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Erik Vynckier's avatar

The foolish decisions in Germany and the EU have made us more dependent on the USA.

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Dianne Carlson's avatar

John, Happy Monday!

I am surprised that the EU and UK to some extent had a failure to anticipate the the US strategic use of its economic dominance, guided very well by both Bessent and Miran. They, Miran, and Bessent and Trump played this well; with rapid negations and targeted concessions to exploit European dependencies. The US extracted significant investments and energy purchases, reinforcing its upper hand. The EU secured some wins zero tariffs on strategic goods. The surprise underscores a broader underestimation of Trump's willingness to disrupt global trade norms and the US is ability to dictate terms in a fragmented global economy. John, your explanations of this was excellent, as always.

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Kieran Wilson's avatar

She certainly got in lane, even adopting Trump’s terminology. And what a place to do it.

I am still genuinely curious who will end up shouldering the burden of this tariff policy. It is a shame the catalyst of panic has been defused. The EU had a rare chance to kick start proprietary defence capability and reduce dependency, but instead it settled for an increased GDP pledge sent straight to the US. Heads should be shaking and fingers checked for missing rings.

If Permian Basin LNG arrives in Germany in significant volumes, Merkel’s Energiewende has failed spectacularly. Are you watching, Mr Miliband?

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John Hulsman's avatar

I’d say Merkel’s energy policy has already failed spectacularly; this is merely a portion of the fallout. As for defense, as I said, the next 10- years will see US dominate whatever the outcome, be it continued reliance on the US or a more Euro-centric defense policy. In many ways, the deal is just the butcher bill coming due for the past 10 years of European policy failure

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Dianne Carlson's avatar

Negotiation's are tough, and Reality is more difficult to swallow at times ... Something that come's to my mind, and a favorite of mine, words from Mick Jagger, these echoed so well with me "you can't always get what you want, but... you get what you need.

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Kieran Wilson's avatar

“And in the end, the love you take is equal to the love you make.”

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Dianne Carlson's avatar

Absolutely a beautiful response, Kieran!I would not expect anything less from you:) Superb!!! You hit it! Now, I hate to go back to Dylan with my response, but I will ;" The times are a changein " so, me thinks:) (some Bad Grammer of course!) we better keep dealing and make sure the love keeps flowing...

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Dianne Carlson's avatar

On a after thought, Kieran, I understand love's got got balance out, so maybe I should have responded with David Bowie "lets Dance" with a call to cooperative momentum, to keep the deals moving , and maybe changes the in the future? But we are were we are at this moment,

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Misbah's avatar

Neither of you went for Dylan's "the answer my friend is blowing in the wind?"

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Dianne Carlson's avatar

Misbah, This musical banter I believe was a combination of personality/style, cultural and emotional resonance, creative expression and thematic to fit the trade context. Many lyric choices were available. It was just a creative freindly sparring.

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Erik Vynckier's avatar

A few years ago, I said: "Renewables are a Trojan Horse for gas!"

No one understood it, or maybe the ones to benefit from it feigned that they did not understand it.

Buffett invested in the Maryland LNG terminal while paying his democratic buddies to sponsor more wind shit by the taxpayers.

EnGie (a merger of Suez and "Gaz de France") signed all the contracts for pipelines and gas turbines.

Ineos bought the Danish North Sea gas from the clueless wind farms Oersted (formerly Dong: Danske Ol och Gas).

Statkraft and Statoil (Norwegian state companies, one now called EquiNor) found the production and generation capacity gaps and grid bottlenecks in the European power and gas grids and minted gold from it.

BASF just signed a long term contract with EquiNor to supply Ludwigshafen now that NordStream is not pumping (and the wind farms on the North Sea have been sold at a drastic loss: they were never any use for 24/7/365 chemicals manufacturing). We had been getting Gazprom since the 90ies. Ammonia factories have already shut down though (never to reopen).

Here's the final German genius: the Waermewende will install heat pumps everywhere. Those heat pumps require electric power which during the Dunkelflaute cannot come from wind or solar, therefore gasturbines. The heat pumps will make less out of the gas - power - heat pump supply chain than a simple gas boiler at home at a far higher supply chain complexity and cost.

Fool Miliband compelled Shell to sell the Sakhalin stake (which they built for Russia). Of course, Putin gladly recuperates the entire project at nil cost to him and Japan (Kita-Gas: "North-Gas") burns Sakhalin gas (which they themselves call Karafuto - it was Japanese occupied for a while) all winter long. You would die in Hokkaido without proper heating in the winter, it is snowed in November - April, I got married there during a snowed-in April.

High time for Shell and BP to escape to NYSE. Escaping the UK stamp duty is just the smallest benefit; the strategic benefits of rebasing in the USA would be huge. Exxon quadrupled over the past 25 years; Shell and BP are down over the past 25 years.

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John Hulsman's avatar

Long ago I played an energy war game for the Commission, where the (obvious, at least to me) outcome was; diversify supply, and see natural gas as the way to meet energy goals, both in economic and other terms. They hated the outcome, thanks me politely….and never had us back. I think about this often, at the forces pushing this form of economic suicide, who saw us off. But that doesn’t mean we were not right then, and are not right now

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Dianne Carlson's avatar

Erick, I needed to do a little research to understand much of your detailed post. Your call was on point, and is Even Truer Now with AI as the latest proof! Big Tech green talk was hot air., they lean on gas backed grids, and line the pockets of players getting rich on that. Buffet is crushing it as you said with his bet. Shell and PB are tanking with regulations, and Exxon is raking it in. AI is screaming gas and need for much much more energy, gas is not going anywhere. More power options across the spectrum is needed. Shell and BP need to ditch the UK, again as you indicated. Your calls on renewables spot on! And looks like Johns energy game was before its time for the Commission to understand.

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Kieran Wilson's avatar

Smart investment into Cove Point. If I remember rightly, it was upgraded to operate bidirectionally, becoming the first facility with export capability on the US East Coast. He surely wouldn’t have invested in a regasification terminal alone and must have seen the opportunity in export as the US transitioned into a net energy exporter. I had a line on that at the time. I recall the offtake agreement being quite a read.

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Erik Vynckier's avatar

He also bought the rail transport of Canadian oil.

How do you get very very wealthy?

You tell the (democratic) regulator to block a pipeline while buying the railroads that will (ineffectively) replace the pipeline.

As long as you pay less in campaign contributions than you make in profit, $$$...

Of course the Cove Point transport is effectively one-way: US to elsewhere. For as long as there is fracking.

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Kieran Wilson's avatar

Yes. I think the Algerians lost (no more imports into the terminal), and the US with Korean offtake partners won.

Cunning strategy. No value in the product if it can’t be delivered!

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Kieran Wilson's avatar

As for Canada, it has got itself into a fossil fuel pickle. Strong upstream and midstream capability but reliant on the US for the downstream bit. You can’t put syncrude into your car. This is where I think the tariff strategy will hurt Canada far more than the US. The tariff bites harder on a more valuable product.

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Erik Vynckier's avatar

If your own government works against you...

See: UK North Sea oil (compare to Norway).

See: Danish gas (compared to Norway again).

See: German chemicals, invented there (!) but hopelessly lost and cannot shut down quickly enough.

Here is the real hammer: once shut, impossible to reopen. The expertise and the organisation is lost. The supply services are all lost. The capable staff with a background in the matter are lost (they retire or move abroad). Impossible hill to climb.

The US will face that in steel. They need Nippon to bring fresh investments and resolve to the sector. Nippon Steel was blocked by Biden (and as a campaign promise by Trump too) from acquiring US Steel. A few weeks ago, Nippon acquired US Steel. Who else can put fresh life into it? Some Wall Street folk from Goldman Sachs and Blackstone or KKR are clueless. And frankly not even interested.

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Kieran Wilson's avatar

Yes, that seems an odd move from the administration on US steel. I guess they are looking for the Japanese to directly put their cash into it.

The Prax debacle here is a disgrace. Owners have allegedly fled the country. Can’t see Lindsey opening again, especially as P66 are next door.

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Erik Vynckier's avatar

We just saw the Opium War conclude this weekend.

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John Hulsman's avatar

That’s pretty accurate historically Erik, in the sense that the outsize pretensions of one side met the objective power realities of the situation. The psychological fallout will be fascinating

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Erik Vynckier's avatar

Note that the iron & steel industry is shutting down in the EU (& the UK): the Net Zero decarbonisation leaves the industry with the most uncompetitive steel in the world.

So, we need to import steel from China (55% world capacity) to manufacture the arms that are supposed to beat them (note, the USA is currently in the same situation).

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Kieran Wilson's avatar

Always helpful when your strategic rival lets you know what corners they have cut.

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Erik Vynckier's avatar

Note that pharma costs will be suppressed by MAHA and RFK Jr. Maybe a Pyrrhic "victory" for the EU.

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Erik Vynckier's avatar

AstraZeneca plans $50B investment in US, including massive plant in Virginia

https://www.borderless.net/news/life-sciences/astrazeneca-plans-50b-investment-in-us-including-massive-plant-in-virginia/?utm_id=62

Swiss Roche (Firma Hoffman La Roche) had already notified the White House of their $50 billion target for investments in the USA ahead of any agreement on tariffs.

Smith Kline Beecham has a head office in West London (on the way to Heathrow) but in all honesty, the CEO spends more time in the Philadelphia office as the USA is by far the biggest market.

Another case of a "UK" company making virtually all of its profit in the US. British Aerospace, Rolls Royce, BP, Shell... They all need to move their main listing and their head offices to the USA. Get rid of the LSE stamp duty and get rid of the pest coming out of Downing Street and Whitehall.

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Erik Vynckier's avatar

Let's have a look at the multilateral "GATT" (Global Agreement on Tariffs and Trade) rounds, chaperoned by the UN WTO (World Trade Organisation).

The Kennedy Round took 37 months.

The Tokyo Round took 74 months.

The Uruguay Round took 87 months.

The Doha Round started in November 2001 and has not yet concluded.

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Terri's avatar

You all know more than me, but I was reading about the EU and was surprised that the Maastricht treaty wasn’t signed until 1993, I thought the EU was much older.

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John Hulsman's avatar

Hi Terri, it was just the last stage in its development, The EEC has been around since the mid-50s

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Terri's avatar

Yes, I read that as well, just wondering why they “finalized “ it in the 90’s for lack of a better way to say it. I thought the world economy was solid at that time, so my thought was why?

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John Hulsman's avatar

The project has never been finalised per se; the technocratic European elite press their people for ever more centralisation, for ever more ‘Europe. It is almost a religious goal, rather than an immediate political one. It is ongoing and ever-lasting, whatever the rightfully nationalistic people of Europe actually think

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Erik Vynckier's avatar

There was an economic boom in the early 90ies from the fall of communism, German reunification and the Thatcher inspired "Single European Act".

The UK always saw the EU as a trading platform, a single market, but not a political union. Kohl and Mittérand saw it otherwise.

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Erik Vynckier's avatar

Maastricht = Mosa Traiectum = the crossing of the Maas river, where the Romans crossed over. They did not go much further north, after three legions were slaughtered by the Germans in the Teutoburger Wald, known as the Varus disaster, for the commander Publius Quinctilius Varus.

Utrecht, Dordrecht, Duivendrecht, Maastricht: the history survives in the place names.

The Romans cut short their drive north in my garden, which is consequently Dutch speaking (from Germanic languages), not French speaking (from Latin). 5 miles South, it's all French.

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Erik Vynckier's avatar

It started in the 50ies with the European Community for Coal and Steel with 6 countries: Germany, France, 3 BeNeLux (who got started earlier) and Italy and with Euratom (an early nuclear collaboration which succeeded best for France and Belgium, who built the same kit - PWRs from FramAtome).

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John Hulsman's avatar

Yes, to follow the alphabet soup. ECSC, to EEC to EU; but the euro-centric drive, Monnet’s functionalism, has always been drearily the same

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Erik Vynckier's avatar

Adenauer & De Gaulle agreed on this.

Jean Monnet & Robert Schuman (born a Letzebuerger who doubled up as French foreign minister) got it working. Schuman is the name of the borough and the railway station in Brussels where the European buildings clump together.

In a sense, Kohl & Mittérand modelled their relationship on Adenauer & De Gaulle. It was natural for Kohl, who had written his PhD on Adenauer and the rebirth of political parties after WWII.

The "ever greater union" had failed before on Charles V (I in Spain) who split his empire again and abdicated exhausted to a monastery in Yuste in Southwest Spain.

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John Hulsman's avatar

Yes, the tragedy for Europe in general and for Germany specifically as Henry the K put it, is that there is no one state that dominates the others, as the US does in North America. The problem is that Germany is too powerful to be just another European power, but not powerful enough to dominate the continent. Add to this, British Imperial policy through the centuries (always side with the second greatest set of powers to keep Europe divided, though the Armada, the Dutch, the Sun King, Napoleon, the Kaiser, Hitler, and Stalin) and you have a recipe for failed homogeneity. Ironically, this is precisely why I love the place, the diversity of cultures is what draws me

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Erik Vynckier's avatar

The far better position in Europe is not to be part of the EU.

Switzerland played it best by never joining (thanks to genuis Christoph Blocher of the nationalist SVP). It is a member of the 1-member multitnational organisation "EFTA" (they are the only member).

Norway is a loose associate member ("EEA" - "together with" Liechtenstein & Iceland) - some economic agreements normalising standards but not a participant in the EU or the Euro.

The Channel Islands Jersey and Guernsey are OECD and British Commonwealth but not UK.

Not surprisingly, the above is where you will find Europe's wealth and solid economic growth.

Turkey wanted to join (in the 90ies with starlet Tansu Ciller), but Erdogan has surely given up such ambition and will be all the better for it.

I advocate: Nexit, Vlexit, Dexit, Daxit, Frexit, Iexit, Spexit, Prexit, Svexit, Fexit, Plexit, Czexit, Slexit, Auxit, Roxit and Buxit. The sooner you get out, the better.

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Kieran Wilson's avatar

John, interesting observation about Spain’s relevance to the US. But should we underestimate their influence in Central and South America? Indirectly, it may be China’s thin end of the wedge into the Americas.

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John Hulsman's avatar

I’d say they matter far less than they used to; China on the other hand, has made great gains in the hemisphere while the US has been strategically napping for the past 50 years

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Kieran Wilson's avatar

I’d speculate China managed this largely through Spanish interested conduits already embedded across Latin America.

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John Hulsman's avatar

There’s less of this than you’d think; the Chinese do these things largely on their own, as they don’t trust others (and I think this is a flaw in their thinking) to further their direct aims. Yes, Spain is increasingly a problem for a united ‘West,’ but I wouldn’t overrate it, either

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Kieran Wilson's avatar

Interesting John. Thanks.

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Erik Vynckier's avatar

Keeping the regulatory structures in place in the EU, is another Pyrrhic "victory": it is a negative productivity shock for the EU.

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John Hulsman's avatar

Yes, it hurts them economically as overregulation is killing the place; even it is a tactical negotiating ‘win’

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Erik Vynckier's avatar

15% Trump - 0% Von der Leyen.

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Erik Vynckier's avatar

The EU Parliament (no less dysfunctional than the EU Commission) passed up the opportunity to kick Von der Leyen out just two weeks ago.

Von der Leyen (herself a DEI selection selected by DEI selection Merkel, Angela this time) selected in turn 5 more DEI women in the Commission for all key positions. Kaja Kallas mayor of Estonia being her candidate for global foreign relations and global policies. She thinks she is smart that way.

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John Hulsman's avatar

I admit Erik, Kallas is my new favourite object of scorn: moralistic, clueless, and as mayor of Estonia utterly unaware of any form of power reality.

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Terri's avatar

This surprised me…Estonia in the EU… again, why?

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Jens Nasstrom's avatar

And as such the perfect embodiment of a small European country.

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Erik Vynckier's avatar

15% is maybe pleasing as the UK is just 10%, the USA can keep up the (futile) appearance that it did ally UK a favour.

It may also allow giving Switzerland the "better" 10%.

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John Hulsman's avatar

Yes, I am sure Anglosphere types within the US decision-making world made precisely this argument about 15-10 percent; as ever with the Trump administration there is no line in terms of linkage between economic and geopolitical goals (which I entirely agree with)

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