US financial showdown with Russia is more dangerous than it looks, for both sides

US financial showdown with Russia is more dangerous than it looks, for both sides

the telegraph

The US Treasury faces a more formidable prey with Russia, the world’s biggest producer of energy with a $2 trillion economy, superb scientists and a first-strike nuclear arsenal

Two currencies - US Dollar and Rouble

Washington is tightening the noose on Russia, slowly shutting off market access for Russian banks, companies and state bodies with $714bn of dollar debt Photo: Alamy

The United States has constructed a financial neutron bomb. For the past 12 years an elite cell at the US Treasury has been sharpening the tools of economic warfare, designing ways to bring almost any country to its knees without firing a shot.

The strategy relies on hegemonic control over the global banking system, buttressed by a network of allies and the reluctant acquiescence of neutral states. Let us call this the Manhattan Project of the early 21st century.

“It is a new kind of war, like a creeping financial insurgency, intended to constrict our enemies’ financial lifeblood, unprecedented in its reach and effectiveness,” says Juan Zarate, the Treasury and White House official who helped spearhead policy after 9/11.

“The new geo-economic game may be more efficient and subtle than past geopolitical competitions, but it is no less ruthless and destructive,” he writes in his book Treasury’s War: the Unleashing of a New Era of Financial Warfare.

Bear this in mind as Washington tightens the noose on Vladimir Putin’s Russia, slowly shutting off market access for Russian banks, companies and state bodies with $714bn of dollar debt (Sberbank data).

The stealth weapon is a “scarlet letter”, devised under Section 311 of the US Patriot Act. Once a bank is tainted in this way – accused of money-laundering or underwriting terrorist activities, a suitably loose offence – it becomes radioactive, caught in the “boa constrictor’s lethal embrace”, as Mr Zarate puts it.

This can be a death sentence even if the lender has no operations in the US. European banks do not dare to defy US regulators. They sever all dealings with the victim.

So do the Chinese, as became clear in 2005 when the US hit Banco Delta Asia (BDA) in Macao for serving as a conduit for North Korean commercial piracy. China pulled the plug. BDA collapsed within two weeks. China also tipped off Washington when Mr Putin proposed a joint Sino-Russian attack on Fannie Mae and Freddie Mac bonds in 2008, aiming to precipitate a dollar crash.

Mr Zarate told me that the US can “go it alone” with sanctions if necessary. It therefore hardly matters whether or not the EU drags its feet over Ukraine, opting for the lowest common denominator to keep Bulgaria, Cyprus, Hungary and Luxembourg on board. Washington has the power to dictate the pace for them.

The new arsenal was first deployed against Ukraine – of all places – in December 2002. Its banks were accused of laundering funds from Russia’s organised crime rings. Kiev capitulated in short order.

Nairu, Burma, North Cyprus, Belarus and Latvia were felled one by one, all forced to comply with US demands. North Korea was then paralysed. The biggest prize yet has been Iran, finally brought to the table. “A hidden war is under way, on a very far-reaching global scale. This is a kind of war through which the enemy assumes it can defeat the Iranian nation,” said then-president Mahmoud Ahmadinejad to Iran’s Majlis. He meant it defiantly. Instead it was prescient.

The US Treasury faces a more formidable prey with Russia, the world’s biggest producer of energy with a $2 trillion economy, superb scientists and a first-strike nuclear arsenal. It is also tightly linked to the German and east European economies. The US risks endangering its own alliance system if it runs roughshod over friends. It is in much the same situation as Britain in the mid-19th century when it enforced naval supremacy, boarding alleged slave ships anywhere in the world, under any flag, ruffling everybody’s feathers.

President Putin knows exactly what the US can do with its financial weapons. Russia was brought into the loop when the two countries were for a while “allies” in the fight against Jihadi terrorism. Mr Putin appointed loyalist Viktor Zubkov – later prime minister – to handle dealings with the US Treasury.

Mr Zarate said the Obama White House has waited too long to strike in earnest, clinging to the hope that Putin would stop short of tearing up the global rule book. “They should take the gloves off. The longer the wait, the more maximalist they may have to be,” he said.

This would be a calibrated escalation, issuing the scarlet letter to Russian banks that help Syria’s regime.

He thinks it may already too late to stop Eastern Ukraine spinning out of control, but not too late to inflict a high cost. “If the US Treasury says three Russian banks are “primary money-laundering concerns”, do you think that UBS, or Standard Chartered will have anything to do with them?”

This will graduate to sanctions on Russian defence firms, mineral exports and energy – trying not to hurt BP assets in Russia too much, he adds tactfully – culminating in a squeeze on Gazprom should all else fail. Whether you are for or against such action, be under no illusion as to what it means. We would be living in a different world, and Wall Street’s S&P 500 would not be trading anywhere near 1,850.

It is true that Russia is not the power it once was, as you can see from these Sberbank charts showing relative economic size against China and Europe.

This is not a repeat of the Cold War. There is no plausible equivalence between Russia and the West, and no ideological mystique.

It has $470bn of foreign reserves but these have already fallen by $35bn since the crisis began as the central bank fights capital flight and defends the rouble. Moscow cannot easily deploy the reserves in a slump without causing the money supply to shrink, deepening a recession that is almost certainly under way. Finance minister Anton Siluanov says growth may be zero this year. The World Bank fears -1.8pc, while Danske Banks says it could be -4pc.

Putin cannot count on global allies to carry him through. Only Venezuela, Bolivia, Cuba, Nicaragua, Belarus, North Korean, Syria, Sudan, Zimbabwe and Armenia lined up behind Mr Putin at the United Nations over Crimea, a roll-call of the irrelevant.

Yet as the old proverb goes: “Russia is never as strong as she looks; Russia is never as weak as she looks.”

Princeton professor Harold James sees echoes of events before the First World War when Britain and France imagined they could use financial warfare to check German power.

He says the world’s interlocking nexus means this cannot be contained. Sanctions risk setting off a chain-reaction to match the 2008 shock. “Lehman was a small institution compared with the Austrian, French and German banks that have become highly exposed to Russia’s financial system. A Russian asset freeze could be catastrophic for European – indeed, global – financial markets,” he wrote on Project Syndicate.

Chancellor George Osborne must have been let into the secret of US plans by now. Perhaps that is why he issued last week’s alert in Washington, warning City bankers to prepare for a sanctions fall-out. The City is precious, he said, “but that doesn’t mean its interests will come above the national security interests of our country”.

The greatest risk is surely an “asymmetric” riposte by the Kremlin. Russia’s cyber-warfare experts are among the best, and they had their own trial run on Estonia in 2007. A cyber shutdown of an Illinois water system was tracked to Russian sources in 2011. We don’t know whether US Homeland Security can counter a full-blown “denial-of-service” attack on electricity grids, water systems, air traffic control, or indeed the New York Stock Exchange, and nor does Washington.

“If we were in a cyberwar today, the US would lose. We’re simply the most dependent and most vulnerable,” said US spy chief Mike McConnell in 2010.

The US defence secretary Leon Panetta warned of a cyber-Pearl Harbour in 2012. “They could shut down the power grid across large parts of the country. They could derail passenger trains or, even more dangerous, derail passenger trains loaded with lethal chemicals. They could contaminate the water supply in major cities, or shut down the power grid across large parts of the country,” he said. Slapstick exaggeration to extract more funds from Congress? We may find out.

Sanctions are as old as time. So are the salutary lessons. Pericles tried to cow the city state of Megara in 432 BC by cutting off trade access to markets of the Athenian Empire. He set off the Pelopennesian Wars, bringing Sparta’s hoplite infantry crashing down on Athens. Greece’s economic system was left in ruins, at the mercy of Persia. That was a taste of asymmetry.

The Dangerous Economic Warfare Policies of the US Treasury

More Evidence That Consolidated Global Power Is Wielded by a Tiny Elite

the daily bell

US financial showdown with Russia is more dangerous than it looks, for both sides … The United States has constructed a financial neutron bomb. For the past 12 years an elite cell at the US Treasury has been sharpening the tools of economic warfare, designing ways to bring almost any country to its knees without firing a shot. The strategy relies on hegemonic control over the global banking system, buttressed by a network of allies and the reluctant acquiescence of neutral states. Let us call this the Manhattan Project of the early 21st century. – UK Telegraph

Dominant Social Theme: How fortunate that the US can place sanctions anywhere in the world. What foresight.

Free-Market Analysis: Gradually and continually (we humbly observe) our theses are confirmed by others. The Anglo-American axis indeed controls the world – China, too.

We find this startling admission in a recent article posted at the UK Telegraph (SEE: US financial showdown with Russia is more dangerous than it looks, for both sides).

And, yes, we’ve reported on it in our own way, proposing that the top elites in any society have more in common with each other than the vast majority of citizens they keep (a distant) company with.

Thus it is not surprising that the US has a great deal of clout around the world. The article also makes the point that the power the US has accumulated makes its exercise dangerous, at least when it comes to Russia.

The Bear is a big and powerful country on its own, and any misjudgment on the part of US officials may cause a kind of destabilization that could lead to direct military conflict between Russia and the US.

Nonetheless, leaving aside the obvious danger, the article’s point about the power that the West – and the US – has accumulated is significant.

Here’s more:

“It is a new kind of war, like a creeping financial insurgency, intended to constrict our enemies’ financial lifeblood, unprecedented in its reach and effectiveness,” says Juan Zarate, the Treasury and White House official who helped spearhead policy after 9/11.

“The new geo-economic game may be more efficient and subtle than past geopolitical competitions, but it is no less ruthless and destructive,” he writes in his book Treasury’s War: the Unleashing of a New Era of Financial Warfare.

Bear this in mind as Washington tightens the noose on Vladimir Putin’s Russia, slowly shutting off market access for Russian banks, companies and state bodies with $714bn of dollar debt (Sberbank data).

… The stealth weapon is a “scarlet letter”, devised under Section 311 of the US Patriot Act. Once a bank is tainted in this way – accused of money-laundering or underwriting terrorist activities, a suitably loose offence – it becomes radioactive, caught in the “boa constrictor’s lethal embrace”, as Mr Zarate puts it.

This can be a death sentence even if the lender has no operations in the US. European banks do not dare to defy US regulators. They sever all dealings with the victim. So do the Chinese, as became clear in 2005 when the US hit Banco Delta Asia (BDA) in Macao for serving as a conduit for North Korean commercial piracy.

China pulled the plug. BDA collapsed within two weeks. China also tipped off Washington when Mr Putin proposed a joint Sino-Russian attack on Fannie Mae and Freddie Mac bonds in 2008, aiming to precipitate a dollar crash.

Mr Zarate told me that the US can “go it alone” with sanctions if necessary. It therefore hardly matters whether or not the EU drags its feet over Ukraine, opting for the lowest common denominator to keep Bulgaria, Cyprus, Hungary and Luxembourg on board. Washington has the power to dictate the pace for them.

This last point is especially noteworthy: Not only is the US effective at placing sanctions on countries around the world, it can also push most countries into complying with these sanctions. If US officials are unhappy, they can threaten credibly to destabilize a country causing such unhappiness.

Of course, it is not just the “US.” Those who stand behind the enormous power of America are globalist bankers located in various independent city-states around the world.

Those wielding sanctions are a power elite that has created a complex tapestry of rules, regulations and relationships that are subordinate to Western interests.

The British Empire dominated in the world in the 1800s, and this domination included China, India and Brazil. The British also had a sizeable influence in Russia during the post-war Russian Revolution, along with Wall Street, as G. Edward Griffin has

Using Social Media To Help the CIA To Destabilize the World

World instability

Security forces from Provincial Reconstruction Team Ghazni secure a landing zone while Polish medics arrive to provide medical care in Ghazni province, Afghanistan. Poles and militaries from other Eastern European countries participated in Iraq and Afghanistan with the hope that someday when they need military assistance, the U.S. would provide it, said Robert D. Kaplan, chief geopolitical analyst for Stratfor.

WASHINGTON (Army News Service, April 11, 2014) — Twitter, Facebook and other types of social media are contributing to global instability, said Robert D. Kaplan, chief geopolitical analyst for Stratfor — a team of intelligence experts.

The use of social media, he explained, has been shown to unite and rally demonstrators at a moment’s notice, enabling them to focus their energies on toppling regimes in just a matter of days. An example would be the use of it during the so-called Arab Spring, which began in December 2010.

Kaplan was keynote speaker at the 25th Annual Strategy Conference in Carlisle, Pa., sponsored by the Army War College, in partnership with the Joint Staff/J7. His remarks and those of others are not official U.S. Army doctrine. Rather they are meant to inform the Army of possible challenges it faces in the coming years and decades, officials said.

FAILED STATES

Failed, collapsed or weakened states pose a regional security problem and even a national security threat for the U.S. and its Army, Kaplan said, defining a weak or failed state as one where travel outside the capital can be dangerous — places like Syria, Iraq, South Sudan and Yemen.

Social media is not the only factor that will increasingly destabilize the world in the next 20 years, he said.

Ethnic and religious sectarian problems will continue to fester and create failed states in places like Africa and the Middle East, areas he compared to the post-Roman Empire Christendom in 4th, 5th and 6th-century Europe, where doctrinal battles and violence occurred between various sects.

Syria, Iraq and the Central African Republic area examples where that is occurring and Kaplan believes it will further spread as passions increase.

Another factor in the rise of failed states, he said, is the end of colonial rule and the strongmen who followed.

Like it or not, he said, the European powers sliced up the world in spheres of influence and domination, where protest and chaos was effectively quashed.

When that domination ended in the 1960s, strongmen — who were seen by their people as leaders against imperialism — emerged. Since these dictators now felt like they had moral authority, they governed how they pleased, he said, adding that it wasn’t always in the best interest of their own people, but at least they maintained tight control.

But with the era of colonial rule and strongmen ending, people are getting restless and want change, he said; however the change each tribe, ethnic or sectarian group seeks may be very different and this results in friction and clashes.

WEAK INSTITUTIONS

One of the most important factors creating global instability, he said, are weak institutions that Americans take for granted; things like the departments of motor vehicles, water and electric companies, police and firefighters. These are not top-level government agencies, but are services that make society function.

In vast swaths of Africa and Asia, these institutions are weak and in some cases nonexistent, he said. Weak institutions in turn give rise to feeble state identities. Feeble state identities in turn breed discontent and anarchy.

That discontent then often manifests itself in militant, radicalized groups like Hamas and Hezbollah, which can create regional security problems. The kinds of people that join these types of groups, he said, are more willing to die for a cause than they would be for the state.

Non-state actors, he said, are also empowered by new technologies that have the potential for doing a great deal of damage; for instance offensive cyber capabilities and plastic explosives that can fit inside a pocket. A very small group of people with ideologies and these types of weapons can cause a great deal of instability.

There’s not much the U.S. will be able to do in the coming years to address failed states, he said, because the money to do it might not be there. The U.S., however, can take selective actions it deems important using its special operations capabilities.

Meanwhile, he said, the Army and other services remaining strong can serve as a deterrent to those who would do America harm. In other words, even if the Army isn’t engaged in direct combat, its strength will dissuade potential aggressors.

DEALING WITH CHINA

As if failed states aren’t bad enough, Kaplan said there’s plenty to be concerned about with respect to non-failed states like China and Russia.

For centuries, China was effectively separated from India by the Himalayas. Then, new technologies made the world a much smaller place.

Now, the Chinese are building warships and routinely sailing in the Indian Ocean and they’re building airfields in Tibet for fighter aircraft. India too is building warships and is using its satellites to spy on the Chinese.

This can cause a great deal of mutual suspicions and mistrust, Kaplan said.

The Chinese are mimicking what the U.S. did in the 19th and 20th centuries in the Western Hemisphere. The U.S. made the Caribbean its own lake and controlled the Panama Canal — the passage between the Atlantic and Pacific.

In China’s case, officials look at the East and South China seas — and increasingly the Indian Ocean — as part of their strategic sphere of influence. In other words, it’s their Caribbean.

For now, it isn’t in their interest to attack the U.S. because their military is not as strong as the U.S. and they can take their time building it up and gaining experience in using new military technologies, he said. Also, Kaplan doesn’t believe the Chinese are in meetings planning a world empire.

The problem for the U.S. with regard to China, he said, is that China will face internal instability over the coming decades because of an economic slowdown and tumultuous ethnic and social transformation.

When that occurs, the best way for China’s leaders to hold sway over their people will be to dial up nationalism, he said. That nationalism would take the form of provocations to its neighbors.

DEALING WITH RUSSIA

With respect to Russia, Kaplan said it too is acting in the same way the U.S. has in the past, dominating countries close to it like Ukraine, which he said the Russian people consider part of their heritage.

Throughout history, the Russians have felt the need for a buffer zone between their country and Europe, especially since it was periodically invaded by the French, Germans and others. America, he said, has been insulated from that threat by two oceans.

Russia’s need for buffers has not gone unnoticed by its eastern European neighbors, who are becoming increasingly uneasy, as Russia has proved willing to use force in Crimea and as it builds up its military forces elsewhere, he said.

Poles, Romanians and others are not reassured that they’ll get military assistance if needed from Western Europe, whose armies have been downsized much more than U.S. Army, he said. As well, Europe has become dependent on Russia for its energy needs, so this gives the Russians a great deal of leverage.

Because of Eastern Europe’s mistrust of getting help from the rest of Europe, Kaplan said they’ve turned increasingly to the U.S. for help, participating in U.S.-led exercises and contributing troops in Iraq and Afghanistan with the hope that in the future, the U.S. will remember their loyalties.

PARTNERSHIPS

So what can America do in the coming decades?

Besides maintaining a strong military, Kaplan said the U.S. can partner with other powers, India and Japan, for instance.

India views the U.S. presence in the Indian Ocean, for example, as a counter to China’s buildup. And in turn, he said, the U.S. values India’s military, although there isn’t a formal treaty like NATO in place.

The other thing the U.S. can do, he said, is to organize its interagency structure in a more vertical manner, like the British did in the 19th century and earlier with its East India Company. Economic, political and military agencies worked hand-in-hand in foreign policy, although today that policy would be viewed as imperialistic.

The U.S. military can use the vertical model to its benefit in national security by working more closely with the Department of State and agencies like the U.S. Agency for International Development.

An important area of national security where Kaplan sees the U.S. going in the right direction is the continued development of its home-grown energy requirements, which makes America less reliant on energy imports from places not always friendly to the U.S.

Besides his work for Stratfor, Kaplan, is a national correspondent for the magazine “The Atlantic,” author of “Asia’s Cauldron: The South China Sea and End of a Stable Pacific,” and in 2011 and 2012, he was chosen by “Foreign Policy” magazine as one of the world’s “Top 100 Global Thinkers.”

The 25th Annual Strategy Conference in Carlisle ran April 8-10.

Mega oil field discovered in southern Russia

Mega oil field discovered in southern Russia

Russia-Today
AFP Photo/Fabio Bucciarelli

AFP Photo/Fabio Bucciarelli

A new oil field with roughly 300 million tons of oil and 90 billion cubic meters of gas has been discovered in the Astrakhan region of Russia.

“The field’s reserves are unprecedented, this discovery confirms the high potential of the Astrakhan region in terms of these major discoveries,” Sergey Donskoy, Russia’s Natural Resources Minister said on Wednesday.

The field, called “Velikoe” (The Great) was discovered by the AFB Oil and Gas Company, which will likely seek out larger partners to develop it.

Two likely candidates are Rosneft, Russia’s state-owned and largest producer, and Lukoil, the country’s second biggest producer.

“According to experts, given the lack of large land deposits, project participation will likely come from all major industry players. The most probable partners are Rosneft and Lukoil, which already have projects in neighboring regions,” Uralsib Capital analyst Aleksey Kokin told mail.ru.

Kokin estimates the deposits could be worth nearly $1 billion.

Rosneft has projects in the neighboring Vanqor oil field, which has a capacity of 140 million tons.

The last major land hydrocarbon deposit discovery was the Vanqor field in 1988, which has over 500 million tons of oil in estimated reserves.

Another Astrakhan region field is Lukoil’s Filanovsky field, which has more than 150 million tons of recoverable oil in the Caspian Sea.

In 2012, the company opened the neighboring Tambov field, also located in the Astrakhan oil field, which is the world’s fifth largest.

Cyprus warns economic sanctions against Russia will destroy its economy

Cyprus warns economic sanctions against Russia will destroy its economy

Russia-Today
Cyprus Foreign Minister Ioannis Kasoulides (Reuters/Yuri Gripas)

Cyprus Foreign Minister Ioannis Kasoulides told a German newspaper Wednesday that economic sanctions against Russia by Europe would destroy the Cypriot economy, adding that every EU state should decide separately whether they want to cut ties with Moscow.

“There are very strong economic ties between Cyprus and Russia. If sanctions are really necessary, then every member state should decide for itself whether to take part. However the measures look, we must not harm ourselves,” Kasoulides told Die Welt.

Kasoulides, speaking during deliberations at a meeting of the Foreign Affairs Council of the EU in Luxemburg, said the upcoming meeting in Geneva between the US, Russia, Ukraine, and the High Representative of the EU is an important “weapon” for establishing de-escalation in Ukraine.

“That is where our efforts should focus,” he added.

After the meeting, EU foreign policy chief Catherine Ashton said the ministers “condemned unreservedly” the recent events in Ukraine, adding that they plan to add additional people to the asset-freeze and travel ban list which was created following the hasty referendum in Crimea last month. Thirty-three Russian officials are already on the list.

There are three stages of sanctions which the EU has drawn up against Russia. Current sanctions – the first two stages – stop short of economic measures and target individuals close to President Putin and disposed Ukrainian President Viktor Yanukovich. The third stage, which was discussed by the EU on April 14, would include full economic measures.

Legal and accounting firms in Cyprus say that sanctions against Russia would negatively affect their prospects for growth, Vedomosti daily reported.

“Sanctions would have a limited influence in Cyprus but right now uncertainty remains and part of the decision making in business will be delayed,” Elias Neocleous, deputy director of Andreas Neocleous and Co, told Bloomberg. Seventy-seven of the firm’s lawyers and six of its tax inspectors have direct dealings with Russian and Ukrainian clients.

Cyprus is one of the biggest offshore investment destinations for Russian money. According to figures from the Central Bank of Russia, $12.9 billion was invested into Russia from Cyprus in the last three quarters of 2013.

But overall, the Cypriot economy remains in poor shape; it shrunk by 5.4 percent in 2013 as a result of tough EU austerity measures and a restructuring of the financial sector. GDP also shrunk by 4.8 percent last year.

A political crisis between Russia and Ukraine would further damage growth prospects for the island. It would also have a devastating effect on tourism, because the number of tourists from Russia and Ukraine would shrink, explained Teodor Panaiotu, a professor of economics and director of the International Management Institute of Cyprus.

“This crisis will lead to a drop in tourism and investment, which we can expect from Russia and Ukraine,” he said.

Tourism is now the most important area of the Cypriot economy and is more valuable than the banking sector, according to former Cyprus President Georgios Vasiliyu.

Israel To Build Gas Pipeline To Turkey?

ISRAEL TO PICK TURKEY AS GAS PARTNER

daily sabah

Israel in talks with Egypt, Turkey on gas export deals. This plan deals a blow to Greek Cypriot LNG plans and could deprive Europe of an alternative to Russian gas. Construction of Turkey’s pipeline may start in 2015

  • by Reuters
  Israel to pick Turkey as gas partner
MILAN/LONDON — Israel’s drive to export its newfound natural gas could help to rebuild strained ties with old regional allies Egypt and Turkey, but could deprive Europe of a precious alternative to Russian gas. Israel has in recent months signed energy deals with Jordan and the Palestinian Authority, though relations with the Palestinians are at a low ebb, and now needs to expand its export horizons to cash in on its huge energy discoveries. If all goes well, the latest developments could see first pipelines being laid between Israel and Turkey as soon as 2015, and a gas cooperation between Israel and Egypt is also emerging, which would allow export access to Asia’s major markets.

Once close allies, ties between Israel and Turkey were severely damaged following a deadly raid by Israeli commandos on a Turkish yacht carrying pro-Palestinian activists trying to defy an Israeli blockade on the Gaza Strip in 2010. Poor relations remain a barrier to a deal on gas, though the sides are talking.

Talks between the Leviathan consortium and Turkish counterparts are focusing on building a 10 billion cubic metre sub-sea pipeline at an expected cost of $2.2 billion, giving Israel access to a major emerging market and one of Europe’s biggest power markets by 2023. “We think construction phase for a pipeline to transport Israeli gas to Turkey could begin in the second half of 2015,” a Turkish energy official said. A separate yetto- be-built pipeline linking Europe with the Caspian through Turkey in 2019 could eventually also open up a new market for Israeli gas in western Europe. Meanwhile, a growing population and soaring demand have left Egypt’s own liquefied natural gas export (LNG) plants in need of new supply, as domestic shortages eat into seaborne exports through the Suez Canal to the world’s most lucrative market in Asia. This has put Israel’s previous plans to pump its gas reserves into a future export plant in Greek Cyprus on the back burner, dealing a major blow to the indebted Mediterranean island’s ambitions to become a global player in the gas market.

A Greek Cypriot LNG export plant was due to deliver at least 5 million tonnes a year to Europe and Asia, allowing Europe to reduce its growing dependency on Russia, which has become of particular concern since the crisis in Ukraine cast a Cold War chill over East-West relations.

Israel’s new plans throw Greek Cypriot developments into doubt. “If Israel has really ditched Greek Cyprus as a partner to develop the region’s gas resources, then we (Greek Cyprus) really do have to find quite a lot more gas if we want to become a viable exporter, and that would inevitably throw our plans back by several years,” said one source involved in developing Greek Cyprus’s gas reserves.

The possibility of sanctions on Russia’s energy sector in response to Moscow’s annexation of Crimea and troop build-up along Ukraine’s eastern border have underscored Europe’s acute need to diversify its oil and gas sources. Israel plans to export gas by pipeline and through several floating LNG production plants, which cool gas to liquid form, so they can ship it to the world’s largest markets. At stake for Israel is a $150 billion tax take should export deals be agreed by a consortium operating its gasfields. Its strategic re-alignment effectively places a tantalisingly close new gas province out of Europe’s reach. Egypt offers a way for the U.S.-Israeli group of companies developing Israel’s giant Leviathan gas field to reach the Asian market, where LNG fetches about twice the price Europeans pay.

Talks between the Leviathan consortium – Israel’s Delek Drilling, Ratio, and Avner Oil, and U.S.-headquartered Noble Energy – and Egyptian authorities are focusing on feeding Israeli gas into the country’s idled LNG export facilities.

Britain’s BG Group, which runs one of Egypt’s under-utilised LNG plants and is among the world’s top LNG trading firms, is in talks with the Leviathan partners.

The favoured option is to build a subsea pipeline from Leviathan to link up with BG Group’s offshore pipeline network in Egyptian waters, allowing Israeli gas to feed directly into its LNG plant at Idku, according to industry sources. If realised, this would not only revive output at Idku but also mean that Israel’s first LNG exports would take place from an Egyptian plant.

Previous land-based pipelines between Egypt and Israel were repeatedly bombed by groups opposed to links with Israel, but a subsea pipeline would be much harder to target. As part of a twin-track export policy, Israel also aims to ship LNG to distant Asian and South American markets through a floating plant to be moored above the Leviathan field.

The Republic of Donetsk Flag

The Republic of Donetsk Flag

itar tass

flag of the self proclaimed donetsk peoples republic

Flag of the self-proclaimed Donetsk People’s Republic in Donetsk    © EPA/PHOTOMIG

New flag of the latest self-proclaimed republic, the Donetsk Republic.  The process of Nation fragmentation, works both ways.   Even though this corrosive virus was set into motion by the opportunists in Washington, it is still very dangerous to Obama’s allies.  The plague referred to as “Balkanization” threatens all nations, both the guilty and the innocent.