The Kremlin’s shadow fleet is today running such a smooth trade to India and China that Putin is essentially getting the world market price for his oil.
Volumes are booming. S&P says shipments averaged 3.5 million barrels a day in October,up from the 3.1 million before the war. Export revenues from fossil fuels over the last two months have been running at $US800 million ($1.2 billion) a day,as if there never had been sanctions.
The West is complicit. VesselsValue says Greek shipowners have sold 290 ships since the war began,mostly to Russia’s Sovcomflot or other opaque traders helping Putin’s war. The EU has turned a blind eye. It is still the biggest buyer of Russia’s LNG gas.
Russia’s oil revenue continues to flow in.Credit:Bloomberg
Washington was always lukewarm about the oil price cap. Joe Biden wanted to keep the oil flowing to avert petrol rage at home,while depriving Putin of revenue at the same time. That balancing act has proved impossible.
Russia is able to run a “hot” war economy on these revenues. The structural damage goes deep but it will not be obvious enough,soon enough,to change the Kremlin’s political calculus.
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Ukraine has lost 30 per cent of its economy,most of its heavy industry,and a fifth of its grain output. The West expects the country to fight an offensive campaign against Russian trenches and minefields without air cover,and with inadequate counter-battery fire,anti-mine kit,and electronic warfare capability.
General James Jones,former NATO supreme commander,said the US has been too slow in trickling out weapons,and too cowed by Putin’s bluster. “They’re having to fight the war with one hand tied behind their backs,” he said.
It is a view shared by a venerable list of ex-Nato commanders. Ukraine is still waiting for F16 fighter jets. The US and Germany are still withholding cruise missiles.
America has an excuse,arguably – it must plan for a war on three fronts against the colluding autocracies;and must husband depleting stocks of weapons. Europe has no such constraint. It is facing an enemy that wishes to restore Tsarist borders and retake swaths of EU territory.
What is the EU doing about this existential threat? It is absorbed by its usual squabbles over euros and process. Mujtaba Rahman,Europe chief at Eurasia Group,says support for Ukraine “risks unravelling” ahead of a make-or-break summit in December.
With an election on the horizon,Joe Biden wanted to keep the oil flowing to keep petrol prices low,while depriving Putin of revenue at the same time. That balancing act has proved impossible.Credit:AP
The Commission’s Ursula von der Leyen wants a €100 billion ($166 billion) top-up package,including €50 billion for Ukraine. This is now in jeopardy.
Berlin was already baulking at fresh money before the German constitutional court issued its maximalist ruling two weeks ago,forcing deep fiscal retrenchment. The chances are even lower now. Berenberg Bank estimates that Berlin must come up with €30-40 billion in 2024 and €20-30 billion for 2025,and a total of €130 billion by 2027.
Rahman said von der Leyen blundered badly in linking Ukraine aid to the EU budget,hoping to use the war as a rocket booster for other ambitions. Everything is instead crashing around her.
Italy,Spain and Greece are angling for concessions. The creditor bloc of Finland,Sweden,Denmark and Austria,along with Germany,insists on cannibalising existing EU funds rather than paying more. Long-festering tensions are bursting into the open.
As matters stand,Putin may outlast the West,exposing all those pious pledges of support – “for as long as it takes” – as humbug.
“It is now clear that a deal is seriously at risk. The blame game is already in full swing,” said Rahman.
Hungarian Prime Minister Viktor Orbán is holding everything to ransom,threatening to veto the start of EU accession talks with Ukraine unless Brussels releases €37 billion of EU funds withheld over rule-of-law and press violations.
Ukraine fatigue in Washington is perhaps worse. Less than $US5 billion remains of the $US44 billion approved by Congress in military aid. Joe Biden’s request for another $US61 billion in aid – half for defence – is deadlocked in Congress,entangled with a dispute over the Mexican border.
With each week,the Republicans fall further under the philo-Putinist spell of Donald Trump.
There may be some poetic licence in Bild-Zeitung’s claims that Biden and Germany’s Olaf Scholz are pressuring Kyiv to accept “brutal compromises”. It undoubtedly reflects a strain of thinking in both capitals. Volodymyr Zelensky is being urged by some to take any deal he can,while he can.
Ukraine has lost 30 per cent of its economy,most of its heavy industry,and a fifth of its grain output.Credit:AP
Needless to say,Putin has no intention of reaching a durable settlement. “He regards Ukraine as an artificial entity created by the enemies of Russia that has no right to exist. Even if there was a deal he would attack again in short order,” said Bond.
Professor Alan Riley from the Atlantic Council said war works well for Putin. “It has become the justification of the regime,making it easier to maintain repression. He can import anything he needs through Turkey or Central Asia,and he feels that the West is weakening,” he said.
“Europe’s defence ministries get it. There is a sense of fear that this can spin completely out of control. They know there has to be massive rearmament.”
The politicians do not yet get it. As matters stand,Putin may outlast the West,exposing all those pious pledges of support – “for as long as it takes” – as humbug.
Europeans must decide whether they are going to defend themselves or rely on an America where Trump is running five points ahead in the polls. The decision must be made immediately.
They are starting from a dire position. Western Europe slashed defence to the bone during the Lost Decade,chiefly in order to comply with the scorched-earth demands of the eurozone’s fiscal regime. Germany did so out of self-inflicted austerity mania and strategic complacency.
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They cut spending on weapons systems and matériel because these were easiest to cut. That is why Europe has so little to give Ukraine today.
Europe cannot wind back the clock. It can ditch its pettifogging rulebook and behave as if it understands the threat. It can still disabuse Vladimir Putin of his belief that Russia has greater staying power.
If the European project cannot rise to this challenge,what is the point of it?
Telegraph,London