US-Russia Relations In “Ice Age” & Risk Of Direct Clash “High”: Kremlin
Russia’s ambassador to the United States issued a statement Friday assessing the state of Moscow-Washington relations as having entered an “ice age” – according to state-owned TASS.
Ambassador Anatoly Antonov said that currently the risk of a direct clash between the US and Russia remains “high” – after the foreign ministry on Thursday again charged that the Biden administration is fueling a “proxy war” in Ukraine.
Antonov acknowledged that strategic dialogue between the two sides is on pause, and that it’s hard to know when they’ll resume, but cited as a rare positive the recent prisoner swaps.
As The Independent reviews of his words in reference to the swaps:
However, Mr Antonov said that talks on prisoner swaps had been “effective” and would continue. Two prisoner swaps, in which US Marine veteran Trevor Reed and basketball star Brittney Griner have been freed by Russia since April in return for convicted drug smuggler Konstantin Yaroshenko and arms dealer Viktor Bout.
A key major development which could fuel escalation is the White House decision to send Patriot anti-air missile defense systems.
President Vladimir Putin was quick to condemn the development but still downplayed the Patriots as “quite old” – saying that his forces would counter it.
Putin also hinted at a future negotiated settlement, saying: “Our goal is not to spin the flywheel of military conflict, but, on the contrary, to end this war.”
In the fresh remarks coming at the end of the week, he said further: “We will strive for an end to this and the sooner the better, of course,” and that “All armed conflicts end one way or another with some kind of negotiations on the diplomatic track.”
“Sooner or later, any parties in a state of conflict sit down and make an agreement. The sooner this realization comes to those who oppose us, the better. We have never given up on this.”
But the Biden administration has said Moscow has shown “zero” interest in pursuing peace negotiations, also as it’s being reported that the Ukrainian government is preparing a serious offer for ceasefire.
Would you like to pay a carbon tax every time that you turn your heater on? What about every time that you fill up your vehicle with gasoline? Incredibly, this will soon be what life is like in Europe. When I first heard that the EU plans to impose direct carbon taxes on individuals, I thought that it must be just another false Internet rumor. But it isn’t a false rumor. News sources in Europe are reporting on it, and you can find information about this plan on the official website of the European Parliament. I don’t know why the corporate media in the United States is not talking about this, because this is an enormous story.
As I write this article, I am still in shock. This is actually happening, and if this plan is successfully implemented in Europe it will be just a matter of time before a similar plan is pushed through in the United States. The following comes from a Dutch article that has been translated into English…
Last night, after long negotiations, the bullet went through the church: residents of the European Union must pay for the greenhouse gases they emit. This means that every time you refuel and if the heating is switched on, you have to pay because of the harmful substances that are released as a result.
Of course they are starting small in an attempt to minimize opposition.
Once this plan goes into effect, the cost of a liter of gasoline will only go up by about 10 cents…
The new scheme will entail higher prices at the pump: up to 10.5 cents for a litre of petrol and 12 cents for diesel, according to a study by the Potsdam Institute for Climate Research.
But as we have seen so many other times, once people become accustomed to new taxes rates tend to go up significantly.
“I am pleased that a balanced agreement has been reached on the largest climate legislation package in the EU ever,” says Esther de Lange (CDA) MEP. She was one of the negotiators and responsible for the coordination of the Green Deal and chief negotiator on the Social Climate Fund.
We are being told that there is broad support for this climate legislation package across the political spectrum.
Europe is scheduled to reduce carbon emissions dramatically by the year 2030, and this new legislation will be a central pillar of that effort…
The measures are part of a package of climate laws. Before 2030, CO2 emissions must be reduced by 55 percent. European industry, which already partly has to do this, will have to deal with higher emission costs, and companies from outside Europe will pay for their emissions at the border. The money raised with this can be spent on climate plans.
If you do not like this new legislation, now is the time to make your voice heard.
Personally, I pledge to make efforts to increase my carbon emissions in protest to this plan.
In fact, I am thinking about firing up my wood stove even now.
The good news, if you want to call it that, is that the new carbon taxes are not scheduled to be implemented until 2027.
So there is still time for the EU to reverse course.
Unfortunately, other draconian measures that are designed to reduce carbon emissions are going full speed ahead right now.
For example, countless farms are currently being permanently shut down all over Europe.
In the Netherlands alone, thousands of farmers are facing forced buyouts whether they like it or not…
The government in the Netherlands is planning to conduct forced buyouts of 3,000 Dutch farms with the intention of closing them down to cut nitrogen emissions in half to meet the country’s climate goals. As many as 11,200 farms will have to close, and another 17,600 farmers will have to significantly downsize their livestock operations to meet these draconian targets.
The plan could not come at a worse time because grocery prices are skyrocketing, and world leaders are warning about an oncoming food crisis caused by supply disruptions caused by the war in Ukraine and rising input costs resulting from the energy crisis.
2022 was the worst year for global hunger in decades, and now the head of the International Committee of the Red Cross is warning that we will see “an enormous level of suffering” in 2023…
The head of the International Committee of the Red Cross warned Wednesday “an enormous level of suffering” awaits the world in 2023 with famine spreading.
Mirjana Spoljaric, who took over at the ICRC in October, told a Geneva press conference: “We expect an enormous level of suffering.
“As the world is trending at the moment we don’t see any easing of the humanitarian pressures, they will be immense potentially,” she said.
“There is a possibility that we will see very high levels of hunger in many parts of the world and insecurity in general.”
Shutting down farms and paying farmers not to grow food in such an environment is absolutely crazy.
But our politicians are doing it anyway.
The global food crisis is going to get substantially worse in 2023, and our leaders seem intent on imposing measures that will greatly accelerate that process.
* * *
It is finally here! Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon.
US New Home Sales Unexpectedly Soar (Again) In November
After an unexpected rebound in October, new home sales are expected to tumble in November (latest data) following the plunge in existing home sales, starts and permits data, and homebuilder sentiment.
Instead – just like in October, new home sales soared (up 5.8% MoM vs -5.1% exp), and October was revised stronger (from +7.5% to +8.2% MoM)…
Source: Bloomberg
This is the 3rd month of surging new home sales in the last four, bucking every housing market trend. However, this is the ninth straight month of annual declines in new home sales.
The total new home sales SAAR is hovering around the COVID lockdown lows…
Source: Bloomberg
A mid-month retreat in 30-year mortgage rates back below 7% along with an increase in builder incentives may have helped support demand.
Still, the sales data are volatile from month to month.
The increase in sales last month was concentrated in the West and Midwest.
The median sales price of a new home was up 9.5% from a year earlier to $471,200.
Finally, given the total collapse in homebuilder confidence (about future sales), which still has a long way to go to catch down to the collapse in homebuyer confidence, we would suggest real estate agents ‘brace, brace, brace’…
Source: Bloomberg
Is that really where The Fed wants the US housing market to end up?
ECB Terminal Rate Pushes Higher As Officials Hammer Hawkish Message
Authored by Ven Ram, Bloomberg macro strategist,
The European Central Bank’s hawkish message from its policy review last week is still rippling through the markets, sending the markets’ assessment of terminal rates higher.
Interest-rate traders are factoring in a terminal rate north of 3.40%, marking an emphatic move from levels of around 2.90% being priced in around the time of the Dec. 15 meeting.
The ECB’s communication has switched tack from getting to the neutral rate to a restrictive rate, with President Christine Lagarde expressly mentioning that increases of 50 basis points would be par for the course “for a period of time.”
Vice President Luis de Guindos reinforced that message for good measure this week, underpinning the increase in terminal rates.
Source: Bloomberg
Just like the Federal Reserve that has said that its job won’t be done until its real funds rate gets to significantly positive levels, the ECB sees such a mission as the defining moment in its journey to quell inflation.
With the ECB’s own forecasts showing inflation likely to be around 6.3% in 2023 and at 3.4% in 2024, a restrictive rate would perforce take its deposit rate in the range of 3.50%-4% in this cycle.
That backdrop makes it hard to be constructive on euro-area bonds, and nowhere is this perhaps more telling than at the front end of the German curve.
Source: Bloomberg
Two-year German yields have surged more than 300 basis points this year, and from the looks of it, there may be more losses to come in the first half of 2023 as the ECB goes about its task.
Jan 6 Committee Unveils 845-Page Report Damning Trump & His Supporters One Last Time
Days after releasing an executive summary, the Jan. 6 Committee has released its full, 814-page report, which encourages the Justice Department (DOJ) to consider slapping former President Trump with at least four criminal charge, including insurrection and obstruction.
The referral is largely symbolic, as the DOJ isn’t required to act on the panel’s recommendations.
The nine-member committee, whose members are known for their partisan anti-Trump members (while pro-Trump lawmakers were denied an opportunity to sit on the panel), concluded that “the central cause of January 6th was one man, former President Donald Trump, who many others followed,” adding that “[n]one of the events of January 6th would have happened without him.”
This guy couldn’t have had anything to do with it, right?
The group’s final report represents the culmination of 18 months of investigation and is based on the interviews of more than 1,000 witnesses, ten hearings, as well as millions of pages of documents, including emails, texts, and phone records.
The report lists 17 specific allegations the authors made based on the information they gathered. It also proposes 11 legislative recommendations in efforts to prevent another breach.
“This report will provide greater detail about the multistep effort devised and driven by Donald Trump to overturn the 2020 election and block the transfer of power,” Jan. 6 Committee Chairman Rep. Bennie Thompson (D-Miss.) wrote in a foreword in the report.
The Jan. 6 committee is set to dissolve at the end of the current Congress in January 2023, when Republicans are set to take control of the House.
Trump, in remarks following the release of the final report, called it “highly partisan” and a “witch hunt.” The report had failed to “study the reason for the [Jan. 6] protest, election fraud,” he wrote.
It marked the first time that lawmakers had referred a former president for criminal prosecution. A charge of insurrection would, if a conviction is passed, bar Trump from running for office again. Trump had announced in November that he would seek the presidency again.
Trump was previously acquitted in February 2021 by the Senate in an impeachment trial over an insurrection incitement charge. Prior to that, he was acquitted in February 2020 by the Senate in his first impeachment trial on two charges—abuse of power and obstruction of Congress.
“These folks don’t get it that when they come after me, people who love freedom rally around me. It strengthens me. What doesn’t kill me makes me stronger,” Trump wrote in a statement posted on his Truth Social platform on Dec. 19 in response to the panel’s criminal referrals.
He added, “Americans know that I pushed for 20,000 troops to prevent violence on Jan 6, and that I went on television and told everyone to go home.”
Ahead of the final report’s release, the Jan. 6 committee made public a collection of 34 transcripts of witness testimony from its investigation on Dec. 21. Most of the 34 witnesses did not answer questions during all or at least part of their testimony, instead opting to assert their Fifth Amendment right against self-incrimination. The panel later released several moretranscripts of witness testimony on early Dec. 22.
Meanwhile, five House Republicans on Dec. 21 published a separate counter report (pdf) that focused on the security failures at the U.S. Capitol on Jan. 6. The report, led by incoming House Judiciary Chairman Jim Jordan (R-Ohio) and Rep. Jim Banks (R-Ind.), showed that staffers under House Speaker Nancy Pelosi (D-Calif.) had played a key role in the security planning that failed to protect the Capitol on Jan. 6, 2021.
The five lawmakers who released the report were those initially nominated by Republican Leader Kevin McCarthy (R-Calif.) to join the Jan. 6 committee. Pelosi had previously refused to seat two of the five, after which all were pulled from consideration. McCarthy, in response, had called Pelosi’s move “an egregious abuse of power.”
The joint session of Congress on Jan. 6, 2021, was temporarily interrupted when a sizable group of protesters entered the Capitol building and its surrounds. Outside were thousands of other mostly peaceful protesters who had gathered in Washington on the day to express concerns about election integrity.
A total of five deaths were recorded in the immediate aftermath of the Jan. 6, 2021 incident. Three of the deaths were ultimately determined to be natural causes, one of the deaths was ruled a homicide due to actions of a Capitol Police officer, and the remaining death was ruled as an accident, but video unsealed in December 2021 suggested that the person was struck by a police officer prior as she lay unconscious near the Capitol building.
As of late December, more than 900 individuals have been dealt charges by the DOJ, accusing them of having committed federal crimes on Jan. 6, 2021. More than 480 of them have pleaded guilty to one or more charges.
More than half of House Republicans didn’t attend Ukrainian President Volodymyr Zelensky’s Wednesday night address to Congress, The Hillreported on Thursday.
According to The Hill, 86 out of 213 House Republicans were at the Capitol for Zelensky’s speech. While some of the absences could be explained by lawmakers getting an early start on Christmas travel, as about a third of House members had active letters to vote by proxy on Wednesday, there is growing opposition to the policy of arming Ukraine among Republicans.
Ahead of Zelensky’s address, Rep. Thomas Massie (R-KY) wrote on Twitter that he would not be attending the speech of a “Ukrainian lobbyist.” Some Republicans that attended the address were spotted sitting during moments when the rest of Congress was giving Zelensky a standing ovation, including Reps. Matt Gaetz (R-FL) and Lauren Boebert (R-CO).
After the speech, Boebert said in a video posted on Twitter that she wouldn’t support “sending additional money to this war” until “Congress receives a full audit of where our money has already gone.”
Gaetz released a statement that said Zelensky “should be commended for putting his country first, but American politicians who indulge his requests are unwilling to do the same for ours.” Gaetz said the speech did not change his stance on “suspending” aid to Ukraine.
Rep. Warren Davidson (R-OH), who attended the address, said the speech sent the wrong message. “We should be focused on trying to contain the war, not expand the war. And this kind of sends the message we’re kind of OK with expanding the war. And I think we should be sending a different message,” he said.
Massie, Boebert, Gaetz, Davidson, and 53 other House Republicans all voted against the $40 billion Ukraine aid bill that was passed back in May. Since then, new aid for Ukraine has been rolled into other massive spending bills, including the new $45 billion that was packed into the $1.7 trillion omnibus bill the Senate passed on Thursday.
Meanwhile, the Neocons are trying to police the Right…
While there is some dissent among Republicans, the majority of GOP members in Congress still support arming Ukraine, and Republican leadership is extremely hawkish on the issue. Rep. Michael McCaul, who is expected to lead the House Foreign Affairs Committee next year, has criticized President Biden for not sending Ukraine more advanced and longer-range weapons.
Senate Minority leader Mitch McConnell (R-KY) said this week that arming Ukraine was the “number one priority” of most Republicans in Congress as he celebrated the $1.7 trillion omnibus bill.
US Durable Goods Orders Plunge In November, Biggest Drop Since COVID
Following a plunge in Leading Economic Indicators (offset by the unexpectedly strong revision to GDP), US Durable Goods Orders tumbled 2.1% MoM in preliminary November data (considerably worse than the 1.0% drop expected)….
Source: Bloomberg
That is the biggest MoM drop since the COVID lockdowns and slowest YoY growth since Feb 2021.
Non-defense aircraft & parts fell 36.4%, while defense aircraft & parts declined 8.6%.
Non-defense capital goods shipments ex-aircraft, which feed directly into GDP calculations, declined by 0.1%.
Rising economic uncertainty and rapid Fed rate hikes are revealed in softening capex intentions, which indicate that a soft patch likely lies ahead…
Source: Bloomberg
…and one wonders if this is the start of a trend in orders as ISM Manufacturing (sentiment) is collapsing?
Oil Jumps After Russia Threatens To Cut Output In Response To Price Cap
After two weeks of silence in detailing how it would react to the G7 oil price cap, overnight the Kremlin raised the stakes for the west when state-run Tass news service quoted Deputy Prime Minister Alexander Novak as saying that Russia may reduce output by 500,000 to 700,000 barrels a day in response to the cap.
While not yet formalized, President Putin plans to sign a decree on the nation’s reaction to the threshold on Monday or Tuesday, containing unspecified “preventive measures.”
“A risk-on sentiment and a weaker US dollar are helping oil today,” said Giovanni Staunovo, a commodities analyst at UBS Group AG. “The Russian comments are also helping but the market probably wants to see it before it believes, hence a muted response.”
As the war in Ukraine grinds on, traders have been waiting for Moscow’s full response to the cap, a policy that imposed a $60-a-barrel ceiling on Russian crude in a bid to reduce the Kremlin’s income while keeping exports on the market. While the policy has largely worked so far, with Russia’s popular Urals oil trading below $60 due to sharp discounts to Brent, as the price of oil rises, Urals will also rise above the critical threshold potentially depriving the world of million in barrels of daily supply.
And speaking of prices, WTI rose more than $2 on the news, while Brent was above $83 despite pervasive global recession fears. The gains meant WTI was set to post its second consecutive weekly gain.
As reported earlier this week, there already had been early signs the cap is impeding Russian oil flows, an impact that would run counter to its stated aims. In the first full week after the limit came into effect on Dec. 5 — in tandem with a European Union ban on seaborne Russian imports and curbs on insurance — total volumes shipped from the nation sank by 54%, tanker tracking compiled by Bloomberg showed.
The threat of Russian output cuts comes as China’s rapid shift from Covid Zero has bolstered the demand outlook next year, even though the swift shedding of curbs has been disruptive. With cases spiking, several measures of mobility including traffic congestion in major cities, subway usage and the number of domestic flights have slumped. That said, the country is also easing quarantine rules for air travel, which should boost consumption and oil demand should surge in a few weeks when China builds up natural immunity to the disease even it admits is no riskier than the common cold.
Meanwhile, with Biden’s politically-mandated SPR drain ending, data this week showed a drop in commercial crude inventories, with nationwide holdings at their lowest for this time of year since 2014. Traders are also watching for any fallout for energy markets from a vicious winter storm that’s pummeling parts of the country.
“There is now a high likelihood that the Biden administration will gear up oil purchases heading into the new year,” said Ole Hvalbye, an analyst at SEB AB. Good luck keeping the price of oil below $95 which is the blended average sale price from the SPR.
In the physical market, the prompt time spread in WTI futures was 13 cents a barrel in backwardation, a bullish pattern in which near-term prices are higher than later-dated ones. A week ago, it was 17 cents a barrel in an opposite bearish contango. In other words, the bottom for the oil market is now in the rearview mirror, just as we expected.
Russian Defense Minister Sergey Shoigu on Wednesday unveiled a plan to increase the size of Russia’s military to 1.5 million troops, an initiativebacked by Russian President Vladimir Putin.
Russia had about 1 million troops in its army at the beginning of the year, and the number was supposed to reach 1.15 million next year, but Shoigu said a further increase is needed to “guarantee the fulfillment of tasks to ensure Russia’s security.”
The increase would constitute a boost to the armed forces’ size by more than 30% if approved and enacted.
One reason for the increase that Shoigu cited was Sweden and Finland’s potential NATO membership. He said if the two Nordic nations joined the Western military alliance, Russia would have to deploy “the corresponding group of forces” to northwestern Russia.
Putin and other Russian officials have previously said that he doesn’t view Finland and Sweden joining NATO as much of a threat as Ukraine’s prospective membership, but they said Moscow would respond to the expansion of NATO military infrastructure.
Finland has an over 800-mile border with Russia, an area that will likely be reinforced by Moscow if Helsinki is admitted into NATO.
Back in September, Putin ordered the mobilization of 300,000 fresh troops for his war effort in Ukraine, and Russia has been reinforcing its positions along the frontlines in Ukraine.
Another mobilization is possible, but at this point, there’s no sign Putin hasn’t made a decision to call up more troops, and Russian officials say the current numbers are sufficient.
While Europe managed to fill its gas storage ahead of winter this year, it will have to import huge amounts of LNG in a competitive market to survive next winter.
The next 12 to 24 months will be critical in establishing whether Europe can stave off a long-term energy crisis.
According to the IEA, if Russian gas supply drops to zero and Chinese LNG demand hits 2021 levels, the EU could have a supply-demand gap of 27 billion cubic meters in 2023.
Despite successfully filling its gas storage ahead of winter this year, Europe’s energy crisis is far from over. The situation for Europe could, in fact, be worse next winter when Russian pipeline gas supply will be down to a trickle, at best.
European households and businesses have already seen a rise in total energy costs by $1.06 trillion (1 trillion euros), according to estimates by European economic think-tank Bruegel published by the International Monetary Fund (IMF). According to Bruegel’s analysts, if governments in Europe do nothing except offer financial support, and if they cover the price increases, this sum would represent a massive 6% of the annual GDP of the EU.
“Massive government support could delay adjustment to a new price equilibrium and create the need for even more support,” Bruegel’s experts say.
Instead, the EU needs a “grand bargain” to encourage savings and increase supply at the same time.
The next 12 to 24 months will determine whether Europe will be able to cope with the energy crisis without having to resort to mandatory rationing or without losing too much industry competitiveness.
Europe’s energy systems were already put to the first real test this month amid an Arctic blast that swept through most of northwestern Europe, bringing freezing temperatures, snow in the UK, and depressing wind speeds in Germany.
Natural gas storage sites in the EU started to drain, with storage at 84% as of December 17, according to Gas Infrastructure Europe. Inventories are higher than at this time last year, but the true test for Europe will come next year when it will have to refill gas storage sites adequately enough to meet the 2023/2024 winter demand.
This is where the planning becomes trickier, depending on how low inventories will be after this winter and whether the EU has the capacity to haul in continued record volumes of LNG and continue outbidding Asia, especially if demand in China rebounds after a reopening from strict Covid curbs.
With lower gas consumption and not much Russian gas flowing via pipelines, the EU has continued to cut its dependence on Russia, from around 40% of imported gas supplies before the Russian invasion of Ukraine, to less than 9%, according to EU figures from September.
However, the significant drop in Russian gas supply this year occurred only in June.
Ahead of winter 2023/2024, the gap in gas supply in Europe will be much wider without Russian gas. Europe will not be importing much Russian gas—or none at all if Russia cuts off deliveries via the one link left operational via Ukraine and via TurkStream—compared to relatively stable imports from Russia in the first half of this year before Moscow started gradually cutting volumes via Nord Stream in June and then shut down the pipeline in early September.
According to a recent report from the IEA, if Russian gas supply drops to zero and Chinese LNG demand rebounds to 2021 levels, the EU could have a gas supply-demand gap of 27 billion cubic meters in 2023.
With the plunge in Russian pipeline gas deliveries, Europe will need “huge volumes” of LNG next year, commodity trader Trafigura said earlier this month.
“Looking forward, we expect gas and LNG markets to remain volatile,” Trafigura said in its annual report for the year to September 30.
“While Europe should avoid a blackout this winter by drawing on inventories and cutting demand, it will need to import huge volumes of LNG in 2023 given the massive reduction in flows from Russia,” Trafigura said.
Natural gas prices in Europe will have to remain elevated so that the continent can continue to attract most of the LNG cargoes in competition with the other key demand centers, according to Trafigura. The commodity trader expects Europe to prioritize the security of supply “through next winter and beyond.”
Huge uncertainties with weather and the EU’s ability to compete with a potential increase in LNG demand in Asia will determine how Europe will fare next winter.
“Behind us now are two months of ‘buyer’s market’ with peak inventories, warm weather, a long queue of LNG ships, and depressed TTF prices,” commodity analysts Ole Hvalbye and Bjarne Schieldrop of SEB Bank said in early December.
“Ahead of us is the huge Q1 uncertainty and at least 12 months of ‘seller’s market’ as the race is on to fill EU nat gas inventories to a satisfying level by October 2023.”
