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Papas Fritas writes:
"James B. Stewart writes in the NYT that there's one major difference between now and the last time Russia invaded a neighbor (Czechoslovakia in 1968): Now Moscow has a stock market that provides a minute-by-minute referendum on Putin's military and diplomatic actions.
On Monday, the Russian stock market index (RTSI) fell more than 12 percent, in what a Russian official called panic selling and the ruble plunged on currency markets, forcing the Russian central bank to raise interest rates by one and a half percentage points to defend the currency. On Tuesday, as soon as Mr. Putin said he saw no need for further Russian military intervention, the Russian market rebounded by 6 percent. With tensions on the rise once more on Friday, the Russian market may again gyrate when it opens on Monday. Russia is far more exposed to market fluctuations than many countries, since the Russian government owns a majority stake in a number of the country's largest companies and many Russian companies and banks are fully integrated into the global financial system.
The old Soviet Union, in stark contrast, was all but impervious to foreign economic or business pressure, thanks in part to an ideological commitment to self-sufficiency. By contrast, today "Russia is too weak and vulnerable economically to go to war," says Anders Aslund. "The Kremlin's fundamental mistake has been to ignore its economic weakness and dependence on Europe." Almost half of Russia's exports go to Europe, and three-quarters of its total exports consist of oil and gas. The energy boom is over, and Europe can turn the tables on Russia after its prior gas supply cuts in 2006 and 2009 replacing this gas with liquefied natural gas, gas from Norway and shale gas.
If the European Union sanctioned Russia's gas supply to Europe, Russia would lose $100 billion or one-fifth of its export revenues, and the Russian economy would be in rampant crisis. Other penalties might include asset freezes and the billionaire Russian elite who are pretty much synonymous with Mr. Putin's friends and allies are the ones who are being severely affected by visa bans, which were imposed by President Obama on Thursday. "The recent events were completely irrational, angering the West for no reason," says one Russian economist. "This is what is most scary, especially for businesses. Instead of reforming the stagnating economy, Putin scared everybody for no reason and with no gain in sight. So it is hard to predict his next actions. But I think a real Cold War is unlikely.""
(Score: 5, Insightful) by khchung on Sunday March 09 2014, @02:26AM
So EU is willing to let its citizens freeze to death next winter just to cause an economic crisis for Russia? As if Russia can't just turn around and sell those gas to China next door? OTOH, EU would have great trouble importing that much gas elsewhere.
"I am going to cut of my fingers so your rings would have one fewer customer!" Yeah, that's a totally credible threat!
(Score: 3, Interesting) by Ethanol-fueled on Sunday March 09 2014, @02:34AM
Scandinavia has plenty of oil and gas for Europe. But why would Russia lose energy revenue? Sure, maybe in the short-term, before it beefs up its infrastructure to send its energy supplies to energy-hungry China and whomever else wants it. This is a mad game of chicken!
(Score: 4, Interesting) by romanr on Sunday March 09 2014, @02:37AM
There isn't really the infrastructure to sell the gas to other customers at the moment. There has been proposed an Altai project to build pipes to China, but this project doesn't seem to be active. But you are probably right, that Europe can't do without Russian gas... yet. If US starts to export gas to Europe, the situation can change quickly.
(Score: 3, Interesting) by jon3k on Sunday March 09 2014, @03:23AM
Europe will get gas elsewhere, maybe you've heard of the shale gas boom? If Russia was forced to sell solely to China the price of their gas would fall to the floor because they can't bargain, they pay what the Chinese tell them. Welcome to economics 101.
(Score: 5, Insightful) by khchung on Sunday March 09 2014, @03:37AM
As others mentioned, it's the infrastructure. You can't simply say "buy from the US", yeah, EU can pay for and take ownership of however much gas in the US, but it's worth shit if they can't move the gas over. Without large enough pipes and a finite number of ships available, having all the gas across an ocean isn't going to help them in winter.
Not to mention the price. EU has been buying Russia gas obviously because it was cheaper. How much a hit on EU's own economy will take for buying more expensive gas? EU's economy aint that strong itself, making the threat even less credible.
You can say Russia has the same problem selling to China, but a BIG difference is they might be able to work out a deal with China to sell the gas (and get money sooner) and then more slowly send over the goods later. China might be willing to do that just so US has something else to worry over, and build up some goodwill with Russia with the same stroke.
Money can move at the speed of light, goods can't.
(Score: 3, Informative) by frojack on Sunday March 09 2014, @04:46AM
Agreed, I don't think American gas is going anywhere.
It isn't politically feasible even if it was technically doable. There are gas transport ships, but nobody likes having them near cities.
The US has been trying to get out of the clutches of middle east oil states, but isn't close to being ready to pick up the EU energy needs.
No, you are mistaken. I've always had this sig.
(Score: 1) by tirefire on Sunday March 09 2014, @07:11AM
I'm pretty ignorant of natural gas, though, so if you could elaborate on why you "don't think american gas isn't going anywhere" that would be great. Or link to a blog with the same idea. I just want to learn more about this since the potential implications are so great.
(Score: 0) by Anonymous Coward on Monday March 10 2014, @08:49AM
Troll: boring & staid. LMGTFY. -1 Flamebait.
Next time, please troll harder.
(Score: 2, Interesting) by KingofBLASH on Sunday March 09 2014, @04:37AM
That's actually exactly how sanctions work. The US and other countries don't care how many citizens of Cuba / Syria / Whatever country is currently getting sanctioned are hurt. The theory being that by hurting the population, you will encourage unrest (and perhaps they will pressure their government).
(Score: 0) by Anonymous Coward on Monday March 10 2014, @08:52AM
On one hand, you say they don't care; on the other hand, you say that their theory involves hurting the population to encourage unrest (thereby pressuring the government). Wouldn't they want to hurt as many people as possible?
(Score: 0) by robodog on Sunday March 09 2014, @09:53PM
There is infrastructure in place allowing the EU to import gas from Scandinavia and North Africa.