Sanctions or War?

It's long overdue we label sanctions for what they really are: war. If you prefer, call them "economic war".

Today, president Obama took the undeclared war another step forward by targeting Lukoil, a private Russian company.

Please consider Gazprom, Lukoil Hit in New Round of Sanctions.

The US dramatically expanded its sanctions against Russia on Friday by adding Gazprom, Europe’s leading energy provider, to the list of targeted companies, as it sought to ratchet up pressure on Moscow to step back from the war in Ukraine.

The latest measures targeting energy, financial services and defence industries also included Lukoil, the privately owned oil group, and Sberbank, Russia’s largest bank.

In addition to blocking most major state-owned groups from western capital markets, the US has also tightened restrictions on some of Russia’s largest energy projects, a key engine of its future economic growth.

One in particular – ExxonMobil’s high-profile exploration partnership with the state-controlled Russian oil group Rosneft in the Russian arctic – is looking increasingly under threat. The two companies began drilling in the Kara Sea last month, but industry analysts question whether their joint venture can survive under the intensifying sanctions regime.

There was also surprise that the US had decided to sanction Lukoil, the first private Russian company to be penalised in this way. The oil producer is not tied to President Putin and has played no role in the Ukraine conflict.

“It sends a message that any Russian firm is now conceivably a fair target instead of solely targeting firms that are state-owned or owned by people believed to be associated with President Putin,” said Andrew Weiss, vice-president for studies at the Carnegie Endowment for International Peace.

A senior administration official said that the latest round of sanctions could be lifted immediately if Russia observed the ceasefire agreement signed with Ukraine in Minsk last week.

Ceasefire Nonsense

Notice how the US is only interested that the rebels not  not violate the ceasefire.

Moreover, the fact is the ceasefire has largely held, and it has been broken by both sides. It's not even clear who broke the ceasefire first.

But if it was the rebels who broke the ceasefire in every instance, one would have expected the US state department to be all over the story with bullhorns. 

Solidarity by Force

President Obama says We will join EU in intensifying sanctions on Russia. 

Yeah right. We twist the EU's arm till they "cry uncle" then we claim we join them. 

Unless the intent is to provoke a military war with Russia, this new round of sanctions is stupider than any of its predecessors.

If Exxon cannot partner with Rosneft in the Russian arctic, guess who will? Try China.

Ruble Falls to Record Low vs. Dollar

Sanctions may be hurting the Ruble, but so are falling energy prices.

Reflections on the Global Economy 

The price of oil has been falling in spite of this mess. That's a big hint that the global economy is in a huge slowdown.

And that drop in oil price likely hurts Russia more than any of these sanctions. 

Like oil, copper says the same thing: World Growth vs. Copper with 3-Month Lag; Iron Sinks to 5-Year Low; US Will Not Decouple.

For a wrapup on sanction madness, please consider Fishing for Trout With Rope and Mashed Potatoes; Mentality of Jackasses; Gas Pains.

Expect a big "surprise" to the downside for global GDP as sanctions can only compound the already evident weakness.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Read more articles by Mish here.