The US And Europe May Have Just Sent A Ton Of Their Russian Business To China

china russia vladimir putin xi jingping

On Tuesday, President Obama announced additional, “major” sanctions against Russia due to the country’s continued involvement with Ukraine and their support of pro-Russian separatist groups.

The sanctions target Russia’s energy, arms, and finance sectors.

This is on top of existing sanctions against a series of large banks and energy firms including Rosneft, the world’s largest oil company, and Gazprombank, Russia’s largest private bank. 

Sanctions are intended to hurt the economy of the targeted country, with the hope that businesses and workers pressure policymakers to alter their behaviour in order to restore the economic status quo.

However, sanctions often come with unintended consequences.

“We see a significant risk of a more fundamental shift in Russian economic policy, away from the market and global institutions in response to more serious sanctions connected to the situation in Ukraine and toward a greater focus on developing domestic markets and links with non-Western economies, particularly China,” said Morgan Stanley analysts Jacob Nell and Alina Slyusarchuk.

Nell and Slyusarchuk note that the recent decision by the Hague, which is calling Russia to award the shareholders of defunct oil company Yukos $50 billion, only adds to the geopolitical rifts.

“The Yukos award could well strengthen Russian sentiment to further isolate itself from the West,” they said

Sanctions have a long history of not working. A study by Gary Hufbauer, Jeffrey Schott, and Kimberly Ann Elliot (HSE) found that only 34% of sanctions that they reviewed between 1914 and 1990 were effective.

Additionally, back in March, Morgan Stanley’s Russia economics and strategy team wrote that, “Typically, sanctions have been applied against much smaller countries, such as Iran, Iraq, Libya and North Korea, with significantly fewer resources” than Russia, which is a “large country, with extensive resources”.

Will it be different this time?

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HOUSE VOTES TO SUE OBAMA

Barack Obama surprised

House Republicans on Wednesday passed a resolution authorizing them to sue President Barack Obama for what they call an overreach of constitutional authority. 

The resolution passed the Republican-controlled House in a party-line vote of 225-201 on Wednesday. All but five Republicans voted for the measure, while all 199 Democrats voted against it. 

The coming lawsuit will accuse Obama of exceeding his constitutional authority as president by making unilateral changes to the Affordable Care Act — specifically, in twice delaying implementation of the law’s so-called employer mandate. 

House Speaker John Boehner has hinted at the lawsuit for a little more than a month. Republicans have argued that Obama has continually overstepped his constitutional authority through executive actions on Obamacare and other areas, including his 2012 order to ease deportations of some young undocumented immigrants.

Late last month, Boehner sent a memo to the House Republican conference, informing them of his plans to file legislation in July that would allow the House of Representatives to file suit to compel Obama to “faithfully execute the laws of our country.” Almost three weeks ago, Boehner’s officereleased a draft resolution focusing on the employer mandate as the basis of the lawsuit.

Obama on Wednesday dismissed the lawsuit as a “political stunt,” and he playfully urged congressional Republicans to work with him and “stop just hatin’ all the time.” He said he takes unilateral action because he can’t wait for Congress to act in certain areas, including equal pay and student-loan interest rates.

“So some of the things we’re doing without Congress are making a difference, but we could do so much more if Congress would just come on and help out a little bit,” Obama said during the Wednesday speech in Kansas City. “Just come on.  Come on and help out a little bit. Stop being mad all the time. Stop just hatin’ all the time.”

The White House and some Democrats have suggested the lawsuit could be a prelude to the House eventually attempting to impeach Obama. But Boehner and others have said those claims originated from a “scam” for Democrats to raise money ahead of the midterm elections.

The Obama administration first delayed a year ago the employer mandate of the Affordable Care Act, which requires most businesses with 50 or more full-time employees to provide health insurance meeting certain minimum criteria — or pay a penalty of $2,000 per worker.

In February, the administration announced it will delay the mandate’s penalty another year for small businesses with 50-99 workers. It said it would also adjust some of the requirements for larger employers. 

Under the new Treasury Department rules, businesses with 100 employees or more must offer coverage to at least 70% of full-time workers in 2015 and 95% in 2016, or face a penalty. 

One Cop In Seattle Has Issued 80% Of The Citations For Marijuana

pot smokers co

SEATTLE (Reuters) – The Seattle Police Department has reassigned an officer who single-handedly issued about 80 percent of the marijuana tickets handed out in the city during the first half of this year, authorities said on Wednesday.

Seattle Police Chief Kathleen O’Toole said staff reviewing data to prepare the department’s first biannual report on marijuana enforcement found that 66 of 83 citations for public pot use were given out by just one officer.

“In some instances, the officer added notes to the tickets,” O’Toole said in a statement, adding that some of the notes requested the attention of City Attorney Peter Holmes and were addressed to “Petey Holmes.”

In one case, she said, “the officer indicated he flipped a coin when contemplating which subject to cite.”

In another, O’Toole added, he referred to Washington’s voter-approved changes to marijuana laws as “silly.”

Washington state voted in 2012 to legalize the sale of cannabis to adults for recreational use but does not allow it to be used in public places.

She said the officer’s actions were reported to the police’s Office of Professional Accountability, and that he will not perform patrol duties while an investigation takes place.

The six-month report, which was released last week, found African Americans in Seattle were ticketed disproportionately to their population for using pot in public.

The police department said 36 percent of the tickets were issued to African-Americans, who make up just eight percent of the city’s population.

A spokesman said the SPD recognized the numbers were disproportionate, and O’Toole reiterated on Wednesday that the study was designed to provide more oversight and to flag “anomalies or outliers” in Seattle’s marijuana enforcement.

(Reporting by Eric M. Johnson in Seattle; Writing by Daniel Wallis; Editing by Michael Perry)

A Small Town in Tennessee Has The Big Cable Companies Terrified

While the nation’s largest internet service providers have been making lots of noise recently, the country’s fastest network has stayed quiet, just like the Tennessee town it services.

The small, southern city of Chattanooga, Tennessee, boasts internet speeds up to a whopping gigabit per second, thanks to a local municipal fiber internet network, and has since last year. That’s the same speed as Google Fiber, only there’s no legacy tech giant pumping technology into the project.

The city of Chattanooga and the publicly owned electric utility EPB did it by themselves.

Big telecom companies like AT&T and Comcast put off plans to outfit southeastern Tennessee with high-speed internet, essentially forcing the city to look for internet solutions elsewhere, Motherboard reports. This is actually a trend. Though Chattanooga’s internet is notable for its blinding speed, many small communities around the country are similarly taking on high-speed internet without the help of big-name ISPs.

In fact, often the ISPs are holding these neglected communities back. In 2011 Longmont, Colorado, passed a ballot referendum that lifted a 2005 state law stopping municipalities from selling services that rely on publicly owned infrastructures, the Denver Post reported. Cable companies like Comcast originally pushed for the law in 2005 because they felt it was “unfair to let tax-supported entities compete with tax-paying businesses,” the Post said.

There are more than 20 states that still have laws like this one on the books, Motherboard reported. The FCC recently said it would help small communities get past these laws if it means faster internet for them. This was in June.

Earlier this month, Rep. Marsha Blackburn (R-Tennessee) proposed an amendment that would make the FCC’s move illegal. Almost every House Republican voted yes. Now the amendment is in the largely Democratic Senate where it’s not likely to pass, though still could, perhaps with a little help from big cable companies.

“Ultimately what it comes down to is these cable companies hate competition,” said Chris Mitchell, the director of community broadband networks for the Institute for Local Self Reliance.

As director, Mitchell watches over issues like municipal networks, net neutrality, and the consolidation of cable companies, advocating for the public’s bets interest. “It’s not about [cable’s] arguments so much as their ability to lobby very well,” he said.

He said that both Republicans and Democrats receive a lot of money from cable companies every year. Blackburn herself has recieved five-figure donations from AT&T, Verizon, and the National Cable, and Telecommunications Association, opensecrets.org says.

Marsha BlackburnRep. Marsha Blackburn (R-Tennessee)

Of course the anti-municipal fiber network crowd does have arguments. A common one is that local government-backed fiber networks are often failures that put tax dollars at risk, which Mitchell says is factually inaccurate. The other is that it’s unfair to allow private companies to compete with government-backed entities, which Mitchell agrees is worth debating.

Municipal fiber internet networks certainly don’t fit in every community. They’re expensive to build — the Washington Post says Chattanooga’s cost $330 million — and a handful have failed. Mitchell says most governments don’t really want to have to build and run their own networks, despite their quality and popularity. Ideally, he says, local governments across the nation could fund the construction of a fiber network and then partner with a third party to run the service. This is happening in several cities nationwide, and it works well, though the number is climbing slowly.

“The first reason a community builds a network tends to be jobs. It helps existing businesses, and draws in new ones,” Mitchell said. “Most of these laws were passed in 2004, 2005. People didn’t think the internet was essential for business.”

This is why for Mitchell and others who oppose Blackburn’s amendment, the most important thing is giving the communities the choice of whether to pursue a network of their own or hand the keys over to Comcast and company.

“Localities are in the best position to decide the broadband needs of their own communities,” Rep. José E. Serrano (D-New York) said in an email statement to Business Insider. He voted against the amendment in the House. “The FCC is poised to help these localities by overruling harmful state policies that prevent innovation and competition.”

While the amendment isn’t likely to make it past the Senate, which has a history of voting down proposals like Blackburn’s, Mitchell knows the issue will remain even if the legislation doesn’t.

“The fight with the FCC is something I think we’re going to see for a while,” he said.

We have reached out to Rep. Blackburn and will update this post if we hear back.

The Trigger Points For World War III Are In Place

obama putin

Pessimism is a useful prism through which to view the affairs of states. Their ambition to gain, retain, and project power is never sated. Optimism, toward which Americans are generally inclined, leads to rash predictions of history’s ending in global consensus and the banishment of war. Such rosy views accompanied the end of the Cold War. They were also much in evidence a century ago, on the eve of World War I.

Then, as now, Europe had lived through a long period of relative peace, after the end of the Napoleonic Wars. Then, too, rapid progress in science, technology, and communications had given humanity a sense of shared interests that precluded war, despite the ominous naval competition between Britain and Germany. Then, too, wealthy individuals devoted their fortunes to conciliation and greater human understanding. Rival powers fumed over provocative annexations, like Austria-Hungary’s of Bosnia-Herzegovina in 1908, but world leaders scarcely believed a global conflagration was possible, let alone that one would begin just six years later. The very monarchs who would consign tens of millions to a murderous morass from 1914 to 1918 and bury four empires believed they were clever enough to finesse the worst.

The unimaginable can occur. That is a notion at once banal and perennially useful to recall. Indeed, it has just happened in Crimea, where a major power has forcefully changed a European border for the first time since 1945. Russia’s act of annexation and its evident designs on eastern Ukraine constitute a reminder that NATO was created to protect Europe after its pair of 20th-century self-immolations. NATO’s core precept, as the Poles and other former vassals of the Soviet empire like to remind blithe western Europeans, is Article 5, by which the Allies agreed that “an armed attack against one or more of them in Europe or North America shall be considered an attack against them all,” triggering a joint military response. This has proved a powerful deterrent against potential adversaries. Vladimir Putin, the Russian president, has been most aggressive in the no-man’s-lands of Georgia and Ukraine, nations suspended between East and West, neither one a member of NATO. Had Ukraine been a member of NATO, the annexation of Crimea would have come only at the (presumably unacceptable) price of war. Article 5, until demonstrated otherwise, is an ironclad commitment.

When a 19-year-old Bosnian Serb nationalist, Gavrilo Princip, assassinated the heir to the Austro-Hungarian throne in Sarajevo, on June 28, 1914, he acted to secure Serbia’s liberty from imperial dominion. He could not have known that within weeks, Austria-Hungary would declare war on Serbia, goading Russia (humiliated in war a decade earlier by Japan) to mobilize in defense of its Slavic ally, which caused the kaiser’s ascendant Germany to launch a preemptive attack on Russia’s ally France, in turn prompting Britain to declare war on Germany.

Events cascade. It is already clear that the nationalist fervor unleashed by Putin after a quarter century of Russia’s perceived post–Cold War decline is far from exhausted. Russians are sure that the dignity of their nation has been trampled by an American and European strategic advance to their border dressed up in talk of democracy, the rule of law, and human rights. Whether this is true is irrelevant; they believe it. National humiliation, real or not, is a tremendous catalyst for war. That was the case in Germany after the Treaty of Versailles imposed reparations and territorial concessions; so, too, in Serbia more than 70 years later, after the breakup of Yugoslavia, a country Serbia had always viewed as an extension of itself. Russia, convinced of its lost greatness, is gripped by a Weimar neurosis resembling Germany’s post–World War I longing for its past stature and power. The Moscow-backed separatists taking over government buildings in eastern Ukraine and proclaiming an independent “Donetsk People’s Republic” demonstrate the virulence of Russian irredentism. Nobody can know where it will stop. Appetite, as the French say, grows with eating.

Let us indulge in dark imaginings, then, in the cause of prudence. Here is one possible scenario: Clashes intensify between Ukrainian government forces and paramilitary formations organized by Russian fifth columnists. The death toll rises. The ongoing NATO dispatch of troops and F‑16s to Poland and the Baltic states, designed as a deterrence, redoubles anger in Russia—“a great and humble nation besieged,” a Russian general might declare. The American president, saying his war-weary country will not seek conflict, imposes sanctions on the entire Russian oil-and-gas sector. European states dependent on Russian energy grumble; a former German chancellor working in natural gas says his country’s interests lie with Moscow. Then, say, an independence movement of the Russian minority gains momentum in Estonia, backed with plausible deniability by Moscow’s agents, and announces support for the Donetsk People’s Republic. A wave of cyberattacks disables Estonian government facilities, and an Estonian big shot calls the Russian leader an “imperialist troglodyte trapped in a zero-sum game.” After an assassination attempt on the Estonian foreign minister at a rally in the capital, calls grow louder for the American president to invoke Article 5. He insists that “drawing red lines in the 21st century is not a useful exercise.”

Let us further imagine that shortly after the president delivers his speech, in a mysterious coincidence, a Chinese ship runs aground on one of the uninhabited Senkaku Islands, administered by Japan, in the East China Sea. China dispatches a small force to what it calls the Diaoyu Islands “as a protective measure.” Japan sends four destroyers to evict the Chinese and reminds the American president that he has said the islands, located near undersea oil reserves, “fall within the scope” of the U.S.-Japan Treaty of Mutual Cooperation and Security. A Republican senator, echoing the bellicose mood in Washington, declares that “Estonia is more than a couple of rocks in the East China Sea” and demands to know whether “the United States has torn up the treaty alliances in Europe and Asia that have been the foundation of global security since 1945.” The president gives China an ultimatum to leave the Japanese islands or face a military response. He also tells Russia that another act of secessionist violence in Estonia will trigger NATO force against Russian troops massed on the Estonian border. Both warnings are ignored. Chinese and Russian leaders accuse the United States of “prolonging Cold War hostilities and alliances in pursuit of global domination.” World War III begins.

It could not happen; of course it couldn’t. Peace, if not outright pacifism, is now bred in the bones of Europeans, who contemplate war with revulsion. Europe is politically and economically integrated. America, after two wars without victory, is in a period of retrenchment that may last a generation. Wars no longer happen between big land armies; they are the stuff of pinpoint strikes by unpiloted drones against jihadist extremists. Putin’s Russia is opportunistic—it will change the balance of power in Ukraine or Georgia if it considers the price acceptable—but it is not reckless in countries under NATO protection. China, with its watchword of “Harmony,” is focused on its own rising success and understands the usefulness of the United States as an offsetting Pacific power able to reassure anxious neighbors like Japan and Vietnam. For the time being, Beijing will not seek to impose its own version of the Monroe Doctrine. It will hold nationalism in check even as the Asian naval arms race accelerates. Unlike in 1914 or 1939, the presence of large American garrisons in Europe and Asia sustains a tenacious Pax Americana. The United Nations, for all its cumbersome failings, serves as the guarantor of last resort against another descent into horror. The specter of nuclear holocaust is the ultimate deterrent for a hyperconnected world. Citizens everywhere now have the tools to raise a cacophony in real time against the sort of folly that, in World War I, produced the deaths of so many unidentifiable young men “known unto God,” in Kipling’s immortal phrasing.

Convincing? It would certainly be nice to believe that, as President Clinton suggested in 1997, great-power territorial politics are a thing of the past. A new era had dawned, he said, in which “enlightened self-interest, as well as shared values, will compel countries to define their greatness in more-constructive ways.” In fact, the realization that the Russian bear can bite as well as growl is timely. It is a reminder that a multipolar world in a time of transition, when popular resentments are rising over joblessness and inequality, is a dangerous place indeed.

The international system does not look particularly stable. The Cold War’s bipolar confrontation, despite its crises, was predictable. Today’s world is not. It features a United States whose power is dominant but no longer determinant; a one-party China that is a rising hegemon; an authoritarian Russia giddy on nationalism and the idea of a restored imperium; and a weak, navel-gazing, blasé Europe whose pursuit of an ever closer union is on hold and perhaps on the brink of reversal.

Pacifist tendencies in western Europe coexist with views of power held in Moscow and Beijing that Bismarck or Clausewitz would recognize instantly. After the genocides in Rwanda and Bosnia, the UN General Assembly ratified the concept that governments have a “responsibility to protect” their citizens from atrocities. But in the face of Syria’s bloody dismemberment and Ukraine’s cynical dismantlement, idealism of that kind looks fluffy or simply irrelevant. The Baltic countries are front-line states once again. The fleeting post–Cold War dream of a zone of unity and peace stretching from Lisbon to Vladivostok has died. As John Mearsheimer observes in his seminal The Tragedy of Great Power Politics, “Unbalanced multipolar systems feature the most dangerous distribution of power, mainly because potential hegemons are likely to get into wars with all of the other great powers in the system.”

In this context, nothing is more dangerous than American weakness. It is understandable that the United States is looking inward after more than a decade of post-9/11 war. But it is also worrying, because the credibility of American power remains the anchor of global security. The nation’s mood is not merely a reflection of economic hardship or the costs of war; it is also determined by the president’s decisions and rhetoric. There was no American majority for involvement in World War I or World War II—until the president set out to forge one (helped decisively in Franklin D. Roosevelt’s case by Pearl Harbor). As Jonathan Eyal of Britain’s Royal United Services Institute says, “If a president stands up and says something, he can shift the debate.”

President Obama has made clear he does not believe in military force. His words spell that out; so does his body language. He asks, after Iraq and Afghanistan, what force accomplishes. These are fair questions; the bar must be very high for unleashing military power. But when an American president marches allies up the hill to defend his “red line”—as Obama did regarding Syria’s use of chemical weapons—and then marches them back down again, he does something damaging that the world does not forget. And when Obama, in response to a recent question about whether declaring that the United States would protect the Senkaku Islands risked drawing another “red line,” gives an evasive answer, he does something so dangerous that his words are worth repeating:

The implication of the question, I think, … is that each and every time a country violates one of these norms, the United States should go to war or stand prepared to engage militarily, and if it doesn’t, then somehow we’re not serious about these norms. Well, that’s not the case.

If these treaty obligations do not constitute a red line triggering a U.S. military response—the only way to prove the seriousness of “these norms”—all bets are off in a world already filled with uncertainties. A century ago, in the absence of clear lines or rules, it was just this kind of feel-good hope and baseless trust in the judgment of rival powers that precipitated catastrophe. But that, it may be said, was then. The world has supposedly been transformed.

But has it? Consider this article in my father’s 1938 high-school yearbook:

The machine has brought men face to face as never before in history. Paris and Berlin are closer today than neighboring villages were in the Middle Ages. In one sense distance has been annihilated. We speed on the wings of the wind and carry in our hands weapons more dreadful than the lightning … The challenge of the machine is the greatest opportunity mankind has yet enjoyed. Out of the rush and swirl of the confusions of our times may yet arise a majestic order of world peace and prosperity.

Optimism is irrepressible in the human heart—and best mistrusted. Our world of hyperconnectivity, and the strains and aspirations that accompany it, is not so novel after all. The ghosts of repetition reside alongside the prophets of progress. From the “rush and swirl” of 1938 where “distance has been annihilated” would follow in short order the slaughter of Stalingrad, the mass murder of European Jewry, the indiscriminate deaths in Hiroshima and Nagasaki, and the anguish of all humanity. We should not lightly discard a well-grounded pessimism or the treaties it has produced.

Energy Companies Rethinking Russia After New Sanctions

London — The downing of Malaysia Airlines Flight 17 over eastern Ukraine — and the tougher round of sanctions against Russia that followed — is prompting some big multinational energy companies to take a fresh look at the ramifications of the crisis.

For months, American and European energy players have continued to sign deals with Russia, maintaining a posture that business was proceeding as usual. But top industry executives are now starting to acknowledge that the escalating tensions could sharply hurt Western oil and gas giants with major investments in Russia, as well as the service companies that are key technology suppliers.

Vladimir Putin and deputy prime minister Dmitry Rogozin, left

“We are in the heat of a very emotional stage,” Robert W. Dudley, BP’s chief executive, told reporters on Tuesday. The company warned that further economic sanctions could harm BP’s income, production and reputation.

France’s oil giant, Total, which had been among the most committed to Russia, said that since the plane disaster it had stopped regularly adding to its stake in its Russian partner Novatek, a gas producer that was placed under sanctions by the United States this month. Total’s chief financial officer, Patrick de La Chevardière, also indicated on Wednesday that the company was considering how the sanctions might affect other projects like a multibillion-dollar natural gas facility it is building with Novatek.

The industry’s tenor has changed as Western governments directly target Russia’s economic prospects, notably its energy industry. After months of settling for measures that seemed largely symbolic, the United States and the European Union on Tuesday agreed on a new round of sanctions that appear as if they may have real teeth.

“The companies are facing the harsh reality that the United States and the European Union have united on sanctions in a way that two weeks ago would have been inconceivable,” said John Lough, a Russia analyst at Chatham House, a London-based research organization.

In a previous round of sanctions, the United States placed some financial restrictions on Russian energy companies like Rosneft and Novatek. The latest sanctions go further, however, as they try to curb the export of highly specialized equipment needed to develop Russia’s new energy frontiers, including the Arctic and shale rock formations in West Siberia.

Companies like Total and Royal Dutch Shell have poured money into Russia in recent years. And a drilling rig to be operated by Exxon Mobil and Rosneft is being transported to Russian Arctic waters.

But Western oil and gas executives, along with their teams of lawyers, are now pondering the impact of the sanctions. It is uncertain what types of equipment or software they may be prohibited from bringing to Russia. “Technology is a very hard thing to define,” said Mr. Dudley of BP. “So we will have to read it very carefully.”

Mr. Dudley also said that it was unclear whether BP would be allowed to proceed with a joint venture on shale oil with Rosneft; the companies reached a preliminary agreement over the deal this year. Exxon Mobil, Shell and Total also have shale ventures in the country.

As the companies assess the murky situation, Russia’s energy future remains in limbo.

Russia rivals Saudi Arabia as the world’s leading oil producer, and it was second in natural gas production last year to the resurgent United States. But Russia’s traditional oil fields in West Siberia, which have sustained the country’s output for decades, are in decline.

To avoid further drops in production, Russia’s industry, which is not yet fully modernized, needs access to the Western technology that has transformed the global oil business in recent decades, allowing oil companies to push into ocean waters more than a mile deep, or produce oil from shale rock. That technology is the main reason Russia has sought help from the global oil majors like Exxon Mobil, which is producing oil off Sakhalin Island in eastern Russia.

Oil rigs

“If the new sanctions stay in place for an extended period of months or years they will have an impact on Russia’s ability to grow or even maintain oil production, ” said Richard Mallinson, an analyst at Energy Aspects, a research firm based in London.

Perhaps Russia’s greatest short-term hope for increasing production is to extract oil from shale rock. Russia is considered to have huge, albeit unproven, potential.

But the latest Western actions target shale gas. Any efforts to make the most of these shale formations would be slowed if the sanctions block service companies like Halliburton from bringing technologies including hydraulic fracturing and horizontal drilling that have changed the energy industry in the United States.

The processes are mostly highly adapted versions of practices that have been around for decades, like hydraulic fracturing, or the pumping of water and other liquids down wells at high pressure to break oil and gas free from the surrounding rock. Some analysts say the shale technologies may be hard to block through sanctions because they are essentially adaptations of decades-old techniques.

Pro-Russian rebels ride on a tank flying Russia's flag, on a road east of Donetsk, Monday

Arctic and deepwater drilling equipment may be easier to restrict, analysts say. The European Union plans to prohibit not only the sale but also the transfer of specially adapted drilling rigs and machinery to Russia, according to an official who briefed reporters on the details of the sanctions.

The official estimated that Russia relied on the European Union for 30 to 60 percent of these technologies. While they represent just 150 million euros in annual sales, they are crucial for projects worth billions.

Russian flag with President Putin's face

The European Union is walking a fine line. Heavily dependent on Russian energy, particularly gas, the European Union wants to use the sanctions to target big future projects in shale and in the Arctic without hurting existing production and disrupting global markets. The gas sector will be excluded, which could lead to complications because in many cases oil and gas are produced with much of the same equipment and from the same locations.

Over the last 10 to 15 years, Western companies have become increasingly enmeshed in Russia with the blessing of their governments. Unlike Saudi Arabia, which largely prohibits foreign participation in oil and gas exploration and production, Russia has welcomed Western investment. Without production from Russia, the oil export market would be even more dominated by the Saudis and other OPEC producers.

City of London and Gherkin

Among the Western players, BP may have the most to lose in Russia. In the second quarter of 2014, BP’s stake of almost 20 percent in Rosneft produced nearly one-third of the company’s oil and gas production and nearly 20 percent of its profits. Total has an 18 percent stake in Novatek.

Exxon Mobil has also plunged into Russia. It has a joint venture with Rosneft to drill in the Kara Sea in the Russian Arctic, which some oil executives think could be a frozen Gulf of Mexico in terms of the oil it holds. The rig operated by the two companies, now sailing toward the Kara Sea from Norway, is expected to drill the first well for the joint venture this summer.

“We are assessing the impact of the sanctions, said Alan T. Jeffers, an Exxon spokesman.

Orban Says He Seeks to End Liberal Democracy in Hungary

Hungarian Prime MinisterViktor Orban said he wants to abandon liberal democracy in favor of an “illiberal state,” citing Russia and Turkey as examples.

The global financial crisis in 2008 showed that “liberal democratic states can’t remain globally competitive,” Orban said on July 26 at a retreat of ethnic Hungarian leaders in Baile Tusnad, Romania.

“I don’t think that our European Union membership precludes us from building an illiberal new state based on national foundations,” Orban said, according to the video of his speech on the government’s website. He listed Russia, Turkey and China as examples of “successful” nations, “none of which is liberal and some of which aren’t even democracies.”

Orban, who was re-elected in April for a second consecutive four-year term, has clashed with the EU as he amassed more power than any of his predecessors since the fall of the Iron Curtain in 1989, replacing the heads of independent institutions including the courts with allies, tightening control over media and changing election rules to help him retain a constitutional majority in Parliament.

Orban, a former self-described liberal, anti-communist student leader in the 1980s, has championed relations with Russian President Vladimir Putin and the leaders of China, Azerbaijan and Kazakhstan since 2010 to boost trade.

NGO Crackdown

The Hungarian prime minister is distancing himself from values shared by most EU nations even as his government relies on funds from the bloc for almost all infrastructure-development financing in the country.

Orban said civil society organizations receiving funding from abroad need to be monitored as he considers those to be agents of foreign powers.

“We’re not dealing with civil society members but paid political activists who are trying to help foreign interests here,” Orban said. “It’s good that a parliamentary committee has been set up to monitor the influence of foreign monitors.”

Orban’s steps mirror those of Russia under Putin, where non-governmental organizations that accept foreign money must register as “foreign agents.” Putin orchestrated a crackdown on NGOs in 2012 after he faced the biggest street protests in more than a decade after elections.

“Orban’s comments are very controversial and closer to what we’re used to hearing from President Putin of Russia than from a leader of a European democracy,” Paul Ivan, an analyst at the Brussels-based European Policy Centre, said by phone today. “It’s also an extremely bad moment to cite Russia and Turkey as examples, with Russia becoming much more imperialistic and nationalistic and with serious attacks on the freedom of speech in Turkey.”

‘Workfare’ State

In Hungary, Orban’s government this year raided organizations that received funds from Norway, accusing one group of channeling money to members of an opposition party, a claim rejected by the organization, Okotars.

In May, Norway suspended 153 million euros ($205 million) in grants to Hungary after the government shifted the distribution of funds to a state company from the government. The country has also protested Hungary’s intimidation of civil society groups.

Orban, who has fueled employment with public works projects, said this weekend that he wants to replace welfare societies with a “workfare” state. He has earlier said more centralized control was needed to confront multinational companies such as banks and energy firms, to escape from “debt slavery,” and to protect Hungarians from becoming a “colony” of the EU.

Orban said his “illiberal democracy” won’t deny the “fundamental values” of liberalism, such as “freedom.”

“The point of the future is that anything can happen,” Orban said. “That means it could easily be that our time will come.”

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