The State of Affairs in Russia

[Admiral Yi]

Does Germany pay in advance?

Not as far as I know.

[Jacob]

Yeah, while Germany doesn't want to be without natural gas I expect that Russia isn't super keen on cutting a massive stream of hard currency either.

[Sheilbh]

Yeah, while Germany doesn't want to be without natural gas I expect that Russia isn't super keen on cutting a massive stream of hard currency either.

Yeah but Russia has I think the third largest foreign currency reserves in the world after China and Japan. That's why Putin has freedom of movement on foreign policy (and it's been a clear strategic decision of Putin's to build up reserves) - so far the reserves are large enough to help withstand sanctions and also, as necessary, to occasionally prop up the ruble. Similarly there's also been a push (unlike in other east European countries or Turkey) to move foreign-currency denominated debt into rubles which I think has worked.

There's no doubt they want their stream of hard currency - but Putin's positioned things so the state doesn't necessarily need to for a while, unlike most other petro-states that don't build up huge reserves and are often quite exposed. And obviously Russia and China have just agreed a new gas deal which will involve another new pipeline. Again it suggests to me Putin's looking for an approach that allows for maximum flexibility in his policy (i.e. it's easy to turn off the taps on Europe if you have the infrastructure to export a lot more to China).

More generally it may be that economically Russia is also pivoting to China - which could leave Europe in a really difficult position if the US is, from a policy and security perspective, more focused on the Pacific and simultaneously Russia is less economically exposed to Europe.

[Jacob]

I'm no expert, but my feeling is that foreign currency reserves can disappear very quickly if you're not careful. But yes, Putin has some room to manoeuvre. Turning off the pipeline for a bit would be sustainable for a bit, but what if Germany for some reason doesn't cave immediately?

[Sheilbh]

I think that's where the increasing the number of pipelines to China and expanding that market plays a role - and is a big thing Russia and China are doing right now. There's lots of pipelines being built (which will also cut out a lot central Asian countries from a pretty big revenue source). My understanding is that trade is also going to be in Euros or dollars.

Obviously you're right on the reserves but Russia's had huge foreign reserves since 2008 (though it started climbing as soon as Putin came into power), they were able to weather sanctions of Georgia and 2014 and are now back to a very large figure. I think it's the three sides of Russian policy - build up foreign reserves to reduce your exposure to sanctions; build alternative pipelines to China to reduce economic dependence/reliance on Europe; and discourage Europe from looking for alternatives to Russian gas to maintain or increase their energy dependence/reliance.

From a Chinese perspective I also wonder if they're thinking that the more they can offer an alternative market to Russia and so de-risk Russia pushing aggressively in Europe blowing up their economy, that's a counter to the US. The US wants to pivot to the Pacific and pull back from Europe. But if the Chinese build that other market for Russia then unless European policymakers get their act together on European defence and security then, just when the US is out we'll pull them back in - which ties them down dealing with Russia in Europe and not China in the Pacific.

[Jacob]

Yeah, that makes sense.

I see that Xi and Putin made statements about "NATO aggression" and "no independence for Taiwan" today. So yeah, if Russia can sell their gas to China instead, that can work out for them.

Would make sense to me for Germany to move away from Russian gas, but you know....

[Sheilbh]

Well on that front Gerhard Schroeder was announced as a director of Gazprom today - which if nothing else shows a spectacular sense of timing

[Jacob]

... right after Putin kicks DW out of Russia and basically salts the earth on them.

[Sheilbh]

I wonder how he's perceived in Germany? If he still has the whole "respected former Chancellor" vibe or if this stuff really tarnishes his reputation with most people?

[Admiral Yi]

I was wondering the same thing.  I can't see that history will treat Schroeder well.

[Zanza]

I wonder how he's perceived in Germany? If he still has the whole "respected former Chancellor" vibe or if this stuff really tarnishes his reputation with most people?

He is seen as a dipshit and Putin stooge.

[Zanza]

I'm no expert, but my feeling is that foreign currency reserves can disappear very quickly if you're not careful. But yes, Putin has some room to manoeuvre. Turning off the pipeline for a bit would be sustainable for a bit, but what if Germany for some reason doesn't cave immediately?

Not sure why Germany is always singled out regarding gas when half the EU is similarly exposed to Russian gas. Would all of these countries cave or is there something specific about German gas consumption that does not exist in the other countries?

[Zanza]

I was wondering the same thing.  I can't see that history will treat Schroeder well.

His chancellorship has a few positives, e.g. on foreign policy joining the Kosovo War and not joining the Iraq War and domestically breaking with some of Germany's extreme conservative societal policies and his labor market and social security reforms of the early 2000s, although the latter are not popular with his own party anymore. Of course his activities after politics, not just his Russia lobbyism, are tarnishing whatever achievement he has.

[Jacob]

Not sure why Germany is always singled out regarding gas when half the EU is similarly exposed to Russian gas. Would all 9f these countries case or is there something specific about German gas consumption that does not exist in the other countries?

Fair point.

I think it's because Germany is seen as being able to pull the other countries along with it, and to change the direction of EU policy towards Russia, more so than the other countries involved.

But maybe it's unfair, I don't know.

I do think that if Germany said "we are putting political will and money towards a project of lessening our dependence on Russian gas", I think it would change the political calculus significantly more than if any of the other countries on the map did so. But if I was the government of any of the other countries, I would consider orienting my energy policy to lessen the dependence on Russian gas. Who knows when Putin will decide to turn of the gas?

[Jacob]

On the Xi - Putin bromance... I saw a thing recently that noted that China still hasn't recognized the Russian annexation of Crimea