Call The Bluff, enough of this Kabuki Cold War Redux poker. It’s time to call the hands of all at the table. Show the cards. Guess what? They won’t show them cuz they got nothin. It’s not a legitimate game. If this faux tension between Russia and the West (and more specifically the U.S. as its faux proxy) were real, Russia could have been brought to its knees long ago and its nuclear arsenal dismantled. But what fun would that be? It was always imperative that nuclear arsenal remain intact, or the illusion of it left intact, for a rainy day Cold War Redux play when the War On Terror stopped paying those easy, up-front dividends.

Per the Kabuki Cold War Redux poker game, we’re to believe Putin’s holding a nuclear Royal Flush and thus is having a run of the table as the rest of the players either suck up to him or call him a cheater. But no one calls him on that potential Royal Flush; it’s just presumed. Since they won’t call, we must. So, let’s call. Assuming the game’s legit, which of course it’s not, then the accusation is that Putin’s a cheater and….….. is using nuclear leverage to run the table. By virtue of this, he and his country must be removed from the game since the bounds of decency have been compromised. Putin’s Russia has impugned the integrity of the game. That can’t be tolerated. The cheater must be deposed. The cheater can easily be deposed. is the cheater being allowed to cheat? Why do the other players at the table not put a stop to it? Because the game is a charade. It’s Kabuki theater for delusional public consumption. They create realities for us to discuss and while we’re discussing these foisted perceptions and perspectives, they’ve moved further down their reality pipeline and are rolling out numerous other reality offerings for those of us who are only partially blind and deaf to futilely ponder and discuss ad nauseum like a bunch of dogs barking senselessly at the rustling leaves on a gloomy Fall afternoon.

So, let’s pretend this game is True Poker (another one HBO….you’re behind on my royalty payments). How do we bring Russia to heel? Quit subsidizing the tyranny via ridiculously high market prices for oil and gas. Russia is, for the most part, a rentier state with Nukes–not a good combination for world peace. e219a1a15dd7aa394ada5ee497ed244fIt’s prosperity is directly tied to the “open” market price of oil and gas, meaning its tyranny is funded by the world in the form of a tax if the world, to mean us Small People, pays the extortionist backdoor surcharge/tax (amount above cost to extract plus a reasonable profit margin) for hydrocarbon fuel.

As I underscored in my very first blog post here, the so-called “open” market price for oil, and by implication gas, is manipulated and rigged by a bunch of treasonous and traitorous scumbags (the Small People in Italy knew how to administer justice to scum like this–the gruesome photo is Mussolini beaten and mutilated beyond recognition for his callous and sadistic exploitation of the Small People. In the end, they got their pound of flesh, or I should say, they got to pound Mussolini’s flesh…to a pulp)  per this link. As I mentioned in my very first blog post, the price of oil is being manipulated, and set really, by insiders who have the power and ability to do it and are doing it. It’s not just speculation on oil which is bad enough, it’s purposeful setting of the price. The price has nothing to do with demand, supply or costs to extract, or at least not costs to extract directly. Once again, per the link, since this can’t be emphasized enough considering the bullshit thrown our way daily by both the mainstream media and its red-headed stepchild, the alternative media:

They were a band of outsiders unable to get jobs with New York’s gilded financial establishment. They would go on to corner the world’s multitrillion-dollar oil market, reaping unimaginable riches while bringing the economy to its knees.

Meet the self-anointed kings of the New York Mercantile Exchange. In some ways, they are everything you would expect them to be: a secretive, members-only club of men and women who live lavish lifestyles; cavort with politicians, strippers, and celebrities; and blissfully jacked up oil prices to nearly $150 a barrel while profiting off the misery of the working class. In other ways, they are nothing you can imagine: many come from working-class families themselves. The progeny of Jewish, Irish, and Italian immigrants who escaped war-torn Europe, they take pride in flagrantly spurning Wall Street.

Under the thumb of an all-powerful international oil cartel, the energy market had long eluded the grasp of America’s hungry capitalists. Neither the oil royalty of Houston nor the titans of Wall Street had ever succeeded in fully wresting away control. But facing extinction, the rough-and-tumble traders of Nymex—led by the reluctant son of a producemerchant—went after this Goliath and won, creating the world’s first free oil market and minting billions in the process. Their stunning journey from poverty to prosperity belies the brutal and violent history that is their legacy.

For the first time, The Asylum unmasks the oil market’s self-described “inmates” in all their unscripted and dysfunctional glory: the happily married father from Long Island whose lust for money and power was exceeded only by his taste for cruel pranks; the Italian kung fu–fighting gasoline trader whose ferocity in the trading pits earned him countless millions; the cheerful Nazi hunter who traded quietly by day and ambushed Nazi sympathizers by night; and the Irish-born femme fatale who outsmarted all but one of the exchange’s chairmen—the Hungarian emigre who, try as he might, could do nothing to rein in the oil market’s unruly inhabitants.

From the treacherous boardroom schemes to the hookers and blow of the trading pits; from the repeat terrorist attacks and FBI stings to the grand alliances and outrageous fortunes that brought the global economy to the brink, The Asylum ventures deep into the belly of the beast, revealing how raw ambition and the endless quest for wealth can change the very nature of both man and market.

Showcasing seven years of research and hundreds of hours of interviews, Leah McGrath Goodman reveals what really happened behind the scenes as oil prices topped out and what choice the traders ultimately made when forced to choose between their longtime brotherhood and their precious oil monopoly.

Containment at its finest. You let these overgrown frat boys loose to drive up the price of oil for their investors but never let them know that was the intent. The frat boys think they’re allowed to get away with it, to pull the wool over the world’s eyes like they used to do when they date-raped naive women back in their college days. And those who allow the frat boys to pretend no one’s watching, well, that’s part of the plan. It’s called containment. The greedy, rapacious frat boys do what they do best without ever knowing anymore than that, and what (and who) the frat boys don’t know, reaps the whirlwind. Russia is one of those reapers. They’ve been reaping this ridiculously-priced oil whirlwind for too long now. It’s time to pull the plug. And if we pull the plug, Russia’s tyranny hits the skids….Big Time. It can’t sustain if you cut its GDP by three quarters overnight, and not to mention, we give a boost to our economies via cheaper fuel and lower prices overall…for everything. What’s not to like about this solution? It’s a Win-Win; one less tyranny to tackle and more prosperity absent the illegal oil tax.

Now, there are some who are going to squabble that Russia is more than a rentier state, but these are the no nuts intellectual bookworms who will tell you there is no such thing as grey hair…it’s only white juxtaposed with another color to give the illusion of grey. Whatever. It’s grey for all practical purposes, and Russia is a rentier state for all practical purposes. Take the rent away, you take the tyranny away. This KPMG study sums up the rentier nature of Russia sufficiently. Per the link:

Following a period of strong GDP growth in the early 2000s the Russian economy experienced a severe decline in
2009. Russia’s GDP contracted by 7.8% in that year, and
was the biggest GDP decrease of the G20 countries. The drastic drop in growth was primarily related to a sharp decrease in oil prices in 2009, heavily affecting the Russian economy, which is highly dependent on oil and gas exports. On top of this, the ruble came under selling pressure and the availability of bank loans declined.

You live by commodities, you die by commodities. It’s really quite simple, and yet instead of pulling this easy plug on Russia by controlling the price of oil to cost to extract plus a reasonable profit, the world allows for a massive wealth transfer from the poor to the rich and The West to Russia in the form of a hidden oil tax under the guise of the “free” market. There’s nothing “free” about this market setting of the price of oil. You have no say in it. It’s not a Democratic process, and in fact, you’re not even considered in the process. The message is “you’ll take whatever shit is handed to you and be grateful.” It should make your blood boil. Instead, your blood is running cold and thick with high fructose corn syrup. Put down the crack pipe and smell the bullshit proffered as roses. We’re being scammed and it’s time to say no more.

As we’ve seen in the previous thread, Putin and the Oligarchs are doing everything they can to create an image of Russia as a destination for capital investment rather than capital flight. years after the fall of the Soviet Union Russia saw its life expectancy drop in tandem with its overall population. For social demographers, this equals certain doom for a society. In the last several years, Russia has miraculously turned this trend around, at least according to their state statistics, and life expectancy is increasing significantly while the population is now projected to grow rather than shrink.

One of the reasons for this is the massive wealth transfer from the increasingly poor in the West via the artificially high price for oil and gas. Every dollar you pay in excess at the pump helps to further enrich the World Wide Oligarch Network (WWON) and that network includes Russia and its budding technocratic/professional middle class who’s purpose is to maintain the status and affairs of the Oligarchy. The sycophantic minions, if you will. This budding class now has some money to spend…thanks to your generous and heretofore unwitting donations at the pump and register. In fact, Russia is so flush with cash from exorbitantly and artificially priced oil and gas, Putin is paying young Russian families to have children and it’s not a pittance. So, your unwitting donations every time you make a purchase for anything are going to financially support and secure Russian families while you have to cut back on your own. Think about that for a second or a minute. You’re not going to have that extra child or you’re not going to be able to fund your child’s education because you’ve been forced to pay an illegal and criminal extortion tax for fuel, the proceeds of which go to making Oligarchs even wealthier than they already are and giving a budding Russian middle class a leg up as you’re on your way down. You should be furious. Mussolini’s bloody and battered head should be flashing before your eyes. How will justice ultimately be meted out for this blatant and sadistic exploitation? Only you can answer that. I don’t suggest the brutality that was visited upon Mussolini, but I understand the anger and frustration of those who did it.

Couple this transfer of wealth from artificially inflated oil and gas prices with what we’ve learned in the Follow The Money thread concerning feckless sanctions, Siemens vote of confidence and ongoing relationship with Russia and China’s long-term trillion dollar gas deal with Gazprom and, well, things just don’t add up. If you look at what they’re doing behind the scenes and out of the spotlight and tune out the words (the propaganda), it does add up and there is no longer a contradiction. Change your perspective. Update your memes. But it doesn’t just end with the aforementioned. There is even further corroboration of collusion and cooperation behind the scenes in plain site.

It does appear Russia is poised to take the entirety of Ukraine and despite the feigned chastising rhetoric of the Western political establishment, every action it’s taken thus far to counter Russia’s advances are instead actions to support Russia’s advances. Take this article from The Daily Beast as an example. Per the article:

Exclusive: U.S. Won’t Share Invasion Intel With Ukraine

American spies have spotted all the signs of an all-out Russian invasion of Ukraine. Why won’t they tell the Ukrainians about the forces on their border?

U.S. intelligence agencies now have detailed information that Russia has amassed the kind of forces needed for a full-scale invasion of Ukraine. But the Obama administration hasn’t shared with Ukraine the imagery, intercepts, and analysis that pinpont the location of the Russian troops ready to seize more Ukrainian land, The Daily Beast has learned.

President Obama has repeatedly and publicly expressed solidarity with the Ukrainian people—and warned Russian leader Vladimir Putin that there will be consequences if he takes over any more Ukrainian territory. Yet Obama’s administration has so far been reluctant to hand over the kind of intelligence the Ukrainians could use to defend themselves. U.S. officials and members of Congress briefed on the crisis in Ukraine tell The Daily Beast that senior U.S. military officers have been instructed to refrain from briefing their Ukrainian counterparts in detail about what the United States knows about the Russians troops amassing on the border.

More At Link
Bush’s Putin

The pic to the left is a painting by George W. Bush; it’s a hobby he’s picked up in retirement. Not bad…I especially like the use of lavender for the background. Nice touch. Hitler was a pretty decent artist, too, as is witnessed by the ambitious offering displayed below. Dubya is fond of Putin. Afterall, he said of the man, “I looked the man in the eye. I found him to be very straightforward and trustworthy and we had a very good dialogue. I was able to get a sense of his soul.” So Putin’s received the Bush Seal of Approval. That means something. And, George made certain Russia didn’t feel left out after it opted out of the invasion of Iraq when he allayed Russian fears by saying to Russia’s NTV television “we fully realize that Russia has economic interests in Iraq as do other countries. Of course these interests will be taken into account” per this link. In hindsight, he wasn’t lying, was he? Russia’s and China’s interests have certainly been taken into account. What are friends for, right?
Hitler’s Putin

As we know, there have been numerous conjectured reasons, aside from the official reasoning, for the invasion and subsequent occupation of Iraq, and one of the reasons was for control of the oil…to control China’s and Russia’s access. Really? If so, the mission was not accomplished, and in fact, I’d say the invasion was not to restrict Russia’s and China’s access, but to bolster their access…all at U.S. taxpayer expense. Once again, the U.S. taxpayer foots the bill to make Russia and now China flush with cash. Neither supported, and in fact protested, the invasion and yet they’re sharing nicely and undeservedly in the spoils, i.e. oil production contracts and in the case of Russia also weapons sales (crazy, I know…but it’s not if you change your perspective and update your memes). Here’s a McClatchyDC article that underscores China’s oil production potential in Iraq. Talk about lies, notice the blatant lying by Houser and Luft, and in fact, the entire article is misinformation because it doesn’t present any counter balance to the lies of Houser and Luft couched as opinion.

The contract terms the Iraqi government offers oil companies also aren’t attractive, said Trevor Houser, an energy specialist with the New York-based Rhodium Group consulting firm. China is expanding in Iraq because it needs the energy and it doesn’t have alternatives that are as good as those of Western oil companies, he said.

The most profitable places in the world to work as an oil company are the North American unconventional fields – such as shale deposits in the Eastern U.S. – and the deepwater fields in West Africa or the Gulf of Mexico, Houser said. China has limited opportunities in those places, he said, with the state-owned oil company PetroChina lacking the technological sophistication needed for deepwater production.

“The fact that (PetroChina) is expanding in Iraq is not to me a sign of their strength, it’s a sign of their relative weakness,” Houser said.

Birol, the chief economist at the International Energy Agency, said that nearly a third of the future oil production in Iraq was expected to come from fields that either were directly owned or co-led by Chinese companies.

Oil companies from the U.S. and other Western nations have been more interested in the Kurdistan region of Iraq, a largely autonomous area that doesn’t take orders from Baghdad. Kurdistan offers more stability and better contract terms to the international oil companies, to the fury of the Baghdad government, which is charged with handling international affairs and calls the contracts illegal.

Western oil companies generally have more attractive global investment opportunities than Iraq, said Luft, who’s an adviser to the U.S. Energy Security Council, a nonprofit group that works to lessen dependence on fossil fuels..

They also need to answer to their shareholders, and they see the world differently from the way state-owned Chinese companies do, he said.“The Chinese oil companies are more in tune with the geopolitical agenda of their government and respond less to shareholders,” Luft said. “If Exxon operates somewhere and has to close down operations for a month, that would have an impact on investors. When the Chinese go into one of those places and something bad happens, there is not the consequence in terms of stock.”

Luft said he didn’t see Chinese development of Iraq’s oil as a case of China enjoying the spoils of a war for which the U.S. had paid dearly both in lives and taxpayer dollars.

It’s a myth that U.S. energy security relies on Middle Eastern imports, he said. Oil from the region makes up just a small percentage of what America uses. The U.S. will benefit if China or anyone else can get Iraqi’s huge reserves developed and onto the market, he said. Since oil is a global commodity, he said, more oil on the market brings down prices.

“Energy security is about not only the availability of the resource but also about the cost,” Luft said. “Anything that brings down global oil prices is positive for U.S. energy security.”

Bullshit, Luft. Chinese and Russian development of Iraq’s oil fields is absolutely at the expense of Iraqi and U.S. lives and the U.S. taxpayer’s dime. And it was the plan all along. And yes, global security and prosperity is predicated upon inexpensive energy meaning lower prices for oil and gas. That was consistently emphasized in the article and it’s one of the few things that wasn’t disinformation but it was presented in such a way to imply that the price of oil and gas is determined by supply and demand, but as was discussed earlier, that is clearly not the case. As we’ve seen above, it’s not about supply and demand, nor is it about cost to produce and deliver. It’s about purposeful, and criminal in my opinion, gouging under the guise of “free” markets.

Another whopper of a lie from the above segment is the quote “the most profitable places in the world to work as an oil company are the North American unconventional fields – such as shale deposits in the Eastern U.S.” Sorry, but this is an outright lie. Don’t take my word for it, here’s what Bloomberg has to say about it:

Dream of U.S. Oil Independence Slams Against Shale Costs

The path toward U.S. energy independence, made possible by a boom in shale oil, will be much harder than it seems.

Just a few of the roadblocks: Independent producers will spend $1.50 drilling this year for every dollar they get back. Shale output drops faster than production from conventional methods. It will take 2,500 new wells a year just to sustain output of 1 million barrels a day in North Dakota’s Bakken shale, according to the Paris-based International Energy Agency. Iraq could do the same with 60.

“We are beginning to live in a different world where getting more oil takes more energy, more effort and will be more expensive,” said Tad Patzek, chairman of the Department of Petroleum and Geosystems Engineering at the University of Texas at Austin.

Companies are showing the strain. Chesapeake Energy Corp., the Oklahoma City-based company founded by Aubrey McClendon, reported profit yesterday that missed analysts’ forecasts by the widest margin in almost two years. Shares declined 4.9 percent. Fort Worth, Texas-based Range Resources Corp. fell 2.3 percent after announcing Feb. 25 that fourth-quarter profit dropped 47 percent. QEP Resources Inc., a Denver-based driller, slid 10 percent after fourth-quarter earnings reported Feb. 25 fell short of analysts’ predictions.

The U.S. oil industry must sprint simply to stay in place. U.S. drillers are expected to spend more than $2.8 trillion by 2035 even though production will peak a decade earlier, the IEA said. The Middle East will spend less than a third of that for three times more crude.

A prolonged slide in prices below $85 a barrel may put pressure on operators that have struggled to contain costs or that don’t own acreage in the prolific “sweet spots” of the oil fields, said Leonardo Maugeri, a former manager at Rome-based energy company Eni SpA who’s researching the geopolitics of energy at Harvard University’s Belfer Center for Science and International Affairs.

Even with crude prices above $100 a barrel, U.S. independent producers will spend $1.50 drilling this year for every dollar they get back from selling oil and gas and will carry debt that is twice as much as annual earnings, said Ryan Oatman, an energy analyst with SunTrust Robinson Humphrey Inc., an investment bank in Houston.

By contrast, the net debt of Exxon Mobil Corp., the world’s largest energy explorer by market value, is less than half of the cash earned from operations last year. The company will spend 68 cents for every dollar it gets back this year, according to company records and analyst forecasts compiled by Bloomberg.

So far, oil prices have been high enough to keep investors interested in the potential profits to be made in shale, Oatman said.

“There is a point at which investors become worried about debt levels and how that spending is going to be financed,” Oatman said. “How do you accelerate and drill without making investors worried about the balance sheet? That’s the key tension in this industry.”

How, Oatman asks? By keeping oil prices ridiculously high, that’s how. And that’s exactly what’s being done. This is a scam of the highest magnitude. You should be outraged. It makes no sense to spend more money and energy to get less than what you put into it. Yet that’s exactly what’s going on with the shale oil play and the only reason it continues is because of the artificially high price of oil. The strategy of tension Kabuki theater that is the Ukraine crisis provides certain cover for the high oil prices to continue indefinitely. american-oilAfterall, what are you going to do about it? Nothing. Most refuse to see it for what it is, and if they can’t or won’t, then there’s no chance of ever addressing the scam and prosecuting the scammers.

The invasion of Iraq was obviously not conducted for the stated official reasons, but neither was Iraq invaded for the alternative reason given by the so-called alternative media. The latter explanation is that the invasion of Iraq was an oil grab by the West, but as we’ve seen above, and I’ll further corroborate below, that hasn’t really transpired. Iraq’s production is still lagging. Yes, it’s starting to pick up some, but its potential is increasingly being contracted to China and Russia for production. So, what is the real reason for the invasion of Iraq? What I’ve been saying all along; it’s about raising and keeping the price of oil artificially high–an illegal, backdoor tax, if you will. Sherwood Ross of Global Research, per this link, agrees. Here’s what he has to say:

Saddam Hussein may have been deposed in order to limit Iraq’s oil production and thus keep world oil prices artificially high. This could be the real reason behind the invasion of Iraq by the Anglo-American forces and their allies.

According to Greg Palast’s new book, “Armed Madhouse”(Plume), “When OPEC raises the price of crude, Big Oil makes out big time.” Palast makes the point Iraq’s output in the 2003-05 period following the invasion saw a decline in oil production. In fact, it dropped to below the level of the 1995-2003 Oil-for-Food arrangement that allowed Iraq to sell two million barrels per day to raise cash for humanitarian purposes. “Whether by design or happenstance, this decline in (Iraqi) output has resulted in tripling the profits of the five U.S. oil majors to $89 billion for a single year, 2005, compared to pre-invasion 2002,” Palast writes.

He points out the oil majors are not simply passive resellers of OPEC production but have reserves of their own which rise in tandem with oil prices. “The rise in the price of oil after the first three years of the (Iraq) war boosted the value of the reserves of ExxonMobil Oil alone by just over $666-billion,” Palast wrote. What’s more, Chevron Oil, “where (Secretary of State) Condoleezza Rice had served as a director, gained a quarter trillion dollars in value.”

Another big winner in the Iraq war is Saudi Arabia. The war-stoked jump in oil prices, Palast writes, put $120 billion in Saudi Arabia’s treasury in 2004, triple its normal take.

Among the big losers have been American motorists, now paying about $3.30 for a gallon of gas. What’s more, the oil price spike has punished U.S. industry, costing America an estimated 1.2-million jobs. “Higher borrowing costs for business since the beginning of the Iraq war are bleeding manufacturing investment,” Palast adds.

Rising oil prices are an anomaly. The world’s petroleum reserves have doubled from 648 billion to !.2 trillion barrels in the past 25 years, Palast reports. According to free market laws of supply and demand, discovery of these immense new pools should cause prices to drop.

To further emphasize that the Iraq invasion was not an oil grab, there’s this article from IMED. Here’s what Julie Lenarz has to say on the matter:

Iraq: The “blood for oil” conspiracy is dead

When the US-led coalition invaded Iraq in 2003, one of the most common perceptions was that the primary motive behind the war was the country’s significant oil reserves.

UnbenanntAccording to a 2002 Pew Poll, 44 per cent British, 75 per cent French, 54 per cent Germans, and 76 per cent Russians were greatly suspicious of US intentions in Iraq and bought into the “blood for oil” narrative. On the contrary, only 22 per cent of Americans believed that the Bush administration’s policy was driven by oil interests.

At the time, experts pointed out that this argument was deeply flawed and a lazy mantra of the war opponents.

While Iraq has the second largest oil reserves in the world, its output in the early 2000s was modest and accounted for only 3 per cent of total global productivity. Due to the geology of the oilfields and, above all, the poor infrastructure destroyed by years of war, Saddam’s negligence, and the sanctions regime, Iraq had the lowest yield of any major producer, amounting to just 0.8 per cent of its potential output.

By the end of 2011, the US had spent almost $802bn on funding the war and, as the Centre for Strategic and International Studies pointed out, Iraq had additional debts of over $100 billion.

On top of that, the US only imports 12.9 per cent of its oil from the Middle East. The vast majority, 8.1 per cent, is provided by Saudi Arabia.

In other words, invading Iraq was an extremely expensive undertaking for the US-led coalition with no guarantee or prospect of considerable profitability.

As Daniel Yergin argued at the time: “no US administration would launch so momentous a campaign just to facilitate a handful of oil development contracts and a moderate increase in supply-half a decade from now.”

The “blood for oil” thesis, at best, represents a small proportion of the truth.

10 years after the invasion of Iraq, who is profiting most from the country’s oil reserves? The US? The UK? No. PetroChina, Russian Lukoil, and Pakistan Petroleum – fierce opponents of the war.

On the other hand, as Germany’s leading weekly news magazine DER SPIEGEL reported this week, “America has not a single, significant oil deal with Baghdad” anymore.

EXXON is moving out of Iraq and PetroChina has taken the lead in the auction of West Qurna – one of the largest oil fields in the world – with Russian Lukoil as a potential competitor. If the Chinese bid is successful, the country will account for 32 per cent of total oil contracts in Iraq.

The “blood for oil” conspiracists owe President Bush an apology.

I had to laugh out loud at the last sentence claiming the “conspiracists” owe Bush an apology. Not! They chose the wrong conspiracy…perhaps by design for those who created and disseminated the meme before allowing it to take on a life of its own. If so, what a great misdirection campaign. I’m not fooled. Follow The Money. Always.

But it’s not just oil production contracts that are being awarded to Russia in Iraq. It’s also weapons contracts. Yes, besides pubescent teenage girls and gas/oil, the next largest Russian export is weapons…the capacity for which was left over from the Cold War days. Per this Pravda article, Russia recently signed a major arms deal with Iraq. How convenient. A positive sign for a long and prosperous relationship.

Russia to sign $5-billion defense contract with Iraq

Russia may join the ranks of major importers of weapons to Iraq. During the visit of Iraqi Prime Minister al-Maliki’s, a contract for $5 billion may be signed for the sale of MiG fighter jets, products of Russian Helicopters, anti-aircraft missile systems, armored vehicles and other weapons to the Middle Eastern country.

f the deal goes through, Iraq will be among five largest importers of Russian arms. According to the newspaper, contracts will be signed for the supply of the products of the pro RAC “MiG”, “Helicopters of Russia, and “Tula “Instrument Design Bureau” in the amount of $4.3 billion dollars. It is assumed that Iraq would sell 30 Mi-28N combat vehicles and 42 anti-aircraft missile and gun complex “Shell-S1.” Additionally, there may be new contracts for the supply of MiG-29M/M2, radars, armored vehicles and other weapons.

Last year, Russia has retained the second place in the world in terms of arms exports, selling weapons abroad for 11.3 billion dollars. Most likely, this year the country will also remain in second place with a total export at $13.293 billion, or 19 percent of the world supply. The main volume of shipments accounted for a very small number of countries that have the potential to negatively affect the front-runner position of Russia in the global arms trade.

That’s a dated article, but the contract did get approved and Russia is now supplying weapons to Iraq per the contract. Sweet. Follow The Money. There’s plenty to be made…and lost depending on who you are. And don’t think the invasion of Iraq at U.S. taxpayer expense wasn’t highly profitable for a a bevy of defense contractors. war or the threat of it and a bloated defense budget, defense contractors have no reason for existence. As a lobbying group, they must make every effort to support a permanent strategy of tension, otherwise their revenue streams, profits and livelihoods disappear, and we can’t have that, can we?

Wait, there’s still more. There’s always more. Russia’s not only selling weapons to Iraq and many other countries including Venezuela, it’s also selling weapons to the U.S. Military. No, I’m not joking, but considering the feigned inflamed rhetoric towards Putin and Russia in the Western mainstream media, it doesn’t square that the U.S. Military would be in bed with Russia’s weapons manufacturers. But it is. If you consider the perspective I’ve presented in this post and update your memes, it makes perfect sense. The strategy of tension is just that, a strategy of tension to keep the price of oil high, military budgets bloated, you poorer and less prosperous and the World Wide Oligarch Network (WWON) wealthier and more powerful. Check this article out from Wired. Per the link:

Russian Firm Got No-Bid Pentagon Contract After Selling Arms to Iran

For two years, the United States regarded Rosoboronexport, Russia’s official weapons exporter, as an international pariah for selling arms to Iran and Syria. Then, in 2010, the U.S. suddenly lifted sanctions against it. By June of this year, the reversal was complete: the Pentagon awarded the company a no-bid contract worth upwards of $1 billion.

How exactly did the United States end up spending taxpayer dollars on Russian equipment with no competition?

The Russian deal may be a small part of the nearly $140 billion in no-bid contracts the Pentagon awarded last year, but it is also in some ways typical, according to an ongoing series by the Center for Public Integrity. If military operations in the early years of Iraq and Afghanistan justified the use of sole-sourcing contracting for support services, then the drawdown in Iraq and Afghanistan created a new justification for steering contracts to a single bidder: the need to quickly equip the military forces there so that the United States could eventually ship out.

This rush was the Pentagon’s stated justification for sole-source procurements for a host of weapons and equipment, particularly for what’s called “non-standard” equipment — in this case, Russian helicopters. The local military forces that the U.S. built in Iraq and Afghanistan were more familiar with Russian equipment than with U.S. gear, the argument went. Even in Afghanistan, a country which fought off a Soviet occupation in the 1980s, U.S. officials argued that the Northern Alliance and Afghan pilots were used to flying Russian helicopters, which are regarded as rugged and reliable.

Today, U.S. contracts for Russian equipment, used primarily to buy Russian-built Mi-17 helicopters for Iraq, Afghanistan and Pakistan, have topped $1 billion. They’ve almost all been sole-source or non-competitive contracts given to a variety of middle men companies. Rosoboronexport included.

To reiterate and underscore the title and sentiment of this post, let’s Call The Bluff. I want to see the U.S. as proxy for the West take control of the price of oil and develop a policy that prices oil at cost to extract plus a 10% profit margin for good measure. Those production costs will not include shale or tar sands oil in the averaging estimation. Russia should be pronounced an enemy and brought to heel via non-violent means and that doesn’t mean feckless, empty sanctions. Greatly reducing Russia’s GDP via lower oil prices will hinder its reported recent so-called expansionist proclivity. countries trading with the enemy will be targeted as complicit and trade with those countries will be curtailed. For example, if China continues to thumb its nose at the West in solidarity with Russia, it must be made to pay the price. Without the West, China’s GDP falls precipitously. The West is responsible for the majority of China’s exports and by virtue of that, the majority of its production and GDP. Take that away and Russia and China will be at each others throats in no time. In fact, they’d annihilate each other in less than a decade.

The above are just a couple of examples of what could be done if the tension were REAL. But it’s not real, and none of the things I mentioned would ever be done because it’s a false perspective. The Oligarchs residing in Russia, China, India, Pakistan, Egypt, Israel, the Middle East and the West (the WWON or World Wide Oligarch Network) are partners in crime…against humanity. They work together but paint a false image of tension and crisis. Look over there, not here. And most do look over there and never see the curtain let alone peek behind it.

That photo above comes from a link provided by the screen name FincalnTheMountains accompanied by this post at Kunstler’s Clusterfuck Nation blog:

According to some Russian Internet resources, the “Russian” troops without insignia that initially occupied Crimea were members of Russian Private Army, sort of “Russian Blackwater”. So Putin had a plausible deniability when he maintained that those were NOT Russian military.

Also some of the mercenaries that liberated Crimea were American Nationals, hired by that Private Army. On that photo we could see one of the mercenaries with far from Slavic face.

Joke’s on Putin

If this claim has any verity, then I don’t think it’s joke on Putin; it’s joke on all those who buy into the strategy of tension. You’re being taken for fools. American mercenaries working side by side with Putin and Russia in annexing Crimea. If true, it’s as insidious as it gets. Nobody would lay claim to these mercenary soldiers. Everyone denied it; Ukraine, Putin and the West. Unbelievable, I know. Maybe there’s a plausible explanation for this, but one hasn’t been provided. If you apply the assertions and sentiments of this post, it’s not so unbelievable.


13 thoughts on “Call The Bluff

  1. American mercenaries working side by side with Putin and Russia in annexing Crimea. If true, it’s as insidious as it gets. – Carol

    Why all this contempt for mercenaries? Must they truly believe in the cause for which they are fighting? Haven’t men fought for a weekly paycheck since time immemorial?

    • Men have fought since time immemorial for any number of reasons–a subject that deserves it own blog post analysis. Oftentimes, some form of remuneration is provided but it’s not necessarily the motivation for soldiering, although it can be. It certainly is with mercenaries. They’re generally compensated generously. The Common Man should loathe the mercenary…nay everyone should loathe the mercenary. Machiavelli makes it quite clear per this link:

      How Many Kinds Of Soldiery There Are, And Concerning Mercenaries

      I say, therefore, that the arms with which a prince defends his state are either his own, or they are mercenaries, auxiliaries, or mixed. Mercenaries and auxiliaries are useless and dangerous; and if one holds his state based on these arms, he will stand neither firm nor safe; for they are disunited, ambitious and without discipline, unfaithful, valiant before friends, cowardly before enemies; they have neither the fear of God nor fidelity to men, and destruction is deferred only so long as the attack is; for in peace one is robbed by them, and in war by the enemy. The fact is, they have no other attraction or reason for keeping the field than a trifle of stipend, which is not sufficient to make them willing to die for you. They are ready enough to be your soldiers whilst you do not make war, but if war comes they take themselves off or run from the foe; which I should have little trouble to prove, for the ruin of Italy has been caused by nothing else than by resting all her hopes for many years on mercenaries, and although they formerly made some display and appeared valiant amongst themselves, yet when the foreigners came they showed what they were. Thus it was that Charles, King of France, was allowed to seize Italy with chalk in hand; 1 and he who told us that our sins were the cause of it told the truth, but they were not the sins he imagined, but those which I have related. And as they were the sins of princes, it is the princes who have also suffered the penalty.

      I wish to demonstrate further the infelicity of these arms. The mercenary captains are either capable men or they are not; if they are, you cannot trust them, because they always aspire to their own greatness, either by oppressing you, who are their master, or others contrary to your intentions; but if the captain is not skilful, you are ruined in the usual way.

      • Excellent and thorough repost to my brief comment. It almost goes without saying that the true patriot is going to be a better soldier than the guy in it for the buck.

        Oddly Machiavelli doesn’t address the simple fact that it has (nearly) always been necessary for armies to hire mercenaries because there just aren’t enough true patriots available to win wars. And then there’s the issue of conscription. The country that employs mercenaries has to rank higher morally than the country that acquires its troops via enslavement.

        Even many of those soldiers we might think of as true patriots actually found their way into the military for a host of reasons that are either lame, mundane, or none too admirable: employment vs unemployment, family tradition, the attraction of a spiffy uniform, military ceremony, the camaraderie of the barracks, join the Navy and see the world (join the Coast Guard and see the coast), perceived glory, or a plain old love of violence.

        Let’s face it, war is a nasty business.

  2. Russia is an oligarchial “tyranny”– yet you concede Putin has used the proceeds to help fuel the burgeoning Russian middle class. Game-set-match..conceding the other parts of your argument, which should not be conceded…you’re a Russophobe and an apologist for American Empire.

    You also get Iraq wrong. Russia and China and of course Iran are benefitting because the neocon Amer-Israel combine LOST. The various wings of the Iraqi insurgency proved too stalwart and the US public grew war-weary. Sistani, who refused to meet with US representatives suring the entire occupation, vetoed Bush’s attempt to usher in a puppet state via a narrowly manipulated election with US/Israeli approved candidates. It was all she wrote,except the phony surge’s failure by its own criteria…reconciling Shia and Sunni
    and truly squashing all wings of insurgency. Never came close on either goal, just reduced the violence enough to leave like a losing football team which had narrowed the
    margin from 40-7 to 40-14.

    Of course the Amer-Israel imperialist combine never throws in the towel and now is
    fueling anti-Russian, anti-Assad/Hezbollah, anti-Iran actions from the Ukraine to Tehran.
    You’re helping. Could be you’re a more plausible albeit unimportant conspirator than the Iraq war for Oil alone worldwide oligarchy and certainly not Israel conspiracy theory.

  3. A couple of pages up from this reply is a cartoon that depicts a cliché cigar-smoking fat-cat trotting along with his ill-gotten profits stuffed in a suitcase. Having spent 26 years of my 45 year career working for a very large defense contractor in the financial/numbers end of the business, I am invariably offended by this universally accepted misperception. I will not go into a long winded defense of the defense business — I tried that on CFN a few years ago to howls of derision — HOWEVER, it came to my attention just yesterday in this article

    that not one of the top 20 US companies based on after tax profits is a defense contractor. You will not find Lockheed Martin, Boeing, General Dynamics et al anywhere on the list. The biggest of the big are into oil, electronic widgets, banking, drugs, soda and cigarettes. Kind of counter intuitive, no?

    • I am invariably offended by this universally accepted misperception.

      Thankfully you’re not variably offended by it. That would be inconsistent. Seriously though, you shouldn’t be so offended. If the “very large defense contractor” you worked for had any business sense, its shareholders would have moved their capital to an organization that provided a greater return. Why would they keep any capital in an obvious loser when they could earn so much more return elsewhere? Risk/Reward, perhaps? Defense stocks are less risky; in a system of permanent war, or the permanent threat of war, there will “invariably” be bloated defense budgets and therefore there will “invariably” be profit to be made supplying the military. And remember, it’s not only defense contractors who profit off a permanent threat of war mentality. As I’ve asserted in this blog post, the threat of permanent war in the 21st century is used to justify and rationalize the artificially high price of oil, not supply and demand. Huge profits for those who have the capital to invest in it and realize the prodigious returns on investments.

      All that being said, defense contractors alone are still making significant profits when you include them in their entirety. Here’s a list of just the top ten. This isn’t small potatoes. And of course, this says nothing about the ethics and morality of profiting from the permanent threat of war and manipulating the system so that threat is ever-present in perpetuity. Per the link:

      Defense contractors are the companies that supply firearms and other weapons to the government. From fighter jets to handguns, these corporations fuel the world’s desire for destruction. In the last fiscal year, the United States government spent over $300 billion on defense contracts. This makes for an extremely profitable business model for weapons manufacturers, though many around the world are dismayed by the enormous amount of money the U.S. spends on death and destruction.

      Not only do these companies supply the physical weapons that soldiers use in combat, they also can offer logistics management, private security forces, intelligence operations, and even ships and airplanes. In fact, since the beginning of the war in the Middle East, private security forces are almost at a 1-1 ratio with government military forces. This causes many to question the ethics of governments employing these mercenaries, due to the fact that these corporations have histories of killing civilians and going overboard in detaining enemy combatants. Many around the world do not approve of governments hiring militias to do their dirty work, but it is something that people will probably just have to get accustomed to. There’s too much money to be made in war. Here are the world’s top- ten defense contractors, sorted by total yearly sales.

      The following link takes the feckless and feigned OWS movement to task for not properly addressing war profiteering. OWS was obssessed with mainly the bankers and high finance. That’s curious and telling if you ask me. The military budget and those who profit from it are The Untouchables even to a movement who’s focus is on the increasing disparity of wealth. A snippet from the link:

      While the Occupy Wall Street movement seems to be focusing mostly on the banking interests that have run our economy into the ground while raking in staggering profits, there remains a sub-set of the 1% that needs to be identified and exposed.

      This sub-set is the 0.01%, the executives that take in astounding sums of money, leverage tens of millions in lobbying money to control our so-called representatives all to the detriment of the American people, the American economy, and the world at large.

      They profit at the expense of the American taxpayer, off the lives of American soldiers, and from death and destruction around the globe.

      These are not entrepreneurs who struck it rich giving us a product or service that we need, they are getting rich while manipulating the American political system and the fear of the American people while perpetuating endless, unnecessary and unethical wars.

      Now let’s take a look at what top CEOs in the defense contracting industry were paid last year.

      CEO of Northrop Grumman, Wesley Bush, made $22.84 million. CEO of Lockheed Martin, Robert Stevens, made $21.89 million and Boeing’s CEO James McNerney made $19.74 million.

      These figures put military contractor executives deep in 0.01% territory, seeing as one must make $9.14 million annually to fall in this ultra-elite strata, according to an article published on the liberal website AlterNet.

      The war profiteers that make up the 0.01% of earners in the United States are not simply bad because they make far more money than anyone else. This is the type of skewed logics that so-called conservatives regularly use in order to justify claims of class warfare.

      Let me be clear: there is nothing wrong with making money, and there is nothing wrong with making lots of money.

      However, if you’re buying off politicians, putting Americans in the line of fire while destroying foreign nations, robbing taxpayers blind and killing jobs in order to get rich I take issue.

      To make matters worse, the Pentagon paid $270 billion from 2007 to 2009 to 91 military contractors that were also involved in civil fraud cases resulting of judgments more than $1 million.

      During the same period, $682 million was paid out to 30 contractors convicted of “hard-core criminal fraud”.

      Military contractors regularly defraud the Department of Defense, and thus the American taxpayer, yet they continue to operate with impunity while taking in nearly unfathomable profits on our dime.

      The war profiteering industry trumps the financial sector when it comes to the millions pumped into Washington in lobbying dollars as well.

      In 2010 Boeing spent an astounding $17.89 million in lobbying efforts while Northrop Grumman spent $15.7 million and Lockheed Martin spent $12.7 million.

      Contrast that with to some of the major players in finance: JP Morgan Chase spent $7.41 million in 2010 while Wells Fargo spent $5.43 million and Bank of America spent $3.98 million.

      None of these numbers should be acceptable but it is clear that the war profiteering industry is putting disturbing amounts of cash into Washington in order to influence public policy, which they do remarkably well.

      If we want to really get our nation – and the world at large – back on track we must not only set our sights on the corrupt, criminal banking industry and the private Federal Reserve but also the equally corrupt and criminal war profiteering industry.

      I think the “cliché cigar-smoking fat-cat trotting along with his ill-gotten profits stuffed in a suitcase” characterization is fitting. I was going to use this cartoon but it didn’t pack enough punch.

      This business of permanent war, or the threat of permanent war, or what I’ve referred to in this blog post as a perpetual strategy of tension is business. It’s the world’s economy, not just the U.S. America takes the beating for military spending, but as has been pointed out poignantly in this blog post, America is merely the military might for the WWON–World Wide Oligarchy Network. Oligarchs the world over reap the whirlwind of a perpetual world war economy. This article from Global Research provides a satisfactory analysis of the perpetual war economy. My chief criticism of the article is that it engages American Exceptionalism…from the so-called “Left” perspective. The Global Oligarchy’s loyalty and allegiance to increasing wealth disparity and concentration transcends the notion of Nation-States; it has no borders and will not be contained. I think this predicament is so thoroughly entrenched, it’s intractable. 9.9 people, or more, out of 10 refuse to see it from this perspective, and if they’re not even willing to do that, certainly nothing could ever be done about it. It will continue until it exhausts itself…and that will be well into the future when you and I have long since taken our last breath. A taste from the link:

      During the Second World War, the wealthy owners and top managers of the big corporations learned a very important lesson: during a war there is money to be made, lots of money. In other words, the arduous task of maximizing profits – the key activity within the capitalist American economy – can be absolved much more efficiently through war than through peace; however, the benevolent cooperation of the state is required. Ever since the Second World War, the rich and powerful of America have remained keenly conscious of this. So is their man in the White House today [2003, i.e. George W. Bush], the scion of a “money dynasty” who was parachuted into the White House in order to promote the interests of his wealthy family members, friends, and associates in corporate America, the interests of money, privilege, and power.

      In the spring of 1945 it was obvious that the war, fountainhead of fabulous profits, would soon be over. What would happen then? Among the economists, many Cassandras conjured up scenarios that loomed extremely unpleasant for America’s political and industrial leaders. During the war, Washington’s purchases of military equipment, and nothing else, had restored the economic demand and thus made possible not only full employment but also unprecedented profits. With the return of peace, the ghost of disharmony between supply and demand threatened to return to haunt America again, and the resulting crisis might well be even more acute than the Great Depression of the “dirty thirties,” because during the war years the productive capacity of the nation had increased considerably, as we have seen. Workers would have to be laid off precisely at the moment when millions of war veterans would come home looking for a civilian job, and the resulting unemployment and decline in purchasing power would aggravate the demand deficit. Seen from the perspective of America’s rich and powerful, the coming unemployment was not a problem; what did matter was that the golden age of gargantuan profits would come to an end. Such a catastrophe had to be prevented, but how?

      Military state expenditures were the source of high profits. In order to keep the profits gushing forth generously, new enemies and new war threats were urgently needed now that Germany and Japan were defeated. How fortunate that the Soviet Union existed, a country which during the war had been a particularly useful partner who had pulled the chestnuts out of the fire for the Allies in Stalingrad and elsewhere, but also a partner whose communist ideas and practices allowed it to be easily transformed into the new bogeyman of the United States. Most American historians now admit that in 1945 the Soviet Union, a country that had suffered enormously during the war, did not constitute a threat at all to the economically and militarily far superior USA, and that Washington itself did not perceive the Soviets as a threat. These historians also acknowledge that Moscow was very keen to work closely together with Washington in the postwar era.

      Indeed, Moscow had nothing to gain, and everything to lose, from a conflict with superpower America, which was brimming with confidence thanks to its monopoly of the atom bomb. However, America – corporate America, the America of the super-rich – urgently needed a new enemy in order to justify the titanic expenditures for “defense” which were needed to keep the wheels of the nation’s economy spinning at full speed also after the end of the war, thus keeping profit margins at the required – or rather, desired – high levels, or even to increase them. It is for this reason that the Cold War was unleashed in 1945, not by the Soviets but by the American “military-industrial” complex, as President Eisenhower would call that elite of wealthy individuals and corporations that knew how to profit from the “warfare economy.”

      In this respect, the Cold War exceeded their fondest expectations. More and more martial equipment had to be cranked out, because the allies within the so-called “free world”, which actually included plenty of nasty dictatorships, had to be armed to the teeth with US equipment. In addition, America’s own armed forces never ceased demanding bigger, better, and more sophisticated tanks, planes, rockets, and, yes, chemical and bacteriological weapons and other weapons of mass destruction. For these goods, the Pentagon was always ready to pay huge sums without asking difficult questions. As had been the case during the Second World War, it was again primarily the large corporations who were allowed to fill the orders. The Cold War generated unprecedented profits, and they flowed into the coffers of those extremely wealthy individuals who happened to be the owners, top managers, and/or major shareholders of these corporations. (Does it come as a surprise that in the United States newly retired Pentagon generals are routinely offered jobs as consultants by large corporations involved in military production, and that businessmen linked with those corporations are regularly appointed as high-ranking officials of the Department of Defense, as advisors of the President, etc.?)

      During the Cold War too, the American state financed its skyrocketing military expenditures by means of loans, and this caused the public debt to rise to dizzying heights. In 1945 the public debt stood at “only” 258 billion dollar, but in 1990 – when the Cold War ground to an end – it amounted to no less than 3.2 trillion dollar! This was a stupendous increase, also when one takes the inflation rate into account, and it caused the American state to become the world’s greatest debtor. (Incidentally, in July 2002 the American public debt had reached 6.1 trillion dollar.) Washington could and should have covered the cost of the Cold War by taxing the huge profits achieved by the corporations involved in the armament orgy, but there was never any question of such a thing. In 1945, when the Second World War come to an end and the Cold War picked up the slack, corporations still paid 50 per cent of all taxes, but during the course of the Cold War this share shrunk consistently, and today it only amounts to approximately 1 per cent.

      This was possible because the nation’s big corporations largely determine what the government in Washington may or may not do, also in the field of fiscal policy. In addition, lowering the tax burden of corporations was made easier because after the Second World War these corporations transformed themselves into multinationals, “at home everywhere and nowhere,” as an American author has written in connection with ITT, and therefore find it easy to avoid paying meaningful taxes anywhere. Stateside, where they pocket the biggest profits, 37 per cent of all American multinationals – and more than 70 per cent of all foreign multinationals – paid not a single dollar of taxes in 1991, while the remaining multinationals remitted less than 1 per cent of their profits in taxes.

      The sky-high costs of the Cold War were thus not borne by those who profited from it and who, incidentally, also continued to pocket the lion’s share of the dividends paid on government bonds, but by the American workers and the American middle class. These low- and middle-income Americans did not receive a penny from the profits yielded so profusely by the Cold War, but they did receive their share of the enormous public debt for which that conflict was largely responsible. It is they, therefore, who were really saddled with the costs of the Cold War, and it is they who continue to pay with their taxes for a disproportionate share of the burden of the public debt.

      In other words, while the profits generated by the Cold War were privatized to the advantage of an extremely wealthy elite, its costs were ruthlessly socialized to the great detriment of all other Americans. During the Cold War, the American economy degenerated into a gigantic swindle, into a perverse redistribution of the nation’s wealth to the advantage of the rich and to the disadvantage not only of the poor and of the working class but also of the middle class, whose members tend to subscribe to the myth that the American capitalist system serves their interests. Indeed, while the wealthy and powerful of America accumulated ever-greater riches, the prosperity achieved by many other Americans during the Second World War was gradually eroded, and the general standard of living declined slowly but steadily.

      More At Link

      I hope you haven’t been invariably offended by this reply.

  4. “In fact, Russia is so flush with cash from exorbitantly and artificially priced oil and gas, Putin is paying young Russian families to have children and it’s not a pittance. So, your unwitting donations every time you make a purchase for anything are going to financially support and secure Russian families while you have to cut back on your own. Think about that for a second or a minute. You’re not going to have that extra child or you’re not going to be able to fund your child’s education because you’ve been forced to pay an illegal and criminal extortion tax for fuel, the proceeds of which go to making Oligarchs even wealthier than they already are and giving a budding Russian middle class a leg up as you’re on your way down.”

    Actually, what you’re missing is the North Sea.

    Maggie and her successors developed the North Sea oil fields at warp speed, and when the Brits reached peak exports in 1999, they were selling it at $10/bbl.

    Good times.

    The UK went from peak exports in 1999 to net imports in 2004, and the continued production decline there mirrored the 2003-2008 price rise.

    They now import at $100+/bbl.

    Pretty stupid of ’em, to exploit the resource so fast, cuz now they’re screwed, heavily screwed.

    • I’m not sure what you mean when you say “what you’re missing is the North Sea.” I concede that sources of oil tap out. I understand supply and demand. The example you provided with Britain and the North Sea is minor in comparison to the whole. I don’t think it’s the microcosm serving as an example for the macrocosm. Also, as I’ve shown in this post with a damning link, the price of oil is being set artificially high by a select group of insiders in the pits at Nymex. It has nothing to do with supply and demand. There’s plenty more proof where the link in the post came from. Let’s try this one on for size. I don’t agree with Greenberger and the author that it’s speculation. Speculation implies risk. There really is no risk for these overgrown frat boys driving up the price. In the absence of that risk, it’s effectively setting the price…and the price is being set ridiculously high for the reasons I’ve stated in this post. Putin has some kind of nerve. The Small People the world over, including America, are making him and his fellow Oligarchs wealthy and instead of saying thank you, he spits in our faces. How ungrateful.

      Financial speculators are gambling on oil the same way they gambled on the housing market a few years ago — a frightening prospect for the fragile economy, a Democratic congressional committee was told Wednesday.

      “It is similar to the gambling Wall Street did on whether or not people would pay their subprime (below-market rate) mortgages in the mortgage meltdown,” said Michael Greenberger, a law professor at the University of Maryland and a former federal regulator of financial markets. “Now they are betting on the upward direction of the price of oil.”

      The housing industry collapse helped trigger the deep recession that began in late 2007 and whose effects are still felt today.

      The economy is slowly recovering, Greenberger said, but it could come to a halt unless oil prices come down. Gene Guilford, president of the Independent Connecticut Petroleum Association, told lawmakers that the recent oil price run-up has cost consumers an additional $10 billion a month since mid-December.

      The House of Representatives’ Democratic Steering and Policy Committee, which consists of party leaders, called the hearing to spotlight Democratic efforts to promote lower oil and gasoline prices. No Republicans were present.

      Today’s routine $4-and-higher prices for a gallon of gasoline have nothing to do with conventional supply-and-demand forces, Greenberger said. He formerly directed regulation of market trading in futures contracts and derivatives for the Commodities Futures Trading Commission.

      “It is excessive speculation, which is a fancy word for saying that gamblers wearing Wall Street suits have taken these markets over,” he said.

      Financial speculators such as investment banks and hedge funds account for at least 65 percent of purchases of contracts for future oil deliveries, more than twice their traditional share, while buyers who intend to actually take delivery of the oil and use it, such as airlines, make up only about one-third of demand. The speculators bid up contract prices, sending oil and gasoline prices higher and reaping them huge profits. The bidding is stoked by fear of possible violence in oil-producing countries, notably Iran.

      Congress has tried to pressure the Commodity Futures Trading Commission to put limits on how many contracts anyone can buy, but financial interests have stymied CFTC efforts in federal court.

      Greenberger suggested several remedies, including a strong Justice Department probe. He said the threat of a serious investigation can be enough to intimidate speculators.

      “If there is a real investigation, just the appearance of it will cause these cockroaches to scatter,” he said, “because the light will be turned on.”

      The Energy Information Administration said Wednesday that U.S. crude oil inventories “are above the upper limit of the average range for this time of year.” Total motor gasoline inventories also remain in the upper limit of the average range. Both were as of March 30. That means supplies are plentiful; there’s no shortage pressure driving prices up.

      The EIA, the statistical arm of the Energy Department, also said that total products supplied over the last four-week period have averaged about 18.2 million barrels per day, down by 4.7 percent compared with the similar period last year. Similarly, over the last four weeks, motor gasoline product supplied has averaged nearly 8.6 million barrels per day, down by 3.8 percent from the same period last year.

      That inventories are up and products supplied are down suggests that producers are stockpiling supplies on concern that prices could go even higher, when they could earn a premium, even as demand for oil and its derivative products such as gasoline is actually down. Inventories are often built up ahead of the summer driving season.

      The benchmark U.S. oil price fell Wednesday to $101.47 in New York, its lowest level since mid-February, but still well above where analysts believe it should be with supplies up and demand down.

    • I agree, but once again, the price doesn’t reflect any of that. It should in the sense the price should be based on cost to extract plus a reasonable profit for a resource so vital to the world economy but it’s not. That cost to extract should not include tar sands and shale oil. Both processes are cost prohibitive and the only reason investment in it has gone forward is because of the artificially high price. Otherwise, investors never would have considered it.

      All this is neither here nor there. As I mentioned in my deleted comment at Clusterfuck Nation, all this talk is cheap (unlike oil – haha) and amounts to not much more than spitting into a strong headwind. I suppose when Jimma said “everything we do and say rings hollow now” he meant for the “we” part to apply to everyone else but him. I call this Kunstler Exceptionalism. His vain attempts to salvage the value of gold are desperate and obvious.

  5. Umm, without tar sands & shale, we’d have had trouble growing global oil production much at all. Throw in growing ChIndia demand, and you’d really have astronomical oil prices without unconventional oil.

    Oh, and Putin gets paid by Urals Blend, which is based on Brent. US costs are driven by WTI, and the two ain’t the same.

    • Umm, without tar sands & shale, we’d have had trouble growing global oil production much at all.

      One day perhaps, but I don’t believe that day is yet, or even close. If my formula was applied to the different sources of oil rather than to just one bucket of costs lumped together for all sources, then sand & shale couldn’t compete and it would never have been attempted. It would have had to wait until the price rose per my formula to cover the costs. One day it will be viable per a cost + reasonable profit perspective, but from an EROI perspective, it doesn’t make sense. With 5.5 to 1 for sand and 1.5 to 1 for shale, they’re losing propositions. The only way this is happening currently is by artificially high prices, but even when you apply my formula and it lowers prices dramatically for now, eventually those prices will rise to this level again and surpass it. At what price does it all fall down? What’s the breaking point? I believe there is one, so it’d be interesting to see an analysis, I’m sure someone’s done one somewhere, that analyzes this sensitivity.

      As it stands now, regardless of the blend, the price is determined in the same way as mentioned in this post. The blends are obviously unique hence the different categories and their respective costs to extract are unique, so yeah, “the two ain’t the same,” but their respective prices are determined using the same bidding up method.

      Applying my formula, Ural blend gets priced at a fraction of what it’s selling for now, and Putin’s wallet gets a lot lighter overnight and his hubris and ego deflate accordingly.

      • “At what price does it all fall down? What’s the breaking point? I believe there is one, so it’d be interesting to see an analysis, ”

        I think we saw it in 2008.

        Global demand is still growing. Its the OECD that’s seeing consumption decline. Without the production from what you correctly point out as very marginal sources, we’d have seen no production growth since around 2005.

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