy US products and lend the US money to bail out its people and credit institutions.

There is absolutely NO reason to view the Euro as superior to the dollar

There's every reason. The US currency is implicitly backed by its use as the oil pricing currency, and by US military might, and a big pile of debts which will never be repaid. And nothing else.

The EU currency is backed by the strength of the economies of a couple of dozen economies. Its diversity gives resiliency - if one country has some idiotic economic policy (say, subprime mortgages and CDOs, or a losing foreign war), it can't fall too far before being saved by the others.

Kiashu -

RE: "The US currency is implicitly backed by its use as the oil pricing currency, and by US military might, and a big pile of debts which will never be repaid. And nothing else."

Do you not have any faith in my great-grandchildren? Once the US has crashed and burned, the resulting currency devaluation will enable the repayment of that debt with pocket change, if anyone has any. It just seems to me that the main tenet in long range planning of the neocons is the destruction of value of the dollar, since I am sure that they know that the fiscal mess they have embraced through their spend-but-don't-tax policies has brought the US economy to a point of collapse.

Oh yeah, and the "full faith and credit" of the US government is behind the US Dollar, just like in the case of the Euro. No wonder it is gaining strength.

Once the US has crashed and burned, the resulting currency devaluation will enable the repayment of that debt with pocket change

You see this, I see this, every other potential investor in US also sees this possibilty. Therefore the risk premium associated with USD holdings increases. In order to attract funds the US must then increase interest rates. Increasing interest rates to placate foreign investors drives up the cost of credit to US householders and firms. This exacerbates the existing credit crunch putting more people out of work, putting more houses into foreclosure, weakening the economy and making it less attractive to foreign investment. This in turn results in a further increase in rates and the downward spiral deepens.

It will not be pretty and your children will not thank you for the world of hurt you have left as your legacy.

It will not be pretty and your children will not thank you for the world of hurt you have left as your legacy.

People in the past had ancestor worship as their religion.

People in the future will have ancestor cursing as their religion.

I'd say the dollar is currently gaining in value as deflation gets a grip on the economy:

Sharp US money supply contraction points to Wall Street crunch ahead

The US money supply has experienced the sharpest contraction in modern history, heightening the risk of a Wall Street crunch and a severe economic slowdown in coming months.

Data compiled by Lombard Street Research shows that the M3 ''broad money" aggregates fell by almost $50bn (£26.8bn) in July, the biggest one-month fall since modern records began in 1959.

"Monthly data for July show that the broad money growth has almost collapsed," said Gabriel Stein, the group's leading monetary economist.

On a three-month basis, the M3 growth rate has fallen from almost 19pc earlier this year to just 2.1pc (annualised) for the period from May to July. This is below the rate of inflation, implying a shrinkage in real terms.

The growth in bank loans has turned negative to a halt since March...

...Monetarists say it is the sharpness of the drop that is most disturbing, rather than the absolute level. Moves of this speed are extremely rare.

Demand for US dollars is rising as fast as the black-hole of deflation is destroying them. The rise in the dollar's international value is probably due in part to the repatriation by the US of foreign investments as everyone scrabbles for cash.

As the money supply contracts the availability of credit declines and the price of credit (interest rates) increase.

The reason for the sudden jump in the value of the dollar is not clear. A partial explanation may be funds liquidating other holdings ( stocks, long commodity trades) and "parking" those funds in Treasuries. There has also been a big investor exit from the GSCs (Fanny, Freddy).

Reuters has an interesting story today:

Large US bank collapse ahead, says ex-IMF economist

SINGAPORE, Aug 19 (Reuters) - The worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world's biggest economy hits further troubles, former IMF chief economist Kenneth Rogoff said

The article describes foreign funds buying US financial stocks as they were thought to be at the bottom of the cycle. If the bottom continues to fall then further investment will be delayed and / or other safe havens sought.

My hunch is we will see oil repriced in a basket of currencies. This will benefit China, Russia and the Gulf states and be negative for the US.

Burgundy: Jeez. Those Bernanke helicopters better hurry up.

I would like to see a post on peak oil vs deflation.

Peak oil implies high oil prices and a yoy decline in oil available to consume. Financial implosion and deflation imply a yoy decline in demand and low energy prices. The question is which one is the stronger force.

Either way we will have economic hardship and energy consumption will decline, but there are differences. If the financial mess is big enough it could hide peak oil for years. If capacity to export oil declines by 4% a year but consumption contracts by 6% a year then we could end up with another glut of cheap oil from over capacity. This perceived glut would quickly evaporate as soon as the economy recovers and we would be deep into depletion with no awareness, infrastructure, or plan.

I'm an amateur in both finance and oil, I know enough to realize that both are going to be big problems but not enough to know which is going to be more powerful in the near term.


Helicopters need fuel and when TSHTF the only helicopters getting the remaining oil will be gunships.

That was yesterday.

Today the dollar is sinking like a stone.


Expect erratic moves in the dollar, against a general sinking to falling trend, from here on out.

Russia could probably do more harm to the US by canceling the so called Megatons to Megawatts program. Because
... One-tenth of America’s electricity comes from fuel made from Russian nuclear warheads!

Perhaps Russia and China have an "agreement" concerning US Treasuries. Together, they could do some very real damage to the US economy. China has been very quiet during the whole Georgia conflict. It will be interesting to see their behavior once the Olympics is finished. I'm already noticing that the table is turning again somewhat with the US$, price of WTI crude, and the DOW just as the Olympics are on their last leg.

Russia holds $65 billion in U.S. securities - really a minor amount compared to Japan ($584B) or China ($503B), and significantly less than the U.K., the oil exporters, Brazil, the Caribbean banking centers or even Luxembourg.

Not that $65B wouldn't be enough to create some havoc in the currency markets. But for now, the Russian incursion into Georgia is probably boosting the dollar via reflexive flight-to-safety investment in treasuries.


Russian government also holds about $100 billion in Fannie Mae and Freddie Mac bonds, although they are apparently trying to limit their exposure in light of recent developments.

Sigh,We all know the answer .I am coming to the conclusion that the wealthy have their hideouts where they ,and their decedents will live as autocrats,with as much of a vestige of modern tech as is left in the world,preserved for their private use.They[those in power]see no way to keep power thru a desperate attempt to prepare for peak...

And then there is this population bottleneck that will start to bite around the time I was supposed to retire...

I have a small permaculture type homestead that will keep me and mine eating,I hope.

I do not think out .gov has the ability ,[after the monkeywrench gang that has been busy smashing all the controls]to deal with the crisis that will be in full force at the first of the year.The world financial system is in the process of melting down to a slag heap,with every one in this administration ,cutting themselves a BIG piece of pie on the way out the door.

We are busy losing 2 wars.

We just got punked by the Russians bigtime.

I honestly though a certain sense of shame might motivate bush to try and make some sort of attempt to start to undo the utter catastrophe that has unleashed on our poor country.Most folks have no idea the true magnitude of the problems headed in their direction

These are the good old days.Enjoy.They will be gone soon.

"Get hold of the resources so they can outlast rival powers by a decade? "

That is EXACTLY their strategy. It's called Last Man Standing. In LMS mitigating the problems that drive the strategy is COMPLETELY irrelevant, and isn't done.

Gotta read the August 18th entry at :

Reality Bites Again

The feeble American response to Russia's assertion of power in the Caucasus of Central Asia was appropriate, since our claims of influence in that part of the world are laughable.

So, this asinine policy has now come to grief. Not only does Russia stand to gain control over the Baku-to-Ceyhan pipeline, but we now have every indication that they will bring the states on its southern flank back into an active sphere of influence, and there is really not a damn thing that the US can pretend to do about it.

Not many know it but Georgia has quite a few billion barrels of oil. It is mostly deep down in the cretaceous. The Russians got all the low hanging fruit. Two companies doing their best to bring on discoveries are Frontera - frr.l and Canargo - cnr. Canargo has a very significant find at Manavi and at Norio has p50 1.5 billion barrels awaiting a farm-out. Potentially there is more then enough enough oil to fund the reconstruction of the country but as events are unfolding when that will be is anybody's guess.

The US and NATO antagonize Russia by meddling in there back yard then act all indignant when Russia responds in kind.Imagine if it were Russia and the US back yard. . oh yea that happened already and was called the Cuban missile crisis and almost started thermonuclear wwIII.It seems to me the lines are being drawn,the pushing and shoving before a fight breaks out.The US is not a rising power and may want a fight before it falls to far.the US, Europe,Australia's. . .Russia china Iran and others.On the bright side WWIII could solve are energy,environmental and many other issues.Like cutting my own head off would solve all of my problems.

hi Ex-Ad.,

Wow! suicidal thinking right out in front.

Well Kunstler obliquely alludes to suicidal-addictive thinking in his quip "*Russia got its house in order under the non-senile, non-alcoholic Vladimir Putin*".

At first I thought he must be comparing to OUR supposed ex-addict, shrub .... the dry drunk. But I guess JHK must have been alluding to Comrade Yeltsin.Urpp.

Israel did massive damage to Lebanon after a few rockets and a few of their soldier were captured. Imagine if a Hezbollah armored column had taken Haifa and killed as many as 2,000 people. That is analogous to the provocation the Russian faced.

If faced with the situation, it is unlikely that the US would have shown the restraint that Russia has.

US lost 2,900 lives and invaded two countries, initiated ongoing conflict in both, and continues to threaten a 3rd.

"US lost 2,900 lives and invaded two countries, initiated ongoing conflict in both, and continues to threaten a 3rd."

To be a little more accurate: "Cheney and others conspired to murder 2,900 fellow-Americans, blamed it on Islamic suicide-jihadist patsies, and used that as an excuse to......."

OK, you may not want to get into the whole Inside Job canoworms here. But for those interested, the sober hard-evidence band-waggon, to a standard of peer-reviewed solidity which can satisfy even the factually-punctilious scientists of this website, is now rolling well, and -- over the past seven years -- has accumulated a lot of impressive material. For those not still struggling with emotional denial (cf. Jim K, G. Monbiot, mahatma Chomsky, Alex Cockburn, Mike Albert [last time I looked], and on) I'll be happy to supply pointers towards the sort of Road-to-Damascus experience which has overtaken a whole lot of previously-sceptical people, including a lot of impressive USAmericans.

Just an illuminating side-issue, perhaps, but pretty relevant to the main topic here.

The Wiki article on Boris Yeltsin is interesting reading for today.... the anniversary of the day Boris faced down the tanks during the putsch of Aug 19, 1991.

Also it quotes Yeltsin's resignation speech, including this:

Today, on this day that is so extraordinarily important for me, I want to say just a few more personal words than usual.
I want to ask for your forgiveness. For the fact that many of the dreams we shared did not come true. And for the fact that what seemed simple to us turned out to be tormentingly difficult. I ask forgiveness for not justifying some hopes of those people who believed that at one stroke, in one spurt, we could leap from the gray, stagnant, totalitarian past into the light, rich, civilized future. I myself believed in this, that we could overcome everything in one spurt.

made me wish longingly for a Truth-Commission-USA .....
hafta go back and read some Orlov today.

"Wow! suicidal thinking right out in front."
i meant it sarcastically but yea part of me is "the sooner shtf the better",lets end this dreary stupid game, reshuffle.

"at one stroke"
"we could overcome everything in one spurt."

thats funny,eloquent speech.

"The US no longer has surplus oil (or gas), and is a net importer of oil."

True, but so what? The US does not have enough fuel to service a 'consumers' paradise' all by itself, but that paradigm is rapidly becoming obsolete, anyway. The greatest shortage in the world is for useful, interesting things for the billions of people to do ... and there is less of this shortage in the US than anywhere else:

" Nor is it the industrial powerhouse of yore. And it's financial structure is cracking up."

Right, the US does not lead the world in pots and pans or vacuum cleaners ... but again, so what? Industry changes; the US has changed and the older 'smokestack' industries have either changed and have been replaced by other industries. (the 'next big thing' will be Alt. Energy ... btw) Is Mexico an industrial power because most US television sets are assembled there? As for finance; it runs in cycles. The most basic is greed and fear, but there are other business cycles and fads and fashions, too. What market capitalism does best is reinvent itself, which it is in the process of doing. There are plenty of inputs, from economists, academia, business, the Courts, pundits ... from this board here ... telling everyone to, 'Do This, no Do That!'.

"It (the US) has only one thing left: a huge world-wide military and intelligence presence. It is the world's superpower, but in decline."

By having a 'huge, world-wide military and intelligence presence' it has allowed most other countries to concentrate on wealth- building instead of developing parallel and redundant military- intelligence apparatuses of their own. I have no problem discussing the serious mistakes the US has made in its choices of how and where it expresses itself militarily (the US should have concentrated on eradicating the Taliban and Al Qaeda in Afghanistan and left Iraq for another time) but the doctrine of a US security umbrella has withstood the tests of time and serious adversaries such as the USSR. Europe is the best example of this; the Eurozone NATO member could certainly increase their defense budgets to counter the apparent increasing threat from Russia, this would be fair from the US standpoint since it currently pays most of NATO's expenses ... but this would also divert large amounts from Eurozone economies now, when they can least afford it. In other words, a practical outcome of the Georgian 'experiment' may be a diversion of funds from Gazprom to Diehl. Historically ... it has been better for the US taxpayer to pay Diehl and for the average French/German/British citizen to heat their houses. Or buy cars or dish washers or ... vacuum cleaners.

"I believe that the TPTB are well aware of this decline, and one faction at least believes that this military advantage (real or not, I dread finding out) should be exploited while (and if) it still exists."

The US military advantages run deep and are cultural. The US has a widening 'vacuum cleaner' gap, but they have advantages in almost all other infrastructures, including direct military support infrastructures which are non-existant in ... Russia or China, for instance.

Currently, the US has a battle- hardened cadre that is quite experienced in all phases of combat. The only other group that can make similar claims is the Taliban!

The Russians in Georgia have not 'won' anything; the longer the Russians stay in Georgia the better chance that place turns into Chechnya. The best friend the Russians have in Georgia is Mikheil Saakashvili. If he is deposed or removed his replacement could be a Dzhokhar Dudayev. The history of the Caucasus is bloody and violent. If Putin has forgotten this and decides to stay, he will quickly be reminded.

If the US does not have CIA or Military intelligence in Georgia it is derelict. The US is nominally a 'friend' of Russia, but ... so what? Countries do not have 'friends' they have interests. The US has interests in the region; Turkey is a NATO member and an ally, the US has relations with the Caspian republics that make use of the commerce lanes that the US pledges to keep open. There is no difference between the US using its influence (and military power if necessary) to keep trans-Caucasus oil pipelines open and using the Navy to keep the Straights of Hormuz open.

Finally, the real question is what the inhabitants of S. Ossetia and Abkhazia stand to 'win' or 'gain' from this nonsense. For centuries the Caucasus has been in vassalage to Russian conquerors. Do Putin's Russians have anything to offer the people who inhabit these provinces?


*** and, furthermore ... ***

Dave,there seems to be a mindset amongst many posters to TOD that the use of nukes in WW11 was a war crime. It wasn't at the time and can't be made retrospective even if you want it that way.
To use nukes now however may or may not be a war crime, but the escalation that would result would almost certainly be a war crime.
We can only hope that the nuclear option is never used but with so many states, including renegade states like North Korea and the US now in possessionit is almost a given.

** renegade states like North Korea ** vs the
non-renegade-desperately-failing-first-to-nuke states like US???

Ah, the renegade states like North Korea AND America means I'm lumping the 2 together. Who knows,after TSHTF North Korea may be a nicer place to live than the US, at least they are used to misery.

It's an extremely dangerous path we are on: a resurgent power that has oil, gas, and nukes, and maybe not too much else, which wants to protect its franchise, v. a declining hyperpower that is deficient in but dependent on oil and gas with little but military brawn.

Every time something scary happens with regards to the oil supply Russia makes money. With oil dropping, It's not surprising that Russia saw now as a good time to stir things up.

Another thing that maybe nobody has considered, what if Iran is responsible for starting the whole thing, South Ossetia is at least ethnically Iranian. Maybe Iran sent in some operatives to provoke the Georgians knowing what Russia would do if Georgia attacked. Iran makes money from high oil prices, and distractions in the world take attention from their nuclear weapons, and space( *cough* ICBM ) ambitions.

Maybe, just maybe, there was some collusion between Iran and Russia on this. Maybe Iran and Russia are going to be more an more friendly in the future with Russia giving Iran discreet help, in exchange for Iran doing scary stuff now and then that jacks up oil prices...

Iran wants to diversify away from Oil revenue anyway. And they can sell their Oil and Gas to India and China. Europe, being part of the west may not seem like an important market for Iran anyway. The west and it's sanctions can go pound sand. Iran may like the idea of the whole Transcaucus being under Russian control, or it may at least abhor the idea of it becoming more and more NATOed.

Russia can sit back and be pleased as Iran makes oil supplies in the middle east insecure, driving up prices and filling Russian coffers, while publically denouncing them. In private, Russia can help it to develop military technology which Iran can sell all over the world to create headaches for the west.

As the US leaves Iraq, Iran and ( now-shiite ruled ) Iraq will probably become either buddies, or maybe even merge somehow. Then they can concentrate on getting sufficient nukes to menace the Saudis with impunity with an eye on annexing them.

Of course the above is just what-if. And see what people think of the idea...

Terrorists blow up BTC pipeline. Russians invade Georgia. Oil price crashes.

HO - it seems that for every heartbeat of the oil price the morons writing drivel for the mainstream press and financial press have a ready reason to hand.

The reason for the steady decline in the oil price can of course be explained by simple supply and demand dynamics. As Rembrandt reported yesterday, global liquids production hit a new record, up 890K barrels from June to July. And high oil price is certainly squashing demand here in the UK.

Events in Russia are interesting to observe, especially wrt BP TNK. TNK has in fact been an albatross around BP's neck. I can't recall the details, but the terms of the PSA (production sharing agreement) are highly unfavorable for BP - price down in the $20s somewhere - and this is what happens when the oil industry lives in the dream world of abundant, infinite, resources. Its actually very queer.

I was surprised to see Russian oil production ticking up again last month but fully expect Russia to join KSA in swing production. Email chat behind the scenes here about Brazil and Russia joining OPEC. You'd think Brazil would be better served joining the OECD and Russia the EU. But it will certainly make for interesting viewing to see Putin visit KSA and suggesting to the Sauds that their interests are perhaps best served selling their remaining oil at $250 / bbl. Afterall, the inflationary sting of this year's price rises drop out of the equation next year.

Terrorists blow up BTC pipeline. Russians invade Georgia. Oil price crashes.

Hey, that triggers a conspiracy theory... stop me if you've heard it before!

US/Saudi conspired to crash the oil price, because they saw the Georgian war coming.

Sounds nutty, because the conventional wisdom is that the US didn't see anything coming. I think it just as likely that they could see it coming, but were absolutely powerless to prevent it (Sakashvili being a genuine loose cannon, and the Russians instigating the provocations by the South Ossetians to which Sak over-reacted)

I am wondering if the arrangement is as unfavorable as you suggest. I think it actually may have been fairly favorable, and that is the problem. All of the controversy wouldn't make sense, if it were very unfavorable. This is what Tom Whipple writes in ASPO-USA's Peak Oil Review (emphasis added):

When the BP-TNK partnership was set up in 2003, it was seen as an important partnership of Russian capitalism and international oil. As oil prices soared, however, Moscow came to appreciate that foreign oil companies were making large profits in comparison to their investments by producing and selling Russian oil. In the last four years the Kremlin has moved to bring Russia’s oil industry back under state control. Now it seems to be BP’s turn.

For many months BPs four Russian billionaire partners have waged a campaign to oust the BP- appointed foreign managers and replace them with Russians. The Kremlin has injected itself into the “dispute” by withholding work visas, conducting police raids, and all manner of state harassment of the British.

The 50-50 joint venture, which produces 1.4 million b/d, is very important to BP as it constitutes a fifth of its reserves and a quarter of its production. Despite Russian claims that the partnership needs new management, BP maintains that all is going well with production increasing. Many foreign observers already foresee the end of BP participation in the venture. Moscow has decided that its oil has become too valuable to left in the hands of foreign capitalists and will eventually bring it all under state control.

BP produces more oil than Exxon - largely a result of TNK

Mkt cap of BP is £95 billion and PE is 9.4
Mkt cap of Exxon is £200 billion and PE is 9.5

So Exxon are deriving much, much higher earnings on lower production. I'm told that Exxon would never have touched TNK since it does not meet their return on capital requirements.

When you're locked into low prices and you have hyper inflation in services its bad news.

The curious thing is that the Russians have probably benefited from BPs field and facilities management expertise and so it is strange they are giving them such a hard time.

This is what BP reports as their financial results as of June 30 for TNK-BP:

BP's reported profits on TNK-BP are about $2.1 billion. This is about 12% of BP's total profits of $16.9 billion.

I haven't studied cost accounting for oil companies to understand exactly how development costs are amortized over the life of the project, but I would expect that the profit calculation includes at least some such amortization. It seems to me that if Russia takes the project over, its cost for BP's share of development costs is whatever little it chooses to pay BP. Going forward, it has all of the undeveloped reserves that it can make a profit on, with relatively little development costs. This is likely to give Russia in a much more favorable cost structure than BP had.


So Russia does the United States a great favor and we are too dumb to recognize it…well, not quite, because if we admitted that it was a favor, the U.S. would lose many of the staggering advantages the Russians have given us by their recent actions in Georgia. We must act outraged, shocked, {SHOCKED!} by this barbaric outrage!

It was with great amusement that I watched on television as just today Secretary of State Condoleezza Rice was scolding Russia for using military force against a sovereign state, bombing commercial and transport facilities and wanting it both ways in “wanting to be a partner but still acting like it was the Cold War.” Thank heaven the U.S. would never behave in such a way (!)…oh wait, never mind that point…

But just as the U.S. misadventure in Iraq was a gift to our enemies (and trading competitors) so the Russian misadventure in Georgia will prove to be a gift to Russian enemies and trading competitors (uh, that would be us) and it will act as such in many of the same ways. Here are a few thoughts:

-There seems to be a belief among some folks that war is expensive for the U.S. while it is somehow free for everyone else. I am going to make the assumption that this is not the case, and that the Russian adventure in Georgia is going to cost them money. How much we cannot know. If this adventure is a “war of weeks, not months” as our adventure in Iraq was promised to be, then they will come out o.k., but what if much like our little misadventure, it turns to be a war of years, not months?

It all looks so easy, doesn’t it? Just roll your tanks, take over the country, and settle into a controlled occupation. But then, the problems start. Snipers take a few pot shots at your troops just to let you know this is not going to be so easy. Third parties start sneaking across the border at night. Some of your troops get a little drunk and crazy and murder and rape some of the locals. A bomb goes off near your troops, and then another. Civilians who “collaborate” with you are murdered. The longer the Russians stay in Georgia the greater the danger for them becomes. But like the Americans in Iraq who were a long time past Vietnam, the Russians are a long way past Afghanistan, hell, that’s our baby now. But it all looks so easy at the start.

-On the day the Russian tanks and troops rolled out for Georgia an arguable case can be made that the United States was (and I hate to have to say this, but all facts seem to indicate it) one of the most reviled nations on Earth. After the attack on the Twin Towers on 9/11 the sympathy of the world was with the U.S. Every one saw the attack for what it was, a horrific mass murder of innocent civilians of all races and faiths, and saw the U.S. as the victim.

The nations of the world even joined us in combat in Afghanistan in our attempt to root out Bin Laden. But then we went too far in the eyes of the world. Our government fell under the sway of the “Will To Power” crowd of the Neo cons. Our clumsy and awkward bid to assert our “power” in Iraq was condemned throughout the world. Our adversaries in Europe, Russia, China, and India smirked into their sleeve watching us throw away the international sympathy we had gained, and secretly enjoyed seeing us convert it into international revulsion. Sure, they could say, we had been right to defend ourselves in Afghanistan, but the Iraq thing, that was going too far, that was using a tragic event as justification for overreach and adventurism.

Now allow me to ask, how long will it be until the world starts to see the Russian “Georgian Adventure” in exactly the same light? And if a Georgian “insurrection” begins to spring up, and the Russians actually have to begin a campaign of…well, killing people, because as we have learned that is what happens in wars, how much will this little adventure cost Russia in prestige, in world respect? You don’t have to ask the U.S., we already know the hard way.

-So while the U.S. can act righteous in public, in secret we must surely be hoping the Russians try to stay in Georgia for a long time. The Cabinets and intellectuals of other former republics of the Soviet Union are now meeting in emergency and secret sessions I assure you, and some European intellectuals have surely arrived at the conclusion that the only way to avoid being next, or living in the shadow of permanent Russian blackmail of being next is to make this little “Georgian Adventure” as expensive as possible for the Russians. Again there is a parallel to the U.S. situation in Iraq, because what horrific problems George Bush the elder so astutely avoided in Iraq War I his son found in spades in Iraq War II, likewise the horrors that Gorbachev and Yeltsin so wisely avoided in the original breakup of the Soviet Union will now be found in spades in the effort to reconstitute it.

-On the day of the Russian invasion of Georgia, the European Community seemed to be mostly annoyed, not threatened, not really angry, but mostly annoyed. This annoyance will soon rise to full blown anger as Russia’s little “Georgian Adventure” begins to cost them real money.

Says Barrons Online on Aug 17th: “By Friday, the dollar had appreciated for 11 straight days against the euro, and it has never strung together a 12-day run."

Currencies around the world from the Romanian leu to the Japanese Yen have gained on the Euro, but the dollar rebound against the Euro has been one of the great underreported stories of this whole “Georgian Adventure”. Last week the U.S. dollar staged the biggest single week rally against the Euro in the history of the Euro since the inception of the currency. Gee you would have thought someone would have noticed…

Make no mistake, someone did. The European Union now has a bit of a noticeable problem. Beside hawking to the world a currency that has no real “Union” behind it (the European Constitutional reforms being voted down by public mandate in the majority of European nations that have put it to the vote and the charter members of the Euro Community being out of compliance with the original memorandums of understanding that form the very base of the organization) they are now also the site of a war zone.

Notice we are leaving aside Europe’s catastrophic demographic composition and it’s mandated contractual social obligations to the elderly, low income and unemployed populations, and we are leaving aside that one of the participants in the southern Euro war zone is also Europe’s primary source of natural gas. More problematical is that Europe, beside being essentially financially powerless is also militarily powerless. The average age of the European military is somewhere around 40, and the continent has not developed a comprehensive new strategic weapons system since the 1970’s (leaving aside a few bits of hardware sold to third world potentates to control their home populations.)


So the real headline of this whole story is one that some very astute intellectuals have long discussed, and it could read something like this”:

“Can the Euro Survive the Truth as Exposed by War on Europe’s Southern Flank?”

In closing, let us look at the U.S. situation vs. Europe as we confront this little “Georgian Adventure”.

The U.S., unlike Europe is still able to provide for most of our own home consumption of our natural gas, and what little we import comes from (for the moment) friendly border countries (Canada and the island nations of Trinidad and Tobago)

The U.S. already has a strong and battle tested military machine with logistical support scattered around the world.

The U.S. is in a better demographic position than Europe by far. We do not have the contractual debt obligations to our own people that Europe does, and we have not conditioned our population to expect the government to come to the aid of the population when they are in need. {In fact, after Hurricane Katrina and the loss of homes in the latest “mortgage crisis” most Americans are well trained NOT to assume the government will help them.}

The U.S. does not rely on exports in the way that Europe and Asia do to maintain employment and income. The U.S. operates with a much more service based economy, and one that relies on internal trade. This is a huge factor. Our major export is agricultural products which as we have recently seen, even our enemies cannot easily do without.

Perhaps the greatest asset the U.S. has in these troublesome times is one that is hardest to measure but may well be of the most value: Economic and Political Unity:

Not one of the fifty U.S. States seriously doubts that the U.S. dollar should be the currency of usage in the U.S. We have one central bank, and hated though it may be by many, it stabilizes our currency in a way that the unwieldy “European Union” can never in the long run stabilize the Euro. At this moment, no nations seriously want to leave the Union, and frankly, after the example of the Civil War, they know they could not even if they wanted to. It may be sad to have to say this, but there are occasions when the power of force can be a stabilizing factor. (If France decided tomorrow to give up on the whole Euro experiment, who could stop that nuclear armed member of the Euro Community from leaving?)

The Russian adventure in Georgia was a clumsy move. Some make the argument that it was the result of provocation by the United States. If so, the Russians were clumsy in allowing themselves to be sucked into the trap, just as the United States was clumsy to allow itself to be sucked into the trap that was Iraq.

It remains to be seen whether the Russian’s are now under the sway politically and philosophically of a “Will To Power” cult of their own, as we in the U.S. were in 2001. Russia has done itself much damage, and as the United States can tell them from our own hard experience, the longer they stay, the more damage they are liable to suffer. Every European nation, especially former Soviet republics, have a motive to make this Russian adventure an expensive failure.

But it is Europe and the Europeans who may suffer most. Trillions of dollars are looking for somewhere to be invested in the world, trade relations are being made, oil money is overdue to be invested outside of the Middle East. How many international bankers see the Euro and the Euro zone as the model of stability, or Europeans as the “Uber Men” of world finance in the way they were seen only a few weeks ago?

As the European myth of world power is laid to rest by what the Russian “Georgian Adventure” reveals, the disdain, even hatred of the Russians will grow in Europe. The Russians will receive and be able to share with the U.S. the vitriol from the Europeans and the vengefulness of their international representatives, bankers, journalists, educators, and intellectuals as the cultural voices of Europe attempt to sow trouble for Russia (as they long have for the U.S.) throughout the developing and third world where the Europeans still hold a great deal of sway and cultural and philosophical influence. To the Russians I can only say enjoy it, it couldn’t have happened to a nicer bunch of guys. An old joke: Russia decided to surround the West with hostile Communist nations. Much to the dismay of Russians they looked around one day and saw they were the ones surrounded by hostile Communist nations!

After the Georgia adventure, Russia will be surrounded by hostile nations, they just may or may not be Communist.


But just as the U.S. misadventure in Iraq was a gift to our enemies (and trading competitors) so the Russian misadventure in Georgia will prove to be a gift to Russian enemies and trading competitors (uh, that would be us)

You seem to assume that war is a zero-sum game. That's absurd. Nobody benefited from the US misadventure in Iraq. Nobody.

Likewise, if the Russians are dumb enough to remain in Georgia, it will cost them dearly. (But they aren't. They are waiting to be asked nicely before leaving.)

War is a destroyer of wealth, commerce, trust, etc. Europe is a loser from this war, sure, because trust and interdependency between the EU and Russia are mutually beneficial, and this is a setback for both. But most likely a temporary one. And you seem to have a weak grasp of European geography : Georgia is only arguably part of Europe (they are part of the Euro football organisation, but not part of the Eurovision song contest!), has no common borders with EU members and is very far indeed from the economically useful parts of Europe.

I see no correlation in the medium term with the value of the Euro or the US dollar. Dollar appreciation in recent weeks has been mostly about the decline in commodities -- the money has to go somewhere, and in a crisis, it seems the $US still has refuge status.

Medium term, I disagree with your assessment that the US is better-positioned than Europe -- the US may not be dependent on exports, but it is very, very dependent on imports, which it will have a lot of trouble paying for.

In any case, I don't understand the reasons for your glee in predicting Euro decline... again, it's not a zero-sum game, and Europe's loss is bad for the USA too. Perhaps the most lasting legacy of GWB's presidency is the weakening of the EU as a geopolitical entity. I can understand why he thought that would be a good idea, but you??

The Russians have been in Georgia since 1802, annexation 1803 after having been asked to help out back then ..

1. How can you compare a "border dispute" with Georgia with the US's occupation of IRAQ, which is 1/4 of the way around the world? Besides, occupying Georgia (if they really feel they need to) is not like trying to occupy Afganistan.

2. Euro-stability is the actual surprise, not the new dollar "strength". There were plenty of observers who were sure that the Euro wouldn't last 10 years. You would be surprised what sovereignty the individual countries have given up - and can't just take back if they so choose. Yes, the people have voted time and again against its constitutions and will continue to do so. Will that stop anything? No. TPTB - also those in America - are for the Euro thing. So it will be.

Cheers, Dom

Dom said, "There were plenty of observers who were sure that the Euro wouldn't last 10 years."

On that I think you are absolutely right. So say it lasts 20 instead, it still won't be any fun for the ones left holding the bag (especially the Europeans)...the myth of European superiority has proven one of the most pervasive in history, ranking right up there with the Americans belief in their own superiority. I hate to have to say it exactly this way, but there is a whole world out there where the white folks don't live...


Hi Rog,

I'm wondering what "the myth of European superiority" has to do with the Euro? One is a new and successful currency - an historical "consolidation" if you will, trying to pull the remains of the European former colonial powers together on an economic basis. Only the UK has been able to thwart the consolidation (monetary union) completely, mostly by allying with the US.

Now, what's up with the myth of superiority? What's race have to do with it?
I am of the opinion that the Euro won't only last the next 50 years but that continental Europe will do one of the better jobs with PO.

Will the Euro replace the US as the world's default currency? Not any time soon. The monetary policies are nowhere near expansionistic enough...

Cheers, Dom

That's absurd. Nobody benefited from the US misadventure in Iraq. Nobody.

Huh? Are you telling me the BAE, EADS and Lockheed-Martin have not profited from Iraq? What about PMCs like Blackwater? What about Halliburton? Someone always benefits. War may destroy wealth and commerce but it also redistributes it. In the case of the BTC pipeline, Russia clearly wanted to destroy that trade for now. And blowing up that East-West railway bridge was clearly intended as well - presumably to redistribute power.

OK let me clarify that :

NO nation benefits from the Iraq war. Russia did not benefit from the Iraq war, nor did the USA. Halliburton, Blackwater, the military-industrial complex in general; sure. Certain economic benefits (mopping up unemployment, general trickle-down on war spending). Net result, heavily negative. Even if you argue that the war is paid for with free money (funded by debt which will never be repaid) then it would have been infinitely better just to pour that money down a black hole -- then it wouldn't have destroyed other people's resources and lives. War is wealth destruction on a grand scale, pretty much by definition.

Arguably, closing down the railway bridge and the pipelines in Georgia, and by implication, asserting a monopoly on oil and gas flows in the region may provide economic benefits to Russia that outweigh the direct and (impossible to measure) indirect costs of the war to Russia. For Georgia, on the other hand, there is no upside. Which is why they should have avoided war at all costs.

Apparently they thought being a "US ally", and having a paid lobbyist heading J mcC's foreign policy staff, was protection enough.

Which leads to another conspiracy theory : J mcC has obtained a considerable bounce in polling from this faraway war. Any sort of war, but especially with Russia as the bad guy, was ideal for him. Is it far-fetched to imagine that he used his close connections to Sakashvili (and to the current US admin) to manipulate them into the war? The result of the war doesn't matter to him, if it allows him to win the election. This would make him, of course, an objective ally of Putin, who gains strategic advantage in exchange for giving McC a domestic political boost.

Nobody benefited from the US misadventure in Iraq.

I think Iran has benefited. They got rid of a hostile Sunni government in a neighbor who had attacked them before and had its government replaced by a friendly Shiite government. Their most important enemy, the US, was severely weakened, both militarily and in its moral standing in the world. Shiites now dominate in two of the three largest oil states in the Gulf and have large populations in the oil producing areas of the other main producers there. Iran's geopolitical position has been significantly strengthened. This has also given them time and cover to advance their nuclear program. The war has also arguably contributed to rising oil prices, by suppressing Iraqi production and increasing the risk premium, which has helped then financially.

RC, It sounds like your trying to convince yourself (with a massively long post) why the US is in a strategically superior position, and how Russia has made such a huge blunder. However, if it was such a big mistake by Russia, then why is Bush & co. reacting so dramatically about the situation? OIL. The same three letters that define the invasion, based on manufactured reasons, into Iraq. Fact is the US is in a terrible strategic position regarding oil, especially now that Russia has taken control of oil flow through Georgia.

Agreed that on the one hand US is in an improved position having invaded Iraq, whose territory, voluntarily or not, allows the US a tenable position to place land forces and airbases to protect the vital suni oil resource lands from aggressive shi'ite neighbours.

But it is also a very difficult position overall to defend if pushing ever starts in earnest. Iran is a powerful potential adversary with very easy access to the choke-point of the Persian Gulf, and Pakistan is essentially a hot pot at full boil, with only Musharef keeping the lid mostly on with a loyal military. But that loyal military must be starting to wonder when the due rewards will start to materialize, in terms of western economic standards. Iran being nuclear-capable is essentially a non-issue the minute a coup occurs in Pakistan.

It wouldn't surprise me a bit to start to see significant effort going into development of alternative pathways to get oil out of KSA / Kuwait / UAE etc without needing to run ships in-out of the Persian Gulf. Perhaps tanker loading facilities on the Red Sea?

Of course all bets go off if / when a coup happens in KSA.

...Pakistan is essentially a hot pot at full boil, with only Musharef keeping the lid mostly on...

Musharraf Resigns as President of Pakistan

After Putin in Georgia, all we need is a bunch of Taliban nut-cases controlling Pakistan's nukes.

(searches for communicator) "Beam me up Scotty - NOW!!!"

why is Bush & co. reacting so dramatically about the situation

I think it might be to help the Republicans in the coming election. McCain is leading by 55%-27% in the polls in the perception of how he is handling this issue.

I would not put it past the Bushies to have provoked this crisis to help McCain. It would not have taken much to convince the loose canon Georgian president that this was a good time to take South Ossetia by force. Even in losing as he did the Republicans come out ahead.

The CIA, and likely the McCain campaign (whose foreign policy chief is a Georgia lobbyist), had to know that the Georgian armored attack of South Ossetia was coming. We have been training and equipping their army and this was probably the biggest combat mission they ever conducted.

McCain's campaign director was a paid lobbyist for Georgia. Other members of his firm still represent Georgia.

The United States is Georgia’s closest ally. It maintained about 130 military advisers in Georgia, along with civilian advisers, contractors involved in all aspects of the Georgian government and people doing business in Georgia. It is inconceivable that the Americans were unaware of Georgia’s mobilization and intentions. It is also inconceivable that the Americans were unaware that the Russians had deployed substantial forces on the South Ossetian frontier. U.S. technical intelligence, from satellite imagery and signals intelligence to unmanned aerial vehicles, could not miss the fact that thousands of Russian troops were moving to forward positions. The Russians clearly knew the Georgians were ready to move. How could the United States not be aware of the Russians? Indeed, given the posture of Russian troops, how could intelligence analysts have missed the possibility that the Russians had laid a trap, hoping for a Georgian invasion to justify its own counterattack?

Another web source that I cannot now locate quoted US military personnel stating that they were aware of the Russian build-up. They were also aware of a Russian troop exercise in early spring which appears to be a dress rehersal for the Russian riposte. A second web source stated that a contingent of 1,000 US marines departed Georgia in the days before Georgia undertook its advance.

I can see McCain or his advisers seeking to create a situation that works to his advantage but I cannot see Bush participating in a scenario which makes him and his adminstration look even more incompetent.

The possibilty of this conflict cementing relations between Iran and Russia as they both now share a potential adversary greatly undermines US regional security interests. The US reveals itself as 1) incompetent; 2) a paper tiger; this will undermine US standing with the Gulf States. These are autocratic Kingdoms and the Bush attempt to introduce western democracy to the region directly threatens their long term hold on power. The Bush attempt to talk down the price of oil impacts their economic interests. Putin is autocratic, has advanced weaponry, shares an interest in high FF prices, and has shown the world that he has cojones and is not about to let Bush bluster prevent him from advancing Russia's interests. I can see the Gulf states taking a liking to him.

I cannot think of any prior US president who has done greater damage to American interests.

I cannot see Bush participating in a scenario which makes him and his adminstration look even more incompetent

Do you think the coverage of this makes this look like a Bush screw up? Hardly anyone in the MSM realizes or is willing to contemplate that Bush/Cheney/some other neocon whack job might have been complicit in this for reasons such as I mentioned. I think they just wanted an October Surprise that would let them do all kinds of cold war posturing. Now everyone in the press is afraid to not be outraged at the Russians and it is definitely helping McCain in the polls.

The timing of the departure of the Marines is suspicious. The Georgians could not have attacked with them there. If the US military knew that the Russian military was deploying as if for a large action, they would have to have told the Georgians. Were they calling what they thought was the Russian's bluff?

Dunno if it is a screw-up from the Bush-Cheney POV.
The American public seems to have got behind McCain on the issue, and his approval ratings have increased and the gap narrowed to Obama.
Doubtless strategists are looking at how much McCain's rating would be likely to increase with a strike on Iran in October.
It crosses my mind that some may be figuring that the Georgian manoeuvre is a good ploy to drag Russia in to defend Iran, and their calculation is that they can then take them out with precision weapons whilst the Russians presumably are thought to be bluffing on the use of tactical nukes.
Maybe the hope is that the oil supplies of the Middle East and Caspian are both then secured, with Israel obliterating Syria in the confusion.
Insane? Sure, but that does not seem to be an impediment to planning.

Dunno if it is a screw-up from the Bush-Cheney POV.

I agree. The Republicans are in such disrepute that even though Obama is a weak candidate he is likely to win unless they can change the whole dynamics and make the election about national security. Here was a way to raise the specter of a resurgent Soviet Union and get back to their previously winning cold war political attacks.

I am not sure I follow or agree with all your geopolitical twists and turns after that but we certainly agree that none of that can happen if the Republicans do not win the election. If this Georgia crisis all blows over before November expect that they will provoke some other crisis to scare the American electorate and steal another election. Expect them to keep stirring this pot. Right now the Republicans are winning.

Those 'geopolitical twists and turns' are just me trying to re-create, probably unsuccessfully, the rationalisations of people who appear to me to be fundamentally lunatic.

However, that does not rule them out of contention - anyone who has read Shirer's 'Rise and Fall of the Third Reich' and followed the course to the Second World War outlined there is familiar with some of the crazy mixtures of over-confidence and wishful thinking which can actuate policy.

Nor is the Second World War an isolated incident - the First was perhaps and even more egregious example of plans running on their own momentum, with the fundamental position that even if they could not see any way to a good outcome, the thing to do was to press on and hope for the best.

Examples could be multiplied, from every era.

I am just desperately hoping that we are not seeing an action re-play.

Those are apt analogies since this might well be the beginning of the Third World War.

OK I've been reading the oildrum for a while now, and found it quite interesting. Sometimes enlightening and sometimes confusing (I can't say that I really understand most of the reasoning and arguments, and the complexity of the issues being discussed is rather bewildering). But.... I hope to be able to continue reading this stuff and learn something from it.

The reason I just signed up is because I would like to hasten the process of learning by maybe occasionally asking a (possibly dumb) question.

Now for my first question...

I've seen several people commenting on the fact that the situation in Georgia may help McCain in the presidential election. This may be obvious to one who's more familiar with the current US politics... but would anyone care to elaborate why the War in Georgia would be favorable to McCain?



Because the Republicans have long established positioning as the military party and the party that favors aggressive action. In a crisis, people lose their rational judgment and tend to follow the most belligerent leader. They worry that a candidate like Obama, who urges conciliation and rational judgment, will be tricked by our enemies due to his inexperience and his "weakness".

Once the crisis has passed, they might realize that they have been conned, but while they feel threatened, they tend to side with the tougher leader. If the Republicans can keep the pot boiling until the beginning of November, McCain might be able to pull off a miraculous upset. It seems to be working now but the US press has not caught on yet due to their lack of objectivity about Obama.

It baffles me too, but turn on CNN and check out the poll ratings - McCain is hammering Obama on the issue, so presumably a really serious dust-up in Iran would send McCain's ratings sky high.

An attack on Iran would have such disastrous short term consequences that it would probably not help the Republicans unless they could convince the electorate that it is the Iranians' fault. The beauty of the Georgia crisis is that it has little immediate consequence in the US but they can still trot out all that tried and true cold war rhetoric. However, if it blows over, they might have to resort to attacking Iran, especially in late October when the consequences might not be immediately recognized.

Unfortunately, their rationale would not need to be correct to be one that they might hold - the assumption that they would not need 'boots on the ground' after invading Iraq gives and idea of how far out they can be.
In this respect at least McCain being a genuine military man instead of a draft-dodger meant that he was more realistic on that occasion in his appraisals, but the plan is possibly to involve him before he has executive power.
The Georgian incident would seem to be used to start the softening up process of demonising Russia, and no doubt umpteen justifications about poor little Israel feeling unprotected with it's 200 or so nuclear weapons would be deployed at the appropriate time.

From the neo-con POV Georgia would seem likely to be always regarded as a opening ploy in the region, moving on to the real object of their hopes, attacking Iran and controlling more oil.
The pity is that it would seem to me that even the most blinkered neo-con probably realises by now that holding yet more territory down in the same way as Iraq and Afghanistan is impractical, so unless they want to fold then a significant escalation would be needed, where mass casualties are inflicted on civilian populations to hold them down.

The political ploy would be on the lines of the German high commands' way of tying they German people in to a horrific war - doing so much damage that the common people would realise that if they lost a terrible revenge would be taken.

It would seem to me that the neo-cons realise that obtaining it's goals means massive escalation - they are running under the whip before the economy collapses, and I think they know it.

I am skeptical with regard to Georgia being a cunning neo-con trap.

1) I don't think any of them are that smart or cunning. They fumble, mess up, make huge mistakes and the corporate media dresses them up like angels. I think they dropped the ball in Georgia and are now bloviating like crazy to compensate for the error.

2) After all this windbaggage about how nations do not act this way in the 21st century do you not think this would make it difficult to sell the public on bombing the hell out of Iranian facilities?

If there is an attack on Iran they will not target physical structures; these are easy to rebuild and may be duplicated at other hidden sites. They will be gunning for the technical professionals with the expertise. This is the same approach the Allies followed in attacking the scientists barracks at Peenemünde.

3) The events in Georgia reveal the US as a paper tiger. The US military, ostensibly the worlds best, has been unable to prevail in Iraq or Afghanistan. Give a sheepherder an AK-47 and the yanks are in trouble. Do you not think that a great many nations are now questioning their faith in US support?

4) Imagine that Georgia had been granted NATO membership and then Captain Blowhard launches his army of 20,000 policemen against the 600,000 strong Russian army. Do you not think that a number of states will be questioning the degree to which the US has been herding Europe in a direction that suits US arms merchants? This could have been an immediate hot war for which neither the US or NATO was prepared. I bet Putin was prepared. The Georgia events are another incredible failure in a long string of failures.

5) Do you not think that ordinary citizens have some awareness of these issues? The corporate media produces its mirage of bafflegab but do you think anybody truly believes what they read or hear? My sense of the issue is a growing public distrust of MSM and politicos and a hunger for something honest and true. My hunch is that none of the current round of western leaders will be in power after the next election cycle; the world does not need Bush or Bush sycophants and the failing economies will drive them out.

then Captain Blowhard launches his army of 20,000 policemen

That's what I thought, too, until I saw tape of the road between the South Ossetian capital and Georgia proper after the Georgian attack was driven back where they showed half a dozen burned out T-72s that the voice over identified as Georgian tanks. Since the US knew that the Russian were massing for a counter attack, do you think we told the Georgians about the Russian forces and they attacked anyway in spite of our vigorous advice not to? Or maybe we said, "there are large Russian forces massing for a counter attack on the other end of the tunnel but they do not mean it"? Maybe we did not even tell them they were there to encourage them to attack. And we pulled our trip wire forces out just in time for the conventions?

The Bush administration does look pretty feckless here but McCain is getting a good bump in the polls and no one is taking Bush to task in the MSM. It seems that they can stir this for months. Don't you think the timing is a bit interesting, right before the two party conventions? In their convention, you can bet that the Republican are going to be blaming a lot of this on Obama and the Democrats and telling us how crises like these require a tough guy like McCain.

I think they dropped the ball in Georgia and are now bloviating like crazy to compensate for the error.

That would be my guess, too. They thought the Russian would not dare to counter attack. But they also calculated that even if they did, they would have a good issue. And now they are playing that angle for all it is worth. They appear to be winning even though they have caused another huge mess.

I was not aware of the Georgian T-72s. The reports and witness accounts reported Georgian shelling followed by Georgian troop incursions in a form of hot headed but un-cordinated sort of Georgian police action. But tanks reflect planning and pre-meditation and this places Georgian actions in a very different light.

It is known that US/Georgia were aware of the Russian build up and associated Russian excercises. I now suspect that the Georgian action was an attempt to capture the Georgian exit to the Roki tunnel. If they had done this they could have sealed it off and denied the Russian's their point of entry. Georgia could then have turned to dealing with the local renegades. The Russians would have been left fuming on the other side of the Caucusus.

Painting this as a muddled Georgian police action makes it look like Captain Blowhard went off half cocked on his own.

Add tanks to the mix and this becomes a pre-meditated and planned strategic strike that was co-ordinated at a number of levels. I can understand this action as an attempt to secure the northern flank prior to any action against Iran (it is noteworthy that the Israeli's also had training teams working in Georgia and they were not providing counter insurgency training but were reported to be providing strategic reconnaissance training (small parties inserted well in advance of the main force to identify targets and direct counterfire). The Israeli participation has not been well reported.

The timing also fits with the move of 5 carrier task forces into the operational area.

If this understanding is correct then Putin has not only served to protect Russian interests but he has also thwarted larger US plans for the region. I am looking forward to what Seymour Hersh manages to dig up. I don't think it will be pretty.

My understanding is that although the Roki tunnel is important, there are other access points to Georgia and so although the Georgians blowing it up would have slightly complicated a Russian invasion, it would not have prevented it.

True enough. Except that the other routes are river valleys and small forces can generally create choke points and delay the advance of a larger force. On the valley routes the Russians would be open to air interdiction. Makes for a great news story: "Dedicated Georgian troops hold off weight of Russian armour." Also creates time to justify US providing air assistance from bases in Iraq with back-up in the form of 5 carrier task forces. Those carrier task forces did not rotate into the operational area by accident.

The more you look at this action the more it reveals itself as a pre-meditated and co-ordinated US/Georgian action, one that did not go as planned.

Found images of Georgian armour. They have 30 T-72s in inventory and looks like at least 20% of the force was employed in the attack.

I think the tunnel may be to the only practical direct route between Russia and South Ossetia. The mountain peaks are about 5,000 meters high on that part of the frontier. I am sure the Russian would have secured the southern end of the tunnel no matter what.

Check out this description of the initial conflict. It says that the Georgian attack involved 9,000 troops from what the Russians described as "20 armored units". From the reporters' perspective it did not seem particularly coordinated but someone had to be authorizing all those army units into action and that is a pretty large operation (about a division). Saakashvili had to be driving this action and the US had to have given him the impression, at least inadvertently, that he could get away with it.

The article tries to make a big deal about precisely when the Russian started to send their troops in but they clearly saw that that mobilization was under way and that an attack was starting before they did. The US has been making a big point of how one does not have to wait until an enemy shoots at you before you begin to defend yourself. The Russians said that the attack resulted in the deaths of about 2,000 people in the South Ossetian capital.

The Russian have only occupied a small amount of territory outside the two break away regions that they are trying to protect in addition to pretty limited bombing elsewhere in the country. This seems like pretty good restraint to me.

Good article! Since OSCE monitors and other western diplomats were aware of the initial Georgian actions the US claim that they were unaware of what their client state was up to does not wash.

Having 5 carrier task forces near to hand is unusual and no coincidence. I think it likely the plan was for Georgia to present the Russians with a fait accompli and then have the US deter Russia from any subsequent reaction.

Putin outfoxed everyone. He got word and returned from the Olympics but no one bothered to inform Bush? Unlikely. The timing also serves to confirm that this was no rash unilateral action on the part of Georgia.

Since OSCE monitors and other western diplomats were aware of the initial Georgian actions the US claim that they were unaware of what their client state was up to does not wash.

Unless they are hopelessly incompetent. I do not think they are that incompetent.

Having 5 carrier task forces near to hand is unusual and no coincidence.

I do not buy the idea advanced in this thread that the action in Georgia is strategically related to anything planned for Iran. If we do attack Iran, we would want to have Russia as much on our side as we could. We would not try to push them into alliance with Iran, which is what we are now doing with the propaganda campaign regarding Georgia. I think that is just an unfortunate consequence of provoking and stirring up the Georgia crisis.

I think the carrier forces are another part of the political plan to provoke another crisis that they think will help with the elections. The planned Iran crisis is just their backup if the Georgia crisis blows over before the election. I find the idea that we really have that many carrier groups deployed to the Gulf area a bit hard to believe and very worrying so perhaps you can provide a link.

I realize the Cheney forces would really like to resolve the Iran problem before they leave office but I do not think Gates and Rice will let them attack before the election, if they can stop it. I think it will almost certainly happen if McCain is elected, unless the Iranians back down or the conflict widens a lot.

I think there has been a lot of misinformed speculation about how an attack on Iran would roll out by many in the media and blogosphere. I have seen informed speculation that it might take 2-3,000 sorties to hit all the targets that we would want to hit to really do the job. That would include not only all the dozens of nuclear sites but also air defense, command and control and leadership targets. They would need not only all those carrier forces but also a lot of Air Force assets flying out of Iraq, Turkey, Diego Garcia and the US. I think we would have a revolt in the military if they tried to use tactical nukes. That ain’t gonna happen.

The idea that Israel would do it is also very unlikely. They do not have enough long range attack aircraft and tankers to make more than maybe 50-100 sorties, which would not do very much. And even to do that they would have to refuel over Iraq, which is politically impossible for the Iraqi government, which is very friendly with Iran.

The New Republic magazine reported July 15, 2004, that a White House aide had told the visiting head of ISI, Ehsan ul-Haq, "It would be best if the arrest or killing of any HVT [high-value target] were announced on 26, 27 or 28 July." Those were the last three days of the Democratic National Convention.

Not related but supports the view that Bush and neo-cons are gaming the system with little MSM comment.

Will look for the carrier task force link. Surprised me when I saw the info as this is significant portion of CVN fleet and such strategic assets do not move without forethought.

We are left with two theses:

1) Bush administration and its foreign policy / intelligence establishment are a bunch of bumbling fools utterly incapable of acting to protect US interests despite all their bluff and bluster in the press. In other words the US is no safer than it was on 9/10.

2)The Bush administration has embarked on some strategic ploy which involves sacrificing the interests of a favored client state in order to archive some other, yet unknown, objective.

I think I'd put my money on #1.

Too bad your quoted story says July and not August.

I would go with #1 and #2.

Article was referencing the Kerry convention in 2004.

The truth is probably under item #3 but we may not know what that is for some time.

The task force data appears to be incorrect. As best I can determine CVN-72 Abraham Lincoln is deployed to North Arabian Sea, with CVN-65 Enterprise in the Middle East and CVN-68 Nimitz in Western Pacifac.

That's a relief.

I came across a lot of references to US reinforcements of the Gulf fleet by googling 'US naval deployments' and limiting the time to 1 month
Here is one of them:
Apparently the plan is to cut off refined products.
With reference to the Russian fleet deployments it is interesting that Syria and Russia have today been talking about mutual support pacts.
Short oil?

That's three US attack carrier battle groups with the Abraham Lincoln probably rotating out soon. The Iwo Jima and Peleliu are amphibious assault ships as is the Ark Royal effectively. At most, that's one extra attack group. That does not worry me too much. Just right for a bit of saber rattling to stir up voter anxiety.

How late can America attack Iran?
If the Neocons lose in November can a lame duck Admin launch an attack in the new year and leave a mess for the incoming Admin. Would Obama then have to stay the course and complete the mission or not.
If he completes the mission then any blood would also be on his hands. If he stops the mess the Neocons could say any problems are due to failure to follow through.

If Obama wins and the election is not disputed as in 2000, I think that is game over. I cannot imagine that the military or the pentagon would cooperate with an attack on Iran in the three months after that that Bush is a lame duck (but this is a good reason that that period should be shortened). No one thinks Iran is an imminent threat.

Don't think that Israel will do it either. The Iraqi government would not tolerate them using their airspace for the attack. The Israelis do not have the logistical capability to launch an effective attack without nukes. Tactical nukes are not even remotely possible.

What pray tell would the Iraqi government be able to do in the event of Israel using their airspace with US support? Nothing. They are an enslaved and impotent nation at the moment, with a large army boot softly resting on their adam's apple.

And don't count Obama out as a hawk. He's going to get or has gotten the briefing about peak oil, climate change, etc., and his 'yes we can' dream will go out the door. Once in power, these people take on a self-importance and 'ends justify the means' attitude that us earthlings will never understand.

Iraq is a sovereign nation, remember? Al-Maliki would be completely discredited in the Islamic world if he were believed to be complicit in letting the hated Israelis attack the allied Shiite government of Iran through Iraqi airspace. He would be exposed as the worse kind of Quisling. His government would likely fall as a result. All the Shiites in Iraq would go to war with the US. All of our work to give the Shiite government legitimacy and build alliances would be undone. Iraq would become a raging inferno.

It is hard to image anything that the US could do that would set back our efforts in Iraq more than to stab the Iraqi Shiites in the back like that.

Iraq would become a raging inferno.


It could become a lot worse than it is now.

But to me the evidence has shown that the US Administration believes Iraq as a 'raging inferno' is the same as a giant US piggy bank. They seem to want a certain level of chaos to continue there, justifying our presence and basically protecting and storing up all the oil reserves for us and nobody else (like a potentially emerging Iraqi middle class).

Hasn't history shown a willingness to stab the Shi'ites in the back when deemed 'necessary'? Remember, our real alliances are and nearly always have been with Sunnis, as in KSA.

"....the Bush attempt to introduce western democracy to the region....."

In the interests of accuracy, can we just get that right. Shouldn't it read:

"....the Bush-Mascotted-Junta's attempt to introduce a puppet version of western pretend-democracy to the region...."

"....the Bush attempt to introduce western democracy to the region....."

In the interests of accuracy, can we just get that right. Shouldn't it read:

"....the Bush-Mascotted-Junta's attempt to introduce a puppet version of Western 'democracy' (largely a fantasy anyway, even as practised in the West) to the region...."

"....the Bush attempt to introduce western democracy to the region....."

In the interests of accuracy, can we just get that right. Shouldn't it read:

"....the Bush-Mascotted-Junta's attempt to introduce a puppet version of Western 'democracy' (largely a fantasy anyway, even as practised in the West) to the region...."
Russia moves SS-21 missiles into Georgia: US defense official

From the tone of some of the posts one is taken aback by the shear superficiality, lack of knowlegde and level of arrogance on display.

Whilst it's tempting, easy, and sometimes usful, to simplify stunning levels of complexity, it's rarely the road to greater understanding.

The Caucasus, like the Balkans, like the Middle East, is a mass of conflicting, contradictory, and competing; people's, histories, interests, illusions and mythologies, rolled into one. The idea that one can glibly understand such a region and so many conflicting national and ethnic narratives is not just arrogant, it's also a sign of collosal ignorance.

This whole idea that there are good guys and bad guys irritates me greatly. What we're observing, on simple level, is great powers competing with one another for power and the ordinary people and countries are merely disposable and unimportant pawns in this great game. The propaganda war is more intense and longer lasting than the war on the ground these days, and "truth", whatever that is in this complex context, is sacrificed both before and after. In fact "truth" is irrelevant, as it's an obsticle to both effective war and effective propaganda.

Great powers are rivals, not friends. Historically wars have almost never been fought for the reasons given, because the interests of those who initiate the fighting are almost uniformally in direct opposition to one another. But blood, land, religion and language, have deep, deep, roots; tribal roots, and can be used and manipulated to justify and ligitimize the most foul crimes.

To put this little war in historical perspective, it's clearly a push-back by Russia after a couple of decades of humiliation.

The Russians made it abundantly clear that they would not tolerate the detachment of Kosovo from Serbia : this is pan-Slavism at its most elemental : but the West did not listen, or rather, discounted the Russian ultimatum, because they have become accustomed to thinking of Russia as a basket-case.

So, rather than continue with the status-quo in Georgia (effective autonomy of the rebel regions, but formal respect of Georgian sovereignty over them), they are going to push for modification of the internationally-recognized frontiers.

This is a bad thing, but the precedent has already been established. And it would be a huge, huge mistake for Europe and the US to make a casus belli out of it.

Hi writerman,

Much of what we TODers see is the "western media" and as such we are very influenced by it. Here is an Asian view from the FT that says our thinking is strategically wrong.

I am shocked! Outraged! What is wrong with you people?

How in the world can you start a thread about Georgia with some lapidary comments on stock investment? Babble about price fluctuations etc., and end with the hope that our summer was as much fun as yours.

Could you please for one second try to imagine what kind of summer somebody had in South Ossetia?

It is obvious from your post that that is apparently not worth thinking of. That's sad.

Not that the comments are much better. It's sad to see how many people have so much oil in the brains and money in the eyes that they cannot see that they will soon wipe all living things from the face of the earth. The dignity has long gone.

I know I will be rated down here. Before you click: Go and see what you have contributed to in Georgia, Nigeria, Iraq, Somalia and elsewhere. Or at least imagine for a second to have been born in one of those regions.

Well, this is theoildrum, not thebleedingheartdrum...

It has occasionally been pointed out that I tend to be one of the more pessimistic of the contributors to this site, and in that light I have also been occasionally chastised for making historical analogies. (And it was the summers just prior to WW1 that I was thinking of, but did not mention).

The reason that I wrote the intro as I did was to point out that there are some events that are likely to have a more serious impact on world fuel production than others, and that I considered this and the events happening in regard to the Kovykta Project to be two of these. You have read things into the post that are not there, and missed the points that are - pity!

Let me quote two statements:

One: "We are against cruelty. We are against ethnic cleansing. A right to come back home should be guaranteed to the refugees. We all agree that murders, property destruction, annihilation of culture and religion are not to be tolerated. That is what we are fighting against. Bombardments of the aggressor will be mercilessly intensified."

Two: "We appeal to all free countries to join us but our actions are not determined by others. I will defend the freedom and security of my citizens, whatever actions are needed for it. Our special forces have seized airports and bridges... air forces and missiles have struck essential targets."

Who do you think is the author of these words? Medvedev? Putin? No. The first quote belongs to Bill Clinton, talking about NATO operation against Yugoslavia. The author of the second quote is the current resident of the White House, talking about the U.S. intervention in Iraq.

Does that mean that the United States and NATO can use brute force where they want to, and Russia has to abstain from it even if it has to look at thousands of its own citizens being shot? If it's not hypocrisy, then what IS hypocrisy?"

Dmitry Rogozin is Russia's ambassador to NATO.

BP is now a subsidiary of Gazprom whether they realize it or not.

This winter will be cold and the Ukraine is getting
a price hike from Russia january 1.

China is only waiting for the olympics to be over to
express it's displeasure at the US.

Taiwan joins the mainland for starters.

If you are a US citizen, I hope you are just as outraged at your leadership for the genocide in Iraq.


Rarely, if ever, has The Privateer crew seen the world so uneasy and tense. With good reason. It is true that many people are having a timeout with the Olympics and/or are on vacation. Even so, climbing unease and tension is there. For now, it is confined to the stock, bond, commodities and currency markets - and to geopolitics and geo-strategy.
WAR In The Caucasus:

A small war has broken out in the Caucasus. With Russian forces engaged, this small war turned into a global issue. Behind the "micro state" of Georgia stands its "sponsor" - the United States. Last year, the US had wanted Georgia and Ukraine to become members of NATO. The European members of NATO baulked, with very good reason. Had Georgia become a NATO member, this localised military confrontation would have become a confrontation between NATO and Russia.
In World Markets - The Tension Is Palpable:

Commodities have tumbled 18 percent since their peak on July 3 on concerns a slowing global economy will reduce demand for raw materials.

The US Dollar has climbed 5 percent on the speculation that falling commodity prices will boost the world's largest economy. US credit markets have remained under stress even after the Fed cut its target rate seven times since last September from 5.25 percent to 2.00 percent. Since last December, says Bloomberg, the Fed has also cycled $US 2.58 TRILLION through US money markets. Gold has taken a pounding, especially in $US terms, as desperate cash seekers are selling their life vests to cope with a relentless deflation.
Distracting Attention Away From The Epicentre:

The epicentre is the US financial system. The issue is deflation in the US. Merrill Lynch has written down $US 46 Billion in asset values and sold $US 30.6 Billion in CDOs at 22 cents on the Dollar. Morgan Stanley has taken $US 14.4 Billion in write-downs on its mortgage related portfolio since the third quarter of 2007. Fannie Mae has slumped to a quarterly loss of $US 2.3 Billion and revealed that it set aside $US 5.3 Billion to cover credit losses over the three months to June. Freddie Mac, by its own admission, has a negative net worth! The latest reported net market value of its assets is negative $US 5.6 Billion. Shares of Fannie Mae have lost 86 percent over the past 12 months while shares of Freddie Mac have surrendered 91 percent. These plunging asset values are virulent deflation.

This is systemic, across the flagships of US finance. An avalanche of US bankruptcies is in the wings.
Deflation - Debt - And The US Debacle Ahead:

The internal American debt implosion is beginning to bite very hard. In the process, it is also deflating the American credit money system and piling even deeper losses on top of American lenders both big and small. Almost one-third of US homeowners who bought in the last five years now owe more on their mortgages than their properties are worth. Second-quarter home prices fell 9.9 percent from a year earlier, giving 29 percent of owners' negative equity. For those who bought at the 2006 peak of the US housing market, 45 percent are now underwater. If American household consumer debts of $US 2.6 TRILLION are added to American mortgage debts, the total reaches $US 14 TRILLION. To that can be added the act of Congress to increase the US national debt limit to $US 10.615 TRILLION and the $US 2.2 TRILLION in State and local US government debts. These debts, at all levels, are now being threatened by the deflating US credit money system. The size of the debts are not diminishing at all. But the ability to roll them over certainly is as lenders raise (or initiate) stricter credit standards.
A (Short) Digression On Deflation:

In any genuine monetary deflation, all prices fall. Where an inflation is an increase in the quantity of both money and credit, a deflation is the opposite. It is a situation where the quantity of money and credit contracts. Obviously, a contraction in the quantity of money and credit will leave the prices of some economic goods above their market clearing levels. That means that they will remain unsold until buyers are enticed by lower prices. Meanwhile, US home equity credit lines are being cut.

JPMorgan Chase & Co., the second biggest US bank by market value after Bank of America Corp, has notified 150,000 customers about changes in their home equity lines of credit since March. In some cases, the credit lines have been reduced. In other cases they have been suspended. The changes affect about 15 percent of JPMorgan's home equity credit customers. Bank of America and Washington Mutual Inc. are among the other lenders that have frozen homeequity credit lines this year. These credit lines are being cut as a result of economic goods failing to meet the real market clearing level. About 2.8 percent of all US homes for sale were vacant as of June 30, according to Census Bureau statistics. That's up 50 percent from three years ago, and is near historic highs. Here lies the heart of the debacle ahead.

A huge proportion of US home mortgage holders are looking at huge losses if they sell. But these people have a much easier way of getting out of the problem. They can simply hand the house keys - and the assured losses - back to their mortgage and home equity lenders. If and when this is done, the house and the loan standing against it which exceeds its value arrive on the balance sheet of the lender. Once that happens (and it is happening), these lenders had better have a big chunk of capital behind them or a direct line of credit with either Fannie or Freddie or even with the Fed. If they don't, they will not survive.
Real Deflations Can Be Good For You:

During the Great Depression, after the financial markets collapsed in 1929, the CPI fell by 26.3 percent from 1929 through 1933. That, in monetary terms, meant that life was getting easier for all those who managed to maintain their jobs because consumer prices were falling all around them. Investors (and there were many) who ignored President Roosevelt's edict to hand in their Gold coin benefited when he lowered the Gold content in the US Dollar from $US 20.67 per ounce to $US 35.00. In paper US Dollar terms, that increased the value of their Gold coin holdings by 69 percent! Combine that with the earlier mentioned fall in US consumer prices and the silent American holders of Gold coin won.

As you know, this week Gold has succumbed to the huge sell- off which has dragged down the entire "commodities" sector. In all REAL deflations - ALL prices fall. Historically it has been Gold which has fallen the least in numerical monetary terms. Since its spot future high close just above the $US 1000 level in March, Gold is now down just over 21 percent. This fall has Gold, or more precisely paper claims to Gold, catching up with the commodity sector sell-off.
The MAIN EVENT - The US Deflation:

The core US financial data has already been stated in this issue. The two items that matter in the first round are American household debts and the debts of the several US States and local authorities. The latter are dependent on American households for their revenues with the exception of any money coming directly to them from Washington. Combined, we are dealing with $US 16.2 TRILLION in "funded" debts - the sum of debt paper and debts owed to banks and other US lenders. This debt paper is having its collateral foundation - the values of the assets these loans are made against - torn out from under it as American house prices fall. When the value of this debt paper - and the loans on the books of the other lenders - also falls, the losses on this paper will defy description!
The Potential US Black Hole Of Deflation:

Think about $US 16.2 TRILLION worth of debt paper and loans on the books of the lenders written down to what Merrill Lynch recently "valued" its CDOs at - 22 cents to the Dollar. On that valuation, $US 16.2 TRILLION is reduced to $US 3.565 TRILLION. That's a write-down of $US 12.636 TRILLION!

$US 12.636 TRILLION is almost equal to the annual US GDP. It is bigger than the total of deposits inside the US banking and financial system as reported by the FDIC. It is a sum beyond retrieval.
The President Of The Dallas Federal Reserve - Richard W. Fisher:

In a May speech at the Commonwealth Club of California, Mr Fisher stated that the US national debt is close to $US 100 TRILLION. "Add together the unfunded liabilities from Medicare and Social Security, and it comes to $99.2 trillion over the infinite horizon. Traditional Medicare composes about 69 percent, the new drug benefit roughly 17 percent and Social Security the remaining 14 percent."

Note here that Mr Fisher deals only with the UNfunded liabilities. He does not include the US Treasury funded liabilities which have just had their limit raised to $US 10.615 TRILLION.
On The Edge Of A Cascade Of US Write-Offs:

Having covered the latest facts from US household finances as well as US "public" (read government) finances, it might be thought that US corporate finances could come to the rescue. Here are the facts from that sector. General Motors (GM) reported a $US 15.5 Billion second quarter net loss. While its operating loss was "only" $US 6.3 Billion, that is still more than the market value of the company! GM is insolvent. GM's loss followed an $US 8.7 Billion loss at Ford reported earlier this week. GM and Ford used to be the flagships of corporate America.

Today, they are only standing up due to the modern wonders of creative accounting.
Something HUGE This Way Comes:

No matter where The Privateer looks across the financial landscape of the US, all we can find in sector after sector is the same. This is true from what remains of industry, to independent farming, to services, as well as banking and other finance. All are systemically on the edge of failure or have in fact already failed beyond retrieval. It is still true that there are spots of economic sanity in the US. For example, slightly more than one-third of all American households own their homes outright and there are many small and medium businesses with sound balance sheets and even with cash reserves. But the American tragedy is that these are surrounded by others which are on the verge of economic death.

The something HUGE which The Privateer now anticipates is either an enormous US bankruptcy out of the blue or a sudden "National Economic Emergency Edict" from Washington for currency controls.
Something BAD Is Coming This Way:

The US Navy is concentrating its forces in the Persian Gulf. The arrival of the three new American strike forces in the next few weeks will raise to five the number of US strike forces in Middle East waters. This is an unprecedented build up since the "crisis" began over Iran's nuclear program. This huge US naval and air strength of more than 40 vessels consists of carriers, warships and submarines, some of which are nuclear armed. It is a repeat of the concentration last seen before the US-led invasion of Iraq in 2003.

All this needed a distraction. Enter Mikhail Saakashvili, the President of Georgia, who went on television on Thursday, August 7 to announce that he had ordered an immediate unilateral cease-fire in some smaller boundary skirmishes between Georgian forces and a small breakaway province. Hours after his announcement, Georgian troops began an all-out offensive with tanks and rockets to "restore constitutional order" to a region that won de facto independence from Georgia in a vicious civil war in 1992. Georgian troops seized a dozen villages and bombarded the capital, Tskhinvali, with air strikes, missiles and tank movements that left much of it destroyed. Georgia's leaders in Tbilisi had originally provoked the conflict in the Caucasus with an offensive against separatists in South Ossetia along the Russian border. Civilians told reporters that Georgian tanks had fired indiscriminately during the two-day seizure of the city. Most of South Ossetia, which is roughly 1.5 times the size of Luxembourg, has been under the control of an internationally unrecognised separatist government since 1992. This war is real.

In recent times, the Pentagon has made an effort to overhaul Georgia's forces from top to bottom. At senior levels, the US helped rewrite Georgian military doctrine and train its commanders and staff officers. At the squad level, American marines and soldiers trained Georgian soldiers in the fundamentals of battle. More than 1,000 US Marines and US soldiers were at a Georgian military base as late as last month to teach combat skills to Georgian troops. Georgia has sent about 2,000 troops to Iraq.

Georgia, meanwhile, began re-equipping its forces with Israeli and American firearms, reconnaissance drones, communications and battlefield management equipment, new convoys of vehicles and stockpiles of ammunition. US military C-17s flew Georgia's 2,000-troop contingent in the coalition force in Iraq back to Tbilisi on Monday, August 11, in response to a Georgian government request. Russia protested.

Georgian forces launched a major offensive that captured the South Ossetian capital. Russian forces drove them out two days later and then rolled right over the Georgian Army which retreated in a total rout. As of August 13, Russian forces were 25 miles from the capital of Georgia where they are stopped. After five days of fighting, President Medvedev of Russia ordered Russian troops in South Ossetia to hold their fire and fixed a six-point peace plan with President Sarkozy of France. Russia then convened an emergency session of the UN Security Council, there calling on both sides to immediately cease hostilities, return to the negotiating table and renounce the use of force. The last part about renouncing the use of force is exactly what Georgia's President Mikhail Saakashvili refused to do.

Declaring that "the aggressor has been punished", President Dmitri Medvedev of Russia announced on August 12, that Russia would stop its campaign. It was over, with Georgia defenceless, routed.

In the midst of all this, the US State Department got a classic case of cold feet while President Bush was enjoying the Olympic Games. A US State Department official made it clear on Saturday, August 9, that there was NO chance the United States would intervene militarily. "There is NO possibility of drawing NATO or the international community into this," said a senior State Department official in a conference call with reporters. "There is none. There is not a danger of a regional conflict in our mind." After that, the Russian offensive went into overdrive and slammed its armoured columns towards Georgia's capital.

President Medvedev then declared later on Tuesday, August 12, that "The aggressor has been punished."

A US client state has been routed in full global view. The US Bush Administration did not lift a finger.
The Wages Of EMPTY Bluster:

The global US empire is now shaking on its global foundations. A strategic distraction which was supposed to tie Russia down for weeks on its southern Caucasus borders has instead demonstrated that the US is a paper tiger without either the military means or the political will to support its own client states.

Israel will be in a full-scale (behind closed doors) panic, haunted by the real fear that were push come to shove in the Middle East, the US would leave it in the lurch just as it did Georgia. In Iraq, even as it is, people will conclude one of two things. They may conclude that the US will have to leave of its own accord because it has neither the means nor the political will to stay. In that case, the better policy is to wait the US out in interminable negotiations which go nowhere until the US leaves in utter frustration.

The other option is to time the US moment of maximum weakness - militarily, strategically and politically - and then throw the US out of Iraq in a massive national armed uprising simply for the honour of doing it.

In Iran, where the mullahs rule, there will be some tense weeks or months as this massive US armada sails closer to their shores. But they too now know that the northern US strategic distraction in Georgia failed and that Russia, strategically as well as politically, is now a free agent instead of being tied down.
The Global Geo-Strategic Consequences Of Georgia's Rout:

Across the close to 800 military bases the US currently has around the world, there will be many local governments asking themselves about the real value, militarily, strategically and politically of having US armed forces on their soil. Many of these governments will conclude that it is more dangerous to have these US forces here than to stand alone. Requests for the departure of US forces can now be expected to cover the globe in a scattered pattern over the weeks and months ahead. Here, the response of the US to such requests is all important. Were the US to refuse to leave in certain areas, it would publicly and globally identify itself as an Occupation Force. In areas which it might choose to leave, the US would itself sign on the political dotted line for the contraction of the American Empire - and the rest of the world would see it as such. Today, NATO is rattling to pieces. It took a visit from the President of France, the defacto head of Europe, to organise the initial six-point cease fire plan by making personal visits to both Moscow and Tbilisi in Georgia. No American participated in any of these meetings. This was yet another case of the US being excluded while others made the decisions which really matter.
The Global Geo-Political Consequences Of Georgia's Rout:

Any idea of keeping NATO engaged in Afghanistan, or expanding it further, died this week in Georgia.

The smaller eastern nations in Europe, close to Russia's borders and therefore very uncomfortable, will from here on seek the warm embrace of the European Union in compensation for their climbing uncertainties about the US. In future, they will even agree to a grand treaty with Russia to put in place the post US departure architecture which both Putin and President Medvedev repeatedly talk about. For Russia, the outcome in Georgia is the opening door for Russia's real place in the world.
The Global Geo-Economic Consequences Of Georgia's Rout:

The ongoing debt sales by the US Treasury are now in doubt as the rest of the world begins to ask itself why it should buy when client states are left in the lurch when even small pushes come to shove.

If ongoing US Treasury debt sales are now in doubt, even more in doubt is the global standing of the US Dollar. Why buy any when the US won't even defend the international value of its own currency?

This is the other something HUGE which The Privateer expects to trigger a US national emergency.

©2008 - The Privateer
(reproduced with permission)

"The global US empire is now shaking on its global foundations."
What utter nonsense. Why would the US use force, when the Russians can be presented as "the bad guy"?

Why would there be 5 US Carrier task forces in or near the Persian Gulf?

This deployment would have preceded the conflict in Georgia; it is not a consequence of the conflict.

My thought is that this may have been part of an attempt to intimidate Iran or, worst case, an attempt to have overwhelming force in place to prevent Iranian overreaction to any bombing of centrifuge sites in Iran.

It might have been more considerate of others if you had condensed this piece and left a reference to the article, rather than reproducing the whole thing.

Deflation, deflation, deflation. Yet the Dow drops due to unexpected inflation in the wholesale sector. Who's rent has dropped because the value of their apartment building has dropped? Why is gas still much higher than this time last year? Why are food prices rising? If there is deflation it is limited to the discretionary part of the economy. People can put off buying a new car but must still buy gas for the car they have. They can put off buying a home but must still pay the rent every month. They can put off buying a new TV but must still pay the electric bill. When will deflation actually benefit those at the bottom of the economic pyramid? NEVER!!!

Deflation is a monetary phenomenon, not a price phenomenon. It is a decrease in the total amount of available money, so it doesn't make sense to talk about it being limited to a particular sector. Similarly, the high prices we are seeing for gas, food, and other essentials are probably not from inflation but from shortages, which are more than compensating for overall deflation (collapsing credit markets).

You are right, though, deflation does not benefit the poor, especially if they are in debt.

In all seriousness concerning this war - based on the level of emotional response and tit-for-tatness that I've seen - I think the best approach to resolving this mess is to get representatives from all sides together and have a marriage councelor/family therapist mediate something. Too many emotions and too many respect issues involved here.

I think too many people here are assuming Russia is in the cat-bird's seat with respect to energy. IMO, they are a sideshow.
Russia's reserves are 60Gb, Kazakhstan 30Gb, Azeri 7Gb. This is tiny compared to Persian Gulf at 700 Gb.

True, Russia has been pumping like mad for the last few years but I for one believe that they are in depletion.

One thing I notice is that they are VERY UNHAPPY with the progress of the IOCs(Big Oil) at developing their resources and finding more. And so are others such as the Kazakhs. They were promised or had exaggerated impressions of their resources which have not been met. I think this is true of national producers(NOCs) the world over.

Russia's gas fantasy is also proving to be short-lived. Urengoy seems to be heading down and NOBODY is developing yamal(ever shifting permafrost) or shtokman(under the arctic ocean) for them. The truth is that these will probably never realize their potential.
After WW2 Josef Stalin decided to build a railroad across north Siberia. It was a huge project with hundreds of thousands of workers(POWs). The 'railway of bones' ended the moment the Father of the Peoples died. The track was 'swallowed up' by the drunken tundra.

(Possibly Alan can add this to his collection...just joking..can't you take a joke?)

Now this was just a single rail line, not a huge petrochemical/NG complex.
As peak oilers know, the Age of the Giants is past.

Think day and night about how to get off oil.

Who in the world believes the Persian Gulf reserves? Read my article on the subject.

I'm just curious. Is it possible that Georgia had been promised direct military aid, esp. troops on the ground from the US, by Ms. Rice? Even more incredible, is it possible he believed that?

Interesting also to speculate on the constraints. Really, the only thing constraining the White House from putting "troops on the ground" levels of intervention was / is the unacceptabilty of native-son casualties in the US military. That constraint only holds on the PTB's until they can develop resaonable competent military robots to take over the nasty parts of occupation. There must, these days, be absolutely top priority development programs to produce robotic systems which can do the work of boots-on-the-ground soldiers. Heaven help the world when they become workable.

yea warfare seems headed that way.we could use heaven's help now.the culmination of millennia?

im sure im just paranoid delusional but. . .
cant imagine happy ending

At the very least, almost. They were getting training, joint exercises, and permission to buy weapons. There's an extensive discussion of the politics here.

France solved the "native son" problem. The French Foreign Legion.

Perhaps a US Army recruiting center in Nepal for Gurkhas ?


If they do recruit Gurkhas I hope they pay them in NPK, greenbacks make lousy fertilizer.

The dog (Saakashvili) bit his master.

Here's a nice summary of the longer term lead-up to the Georgian conflict by Billmon:

I'm not a fan of DailyKos, but Billmon at one time had an independent blog (The Whiskey Bar) and his commentary was generally savvy and at times downright prescient. Here he provides a post-Soviet rundown on the U.S.' gradual push for NATO expansion prefacing the current situation.

Don't look now, but the AP wants us all to know that Russia has stolen commandeered four, yes FOUR, whole Hummers that were allegedly awaiting shipment back to the US!

Happy Motoring indeed.

Don't forget Yugoslavia

Readers will recall that the justification for the Nato bombing was that the Serbs were committing "genocide" in the secessionist province of Kosovo against ethnic Albanians. David Scheffer, US ambassador-at-large for war crimes, announced that as many as "225,000 ethnic Albanian men aged between 14 and 59" may have been murdered. Tony Blair invoked the Holocaust and "the spirit of the Second World War". The west's heroic allies were the Kosovo Liberation Army (KLA), whose murderous record was set aside. The British foreign secretary, Robin Cook, told them to call him any time on his mobile phone.

With the Nato bombing over, international teams descended upon Kosovo to exhume the "holocaust". The FBI failed to find a single mass grave and went home. The Spanish forensic team did the same, its leader angrily denouncing "a semantic pirouette by the war propaganda machines". A year later, Del Ponte's tribunal announced the final count of the dead in Kosovo: 2,788. This included combatants on both sides and Serbs and Roma murdered by the KLA. There was no genocide in Kosovo. The "holocaust" was a lie. The Nato attack had been fraudulent.

"Fool me once Shame on you Fool me twice Shame on me." --Chinese Proverb

Alternately, the US version:

“There’s an old saying in Tennessee — I know it’s in Texas, probably in Tennessee — that says, fool me once, shame on — shame on you. Fool me — you can’t get fooled again”

For what it's worth. I've now seen two sources, Paul Craig Roberts and Frank Gardener, and have two private sources, two people I trust and respect, who also relate the same basic story. Namely, that two batteries of Russian rockets went with the tanks into South Ossetia, and they were, or most probably were armed with tactical nuclear weapons. Perhaps more importantly the Russians let the United States know that if their forces were opposed or attacked with US precision guided weapons, they would reply by immediately escalating the conflict to a nuclear one, and that the Russian commanders on the ground had already been notified and given permission by Moscow to defend themselves using nukes.

Now, this is a very disturbing story, and it may not be true. It may be a way of channeling information into the public domaine reflecting the concern felt by circles in the Pentagon or CIA or somewhere else, that this border conflict over a tiny country a long way from the United States could get out of hand. On the other hand it might be accurate and shows what a dangerous world we live in and how the threshold for the use of nuclear weapons is continually being lowered.

Part of what Paul Craig Roberts has to say:

The Americans were the first to announce preemptive nuclear attack as their permissible war doctrine. Now the Russians have announced the tactical use of nuclear weapons as their response to American smart weapons.

It is obvious that American foreign policy, with its goal of ringing Russia with US military bases, is leading directly to nuclear war.

While American electronics are solid-state, the Russian military still uses vacuum tubes for ground radar and aircraft radar.

The fact that the Smerch-A1 radar was also heavily based on vacuum-tube instead of solid-state technology also led to some criticisms. However, many microwave engineers insist even now that vacuum-tube technology is perfectly practical and cost-effective for high-power microwave applications, though it is clear that the Smerch-Aa lacked the "smarts" of the most sophisticated contemporary Western radars.

American electronics are almost certainly better than Russian electronics **except if things go nuclear**.

The worst of the pulse lasts for only a second, but any unprotected electrical equipment — and anything connected to electrical cables, which act as giant lightning rods or antennas — will be affected by the pulse. Older, vacuum tube (valve) based equipment is much less vulnerable to EMP; Soviet Cold War–era military aircraft often had avionics based on vacuum tubes.

Electromagnetic pulse

Fried circuits could make "electronic battlefield" technology totally useless. I *really* hope that this nonsense doesn't get out of hand.

American foreign policy, with its goal of ringing Russia with US military bases, is leading directly to nuclear war.

The reason the cold war remained cold was due to mutually assured destruction. I could nuke you but there was no way to be assured that my attack would take out all of your weapons. Therefore any attack on you would likely result in a counterstrike which would destroy some of my cities and people.

The US forward basing of ABMs makes it more likely that any counterstrike will be neutralized with the enemy missiles falling somewhere in Europe rather than continuing on toward NY or Washington.

The US introduction of forward ABM basing therefore increases the likelihood of the US making a pre-emptive strike (a pre-emptive strike is now official US defense policy). To say that the ABM screen is targeted at some rogue state does not hold water. Boeing has converted a semi-submersible into a mobile ocean going ABM platform and there are ABM installations in Alaska well beyond the reach of any Iranian missile. All of these facilities serve to give the US a first strike capability and generate a false confidence in the ability to survive any counterstrike - they lower the threshold for nuclear war.

The Americans are much more dangerous than the Iranians who rely on Photoshop for 25% of their deterrent capacity.

Tem ABM missiles in Poland and a comparable # in Alaska are *NOT* going to stop more than one missile each.

Even after arms reduction treaties, Russian has hundreds of missiles. Plus bombers and fighter-bombers.

And just one atomic bomb will ruin your entire decade. The #s simply do NOT add up to any sort of strategic shift.



Even worse for any planned missile defense system are the existence of dozens of cheap and cheerful techniques that can be used to spoof these systems.

The defense system would run out of ammunition long before an opponent ran out of decoys.

I've seen the reports about the Russian tac nukes and I would really like to see some stronger sourcing before accepting those reports as true.

Little help comes from CNN and other 'credible' MSM sources that have lately chimed in with statements from a 'US Defense Official' (VPOTUS incognito?) that claims the Russians have moved SS-21s in theater, but Russia counters with an immediate, sourced denial.

America has declared "War on Drugs"
"War on Terrorism"

How about "War on Energy Shortages"
While we don't have energy shortages YET I really hope there is a logical and feasible "War on Energy Shortages" within the next 5(?) or so years. Putting the same degree of priority on energy solutions like Solar, Wind, Nuclear ( I don't like is however reasonably safe and definately practical ), etc. as we currently spend on military would be awesome. Results would be fast IE 10 year timeframe for drastic reduction of Oil & Gas use.

The future is unkown, I can hope though for one of the better futures;)

Drizzt: While I appreciate your compassion and humanity,I have to disagree on the "War on Energy Shortages" strategy.America has waged a
"War on drugs"
"War on crime"
"War on poverty"
"War on illiteracy"
"War on terrorisim"
All absolute failures for obvious reasons,not the least of which being that the goverment was engaged in
"double speak" (See George Orwells 1984)
The goverment then went after drugs users and not drugs.
Then they went after poor people and left the poverty.
Then they went after teachers and left all the children behind.
Then they passed laws to protect the criminals in
office and leave the proles with the crime.
Then they created terrorists faster then they could kill them (See invading innocent countries and killing
wedding parties)
Its impossible to wage a war on a idea or word.Trying to eliminate building fires buy studying building fires and comming to the conclusion that every building fire has firemen with fire trucks and firemens helmets and further deducting that by getting
rid of all firemen and fire equipment will reduce building fires is absurd....buts thats what actually
happens. Iam not making this stuff up.
Ask anyone who's been to war and I can assure you that
you will hear this as a constant refrain.
The utter absurdity causes typically sane men to
become drooling babblers with ten thousand yard stares
War is so ingrained into the American psyche,they will
wage war on kittens if their leaders suggest it.
Besides,America is waging war on energy as I type this
They are killing innocents to secure the energy those
innocents were unfortunate enough to be born on top
of. I can fully understand if you doubt what Ive
written. I meant no assault on your sensibilities.
I was told by women once..."Youre gonna have a rude
awakening one of these days" and sure enough...every
day since then I have.
Drizzt,They burned every village in Vietnam for 14 yrs
to save the village.
Did you catch that? Burning the villages and killing
the villagers to save them.
Ya really cant make this stuff up.

I have read letters written by soldiers in past wars.
The writers were common men and being from centuries
ago,it struck me that the letters were always articulate,moving and above all quite accurate to what
was happening around them. I would never have supposed
that these writers and what they would have written would contain such incite into realms that were in
order of magnitude,seemingly above them.
Today we have academics in an era who, here on TOD write and work, postulate and predict,dissect and
disseminate this information concerning a monumental
shift in world society due to peakoil.
I put forth that these peoples will be regarded in the
future ,unseen and unstoppable, as having that same
kind of effect on those who look back from whence they
I feel as if Iam looking into the yawning mouth of
history and am lucky enough to recognise it.
I wish to thank the editors and those who make this
work available.
Sure,bad decisions will be made and tough times are
ahead...but the hope that man needs and searches for
can be found at his own feet.Evidence offered is here
on TOD

An amusing comment from a London times reader (in the US)

Sabatouge all Russian oil pipelines which is where all her new money is coming from
geo magn, ellicott city, USA

which was in resonse to this article:

The gentleman from Ellicott city is not apparently aware of what the loss of 9mbpd (minus internal consumption) would do to the world. And herin lies the crux of the matter. Europe (or the rest of the world for that mattetr) cannot now afford to have bad relations with the mighty Bear! Yet this is the very road our politicians are taking us down.

$200 will seem like a walk in the park if this goes sour.

Saakashvili's regime already sabotaged Russia's gas pipelines running to Georgia and Armenia in 2006. Of course the totalitarian western media blamed Russia. Armenia depends on Russian natural gas and is an ally of Russia. It was obvious who blew up the pipelines since Saakashvili had arranged for Azeri supplies. The same retarded "Russia is out to punish poor little Georgia for wanting to join NATO" bleating was heard from psychopath Saakashvili then as is heard from his allies in the west today. This was an act of war too since the pipelines were blown up on Russia's side of the border. Saakashvili has been baiting Russia for years. Mortar bomb attacks on Tskhinvali have been a regular occurrence for the last three years. These incidents have not been covered by TV news but have hit wire services where they are generously excused by claiming there was gunfire exchanged with South Ossetian secessionists. Hmm, mortar bombing cities is equal to gunfire. The claims about South Ossetian shelling of Georgian villages spread around in the last two weeks are pure fiction. If there had ever been a single case of such attacks it would have been all over the news. Unlike Saakashvili, South Ossetians did not have any howitzers, MLRS or mortars to attack Georgia. So Saakashvili had to take this to a whole new level to trigger Russian intervention and nauseating, fake heart bleeding for "a democracy under brutal attack" in the west.

NATO in Afghanistan. Seems that the French troops killed and wounded yesterday in a Taliban ambush may have been the victims of NATO aircraft.

After waiting for backup for 4 hours and almost out of ammo, the troops were possibly then bombed by the backup NATO aircraft, then attacked by Afghan ground troops sent to rescue them.

The Georgians were lucky that NATO didn't come to their aid.

Speaking of NATO ...

Russia to cut all military ties with NATO

At UN, Russia circulates Georgia resolution;_ylt...

Hey, this is really just ultra-cool. Syria is going to get Russian missiles, lots of other military hardware, and even a new Russian Navy port, maybe two. That should drive Israel and the neo-cons absolutely insane. Not that they aren't already, but ...


Russia is now reporting that the orginial 'genocide' estimate of 1600 people was a bit high and are now claiming a 'mini-genocide' of 133 people.
No doubt an 'intelligence failure' was reponsible for this invasion.

Many killed appear to be local Georgians killed by Russian/Ossetian looters. These irregulars seem to be escorted about by Russian tanks.

Some may say these 'soldiers' are Russia's answer to Blackwater mercenaries, while
other will say these were the tools of Russia's successful counterinsurgency in Chechnya. Either way they are violations of international law.

Best wishes for those who have justified Russia's 'rescue' mission inside Georgia.

Too many blatant lies undermine your credibility majorian (*)

Russian prosecutors announced that so far they have identified 133 of the killed civilians...

*) Ah! Hem! May be not, it can hardly be worse!

The problem is that many bodies were quickly buried in people's backyards, and until all the thousands of Ossetians who fled come back, there is really no valid way to count the dead. Obviously many people buried dead relatives, then fled north. It will be awhile before there is a real count.
Isn't it strange how the Amerikan MSM is trying so hard to make Russia the aggressor? Have they no shame? The US has become a totally disgusting nation of obese, greedy, demented slobs so beyond the pale of human decency that they will live in infamy along with the Third Reich and Pol Pot.


Perhaps just counting the dead bodies is a difficulty for Russian prosecuters or is it that a dead body without 'proper' identification isn't really dead?

My credibility couldn't be lower. The pro-Putin group-think(represented by you, dear K) has troll rated me to the very bottom, it's true.

But facts are stubborn things, so you must fight much harder to either conceal them or bury them under a mountain of lies.

All in the name of your hero, Putin who stands up against America.

Isn't it strange how the Amerikan MSM is trying so hard to make Russia the aggressor? Have they no shame? The US has become a totally disgusting nation of obese, greedy, demented slobs so beyond the pale of human decency that they will live in infamy along with the Third Reich and Pol Pot.


Are you in the US?
Because if you are, you'll see that the power-loving MSM accepts Putin's aggressions as the NATURAL reassertion of Russia's psychological need of a MASTER.

They unashamedly admire and fear your new Czar and his minions.
This admiration however doesn't extend to Russia's neighbors who enjoy only the fear.

'Let them hate me so long as they fear me'--the Roman Emperor Caligula

But facts are stubborn things, so you must fight much harder to either conceal them or bury them under a mountain of lies.

A point of agreement at least!
I also congratulate you for your "professionalism", accusing the opponent of the very tricks you use, good training indeed...

'Let them hate me so long as they fear me'--the Roman Emperor Caligula

Another "mirror image", how do you think Bush and the US are viewed in muslim countries and even not so muslim ones?

BTW, I am by no means a Putin groupie, far, far less than you are a Bush groupie, both are made of the same kind of manure, too bad the evil Putin isn't only evil but clever.

I'll happily denounce the Bush-Cheney monstrosity as a traitor to the US constitution as well as a power-mad bully abroad as I have many times.

I find more than a little of Caligula in the expressed statements of our veep. There are certainly grounds for war crimes trials over Iraq, Guantanamo, etc. And I am actively working to remove this blot from my government.

But I am no 'professional'.

Is it a 'trick' to state facts?

You see similarities but no differences--a personal brain defect.

You see mirror-images where there are no mirrors. In fact there is no such thing as a true mirror in reality, all mirrors distort.
Again, another idee fixe of your own poorly constructed consciousness.

And what about your 'professionalism'(by your own logic, otherwise how could you 'congratulate' me?); A morality-free world view--looking for your next paymaster.

'Go to the rising sun(Caligula), my sun is setting'--the aged Emperor Tiberius to his slave Macro, who smothered Tiberius soon afterwards.

Russian fighting machine is showing its age, say military analysts

I hope to goodness that the US plays it cool with Russia, which is really, the short term aside, in a truly lousy strategic position.
It's oil production is falling now, and exports even more sharply, and Russia has not really got a great deal else.
On top of that, they need to spend around $100bn to upgrade their military to be competitive now - how that will rate compared to the likely military strength of China in 2025 is another matter.

They also have strongly negative demographics, which however wonderful that may be for the overall health of the planet provides issues in finance, and even greater constraints on any ambitions to maintain great power status.
For a discussion see here:
Russia Economy Watch

In addition, it has not previously been clear what the relationship would be between the oil price going up and demand destruction through recession countering this and leading to stable or falling prices, even with restricted supply.
Recent experience seems to indicate that this point may be between $120-$150/barrel, which would restrict Russia's future finance much more than if the world economy was able to sustain a price of, say, $500, and may lead to Russian revenues falling as rapidly as it's exports.
This should be partly balanced by rising prices for natural gas, which perhaps have more leeway, but the notion of Russia having ever increased revenues from ever rising oil prices in spite of falling exports may be misplaced.

In short, by 2025 barring the exploitation of gas hydrates the notion of Russia as being in the great power game seems difficult to sustain.