I’m breaking my word from last week’s natural gas shakedown in which I noted I would write about customer intolerance for high energy prices this week. Since then, a kerfuffle has broken out in the Eurasian landmass. I was asked if I might be interested in writing about that, especially regarding energy. No! I don’t know much about it; it won’t impact our energy supply, and we should not get involved. After listening to some podcasts and news clips, my Gallup “strengths” got the best of me.
My top four strengths are posted on the left, with a layperson’s definition in the righthand column. We see here why I can’t resist learning, digging, and sharing. I always want the big picture.
When I was coming of age, we were running out of energy, the Soviet Union had a hair-trigger for launching nukes, fallout shelter signs were ubiquitous on the entrances of massive buildings, and yes, we did the hide-under-the-desk drills. Peak fear, which I’m not belittling, came in 1983 with the ABC movie, The Day After (a nuclear attack). Although the special effects are primitive, it’s gruesome, even today.
Back then, I didn’t know the context because anything that happened before 1975 didn’t matter in my world. The Soviets were evil, and we had to prevail.
The Great War
Little did I know, the 20th century was the deadliest in recorded history. Wars start, not just for dominance but to settle scores. I could go rabbit hole forever, but I have word limits, so let’s start with The Great War, World War I. The warring sides were as follows.
- Central Powers: Germany, Austria, Hungary, Turkey
- Allies: France, UK, Russia, Italy, Japan, USA
The Central Powers essentially form a line of countries that separate Western Europe from Asia. The Great War began with an attempt to humiliate Serbia after they shot Austrian aristocrat Franz Ferdinand dead. It took a month after that event for the war to spin up, and when that happened, declarations of war sprouted like weeds.
At the end of this hellish war in which chemical weapons were used and Spanish flu killed people indiscriminately (no age bias), Germany was blamed for it and humiliated. They were blamed because they had an alliance with Austria to defend each other against Russia, and so they jumped in first to start WWI. They also led a military arms race before the war. Germany had land, people, and property taken from them as part of the armistice. We know how that turned out. Winston Churchill wrote of the armistice, “This is not peace. It is an armistice for twenty years.” How prophetic.
World War II
Germany, of course, did not stand for the humiliation giving rise to the Third Reich, which had a pre-cut deal with Imperial Japan. The day after the attack on Pearl Harbor, the US declared war on Japan. A few days later, Germany declared war on the US. Japan’s attack on China and Germany’s on The Soviet Union were extremely brutal. Russia lost over 22 million lives. China lost over 19 million lives. For comparison, the United States lost 250,000 souls during WWII. The scale is off the chart but burned into their DNA. Ukraine was a massive killing field with 15 million deaths during the war.
We return to the cold war with the Soviets. At the end of the cold war, Reagan and Gorbachev signed a deal that promised NATO, an alliance of western nations to defend against the Soviet Union and created in 1949, would not expand east toward Russia. Well, that’s precisely what NATO has done since then. My question is, why didn’t NATO simply disband? At this point, NATO is a joke. To boot, Putin proclaimed this move 15 years ago. In elevator voice: Now passing a rabbit hole.
Post Cold War
On the maps below, you can see that NATO expanded right up into Putin’s grill bordering on Ukraine since the end of the Cold War. That’s a bit like parking Soviet missiles on Cuba. Twenty-two million deaths are burned into Russian DNA, and for former KGB officer Putin, the humiliation of the defunct Soviet Union. I only understand this 50,000-foot stuff, but Ukraine has mixed ethnicities. Putin’s reasons for the invasion include “demilitarization and de’Nazification” Ukraine, protecting Russia, and protecting citizens from bullying and genocide. It looks more like score-settling, payback, and pushback on NATO.
Meanwhile, Europe gets almost half its natural gas from Russia, which is building pipelines around Ukraine. This is another example of the dangers of fuel concentration, i.e., the opposite of fuel diversification. It looks to me like the European Union, with Germany leading the way, played right into Putin’s hands.
I would not follow German energy policy. One German-American panelist at a WPUI workshop a few years ago said, “watch what the Germans do and do the opposite.” They just closed half their nuclear plants and rely even more on Russian natural gas. And what about carbon emissions? Summary: give yourself up as a hostage to your adversary, fund the adversary, raise energy prices on your people, and increase emissions – that is some fine policy and planning, alrighty.
Putin the Schemer
Russia funds NGOs (non-government organizations, i.e., non-profits) worldwide. Any bets that Putin supported anti-nuke movements in Europe or anti-fracking campaigns in the US? Now passing a rabbit hole.
The West’s retaliation at this point includes sanctions that decrease Putin’s supply of natural gas, driving up energy costs for Europe. The sanctions are also devaluing the ruble by 25-30%, so far, hitting the Russian people. By the time you read this, I’m sure the situation will have changed, but the West is also using the money transfer system, SWIFT, which is used for international oil and natural gas transactions, to debank Russia.
This is perilous stuff. Putin has more nuclear weapons than does the United States. In my humble opinion, this is Brussel’s problem to sort out – and why do we need NATO?
Some morals of this story:
- Don’t humiliate people
- Keep your word
- Believe your adversary
- Diversify to manage risk