Gasoline Stimmies: This Is How You Return To A 70’s-Style Wage-Price Spiral

I have to repeat yet again that this is not just a war but an economic war, and not just a crisis but a metacrisis. As such, the latest attack from Moscow was always obvious to those expecting both sides to deliberately hurt the other while strengthening their own geostrategic position: using Russian energy as a weapon against Western sanctions.

Russia’s key Caspian oil pipeline is to be closed “for repairs” that will last two months, taking around 1mbpd out of circulation; but, eclipsing that, within a week Russia will demand payment in roubles for its gas from “hostile countries” – which means Europe.

Obviously, this is a breach of contract. Shock! Horror! Contracts might be broken! You think freezing FX reserves, sanctions, talking about naval blockades, proposing the introduction of letters of marque allowing privateers to seize Russian property at sea, as well as Russian forced nationalisations –to say nothing of blowing up civilians and threatening the use of nuclear weapons on state TV– is business as usual? Contract, shmontract.

Equally obviously, this has a benign interpretation and a grave one. The benign one is Europe will swap EUR for RUB and then give the RUB back to Russia for gas. Except that Putin is introducing this new radical measure because he says there is no point in selling Russian gas or oil for dollars or euros if he can’t spend them: they are funny money to him under sanctions. As such, the grave interpretation is Putin attempting to get his own funny money accepted as equivalent to the dollar and euro, even if it is managed by a central bank where everyone is either quitting or trying to quit, and as the last remaining Russian liberal, Anatoly Chubais, leaves both the Kremlin and the country in opposition to the war. – READ MORE