Dazed and Confused

Larry Johnson discusses US intell: https://sonar21.com/western-military-analysts-including-the-cia-dazed-and-confused/

WESTERN MILITARY ANALYSTS, INCLUDING THE CIA, DAZED AND CONFUSED

21 June 2022 by Larry Johnson 

Are we witnessing the consequences of legalized marijuana causing contact highs among the intelligence community that surrounds Washington, DC? How else to explain the parade of political and military analysts now seized with angst over the growing gulf between what they claimed would happen to Russia in Ukraine and the stark reality. Hell, even the CIA is trying to figure out what went wrong with its analysis and is still getting it wrong. Remarkable.

The problem with the CIA is simple–when you prioritize hiring people because of their embrace of pronouns and degenerate sexuality over recruiting accomplished, genuinely educated people equipped with critical thinking skills, do not be surprised that the juvenile mediocrities perform poorly. How is a gender fluid “them” with no military experience and no foreign language skills going to predict the military outcome of a conflict where the attacking force is outnumbered 3 to 1?

Failure is supposed to be a great teacher. But that instruction only succeeds if the pupil is open to learning hard lessons. The CIA has become a purple haired clown show. Just take a gander at the of this article from the Business Insider–US intel officials admit they didn’t see that Russia’s military was a ‘hollow force.’ Here’s what they did see and how they missed it.

Russia is now a “hollow force?” The only hollow thing in this example are the empty noggins of the morons masquerading as intelligence analysts. Check out their excuses for getting it wrong:

  • The Russian force the US military and intelligence agencies believed to be a near-peer adversary hasn’t shown up. The force that did appear had its main thrust blunted by smaller Ukrainian units.
  • “What we did not see from the inside was sort of this hollow force” that lacked an effective non-commissioned officer corps, leadership training, and effective doctrines, Berrier said of the Russians.
  • While US intelligence agencies misinterpreted the effectiveness of the Russian and Ukrainian militaries, they provided accurate information about Russia’s intentions in the months prior to Russia’s attack, which began on February 24.
  • “When you deal with a foreign actor, analysts can fall prey to a number of mental traps, from confirmation bias, availability bias, or even favoring existing analytic lines over new information,” Michael E. van Landingham, a former Russia analyst at the CIA, told Insider.

But this is all nonsense. There is this thing called the internet. It actually allows an inquiring mind to go back in time and see what the CIA was saying in February and March. This is not my opinion. You may read the facts for yourself:

How US intelligence got it right on Ukraine–The CIA director, Bill Burns, a career diplomat, and his boss, the director of national intelligence, Avril Haines, a former deputy CIA director, came to office a year ago. . . Burns and Haines refocused on Russia and China, concentrating on collecting and analyzing intelligence on the authoritarian regimes of Russian President Vladimir Putin and Chinese President Xi Jinping. For the first time in a long time, American intelligence agencies were thinking strategically, looking out over the horizon, as opposed to reporting what happened five minutes ago. The result was a clear and prescient picture of Putin’s intentions toward Ukraine.

The Intelligence Community Hits a Grand Slam. Now, It Must Help Ukraine Win–The Biden administration is also entitled to some applause. It “flooded the zone” with authorized disclosures of intelligence prior to the Russian invasion. . . . The more recent disclosures were also designed as a deterrent, to get inside Russian President Vladimir Putin’s decision-making process and perhaps cause him to think twice before hitting the “go” button. . . . The intelligence community along with U.S. military special operations forces must prepare to conduct and/or support a Ukrainian insurgency campaign. The model should be Afghanistan in 1980, just after the Soviet invasion. . . . At the same time, the intelligence community must — and will — look for and encourage diplomats and intelligence officers serving at Russian embassies abroad who are making the decision whether or not to jump from Putin’s ship. . . . The intelligence community will also watch to see signs that tens of thousands, or perhaps more, brave Russians are getting ready to take to their streets. . . . Finally, there’s the intelligence community’s support of Ukrainian President Volodymyr Zelensky. . . . Zelensky vs. Putin. Leonidas vs. Xerxes. Will history repeat itself? Perhaps. But let’s hope that the new Leonidas lives this time to tell the tale. And that his people triumph in sovereign democracy alongside him. America has a stake in this fight. It’s time to make some history. It’s time to help Ukraine win.

Top American generals on three key lessons learned from Ukraine–“The computer models would have said Russia wins in 72 to 96 hours,” said Marine Corps Commandant Gen. David Berger. They “cannot explain why Ukraine is still hanging on. Why is that?” . . . . It took months for Russian President Vladimir Putin to amass more than 175,000 Russian troops on the Ukrainian border. But since those forces mobilized on Feb. 23, the Russian military has been embarrassed by one logistical failure after another. Videos posted on social media showed lines of tanks and military vehicles stalled on Ukrainian roads, with no spare parts available to fix broken vehicles and no fuel to get them running again. Other viral videos showed hungry Russian soldiers who had apparently run out of rations accepting food from Ukrainians.

The ignorance of the U.S. military commanders and the oxymoronically named intelligence community is breathtaking. If you are trying to predict the outcome of a military operation there are, as Andrei Martyanov describes in his must read book (The (Real) Revolution in Military Affairs) key variables that must be weighed. One of these is the nature of the defensive fortifications of the Ukrainian army. For the love of God, the entire damn U.S. intelligence community had eight years to track and identify the formidable system of trenches, revetments and bunkers the Ukrainians had constructed. Then there is the fact that Ukraine’s army outnumbered Russia by three-to-one. In what drug addled universe does an analyst conclude and promulgate that a out-manned Russian army will conquer a country twice the size of the United Kingdom in four days?

Perhaps this was a deliberate straw-man strategy–i.e., play up the Russians as ten feet tall (knowing all along that they have the ability to eventually grind the Ukrainians into talcum powder) and then portray them as a weak, doddering power. Maybe the terrible analytical predictions were part of a broader propaganda campaign.

What I do not understand is why the technical collection systems at NSA and NIMA (i.e., National Imagery and Mapping Agency) apparently failed to identify the robust Ukrainian defenses? What should alarm U.S. legislators is that the CIA still does not have a damn clue about what is going on. Specifically, describing Russia as a “hollowed” out force is baseless nonsense. The complex military operations the Russians are conducting across a 900 mile front that stretches from Kharkiv in the north, thru the Donbas and then southwest to Odessa. Besides supplying ground forces with ammunition, fuel, food and medical care, Russian logicians also are feeding hundreds of thousands of civilians left homeless because of the fighting. Then there is the coordination of artillery and sea-based cruise missiles along with close air support from fixed wing and rotary wing air craft.

The CIA is learning the hardway the truth of Sun Tzu’s aphorism:

If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.

That is where the United States intelligence community is; it is ignorant of itself and the Russians.

One of the old intel codgers, Graham E. Fuller, who was Vice Chair of the National Intelligence Council at CIA back when I was an analyst, has it figured out. He wrote a piece sure to get him removed from woke Washington, DC parties:

The war in Ukraine has dragged on long enough now to reveal certain clear trajectories. First, two fundamental realities:

  • Putin is to be condemned for launching this war– as is virtually any leader who launches any war.  Putin can be termed a war criminal–in good company with George W. Bush who has killed vastly greater numbers than Putin.
  • Secondary condemnation belongs to the US (NATO) in deliberately provoking a war with Russia by implacably pushing its hostile military organization, despite Moscow’s repeated notifications about crossing red lines, right up to the gates of Russia.  This war did not have to be if Ukranian neutrality, á la Finland and Austria, had been accepted. Instead Washington has called for clear Russian defeat.

Contrary to Washington’s triumphalist pronouncements, Russia is winning the war, Ukraine has lost the war.  Any longer-term damage to Russia is open to debate.

Sadly for Washington, nearly every single one of its expectations about this war are turning out to be incorrect. Indeed the West may come to look back at this moment as the final argument against following Washington’s quest for global dominance into ever newer and more dangerous and damaging confrontations with Eurasia. And most of the rest of the world–Latin America, India, the Middle East and Africa– find few national interests in this fundamentally American war against Russia.

Graham, I could not have conveyed the message with more clarity. You nailed it.

***********************************************************************************************

Here’s Graham Fuller’s full piece: https://grahamefuller.com/some-hard-thoughts-about-post-ukraine/

Some hard thoughts about post Ukraine

June 19, 2022

by Graham E. Fuller (grahamefuller. com)

18 June 2022

The war in Ukraine has dragged on long enough now to reveal certain clear trajectories. First, two fundamental realities:

  1. Putin is to be condemned for launching this war– as is virtually any leader who launches any war.  Putin can be termed a war criminal–in good company with George W. Bush who has killed vastly greater numbers than Putin.
  2. secondary condemnation belongs to the US (NATO) in deliberately provoking a war with Russia by implacably pushing its hostile military organization, despite Moscow’s repeated notifications about crossing red lines, right up to the gates of Russia.  This war did not have to be if Ukranian neutrality, á la Finland and Austria, had been accepted. Instead Washington has called for clear Russian defeat.

As the war grinds to a close, where will things go?

Contrary to Washington’s triumphalist pronouncements, Russia is winning the war, Ukraine has lost the war.  Any longer-term damage to Russia is open to debate.

American sanctions against Russia  have turned out to be far more devastating to Europe than to Russia. The global economy has slowed and many developing nations face serious food shortages and risk of broad starvation.

There are already deep cracks in the European façade of so-called “NATO unity.” Western Europe will increasingly rue the day that it blindly followed the American Pied Piper to war against Russia. Indeed, this is not a Ukrainian-Russian war but an American-Russian war fought by proxy to the last Ukrainian.

Contrary to optimistic declarations, NATO may in fact ultimately emerge weakened. Western Europeans will think long and hard about the wisdom and deep costs of provoking deeper long term confrontations with Russia or other “competitors”of the US.

Europe will sooner or later return to the purchase of inexpensive Russian energy. Russia lies on the doorstep and a natural economic relationship with Russia will possess overwhelming logic in the end. 

Europe already perceives the US as a declining power with an erratic and hypocritical foreign policy “vision” premised upon the  desperate need to preserve “American leadership” in the world. America’s willingness to go to war to this end is increasingly dangerous to others.

Washington has also made it clear that Europe must sign on to an “ideological” struggle against China as well in some kind of protean struggle of “democracy against authoritarianism”. Yet, if anything this is a classic struggle for power across the globe. And Europe can even less afford to blunder into confrontation with China–a “threat” perceived primarily by Washington yet unconvincing to many European states and much of the world..

China’s Belt and Road initiative is perhaps the most ambitious economic and geopolitical project in world history. It is already linking China with Europe by rail and sea. European exclusion from the Belt and Road project will cost it dearly. Note that the Belt and Road runs right through Russia. It is impossible for Europe to close its doors to Russia while maintaining access to this Eurasian mega project. Thus a Europe that perceives the US already in decline has a little incentive to join the bandwagon against China. The end of the Ukraine war will bring serious reconsideration in Europe about the benefits of propping up Washington’s desperate bid to maintain its global hegemony.

Europe will undergo increasing identity crisis in determining its future global role. Western Europeans will tire of subservience to the 75 year American domination of European foreign policy. Right now NATO is  European foreign policy and Europe remains inexplicably timid in asserting  any independent voice.How long will that prevail?

We now see how massive US sanctions against Russia, including confiscation of Russian funds in western banks, is causing most of the world to reconsider the wisdom of banking entirely on the US dollar into the future. Diversification of international economic instruments is already in the cards and willl only act to weaken Washington’s once dominant economic position and its unilateral weaponisation of the dollar.

One of the most disturbing features of this US-Russian struggle in Ukraine has been the utter corruption of independent media. Indeed Washington has won the information and propaganda war hands down, orchestrating all Western media to sing from the same hymnbook in characterizing the Ukraine war.  The West has never before witnessed such a blanket imposition by one country’s ideologically-driven geopolitical perspective at home. Nor, of course, is the Russian press to be trusted either. In the midst of  a virulent anti-Russian propaganda barrage whose likes I have never seen during my Cold Warrior days, serious analysts must dig deep these days to gain some objective understanding of what is actually taking place in Ukraine.

Would that this American media dominance that denies nearly all alternative voices were merely a blip occasioned by Ukraine events. But European elites are perhaps slowly coming to the realization that they have been stampeded into this position of total “unanimity”; cracks are already beginning to appear in the façade of “EU and NATO unity.” But the more dangerous implication is that as we head into future global crises, a genuine independent free press is largely disappearing, falling into the hands of corporate-dominated media close to policy circles , and now bolstered by electronic social media, all manipulating the narrative to its own ends. As we move into a predictably greater and more dangerous crises of instability through global warming, refugee flows, natural disasters, and likely new pandemics, rigorous state and corporate domination of the  western media becomes very dangerous indeed to the future of democracy. We no longer hear alternative voices on Ukraine today.

Finally, Russia’s geopolitical character has very likely now decisively tilted towards Eurasia. Russians have sought for centuries to be accepted within Europe but have been consistently held at arms length. The West will not discuss a new strategic and security architecture. Ukraine has simply intensified this trend. Russian elites now no longer possess an  alternative to accepting that its economic future lies in the Pacific where Vladivostok lies only one or two hours away by air from the vast economies of Beijing, Tokyo, and Seoul. China and Russia have now been decisively pushed ever more closely together specifically out of common concern to block unfettered US freedom of unilateral military and economic intervention around the world. That the US can split US-induced Russian and Chinese cooperation is a fantasy. Russia has scientific brilliance, abundant energy, rich rare minerals and metals, while global warming will increase the agricultural potential of Siberia. China has the capital, the markets, and the manpower to contribute to what becomes a natural partnership across Eurasia.

Sadly for Washington, nearly every single one of its expectations about this war are turning out to be incorrect. Indeed the West may come to look back at this moment as the final argument against following Washington’s quest for global dominance into ever newer and more dangerous and damaging confrontations with Eurasia. And most of the rest of the world–Latin America, India, the Middle East and Africa– find few national interests in this fundamentally American war against Russia.

==================

Graham E. Fuller is a former Vice Chair of the National Intelligence Council at CIA with responsibility for global intelligence estimates. 

Bullwhip!

ZH: https://www.zerohedge.com/economics/deflationary-tsunami-deck-tidal-wave-discounts-and-crashing-prices

Deflationary Tsunami On Deck: A “Tidal Wave” Of Discounts And Crashing Prices

BY TYLER DURDEN

FRIDAY, JUN 17, 2022 – 12:00 PM

Three weeks ago, we showed readers what happens when the infamous “Bullwhip effect” reversal takes place by presenting the unprecedented surge in the “Inventory to Sales” ratio for a broad range of US retailers covering the furniture, home furnishings and appliances, building materials and garden equipment, and a category known as “other general merchandise,” which includes Walmart and Target. Since then, this ratio has only gotten even more extended, and as shown below it is now at the highest level since the bursting of the dot com bubble!

What does this mean for retailers and the price of goods? Three weeks ago we said “Think: widespread inventory liquidations” and added…

To be sure, not every product will see its price cut: commodities, whose bullwhip effect take much longer to manifest itself, usually lasting several years in either direction, are only just starting to see their price cycle higher. However, other products – like those carried by the Walmarts and Targets of the world – are about to see a deflationary plunge the likes of which we have not seen since the global financial crisis as retailers commence a voluntary destocking wave the likes of which have not been seen in over a decade.

Today both Wall Street and the mainstream media have caught up, with both predicting unprecedented deflationary price cuts in the coming weeks.

We start with Morgan Stanley’s bearish strategist Michael Wilson, who in his latest bearish weekly note (available to pro subs) focused on shrinking margins in general, and on retailer discounting in particular, and wrote that while there is a modest pick up in over sales, the far more concerning issue is that “inventory across the sector is up about 30% YOY and sales growth is up about 0% YOY translating to approximately 30% YOY of excess inventory” and while mark down/margin pressure did not hit in 1Q it should hit June/July. Indeed, “store checks show that aggressive discounting has already started as of the Memorial Day holiday weekend. Discounting pressure could accelerate through July.”  And since more retailers are now discounting, “companies are having to offer even bigger discounts to compel consumers to buy, and it is a race to the bottom in margins in order to clear through inventory.”

It gets much worse, however, because courtesy of the delayed nature of the bullwhip effect, Morgan Stanley thinks it will be some time before retailers can cut back on forward inventory orders! Companies are no longer in a position to order 6 months in advance because of delays in the supply chain, and are currently working with about an 8 month lead time. Shockingly, this means decisions today to cut forward orders could begin to eliminate the inventory problem in 1Q23, but not likely before then.

As a result, Wilson concludes, “we are likely to see a tidal wave of discounts that carry us through December because 2022 inventory orders have already been placed.

It’s not just Wall Street finally catching up, however: overnight the WSJ also writes that “Big discounts are coming.”

Echoing everything we have written in the past two months, the Journal writes that Target, Walmart and Macy’s announced recently that they are starting to receive large shipments of outdoor furniture, loungewear and electronics (and if Morgan Stanley is correct and lead times are indeed 8 months they will keep receiving these into 2023!) everyone wanted, but couldn’t find, during the pandemic.

The problem for retailers is a windfall for those in the market for sweatpants or couches. Look for prices to start dropping around July 4, analysts say when the deflationary retail tsunami is unleashed in full force.

“There are going to be discounts like you’ve never seen before,” says Mickey Chadha, a Moody’s Investors Service analyst who tracks the retail industry.

Retailer discounts are part of an effort to get shoppers interested in buying things again as Americans shift their spending to services such as concerts, eating out, and travel they missed out on during the pandemic. Deep discounts are expected on oversize couches, appliances and patio furniture that are more expensive for companies to store in their warehouses, analysts say. In fact, in everything this has some component of consumer goods demand to it.

Look to e-retailers that specialize in larger goods like furniture to lower their prices, says Chirag Modi, who oversees supply chain execution and warehousing at consulting firm Blue Yonder.

And if your drawers aren’t already bursting with work-from-home loungewear, stores will try hard to get you to take it off their shelves. “It might be a good time to buy sweatpants. They’re certainly going to be on sale this summer,” says Dan Wallace-Brewster, who directs marketing at e-commerce software company Scalefast. Office wear might not be discounted, he says.

Some retailers, like Target, have already announced they’re planning big discounts. Others with robust warehouse capacity, like Walmart, may be more likely to hold on to their excess inventory, analysts say.

Chadha said that retailers who sell their own lines of clothing and décor, like Gap, could be especially inclined to mark down their inventory, because they can’t pass the cost onto anyone else. Companies that carry other brands, like Macy’s, can potentially pass some of the surplus back to the producers.

Consumer electronics are another category ripe for overstock discounts, Mr. Wallace-Brewster says, because the chip shortage is showing signs of abating. Items such as TVs and laptops are about to see major price cuts.

Gwen Baer says she now wishes she had waited before splurging on a $3,000 couch for her new home that took six months to arrive in 2020. The 30-year-old Atlanta digital-media strategist plans to watch for sales at Target, West Elm and other retailers to finish outfitting her house, which she and her fiancé purchased in August 2020.     

Her fiancé, Thomas Li, hopes to buy a new TV to replace the 10-year-old one in their bedroom. He’s hoping the sales mean lower prices on OLED screens.

“The stores are really making lemonade out of some lemons,” Ms. Baer says.

If you miss the wave of sales coming in a few weeks fear not: sales will likely continue well into back-to-school season and beyond. Modi says he is waiting until Thanksgiving to buy furniture for his own home renovation, and regrets already preordering kitchen cabinets. “I’m hedging my bets I’ll be able to get better deals in the fall,” Modi says adding that inventory surpluses are unlikely to affect the price of home staples and food. Discount retailers like TJ Maxx and Ross that specialize in surplus goods may not have great sales.

Bigger metro areas may be poised for higher discounts than their rural counterparts, according to Modi, since they ordered based on demand at the height of the pandemic—which was higher in areas that are more population-dense.

Not everything is set for a deflationary crash: don’t expect luxury items to see price cuts. If anything, luxury prices for things like handbags and shoes are poised to keep climbing, said Oliver Chen, a retail analyst for Cowen: “Demand is so strong, and it’s a supply-constrained industry, generally, so quite the opposite rebalancing is happening.”

And while inflation is likely to persist in the ultra high, the implication for broader inflation is clear: most prices that make up the core CPI basket are about to fall off a cliff in weeks if not days, with upcoming core CPI prints set to plunge, which means that the only thing that will remain red hot is headline inflation, i.e., food and energy prices, the same prices which the Fed has traditionally ignored. It remains to be seen if it will do so this time around, or if – realizing that the US is entering a recession – it will resume easing even in the face of $5 gas prices…

Ukraine Reaches for the Bottom

As reported by Tass, Ukrainian President Vladimir Zelensky has signed a law allowing to send servicemen of Ukraine’s Territorial Defense Forces to combat zones, according to the Ukrainian parliament’s website.

The document was signed by parliament chair Ruslan Stefanchuk on May 6, and submitted to the president for signing on the same day.

For the time being, units of Ukraine’s Territorial Defense Forces perform tasks solely within their region or community. The law, if signed, will authorize their deployment all across the country, including not only the current zones of hostilities, but also regions that Kiev views as its occupied territories.

The decision on the deployment will be made by the commander-in-chief of the Ukrainian armed forces.

According to the parliament’s website, the law will come into force on the day after its official publication.

However, the procedural term for the president to sign the document expired on June 7. The Ukrainian authorities gave no explanation for the delay.

Earlier, Ukrainian Defense Minister Alexey Reznikov said his country must increase the number of servicemen directly engaged in hostilities to one million people.

In accordance with the law “On foundations of national resistance,” signed last July, the Territorial Defense Forces are a separate branch of troops within the Armed Forces of Ukraine. As of January 2022, Ukraine had 25 territorial defense brigades, comprising up to 100,000 personnel. In May, Zelensky relieved of duty the Territorial Defense Forces commander without providing any explanation for the move.

he Territorial Defense is a paramilitary structure created in the wake of Euromaidan. At the beginning of 2022, its brigades included about two million fighters.

The so-called Teroborona units consist of Maidan activists, nationalists and veterans of the war in Donbass. Basically, these are not professional military, but rather civilians who have not received the necessary training. They were mainly used as armed groups serving the interests of local business.

Previously, members of Teroborona were exempted from conscription in case of hostilities in Ukraine. However, after the start of Russia’s military operation, some of them had to take part in hostilities for which they were not ready either morally or technically.

Dozens of Ukrainian units complained about the huge losses and lack of weapons and training, pointing out that they were sent to the front lines illegally.

As a result, Zelensky’s decree legalized sending untrained members of Teroborona to the front as cannon fodder for the professional Russian army. Zelensky’s current decision confirms the huge losses of the Armed Forces of Ukraine.

The President of Ukraine has already admitted that Ukraine is losing to Russia in technology and is not capable of conducting offensive actions. He confirmed that the Ukrainian offensive is impossible.

On June 12, one of the main propagandists of the Kiev regime Alexey Arestovich claimed that a significant part of the Ukrainian military could join the Russian army.

According to him, if the West does not help Ukraine, 500 thousand Ukrainians will join the 1.5 million service members of the Russian Federation and the Republic of Belarus, after which these forces will allegedly go to war on Europe.

Arestovich confirmed the pro-Russian sentiment among a large part of the population of Ukraine, including among the military.

Zelensky’s complains and threats from Arestovich had no result and the West does not believe in the victory of Ukraine any longer.

NATO Secretary General Jens Stoltenberg claimed that peace in Ukraine is possible only if Kiev makes territorial concessions. In its turn, NATO is helping the Kiev regime to pay the lowest price.

Thus, the hysteria among the leaders of the Ukrainian regime and the recognition of Kiev’s inevitable defeat in the war confirm that the changes in the military tactics of the Russian command are bearing fruit. The orderly grinding down of Ukrainian forces in the small boilers in the Donbas continues.

Biden Gets His Recession

https://www.zerohedge.com/markets/stocks-open-5th-largest-sell-program-history-bonds-bitcoin-bullion-all-battered

US cash equity markets opened with no panic-bid, instead being met with a wall of selling after the ugly overnight futures session.

The selling wave was almost unprecedented, with a TICK below -2000 – the fifth largest ‘sell program’ in history…

As Bloomberg notes, sell programs of this size are typically not single events. They tend to happen in clusters and that probably means stocks might be in store for bigger losses.

This puke sent the S&P 500 to the lows of the year and into bear market territory…

Elsewhere, the picture is just as bloodbath-y with Bitcoin puked back below $24k…

Gold topped $1880 briefly then plunged back below $1840…

The yield curve (2s10s) briefly inverted this morning, as the short-end underperforms (but the entire Treasury market is getting hammered)…

And credit markets are really hemorrhaging with IG credit crashing back to its COVID lockdown spike lows…

The last time credit markets puked like this, The Fed turned up the intervention amplifier to ’11’.

Is that a silver lining? A few ticks lower and Powell throws in the towel – the Fed will not risk a depression… or will he?

The market is starting to capitulate on the hope of an imminent Fed Put for now…

And is pricing in 3 rate-cuts after, to ‘rescue’ us from the imminent shitshow.

Build Back Redder

А сегодня что для завтра сделал я?

Dreizen Report: https://thedreizinreport.com/2022/06/09/since-everyone-asks-whats-the-russian-air-force-doing/

You can learn a lot from one short video.

The below video shows what I assume to be two Russian Su-25 “Grach” ground attack jets flying very low over southeastern or southern Ukraine, soon to be part of the Russian Federation.

The video has been “enriched” with a soundtrack, namely the iconic song Prekrasnoe Dalyoko (which I veeeeeery roughly translate as “Splendid Someday“) from the 1980s hit TV miniseries Gostia iz Budush’evo (“Guest from the Future.“)

The last few seconds of the video, show a blank screen with the Russian words for, “Today, what have I done for tomorrow?“, a key phrase in the song’s lyrics. The relevance is obvious.

These pilots are part of a war effort to guarantee Russia’s physical-political and economic (e.g. control over Black Sea oil and grain export routes as well as oil and gas resources) security for the coming decades. Moreover, using this beautiful song—with its searing lyrics—in the given context, is intended to evoke feelings of mission and participation in a Russian audience.

Today, what have I done for tomorrow?”

First, some musings on working for tomorrow, then later we’ll analyze the video and Russia’s air war more broadly, both of these from a technical, tactical, and strategic perspective.

The U.S. Government agency where I work my dayjob—and which I don’t represent or speak for in any capacity whatsoever on this blog—sent out an email a few days ago, praising the more than 20,000 (out of 400,000-plus) employees who chose to include their “pro-noun” preferences in their email profiles, in line with management’s encouragement. (So far, I’ve not seen any gender-flipping—if anything, I’m guessing it’s an act of protest or ridicule in most cases.)

Today, what have I done for tomorrow?” For America’s tomorrow, the Brandon fre@kshow hasn’t done squat. My God, what a bunch of Limp D*ck Losers. Their rule started with a military occupation of the nation’s capital, to keep any residual protestors from heckling within two miles of their inauguration, and it’s all been downhill from there.

Now, they intend to withhold school lunch funding from states that won’t let boys use the girls’ bathroom. What a G@WD D@MN CIRCUS. They are daring the Universe to DESTROY them. I’m convinced the korona is coming back soon, and it will bury them and their pro-nouns under millions of vakk-syn-ay-ted corpses. But, посмотрим, as they say in Russian—we’ll see what happens.

What does this video tell us?

As you can see, the craft taking up most of the video, is flying in a pair (at least.) It is flying EXTREMELY low. Between it and its partner, they deploy decoy flares two or three times in the span of less than one minute of footage (the third time might be a repeat—please leave a comment if you’re sure one way or the other—and quite a bit of “downtime” may have been edited out.) Most likely, they both deploy flares simultaneously, but the visible focus is on one at a time.

The flares are intended to confuse the infrared homing on Uncle Sam’s Stinger missiles, which have been “donated” (with a time-delay) to ISIS or other as-yet-unknown international terrorists, using the Ukraine as middle-man. Of course, the middle-man will cook most of them off himself, but you may wish to think twice about flying anything but El Al and Arkia from now on. (Israel’s main airlines are believed to load “countermeasures” on their planes.)

This may have been a “trailblazer” flight, to draw Stinger fire so as to clear the way for another flight, perhaps a bombing run by more Su-25’s, or a strafing run by attack helicopters.

Many readers have asked, where is the Russian air force, why don’t we see them? It’s a valid question, but an odd one. There are many videos of Russian aircraft flying by. I think what the questioners really mean is, why don’t we see the sort of “target destroyed from 20,000 feet” videos that Americans got used to, starting with the 1991 war against Iraq?

FIRST, either Russia doesn’t have the sort of video recording capabilities that CNN viewers have come to expect, or if it does, it’s not releasing the video, as such might be used by U.S. planners to understand Russian techniques and to defend/mask ground targets or even help bring down Russian aircraft.

SECOND, most Russian manned aircraft activity consists of tactical bombing and strafing runs. There is extensive footage of Russian attack helicopters shooting at ground targets, often with success. As for the fixed-wing aircraft (planes), they typically drop “dumb” (unguided) bombs onto targets from a height of as little as 40 meters (to avoid being seen at a distance by Stinger operators), and there’s simply nothing that can be recorded under those circumstances.

Of course, these bombing runs are not particularly accurate with respect to limited, perhaps unseen targets such as, for example, a platoon-sized strongpoint in a forest. These aircraft would be more useful against columns on a road, but the Ukrainians mostly hide and play static defense.

THIRD, “no one” expected this, but it turns out Russia had (perhaps still has) so many cruise missiles—with explosive payloads of up to 500 kilograms—that it hardly needs to use its heavy bombers. After all, the Ukraine still has some limited, high-altitude air defenses (now less than 10 percent of what it started the war with, but air defense is air defense), so why take the risk?

Strategic bombers have indeed been used to drop blockbusters on the Azovstal complex in Mariupol, and to launch cruise missiles against targets in Kiev and elsewhere, but these flights have not been “well advertised”, with not even so much as video of the planes taking off or landing. It’s clear that Russian military censorship and discretion is at work here. No doubt, Uncle Sam is salivating to learn which types of aircraft, where are they based, etc. But, why give anything away for free? Let the U.S. work for it.

Russia’s cruise missiles have been such a blast, they are taboo in the MSM

Cruise missiles have been THE greatest Russian success story of this war, which is probably why they have gone almost unmentioned in the U.S. and UK press.

First, “no one” expected Russia to have so many. As of now, somewhere north of 1500 of various types (mostly the Kalibr but also the OniksKh-22Kinzhal, etc.) have been launched against targets in the Ukraine, which is ABOUT THREE-QUARTERS AS MANY CRUISE MISSILES AS THE UNITED STATED HAS LAUNCHED IN **ALL** ITS WARS AND OPERATIONS SINCE 1991.

Second, these things have proven to be amazingly accurate, usually to within just a few meters. In over 100 days of war, with over 1500 launches, excluding the 10 percent or so that have been shot down, the number of Russian cruise missiles that have fallen so short of their targets as to kill civilians or damage civilian homes (without damaging their intended targets at all) can probably be counted on two hands.

Third, Russian cruise missiles have destroyed likely hundreds of tons and hundreds of millions (if not billions) of dollars of NATO country hardware and munitions being moved inside, or stored in, the Ukraine, before it even reached the “front lines.”

Much of this stuff was supposed to be “hidden”, but was discovered by Russian intelligence using satellite imagery or in many cases, informers on the ground. This is an embarrassment, and not something Uncle Sam wants to advertise.

Of course, in war there are losses, but as it’s not supposed to be “their” war, it’s not something “they” want to highlight to their taxpaying publics. As far as the party line goes, all the “donations” are reaching Ukrainian forces in the field.

Is it any wonder that this success story has been fully ignored by the “Russia is losing” crowd?

Rabobank: Western Leadership Has Successfully Turned Our Economies Into Emerging Markets

Michael Every, Rabobank: https://www.zerohedge.com/markets/rabobank-western-leadership-has-successfully-turned-our-economies-emerging-markets

It was a tough call for me whether to go with the above title of the Daily today, or for ‘These are not serious people, and I refuse to take them seriously’.

Friday’s shocking US inflation came in well above expectations at 1.0% m-o-m / 8.6% y-o-y headline, and 0.6% m-o-m / 6.0% y-o-y core. That’s the highest y-o-y headline CPI since December 1981, even further back in time than the first ‘Top Gun’ movie. Indeed, in Tom Cruise terms, it’s back to his second-ever movie, ‘Taps’.

Over the past decade, US CPI averaged 1.6% y-o-y. Over the past 12 months, it was 6.9%. Food, energy, and services inflation is rampant, and while goods inflation is edging lower and inventories need to be cleared, there is still an implied manufacturing shock coming from the input side with a lag. Indeed, core inflation has only seen one monthly print lower than 0.5% (6% annualized) since October last year, the trend in energy is not going to stop, and neither will that in Owners’ Equivalent Rent given soaring mortgage rates force more people to rent.

There is now some talk of so-called “core-core” inflation excluding food and energy, and airfares, rents, vehicles, hotels, and health insurance, which shows inflation is ebbing. Logically, if we take out everything going up then inflation is zero. Likewise, the Fed and the White House told us there was no inflation; was going to be no inflation; if there was any inflation it was mild; and once it got high, that it would be transitory. These are not serious people, and I refuse to take them seriously.

Yet the Michigan consumer survey collapsing to a lower level than during the Global Financial Crisis should be, with 1-year ahead inflation seen at 5.4% and 5- to 10-year inflation up to 3.3%. Given it is estimated US households need over $430 more a month just to stand still vs. inflation, this is not a surprise. Indeed, what Philip Marey had already flagged the Financial Times’ today makes clear is now the widespread view: ‘US set for recession next year, economists predict’. Yet we were repeatedly told by the Fed, the White House, and many in markets that a US recession was not a risk. Likewise, RaboResearch flagged the energy-shock risks for Europe weeks ago, which the ECB still does not recognize. Even Australia is now seeing market calls for a 15% drop in house prices ahead, which is hardly GDP positive for an asset-addled economy.

In short, we can ignore ‘stagflation’ and can proceed to a new word shared by an incisive reader: “Incession” – inflation and recession. I repeat that we aren’t used to that concept in developed markets by any name, but emerging markets know the phenomenon all too well. Congratulations to the Western leadership of the past four decades, who have successfully turned our economies into something closer to emerging markets!

Markets are obviously far from happy. US 2-year yields leaped from 2.81% to 3.14% Friday, the kind of spike few see in a career. 5-years jumped from 3.07% to 3.31%. 10-years rose less, from 3.04% to 3.16%, so 2s-10s is close to inversion again, and 5s-10s already is. 30-years, despite wild swings, only rose 3bp at the close to 3.19%, so 5s-30s is also inverted and 2s-30s is close to it.

Stocks went down again despite the hordes of deeply unserious people telling you they only go up. We also saw the US dollar surge, with EUR back below 1.05 this morning in Asian trading, and JPY moving past 135, as the DXY sits close to 104.5. Moreover, commodities dropped back only a little, with Brent -1.4% to $120.3. Imagine how much more is needed to get oil back to $100.

So, what should the Fed do this week? The expectation is Wednesday’s meeting will still the pre-flagged 50bps move. However, we are starting to hear whispers of a 75bps hike, and this weekend saw the first suggestion of 100bps and the Fed opening the door to inter-meeting hikes of indeterminate size. A good emerging-market central bank would do exactly that in these kinds of circumstances. Of course, the author of the 100bps call made clear this will not happen,… because these are not serious people, who we should refuse to take seriously.

A far broader range of policies are needed to fight inflation. Back in the late 70s and early 80s, supply-side reform moved the West away from a fiscal Keynesianism unable to cope with higher oil prices and tight labor markets by moving manufacturing jobs to emerging markets. Today, the trend is moving back towards fiscal populism and away from manufacturing in key emerging markets. However, these policies aren’t joined up in the way they were in the 70s and 80s, either intellectually or practically.

On the fiscal side, UK PM BYO is promising tax cuts, which don’t help those who aren’t earning much suffering most from high inflation. On the production side, he is launching a scheme to grow more food in the UK,… while cutting subsidies to farmers, signing free trade deals with cheaper producers, closing off EU markets and cheap EU labour, and pushing ahead with green reforms that raise costs. As an anguished farmer notes in The Guardian in an article about “rural fury”“We want to be eating more British and more local food but again I just ask how. It’s all very well to have words but it’s got to have really meaningful delivery and we aren’t seeing that yet.”

In France, President Macron is projected to probably scrape a narrow parliamentary majority but is only going to take around 25% of the vote share. That will make it more difficult for him to cut taxes and raise the retirement age from 62 to 65, as pledged. So, perhaps just the tax cut then?

In the US, the White House is talking about fighting inflation while doing little to expand domestic supply over imports, and winking at slashing student debt, which is a direct fiscal transfer (to the relatively better off).

Markets won’t like it, but if we get “incession”, we are also going to get such “unpopulism”.

So, back to the question of ‘what to do?’ On the UK front, there is a simple theoretical answer: shift away from ‘Brexit means Hard Brexit’ to re-join the European Free Trade Area (EFTA), or the so-called Norwegian Model. True, it would be politically impossible under present leadership, but it might perhaps happen after the next election under Labour.

Yet what is the EU to do about its own self-inflicted structural problems that are far more difficult to resolve than Brexit? Note that Ukraine will find out within a week or so if it is going to get the green light to begin the (slow) EU membership process or not. At the same time, Ukraine is running out of ammunition with which to fight Russia, so determining what the country that joins will physically look like. Many Western soliloquies have been delivered, but far fewer arms: and Russia wants ‘its’ land back.

That is also ammunition to those who dispute that a globalised, free-trade economy holds all the best answers to our existential economic questions. How many EU countries would find themselves in the same boat as Ukraine in a similar crisis, which cannot be ruled out? Arguably all of them expect France. They would end up relying on the US – as ever. And whom can the US rely on? Didn’t we just go through this with Covid? Despite that, and Ukraine, the West is still firing geopolitical/geoeconomic blanks.

The simple fact is that if you push your commodities and manufacturing to other countries to lower inflation, you let those countries push you back by withholding supply, raising inflation again. Imagine if the US or EU were major net exporters to Russia or China, and D.C./Brussels didn’t like what they were doing: wouldn’t they withhold key goods as an economic pressure point? (Assuming American or EU firms cared more about home than their own profits – but there is always legislation/sanctions to give them a shove in the right direction.)

Geopolitical logic says the West needs to increase supply. It needs to do it now. And it needs to reduce supply from those who threaten to withhold it. Yes, that is as “unpopulist” as the Fed hiking 75bps or 100bps to also reduce demand and refusing to spoon-feed pampered markets as to what happens next on rates to keep them on edge. However, it does not stop either being true. The fact that this is not happening only shows that those at the top are not serious people, and that we should refuse to take them seriously.

Bringing it back to inflation, we are close to the summer solstice: then it’s six months until the depths of winter. At that point, Europe says it won’t be buying any Russian oil. If global supply is then constricted and demand hasn’t fallen, US retail gasoline prices might be $6 or $7 a gallon, or higher. Is that a recession? Yes, a deep one. Is it an inflation crisis too? Yes, a large one. And, crucially, it is driven by the geopolitical backdrop.

Relatedly, at the Singapore Shangri-La Dialogue, the good news was that the US and China are talking again. The bad news was what they were saying to each other. The US stressed they aren’t looking to form an ‘Asian NATO’, but don’t want any forced changes in the region. China claimed the US is stirring up problems, smearing it, and Beijing is prepared to fight a war to the end to take Taiwan if it moves towards independence, while escalating claims to the South China Sea: the only stated route to de-escalation is the US acceding to Chinese demands.

Meanwhile, Japanese PM Kishida’s keynote speech noted, “I will seek to build a stable international order through dialogue, not confrontation. At the same time, however, we must be prepared for the emergence of an entity that tramples on the peace and security of other countries by force or threat without honoring the rules.” He was not referring to the US.

“This will be absolutely essential if Japan is to learn to survive in the new era and keep speaking out as a standard-bearer of peace. I am determined to… secure substantial increase of Japan’s defence budget… In doing so, we will not rule out any options, including so-called “counterstrike capabilities”, and will realistically consider what is necessary to protect the lives and livelihoods of our people.” He also spoke of the Quad offering $50bn in infrastructure funding to ASEAN over next 5 years, obviously as a counter-offer to Chinese capital.

In short, the Japanese warning is that we risk stumbling towards a conflict like Ukraine in the Indo-Pacific too: and yet the West are *still* not moving supply chains fast enough to avoid calamity if it were to happen.

So, what to do? Shift supply as if this were a war *now*. And raise rates as high as needed for as long as needed to stifle capital flowing into frivolous and vampiric asset-speculation over desperately-needed physical production. It’s an Austrian view; it’s a realpolitik view; and it’s a post-Keynesian MMT view on how to fund it. But we aren’t seeing any rapid movement in that direction because those at the top in D.C. thinktanks and key parts of the Pentagon are also not serious people – and we should also refuse to take them seriously.

As the Modern War Institute at West Point puts it in its op-ed ‘We’re Doing It Wrong, “The US just lost two wars. How is it possible that the war colleges have educated more than twenty thousand “strategists” over the last two decades and have nothing to show for it but two strategic defeats?… Take, for instance, economics. Students need to understand how economics works in the real world, such as how markets, debt, or rapid currency moves influence strategic decisions.”  Equally, the Fed, which bankrolls the fading military hegemon propping up the entire global financial system, needs to understand the Pentagon’s needs and geostrategy better – rather than how to get on the $250,000 after-dinner speech circuit. (Though those prices have surely risen with inflation.)

Hold that thought as former Marine Gen. John Allen, President of the thinktank The Brookings Institute, steps down under an FBI probe for being an unregistered foreign agent (for Qatar). According to those who look at this in depth, that is the merest tip of the iceberg across D.C. – and Qatar is hardly the prime suspect.

Which brings me back to 1981’s ‘Taps’, where the movie description is: “When an exclusive military school is threatened with demolition by a rapacious real-estate company, the students stage an uprising and siege control of the campus.” So, Wall Street triumphing over national security was a thing back in 1981 in Hollywood imaginations. Now it’s real life, and some are worried about playing Taps (a bugle call during flag ceremonies at military funerals by the US Armed Forces) for real.

Reversing that US drift, and reversing a 1981 level of US inflation, requires new policies that are joined at the hip: and serious people we could take seriously. But for now we will probably just get 50bps this week and strategic inaction; and so higher commodity prices; and so higher inflation; and so incession.

As a result, we will also get populist political distractions.

Today, the British government will release legislation that opens the door to tearing-up the Northern Ireland Protocol, so breaking international law. The CBI are warning the UK this will be a huge error, and the EU have made clear it will trigger a trade war. Nonetheless, sausage rolls, the need to distract from two seemingly-inevitable byelection defeats this week, and PM BYO’s desire to stay in office all suggest the UK will nonetheless go down this route. Just don’t think the EU and US are immune from their own forms of such “unpopulism”.

Miley Cyrus To Perform Halftime Show At Jan. 6 Committee Hearings

Babylon Bee: https://babylonbee.com/news/miley-cyrus-to-perform-halftime-show-at-jan-6-committee-hearings

WASHINGTON, D.C.—The nation is abuzz with anticipation of the televised January 6 Committee hearing making its prime time debut at 8 p.m. ET. To top off the excitement of the House select committee’s investigation, producers of the star-studded extravaganza have announced that Miley Cyrus will be the featured performer during the hearing’s halftime show.

Other performers during the bedazzling spectacle will include Neil Young, Bruce Springsteen, Demi Lovato, and the ghost of Alexandria Ocasio-Cortez.

“If you thought the Depp-Heard trial was exciting, wait until you get a load of this baby,” said James Goldston, a former ABC News executive hired by the Democrat-led committee to really “wow” the American people with a multimedia presentation aimed at objectively and judiciously seeking the truth of what really happened that fateful day.

Republican lawmakers have pounced on the House select committee, accusing them of putting on a politicized, narrative-driven stunt rather than seeking truth. In response, GOP lawmakers have sworn to make their own January 6 Committee with cool, Republican members, lots of American flags, and a concert on Mt. Rushmore featuring Toby Keith and Morgan Wallen.

The January 6 Committee said the opening ceremony of the hearing will include previously-unseen video footage of the Capitol riots, followed by a ritual burning of Trump in effigy.


To celebrate Pride Month, Mattel has released its first-ever pregnant man doll: Pregnant Ken! You can have all sorts of fun with the clearly MALE Ken doll and his pregnant belly! Available wherever non-gender-specific toys are sold.

American Households Crushed

ZeroHedge: https://www.zerohedge.com/economics/shocking-consumer-credit-numbers-everyone-maxing-out-their-credit-card-ahead-recession-0

Shocking Consumer Credit Numbers: Everyone Maxing Out Their Credit Card Ahead Of The Recession

While it is traditionally viewed as a B-grade economic indicator, the April consumer credit report from the Federal Reserve was another shocker especially after last month’s stunning surge in credit card debt which saw the biggest increase in revolving credit on record which is why we said that today’s G.19 print straight from the Fed would be just as important as Friday’s CPI print…

… and sure enough it was, while again confirming what we have been saying for month: any excess savings accumulated by the US middle class are long gone, and in their place Americans have unleashed a credit-card fueled spending spree.

Here are the shocking numbers: in April one month after the jarring March print again came in more than double the $25 billion expected to $52.435 billion, in April consumer credit again exploded to a ridiculous $38.1 billion, again blowing away expectations of a $35 billion increase (and not much lower than last month’s downward revised $47.3 billion).

And while non-revolving credit (student and car loans) rose by a relatively pedestrian 21.1 billion (which was still the 6th highest on record)…

… the stunner for the third month in a row was revolving, or credit card debt, which remained shockingly high, rising by the second highest on record at $17.8 billion, and down from only the highest print on record, March’s downward revised $25.6 billion (from $31.4 billion)…

… and sending total revolving consumer credit back to new all time highs at just over $1.1 trillion, erasing all the post-covid credit card deleveraging just in time for those credit card APRs to start moving much higher, first slowly and then very fast.

As an aside, and while not at all surprising, both auto and student loans hit a new all time high at the end of the first quarter.

While this unprecedented rush to buy everything on credit at a time when there were no notable Hallmark holidays should not come as much of a surprise, after all we have repeatedly shown that for the middle class any “excess savings” are now gone, long gone with the personal savings rate plunging to the lowest since just before Lehman…

… the fact is that most economists – such as those at Goldman Sachs – had previously anticipated that continued spending of savings by consumers is what will keep the US economy levitating in 2022. Unfortunately, as the consumer credit numbers of the past three months demonstrate all too clearly, any savings that US middle class households may have stored away courtesy of stimmies, are long gone.

The implications are profound: any model that projected that US spending will be fueled by “savings” can now be trashed. And since this is most of them, the consequences are dire as they confirm – once again – that the Fed is tapering, QTing and hiking right into a consumer-driven recession which was not visible until new precisely because of all the credit-card fueled spending, which according to Deutsche Bank will begin in late 2023 and which according to Morgan Stanley can start in as little as 3 months. Today’s data suggests that Morgan Stanley is right.

What Happens When Russia Wins

Moon of Alabama: https://www.moonofalabama.org/2022/06/how-russia-can-and-will-de-nato-size-europe.html#more

The long-overdue end of NATO and US troops in Europe?

How Russia Can (And Will?) De-NATO-size Europe

In a video published yesterday Gonzalo Lire, currently under house arrest in Karkov, is asking a very interesting question:

What Happens To Europe When Russia Wins? (vid)

Lira states, and I agree with him, that Russia will win the war in the Ukraine, take the south and east to likely create a new country and leave the rest of the cadaver for Poland, Hungary, Romania, Lithuania and others to feast on.

But then what?

The U.S. controlled NATO will still be there. It is practically guaranteed that the U.S. will use it to push for revenge for the loss of Ukraine. This will be done by a steady buildup of troops and long range missile capabilities along Russia’s Nordic and Baltic borders and additional naval threats in the northern Arctic as well as the southern Black Sea. Some ten years from now the U.S. would be able to again try to wage a big (proxy) war against Russia. Then with a decent chance to win.

No negotiations or peace agreements will prevent that. The U.S. is famously non-agreement-capable (недоговороспособны). It has broken ALL promises and agreements it has ever made with Russia.

Dozens of U.S. and European luminaries had promised to Russia that NATO would expand ‘not one inch’ towards Russia. Look where its borders are now. The U.S. and the EU have confiscated huge amounts of Russian state owned money [Note: over $300 billion]. They have even taken, in contradiction to their own constitutions, the properties of private Russian citizens just because those persons happen to be Russian.

In 2014 Germany and France signed on to guarantee elections for a peaceful regime change in Kiev. A day later the fascists stormed the Ukrainian parliament and those guarantees turned out to be totally worthless. The U.S. simply said fuck the EU. It does not give shit about European interests. Germany and France later negotiated and signed the Minsk-1 and Minsk-2 agreements. They continued to feed billions of EU money into Ukraine even as the Ukrainian government, controlled by the U.S., did nothing to fulfill them. Yes, they were that stupid.

The U.S. has installed ‘missile defense’ systems in Poland and Romania which are in fact designed to lob Intermediate Range Ballistic Missiles (IRBM) onto Moscow. These are a serious danger to Russia.

Even after Ukraine is finished, NATO and its EU proxies will continue to be a danger to Russia. Both have proven to be unable to keep promises. Russia in consequence will have to rearrange them.

Russia could do that by force. But there will be no march towards Riga, Warsaw, Berlin or Paris. (Remember that Russia has been there and done that which every time has led to major changes in Europe.)

Russia has announced its strategic aims. In December 2021 Russia set forth two agreements which the U.S. and NATO. They included demands for a future arrangement in Europe that would guarantee indivisible security for all. On January 21 2022 the Russian Foreign Minister Sergei Lavrov was to meet Secretary of State Anthony Blinken in Geneva to talk about Russia’s proposals. Just minutes before that meeting the Foreign Ministry of Russia held a news conference to answer media questions:

Question: What will Russia’s demand that NATO return to the 1997 framework mean for Bulgaria and Romania? Will they have to leave NATO, remove US bases from their territory, or something else?

Answer: You mentioned one of the cornerstones of Russia’s initiatives. It was deliberately set forth with utmost clarity to avoid any ambiguity. We are talking about the withdrawal of foreign forces, equipment, and weapons, as well as taking other steps to return to the set-up we had in 1997 in non-NATO countries. This includes Bulgaria and Romania.

Reuters reported:

MOSCOW (Reuters) – The security guarantees that Russia seeks from the West include provisions requiring NATO forces to leave Romania and Bulgaria, the Russian foreign ministry said on Friday.

Moscow has demanded legally binding guarantees from NATO that the bloc will stop its expansion and return to its 1997 borders.

Replying to a question about what that would mean for Bulgaria and Romania, which joined NATO after 1997, the ministry said Russia wanted all foreign troops, weapons and other military hardware withdrawn from those countries.

After more than 20 years of watching Lavrov and Putin everyone should know that they do not publicly set out aims if they have no way to achieve them. They always have well thought out plans before announcing their goals.

So how can Russia actually achieve a retreat of NATO back to its 1997 borders?

Sanctions. The U.S. has used its economic and military powers to sanction this or that country that did not do as it was told to do by Washington. Unless enacted by the UN Security Council such sanctions have no basis in international law. Despite that the U.S. even used secondary sanctions. It threatened sanctions against Europe, and everyone else, as it ordered them to not deal with Iran or Venezuela.

Alan MacLeod @AlanRMacLeod – 22:45 UTC · Jun 5, 2022

The US is thinking about “allowing” Europe and Venezuela to trade together. Think about what this story tells us about global power relations and who is in charge.

Bloomberg @business – 12:13 UTC · Jun 5, 2022

The US could allow Eni and Repsol to ship Venezuelan oil to Europe as soon as July to make up for Russian crude, Reuters reported trib.al/fQ10QlX

Russia can do similar. But as it always follows international law, it will have to do it in a slightly different way.

Russia is a superpower in that it produces all kinds of raw materials the world, and especially the ‘west’, needs. Europe, and especially Germany, is depending on natural gas and oil from Russia. Energy prices in Germany will at least triple if it is completely cut off from Russian supplies.

German industry leader have loudly announced that they will have to close shop if the current European policies of restricting Russian energy supplies continues. The chemical giants BASF and Bayer will have to move to some other country. Volkswagen, Mercedes, BMW will have to stop all production in Europe. Steel production would fall to zero. Lack of fertilizer would lead to dependency on foreign agriculture.

Mass unemployment would follow. Millions will be in the street to protest against rolling blackouts, freezing apartments and hyperinflation.

Russia can achieve this at any time. It simply has to stop supplying gas and oil to Europe.

Despite six European ‘sanction packages’ against Russia there has yet to be a reciprocal response from Russia. It may still hope that European leaders will recognized the deadly game the U.S. is playing with them.

Unfortunately the leaders of Europe are dumb and compromised. The ‘olive green’ German Minister for Economic Destruction Robert Habeck still dreams of bringing Russia’s economy to its knees even as the ruble rises and Germany’s economy is falling apart. Chancellor Olaf Scholz was never the brightest bulb in the room. He is deeply compromised through his involvement in the Wireguard scandal. He was the Minister of Finance when reports of the company’s billion dollar fraud were suppressed by his ministry. And don’t get me going about Ursula van der Leyen who has been proven to be corrupt and incompetent ever since she took her first public office. U.S. secret services will know of many other crimes these people have been involved in.

The current ideological leaders of Europe will have to be replaced by clean ones who follow the German tradition of Realpolitik:

Realpolitik (German: [ʁeˈaːlpoliˌtiːk]; from German real ‘realistic, practical, actual’, and Politik ‘politics’), refers to enacting or engaging in diplomatic or political policies based primarily on considerations of given circumstances and factors, rather than strictly binding itself to explicit ideological notions or moral and ethical premises. In this respect, it shares aspects of its philosophical approach with those of realism and pragmatism. It is often simply referred to as “pragmatism” in politics, e.g. “pursuing pragmatic policies” or “realistic policies”.

Only with new and decent leaders will Europe come to its senses.

Russia can help to achieve that while at the same time solving its NATO problem.

It can publicly declare that:

THERE WILL BE NO FURTHER RUSSIAN SUPPLIES OF ANY KIND TO EUROPE UNTIL IT BREAKS WITH WASHINGTON.

What would follow?

Millions of discussions under candlelight would be held in freezing and hungry European households. Political opinions would change. Governments would be replaced with more pragmatic ones.

France and Germany would either have to leave NATO or become impoverished and irrelevant. U.S. troops on European grounds would be asked to leave or be attacked and thrown out by an enraged public. Germany would prohibit the U.S. military from using its airspace. The U.S would lose its grip over the continent.

That can’t happen? Well, Gonzalo Lira disagrees and so do I. In early February, before the Russian intervention in Ukraine, I had warned of the consequences of current ‘western’ policies:

The U.S. strategy to ‘fix’ Russia in Europe by imposing ‘crushing sanctions’ on it to then attack China is failing. That is because it was completely misconceived.

Russia is the most autarkic country in the world. It produces nearly everything it needs and has highly desirable products that are in global demand and are especially needed in Europe. Russia also has huge financial reserves. A sanctions strategy against Russia can not work.

The consequences for Europe were obvious:

The U.S. and its proxies in the EU and elsewhere have put up very harsh sanctions on Russia to damage its economy.

The final intent of this economic war is regime change in Russia.

The likely consequence will be regime change in many other countries.

All energy consumption in the U.S. and EU will now come at a premium price. This will push the EU and the U.S. into a recession. As Russia will increase the prices for exports of goods in which it has market power – gas, oil, wheat, potassium, titanium, aluminum, palladium, neon etc – the rise in inflation all around the world will become significant.

[Russia and China] have spent more brain time on the issue than the U.S. has.

The Europeans should have acknowledged that instead of helping the U.S. to keep up its self-image of a unipolar power.

It will take some time for the new economic realities to settle in. They will likely change the current view of Europe’s real strategic interests. 

Europe is fortunate in that Russia, even before re-entering the Ukraine, has offered a very decent alternative to U.S. hegemony in Europe:

A man who has Putin’s ear, Professor Sergey Karaganov who is the honorary chairman of Russia’s Council on Foreign and Defense Policy, has written an op-ed that points to an alternative.

The piece was requested by and supposed to be published in the Financial Times, which means that it is directed at the European leadership. But the FT has now rejected it for unstated reasons. It was then published in the Russia in Global Affairs journal and has now been re-published by RT.

[Karaganov] states:

The security system in Europe, built largely by the West after the 1990s, without a peace treaty having been signed after the end of the previous Cold War, is dangerously unsustainable.

There are a few ways to solve the narrow Ukrainian problem, such as its return to permanent neutrality, or legal guarantees from several key NATO countries not to ever vote for further expansion of the bloc. Diplomats, I assume, have a few others up their sleeves. We do not want to humiliate Brussels by insisting on repudiating its erroneous plea for the open-ended expansion of NATO. We all know the end of the Versailles humiliation. And, of course, the implementation of the Minsk agreements.

But the task is wider: to build a viable system on the ruins of the present. And without resorting to arms, of course. Probably in the wider Greater Eurasian framework. Russia needs a safe and friendly Western flank in the competition of the future. Europe without Russia or even against it has been rapidly losing its international clout. That was predicted by many people in the 1990s, when Russia offered to integrate with, not in, the continent’s systems. We are too big and proud to be absorbed. Our pitch was rejected then, but there is always a chance it won’t be this time.

That last paragraph is the gist of Russia’s real strategic aims. They require to destroy the current system of U.S. hegemony over Europe. Europe will have to be de-NATO-sized. Regime changes in European countries will probably be necessary to see to that.

Russia’s leaders now have a once in a century chance to achieve those aims. They will be condemned by their compatriots if the refrain from doing so. The U.S. has no way to prevent or counter a Russian sales boycott and its consequences.

When will European politicians, or those behind them, finally wake up to those facts?

Update (11:45 UTC):

A soundbite from a press conference Lavrov is currently holding:

Russian Embassy, UK @RussianEmbassy – 11:41 UTC · Jun 6, 2022

FM #Lavrov: To all appearances, no one is going to even reform #NATO. They are going to turn this “defensive alliance” into a global alliance claiming global military dominance. This is a dangerous path that is definitely doomed to failure.

What Does Putin Think?

I learned a long time ago to take people at their word. It may not be the complete truth, but it’s far more likely to be right than anything I tell myself or other tell me.

In 2007 Putin spoke at the Munich Conference on Security Policy, and shared his point of view.

He said this 15 years ago on February 10, 2007.

And everything he has done since has been consistent with what he said.

Kremlin Transcript: http://en.kremlin.ru/events/president/transcripts/24034

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Vladimir Putin: Thank you very much dear Madam Federal Chancellor, Mr Teltschik, ladies and gentlemen!

I am truly grateful to be invited to such a representative conference that has assembled politicians, military officials, entrepreneurs and experts from more than 40 nations.

This conference’s structure allows me to avoid excessive politeness and the need to speak in roundabout, pleasant but empty diplomatic terms. This conference’s format will allow me to say what I really think about international security problems. And if my comments seem unduly polemical, pointed or inexact to our colleagues, then I would ask you not to get angry with me. After all, this is only a conference. And I hope that after the first two or three minutes of my speech Mr Teltschik will not turn on the red light over there.

Therefore. It is well known that international security comprises much more than issues relating to military and political stability. It involves the stability of the global economy, overcoming poverty, economic security and developing a dialogue between civilisations.

This universal, indivisible character of security is expressed as the basic principle that “security for one is security for all”. As Franklin D. Roosevelt said during the first few days that the Second World War was breaking out: “When peace has been broken anywhere, the peace of all countries everywhere is in danger.”

These words remain topical today. Incidentally, the theme of our conference – global crises, global responsibility – exemplifies this.

Only two decades ago the world was ideologically and economically divided and it was the huge strategic potential of two superpowers that ensured global security.

This global stand-off pushed the sharpest economic and social problems to the margins of the international community’s and the world’s agenda. And, just like any war, the Cold War left us with live ammunition, figuratively speaking. I am referring to ideological stereotypes, double standards and other typical aspects of Cold War bloc thinking.

The unipolar world that had been proposed after the Cold War did not take place either.

The history of humanity certainly has gone through unipolar periods and seen aspirations to world supremacy. And what hasn’t happened in world history?

However, what is a unipolar world? However one might embellish this term, at the end of the day it refers to one type of situation, namely one centre of authority, one centre of force, one centre of decision-making.

It is world in which there is one master, one sovereign. And at the end of the day this is pernicious not only for all those within this system, but also for the sovereign itself because it destroys itself from within.

And this certainly has nothing in common with democracy. Because, as you know, democracy is the power of the majority in light of the interests and opinions of the minority.

Incidentally, Russia – we – are constantly being taught about democracy. But for some reason those who teach us do not want to learn themselves.

I consider that the unipolar model is not only unacceptable but also impossible in today’s world. And this is not only because if there was individual leadership in today’s – and precisely in today’s – world, then the military, political and economic resources would not suffice. What is even more important is that the model itself is flawed because at its basis there is and can be no moral foundations for modern civilisation.

Along with this, what is happening in today’s world – and we just started to discuss this – is a tentative to introduce precisely this concept into international affairs, the concept of a unipolar world.

And with which results?

Unilateral and frequently illegitimate actions have not resolved any problems. Moreover, they have caused new human tragedies and created new centres of tension. Judge for yourselves: wars as well as local and regional conflicts have not diminished. Mr Teltschik mentioned this very gently. And no less people perish in these conflicts – even more are dying than before. Significantly more, significantly more!

Today we are witnessing an almost uncontained hyper use of force – military force – in international relations, force that is plunging the world into an abyss of permanent conflicts. As a result we do not have sufficient strength to find a comprehensive solution to any one of these conflicts. Finding a political settlement also becomes impossible.

We are seeing a greater and greater disdain for the basic principles of international law. And independent legal norms are, as a matter of fact, coming increasingly closer to one state’s legal system. One state and, of course, first and foremost the United States, has overstepped its national borders in every way. This is visible in the economic, political, cultural and educational policies it imposes on other nations. Well, who likes this? Who is happy about this?

In international relations we increasingly see the desire to resolve a given question according to so-called issues of political expediency, based on the current political climate.

And of course this is extremely dangerous. It results in the fact that no one feels safe. I want to emphasise this – no one feels safe! Because no one can feel that international law is like a stone wall that will protect them. Of course such a policy stimulates an arms race.

The force’s dominance inevitably encourages a number of countries to acquire weapons of mass destruction. Moreover, significantly new threats – though they were also well-known before – have appeared, and today threats such as terrorism have taken on a global character.

I am convinced that we have reached that decisive moment when we must seriously think about the architecture of global security.

And we must proceed by searching for a reasonable balance between the interests of all participants in the international dialogue. Especially since the international landscape is so varied and changes so quickly – changes in light of the dynamic development in a whole number of countries and regions.

Madam Federal Chancellor already mentioned this. The combined GDP measured in purchasing power parity of countries such as India and China is already greater than that of the United States. And a similar calculation with the GDP of the BRIC countries – Brazil, Russia, India and China – surpasses the cumulative GDP of the EU. And according to experts this gap will only increase in the future.

There is no reason to doubt that the economic potential of the new centres of global economic growth will inevitably be converted into political influence and will strengthen multipolarity.

In connection with this the role of multilateral diplomacy is significantly increasing. The need for principles such as openness, transparency and predictability in politics is uncontested and the use of force should be a really exceptional measure, comparable to using the death penalty in the judicial systems of certain states.

However, today we are witnessing the opposite tendency, namely a situation in which countries that forbid the death penalty even for murderers and other, dangerous criminals are airily participating in military operations that are difficult to consider legitimate. And as a matter of fact, these conflicts are killing people – hundreds and thousands of civilians!

But at the same time the question arises of whether we should be indifferent and aloof to various internal conflicts inside countries, to authoritarian regimes, to tyrants, and to the proliferation of weapons of mass destruction? As a matter of fact, this was also at the centre of the question that our dear colleague Mr Lieberman asked the Federal Chancellor. If I correctly understood your question (addressing Mr Lieberman), then of course it is a serious one! Can we be indifferent observers in view of what is happening? I will try to answer your question as well: of course not.

But do we have the means to counter these threats? Certainly we do. It is sufficient to look at recent history. Did not our country have a peaceful transition to democracy? Indeed, we witnessed a peaceful transformation of the Soviet regime – a peaceful transformation! And what a regime! With what a number of weapons, including nuclear weapons! Why should we start bombing and shooting now at every available opportunity? Is it the case when without the threat of mutual destruction we do not have enough political culture, respect for democratic values and for the law?

I am convinced that the only mechanism that can make decisions about using military force as a last resort is the Charter of the United Nations. And in connection with this, either I did not understand what our colleague, the Italian Defence Minister, just said or what he said was inexact. In any case, I understood that the use of force can only be legitimate when the decision is taken by NATO, the EU, or the UN. If he really does think so, then we have different points of view. Or I didn’t hear correctly. The use of force can only be considered legitimate if the decision is sanctioned by the UN. And we do not need to substitute NATO or the EU for the UN. When the UN will truly unite the forces of the international community and can really react to events in various countries, when we will leave behind this disdain for international law, then the situation will be able to change. Otherwise the situation will simply result in a dead end, and the number of serious mistakes will be multiplied. Along with this, it is necessary to make sure that international law have a universal character both in the conception and application of its norms.

And one must not forget that democratic political actions necessarily go along with discussion and a laborious decision-making process.

Dear ladies and gentlemen!

The potential danger of the destabilisation of international relations is connected with obvious stagnation in the disarmament issue.

Russia supports the renewal of dialogue on this important question.

It is important to conserve the international legal framework relating to weapons destruction and therefore ensure continuity in the process of reducing nuclear weapons.

Together with the United States of America we agreed to reduce our nuclear strategic missile capabilities to up to 1700–2000 nuclear warheads by 31 December 2012. Russia intends to strictly fulfil the obligations it has taken on. We hope that our partners will also act in a transparent way and will refrain from laying aside a couple of hundred superfluous nuclear warheads for a rainy day. And if today the new American Defence Minister declares that the United States will not hide these superfluous weapons in warehouse or, as one might say, under a pillow or under the blanket, then I suggest that we all rise and greet this declaration standing. It would be a very important declaration.

Russia strictly adheres to and intends to further adhere to the Treaty on the Non-Proliferation of Nuclear Weapons as well as the multilateral supervision regime for missile technologies. The principles incorporated in these documents are universal ones.

In connection with this I would like to recall that in the 1980s the USSR and the United States signed an agreement on destroying a whole range of small- and medium-range missiles but these documents do not have a universal character.

Today many other countries have these missiles, including the Democratic People’s Republic of Korea, the Republic of Korea, India, Iran, Pakistan and Israel. Many countries are working on these systems and plan to incorporate them as part of their weapons arsenals. And only the United States and Russia bear the responsibility to not create such weapons systems.

It is obvious that in these conditions we must think about ensuring our own security.

At the same time, it is impossible to sanction the appearance of new, destabilising high-tech weapons. Needless to say it refers to measures to prevent a new area of confrontation, especially in outer space. Star wars is no longer a fantasy – it is a reality. In the middle of the 1980s our American partners were already able to intercept their own satellite.

In Russia’s opinion, the militarisation of outer space could have unpredictable consequences for the international community, and provoke nothing less than the beginning of a nuclear era. And we have come forward more than once with initiatives designed to prevent the use of weapons in outer space.

Today I would like to tell you that we have prepared a project for an agreement on the prevention of deploying weapons in outer space. And in the near future it will be sent to our partners as an official proposal. Let’s work on this together.

Plans to expand certain elements of the anti-missile defence system to Europe cannot help but disturb us. Who needs the next step of what would be, in this case, an inevitable arms race? I deeply doubt that Europeans themselves do.

Missile weapons with a range of about five to eight thousand kilometres that really pose a threat to Europe do not exist in any of the so-called problem countries. And in the near future and prospects, this will not happen and is not even foreseeable. And any hypothetical launch of, for example, a North Korean rocket to American territory through western Europe obviously contradicts the laws of ballistics. As we say in Russia, it would be like using the right hand to reach the left ear.

And here in Germany I cannot help but mention the pitiable condition of the Treaty on Conventional Armed Forces in Europe.

The Adapted Treaty on Conventional Armed Forces in Europe was signed in 1999. It took into account a new geopolitical reality, namely the elimination of the Warsaw bloc. Seven years have passed and only four states have ratified this document, including the Russian Federation.

NATO countries openly declared that they will not ratify this treaty, including the provisions on flank restrictions (on deploying a certain number of armed forces in the flank zones), until Russia removed its military bases from Georgia and Moldova. Our army is leaving Georgia, even according to an accelerated schedule. We resolved the problems we had with our Georgian colleagues, as everybody knows. There are still 1,500 servicemen in Moldova that are carrying out peacekeeping operations and protecting warehouses with ammunition left over from Soviet times. We constantly discuss this issue with Mr Solana and he knows our position. We are ready to further work in this direction.

But what is happening at the same time? Simultaneously the so-called flexible frontline American bases with up to five thousand men in each. It turns out that NATO has put its frontline forces on our borders, and we continue to strictly fulfil the treaty obligations and do not react to these actions at all.

I think it is obvious that NATO expansion does not have any relation with the modernisation of the Alliance itself or with ensuring security in Europe. On the contrary, it represents a serious provocation that reduces the level of mutual trust. And we have the right to ask: against whom is this expansion intended? And what happened to the assurances our western partners made after the dissolution of the Warsaw Pact? Where are those declarations today? No one even remembers them. But I will allow myself to remind this audience what was said. I would like to quote the speech of NATO General Secretary Mr Woerner in Brussels on 17 May 1990. He said at the time that: “the fact that we are ready not to place a NATO army outside of German territory gives the Soviet Union a firm security guarantee”. Where are these guarantees?

The stones and concrete blocks of the Berlin Wall have long been distributed as souvenirs. But we should not forget that the fall of the Berlin Wall was possible thanks to a historic choice – one that was also made by our people, the people of Russia – a choice in favour of democracy, freedom, openness and a sincere partnership with all the members of the big European family.

And now they are trying to impose new dividing lines and walls on us – these walls may be virtual but they are nevertheless dividing, ones that cut through our continent. And is it possible that we will once again require many years and decades, as well as several generations of politicians, to dissemble and dismantle these new walls?

Dear ladies and gentlemen!

We are unequivocally in favour of strengthening the regime of non-proliferation. The present international legal principles allow us to develop technologies to manufacture nuclear fuel for peaceful purposes. And many countries with all good reasons want to create their own nuclear energy as a basis for their energy independence. But we also understand that these technologies can be quickly transformed into nuclear weapons.

This creates serious international tensions. The situation surrounding the Iranian nuclear programme acts as a clear example. And if the international community does not find a reasonable solution for resolving this conflict of interests, the world will continue to suffer similar, destabilising crises because there are more threshold countries than simply Iran. We both know this. We are going to constantly fight against the threat of the proliferation of weapons of mass destruction.

Last year Russia put forward the initiative to establish international centres for the enrichment of uranium. We are open to the possibility that such centres not only be created in Russia, but also in other countries where there is a legitimate basis for using civil nuclear energy. Countries that want to develop their nuclear energy could guarantee that they will receive fuel through direct participation in these centres. And the centres would, of course, operate under strict IAEA supervision.

The latest initiatives put forward by American President George W. Bush are in conformity with the Russian proposals. I consider that Russia and the USA are objectively and equally interested in strengthening the regime of the non-proliferation of weapons of mass destruction and their deployment. It is precisely our countries, with leading nuclear and missile capabilities, that must act as leaders in developing new, stricter non-proliferation measures. Russia is ready for such work. We are engaged in consultations with our American friends.

In general, we should talk about establishing a whole system of political incentives and economic stimuli whereby it would not be in states’ interests to establish their own capabilities in the nuclear fuel cycle but they would still have the opportunity to develop nuclear energy and strengthen their energy capabilities.

In connection with this I shall talk about international energy cooperation in more detail. Madam Federal Chancellor also spoke about this briefly – she mentioned, touched on this theme. In the energy sector Russia intends to create uniform market principles and transparent conditions for all. It is obvious that energy prices must be determined by the market instead of being the subject of political speculation, economic pressure or blackmail.

We are open to cooperation. Foreign companies participate in all our major energy projects. According to different estimates, up to 26 percent of the oil extraction in Russia – and please think about this figure – up to 26 percent of the oil extraction in Russia is done by foreign capital. Try, try to find me a similar example where Russian business participates extensively in key economic sectors in western countries. Such examples do not exist! There are no such examples.

I would also recall the parity of foreign investments in Russia and those Russia makes abroad. The parity is about fifteen to one. And here you have an obvious example of the openness and stability of the Russian economy.

Economic security is the sector in which all must adhere to uniform principles. We are ready to compete fairly.

For that reason more and more opportunities are appearing in the Russian economy. Experts and our western partners are objectively evaluating these changes. As such, Russia’s OECD sovereign credit rating improved and Russia passed from the fourth to the third group. And today in Munich I would like to use this occasion to thank our German colleagues for their help in the above decision.

Furthermore. As you know, the process of Russia joining the WTO has reached its final stages. I would point out that during long, difficult talks we heard words about freedom of speech, free trade, and equal possibilities more than once but, for some reason, exclusively in reference to the Russian market.

And there is still one more important theme that directly affects global security. Today many talk about the struggle against poverty. What is actually happening in this sphere? On the one hand, financial resources are allocated for programmes to help the world’s poorest countries – and at times substantial financial resources. But to be honest — and many here also know this – linked with the development of that same donor country’s companies. And on the other hand, developed countries simultaneously keep their agricultural subsidies and limit some countries’ access to high-tech products.

And let’s say things as they are – one hand distributes charitable help and the other hand not only preserves economic backwardness but also reaps the profits thereof. The increasing social tension in depressed regions inevitably results in the growth of radicalism, extremism, feeds terrorism and local conflicts. And if all this happens in, shall we say, a region such as the Middle East where there is increasingly the sense that the world at large is unfair, then there is the risk of global destabilisation.

It is obvious that the world’s leading countries should see this threat. And that they should therefore build a more democratic, fairer system of global economic relations, a system that would give everyone the chance and the possibility to develop.

Dear ladies and gentlemen, speaking at the Conference on Security Policy, it is impossible not to mention the activities of the Organisation for Security and Cooperation in Europe (OSCE). As is well-known, this organisation was created to examine all – I shall emphasise this – all aspects of security: military, political, economic, humanitarian and, especially, the relations between these spheres.

What do we see happening today? We see that this balance is clearly destroyed. People are trying to transform the OSCE into a vulgar instrument designed to promote the foreign policy interests of one or a group of countries. And this task is also being accomplished by the OSCE’s bureaucratic apparatus which is absolutely not connected with the state founders in any way. Decision-making procedures and the involvement of so-called non-governmental organisations are tailored for this task. These organisations are formally independent but they are purposefully financed and therefore under control.

According to the founding documents, in the humanitarian sphere the OSCE is designed to assist country members in observing international human rights norms at their request. This is an important task. We support this. But this does not mean interfering in the internal affairs of other countries, and especially not imposing a regime that determines how these states should live and develop.

It is obvious that such interference does not promote the development of democratic states at all. On the contrary, it makes them dependent and, as a consequence, politically and economically unstable.

We expect that the OSCE be guided by its primary tasks and build relations with sovereign states based on respect, trust and transparency.

Dear ladies and gentlemen!

In conclusion I would like to note the following. We very often – and personally, I very often – hear appeals by our partners, including our European partners, to the effect that Russia should play an increasingly active role in world affairs.

In connection with this I would allow myself to make one small remark. It is hardly necessary to incite us to do so. Russia is a country with a history that spans more than a thousand years and has practically always used the privilege to carry out an independent foreign policy.

We are not going to change this tradition today. At the same time, we are well aware of how the world has changed and we have a realistic sense of our own opportunities and potential. And of course we would like to interact with responsible and independent partners with whom we could work together in constructing a fair and democratic world order that would ensure security and prosperity not only for a select few, but for all.

Thank you for your attention.

Horst Teltschik: Thank you very much for your important speech. We heard new themes, including the issue of global security architecture – one was not in the foreground over the last few years – disarmament, arms control, the issue of the NATO-Russian relations, and cooperation in the field of technology.

There are still a whole number of questions and Mr President is ready to answer.

Question: Dear Mr President, thank you for your speech. I would like to emphasise that the German Bundestag is convinced of Russia’s importance as Europe’s partner and of the importance of the role you play. The Federal Chancellor said this in her speech.

Proceeding from experience, I would like to mention two issues in your speech. First of all, on your opinion of NATO and NATO expansion, a phenomenon that you consider dangerous for Russia. Would you acknowledge that this phenomenon is, in practice, not expansion but rather the self-determination of democratic states who want this? And that NATO finds it difficult to accept states that do not declare this readiness? You could admit that thanks to NATO expansion eastern borders have become more reliable, more secure. Why are you afraid of democracy? I am convinced that only democratic states can become members of NATO. This stabilises neighbours.

About what is happening inside your country. The murder of Anna Politkovskaya was a symbol. One can say that this affects many journalists, makes everybody afraid, and the law on non-governmental organisations also causes alarm.

Question: I well understand your comments about non-proliferation. Especially at the end of the Cold War we saw a reduction of the deployment of nuclear weapons, but we also saw increased terrorism. Nuclear materials must be kept away from terrorists.

Question: Coming back to the question that was also asked to the Federal Chancellor. What does the future hold for Kosovo and Serbia? What is your opinion of Mr Ahtisaari? How will Russia influence resolving this problem?

Question: Can you comment on the experiences of Russian servicemen in Chechnya? And about your comments on energy: you briefly mentioned the market role energy plays in politics. The EU is interested in reaching a partnership agreement that contains fixed policy principles. Are you ready to guarantee reliable energy deliveries, including in the agreement?

Question: Mr President, your speech was both sincere and frank. I hope that you understand my frank and direct question. In the 1990s Russian experts actively helped Iran develop missile technologies. Iran now has advanced medium- and long-range missiles that would enable it to strike Russia and part of Europe. They are also working towards placing nuclear warheads on these missiles. Your country has made efforts to negotiate with Iran on this issue and supported the UN Security Council resolution to prevent Iran from carrying out such a policy.

My question is as follows: what efforts will Russia make – through the UN or otherwise – to stop these very serious events in Iran?

Question: I am confident that the historians of the future will not describe our conference as one in which the Second Cold War was declared. But they could. You said that it is necessary to put pressure on Iran and to provide positive incentives. But is it not true that Russia is interfering with the process of applying strong pressure through sanctions? Secondly, with regards to deliveries of weapons, Russia is encouraging Iran, especially since these weapons appeared in Lebanon and in Gaza. What are your comments on this?

Question: I understand your sincerity and I hope that you will accept our sincerity. First of all, about arms control. Who needs a new arms race? I want to point out that the USA has not developed a new strategic weapon in more than two decades and that you recently tested the Topol-M missile, and that it is already deployed in silos and on mobile installations. You criticised the USA for unilateral actions and said twice that military actions can only be legitimate if they receive UN approval. The USA is carrying out military actions in Iraq and in Afghanistan according to UN decisions and today in Kosovo the majority of troops are supporting peace-making operations in this country.

My question is the following: are you saying that independently of how Russia perceives a threat to its international interests, it will not undertake military operations without UN approval?

Question: You talked about the danger of a unipolar world in which one sovereign makes a decision without consulting anyone else. In many people’s opinion, in Russia we are seeing an increasingly unipolar government where competing centres of influence are forced to tow the party line, whether it be in the State Duma, the regional leadership, the media, business communities or non-governmental organisations. Would a unipolar government be such a reliable partner when the issue of energy security is at stake?

President Vladimir Putin: First of all I would like to thank you for your questions. Very interesting. It is a shame that we have little time left because I would be pleased to have a separate discussion with all of you. I very much enjoy this, I like it.

I will begin with the last question about the unipolar nature of the Russian government. Today the Communist Party of the Russian Federation, the United Russia Party, the Liberal Democratic Party and other political forces as well sit in the Russian parliament. And their basic positions differ significantly. If you aren’t aware of this then just have a talk with the leadership of the Communist Party of the Russian Federation and then with the leader of our liberal democrats, Mr Zhirinovsky. You will see the difference at once. If you cannot see it now, then have a talk with them. There is no problem here, simply go to Moscow and talk to them.

About our future plans. We would like to have a mature political system, a multi-party system with responsible politicians who can anticipate the country’s development and not only work responsibly before elections and immediately after, but in a long-term future as well. That is what we aspire to. And this system will certainly be a multi-party one. All our actions within Russia, including changing the State Duma election regime, the election regime in the Russian parliament, are designed to strengthen a multi-party system in Russia.

And now about whether our government cabinet is able to operate responsibly in resolving issues linked to energy deliveries and ensuring energy security. Of course it can! Moreover, all that we have done and are doing is designed to achieve only one goal, namely to transfer our relations with consumers and countries that transport our energy to market-based, transparent principles and long-term contracts.

I will remind you and my colleague, the President of Ukraine, who is sitting opposite from me, also knows this. For fifteen years prior to 2006, as long as we did not make the corresponding decisions during our difficult talks, deliveries of Russian energy and, first and foremost, of gas to Europe depended on the conditions and prices for the deliveries of Russian gas to Ukraine itself. And this was something that Ukraine and Russia agreed among themselves. And if we reached no agreement, then all European consumers would sit there with no gas. Would you like to see this happen? I don’t think so. And despite all the scandals, the protection of interests, and differences of opinion we were able to agree with President Yushchenko. I consider that he made a responsible, absolutely correct and market-oriented decision. We signed separate contracts for the delivery of our gas to Ukraine and for delivering Russian gas to Europe for the next five years. You should thank us, both Russia and Ukraine, for this decision. And thank you also for your question.

It would have been better if I answered your questions at once.

Regarding our perception of NATO’s eastern expansion, I already mentioned the guarantees that were made and that are not being observed today. Do you happen to think that this is normal practice in international affairs? But all right, forget it. Forget these guarantees. With respect to democracy and NATO expansion. NATO is not a universal organisation, as opposed to the UN. It is first and foremost a military and political alliance, military and political! Well, ensuring one’s own security is the right of any sovereign state. We are not arguing against this. Of course we are not objecting to this. But why is it necessary to put military infrastructure on our borders during this expansion? Can someone answer this question? Unless the expansion of military infrastructure is connected with fighting against today’s global threats? Let’s put it this way, what is the most important of these threats for us today – the most important for Russia, for the USA and for Europe – it is terrorism and the fight against it.

Does one need Russia to fight against terrorism? Of course! Does one need India to fight against terrorism! Of course! But we are not members of NATO and other countries aren’t either. But we can only work on this issue effectively by joining our forces. As such, expanding infrastructure, especially military infrastructure, to our borders is not connected in any way with the democratic choices of individual states. And I would ask that we not mix these two concepts.

You know, I wrote so illegibly here that even I cannot read my own writing. I will therefore answer what I can read and if I do not answer something, please remind me of the question.

What will happen with Kosovo and with Serbia? Only Kosovars and Serbs can know. And let’s not tell them how they should live their lives. There is no need to play God and resolve all of these peoples’ problems. Together we can only create certain necessary conditions and help people resolve their own problems. Create the necessary conditions and act as the guarantors of certain agreements. But we should not impose these agreements. Otherwise, we shall simply put the situation into a dead end. And if one of the participants in this difficult process feels offended or humiliated, then the problem will last for centuries. We will only create a dead end.

What does our position consist in? Our position consists in adhering precisely to this principle. And if we see that one party is clearly dissatisfied with the proposals to resolve the situation then we are not going to support this option.

I did not exactly understand what you meant when you asked about our servicemen’s experience in Chechnya. Their experience is not pleasant, but it is extensive. And if you are interested in the general situation in Chechnya, then I can tell you that a parliament and a president have been elected, and that the government is functioning. All the bodies of authority and administration have been formed. Practically all the political forces in Chechnya have been involved in work in the Republic. As an example, the former Defence Minister of Aslan Maskhadov’s government is now a member of parliament in Chechnya. And we made a whole series of decisions that would allow former insurgents to return not only to normal life, but also to the Republic’s political activities. As such, today we prefer to act by using economic and political means and, in practice, we have transferred the responsibility for ensuring security almost 100 percent to the Chechen people. Because the agencies of law and order that were formed in Chechnya are almost 100 percent composed of local citizens, from those living in Chechnya on a permanent basis – from Chechens.

As to Lebanon, I also did not quite understand what you meant. But, yes, the fact that we sent military construction workers to Lebanon to restore bridges and infrastructure that was destroyed in the conflict with Israel is a confirmation of a well-known situation, the one I described just now. And military units protecting these builders were made up of servicemen from Chechnya and with Chechen origins. We recognised that if our servicemen must operate in regions inhabited by Muslims, sending a contingent of Muslim servicemen would be no bad thing. And we were not mistaken. The local population really gave a warm welcome to our military builders.

Now about the energy agreement with the European Union, since this is how I understood the question. We have said many times that we are not against agreeing on the principles underlying our energy relations with the EU. Moreover, the principles contained in the Charter are generally comprehensible. But the Charter itself is not so acceptable to us. Because not only Russia but also our European partners do not adhere to its principles. It is enough to remember that the market for nuclear materials remains closed for us. Nobody has opened this market to us.

There are also other moments which I simply do not want to draw attention to now. But as to the principles themselves, we are already using these principles in our work with German companies. I shall remind you of the transaction that took place between Gazprom and BASF. As a matter of fact, this was an asset swap. We are ready to continue to work this way. We are ready. But in each concrete instance we must understand what we give, what our partners give, calculate, have an independent international expert evaluation, and then make a decision. We are ready to engage in this work. We have actually just recently done something similar with our Italian partners, with the company ENI. And we did more than simply sign an agreement about deliveries until 2035 – I think – we also talked about swapping assets. And we are studying this same type of cooperation with our Ukrainian friends. This is going ahead.

And is it necessary to fix these principles in a possible future fundamental text between Russia and the EU? It is possible to have different opinions on this issue. I consider that it is not necessary because, in addition to energy, we have other spheres in which we cooperate with the EU, including agriculture, high-tech and transportation. And all of this is very important and very interesting. And we cannot put all of this in one fundamental act that should act as a framework document. Or would you want us to put only what you need in the document and leave what we need outside of the framework? Let’s discuss things honestly with one another and take mutually acceptable decisions.

“In the 1990s Russia helped Iran develop missile technologies”. I think that you asked me this question. “Today Iran wants to put nuclear warheads on these missiles that could reach Europe. What is Russia going to do about the Iranian nuclear programme?” Is that so?

Well first of all, I do not have data that in the 1990s Russia helped Iran create its own missile technologies. It was other countries that worked very actively towards this. And technology was transferred through different channels. And we have proof of this. At the time I gave these proofs directly to the President of the United States. And technology also came from Europe and from Asian countries.

So Russia is hardly at fault here. I assure you. Russia is the country least involved here. Least of all. If it is involved at all. At the time I was still working in St Petersburg, but we were not involved with this. I can assure you of this. But you know that at the business level something could have happened. We trained experts in institutes and so on. And at the request and according to the information of our American partners we reacted harshly to this. Immediately and harshly. We did not observe such a reaction from our other partners, including European partners. Moreover, I do not know whether you are aware of this or not but you should know that military technology and special equipment is still coming from the United States. Until now. Until now spare parts for F-14 planes come from the armed forces and the Pentagon. As far as I know, there is even an investigation taking place in the United States on this account. And despite the fact that this investigation is proceeding and that these spare parts were seized at the border and then sent back, after a certain amount of time, according to the data I have – and if they are not correct then check them – those same cargos were again seized at the border. Even bearing a tag ‘material evidence’.

You know, this stream is really hard to stop. We need to work together to do so.

About whether or not Iran has missiles that threaten Europe. You are mistaken. Today Iran has – Mr Gates is here today and certainly knows this data better than I do, and the Russian Defence Minister is also here – missiles with a range of 2000 kilometres.

Russian Defence Minister Sergei Ivanov: 1600–1700 kilometres.

Vladimir Putin: 1600–1700 kilometres. Only. Well, count how many kilometres there are between Munich and the Iranian border. Iran has no such missiles. They plan to develop some with a range of 2400 kilometres. It is not known whether they have the technology to do so. And with respect to 4000, 5000 or 6000 kilometres, then I think that this would simply require a different economy. So, it is improbable in general. And Iran is not threatening Europe. With regard to the idea that they are preparing to use nuclear warheads then we do not have such data. We do not have this data about nuclear warheads.

North Korea has tested a nuclear device. Iranians are constantly saying that their nuclear programme has a peaceful character. But I agree with you that the international community has concerns about the character and quality of Iran’s nuclear programmes. And Mr ElBaradai recently stated these concerns in what I think were six or seven points. I agree with you about this. And I do not understand why the Iranian party has still not reacted in a positive and constructive way to the concerns that Mr ElBaradai stated and therefore assuaged these concerns. I do not understand this just as you do not understand it.

What are we going to do? I think that together we need to work patiently and carefully. And, that’s right, to create incentives and show the Iranian leadership that cooperation with the international community is much better than confrontation.

Yes, and again about the deliveries of weapons to Iran. You know that there has been more talk than deliveries. Our military and technical cooperation with Iran is minimal. Simply minimal. I am not sure what minimal figures it is estimated at. In general we deliver much less arms to the Middle East than other countries, including the United States. No comparison is possible there. We recently delivered an anti-aircraft weapon system to Iran – that is true – with a medium range, approximately 30 to 50 kilometres. That is true. Why did we do this? I can explain why. We did this so that Iran did not feel it had been driven into a corner. So that it didn’t feel that it was in some kind of hostile environment. Rather that Iran could understand that it had channels of communication and friends that it could trust. We very much expect that the Iranian party will understand and hear our signals.

As to our weapons in Lebanon and in the Gaza strip. I am not aware of our weapons in the Gaza strip. I have not heard of such examples. Well, Kalashnikovs are in general the most widely used small arms in the world. They are probably everywhere. And probably there are still automatic Kalashnikovs in Germany or, in any case, some that have still not been destroyed. That is one hundred percent certain.

In Lebanon it is true. Elements of our anti-tank systems really have been seen there. That is true. Our Israeli partners told me about this at once. We carried out a thorough investigation into what happened. And we determined that these systems had remained in Lebanese territory after the Syrian army left. We carried out the corresponding work with our Syrian partners. We determined that our future military and technical cooperation with Syria would exclude the possibility that weapons could fall into any hands other than the ones they were destined for. We developed such a system. Among other things, we agreed on a system of possible warehouse inspections, at any time that is convenient for Russian experts. Inspections in warehouses after deliveries of Russian weapons systems to Syria.

“The USA are not developing strategic weapons but Russia is. Will Russia use force in the future if it is not sanctioned by the UN? Russia is developing a system of strategic weapons”.

Fine question, excellent! I am very grateful to you for this question. It will give me the opportunity to talk about the essence of what is happening. What are we indebted to in the past decades if there was a stand-off between two superpowers and two systems but nevertheless a big war did not take place? We are indebted to the balance of powers between these two superpowers. There was an equilibrium and a fear of mutual destruction. And in those days one party was afraid to make an extra step without consulting the other. And this was certainly a fragile peace and a frightening one. But as we see today, it was reliable enough. Today, it seems that the peace is not so reliable.

Yes, the United States is ostensibly not developing an offensive weapon. In any case, the public does not know about this. Even though they are certainly developing them. But we aren’t even going to ask about this now. We know that these developments are proceeding. But we pretend that we don’t know, so we say that they aren’t developing new weapons. But what do we know? That the United States is actively developing and already strengthening an anti-missile defence system. Today this system is ineffective but we do not know exactly whether it will one day be effective. But in theory it is being created for that purpose. So hypothetically we recognise that when this moment arrives, the possible threat from our nuclear forces will be completely neutralised. Russia’s present nuclear capabilities, that is. The balance of powers will be absolutely destroyed and one of the parties will benefit from the feeling of complete security. This means that its hands will be free not only in local but eventually also in global conflicts.

We are discussing this with you now. I would not want anyone to suspect any aggressive intentions on our part. But the system of international relations is just like mathematics. There are no personal dimensions. And of course we should react to this. How? Either the same as you and therefore by building a multi-billion dollar anti-missile system or, in view of our present economic and financial possibilities, by developing an asymmetrical answer. So that everybody can understand that the anti-missile defence system is useless against Russia because we have certain weapons that easily overcome it. And we are proceeding in this direction. It is cheaper for us. And this is in no way directed against the United States themselves.

I completely agree if you say that the Strategic Defense Initiative (SDI) is not directed against us, just as our new weapons are not directed against you. And I fully agree with my colleague and my friend about another thing. Do you know – and I will not be afraid of the word – that in spite of all our disagreements I consider the President of the United States my friend. He is a decent person and I know that today the wolves can blame the United States for everything that is being done on the international arena and internally. But I know that he is a decent person and it is possible to talk and reach agreements with him. And when I talked to him he said: “I proceed from the fact that Russia and the USA will never be opponents and enemies again”. I agree with him. But I repeat once again that there are symmetries and asymmetries here, there is nothing personal. It is simply a calculation.

And now about whether Russia will use military force without the sanction of the UN. We will always operate strictly within the international legal framework. My basic education is in law and I will allow myself to remind both myself and my colleagues that according to the UN Charter peace-keeping operations require the sanction of both the UN and the UN Security Council. This is in the case of peace-keeping operations. But in the UN Charter there is also an article about self-defence. And no sanctions are required in this case.

So, what have I forgotten?

Question: My question was about multipolarity in Russia itself and about the attitude of the international community towards Russia if Russia does not observe these principles, in reference to the murder of journalists, fears, anxieties, the absence of freedom and non-governmental organisations.

Vladimir Putin: I will say a couple of words. I already answered part of the question when I talked about the structure of the Russian parliament. Look at who is represented there, the political views of the people who have leadership positions in parliament, the legitimate parties. Now, as to non-governmental organisations, they are working actively in Russia. Yes, we introduced a new system for registering these organisations. But it is not that different from registration systems in other countries. And we have not yet seen any complaints from non-governmental organisations themselves. We have not refused registration to almost any organisations. There were two or three cases that were refused on simply formal grounds and these organisations are working on correcting certain provisions in their charters and so on. Nobody has been refused registration based on substantial, fundamental issues. All are continuing to work in the most active possible way and will continue to do so in the future.

What bothers us? I can say and I think that it is clear for all, that when these non-governmental organisations are financed by foreign governments, we see them as an instrument that foreign states use to carry out their Russian policies. That is the first thing. The second. In every country there are certain rules for financing, shall we say, election campaigns. Financing from foreign governments, including within governmental campaigns, proceeds through non-governmental organisations. And who is happy about this? Is this normal democracy? It is secret financing. Hidden from society. Where is the democracy here? Can you tell me? No! You can’t tell me and you never will be able to. Because there is no democracy here, there is simply one state exerting influence on another.

But we are interested in developing civil society in Russia, so that it scolds and criticises the authorities, helps them determine their own mistakes, and correct their policies in Russian citizens’ interests. We are certainly interested in this and we will support civil society and non-governmental organisations.

As to fears and so on, are you aware that today Russians have fewer fears than citizens in many other countries? Because in the last few years we made cardinal changes to improve the economic well-being of our citizens. We still have a great many problems. And we still have a great many unresolved problems. Including problems linked with poverty. And I can tell you that fears basically come from this source.

As to journalists then yes, this represents an important and difficult problem. And, incidentally, journalists are not only killed in Russia, but in other countries as well. Where are most journalists killed? You are an expert and probably know in which country the most journalists died in, say, the last year and a half? The largest number of journalists were killed in Iraq.

As to tragedies within Russia, we will certainly struggle with these phenomena in the most thorough way possible and sternly punish all criminals who try to undermine trust in Russia and damage our political system.

Thank you for your attention.