Collapse of Europe awaits

The clock is ticking

There has been a lively debate, especially among some economist, like me and my friend Andreas Steno Larssen, on whether Europe will be able to weather the winter without Russian gas. We got a general answer late past week.

François-Régis Mouton, Regional Director Europe of the International association of Oil & Gas Producers (IOGP), stated in an interview of NPR that:

“Even if you boost any other alternatives from now on to 2026, 2027, Europe will not be able to supply its gas demand.“

Alas, we are not talking about next year or even year after that but a period of seven years of gas delivery disruptions. Essentially this ‘screams bloody murder’ for the European corporate sector and to households in kind.

Moreover, the whole electrivity balance of Europe for the winter, basically, depends on Norwegian hydro-power. Late August Norway announced that they will cut electricity exports due to low hydro-reservoir levels. This is very understandable, because Norway would be just covering, with high domestic prices, for the extremely fool-hearted and short-sighted decisions of Germany to relinquish her own power-generation and put her faith on Russian gas imports. The Nordic electricity market, Nordpool, would be self-sufficient in energy, without the “central-European problem”. Thus, especially after the announcement of Norway, rolling blackouts loom in Europe.

European countries are essentially closing to a point, where we either sink together, or swim alone. This is not a political statement, but a brutal truth, if the current stubborn policy line of European leaders does not change.

Fortunately, Russia has not pushed Europe to the brink, at least not yet. For example, Italy still receives Russian gas, which is good because without it, her economy would probably collapse altogether. Late past week, the Italian 10-year bond yields passed the 4% mark, considered to be the ‘line in the sand’ for the financial solvency of her government. Now we are waiting how markets, the ECB and EU leaders respond.

What truly worries me is that President Putin has actually been relatively lenient towards Europe thus far. He could, for example, cut gas to Italy causing utter havoc. Russia holds fourth largest reserves on rare minerals and Russia is also the largest exporter of fertilizers. While dependent on foreign supply of, e.g., microchips, Russia has several ‘weapons’ in the ravaging “economic war”, which could inflict devastating damage to Europe but also to global economy. Naturally these would inflict serious damage to the Russian economy, at least temporarily. Alas, we are effectively wittnessing ‘an adjusted economic suicide’, between Russia and rest of Europe.

European unity is also already cracking under the pressure. Reports state that Russia is preparing a first shipment from its new LNG plan, to Greece. Hungary is buying additional gas from Russia in accordance with their new agreement. Both Hungary and Czech Repulic are objecting the plans for a price cap of Russian gas. I am expecting that the European political cohesion will keep decaying in the coming months.

I also think that there’s merit to rebel against the current policy stance of the EU. I don’t see a quick regime change in Russia as a possibility. Opposition has been all but decimated and Putin has Stalin-like control on power. Any coup is thus unlikely.

Personally, I think that all aggressions should be met primary by the strength of arms, and I am not alone. Like mentioned in my latest Epoch Times piece, one of the most famed economists, John Maynard Keynes, warned againts using sactions, already in 1924, because they “would always run the risk of not being efficacious and of not being easily distinguished from acts of war.”

I fear that many Europeans will learn that lesson shortly. Let’s just hope I am wrong…