Dimitry Orlov: Not the new world order you ordered

The "Russians killing Ukrainian civilians" fake news factory is still going strong, but sooner or later this story will have to be phased out and some new mass media obsession will be needed to distract the distraught masses from what's actually happening. What shall it be? Central Park squirrels with bubonic plague? Hunter Biden's sex change operation? A baby that fell down an oil well?

Joe Biden, tottering on his spindly legs, flew off to Europe to preach unity in the face of Russian aggression in the Ukraine or some such. That was the plan, but then Putin changed it by announcing that Russia will only be selling natural gas for rubles. Coming on the heels of Saudi announcement that it will start selling oil for yuan (a quarter of its exports goes to China) this didn't sound like good news at all.

You can probably find some expert to tell you that the US, with 20% of world's oil production, can still call the shots and that 'tis but a scratch. But given enough pre-existing conditions, even scratches can be fatal. First, to present a happier picture, in the US just about any liquid that comes out of a well and isn't water has been redefined as "oil"—but most of it just isn't that useful, especially for making jet fuel or diesel; for that, actual real high-quality oil from Venezuela or Saudi Arabia or Russia has to be imported. Second, the US burns an awful lot of oil just driving around its bloated, blighted suburban sprawl, which is more or less all it has at this point except for a few tiny pin-pricks of old urban goodness.

Given the massive decades-long build-out of sprawl, 20% of the world's oil production just isn't enough for its 5% of the world's population—it needs more! Third, the US has grown accustomed to getting the extra oil it needs by printing dollars and using them to pay for it, and that's no longer going to work.

The long and short of it is, the US has managed to cut itself out of the international oil market. First, it refused to import Russian oil because of the special military operation in the (former) Ukraine. Second, Biden sent a high-level delegation to Venezuela, to try to sweet-talk Nicolas Maduro into resuming oil sales to the US. The delegation was told to go talk to Juan Guaidó, whoever he is and wherever he may be. Third—and this is the most painful part—Biden tried phoning Mohammed bin Salman of Saudi Arabia and Mohammed Bin Sayed of United Arab Emirates, and both of them refused to take Biden's call, which is the diplomatic equivalent of a bitch-slap.

And now Biden lands in Europe all ready to announce even more sanctions against Russia and talk about unity and solidarity with the European leaders. Except the European leaders are now passed out cold from shock because yesterday Putin announced that from now on Russian exports will only be available for rubles, starting with natural gas. If they can't find a way to start paying rubles for gas they will face industry shutdowns, electric outages and the next heating season simply won't happen. What makes this situation particularly painful is that they have no right to complain. Who was it that confiscated Russian reserves held in dollars and euros, proving to Russia that these currencies are unreliable? Some people made a feeble attempt to argue that payment in dollars is stipulated in the existing gas contracts; however, the gas in question happens to be on Russian territory, where, according to the Russian constitution, presidential orders and Russian laws take precedence.

And so the agenda in Europe has suddenly been revised from "What sanctions do we impose next?" to "how do we get some rubles?" And that's a really good question. Suppose you want to buy rubles with dollars or euros. Well, there's an issue with that: rubles can only be purchased inside Russia, and getting dollars or euros into Russia is problematic because of sanctions against Russian banks. And there's another issue with that: flooding the Russian foreign currency market will drive the exchange rate sky-high in a big hurry and cause traders to hoard rubles. So, what else is there? Well, you could go to the Russian central bank and take out a loan. The interest rate will be 20% and you'll need collateral. Cash, be it dollars or euros, is useless as collateral because these currencies are unreliable; see above. You could put up stocks, but not Microsoft or IKEA or Siemens because they have pulled out of Russia, and not Facebook because they have violated Russian law and have been banned. And you probably wouldn't want to put up stocks of Western defense companies, for obvious reasons. And then if you default on any of these loans, then you'll end up with Russian central bank officials on the boards of Western corporations. Maybe it would be better to put up land. The EU could put up Estonia, Latvia and Lithuania; the US could put up Alaska and Hawaii.

There will be a lot for the European leaders to discuss; the question is, Will they be able to come out of their stupor and actually express thoughts that make sense? This situation calls for some creative thinking and brave new initiatives while what they have spent their whole lives training for is reciting their lines and being ever so politically correct while doing so. Pure mental inertia will compel them all to continue being "hard on Russia," completely ignoring the fact that what this actually means is them being unreasonable and hard on their own people. And that's the really sad part and an unintended consequence from the Russian point of view. Russia would like the western countries to remain intact and just to be reasonable. Is that too much to ask?