What would a US-NATO and Russia War at Ukraine Look Like? Clue: Nuclear War

At the LewRockwell.com, historian Eric Margolis ponders on scenarios from a possible escalation in the Ukraine crisis that leads to the real thing—a shooting war between NATO-US and the Russia.

First, the seeds to war has already been sown. 

Channeling the great French economist  Frederic Bastiat’s if goods don t cross borders, armies will Mr. Margolis writes (bold mine)

Russia and the West are at war – over fruits, veggies, pork, and bank loans. The cause is Ukraine, a vast emptiness formerly unknown to the western world,  but now deemed a vital national security interest worthy of a risking a very scary war.

Economic embargos such as those launched by the US against Russia may seem relatively harmless. They are not. Trade sanctions are a form of strategic warfare that is sometimes followed by bullets and shells.

Think, for good example, of the 1940 US embargo against Japan that led Tokyo’s fateful decision to go to war rather than face slow,economic strangulation. How many Americans know that President Roosevelt closed the Panama Canal to Japanese shipping to enforce demands that Tokyo get out of Manchuria and China?

Frighteningly, today, there are senior officials in Washington and Moscow who are actually considering a head on clash in Ukraine between Russian forces and NATO – which is an extension of US military power.

More aggravating factors…

Intensifying attacks by Ukrainian government forces (quietly armed and financed by the US) against  pro-Russian separatists and civilian targets in eastern Ukraine are increasing the danger that Moscow may intervene militarily to protect Ukraine’s ethnic Russian minority.

A full-scale military clash could begin with a Russian-declared “no-fly” zone over the eastern Ukraine such as the US imposed over Iraq. Moscow’s aim would be to stop the bombing and shelling of Ukrainian rebel cities by Kiev’s air force.

The balance of power between protagonists…

NATO could quickly deploy its potent air power against Russian aircraft.  US and NATO aircraft flying from new bases in Romania, Bulgaria, and Poland could seriously challenge the Russian Air Force over the Russia-Ukraine border region. More US warplanes would be rushed into Eastern Europe. Russian air defenses are strong and its air bases are close to the sphere of action. Still, NATO air power has a technological superiority over the Russian Air Force and better trained pilots.

On the ground, Russia has a slight advantage. It has 16,000-18,000 troops on the Ukraine border made up of mechanized infantry, armor, mobile air defense and artillery. A competent but small force, and hardly a menace to Europe, as the pro-war media howl.   Compare this small number of troops to the Soviet 1st Ukrainian Front alone in 1944,  made up of six armies and thousands of tanks and heavy guns.

Why a large conventional warfare is like fighting the last war

Russia could fight border skirmishes but certainly not retake Ukraine with this paltry force. Russia’s once 200-division army which boasted some 50,000 tanks is today a shadow of its past: 205,000 active soldiers and 80,000 indifferent reservists spread over the world’s larges nation. Russia, as always, has excellent heavy artillery and good tanks, but nothing compared to WWII when Soviet 152mm guns and rocket batteries were lined up wheel-to-wheel for kilometers.

Any attempt by NATO to capture Crimea would likely be defeated by Soviet air, naval, and land forces. The constricted, shallow Black Sea could prove a death trap for US warships.  Sevastopol (with Leningrad and Stalingrad) was named a Hero City of the Soviet Union for its heroic defense in WWII

Ukraine’s cobbled together army, about 64,000 men, suffers from poor training, logistical problems, and weak leadership. During Soviet days, it numbered more than 700,000 with the cutting edge of Russian weapons. Today, the army is stiffened by foreign mercenaries and far-rightists from Kiev. Even so, it could not stand up to Russia’s better-armed, better-equipped troops.

What about NATO?  In 1970, the US Army had about 710,000 soldiers in Europe, mostly based in Germany. Today, US has only 27,500 German-based troops left,  largely non-combat support units. At best, the US could probably assemble two weak combat brigades – about 5,500 men total – to rush to Ukraine. The rest of US forces are based in Afghanistan, Kuwait, the Gulf,  South Korea, and Japan, or at stateside. Moving them to Europe would take about six months.

From limited conventional war to the risks of Mutually Assured Destruction

So any military clash in Ukraine would initially be limited in scope and intensity. But a confrontation could quickly escalate into a dangerous crisis. The Cold War taught that nuclear – armed powers must never fight directly, only through proxies.

Nothing is worth the risk of nuclear war, even a limited one.

Let the Ukrainians sort out their differences by referendum.

On the 100^th anniversary of World War I, we again see our leaders playing with matches.

The above chart from Businessinsider.com represents the updated distribution of nuclear weapons around the globe.

For those who believe that a US-NATO and Russian nuclear exchange would be like a boxing match that one can just watch while eating popcorns and cheer on the sidelines, here is a quote from political analyst Paul Craig Roberts at his website:

However, Washington believes that it can win a nuclear war with little or no damage to the US. This belief makes nuclear war likely.

As Steven Starr makes clear, this belief is based in ignorance. Nuclear war has no winner. Even if US cities were saved from retaliation by ABMs, the radiation and nuclear winter effects of the weapons that hit Russia and China would destroy the US as well.

A list of potential consequences from a nuclear fallout from any prospective full scale nuclear exchange can be seen here.

Have a nice day

Breaking: US President Obama Authorizes Air Strikes in Iraq, Global Equity Markets Convulses

The US government (and vested interest groups) has been itching to get involved in wars. So the 2009 Nobel Prize for Peace awardee US President Barack Obama found justification to get into one, thereby authorizing airstrikes in Iraq.

From CNN:

U.S. President Barack Obama said Thursday that he's authorized "targeted airstrikes" in Iraq to protect American personnel and help Iraqi forces.

"We do whatever is necessary to protect our people," Obama said. "We support our allies when they're in danger."

A key concern for U.S. officials: American consular staff and military advisers working with the Iraqi military in Irbil, the largest city in Iraq's Kurdish region.

Obama said Thursday he'd directed the military to take targeted strikes against Islamist militants "should they move towards the city."

Rapid developments on the ground, where a humanitarian crisis is emerging with minority groups facing possible slaughter by Sunni Muslim extremists, have set the stage for an increasingly dire situation.

It’s not farfetched where ground forces will be next. Besides, after all these years money spent and lives lost, the US government can't seem to get enough of Iraq

Oh, don’t forget there is the Ukraine crisis in the pipeline. So far, the Ukraine crisis has been a ‘civil war’. But this localized war may mutate into an international war or even World War III very soon.

As I explained here War has almost always been associated with inflationism: 

War has always been used as opportunities to exploit society (through financial repression) and suppress internal political opposition in order to advance the interests of the ruling political class whose interest are interlinked with the politically favored banking class, the welfare and the warfare class.

American Novelist Ernest Hemmingway said it best: 

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.

Stocks have been taking a drubbing, as of this writing Japan’s Nikkei are off nearly 3%

Asian markets have been mostly bloodied (Bloomberg).

So as with US futures (CNN)

But for the bulls, such would represent a 'buying opportunity'. That's because for the "don't worry be happy" crowd, stocks are bound to go up forever....until it won't.

Michael Rozeff: US Implements the Wolfowitz Doctrine

Retired Professor and author Michael Rozeff on the undeclared "Wolfowitz Doctrine" as blueprint to US imperial foreign policy.

From the Lew Rockwell Blog (bold mine)

The U.S. is implementing the Wolfowitz Doctrine. It aims to maintain the U.S. as the sole superpower and to preclude any regional powers. It wants no rivals such as Russia, Iran and China. This agenda is primary for the U.S. Other purported goals of foreign policy such as anti-terrorism, furthering democracy, advancing human rights, and the self-determination of peoples are useful only insofar as they advance the superpower status of the U.S. and the elimination of rivals. Whenever the Wolfowitz Doctrine can be implemented by sacrificing anti-terrorism, democracy, human rights and self-determination, the U.S. does not hesitate to sacrifice them. This is why the U.S. appears to be so hypocritical.

Here is an example out of today’s news. The U.S. condemns separatism in Ukraine and aids Kiev in attacking its own people with heavy and advanced weapons of all kinds. This is because the superpower agenda is served by steering Ukraine into the Western camp. At the very same time, the U.S. condemns China for indicting a professor who is a vocal separatist and critical of Chinese policy in Xinjiang. Hence, we observe the U.S. against separatism in Ukraine but supporting it in China. This is because the U.S. is applying pressure on China wherever it thinks this will succeed in diminishing China as a power. If China has to contend with breakaway movements, the U.S. agenda is advanced.

Numerous other instances of U.S. hypocrisy can be understood in this way. The U.S. will support democracy but then ignore elections and support dictators. It will bemoan the deaths of children in some instances but support their being killed in others. It will condemn interfering in domestic politics in some countries but approve of it in other instances. It will condemn terrorism and then arm terrorists. This is because the overriding agenda is the Wolfowitz Doctrine.

The U.S. supplies the Israeli military with aid and ammunition so as to maintain Israel in the region and prevent regional powers like Iran from growing in strength. When Israel attacks Gaza, the U.S. approves a certain amount of death and destruction. However, if Israel’s killing becomes so excessive that it promises to cause a backlash that weakens Israel or gives rise to an anti-Israel movement that is more radical than Hamas, then the U.S. will switch and disapprove of Israel’s attack and seek to stop it. The criterion being used is that of the supremacy of U.S. power in a worldwide game of power.

This is not to say that the different divisions in Washington are united in this goal or united in how to play this game. It’s not to say that the Wolfowitz Doctrine is sensible. It’s not to say that important leaders are playing this game effectively. In most instances, they are playing it foolishly, rashly, dangerously and in a very costly way that results in diminishing U.S. power. This exclusive superpower goal and game generally reduces American well-being in numerous ways. From that standpoint, the Wolfowitz Doctrine is deeply flawed.

Daniel Adams also at the Lew Rockwell Blog also reveals that the US government just gave a green light to the Israeli government for the use armaments from a US government owned US $ 1 billion cache or “War Reserves Stocks Allies-Israel (WRSA-I) in the ghastly war with the Hamas at the Gaza. Reportedly 80% of the fatalities have been civilians as the military industrial complex benefits from sale of arms.

Sad to see how political (and politically based economic) greed has led to senseless slaughter of innocent lives.

David Stockman: The Ukrainian crisis is the outcome of the mindless 20-year drive of the Warfare State to push an obsolete NATO to the very doorstep of Russia

The public loves the visible, so they are easily swayed by media who sell political messages by focusing on the visible and the sensational. Yet it has hardly been reckoned that much of social activities have been a product of history.  This means that to ignore history is to neglect an important component of reality.

In the case of the Ukraine crisis, which risks morphing into World War III, analyst David Stockman at his Contra Corner website explains how the past and present US foreign policy warfare state-imperialism agenda has brought upon the current tensions. The key excerpts from the article (bold mine, italics original)

The Kiev government is a dysfunctional, bankrupt usurper that is deploying western taxpayer money to wage a vicious war on several million Russian-speaking citizens in the Donbas—-the traditional center of greater Russia’s coal, steel and industrial infrastructure. It is geographically part of present day Ukraine by historical happenstance. For better or worse, it was Stalin who financed its forced draft industrialization during the 1930s; populated it with Russian speakers to insure political reliability; and expelled the Nazi occupiers at immeasurable cost in blood and treasure during WWII. Indeed, the Donbas and Russia have been Saimese twins economically and politically not merely for decades, but centuries.

On the other hand, Kiev’s marauding army and militias would come to an instant halt without access to the $35 billion of promised aid from the IMF, EU and US treasury. Obama just needs to say “stop”. That’s it. The civil war would quickly end, permitting the US, Russia and the warring parties of the Ukraine to hold a peace conference and work out the details of a separation agreement.

After all, what is so sacrosanct about preserving the territorial integrity of the Ukraine? Ever since the middle ages, it has consisted of a set of meandering borders in search of a nation that never existed owing to endemic ethnic, tribal and religious differences. Its modern boundaries are merely the fruit of 20th century wars and  the expediencies of a totalitarian state during the decades of its rise, rule and disintegration.

There was until recently a neighboring “state” of equally artificial lineage called Czechoslovakia. It was carved out of the German and Austrian empires by the vengeful victors at Versailles, urged on by scheming Czech nationalists who coveted the resources of the Slovaks. But notwithstanding revolutions, the Stalinist oppression, the Cold War, the Prague Spring and all the rest of the 20th century mayhem—-the machinations at Versailles didn’t birth a state that was viable or sustainable. Accordingly, separation has been had, and the parties are better off for it—as are its neighbors and the larger world.

And on the topic of partition there is the ghost of Yugoslavia–another state that emerged in whole cloth  from the madness of Versailles. Yes, it has been partitioned now into half a dozen smaller states—-Slovenia, Macedonia, Serbia, Montenegro, Croatia, Kosovo and Bosnia. But the operative point is that the partitioner was none other than Washington and its European groupies who had no regard for those happenstance 20th century-made borders when it suited their purpose. 

So the sanctimonious yelping from Washington about the sacred territorial integrity of the Ukraine is ahistorical tommyrot. In fact, however, it is a thin fig leaf for a far more insidious purpose. Namely, the self-aggrandizement of the Warfare State machinery that was left stranded in Imperial Washington without purpose or justification when the Cold War ended two decades ago.

So the Warfare State machinery—including its spy network, state department, aid agencies and NGO supplicants— invented enemies and missions to justify their continued existence and their massive dissipation of fiscal resources. Those are upwards of $1 trillion annually if you count everything including veterans and homeland security.

Thus, after arming the mujahedeen in Afghanistan against the Soviets in the 1980s, their Taliban successors were deemed our enemy after the cold war ended—even though they never poised a scintilla of threat to the citizens of Lincoln NE or Worcester MA.  So too with our 1980′s ally Saddam Hussein, and also with Khadafy, Assad and the warring tribal potentates and cutthroats of Yemen, Somalia and Waziristan, to name just a few.

But it is in eastern Europe that the Warfare State machinery has most egregiously made an enemy and mission out of whole cloth. As the Cold War was drawing to a close in the late 1980s, then Secretary of State James Baker made a sensible deal with Gorbachev. In return for Soviet acquiesce in the reunification of Germany, the US would insure that NATO did not expand by a “single inch”. 

Since then, of course, there has been a senseless bipartisan betrayal and stampede in the opposite direction. Starting under Clinton and extending through Bush and Obama, NATO has been expanded from 16 nations at the end of the Cold War to 28 countries today. 

Yet the very recitation of its new members underscores the historical farce that this needless expansion amounted to. For better or worse, the formation of NATO in the late 1940′s involved what were perceived to be vital national security interests against a Stalinist policy that by the lights of the hawks and militarists of the day amounted to a violation of his Yalta obligations. Accordingly, NATO constituted an alliance of real nations—England, France, Italy and West Germany—-that could make a meaningful contribution to collective security against the perceived Soviet threat of the times.

But Albania, Bulgaria, Latvia, Slovakia and Slovenia?  And that is not to forget Moldova, Georgia, Macedonia and the Ukraine—all of which are still coveted for membership by the NATO apparatchiks. What could these micro-states possibly contribute to American security? That’s especially the case since the Warsaw pact had been dissolved; the Soviet Empire has erased from the pages of history; and the Russian successor was left with an Italian sized GDP encumbered with the destructive legacy of a state-dominated economy that had been appropriated by a passel of thieves, opportunists and oligarchs.

In short, today’s Ukrainian crisis is the outcome of the mindless 20-year drive of the Warfare State to push an obsolete NATO to the very doorstep of Russia, and into the messy remnants of the Soviet disintegration. Stated differently, Putin has been in power for 15 years, yet during 13 of those years there was no hue and cry from Washington, London and Brussels that he was an incipient Hitler bent on sweeping conquest. Even the so-called invasion of Georgia in 2008 was a tempest in a teapot provoked by local pro-Russian separatists who did not want to be ruled by a de facto American interloper in Tbilisi.

Pls read the entire article here

Malaysian Airline MH17 Crash: 16 Central Issues; Justification for World War III (?) and Iran Air Flight 655

Whodunit? 

Contra mainstream’s mechanical finger pointing propaganda on the Malaysian MH17 crash, Global Research’s Julie Lévesque raises 16 central issues on the crash that has become a geopolitical tinderbox that shouldn’t be ignored (bold original)

1. Malaysian Airlines confirmed that the pilot was instructed to fly at a lower altitude by the Kiev air traffic control tower upon its entry into Ukraine airspace. (Malaysian Airlines MH17 Was Ordered to Fly over the East Ukraine Warzone)

2. The flight path was changed. We still don’t know who ordered it, but we know it was not Eurocontrol:

MH17 was diverted from the normal South Easterly route over the sea of Azov to a path over the Donetsk. Oblast. (The Flight Path of MH17 Was Changed. July 17 Plane Route was over the Ukraine Warzone)

According to Malaysian Airlines “The usual flight route [across the sea of Azov] was earlier declared safe by the International Civil Aviation Organisation. The International Air Transportation Association has stated that the airspace the aircraft was traversing was not subject to restrictions.”

…

The regular flight path of MH17 (and other international flights) over a period of ten days prior to July 17th ( day of the disaster), crossing Eastern Ukraine in a Southeasterly direction is across the Sea of Azov (click on the article link below to see the map). While the audio records of the MH17 flight have been confiscated by the Kiev government, the order to change the flight path did not come from Eurocontrol. Did this order to change the flight path come from the Ukrainian authorities? Was the pilot instructed to change course? (Malaysian Airlines MH17 Was Ordered to Fly over the East Ukraine Warzone)

3.  The presence of the Ukrainian military jet was confirmed by Spanish air traffic controller “Carlos” at Kiev Borispol airport shortly after the plane was shot down, as well as eyewitnesses in Donetsk. (How American Propaganda Works: “Guilt By Insinuation”, Spanish Air Controller @ Kiev Borispol Airport: Ukraine Military Shot Down Boeing MH#17

The Spanish air traffic controller documented the event on Twitter as it happened. He claimed it was not an accident, that the Ukrainian authorities shot down MH17 and were trying to “make it look like an attack by pro-Russians” . His Twitter account was closed down shortly after the tragedy. Although his account has yet to be fully corroborated, some of his claims have been confirmed by Malaysian Airlines and the Russian authorities.

There have been some reports to the effect the Spanish Air controller is fake and that the twitter message were sent out of London. Upon further investigation, the Spanish Air Controller conducted several media interviews in the last 2-3 months, see his interview with RT (Spanish Air Controller @ Kiev Borispol Airport: Ukraine Military Shot Down Boeing MH#17)

4. Russia has made available public radar and satellite imagery as evidence. Its images suggest the following:

a) Kiev’s regime deployed anti-air missile systems in Donetsk in and around the area where flight MH17 crashed.

b) An Ukrainian warplane SU-25 trailing flight MH17

c) the report pointed to the possibility of an air-to-air attack on MH17

d) the report also pointed to inconsistencies pertaining to the reports of the Ukrainian air traffic control

The Russian authorities did not come to any conclusion regarding who was to blame for shooting down the plane. (MH17 Show & Tell: It’s the West’s Turn – Russian Satellites and Radars Contradict West’s Baseless Claims)

5. The U.S., despite its global spying apparatus, has not shown any radar or satellite imagery to back its claim that Russia and the Eastern-Ukrainian opposition are responsible for the downing of MH17. The evidence it has presented so far is weak and based on pro-Kiev documents consisting of YouTube videos and various social media – “all of which are admittedly unverifiable and some of which is veritably fabricated.”:

Is US intelligence simply reading blogs? Or are the blogs somehow a clearinghouse of US intelligence? Or are the blogs fabrications by US intelligence in an attempt to frame Russia? One in particular, “Ukraine at War,” is a definitive collection of fabrications, biased propaganda, and dubious claims that appear to precede “US intelligence” claims. (Assigning Blame to East Ukraine Rebels: US Appeals to “Law of the Jungle” in MH17 Case)

6. “The Russian Defense Ministry pointed out that at the moment of destruction of MH-17 an American satellite was flying over the area”:

The Russian government urges Washington to make available the photos and data captured by the satellite.(How American Propaganda Works: “Guilt By Insinuation”)

7. A U.S. intelligence source claimed the “U.S. intelligence agencies do have detailed satellite images of the likely missile battery that launched the fateful missile, but the battery appears to have been under the control of Ukrainian government troops dressed in what look like Ukrainian uniforms”. These images could confirm the evidence presented by Russia to the effect that Kiev’s regime deployed anti-air missile systems in Donetsk in and around the area where flight MH17 crashed. (Fact number 4, Whistleblower: U.S. Satellite Images Show Ukrainian Troops Shooting Down MH17)

8. Russia called for an expert independent investigation:

President Putin has repeatedly stressed that the investigation of MH-17 requires “a fully representative group of experts to be working at the site under the guidance of the International Civil Aviation Organization (ICAO).”  Putin’s call for an independent expert examination by ICAO does not sound like a person with anything to hide. (How American Propaganda Works: “Guilt By Insinuation”)

9. The U.S. claimed, without evidence, but “with confidence” that Russia was involved:

[On  July 20, the US Secretary of State, John Kerry confirmed that pro-Russian separatists were involved in the downing of the Malaysian airliner and said that it was “pretty clear” that Russia was involved. Here are Kerry’s words:  “It’s pretty clear that this is a system that was transferred from Russia into the hands of separatists. We know with confidence, with confidence, that the Ukrainians did not have such a system anywhere near the vicinity at that point and time, so it obviously points a very clear finger at the separatists.” (Ibid.)

10. U.S. Secretary of State John Kerry's statement above regarding Russian involvement is contradicted by the Russian satellite photos and numerous eye witnesses on the ground. (Ibid.)

Read the rest here:

And while we are this, the Malaysian crash MH-17 crash may just serve as a Casus belli of World War III

Paul Craig Roberts warns (bold mine)

Twenty-two US senators have introduced into the 113th Congress, Second Session, a bill,S.2277, "To prevent further Russian aggression toward Ukraine and other sovereign states in Europe and Eurasia, and for other purposes."

Note that prior to any evidence of any Russian aggression, there are already 22 senators lined up in behalf of preventing further Russian aggression.

Accompanying this preparatory propaganda move to create a framework for war, hot or cold with Russia, NATO commander General Philip Breedlove announced his plan for a deployment of massive military means in Eastern Europe that would permit lightening responses against Russia in order to protect Europe from Russian aggression…

However you look at this, it comprises a declaration of war. Moreover, these provocative and expensive moves are presented as necessary to counter Russian aggression for which there is no evidence.

Read the rest here

Oh, the Slate’s Fred Kaplan reminds the US government of their own version of MH17: Iran Air Flight 655

Fury and frustration still mount over the downing of Malaysia Airlines Flight 17, and justly so. But before accusing Russian President Vladimir Putin of war crimes or dismissing the entire episode as a tragic fluke, it’s worth looking back at another doomed passenger plane—Iran Air Flight 655—shot down on July 3, 1988, not by some scruffy rebel on contested soil but by a U.S. Navy captain in command of an Aegis-class cruiser called the Vincennes.

Read the rest here

Ron Paul: What the Media Won’t Report About Malaysian Airlines Flight MH17

Ron Paul explains the propaganda behind the downing of the MH17

As published from the Ron Paul Institute (bold mine)

Just days after the tragic crash of a Malaysian Airlines flight over eastern Ukraine, Western politicians and media joined together to gain the maximum propaganda value from the disaster. It had to be Russia; it had to be Putin, they said. President Obama held a press conference to claim – even before an investigation – that it was pro-Russian rebels in the region who were responsible. His ambassador to the UN, Samantha Power, did the same at the UN Security Council – just one day after the crash!

While western media outlets rush to repeat government propaganda on the event, there are a few things they will not report.

They will not report that the crisis in Ukraine started late last year, when EU and US-supported protesters plotted the overthrow of the elected Ukrainian president, Viktor Yanukovych. Without US-sponsored “regime change,” it is unlikely that hundreds would have been killed in the unrest that followed. Nor would the Malaysian Airlines crash have happened.

The media has reported that the plane must have been shot down by Russian forces or Russian-backed separatists, because the missile that reportedly brought down the plane was Russian made. But they will not report that the Ukrainian government also uses the exact same Russian-made weapons.

They will not report that the post-coup government in Kiev has, according to OSCE monitors, killed 250 people in the breakaway Lugansk region since June, including 20 killed as government forces bombed the city center the day after the plane crash! Most of these are civilians and together they roughly equal the number killed in the plane crash. By contrast, Russia has killed no one in Ukraine, and the separatists have struck largely military, not civilian, targets.

They will not report that the US has strongly backed the Ukrainian government in these attacks on civilians, which a State Department spokeswoman called “measured and moderate.”
 

They will not report that neither Russia nor the separatists in eastern Ukraine have anything to gain but everything to lose by shooting down a passenger liner full of civilians.

They will not report that the Ukrainian government has much to gain by pinning the attack on Russia, and that the Ukrainian prime minister has already expressed his pleasure that Russia is being blamed for the attack.

They will not report that the missile that apparently shot down the plane was from a sophisticated surface-to-air missile system that requires a good deal of training that the separatists do not have.

They will not report that the separatists in eastern Ukraine have inflicted considerable losses on the Ukrainian government in the week before the plane was downed.

They will not report how similar this is to last summer’s US claim that the Assad government in Syria had used poison gas against civilians in Ghouta. Assad was also gaining the upper hand in his struggle with US-backed rebels and the US claimed that the attack came from Syrian government positions. Then, US claims led us to the brink of another war in the Middle East. At the last minute public opposition forced Obama to back down – and we have learned since then that US claims about the gas attack were false.

Of course it is entirely possible that the Obama administration and the US media has it right this time, and Russia or the separatists in eastern Ukraine either purposely or inadvertently shot down this aircraft. The real point is, it's very difficult to get accurate information so everybody engages in propaganda. At this point it would be unwise to say the Russians did it, the Ukrainian government did it, or the rebels did it. Is it so hard to simply demand a real investigation?

As Josph Goebbels, Nazi propaganda minister was once quoted: It is the absolute right of the State to supervise the formation of public opinion.

When Political Promises Fail: Kiev Doubles Prices of Cold Water

Sovereign Man’s Simon Black relates of the real time unfortunate developments in the Ukraine capital of Kiev, where political promises on public goods (water supply) appears to have been broken:  

Hours ago, the local gas company in Kiev (Kyivenergo) announced that they would be shutting off the hot water supply to most of the city.

While the official reason for the hot water shutoff is that Kyivenergo (the energy supplier to Kiev) owes a debt to the Ukrainian state gas company (Naftogaz) of over $100 million.

It’s just a quirky little coincidence that this debt suddenly became materially important only one week after Russia shut off natural gas supplies to Ukraine.

Funny thing is that Ukrainian politicians for years had been telling people not to worry about this.

You see, Ukraine has its own domestic natural gas supplies. And they tell people that the domestic gas is strictly for the people and their utilities (like hot water).

Russian gas, according to this story, is imported for businesses to use. But that domestic gas is sacrosanct, only for the people.

Clearly this turned out to be a big fat lie.

Bear in mind, it was just a few weeks ago that utility companies announced that the price of cold water would jump from 3.18 hryvnas per cubic meter to 6.22– a 95% increase, practically overnight.

So there’s an entire city now taking cold showers… and paying twice the price for the privilege! Insult. Injury.

This will be a problem once winter sets in. Nonetheless the lesson from Kiev’s water politics, again from Mr. Black (bold mine)

1. Politicians always lie. They will tell you that your nation is stronger than it really is, that your country is prepared for whatever may come, that your benefits will never be cut, etc.

And even though they may be well-intentioned, these are not promises that can be kept… especially by a nation in crisis.

2. A nation in crisis affects just about everything. It’s not just about numbers and data, or even Molotov cocktails. It’s hot water and toilet paper. It’s food on the shelves. It’s the stuff we all take for granted that suddenly doesn’t function anymore.

3. Even though the obvious warning signs are there, most people wait until it’s too late (or at least suboptimal) before considering their options. 

When you wait until a full blown crisis, you have to rush through critical decisions in haste instead of planning things out slowly, rationally.

That's the reason crises signify as Black Swans: People hardly realize of their impact.

Watch Out, Surging Oil Prices will COMPOUND on Inflation Risks!

Low-flation eh?

From Reuters:

Oil prices jumped to nine-month highs on Thursday, as concerns mounted that escalating violence in Iraq could disrupt oil supplies from the second-largest OPEC producer.

Sunni Islamist militants, who took over Iraq's second-biggest city Mosul earlier this week, extended their advance south toward Baghdad and surrounded the country's largest refinery in the northern town of Baiji on Thursday.

Let us see these via charts.

The US crude benchmark the WTIC just had a breakout!

US gasoline likewise posted a seeming breakout, which will likely be confirmed or falsified during the coming sessions.

This will ADD to the growing inflation pressures in the US which will jeopardize the stock market bubble.

Even Europe's Brent Crude seems as testing a critical resistance level.

The question is will troubles in Iraq signify a temporary event or will these escalate?

The recent twist of events reveals how the US Bush-Obama war on Iraq has not only been a dramatic failure of US interventionist policies, but a blowback, as the so-called terrorists seemingly beating back the Americans at their own game.  Talk about Karma.

These also seem as the unintended consequence of the confused and self contradictory imperial policies by the US government in the region.

Paradoxically, the client state or the US sponsored Iraq government has been fighting off insurgents whom has relations with US backed rebels in Syria!

From the PBS Frontline (May 2014): The interviews are the latest evidence that after more than three years of warfare, the United States has stepped up the provision of lethal aid to the rebels. In recent months, at least five rebel units have posted videos showing their members firing U.S.-made TOW anti-tank missiles at Syrian positions…many both inside and out of government fear U.S.-provided weapons could make their way into extremist hands, particularly in a place like Syria, where alliances and foes change with breakneck fluidity. Moderate rebel groups have worked closely with the al Qaida-aligned Nusra Front and the Islamic Front, one of whose factions, Ahrar al Sham, includes al Qaida members among its founders."

Now Iraq’s rebels could be using some of the US provided weapons in their war to take control of Iraq via Baghdad. 

Al Qaida-inspired militants from ISIS, the Islamic State of Iraq and al-Sham, have reportedly seized US Black Hawk helicopters, looted 500 billion Iraqi dinars - the equivalent of $429m (£256m) - from Mosul's central bank, has now laid siege or surrounded Iraq's largest refinery in Baiji, and may have unleashed a sectarian war.

Reports the Zero Hedge: As the WSJ reports, after hard core Al Qaeda spin off ISIS (no relation to Sterling Archer) took over Saddam's home town of Tikrit yesterday, Iraq edged closer to all-out sectarian conflict on Thursday as Kurdish forces took control of a provincial capital in the oil-rich north and Sunni militants vowed to march on two cities revered by Shiite Muslims.  Kurdish militia known as peshmerga said they had taken up positions in key government installations in Kirkuk, as forces of the Shiite-dominated government of Prime Minister Nouri al-Maliki abandoned their posts and fled in fear of advancing Sunni militants, an official in the office of the provincial governor said.

Cumulative years of US interventions seem to have triggered a regional conflagration.

Yet the US government will continue to intervene as wars signifies as good business for the politically influential military industrial complex. President Obama has pledged to support the incumbent Iraq government, but did not offer ground troops.

Aside from the renewed outbreak violence in Iraq, one ramification of the US –Russia proxy civil war in Ukraine has been a test of mettle between two major military powers: The US government acknowledged that they have scrambled jet fighters to intercept 4 Russian bombers who flew nearly 50 miles off the California Coast. Wow! Russians frontally testing the US.

As geopolitical risks have been simmering, the effects of which has been to disrupt supply chains (as oil), thereby compounding on pressures to global consumer price inflation.

But for the don’t worry be happy crowd, whether in the Philippines or the US or elsewhere, various additional risks aside from inflation, such as protectionism or war should be dismissed because stocks are bound to rise forever, based on the kooky idea of "don't fight the FED" or central banks! Maybe they think that central banks can print oil too.

Russia Flaunts Nuclear Arms Capability...as Deterrent?

In World War I, the Maginot Line has been emblematic of a failed military strategy which was once proven effective. This has been characterized by the adage, “generals always fight the last war, especially if they have won it” 

And I have been saying, any confrontation involving major powers will likely involve using new or modern technology built armaments: nuclear weapons. 

Governments comprise a select group of politically mandated people authorized to use force. In combat, particularly with external forces, where the goal is to subjugate or defeat the opponent, governments with access to deadly weapons will likely choose to use them to reach such objective. Thus instead of conventional warfare, the risks of future wars will be one of nuclear exchanges.

The escalating stalemate in Ukraine has prompted Russia to flex her nuclear muscles against the West with a showcase of her nuclear capabilities

First a test launch of ICBM missiles...

From RiaNovosti 

Russia’s strategic missile forces test launched an intercontinental ballistic missile (ICBM) during a training exercise on Thursday under the leadership of President Vladimir Putin.

The RS-12M Topol ICBM was launched from the country's northern Plesetsk space center.

Prelaunch operations and the launch and flight of the missile followed a strictly planned procedure. The Russian Ministry of Defense said the missile struck the practice target at the Kura ballistic range in the country’s Far East within the prescribed accuracy.

On Thursday, President Putin as Russia’s commander-in-chief held a planned training exercise of the armed forces. The presidents of Collective Security Treaty Organization (CSTO) member countries – Belarus, Armenia, Tajikistan and Kyrgyzstan – observed the training process at the national defense control center.

Next the following video shows how Russia is “NOT” preparing for a nuclear war (hat tip zero hedge) 

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This seems like a reprise of the Cold War...yet increases the risks of World War III. 

Nuclear Weapons: Who has what? ... according to the CNN

No worries, stocks will continue to soar.

US Stocks in V-Shape Intraday Recovery as Bad News is Good news

European stocks got clobbered yesterday reportedly due to the escalation in Ukraine crisis. Ukraine’s government has launched a military offensive against separatist militants sympathetic to the government of Russia from cities in the eastern Donetsk region (Bloomberg). Ukraine is increasingly at risk of a civil war. And worse, if both Russia and the NATO-US intervenes this raises the risks of world war III.

While such sentiment initially plagued US stocks, all these abruptly reversed when a  report saying that the Japanese government is about to release its outlook that will downgrade its ‘overall assessment’ of the economy as private consumption takes a hit from April sales taxes (I must add and inflation). This sent US stocks recovering from the depths of a selloff!

As you can see all three US major stock market indices (Dow Industrial, S&P 500 and the Nasdaq) fashioned out a fantastic simultaneous V-shape intraday recovery. 

Ah, don’t you see? Bad news is good news because the Wall Street’s of the world, like sharks, have smelled blood. They expect that the Bank of Japan to impose additional easing to address faltering Abenomics.

As of this writing Japan’s Nikkei is now on a ramp up by more than 1.5% as the USD-yen soar past 102

Financial journalist Michael Lewis recently raised a controversy saying the stock markets has been rigged in favor of High Frequency Trading. Well, this would seem as  speck considering how central banks “manage” the financial markets.

Quote of the Day: War fever feeds on ignorance

Ignorance is a primary fuel of nationalism and aggression. Patriotism is the last refuge of scoundrel, as Dr . Johnson observed, and the first platform of fools.

Three professors from Princeton, Dartmouth and Harvard University just did a poll that found only 16% of Americans queried could find Ukraine on the world map. Actually, that’s better than I expected, given American’s notorious geographical illiteracy. Seeing Ukraine’s map on TV every night no doubt helped.

Worryingly, but hardly surprisingly, the poll also found that the further a poll respondent thought Ukraine was from its real location, the more likely he was to support US military intervention in Ukraine. Few Americans could find Iraq (Eye-raq to most), Afghanistan, or Iran (Eye-ran) on the map.

“Let’s get those dirty Commies,” goes the latest wave of war fever to sweep the US, “if we can only find them!” Some respondents put Ukraine in Australia, or South America…

War fever feeds on ignorance. If mobs in Paris had known in August, 1914, that they would die on the mud of Flanders few would have been so eager for war. All sides in World War One mistakenly believed in a short, sweet military victory. The great French voice against the folly of war, Jean Juares, was assassinated by nationalists.

“The proportion of collage grads who could correctly identify Ukraine (20%) is only slightly higher than the proportion of Americans who told Pew (the respected polling outfit) that President Obama was Muslim in August, 2010,” found the Ivy League professors.

About the same percentage of Americans believe that Elvis is still alive, or that an Islamic Caliphate will shortly rule America. Ever since the Bush administration, stupidity and ignorance have become fashionable.

This is from historian Eric Margolis—commenting on the controversial poll published at the Washington Post Blog, where the less Americans know about Ukraine’s location, the greater the desire to intervene—at the LewRockwell.com. 

I find the observation of the relationship between ignorance (which should not be limited to geography) and militancy highly relevant. And this applies everywhere, not just to American's perception to the Ukraine geopolitcal conundrum.

I’ve noticed that for the many who agitate and pine for war are mostly those with hardly any inkling of war’s horrors. Their conception of war seem to emanate from the movies or shows they’ve watched or from games that they have played—as third party or from the audience perspective.  They perhaps expect somebody to do the fighting for and in behalf of them, while like in sport games, they cheer from the sidelines. They hardly seem to grasp that in war, the lives of their treasured family, relatives, friends or their neighbors may be at stake while their homes devastated and ravaged. They also seem to see wars as cost—free (I mean economic aside from social costs).

And mostly the same group usually serve as unwitting instruments or mouthpieces of the major beneficiaries of war: the political class—who pitch the war fever amplified by media to gain popularity via the herding effect to justify the imposition of taxes, inflationism and economic repression in order to expand their control over society and their resources. Wars after all are not only about politics, but about business too.

So the other beneficiaries or the cohorts of the political class are the defense industry and their financiers aside from mainstream media.  And all it takes to push for war is to rile up on the emotions of the unthinking electorates. As a saying goes, if all you have is a (emotional) hammer, everything looks like a nail.

Russia’s Interventions in Crimea: The Geopolitics of Oil Prices

Global politics are a complex dynamic.

I previously noted that Russia’s response to the Ukraine’s political crisis may have been a pushback on what the former’s political leaders see as “encirclement strategy” (Russia’s government doesn’t want to see US-NATO troops on her door steps). This via indirect interventions by the US on the latter’s affair.

But there seems to be another angle: the actions of the Russian government could have been meant to keep oil prices up. As the prolific fund manager Louis-Vincent Gave of Gavekal.com sums up “when the oil price is high, Russia is strong; when the oil price is weak, Russia is weak”

Mr. Gave writes [www.gavekal.com, hat tip John Mauldin, with Mr. Gave’s permission, Thanks Louis] (bold mine, italics original):

Nineteenth century statesman Lord Palmerston famously said that “nations have no permanent friends or allies, they only have permanent interests.” As anyone who has ever opened a history book knows, Russia’s permanent interest has always been access to warm-water seaports. So perhaps we can just reduce the current showdown over Crimea to this very simple truth: there is no way Russia will ever let go of Sevastopol again. And aside from the historical importance of Crimea (Russia did fight France, England and Turkey 160 years ago to claim its stake on the Crimean peninsula), there are two potential reasons for Russia to risk everything in order to hold on to a warm seaport. Let us call the first explanation “reasoned paranoia,” the other “devilish Machiavellianism.”

Reasoned paranoia

Put yourself in Russian shoes for a brief instant: over the past two centuries, Russia has had to fight back invasions from France (led by Napoleon in 1812), an alliance including France, England and Turkey (Crimean War in the 1850s), and Germany in both world wars. Why does this matter? Because when one looks at a map of the world today, there really is only one empire that continues to gobble up territory all along its borders, insists on a common set of values with little discussion (removal of death penalty, acceptance of alternative lifestyles and multi- culturalism...), centralizes economic and political decisions away from local populations, etc. And that empire may be based in Brussels, but it is fundamentally run by Germans and Frenchmen (Belgians have a hard enough time running their own country). More importantly, that empire is coming ever closer to Russia’s borders.

Of course, the European Union’s enlargement on its own could be presented as primarily an economic enterprise, designed mainly to raise living standards in central and eastern Europe, and even to increase the potential of Russia’s neighbors as trading partners. However, this is not how most of the EU leaders themselves view the exercise; instead the EU project is defined as being first political, then economic. Worse yet in Russian eyes, the combination of the EU and NATO expansion, which is what we have broadly seen (with US recently sending fighter jets to Poland and a Baltic state) is a very different proposition, for there is nothing economic about NATO enlargement!

For Russia, how can the EU-NATO continuous eastward expansion not be seen as an unstoppable politico-military juggernaut, advancing relentlessly towards Russia’s borders and swallowing up all intervening countries, with the unique and critical exception of Russia itself? From Moscow, this eastward expansion can become hard to distinguish from previous encroachments by French and German leaders whose intentions may have been less benign than those of the present Western leaders, but whose supposedly “civilizing” missions were just as strong. Throw on top of that the debate/bashing of Russia over gay rights, the less than favorable coverage of its very expensive Olympic party, the glorification in the Western media of Pussy Riot, the confiscation of Russian assets in Cyprus ... and one can see why Russia may feel a little paranoid today when it comes to the EU. The Russians can probably relate to Joseph Heller’s line from Catch-22:“Ju st because you're paranoid doesn't mean they aren't after you.” 

Devilish Machiavellianism

Moving away from Russia’s paranoia and returning to Russia’s permanent interests, we should probably remind ourselves of the following when looking at recent developments: 1) Vladimir Putin is an ex-KGB officer and deeply nationalistic, 2) Putin is very aware of Russia’s long-term interests, 3) when the oil price is high, Russia is strong; when the oil price is weak, Russia is weak. 

It is perhaps this latter point that matters the most for, away from newspapers headlines and the daily grind of most of our readers, World War IV has already started in earnest (if we assume that the Cold War was World War III). And the reason few of us have noticed that World War IV has started is that this war pits the Sunnis against the Shias, and most of our readers are neither. Of course, the reason we should care (beyond the harrowing tales of human suffering coming in the conflicted areas), and the reason that Russia has a particular bone in this fight, is obvious enough: oil. 

Indeed, in the Sunni-Shia fight that we see today in Syria, Lebanon, Iraq and elsewhere, the Sunnis control the purse strings (thanks mostly to the Saudi and Kuwaiti oil fields) while the Shias control the population. And this is where things get potentially interesting for Russia. Indeed, a quick look at a map of the Middle East shows that a) the Saudi oil fields are sitting primarily in areas populated by the minority Shias, who have seen very little, if any, of the benefits of the exploitation of oil and b) the same can be said of Bahrain, where the population is majority Shia.

Now of course, Iran has for decades tried to infiltrate/destabilize Shia Bahrain and the Shia parts of Saudi Arabia, though so far, the Saudis (thanks in part to US military technology) have done a very decent job of holding their own backyard. But could this change over the coming years? Could the civil war currently tearing apart large sections of the Middle East get worse?

At the very least, Putin has to plan for such a possibility which, let’s face it, would very much play to Russia’s long-term interests. Indeed, a greater clash between Iran and Saudi Arabia would probably see oil rise to US$200/barrel. Europe, as well as China and Japan, would become even more dependent on Russian energy exports. In both financial terms and geo-political terms, this would be a terrific outcome for Russia.

It would be such a good outcome that the temptation to keep things going (through weapon sales) would be overwhelming. This is all the more so since the Sunnis in the Middle East have really been no friends to the Russians, financing the rebellions in Chechnya, Dagestan, etc. So having the opportunity to say “payback’s a bitch” must be tempting for Putin who, from Assad to the Iranians, is clearly throwing Russia’s lot in with the Shias. Of course, for Russia to be relevant, and hope to influence the Sunni-Shia conflict, Russia needs to have the ability to sell, and deliver weapons. And for that, one needs ships and a port. Ergo, the importance of Sevastopol, and the importance of Russia’s Syrian port (Tartus, sitting pretty much across from Cyprus).

The questions raised

The above brings us to the current Western perception of the Ukrainian crisis. Most of the people we speak to see the crisis as troublesome because it may lead to restlessness amongst the Russian minorities scattered across Eastern Europe and Central Asia, and tempt further border encroachments across a region that remains highly unstable. This is of course a perfectly valid fear, though it must be noted that, throughout history, there have been few constants to the inhabitants of the Kremlin (or of the Winter Palace before then). But nonetheless, one could count on Russia’s elite to:

a) Care deeply about maintaining access to warm-water seaports and

b) Care little for the welfare of the average Russian

So, it therefore seems likely that the fact that Russia is eager to redraw the borders around Crimea has more to do with the former than the latter. And that the Crimean incident does not mean that Putin will try and absorb Russian minorities into a “Greater Russia” wherever those minorities may be. The bigger question is that having secured Russia’s access to Sevastopol, and Tartus, will Russia use these ports to influence the Shia-Sunni conflict directly, and the oil price indirectly?

After all, with oil production in the US re-accelerating, with Iran potentially foregoing its membership in the “Axis of Evil,” with GDP growth slowing dramatically in emerging markets, with either Libya or Iraq potentially coming back on stream at some point in the future, with Japan set to restart its nukes ... the logical destination for oil prices would be to follow most other commodities and head lower. But that would not be in the Russian interest for the one lesson Putin most certainly drew from the late 1990s was that a high oil price equates to a strong Russia, and vice-versa.

And so, with President Obama attempting to redefine the US role in the region away from being the Sunnis’ protector, and mend fences with Shias, Russia may be seeing an opportunity to influence events in the Middle East more than she has done in the past. In that regard, the Crimean annexation may announce the next wave of Sunni-Shia conflict in the Middle East, and the next wave of orders for French-manufactured weapons (as the US has broadly started to disengage itself, France has been the only G8 country basically stepping up to fight in the Saudi corner ... a stance that should soon be rewarded with a €2.7bn contract for Crotale missiles produced by Thales and a €2.4bn contract for Airbus to undertake Saudi’s border surveillance). And, finally, the Crimean annexation may announce the next gap higher in oil prices.

In short, buying a straddle option position on oil makes a lot of sense. On the one hand, if the Saudis and the US want to punish Russia for its destabilizing actions, then the way to do it will be to join forces (even if Saudi-US relations are at a nadir right now) and crush the oil price. Alternatively, if the US leadership remains haphazard and continues to broadly disengage from the greater Middle East, then Russia will advance, provide weapons and intelligence to the Shias, and the unfolding Sunni- Shia war will accelerate, potentially leading to a gap higher in oil prices. One scenario is very bullish for risk assets, the other is very bearish! Investors who believe that the US State Department has the situation under control should plan for the former. Investors who fear that Putin’s Machiavellianism will carry the day should plan for the latter (e.g., buy out-of-the-money calls on oil, French defense stocks, Russian oil stocks).

My thoughts 

The above chart from Daily Reckoning which I earlier pointed out represents oil prices required to maintain welfare states of many top oil producing countries (based on 2012). This should much higher today. So if the US-Saudi consortium will punish Russia by way of forcing down oil prices then many of these oil welfare states will incur financing problems that may lead not only to bigger fiscal issues but also to another wave of internal political upheavals or “Arab Spring” 2.0. This may lead to oil supply disruptions and higher prices.

And since Saudi Arabia’s breakeven may be at $80 per bbl, then a dramatic drop in oil prices seem not to be in the interest of Saudi.

On the other hand, Mid-East wars and the risks of its escalation that will cause a spike in oil prices or an “oil shock” will likely spur more economic and political uncertainties. This should also bring forth stagflation which means soaring interest rates that may prick global debt bubbles.

And as previously noted “oil shocks” have been linked with recessions.

University of California economic professor James Hamilton argues that an “oil shock” played a substantial role in the recession of 2008. Mr. Hamilton further noted that high oil prices had been linked with 11 of the 12 post World War II recessions.

So current developments in Crimea may extrapolate to a deeper conundrum for global financial markets and world economies.