U.S. is in the Hands of Putin

The U.S., like it or not, irrespective of whether one is rich or poor, dumb as a bag of hammers or razor sharp, is in the hands of the Oil exporters. Particularly Saudi Arabia and Russia. Especially Russia.

I have my doubts about what is being reported is what is really going on inside of Ukraine. Dmitri Orlov's analysis has merit, but ultimately, and at this moment (and I reserve the right to change me mind on a dime), I think Dmitri is incorrect; or perhaps I should say that I think my scenario is just slightly more probable.

Of course, I lack Dmitri's native Russian experience... in this he has it all over me... but I think Putin just put (most of) his cards on the table, and I think that this has been in the contingency plan playbook for some time now. Please keep in mind that I do not think Putin is a boogey man like much of the U.S. establishment does. In fact, I think he is a first rate SOB with a serious talent for chess. I grew up in a "chess home". Chess players are simply better at combinational game theory than Lawyers. President Obama is a nice guy. His staff is bright. They probably see what has happened here, maybe even saw it coming... and realize that they can't do a damn thing about it.

The Russian political establishment are ALL chess players; the U.S political establishment are ALL lawyers. Please don't take this as a shot at lawyers. It is not. Lawyers make fine wordsmiths, and sometimes that's what you need. An experienced trial lawyer would be the next best thing to an accomplished chess player - those guys can think many steps ahead - but that's not what the U.S. has running the train set. In the final analysis, Russia and the East just won't be doing as much business with the U.S. and will be much more keen on doing business between themselves in the future and will be more interested in cutting the U.S. out of the transaction than supporting U.S.$ hegemony.

Russia, unlike Saudi Arabia has the means at its disposal to defend its Oil, Nat Gas, and Coal resources. But we are really talking about Oil.

Russia is the second largest Oil exporter in the World - over 7,000,000 bpd, or about 20% of the world export market. Putin knows, with absolute certainty, that the end is coming for Oil exports, Russian or otherwise. He knows, with certainty, that the end is much less than 20 years away. Not the potential end - the real end. As a chess player, he must know that it is better to make your move when the board is not forcing your hand. Russia has been waiting for the West to move king's knight to Ukraine, and we just did. That knight has been beheaded. Will Russia now go directly for the Queen (Checkmate is not as valuable in this case and at this moment)? We shall see.

Russia does NOT have to remove all of its exported Oil from the market. 3mm bpd would be enough, me thinks, and allow them many more years of net exports and acceptable internal conditions. But just for sh**'s and grins, Putin could, to make his point, hold up all 7 million bpd for just a week, smash asset prices the world over, and restart negotiations with a much weaker adversary. Or something like that.

(For those that think that with U.S. imports declining that this is no big deal: The removal of several million bpd of Oil exports might well firm oil prices as it weakens Russia's political adversaries. If they cut their exports by half, and the price of Oil rises 50%, Russia is still getting 75% of what it was getting on a current basis, but will dramatically increase the total take over the life of the exportable resource.)

Russia (Putin) is going to do what is in their best interests. Nothing more, nothing less. Ergo, the big question is:

Is it in Russia's best interest's to do this now? If so, they will do it, and they will do it now, and everything else is just freebee negotiating. They can make all kinds of demands, all of which the West will acquiesce to, and then will do whatever is in its best interests anyway. Its just cold, calculating chess. If it is not in their best interests to do this now, then they won't. I don't know exactly what is in their best interests at the moment... I am going to noodle it, but that doesn't mean much. We will find out soon enough. If they pull the Oil from the market it will be far more interesting than 1973's oil embargo.

And all of that nonsense, shouting and screaming, huffing and puffing, sucking and blowing you hear from the U.S. political class? They have no power to do anything about this and are merely posturing for the next political election cycle here. They will blame Obama, G.W. Bush, the Right, the Left, the Middle, the Up, the Down... but its just chess.