Anthony Blinken’s “Tremendous Opportunity” Ain’t Good News For Germany And The United Kingdom
Secretary of State Blinken tried to put lipstick on this pig:
With winter approaching, Blinken said that the US wants the bloc to use less fuel.
Washington has for years been trying to convince EU leaders to swap Russian gas for its LNG. . . .
Speaking to reporters in Washington, Blinken boasted that the US is now “the leading supplier of [liquefied natural gas] to Europe.” In addition to shipping its own fuel to Europe, Blinken said that the US is working with European leaders to find ways to “decrease demand” and “speed up the transition to renewables.”
“It’s a tremendous opportunity to once and for all remove the dependence on Russian energy and thus to take away from [Russian President] Vladimir Putin the weaponization of energy as a means of advancing his imperial designs,” Blinken declared.
Not so fast Tony. There are not billions of cubic feet of natural gas languishing looking for eager buyers. The LNG exporters sell contract at least one or more years in advance. If you are Chinese or German plant that operates on natural gas, you contract with the U.S. supplier at least one year in advance to buy gas at a set price. Those European companies will receive gas this winter based on contracts signed last year, for example. That is not the problem.
The U.S. LNG exporters are the biggest in the world and there are six currently operating (the Freeport facility, which experienced an explosion in June, is not expected to be back on line until December). Guess what? Most of the Freeport export of LNG was destined for Germany. There is no magic wand to make that gas available to the Green Gods in Berlin.
The following map is a handy reference for identifying the ports that are set up to export LNG.
Almost all of the current production is under contract for the next two or three years and most of that is headed to Asia. Where is Germany going to buy the LNG it needs to keep its manufacturing plants open?
They cannot just put in a last minute order to the U.S. LNG exporters. The current supply is already spoken for. The U.S. exporters do not have the luxury of breaching contracts just to get a better price. If they stiff China, for example, there would be one hell of a lawsuit. However, if the Chinese buyer decides to sell what he has purchased to Germany (and make a hefty profit in the process) he could do that.
The Germans and the United Kingdom folks are getting double whammy because of the strong price of the dollar relative to the Euro and the British Pound Sterling. The foreigners have to buy dollars to make the U.S. dollar payments. The U.S. exporters will not accept foreign currency as payment. Go try to buy a Starbucks coffee in Corpus Christi with a Euro. That ain’t happening.
The strong dollar adds to the inflationary spiral that is spinning across the U.K and Europe. The economic deterioration in Europe and the U.K. will only worsen in the coming months.
The tremendous opportunity applies for US producers who have not already entered into contracts to supply LNG to U.S. LNG exporters. Those companies stand to make out like bandits robbing Fort Knox. They have product that is not already spoken for and will be able to get full market price. If you own stocks in any of those companies you are likely to have a very happy time when the 3rd quarter profit/loss reports are announced.
So, what does this mean for the ability of the United States and NATO to sustain the war in Ukraine and defeat Russia. It is worth recalling James Carville’s wry anlysis during Bill Clinton’s first Presidential campaign–it is the economy stupid. The domestic unrest in Europe is going to increase, not diminish. Will the NATO countries still be enthusiastic about sending billions of dollars to Ukraine while their people face soaring utility bills and higher prices for food, along with unheated homes and companies going bankrupt? The answer is simple–no. Ukraine’s “victories” in Izyum and Liman are no salve for ruptured economies.
Russia’s economic position remains strong. It has plenty of customers for its oil and gas. And it remains the big kid on the block with enriched uranium needed to fuel nuclear power plants:
Russia mines approximately 6% of the raw uranium produced annually, according to the report. That’s an amount that can be replaced if other countries that mine uranium increase their uranium mining.
However, uranium does not go directly from a mine into a nuclear reactor. It has to go through conversion and enrichment before it can be used as fuel in a nuclear reactor.
Here, Russia is a dominant player. Russia owned 40% of the total uranium conversion infrastructure in the world in 2020, and 46% of the total uranium enrichment capacity in the world in 2018, according to the report. (This was the most up-to-date data publicly available, according to the report authors.)
This is just a reminder that wars are not won only on the battlefield. Economic factors matter as well and on this point Russia controls trump cards.
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