Sanctions or Sucking Up? US Grovels in Ukraine

The US sent Energy Secretary Rick Perry to the inauguration of the new Ukrainian President, Volodymyr Zelenskiy, to announce the sanctions bill on Gazprom’s Nordstream 2 pipeline would pass.

I can’t tell what’s more pathetic at this point, the neocons in Trump’s administration thinking that sanctions actually achieve their goals or using them to suck up to a new president they don’t actively control yet.

Think about this. Perry goes to Kiev for nothing more than a photo op to assure Zelenskiy that the US won’t abandon the struggle stick it to the Russians. He does this with no sense of shame or irony after spending five years destroying Ukraine with an ill-advised coup which ushered in the chaos that brought Zelenskiy to power.

The hypocrisy of it all is stunning.

Outgoing US puppet Petro Poroshenko was such a disaster that Ukrainians voted 3 to 1 to get rid of him in favor of a political neophyte and television comic.

That’s how badly the US has mismanaged Ukrainian post-coup affairs. And the Russians are supposed to be the bad guys in this scenario?

And now Perry is going to virtue signal that the US will sanction Nordstream 2 to keep their access to Ukraine’s highest office? Zelenskiy may be a neophyte but he’s not stupid either.

The US’s opposition to Nordstream 2 is mainly for its own purposes. Just like its interest in Ukraine is purely selfish. President Trump wants the gas volumes slated for Nordstream 2 to go to US LNG exporters first. Ukraine isn’t all that important in the end to him.

Stopping Nordstream 2 is supposed to do two things. Force Russia to the bargaining table with Naftogaz, the Ukrainian state gas transit company, and cut a new deal since the old one is expiring at the end of this year.

It’s also meant to force Germany to buy more expensive US LNG. However, Trump can raise Germany’s costs he will. This, to him, is the way to fix them stealing from the US by building car factories in Indiana and Tennessee and selling us BMWs, Volkswagens and Porsches.

Germany is finally standing up for itself somewhat, adamantly declaring that it is ‘not a colony of the US’ even though, let’s get real, it is. Talk is cheap, however, and now is the time to act independently on major policy decisions.

Trump sending Perry to Zelenskiy’s inauguration should tell you all you need to know about how important Ukraine is in this calculus. It isn’t. Because if it were important either Trump himself would have gone or Secretary of State Mike Pompeo, not a cipher like Rick Perry.

And the truth is that Zelenskiy doesn’t need leverage to cut a deal with Gazprom. Gazprom has said on multiple occasions it would be happy to renegotiate the gas contract. It would do so as a favor to Angela Merkel and the EU to soothe fears over keeping Ukraine destabilized.

The problem was it was Poroshenko that refused to come to the table, at the behest of his US masters.

Moreover, Ukraine’s energy future is bleak now that Russia has embargoed Ukraine on oil and coal imports, including reselling through Belarus, which has also put Belarussian President Lukashenko on notice that Moscow is tired of his games as well.

Zelenskiy’s first move should be to sit down with Vladimir Putin at a moment’s notice. But he can’t do that until he has the backing of the parliament. This is why he dissolved parliament immediately upon taking office, bypassing an attempt to delay such elections until late October.

Poroshenko left him multiple poison pills to navigate but a gas transit contract with Gazprom is the easiest thing to get done. But, for Putin, this means Merkel putting to bed any more doubts about the final construction of Nordstream 2.

No gas transit deal with Ukraine gave German Chancellor Angela Merkel the excuse to keep all dialogue frozen on a number of issues, including ending sanctions against Russia. But she’s facing a major change in her political pull in Brussels in a week as the European Parliamentary elections could shift the balance of power enough to see any sanctions extension this summer vetoed.

And with Germany’s economy faltering badly and the markets finally waking up to the changes politically on the horizon, Merkel is rapidly reaching the end of her current policy quagmire with respect to Russia and the US

She will have to break the deadlock over Nordstream 2 and time is running out before Ukraine finds themselves unable to import the energy needed to keep the heat on this winter.

And that brings me to Denmark. The Danes are foot-dragging an environmental permit (due to obvious pressure behind the scenes by the US and the U.K.) to halt the last miles of the pipeline which is now two-thirds complete.

The delay is, again, temporary as Denmark has no good reasons to not issue the permit except the worst kind of politics.

The new sanctions only have power if the Danes continue refusing the permit. Because, you will notice, the sanctions aren’t going to affect the major partners of Nordstream 2, the five big oil and gas majors who put up half the funds.

It’s the pipe layers and insurance companies doing the actual construction. Because that’s all the US dares sanction. Just like the empty threats against Chinese state oil companies for buying Iranian oil, the US knows there is a limit to who and what they can sanction without collapsing the world economy.

Lastly, never underestimate the long-term effect here on the US and the further use of the dollar. Right now, the dollar is the major game in town. It’s vital to the survival of a lot of companies and banks, but it is also, ultimately, replaceable in the kinds of businesses under the threat of sanctions here.

Everywhere you look Trump is lashing out at whoever he thinks he can gain leverage over to force concessions for US interests. But all he is doing is making it clear to everyone that the dollar now carries unacceptable political risk to carry on their company’s balance sheet.

And it will only further lower the barrier both economically and politically to shift away from using it leaving the US ever more isolated. And the fact that this is happening over such a small thing like a pipeline and a failed state like Ukraine makes everyone involved look desperate and pathetic.