Russia - General Discussion.

SolarisKenzo

Active Member
Price cap in both gas and oil Is a matter difficult to solve in Europe.
France, Italy, Spain or Greece are worried about the price.
Germany, Belgium, Netherlands or Hungary are worried about not having enough to power their plants.

Kind of a difficult situation to solve of you are in democracy...
 

Ananda

The Bunker Group
Caping prices on Russian Hydrocarbon is desperate Political ideas, and from market point of view is counter productive to the consumers, especially Euro Zone. No wonder the idea support coming from US or those in Euro zone that are not or less depends with Russian Hydrocarbon.

Hydrocarbon at this time around and coming to Winter is Sellers/Suppliers market, not the other way around. You can call for price cap 'if' you're in Buyers/Demands side market condition. This is market rules 101. That's why market always bit 'laugh' on this West Political ideas coming from Biden on caping Russian Hydrocarbon. Laugh because it will bite back towards Euro customer.

So far nobody else outside collective west even seriously think joining this ideas on caping Russian Hydrocarbon. Thus Russia can sell to anyone else, and Euro zone either will find more expensive suppliers or has to bite their own tounge and swallow Russian prices.

Again if the condition of the market is reverse on buyers market, then the situation is different. However no one in the market especially in commodities market see that happening even few years in future. Energy market seems set to be Sellers market for sometime.
 

Vivendi

Well-Known Member
A "war tax" doesn't limit the price paid to Russia, it just links aid to Ukraine to purchases from Russia.
I was thinking that since the oil market is global, Russia would have to lower the price by approx. 30% to get sales in the countries having the "war tax". Unless Russian oil quality is superior. Nobody would pay a higher price for a product if the quality is the same. I guess the main risk would be if other oil producers decided to increase the price, but my thinking was (again) that the oil market is global and therefore they would find it difficult to increase the price in some markets but not in others.

Of course, one effect of this could be that Russia would strive to sell to countries not having the "war tax" to avoid reducing their prices to stay competitive, probably meaning that less Russian oil would be sold in countries having the "war tax". But that would also be considered not a negative since one wants to reduce purchase of Russian oil anyway.

First 6 months of 2022, 80% of cars sold in Norway were electric. The main reason was that fossil fuel cars were heavily taxed, whereas electric cars are exempt from tax. Meaning that the price difference between electric car and fossil car is quite small in Norway. Throw in a few more incentives and people rush to buy electric cars, even if many of them still have a lower range than what most people find comfortable especially in a cold country like Norway (range drops dramatically when it's cold). Nybilsalget første halvår 2022: God elbilutvikling kan bremses av bompengeforslag | Norsk elbilforening (ntb.no)
(I myself got a Tesla model 3 and I love it -- great car and annual operating costs much lower than for fossil car.)
 
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tl1000r

New Member
I guess the main risk would be if other oil producers decided to increase the price
nobody can just decide, as Ananda said earlier the market regulate the price. If the global quantity decreased so world prices will go higher!

First 6 months of 2022, 80% of cars sold in Norway were electric
From what recource Norway produce the electric energy? Please check it out before fast conclusions. If Norway not using fossil energy its not mean that other countries do the same or can do the same in the next future.

price difference between electric car and fossil car is quite small in Norway
if i remember correctly in USA part of electric car (tesla) cost donated by goverment. I think Norway goverment do the same. Li-Ion battery production and recycling cost still high and kill all benefits of electric cars.
 

Vivendi

Well-Known Member
From what recource Norway produce the electric energy? Please check it out before fast conclusions. If Norway not using fossil energy its not mean that other countries do the same or can do the same in the next future.
You miss the point. Sales of electric cars in Norway was just an example on how the use of taxes can influence buying decisions -- quite significantly.
 

tl1000r

New Member
I think it's bad example. Trade wars and stimulating of electric cars selling for better ecology in the big towns too different things in context of war tax for Ukraine. In other words all that taxes in war context mean that people will pay it by self after energy cost goes higher and higher. Lets see how so much praised here democracy countries will manage it during the time.
 

John Fedup

The Bunker Group
I was thinking that since the oil market is global, Russia would have to lower the price by approx. 30% to get sales in the countries having the "war tax". Unless Russian oil quality is superior. Nobody would pay a higher price for a product if the quality is the same. I guess the main risk would be if other oil producers decided to increase the price, but my thinking was (again) that the oil market is global and therefore they would find it difficult to increase the price in some markets but not in others.

Of course, one effect of this could be that Russia would strive to sell to countries not having the "war tax" to avoid reducing their prices to stay competitive, probably meaning that less Russian oil would be sold in countries having the "war tax". But that would also be considered not a negative since one wants to reduce purchase of Russian oil anyway.

First 6 months of 2022, 80% of cars sold in Norway were electric. The main reason was that fossil fuel cars were heavily taxed, whereas electric cars are exempt from tax. Meaning that the price difference between electric car and fossil car is quite small in Norway. Throw in a few more incentives and people rush to buy electric cars, even if many of them still have a lower range than what most people find comfortable especially in a cold country like Norway (range drops dramatically when it's cold). Nybilsalget første halvår 2022: God elbilutvikling kan bremses av bompengeforslag | Norsk elbilforening (ntb.no)
(I myself got a Tesla model 3 and I love it -- great car and annual operating costs much lower than for fossil car.)
Fortunately for Norway, lots of NG and hydroelectrical generation to recharge EV. Other markets aren't so fortunate. Canada has federal incentives for EV and some provinces have even larger ones. Most Toyota plug-in EVs go to BC which offers the biggest provincial incentive.
 

Vivendi

Well-Known Member
Fortunately for Norway, lots of NG and hydroelectrical generation to recharge EV. Other markets aren't so fortunate. Canada has federal incentives for EV and some provinces have even larger ones. Most Toyota plug-in EVs go to BC which offers the biggest provincial incentive.
This is OT, but countries without hydroelectric should really build nuclear powerplants, ASAP. There is a huge need in Europe, and probably also North America. Mass production would lower costs. Plenty of cheap electricity would become available.
 

John Fedup

The Bunker Group
This is OT, but countries without hydroelectric should really build nuclear powerplants, ASAP. There is a huge need in Europe, and probably also North America. Mass production would lower costs. Plenty of cheap electricity would become available.
True enough. Hopefully SMR technology works out that would make nuke power more feasible for many nations. Leave it at that and we better get back on topic before the mods wack us.
 
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The EU is asking it's members to accept a $60 dollar price cap on Russian oil in an attempt to "squeeze Russia's oil revenues":

EU Asks Members to Set Russia Oil-Price Cap at $60 - WSJ

To me it would make more sense to add a "war tax" on Russian products imported into EU, e.g., 30%. The "war tax" would be put on top of the regular price and all of it would be redirected to Ukraine, for non-military purposes only.

This would both "squeeze Russia's oil revenues" and also, if anything is sold, provide extra financial support to Ukraine. They need a lot of humanitarian aid, as well as rebuilding critical civilian infrastructure.

What would be the downside of adding a "war tax" instead of a price cap? I can't think of any, but I suspect there might be some things?
Many nations essentially have 'war taxes' (Tariffs) in place implemented in months following the February invasion. The US, UK and Australia have implemented a 35% tariff on most/all Russian goods that are not outright banned:

Proclamation 10420—Increasing Duties on Certain Articles From the Russian Federation | The American Presidency Project
https://www.gov.uk/guidance/additional-duties-on-goods-originating-in-russia-and-belarus
https://www.foreignminister.gov.au/minister/marise-payne/media-release/australia-impose-tariff-increases-all-imports-russia

Punitive tariffs have an advantage over a price cap in that they can raise revenue, provide a soft cap that can adjust to dramatically different market conditions, and still have the effect of making trade more difficult and likely less profitable for the targeted nation.

However, when wealthy nations apply punitive tariffs to hydrocarbons or other commodities with inelastic demand, this increases inflation for the nation applying the tariffs, as the companies and citizens of the purchasing country must either:
1. Continue to buy the commodities anyway, paying an additional tax to their government
2. Buy from an alternate supplier, by outbidding market price and paying more in transport/shipping due to sudden market distortions. This will come at a premium and could increase the global market price by a smaller margin. This is the same effect as a ban.
2(a) - The targeted can reduce harm to its economy by selling to other market participants at a discount (EG. India, China.) - doing so reduces inflation in those other market participants. The global inflation caused by distortion has some effect in reducing the impact of having to sell to certain players at a discount. However it too is still harmed.

Applying a price cap would be much less flexible. Depending on where the cap sits in relation to 'market' rate, it can become:
1. An effective ban if the cap is too low. This results in an alternate supplier approach per 2 and 2(a) above.
2. Irrelevant if the cap is too high. If the cap is at or higher than market, there is no effect.
3. A potential forced discount by the seller, if targeted correctly. However this is almost a negotiated discount outcome, similar to the way India and China are already buying Russian energy at a steep discount.

The US and Australia have already banned the import of Russian Oil, and the UK and EU had been in the process of implementing a full ban across December 2022 to Feb 2023.

EU sanctions against Russia explained

If the G7 & EU proceed with a price cap mechanism and give themselves permission to proceed with buying oil at a set limited price, then these nations could take advantage of some of the inflation reducing effects that other buyers have been enjoying;

https://www.washingtonpost.com/business/energy/putins-few-oil-buyers-demand-deep-discounts/2022/11/27/

So the current price cap might not significantly harm Russia, and if the G7 decides to go back to buying Russian oil then Russia's price negotiations actually get stronger. But the change could help Europe, and reduce inflationary impacts across the affected countries.

I was thinking that since the oil market is global, Russia would have to lower the price by approx. 30% to get sales in the countries having the "war tax". Unless Russian oil quality is superior. Nobody would pay a higher price for a product if the quality is the same. I guess the main risk would be if other oil producers decided to increase the price, but my thinking was (again) that the oil market is global and therefore they would find it difficult to increase the price in some markets but not in others.

Of course, one effect of this could be that Russia would strive to sell to countries not having the "war tax" to avoid reducing their prices to stay competitive, probably meaning that less Russian oil would be sold in countries having the "war tax". But that would also be considered not a negative since one wants to reduce purchase of Russian oil anyway.

First 6 months of 2022, 80% of cars sold in Norway were electric. The main reason was that fossil fuel cars were heavily taxed, whereas electric cars are exempt from tax. Meaning that the price difference between electric car and fossil car is quite small in Norway. Throw in a few more incentives and people rush to buy electric cars, even if many of them still have a lower range than what most people find comfortable especially in a cold country like Norway (range drops dramatically when it's cold). Nybilsalget første halvår 2022: God elbilutvikling kan bremses av bompengeforslag | Norsk elbilforening (ntb.no)
(I myself got a Tesla model 3 and I love it -- great car and annual operating costs much lower than for fossil car.)
You're exactly correct on the effect of taxes on buyer behaviour, where appropriate (though more expensive) replacements exist - in this case reducing the competitiveness and hence profit of the targeted seller.

But essential commodity demand is less elastic. Humans across the globe want to be able to drive to work, heat their homes, and have goods trucked into their supermarkets so they don't starve. And we'll pay anything required to make that happen - meaning prices go up the less efficient the market runs.

Other market players are not interested in supporting the West in correcting for this problem with increased hydrocarbon production:

OPEC+ to consider deeper oil output cuts ahead of Russia sanctions and proposed price cap

Personally I think the price cap plan is partly a way for the West to save face and appear to be doing something 'harsh' while actually backtracking what they have been committing to, realising that the market distortion was going to hurt them more than Russia. This also may allow the west to get in on some of that sweet sweet oil discount the Easterners have been enjoying.

Phew. I hope this helps, and not a Wikipedia link in sight! ;)
 

Ananda

The Bunker Group

Whether G7 Price Cap or this plan Russian counter move on Price Floor, actually both will not matter much. As both action no more then 'vain' political move. Vain as USD 60 price cap actually already higher then what Russian sell most to India and China (at discount). Vain also as Russia still not getting more new market in Asia yet. Russia thus also trying to get to other Asian market, with their own Russian Tankers fleet (in order to by pass punitive Western Insurance costs). Mostly with insurance brokerage on other non western market.

USD 60 price also mostly the prices in Russian 'gray' market transaction. Gray as this is happen in middle of International waters from one tanker to another. There's other way arounds for Russian to sell their Hydrocarbons. There're also markets that want to get Russian Hydrocarbon. China potentially relaxing Covid restrictions plus Northern hemisphere winter will projected increase demands for Hydrocarbon. Especially if winter getting colder then what anticipated as relatively milder winter.

Energy market will continue to be predicted as Sellers/Suppliers market and increasingly with inelastic tendencies toward one sided (suppliers) benefits. No suppliers so far want to increase production from existing set up capacities limit. So it is counterproductive to disrupt already increasingly one sided suppliers market trend.
 

SolarisKenzo

Active Member
Off-topic political post
Text by tl1000r deleted for trolling after he was warned, repeatedly.
Your question is clearly political and slanted, but I will anyway answer with my view of things. [Mod edit: Red text warnings have been issued against further thread derails — do not contribute to this problem. If you continue to reply to political posts, with further discussions on politics (instead of following forum rules), you will also be banned.]

A superpower, like the US or PRC, defends itself by making potential rivals harmless.
This means that a superpower has the need to be able to project force using overseas bases and hubs located in puppet states ( or allied states ) deterring the enemies from changing the status-quo ( that is by definition a good thing for a superpower, except when 2 superpower confronts each other ).
The fact that Russia has a similar GDP to Spain and that they are an economic dwarf ( while still being a geographic giant ) does not prevent them from having an aggressive foreign policy, exactly like the US, with the difference that the US, being a superpower, can afford to gamble and play an aggressive role.
China is something else I cant really explain here...
So, why should USA and EU spend 1000 Billions dollar in defence a year?
To defend themselves.
They must defend themselves by showing such superiority as to discourage anyone from opposing their decisions.
And to be able to influence their neighbours...
 
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Vivendi

Well-Known Member
Europe spent in 2022 more or less 1/3 of USA military budget ( 270 billions vs 800 billions ), but has roughly 1/10 of US capability.
Are those EUR or $, do you include the UK, and what is your source? EU spending in 2021 was EUR 214 billion, 6% growth compared to 2020 according to EDA: European defence spending surpasses €200 billion for first time (europa.eu)

I have not seen estimates for 2022 yet.

European defence spending is a mess, no doubt about it. A lot is due to nationalist politics as you allude to. Nobody wants to give up their national industries. However things are now starting to improve, partly triggered by the war in Ukraine.

Things started also to improve even before Russia's latest invasion in Ukraine. E.g., in 2021, Member States allocated €7.9 billion to European collaborative defense equipment procurement projects, almost double the €4.1 billion recorded in 2020.

Russia's invasion of Ukraine seems not to stop any time soon, and I hope this will keep motivate Europe to start building more sensible defense structures.
 

SolarisKenzo

Active Member
Are those EUR or $, do you include the UK, and what is your source? EU spending in 2021 was EUR 214 billion, 6% growth compared to 2020 according to EDA: European defence spending surpasses €200 billion for first time (europa.eu)

I have not seen estimates for 2022 yet.

European defence spending is a mess, no doubt about it. A lot is due to nationalist politics as you allude to. Nobody wants to give up their national industries. However things are now starting to improve, partly triggered by the war in Ukraine.

Things started also to improve even before Russia's latest invasion in Ukraine. E.g., in 2021, Member States allocated €7.9 billion to European collaborative defense equipment procurement projects, almost double the €4.1 billion recorded in 2020.

Russia's invasion of Ukraine seems not to stop any time soon, and I hope this will keep motivate Europe to start building more sensible defense structures.
As you correctly pointed out, I forgot to write $.
Numbers are more or less, and taken from a conference I had the opportunity to watch some weeks ago.
They were probably in excess, but it was to give the idea...

link to the video ( its in italian/english... )

Things started to improve, yes, but not even close enough...
 

swerve

Super Moderator
This Is the result of egoistic and weak european politics from the end of cold war to today.
The end of the soviet Union was a good opportunity for Europe to unite and become Independent from US, Russian and Chinese influence.
European countries alone are insignificant compared to superpowers, but nationalist egoism Is preventing Europe from investing in a common defence policy, industry, and forces.
European countries are more focused on trashtalking eachother and letting the US ruling their countries for them...
The result Is total International insignificancy and incapability of becoming Independent in politics and defence.
Hopefully this war will hit Europe hard enough for their leaders to understand that they are actually the problem...but I doubt.

Europe spent in 2022 more or less 1/3 of USA military budget ( 270 billions vs 800 billions ), but has roughly 1/10 of US capability.
This Is what you get when you dont understand...
2022 isn't over yet, & nobody knows yet what total defence spending will be. In 2021, NATO Europe (excluding Turkey because most of it's not in Europe but including Finland & Sweden because they were already closely linked to NATO) spent about $297 billion, & there have been big increases by some countries this year, a lot of it additional spending which wasn't in the original 2022 budgets.

Your figure for US spending matches actual US spending for 2021, so should be compared with European spending for that year.
 

SolarisKenzo

Active Member
The point of my message werent the numbers, that are purely used as an example.
The point Is that Europe Is an economic giant and yet politically insignificant.
Unity Is strenght.
Even if european countries double their spending next year, the wont solve anything.
Its not about spending more, Its about spending Better and spending together.

But thats probably just my view, Who knows...
P.s.
You are both right and the numbers are actually 220 Billion dollars vs 800 in the year 2021.
 

swerve

Super Moderator
The point of my message werent the numbers, that are purely used as an example.
The point Is that Europe Is an economic giant and yet politically insignificant.
Unity Is strenght.
Even if european countries double their spending next year, the wont solve anything.
Its not about spending more, Its about spending Better and spending together.

But thats probably just my view, Who knows...
P.s.
You are both right and the numbers are actually 220 Billion dollars vs 800 in the year 2021.
No, that number is wrong. NATO publishes the numbers (according to the NATO definition), & NATO Europe spent well over $300 billion in 2021. I made a mistake in my first post. I was looking at constant 2015 prices & exchange rates. At current prices, it was $324 billion - & that's not Europe, it's just NATO members in Europe. Finland & Sweden are in Europe & actively engaged in its defence & including them it was $337 billion.
https://www.nato.int/nato_static_fl2014/assets/pdf/2022/3/pdf/220331-def-exp-2021-en.PDF - Table 2, page 7.

$337 billion is a lot more than $220 billion, or even $270 billion. Where are you getting your numbers?
 

SolarisKenzo

Active Member
No, that number is wrong. NATO publishes the numbers (according to the NATO definition), & NATO Europe spent well over $300 billion in 2021. I made a mistake in my first post. I was looking at constant 2015 prices & exchange rates. At current prices, it was $324 billion - & that's not Europe, it's just NATO members in Europe. Finland & Sweden are in Europe & actively engaged in its defence & including them it was $337 billion.
https://www.nato.int/nato_static_fl2014/assets/pdf/2022/3/pdf/220331-def-exp-2021-en.PDF - Table 2, page 7.

$337 billion is a lot more than $220 billion, or even $270 billion. Where are you getting your numbers?
Latest News ,as posted also by vivendi.

I'm speaking of EU members.
UK, Turkey, Norway... are not in EU as you know...
Still the point is not the numbers... You can put whatever number you want, my message is political not mathematical.
 

Ananda

The Bunker Group
The fact that Russia has a similar GDP to Spain and that they are an economic dwarf ( while still being a geographic giant ) does not prevent them from having an aggressive foreign policy, exactly like the US, with the difference that the US, being a superpower, can afford to gamble and play an aggressive role.
For some time economist and people in market already debating which one is more appropriate to shown real economics size of a nation. Either GDP Nominal (usually in USD) or GDP PPP. So far the answer that many in market see is neither one, more combination of both. As the condition of a nation is differed to each other.

Simplyfied this, if a nation are more depends on Global Trade, most of their productions depends on materials sources from Global Production Chain, then Nominal GDP more appropriate to shown their economics size. However on the opposite, if a nation mostly source their productions domestically using their own production chains from front to end productions cycles then, they are more approprite to used PPP GDP to shown their economics size. This is related to how much the costs of similar type of productions not just costs of production and materials but also cost of manhours.

So especially in Military Industrial Complex it is more differed if we compare China and lesser extent Russia toward MIC of Collective West. The costs to build one Frigates in China and Russia (including all armaments and components) costs much less then what needed in collective west. However if emerging nations like India or Indonesia want to build their Frigates domestically it can turn out more expensives or at least in similar costs then build it in Euro yards.

Put it China and Russia vs India and Indonesia as example to shown the difference levels of domestication matter more then just the costs of manpower etc. Even tough all four have PPP GDP that more or less 3 to 4 times higher then Nominal ones. Simply because the level of domestication sourcing between China and Russia MIC are far higher then Indian let alone Indonesia ones.

This is what I'm saying in this thread for some time. If the embargoes able Russian MIC to sources domestically or from other non collective west their productions materials, then Nominal GDP comparison can not be use as guidance on how far the Russian MIC productivities level after the embargoes. Same thing can not be just shown Western Nominal GDP as comparison to how much they can produce more to emerging market productivities (which Russia and China included).

So comparing how much Collective West can put on their defense Budget compare to what China or Russia can put on theirs, definitely not going to shown comparable productivities output results. It is only shown west increasing their outputs, but not how much Russia or China can put on dollar to dollar base.
 

swerve

Super Moderator
Latest News ,as posted also by vivendi.

I'm speaking of EU members.
UK, Turkey, Norway... are not in EU as you know...
Still the point is not the numbers... You can put whatever number you want, my message is political not mathematical.
1, The EU is not Europe.
2. Nor is it particularly relevant to a military comparison of European countries with the USA.
3. The EDA (what the quoted number is for) does not (quite) include all EU members.
4. Your dollar figure does not use the exchange rate for the period referred to. It'd be $253 billion at the average rate for 2021.

It's perfectly legitimate to use imprecise but approximately right numbers in a discussion of general principles, but if you do so you should make it clear from the start both that your numbers are approximate, & what they refer to. After quibbling over precise numbers for some time, you've only now said what your number refers to. That affects your general argument, as well. Discussion of European disunity could reasonably be interpreted as covering non-EU members, such as the UK & Norway. Indeed, their non-membership is relevant to such a discussion.
 
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