The USA's new Nuke - Shale oil

Interesting things happened in March of 2014. Russia invaded Crimea and the world waited with held breath to see how the world would respond. The response would come rather quickly in the form of sanctions. Sanctions that on the surface looked rather mild. Echoes of Georgia 2008 were feared. As was the case then it appeared now that the West was too preoccupied elsewhere to deal properly with Russian aggression.

The sanctions quietly struck at Russian energy expansion aspirations. One of the results of which is the recent halting of the South Stream Pipeline. Behind the scenes something else was happening in the United States. Shale oil production began pumping at an unprecedented rate. Global production had dropped significantly, but U.S. shale production picked up the slack.

On March 24th the leaders of the G8 decided to suspend Russia's membership effectively becoming the G7. 4 days later Barrack Obama would meet with King Abdullah in Saudi Arabia. The public reason for the meeting was that Obama wanted to "reassure" the King on U.S./Saudi relations. He wanted to make it clear that the United States wold not pursue a "bad" nuclear deal with Iran. Whatever else said or discussed was off the record. My guess is that Obama warned his ally of the impending "Shale Boom". They must have discussed their mutual benefit from it.

Some say that the Shale Boom is anything but a benefit to the Saudi Kingdom. In fact the recent OPEC decision not to cut production was seen as a direct attack on shale production. The theory is that the cost to extract shale oil is too expensive to maintain at a low Price Per Barrel (PPB). With both U.S. Shale and OPEC production high the PPB would be so low that Shale producers couldn't keep up.

So who are the losers and who are the winners in this situation? The Saudis have the only reserves in the area large enough to maintain production at such a reduced PPB. The Iranians simply don't. King Abdullah must have smiled at the thought of prolonged and extended nuclear talks with the west. As long as the talks are extended and sanctions are in place the low PPB can effectively hemorrhage the Iranian economy. It's no coincidence that the clear advantage this gives the Saudis over Iran is similar to the advantage this gives the West over Russia.

Think about it. The only people that can play this game and win from it are the Americans and the Saudis. The economies of both Russia and Iran are nearly solely based off of hydrocarbon sales. In time their currency and economies will buckle.

Eventually the low PPB would have an effect on Shale production...but it would take awhile. But let's say that happens. The shale producers will pull back on production, the PPB would rise and that would reopen the profitability to start production again. This model has effectively turned the United State's Shale production into the modern day economic nuclear weapon. Rather than NORAD the frackers now have their thumbs on the "red button". Ready and willing to press it should they have to. Should a country such as Russia or Iran step out of line the U.S. and Saudi Arabia could tank the global PPB again.

We all noticed when Regional powers such as China, Russia, India, Pakistan, Iran, etc began building up and modernizing their armed forces. The development of new weapons of war has been reported on every front page for the past decade. As tanks roll into Eastern Ukraine, S300 missiles ship to Syria, and satellites enter orbit the most potent weapon of them all was being developed in Southern Texas. The United State's new weapon of war has been developed, tested and as of March 2014 has been deployed on the battlefield. Companies such as Exxon, Marathon and Conocophillips have joined the likes of Lockheed, Boeing and Northrop.

With the Saudi ability to maintain high production regardless of cost and the U.S. ability to manipulate production based off of high or low PPB a new oil production model has been created. That model effectively weaponized Shale oil. But maybe the bigger story here is the diminishing role OPEC will play going forward. You could make the argument that OPEC has been broken by this. Oil is entering a market where those that can manipulate it have changed. Nations that haven't diversified their economies enough will find themselves on uneasy ground.

Kurdish independence - the time is now

In 1967 the nation of Israel was facing invasion from every direction. The Egyptian led United Arab Republic had united the entire Middle East with promises of destroying Israel.

Much was at stake. The most obvious being the welfare of the State of Israel. Just as important however was the hegemony of Nasser’s UAR and what he had planned for all of Arabia. Nasser was also fully in bed with the Soviet Union. A middle east under the control of the UAR was a middle east under the control of the USSR.

The tiny nation of Israel provided the perfect regional power check to multiple enemies. Despite their size they were able to counter Nasser’s Arab socialist plans and ultimately Soviet designs and aspirations for the entire Middle East.

2014 Kurdistan has the opportunity to become 1967 Israel. Israel provided a power check to the UAR and socialism while also countering Soviet interests. Kurdistan has the opportunity to counter militant Islamists, Syria, Iran, and Turkey. Why are we not pushing for Kurdistan to claim self determination? Why are we not capitalizing on the historic cooperation between the Syrian and Iraqi Kurds at the defense of Kobane? The Syrian/Iraqi border in the North is already non existent. Now is the time for the Kurds to take what is theirs.

What’s standing in the way? Iran and Turkey have been using the Kurds as leverage against each other for quite some time. Before we get into that let’s take a look at the Kurdish players involved in both Iraq and Syria.

In Iraq - Iraq has a federalized system of government. Each region assumes governmental responsibilities for their territory but are ultimately subservient to Baghdad. Baghdad also handles all international affairs.

The KRG (Kurdistan Regional Government) is the governing body of Kurdistan. It has two main political parties that dominate the government. The KDP (Kurdistan Democratic Party) and the PUK (Patriotic Union of Kurdistan). The Peshmerga are the national defense force of Kurdistan...the army. They’re under the direct control of the KRG.

In Syria - The PYD (Democratic Union Party) is the dominant Kurdish governing force in Kurdish Syria. Their power grew during the Syrian civil war. As Assad struggled to contain the Sunni rebels in the south the PYD seized control of Kurdish lands in the North. The YPG (People’s Protection Units) is the PYD’s defense force...their army.

The PYD, and by extension the YPG, is an affiliate of the PKK (Kurdistan Workers Party). The PKK is a militant group that has been engaged in armed conflict with Turkey. They’re also designated as a terrorist group.

Looking at all of those political divisions spread across multiple countries it’s easy to see how the Kurds are manipulated and divided. The PUK in Iraq was actually first started in Damascus, Syria. Hafiz al-Assad personally supported both the PUK and the PKK. It’s of no surprise at all that Iran has a relationship with both the PUK and PKK. They use that relationship as leverage against Turkey. To counter that the Turks have cultivated a strong relationship with the KDP in Iraq. They in turn use that relationship to pressure both Iran and Iraq. This foreign coercion needs to be stopped.

If the United States and the west truly want to change the region for the better they need to pursue a strategy that actually makes sense. A strategy that doesn’t involve arming or training our enemies. We don’t have to choose between evils. Why are we training Iraqis and arming “moderate” rebels in Syria? Increasing the capability of the Iraqi army helps Iran. Arming the Islamists in Syria increases the likelihood that radical groups will get more sophisticated weaponry. Iran gains on one end and anarchy looms on the other.

There is no outside military solution here. The only strategy should be to redirect United States influence toward encouraging full Kurdish independence. Once that happens we can deal with the Kurds directly. Supplying them with arms, training, and economic support. An independent Kurdistan with the full backing of the United States government could provide the regional power check in 2014 that Israel provided in 1967.

Edward Snowden - Russian disinformation tool

The NSA Director of Technology Lonny Anderson was in Australia recently. The secret meeting held with Australian Intelligence was allegedly to discuss more leaks coming soon from Edward Snowden.

I'm not not going to get into why Snowden did what he did in the beginning nor am I going to give my opinion on whether I agree with his actions or not. The outing of the Prism program was huge. Again whether you agree with Snowden or not, his actions affected policy both domestically and internationally.
First of all, we need to talk about how classified information is handled in the United States. The highest clearance you can achieve is called Top Secret SCI. The SCI stands for Sensitive Compartmentalized Information. Classified information at the Top Secret level is compartmentalized. It's filtered to those that have the need to know. TS SCI isn't a master key to the government's classified vaults. It's more like a hall pass to access the areas that your authorized to be in.

Edward Snowden had access to whatever he was working on at the time he was employed by the NSA. He had information regarding the Prism program and for whatever reason (political, ideological, monetary, etc) he released that information to the public. That was credible. However, the claims of his "leaks" following the Prism revelation are getting crazier and crazier. Remember how classified information works. It's compartmentalized. It's a hall pass not a master key. There's a limit to what he had access to.

Snowden released the Prism information from Hong Kong and then went straight to Moscow. He's still there. All the additional leaks after he left Hong Kong have been while in exile in Moscow.

Let's call a spade a spade. No matter what Edward Snowden started out as he's now something completely different. He's a Russian disinformation tool.

What is the Russian government today? Has it really changed since the Czar or Soviet eras? It's gone from one autocracy to the next. All that has changed is the ideology behind the Despot. The KGB acted much like an autonomous mini government within the larger Soviet State. Not only did they master the art of disinformation globally they did it domestically as well. They practically wrote the book on modern day disinformation practices. The same architects of KGB intelligence practices during the Soviet era are now the rulers and policy makers of the modern day Russian Federation. There is around 6,000 former KGB that hold current government positions. The former Soviet "autonomous mini government" now runs Russia overtly.

It's was no surprise at all that the Russian government welcomed Snowden with open arms. However, his value to the Russians isn't in his NSA/Prism knowledge. His greater value lies in his perceived credibility to the world. Why?

Snowden's intelligence leaks were most likely drained when he outed Prism. However, the media fire storm that followed gave him immediate street cred. This fit perfectly inside the old KGB disinformation model. Disinformation in counter intelligence circles is more than what you might be thinking. It's information intended to deceive that comes from a trusted source. 

Example: If the FSB tells the world that the Australian Intelliegence services had tapped the Indonesian President's phone...not many would believe it. However, if it's released as a Snowden "leak"...media firestorm.

The above example actually happened. The result was a catastrophe in Australian/Indonesian relations.

Some of the information that will come out via "Snowden leaks" may be true, but that's how disinformation works. Mix in a little truth along with the false. As it stands today, no one knows the difference. From now on consider everything that's released via Snowden to be politically tied to the Russian Federation. He's nothing more than a pawn in a larger game.

What's Putin's next move - The Russian Playbook

Russian military units began pouring into Eastern Ukraine this past weekend. No longer trying to hide or be covert. Russian war equipment theatrically paraded across the border with their unit designators on display for all to see. It’s no coincidence that a small army of reporters and tweeters were on site to witness the entire show.

They weren’t even trying to hide it. They might as well have been passing in review in the middle of Red Square.

This isn’t surprising at all. In fact it’s a textbook move by Vladimir Putin. A textbook the Russians have been following since the Soviet Union fell in 1991. When the USSR fell there were two main strategic priorities the Russian’s were concerned about. The first and most important was Ukraine which is Russia’s gateway to Western Europe. Jimmy Carter’s National Security Advisor Zbigniew Brzezinski said the following regarding Ukraine’s importance to Russia:

“Ukraine, a new and important space on the Eurasian chessboard, is a geopolitical pivot because its very existence as an independent country helps to transform Russia. Without Ukraine, Russia ceases to be a Eurasian empire.”

The second was Georgia which is Russia’s gateway to the oil and warm waters of the Middle East. Russia has had aspirations to extend into the Middle East ever since the Stalin days. Both Ukraine and Georgia are the two geographic pivots necessary for Russia to become an empire.

The Soviet Union officially dissolved on Christmas day 1991. The leadership of the new Russian Federation identified their two main priorities and assessed risks. The Soviets had devoted much to Ukraine over the years. The result of which was a heavily entrenched political support base. Ukraine and Belarus along with Russia became the founding members of the new Commonwealth of Independent States (CIS).

Georgia however was another matter. The Russians knew that the Georgian political elite were ready to turn to NATO. To counter this they flamed ethnic fires with two ethnic groups within Georgia. Ossetians in the North and Abkhazians in the North West.

The conflict began as simple protests but it quickly escalated. Ossetians and Abkhazians began attacking Georgian government buildings with home made weapons and hunting rifles. Pretty soon the separatists began getting weapon supplies from Russia. The conflicts came to a close with Russia brokering a cease fire that left Georgia fractured. Two autonomous regions emerged - Abkhazia and South Ossetia.

If this sounds familiar to you….it should be. If you played the news broadcasts of Ukraine today side by side with those from Georgia in 1992 you wouldn’t be able to tell the difference. The tactics used are near identical. Remember when the Russian separatists shot down Malaysian commercial flight MH17? That exact same scenario happened in Abkhazia in 1993. Only in Georgia the separatists shot down more than one commercial plane.

http://articles.latimes.com/1993-09-23/news/mn-38196_1_georgian-army       

The process the Russians followed in Georgia is strikingly similar to present day Ukraine. Moscow helps to force a stalemate by supplying the separatists with arms. Once that stalemate happens they help broker a ceasefire.There’s usually a caveat in that ceasefire that states that the Russian military guarantees the peace and will intervene if it’s broken. The end result is an autonomous region within the country that is loyal to Russia.

Fast forward to 2004. Ukraine was on the verge of their “Orange Revolution”. Like the Georgians in 1992 the Ukrainians now looked to the West rather than to Moscow. The uprisings forced a recount in the their ongoing presidential election and the heavily Russian supported Viktor Yanukovych was ousted.

The Orange Revolution would spread to both Belarus and Russia herself. Russia had to do something….

Russia had already laid the foundation for their response back in Georgia in 1992. In 2008 “color revolutions” had spread from Ukraine to Belarus and Russia. For seemingly no reason at all the autonomous region of South Ossetia began shelling various Georgian positions. Georgia counter attacked and closed in on South Ossetia. On cue Russia invaded into Georgia backed up by Abkhazian forces from the North West. The conflict would later end again via a Russian brokered cease fire.

The message was clear - the Soviet Union may be gone but the Russians are still in control. The Georgian conflict sent ripples of fear all over the former Soviet Bloc. The “color revolutions” died out and Ukraine began to slide back under Russia’s thumb.

Ukrainians now in 2014 see themselves as the Georgians of 2008. Russia following their textbook has positioned Kiev to have to make the same decisions Tbilisi made in 2008. If the autonomous regions in Eastern Ukraine begin shelling Ukrainian positions, like the South Ossetians did, Ukraine will have to react with caution and restraint. If they over react Russia will use that to send another message and will fully invade Eastern Ukraine.

What happens next?

I really think that the Ukrainian revolution of 2014 was something the Russians didn’t expect to happen. They assumed they’d always be able to manipulate Ukraine using their political and economic stranglehold they enjoyed in Kiev. However, when Yanukovych’s regime was ousted Putin was forced to escalate the timeline. 2008 Georgia was brought to 2014 Ukraine. If Ukraine continues their push to integrate into the EU and forge a relationship with NATO Russia will push the autonomous regions in Eastern Ukraine to begin shelling Ukrainian positions….a la South Ossetia 2008. Moscow will wait and gauge their reaction.

If Georgia continues their goals of joining NATO Russia WILL annex either Abkhazia, South Ossetia or both. They’ll most probably annex Abkhazia and dangle South Ossetia as a future warning.

Georgia and Ukraine represent Russia’s primary targets, but keep in mind the effect all this will have on the rest of the region. Places such as Moldova, Belarus and even Russia’s own populace will be watching.

Moscow is following a geopolitical playbook using plays they’ve already ran. Realizing and understanding this is key to predicting what they want and what they’re willing to do in the future.

Defeating ISIS - Is that the goal?

Why does everyone assume the current strategy regarding ISIS is to destroy them? I’ve heard “analysts” that are shocked that Turkey won’t get more involved in defending Kobani. Others, whether they be politicians or more “analysts”, declaring that the current U.S. air campaign will never fully defeat ISIS. “We simply must commit boots on the ground!” they say.

Geopolitics is cold and pragmatic. It’s never emotional. To quote Robert Strausz-Hupe, nation states are interested in “space and power”. As the German inventors of Geopolitik believed, a nation is either expanding or dying.  It’s a very imperialistic ethos but it’s a game that most of the world’s powers are engaged in. Yes, this includes the largest and most powerful empire the world has ever known...the United States.

So what then is the United States' ISIS strategy? If it’s not to defeat them outright what ulterior motives might be in play here?

Does history provide any kind of reference that we can gain insight from?

As I looked for a historical reference that might help us understand the current ongoing conflict with ISIS I decided to look for other ISIS like groups in the past. I didn’t want to focus on their obsession with establishing a caliphate. Instead I looked throughout history for smaller groups that employed similar tactics in the midst of larger more powerful empires. The use of extreme terror, beheadings, ideological, well funded, etc.

I came across a book of United States diplomatic correspondence from the 1700’s and 1800’s. Thomas Jefferson said this:

“That it was a law, that the first who boarded an enemy’s vessel should have one slave more than his share with the rest, which operated as an incentive to the most desperate valor and enterprise; that it was the practice of their corsairs to bear down upon a ship, for each sailor to take a dagger in each hand and another in his mouth, and leap on board, which so terrified their enemies that very few ever stood against them; that he verily believed the devil assisted his countrymen, for they were almost always successful.”

It was the bolded portion that got my attention the most - “which so terrified their enemies that very few ever stood against them”.

Thomas Jefferson was talking about the Barbary Pirates. They were radical Islamists who attacked merchant vessels along the North African Barbary Coast. Today this area encompasses the modern states of Morocco, Algeria, Tunisia, and Libya. Piracy was the main source of income for these nations...and business was good. North Africa sat on the busiest trade route in the world at the time. The Mediterranean Sea trade route saw commerce from every major player in the world. The newest of which was the United States who, after losing protection from The British Navy and later the French Navy, began to see ship after ship fall to the Barbary Pirates. Not only were the U.S. ships and their cargo being seized but their crews were being enslaved as well. Keep in mind that, while this was going on, British and French ships were sailing through the Med unmolested.

Jefferson traveled to London and called an official meeting with the Tripoli Ambassador. He asked him point blank why the Barbary people waged warfare on them. Why did they hate a nation and people that had done nothing to provoke such a reaction? The Ambassador from Tripoli didn’t hesitate in his response:

“The Ambassador answered us, that it was founded on the laws of their Prophet; that it was written in their Koran, that all nations who should not have acknowledged their authority, were sinners; that it was their right and duty to make war upon them wherever they could be found, and to make slaves of all they could take as prisoners; and that every Mussulman who was slain in battle was sure to go to Paradise.”

You can find similar quotes today from ISIS leader Abu Bakr al-Baghdadi. ISIS and the Barbary Pirates have so much more in common than people realize. From a geopolitical perspective their goals are/were to dominate a geographic location using terror and ideology as their foreign policy. The Barbary Pirates were operating in between a host of larger more powerful regional players. They played it safe and chose not to attack British and French ships.

From the U.S. State Department:

“The two major European powers, Great Britain and France, found it expedient to encourage the Barbary States’ policy and pay tribute to them, as it allowed their merchant shipping an increased share of the Mediterranean trade, and Barbary leaders chose not to challenge the superior British or French navies.

Prior to independence, American colonists had enjoyed the protection of the British Navy. However, once the United States declared independence, British diplomats were quick to inform the Barbary States that U.S. ships were open to attack. In 1785, Dey Muhammad of Algiers declared war on the United States and captured several American ships. The financially troubled Confederation Government of the United States was unable to raise a navy or the tribute that would protect U.S. ships.”

It wasn’t like there was any secret on the radical ideology that the Barbary Pirates followed. It was widely and publicly known. The British Navy was the most powerful naval force in the history of mankind. Why wouldn’t it eliminate a clearly defined evil threat? Likewise, the French had their own impressive navy. Why did they stand by and watch the Barbary butchery in the most profitable trade zone in the world?

George Washington contemplated the same in a letter he penned from Mount Vernon:

“Mount Vernon, October 10, 1796.

Sir: Your letter of the 5th instant with its enclosure, came to hand by friday's post.

The extracts therein produced both pleasure and pain: the former, at hearing that our citizens are at length released from their unfortunate confinement in Algiers, the latter, to find that others of them have fallen into a similar situation at Tunis, contrary to the truce, and to the arrangement made with Mr. Donaldson.

'Tis difficult to understand precisely what the French government design relative to this Country, from the accounts given by Mr. Monroe.”

Washington’s confusion mirrors that to the confusion the media has regarding ISIS today. Why didn’t the world’s powers of the time (Great Britain and France) simply just remove the threat?

The answer is that the Barbary Pirates were useful. They kept emerging powers in check. That included the United States whose merchant vessels were in direct competition with those from Great Britain and France. The Barbary pirates were a means to an end. Even though they represented an extreme, evil and dangerous ideology. It didn’t matter in the grand scheme of things. 

The United States was backed into a corner. They either went to war to eliminate the threat or they suffered the losses and risked bankrupting their new nation. They would end up going to war, and the Marines would add a new line to their hymn.

So again, why is it assumed that the overall strategy is to destroy ISIS?

First of all from the Turkish perspective.

The Turks have been heavily criticized throughout the entire conflict. For not providing military bases to assist coalition strike aircraft, to not defending Kobani, etc.

Turkey is in a very awkward position. They have two immediate geopolitical goals that ISIS helps them achieve. The destruction of the Assad regime in Syria and the degradation of militant Kurds. The latter of which Turkey believes provide assistance to the PKK whom the Turks have labeled a terrorist organization.

The bigger picture reveals a much larger competition between Turkey and the Iranians. The ISIS threat to Assad is also a direct threat to Iranian influence. If Assad was no longer in power Syrian influence could be turned away from Tehran and toward Ankara. For this same reason, you’ll likely never see the other Arab nations fully commit to any kind of meaningful large scale assault.

Even though ISIS poses an eventual threat to Turkey and the rest of the Arab monarchies ISIS provides them all an immediate means to an end.

From the U.S. perspective.

Like Turkey and the Arab monarchies, the United States wants the eventual downfall of the Assad regime. In extension that leads to a smaller sphere of influence for the Iranians.

It’s obvious to everyone that airstrikes alone won’t stop ISIS. That’s not their goal. The airstrikes have two main goals.

1. The first is to limit and specifically target radical groups that are looking to export terrorism. Groups such as al qaeda or groups within ISIS that want to take jihad away from the Levant region and go global. The United States is hoping to manage the growth of these cells and not allow the region to become a safe haven for terrorist groups to recruit and train in.

2. The second is to make sure ISIS is pointed in the right direction. That means that they’re attacking Assad, Iranian assets, etc.

Also, like Turkey, the United States is in an awkward position. Taking sides is harder than it appears. Attacking ISIS leads to a stronger Assad which in turn strengthens Iran. Similarly, if the U.S. were to commit to fully supporting Iraq against ISIS the eventual outcome is familiar. A stronger Iranian influence in Iraq. All the current roads lead to a stronger Iran if ISIS were suddenly out of the picture.

Conclusion

Like the Barbary Pirates, ISIS today is a means to an end.The British and French couldn’t endorse the Barbary Pirates and openly support their behavior. To do so would be an endorsement for their radical and evil ideology. However, they had a problem with increased competition in the Mediterranean trade route. The United States was up and coming and their navy may one day be a potential threat. The British and French decided to let the Barbary Pirates operate as long as their geopolitical goals aligned.

ISIS is brutal, horrific and evil. They are the personification of everything we would rise up against to stop. However, we find ourselves in the same position that the British and French were in 1800. With our geopolitical goals aligning along with an extremist group. 

The world’s powers are trying to balance geopolitical motives against morality. Every time ISIS broadcasts another beheading that balance shifts. Eventually society will demand moral action from their governments. Until then, expect the players involved to milk this for all it’s worth.

Why is Oil Crashing? - What can history tell us?

James Fairgrieve was a British geographer and geopolititian in the early 1900’s. One of his theories was that imperialists throughout history had been primarily driven by the search for energy. Over the centuries the political center of the world usually shifts toward which source of energy is relevant at that time.

The 1970’s showed the world just how important hydrocarbons had become to the global economy. The Middle East became the political center of the world. OPEC would reduce oil output and embargo the West for supporting Israel. On top of that, the overthrow of the Shah in Iran would all but hault oil production for Tehran.

1970’s Oil Crisis

The result - oil prices went through the roof. Heavily industrialized countries that depended on oil saw stagnant economic growth. The world found themselves grouped as such:

1. Heavily dependant on foreign oil supplies. Recession imminent. (Western Europe)
2. Partly reliant on foreign oil mixed with a steady domestic supply. (United States)
3. Domestic oil production is the primary source of GDP. (OPEC countries and USSR)

Oil became an extremely powerful tool the world’s geopolitical players would use to impose their foreign policy and ensure their interests.

History would later see Kissinger persuade the Israelis to leave the Sinai and the Golan Heights. The oil embargo would soon be lifted. Oil production would normalize and with that the Brent crude price per barrel would go down.

1980’s Oil Glut

Ronald Reagan would use the 1970’s energy crisis as a playbook for economic warfare. It’s rumored that President Reagan sent CIA director William Casey to Saudi Arabia in 1981 to initiate a lethal strike aimed at the Soviet Union’s pocket book.

The deal - Saudi Arabia was weak in military hardware. They were threatened on every border by Iraq, Iran, and the USSR. The Soviets had coveted the Middle East since before WW2.

Soviet Foreign Minister Molotov traveled to Berlin in 1940 for a meeting with Hitler. The reason? Hitler wanted to lure Stalin into an alliance. He knew that the best way to win a war in Western Europe was to ensure he didn’t have to fight the Soviets on his Eastern flank. Hitler and Mussolini both figured that Stalin wouldn’t intervene. Stalin wouldn’t risk spilling Russian blood for the sake of the English and French.

Hitler decided to dangle the idea of inviting Russia into the trio of Germany/Italy/Japan. A “Four-Power Pact” rather than the “Three-Power Pact”. Hitler’s meeting with Molotov was to discuss these terms and to divvy up the spheres of influence they would each inherit after the war.

What was Stalin’s primary condition for joining with Hitler? Straight from Molotov’s mouth:

“The first protocol, dealing with the spheres of influence, must recognise that the area south of Batum and Baku in the general direction of the Persian Gulf is recognised as the centre of gravity of the aspirations of the Soviet Union.”

The Russians were basically quoting James Fairgrieve. They recognized that the Middle East was now the “political center of the world”. It was the Russian “center of gravity”. The German’s, however, invented geopolitics and would never agree to this. Hitler never replied to Stalin’s conditions and the Soviets would never join the Three-Power Pact.

CIA Director Casey and President Ronald Reagan believed the Soviet’s still saw the Middle East as their “center of gravity”. The Saudis believed this as well. The deal was simple. The United States promised military backing and equipment so that Saudi Arabia could solidify their borders. In return the Saudis promised to defy OPEC and over flood the market with oil. The United States would also ramp up production. The result - The 1980’s Oil Glut. Oil prices dropped so low that the USSR lost billions per day. They would never recover and the Soviet Union inevitably would collapse.

There’s the history. What does that show us today?

Has anyone noticed their gas prices lately? Why on earth are oil and gas prices going down in a world that is ripped by instability? Here is a graph that shows oil prices over the past 6 months:

As you can see there’s been a dramatic drop in the price per barrel since mid June. What’s the catalyst making this happen?

1. Dramatic increase in production from the U.S.
2. Dramatic increase from Libya (despite internal turmoil).
3. Saudi Arabia increases production despite OPEC objections (sound familiar?).

First of all, who benefits from this? Who gets hurt?

Russia

It’s hard for me not to quote Sean Connery from The Hunt for Red October, “Once more, we play our dangerous game, a game of chess against our old adversary.”

We’re pulling the same levers we’ve pulled in the past. It’s amazing that the Russians haven’t diversified their economy away from hydrocarbon sales. Reagan furiously opposed the Urengoi pipeline that began Western Europe’s dependency on Russian gas. He warned the Europeans that Russia would gain a significant strategic advantage over them, but the pipeline was built regardless.

We’re seeing the result of that today in the proxy war in Eastern Ukraine. It’s not a coincidence that as the Russians began to support the separatists in Eastern Ukraine the price of oil began to drop out of the cellar. The Ukraine crisis and this modern day “oil crash” happened one after the other. The United States has played this move before and the Russians know they have little to counter it with. Washington D.C. sent a clear message to Russia. That they’re not only willing but completely able to crash Moscow’s economy if provoked to do so.

Putin now has to try and increase demand so that the PPB (price per barrel) goes back up. Look for them to increase cooperation with China. China has the demand to effect the PPB. My guess is that we’ll see news come from that in the near future.

Iran

Tehran is in an interesting predicament here. Their heavily sanctioned economy is also primarily driven by hydrocarbon sales. At the same time they’re locked in intense negotiations regarding their nuclear program. This gives the U.S. and Saudi Arabia a lot of leverage. It may force Iran to make considerable concessions.

It’s important to note that, just like in the 80’s, we must have promised the Saudis….something. The Saudis main struggle right now is Iran. Proxy battles between the Iranians and Saudis are being fought all over the Middle East. In Yemen, Eastern Saudi Arabia, Syria, Iraq, etc. Even the Iranian/U.S. rapprochement itseIf is a major setback for the Saudis. If a deal was indeed made look for progress on one of these fronts. Would the U.S. consider backing out of the Iranian nuclear talks all together to appease the Saudis? I guess we’ll find out soon.

Libya

The situation in Libya is interesting. Quite frankly I’m shocked that Libya has been able to produce as much oil lately as they’ve been. The central government has had to relocate as militias have gained more and more power daily. Somehow, Libya was able to flood the global oil market with a billion barrels per day.

Where is the Libyan oil coming from? Primarily from the Waha oil field. The Waha oil field is operated by 3 companies: ConocoPhillips, Hess Corp, and Marathon Oil. All U.S. based companies. Draw your own conclusions there…

Conclusion

James Fairgrieve made an observation in the 1900’s that very well could have influenced Russian geopolitical thinkers for the entire century. What was theory in Fairgrieve’s time became very much the reality in the 1970’s and 80’s. The players back then are the same today. The conflicts are a bit different but the circumstances are remarkably the same. The biggest difference from the old Cold War to our new one today is in the timeline. Economic warfare such as this was Reagan’s knock out final blow. The United States this time has used it as their opening salvo.

Understanding the situation in Ukraine

Kiev and Russian backed separatists in Eastern Ukraine have agreed to a ceasefire while they work on the details of autonomy for the Donetsk/Luhansk regions. A few skirmishes have flared but all in all the ceasefire appears to be holding.

Many people in the West are left scratching their heads wondering what the deal is. What does this mean? What is Putin doing? What’s the end game?

How did we get here?

It’s been both amusing and disturbing how the media has reported on the Ukraine crises. Regardless of whether it’s TV, radio, or print you’ve probably been duped into thinking that after much struggle the evil Vladimir Putin twisted his mustachios and walked away having outsmarted the West. Nothing could be further from the truth.

Let’s make this abundantly clear...Russia has endured a tremendous loss in Ukraine. When Viktor Yanukovych halted deals with the EU he made it very clear that Ukraine was no longer neutral and would be a partner with Russia. This effectively alienated 75% of the country and plunged them into full on revolt. The rumor from the inside walls of the Kremlin is that Putin fired his entire staff of Ukrainian advisors after Yanukovych was deposed. He was furious with their reckless miscalculation.

Annexing Crimea was a last ditch effort and one that Putin had no choice but to take. Yes, he gained Crimea….but he LOST Ukraine. Moscow’s strategy since the fall of the Soviet Union has been to keep Ukraine neutral. Neither tipping one way or the other. The usually patient and calculating Putin uncharacteristically moved too soon. This had the effect of pivoting Ukraine towards the West rather than to Moscow. Putin has been in full on chaotic damage control ever since.

What does Ukraine mean to Russia?

First of all, it’s important to identify what Ukraine’s importance is to Russia. That’ll be important to clarify when we contrast Ukraine’s importance to the West.

Ukraine is Russia’s strategic priority in Central/Western Europe. Ukraine represents the gateway of either foreign invasion into mother Russia or mother Russian invasion into Western Europe.

Zbigniew Brzezinski was Jimmy Carter’s National Security Advisor in the late 70’s and early 80’s. In the book The Grand Chessboard Brzezinski says this about Ukraine:

“Ukraine, a new and important space on the Eurasian chessboard, is a geopolitical pivot because its very existence as an independent country helps to transform Russia. Without Ukraine, Russia ceases to be a Eurasian empire.”

“However, if Moscow regains control over Ukraine, with its 52 million people and major resources as well as access to the Black Sea, Russia automatically again regains the wherewithal to become a powerful imperial state, spanning Europe and Asia.”

Russia must maintain influence over Ukraine if it ever aspires to be a dominant Empire again. Even if Putin see’s those aspirations as being far off or even untainable again Moscow must continue to pursue it. To do otherwise would show considerable weakness to Russia’s periphery, the rest of the world, and their own citizens.

Ukraine represents Russia’s symbolic and actual desire to be an empire once again.

What is Russia’s strategy in Eastern Ukraine?

Putin’s Ukrainian strategy is similar to what he has done in other breakaway regions in Eastern Europe such as Georgia and Moldova. The goal is to unite and arm minority ethnic Russians and have them claim self determination.

If the host nation responds violently Putin can intervene claiming humanitarian relief to ethnic Russians. If the host nation grants autonomy Putin can use the threat that eventually the autonomous region may eventually try and achieve full on independance. Possibly even amalgamation by Russia entirely.

The threat of ethnic instability will be a considerable lever Moscow can pull to gain leverage. That along with energy control is how Russia manipulates her periphery.

The biggest problem with this strategy is two fold:

1. Putin is stoking ethnic tension in an area that is highly volatile. At a time where nationalism and far right groups are gaining ground rapidly. Ethnic Ukrainians are rising up in considerable numbers. Rather than having a favorable opinion towards Russians or even neutral, Putin has turned Ukrainians into enemies.
2. Ethnic Russians in many regions that Putin is employing this strategy are on the decline. Ethnic Russian birth rates are going down in places like Eastern Ukraine, the Caucasus, Georgia, etc. The older generation that remember the glory days of the Soviet Union are dieing out.

What does Ukraine mean to the United States?

Ukraine has no immediate strategic value to the United States. Ukraine’s primary purpose for the U.S. is to distract the Russians. Washington knows that Ukraine is vital to Moscow and this provides an obvious weakness. Russia can never let Ukraine fall out of influence. They’ll literally drop everything they’re doing to run to that battle field. It’s that important.

6-12 months ago Moscow was making a push into the world that we hadn’t seen in a long time. They were challenging US interests in the Middle East, South America, etc. Putin made considerable strides in Syria, Egypt, Venezuela, and China. He also stepped up aggressive politics in his periphery attempting to gain leverage in the former Soviet influence states of Azerbaijan, Georgia, Ukraine, Moldova, etc.

From the Western point of view it appeared that Putin had reached a point where he believed that the time was ripe to expand Russian influence and power in the world. It’s of no coincidence that the Ukrainian revolution quickly followed. Overnight Moscow went silent on Syria, Egypt, etc. All Russian assets focused on Ukraine. This in turn freed up the U.S. and her allies to re-engage and gain momentum in other parts of the world without Russian interference.

What is the United State’s strategy in Ukraine?

The United States will not resort to a strong military response in Ukraine. Don't take this the wrong way. We're definitely not scared to do it. In fact if we were really serious about halting Russian advances in Ukraine we would most definitely encourage NATO to put boots on the ground in Eastern Ukraine.

George Kennan was the father of the Soviet containment policy and had this to say about the Russians:

"Soviet power, unlike that of Hitlerite Germany, is neither schematic nor adventunstic. It does not work by fixed plans. It does not take unnecessary risks. Impervious to logic of reason, and it is highly sensitive to logic of force. For this reason it can easily withdraw--and usually does when strong resistance is encountered at any point.

Thus, if the adversary has sufficient force and makes clear his readiness to use it, he rarely has to do so. If situations are properly handled there need be no prestige-engaging showdowns."

We have no intention of forcing Putin to back down so early in this conflict. If we did we would have responded as per our knowledge and doctrine on Russia tells us what will work. This doctrine is true today just as it was in the 50's. Show Putin you're willing to hit him on the jaw....he'll back down.

The truth is we don't want him to back down yet.  We want this to drag on as long as possible.

Long term strategy

Putin looks to control the Russian periphery with minority ethnic Russians and natural gas control. The United States pursues a strategy of economic reform and maintaining pro democracy groups that form mass demonstrations like the one at Maidan.

There of many examples of how the U.S. tempts nations with their economic superiority. Even in Eastern Europe. In the 1950’s during the Cold War General Electric bought into light bulb manufacturing in Hungary. That along with other Western foreign investment provided a considerable temptation to the native Communist party.

More recently, the United States has almost single handedly transformed Poland into one of the strongest economies in Europe. Between 1992 and 2001 the United States pumped in over 50 billion in foreign investment. You can track U.S. interest in a country by following foreign investment.

Today in Ukraine we see similar signs that U.S. economic power is starting to sneak in. Organizations such as the U.S.-Ukraine Business Council (USUBC) are quietly bringing in Western companies to invest.

U.S. energy company Westinghouse has also moved in to supply Ukranian Nuclear facilities with nuclear fuel. This is part of a much larger plan to begin weaning Europe off of Russian energy as a whole.

Conclusion

In the end Ukraine currently represents two things: A grand strategy to Russia and a grand Distraction Mechanism by the West. Remember that geopolitics ultimately is a big game against competing nations. The name of the game is who can politically dominate the most space. Russia is concentrating on her region and the U.S. is more concerned with Russian interference in other parts of the world.

As for the Ukrainians? The name of their game is the same as its been their entire existence. Survival. Survive while being tugged on between powerful outsiders. Caught in the middle of an argument they didn't  start. Geography is cold and and without empathy. Ukraine is an example of a nation destined for struggle based off of its unforgiving geography.