Diary

Dealing With Putin: Fracking and Hacking

Vladimir Putin has allegedly tried to interfere in the American presidential campaign by hacking DNC and John Podesta e-mails and publishing them in an effort to: (take your pick) (1) just be a jerk, (2) undermine faith in the electoral process, (3) undermine faith in American democracy, (4) he favored Donald Trump, and/or (5) he hated Hillary Clinton and doesn’t care who is President of the United States. Whatever the reason, the intelligence community and the FBI have spoken. In response, Obama expelled 35 Russians from the US and closed down two Russian operations centers in the United States. Perhaps there is more that we don’t know, but that is where it stands now.

In the 1980’s, President Ronald Reagan viewed the Soviet Union as the greatest threat to American security and world peace and with good reason. His opposition to the Soviet Union was ideological, not personal which is the case with Putin and America. As a result, he fought the Cold War like a warrior using every means at his disposal. Perhaps the greatest weapon in the American arsenal was his mind and American economic clout.

Although derided at the time and laughed at by “experts,” Reagan initiated the Strategic Defense Initiative (SDI), or as it was derisively called, “Star Wars.” Whether the United States ever truly intended to develop a space-based anti-ballistic missile system is moot at this point. The Soviet Union believed it and in their zeal to catch up basically laid the economic seeds for bankruptcy in an already economically-struggling country. The end result is that economic reality, not space-based platforms with lasers brought down the Soviet Union and Communism throughout Eastern Europe.

Today, the United States should heed the unspoken strategy of the Reagan years. Despite a lagging economy in the United States, Russia cannot hold a candle to our’s. The reason is simple and it is their Achille’s heel. This is a country with negative economic growth where consumption is down almost 10% and investment down 7.6%. Industrial production has slacked off 3.6% in Russia. Retail sales are down another 10% and they have an inflation rate of anywhere from 12-15%. Perhaps the only positive economic news for Russia is that they have a positive trade balance.

Some of the bad news in Russia is due to sanctions imposed in the aftermath of Putin’s dalliance in the Crimea and eastern Ukraine. Some of these sanctions have blocked Russia from important international credit markets. But perhaps the biggest reason for their plight is the drop in oil and natural gas prices on the international market. It is a known fact that 70% of Russian exports are gas and oil and they derive 50% of their government revenue from this source. It is also a known fact that Russia has been vehemently opposed to competing pipelines that move oil over non-Russian soil from former Soviet republics. And finally, it is a known fact that Russia and Putin have used these pipelines and their oil and gas to essentially blackmail Central and Western European countries by threatening or actually cutting off gas and oil supplies in order to curry political gain.

Meanwhile, assuming jackasses like Yoko Ono and protesters in North Dakota would just shut up and go away, the United States is enjoying an energy boom and it could get better. It is estimated that 67% of the natural gas used in the United States is the result of fracking. More importantly, the Energy Information Agency predicts that the United States has not even reached its potential in natural gas extraction. Thus far, the majority of natural gas extraction has occurred in the lower 48 states, but there are huge untapped reserves offshore for the waiting.

Secondly, despite the move away from coal as a source of energy, the United States sits on some of the world’s largest reserves. Even if we or Europe are unwilling to use coal, there will be a market for it in the developing world. For example, a country like India or an emerging African country needs to ask themselves whether they want a cheap source of energy, or do they want to fall in line with the UN and climate change activists and risk economic growth.

The United States also sits on some of the world’s largest uranium reserves (some that Clinton “sold” to the Russians by the way; that is a fact, not “fake news”). If this country committed to more nuclear energy (which would require the Ralph Naders of the world to take a long walk on a short pier), the United States could become a net exporter of energy.

Seventeen European countries rely on Russian natural gas for greater than 50% of their consumption needs according to the European Union. Fourteen of those countries are not economically well off as they transition to capitalism. But imagine if the United States was to enter the European energy market at a premium for these countries where they would be made less reliant on Russian imports. In response to the falling energy prices, Russian devaluation of the ruble allowed companies like Gazprom and Lukoil to avoid financial disaster. But, these moves come at a price to the Russian government which loses out on much needed revenue to finance their military build up and dalliance in foreign affairs in the Ukraine, Syria and elsewhere, and also their intelligence hacking abilities.

By taking full advantage of the natural resources with which God blessed this country coupled with energy-based economic “warfare” with Russia by undercutting their prices (nations are consumers after all), the United States can send a clear and convincing message to Russia and Putin that is more effective than a lecture and the expulsion of 35 Russians with diplomatic credentials.

Just as SDI helped bring down the Soviet Union and discredited Communism in Europe, American energy can put Russia in its place and at a minimum teach Putin a valuable lesson, if not topple him. Obama lacked the balls given his tether to the environmental lobby and his stated belief that climate change is the greatest national security threat facing the country. Let us hope Trump and his collection of billionaires and generals know how to wage economic war.