Russia - General Discussion.

[John Fedup]

Everyone is talking about market readjustment, but it seems Russian oil is just making it to western markets by passing through third countries. It remains to be seen whether this is a temporary workaround that will get shut down or a permanent hole in the sanctions.

WSJ News Exclusive | Russian Oil Producers Stay One Step Ahead of Sanctions

Russia is getting oil to market by using ship-to-ship transfers and tapping Indian refineries to hide the origins of gasoline and other fuels.

www.wsj.com

Likely the latter IMHO, especially with Biden being hampered over gas prices with the midterm elections looming.

 

[Ananda]

It remains to be seen whether this is a temporary workaround that will get shut down or a permanent hole in the sanctions.

This is an interesting question, that in the end seems will be determine on how far West especially Euro zone able to replace Russian Hydrocarbon supply. The practise of 'oil laundry' actually already happen for some time, especially with Iran Oil during embargoes. Basically the tankers owners fill half of the tankers with legitemate oil agreed with customers, and fill another half with similar grade oil from Iran with bargain price.

As Russia now under embargoes from Collective West, then the practise understandably will happen to Russian oil. Especially if the bargain price can be agreed on. It is been talked this happen lately with Greek Tankers, but I'm not suprise if this happen with other tankers.

Russian seaborne oil exports could find ways round EU insurance ban: sources | Hellenic Shipping News Worldwide

www.hellenicshippingnews.com

The most pressure for Russian Oil sea borne logistics, are matter of Insurance. Most of maritime insurance handle from London brokerage market. Thus either Russian has to provide their own insurance or other Financial market insurance brokerage (most likely Shanghai or Hong Kong) that cover it. As compensation those brokerage will increase the costs, which is one of reason why Russian sold their Hydrocarbon at discount price to cover increase in logistics costs.

As for getting gasoline or other refine based products from Indian refineries, mostly happen due lower costs from their refineries, which big part also due on they are getting cheaper Russian oil. In theory, customers can ask where the crude oil origination. However from my understanding from one of commodities trades, most customers took blind eyes on that, as long as they got better pricing. In the end by most law, they are only has to state the refineries product origination, and not crude oil ones.

 

[Vivendi]

Lithuania has decided to block transit of goods into Kaliningrad that have been banned by EU. Russia demanded today that Lithuania lift the ban, and "reserve the right to take actions" if the blockage is not lifted in the near future. Banned goods include coal, metals, construction materials and "advanced technology". Lithuania defends the blockage, saying they are simply enforcing EU sanctions. Russia warns Lithuania over Kaliningrad restrictions

I suspect this is mainly huffing and puffing from Russia. Probably they will try to stir up some trouble, e.g., cyber attacks, spreading of disinformation, incursions into air/sea space, etc. Could they also go further? Who knows. I hope not.

Anyway only 50% of the goods will not be let through, I assume Russia can easily ship that by sea.

 

[SolarWind]

I would start taking Russia seriously at this point and hope that Lithuania is getting something critical from Russia that could be easily cut off. It would be better if there were.

 

[SolarWind]

Everyone is talking about market readjustment, but it seems Russian oil is just making it to western markets by passing through third countries. It remains to be seen whether this is a temporary workaround that will get shut down or a permanent hole in the sanctions.

WSJ News Exclusive | Russian Oil Producers Stay One Step Ahead of Sanctions

Russia is getting oil to market by using ship-to-ship transfers and tapping Indian refineries to hide the origins of gasoline and other fuels.

www.wsj.com

According to the article, US Import rules by default allow for a relatively small share of inputs for imported petroleum products to be derived from Russian oil, as is the case with the Indian refinery products mentioned in the article. This does appear to be a standard practice though and is not an exception made for Russian oil, but the rules could be changed if need be.

 

[Ananda]

Russia exports gold to Switzerland for the first time since the war in Ukraine began as some buyers soften on self-sanctioning

Most nations have self-sanctioned from Russian gold, but Switzerland's move signals that the trend may be easing.

markets.businessinsider.com

Even tough Swiss market don't put definite embargoes of Russian metal (unlike London), but this move shown tendency those self enforce embargoes against Russian stuff, perhaps loosing momentum.

Like I said several times in this thread, there's no way perpetual embargoes for Russian resources will be taking on for most parties. Not taking to those outside Collective West, where most of them still trade more or less with Russian. How about inside the collective West (even tough Swiss basically not include in collective West, but it's in Eurozone nonetheless).

Sooner or later those who embargoes Russian resources will taking some splits between them. Some perhaps like Baltic states, Scandinavians, Poland, or UK will stay on, while for the others ? That's the question.

 

[Vivendi]

Russia exports gold to Switzerland for the first time since the war in Ukraine began as some buyers soften on self-sanctioning

Most nations have self-sanctioned from Russian gold, but Switzerland's move signals that the trend may be easing.

markets.businessinsider.com

Even tough Swiss market don't put definite embargoes of Russian metal (unlike London), but this move shown tendency those self enforce embargoes against Russian stuff, perhaps loosing momentum.

Like I said several times in this thread, there's no way perpetual embargoes for Russian resources will be taking on for most parties. Not taking to those outside Collective West, where most of them still trade more or less with Russian. How about inside the collective West (even tough Swiss basically not include in collective West, but it's in Eurozone nonetheless).

Sooner or later those who embargoes Russian resources will taking some splits between them. Some perhaps like Baltic states, Scandinavians, Poland, or UK will stay on, while for the others ? That's the question.

The "economical warfare" that is being conducted against Russia is not going to be very effective, as the market adjusts, as you have said repeatedly.

What could "the west" do differently to make the "economic warfare" against Russia more effective?

 

[Vivendi]

Estonia on Wednesday accused Russia of engaging in escalatory actions ahead of next week’s NATO summit, including alleged missile simulations and airspace violations.

It also referenced Russia’s threat this week against Estonia’s fellow Baltic state Lithuania over its restriction of rail traffic to Russia’s Kaliningrad exclave.

“Currently, there is no immediate military threat against Estonia. However, we see that the Russian Federation is escalating its rhetoric and activities ahead of the Madrid Summit,” Estonian defence ministry spokesman Thomas Mell told AFP.

“Russia turning the implementation of European Union sanctions, which were announced months ago, against Lithuania, simulating missile attacks against targets in the Baltics and the Russian Federation’s helicopters violating Baltic borders are all coinciding in time and space,” he added.
Estonia Accuses Russia of 'Escalatory' Actions (thedefensepost.com)

In other, and definitely completely unrelated news, France conducted an "emergency force projection operation" yesterday, deploying additional 100 paratroopers to Estonia in less than six hours: "THUNDER LYNX" / Twitter

 

[Vivendi]

Estonia would be wiped off the map and the historic centre of its capital city razed to the ground under current Nato plans to defend the country from any Russian attack, according to its prime minister.

Kaja Kallas told reporters on Wednesday that the alliance’s existing defence plans for the three Baltic states was to allow them to be overrun before liberating them after 180 days.

Remarking that it was now more than 100 days since Russia began its full-scale invasion of Ukraine, Estonia’s prime minister said: “If you compare the sizes of Ukraine and the Baltic countries, it would mean the complete destruction of countries and our culture.” Subscribe to read | Financial Times

I fully agree with her, I think the current plans for defence of the Baltics are not good enough. Hopefully it will be beefed up soon.

 

[SolarWind]

Estonia would be wiped off the map and the historic centre of its capital city razed to the ground under current Nato plans to defend the country from any Russian attack, according to its prime minister.

Kaja Kallas told reporters on Wednesday that the alliance’s existing defence plans for the three Baltic states was to allow them to be overrun before liberating them after 180 days.

Remarking that it was now more than 100 days since Russia began its full-scale invasion of Ukraine, Estonia’s prime minister said: “If you compare the sizes of Ukraine and the Baltic countries, it would mean the complete destruction of countries and our culture.” Subscribe to read | Financial Times

I fully agree with her, I think the current plans for defence of the Baltics are not good enough. Hopefully it will be beefed up soon.

Are the Baltic States Really Indefensible? - Foreign Policy Research Institute

Are the Baltic States really indefensible? FPRI's Stephen Blank discusses in KyivPost.

www.fpri.org

The article makes an interesting argument that the NATO response could not come on time to prevent Russia from overrunning the Baltics and so the focus must be on deterrence. However, in the current situation, a Baltics incursion could result in the possibility of untying NATO hands in Ukraine to push Russians out. In this situation, Russia has more to lose from military aggression against the Baltics than before their war in Ukraine. Given these circumstances, Lithuania just might get away with blockading the Kaliningrad.

 

[Ananda]

What could "the west" do differently to make the "economic warfare" against Russia more effective?

Be realistic from begining not conducting economic warfare emotionally. Make Ursula and her cohort shut their mouth, as their rhetoric only backfire toward EU own market. This is what I have put in this thread before and some market analysts already warn.

Collective West from begining of this embargoes already went with mind set : "Our Economy much bigger and powerful then Russia, thus we can inflict more damage to them". However they are not calculating the overall costs that their economy will suffer. Perhaps they already did, but not openly shown that to the public. Like I said before the market analysts that warned the additional costs will be significant enough, not being cover by mainstream media, and only recently their voice being heard more.

They have to understand there's no way Global economy will shun Russian recources (whether hydrocarbon, metals, minerals, including the processed ones). It is just too big and some market will always need them. Russia simply much bigger than Iran or Venezuella, that it can't be shun like that without hitting them back.

The west politicians talk about hitting Russia cash flow on financing the war, when the reality the sanctions just add more cash flows toward Russian Coffer. Decoupling the West from Russia will take time, thus has to be done more gradually to be more effective. Afterall West and Russia already interconected too much on energy ecosystem. You don't decoupling on situation like that in instant or in short time.

Russia will get hurt more on certain segments, like high tech supply. That's where west should be more concentrated on that and not in Energy or Agriculture. Doing more gradually and discreet with energy to not create panic within West own market. Like I said, without the war market already predict USD 90 in average per gallon, with inflation around 6%-7% in average This is just due to Covid recovery. This economic warfare increase the costs significantly due to affecting structural damage.

West already want to punish Russia without calculating the cost that they are going to beared. This is what will happen if Politicians playing with market mechanism on emotional and moment populist thinking. Some EU politicians talking about green energy to take over the hydrocarbon problem. Sorry to say but it is most foolish argument that I heard because the most optimistics scenario will only put at least by end of decade. So, what the West going to do with energy for at least for a decade ?

Be realistic on doing economic warfare, and don't talk big aim if you know it will cost you back. That's what can make any economic warfare fizzle, the miss calculation on the costs that will hit you back.

 

[Todjaeger]

The article makes an interesting argument that the NATO response could not come on time to prevent Russia from overrunning the Baltics and so the focus must be on deterrence. However, in the current situation, a Baltics incursion could result in the possibility of untying NATO hands in Ukraine to push Russians out. In this situation, Russia has more to lose from military aggression against the Baltics than before their war in Ukraine. Given these circumstances, Lithuania just might get away with blockading the Kaliningrad.

Has Lithuania actually imposed a blockade on Russia's territory around Kaliningrad though? Given the definitions of the word Blockade found in dictionaries, unless/until the SLOC's into and out of Kaliningrad are also deliberately blocked, then to state the Lithuania has blockaded the territory is at best a hyperbolic statement exaggerating the situation.

It is also worth noting that there exists no direct land route from the main Russian territories to Kaliningrad that does not have to pass through at least two other countries first.

 

[Feanor]

Has Lithuania actually imposed a blockade on Russia's territory around Kaliningrad though? Given the definitions of the word Blockade found in dictionaries, unless/until the SLOC's into and out of Kaliningrad are also deliberately blocked, then to state the Lithuania has blockaded the territory is at best a hyperbolic statement exaggerating the situation.

It is also worth noting that there exists no direct land route from the main Russian territories to Kaliningrad that does not have to pass through at least two other countries first.

I believe there is some sort of treaty in place to allow Russian transit to the area, with the EU as a signatory. But I'm not familiar with the provisions of the treaty. I suspect from a strict legal standpoint Lithuania is correct, but in practice it's a substantive attempt to restrict Russia's ability to deliver cargo to Kaliningrad. Russia is likely taking the substantive view and threatening some sort of retaliation in response to this.

 

[SolarWind]

Has Lithuania actually imposed a blockade on Russia's territory around Kaliningrad though? Given the definitions of the word Blockade found in dictionaries, unless/until the SLOC's into and out of Kaliningrad are also deliberately blocked, then to state the Lithuania has blockaded the territory is at best a hyperbolic statement exaggerating the situation.

It is also worth noting that there exists no direct land route from the main Russian territories to Kaliningrad that does not have to pass through at least two other countries first.

Applying the word blockade in this situation was not originally my idea, just seems how it is being referred to. In all fairness, your hyper-referenced definition in dictionary.com under its section 2 arguably fits for this case: "any obstruction of passage or progress". Still, arguing semantics does not really add to the discussion here and you do make a number of good points, which I agree with.

 

[Todjaeger]

I believe there is some sort of treaty in place to allow Russian transit to the area, with the EU as a signatory. But I'm not familiar with the provisions of the treaty. I suspect from a strict legal standpoint Lithuania is correct, but in practice it's a substantive attempt to restrict Russia's ability to deliver cargo to Kaliningrad. Russia is likely taking the substantive view and threatening some sort of retaliation in response to this.

I went looking to see if I could find such a treaty, but as of right now I have not encountered one, though I have encountered claims of one. The exact text of such a treaty would also somewhat important, since that would likely under what conditions passage could be denied.

In practice though I do not think it would matter since there would also need to be faith that nations which are signatory to treaties would actually abide by the treaties they signed. At present I grow less and less optimistic that a number of nations will honour agreements they had previously made if they feel there is an advantage in not doing so.

 

[Feanor]

I went looking to see if I could find such a treaty, but as of right now I have not encountered one, though I have encountered claims of one. The exact text of such a treaty would also somewhat important, since that would likely under what conditions passage could be denied.

In practice though I do not think it would matter since there would also need to be faith that nations which are signatory to treaties would actually abide by the treaties they signed. At present I grow less and less optimistic that a number of nations will honour agreements they had previously made if they feel there is an advantage in not doing so.

I recall Lithuanian statements that there is a 3 party treaty that includes the EU and Russia, regarding transit to Kaliningrad. I didn't go looking for it. In this case they are treating sanctions intended to prevent certain Russian goods from going to the EU as justification to prevent those goods from transiting through Lithuania to Kaliningrad. It's pretty clear this causes a problem for Russia, but given that shipping is generally cheaper then land transit and Russian shipping is still coming in fine it shouldn't be that bad. Russia specifically prepared certain civilian vessels pre-war to support Kaliningrad in this scenario. I suspect this is more of a long term problem then a short term problem. A lot will depend on what, if any, leverage Russia can bring to bear, and on what impact this has for Russia in the grand scheme of things.

 

[T.C.P]

Be realistic from begining not conducting economic warfare emotionally. Make Ursula and her cohort shut their mouth, as their rhetoric only backfire toward EU own market. This is what I have put in this thread before and some market analysts already warn.

I agree with you, but the only way that would have been possible is if the West were dictatorships and all government officials were specialists in economic and strategic affairs and did not have to appease the civillian populace.

The reality is, the average person will not understand playing the long game, the public reaction of the Russian invasion in the West has been very strong, the leaders have to use rhetoric to show the populace that they are doing things. The average MP/governor is also not going to be intelligent enough to understand the economic strategies and wont just kow tow to the opinions of experts.

Us Asians can take a more detached view of the war, but for Europeans and especially Eastern Europeans, emotions regarding this invasion are understandable high, you cannot expect them to take such cold hearted view of things, we are all humans after all. The general public reaction and wild takes in Bangladesh, everytime Israel makes a strike on Gaza makes the most anti Russian Polish nationalist look like a level headed academic.

 

[Capt. Ironpants]

I recall Lithuanian statements that there is a 3 party treaty that includes the EU and Russia, regarding transit to Kaliningrad. I didn't go looking for it. In this case they are treating sanctions intended to prevent certain Russian goods from going to the EU as justification to prevent those goods from transiting through Lithuania to Kaliningrad. It's pretty clear this causes a problem for Russia, but given that shipping is generally cheaper then land transit and Russian shipping is still coming in fine it shouldn't be that bad. Russia specifically prepared certain civilian vessels pre-war to support Kaliningrad in this scenario. I suspect this is more of a long term problem then a short term problem. A lot will depend on what, if any, leverage Russia can bring to bear, and on what impact this has for Russia in the grand scheme of things.

In 2002, the EU and Moscow reached an agreement on travel between Russia and Kaliningrad, ahead of Poland and Lithuania joining the European Union in 2004. If you do an internet search on "EU Russia Kaliningrad 2002" (minus quotation marks) you can find a number of news articles and other materials relating to it. I got in big trouble for posting a link to a CNN article once, so I leave it up to you guys to search and find. I'm not sure what sources are okay.

@Todjaeger may be interested, too.

 

[Todjaeger]

In 2002, the EU and Moscow reached an agreement on travel between Russia and Kaliningrad, ahead of Poland and Lithuania joining the European Union in 2004. If you do an internet search on "EU Russia Kaliningrad 2002" (minus quotation marks) you can find a number of news articles and other materials relating to it. I got in big trouble for posting a link to a CNN article once, so I leave it up to you guys to search and find. I'm not sure what sources are okay.

@Todjaeger may be interested, too.

I have included a link to the EU article mentioned above found here.

In a nutshell, and fully admitting that I am not an attorney or anything even close to a specialist in int'l law, the agreement was above the need for Russian citizens to obtain visas in order to transit through EU territories if they were to travel between the Kaliningrad enclave and the rest of Russia. As part of the agreement, the then EU members-to-be of Poland and Lithuania were to bring their rules for visas to the same as EU standards, and ultimately to Schengen rules. Having read through it, I do not find any mention of rules regarding freight links, apart from apparently some EU funding for Kaliningrad customs and transit/port facilities. My impression on reading about that is that such funding was intended more to permit or ease trade between the Kaliningrad enclave and the EU, and was not about establishing or maintaining any transit link between Kaliningrad and Russia.

As I had noted in a prior post, neither Poland or Lithuania have any land border with Russia except for the Kaliningrad enclave, so anything/anyone making an as direct as possible ground transit between the enclave and the rest of Russia would also need to pass through either Belarus or Latvia. Other, even more indirect and therefore convoluted ground routes are also possible of course.

 

[Ananda]

did not have to appease the civillian populace.

I put the emphasis on this one. Because the West Politicians and mainstream media, are they telling the truth or are they 'building' public opinion on the direction with what they want ?

Even dictatorship like Russia, they don't disregard public opinion. It is just they are have more forcefull tools to control it. I just see both side politicians are building their own agenda to move public opinion on the direction they want.

Russia already in begining prepared their public on economic hardship, while West much less so. Thus when the cost of economic war hit them larger then expected, I do see Western public (on some section) begin to complaint. This is not a good way to do prolong economic war, as you have to prepared your population from the begining of the economic costs.

The dictactorial Russia seems more preparing their population from begining, and not so with the West. Is it because miss calculation and over confidence? Time will tell.

Off course emotional factors in Euro public and Russian are high on this war. My point is to make prolong succesfull economic war, is not much different with war in the ground. You have to calculate your own strength and weaknesses, then work it out around that base on your advantage. This include preparing your public toward the costs, in order not getting surprise turn around on their opinion. Whether you are democracy or authoritarian regime, public opinion is something you need to manage when you conducting prolong warfare.