Leeham News and Analysis
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Leeham News and Analysis
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- Pontifications: Boeing “transparency”–not so much. April 9, 2024
- Airbus charges and write-offs since 1999: more than €33bn April 8, 2024
Pontifications: Ukraine impact on commercial aviation
By Scott Hamilton
Feb. 28, 2022, © Leeham News: The clouds are very dark over Ukraine today. The unprovoked invasion of Ukraine by an international autocratic lying amoral thug is horrible. What the implications are for neighboring European countries, the greater Europe, the US, and the rest of the world won’t be fully understood for months.
But reality is reality, and LNA’s focus on commercial aviation must look at things from this perspective—narrow as it is in the context of human tolls underway in Ukraine now. In the dark cloud of the Ukraine crisis, we must look at what the impacts might be on commercial aviation.
Early impacts
In these very early days, the full impact can only be speculated. But here’s what we know so far, only a week into the invasion.
- Russia is the principal supplier of titanium, which is an important raw material for Boeing, Airbus, Embraer, and engine makers. As far as we know, no sanctions by the “West” or by Russia have been applied to titanium. But they could be at some point. Cutting off the Russian supply could cripple production. Kevin Michaels of AeroDynamic Advisory, a consultancy with a focus on the supply chain, predicted that commercial aviation production could even grind to a halt.
- Even if the Russian flow of titanium continues, the price charged undoubtedly will go up dramatically. Costs for the manufacturers will go up. How much can be recovered in the standard aircraft order contract escalation clauses is unknown.
- The UK banned Aeroflot from flying to London or using UK airspace. Russia closed its airspace to all airlines.
- Ukraine quickly closed its airspace to civilian traffic. There is no desire for a repeat of a Russian shootdown of Malaysia Flight 17 years ago, even though that was a mistake.
- The cost of a barrel of oil quickly went to more than $100/bbl. There was talk by Thursday of it going to $120/bbl or more. This, of course, will eventually impact the airlines and their bottom lines—and, perhaps, their ability to buy or finance airplanes.
- The European Union will ban sales of aircraft and parts to Russian airlines. Aeroflot alone has 116 Airbus and 59 Boeing aircraft. Only 10 are Russian-made airliners. There are 14 Airbus A350s on order.
Impact for the OEMs
With the Ukraine invasion underway, might this trigger the Force Majeure clause in airplane contracts? Or if the titanium supply dries up, would this trigger the clause? Force Majeure relates to events outside the control of the OEM.
Boeing has about 110 787s and more than 300 737s in inventory. Boeing no longer has ticketing authority to certify the airplanes for delivery. This is held by the Federal Aviation Administration. Boeing is on the hook for customer compensation due to the MAX regulatory grounding and the inability to deliver 787s. Will the Force Majeure draw a timeline that may be used to halt future compensation claims? The airlines and lessors surely will say the underlying delivery delays mean the clock won’t stop with Ukraine. Boeing’s lawyers probably will take a different view. In this event, what’s not paid in compensation goes to the legal teams, albeit at a lower cost.
Airbus and Embraer have the same clause in their contracts, but their current circumstances don’t remotely match the predicaments Boeing is in.
A brand new A350-900 left Toulouse in recent days for Aeroflot in Russia. Likely the payments went through just before that channel closed.
On the face of it, this is appalling behaviour from Airbus, but does anyone know how long they will be able to keep it operational without spare parts?
Why is it “appalling”?
BA and other US arms suppliers have no problem shipping armaments to a certain country in the middle east, despite worldwide condemnation of that country’s behavior toward its neighbors.
Double standards.
Another case in point: During the 1st Iraq invasion, Saddam had F-14s in his arsenal, I think they needed parts… I read an article once about American service men having to go up against weapons manufactured in America. Sometimes it’s two things, and The Jobs argument wins.
@Sam1
Saddam/Iraq did not, not ever did have F-14’s or other American military war aircraft. The Iranians have them, we sold them massive weapons when the Shah was in power. I know because I was there!
no… Iran had F-14s that we sold the Shah. Iraq had french Mirage F-1s and russian jets.
Ok, I thought maybe Iraq took them from Iran. I wonder whatever happened to them. I knew there weren’t very many of them, but if they cannibalized them maybe a couple would still fly…
This comment is pretty hilarious. Let’s see how many other pro-Aeroflot and anti-Israeli comments are racked up here.
Nothing wrong with consistency.
No anti-this or pro-that…just uniform application of the rules.
Saudi Arabia is another ME country that buys big in aircraft but its attacks on its small neighbour are overlooked- indeed supported by certain big powers who have a suddenly found their consciences
-A double standard is indication of a hidden agenda or bias. Word salad can be used to conflate the issue and make seem to go away of course.
-The regime change wars around President 43 and executed by the Secretary of State of number 44 lead to some horrific things in Syria probably worse than what we are seeing in the Ukraine. The ends justified the means of course. All the same factors were there gas pipelines, someone’s border security etc. I remember Boris Johnson, ,not yet PM, penned an article saying its not worth getting involved with the hideous people that would be used for this but SofS of #44 went ahead. So we don’t really look too moral either from some POV, we did that to Syria we would do it to Russia or the Ukraine is what they’re thinking.
-Russia or rather the Regime must suffer consequences for its actions (much as I understand how they came about in terms of the privations and powerlessness) and in doing so aviation in both countries will suffer. Airbus must learn to make A350 bogies of aluminium.
-Ultimately we must learn to trade, get along, form relationships, be open and trusting. Wizz Air and Ryan Air should be flying thousands of young backpackers between Europe and Russia every day, that will diffuse tensions. The damage of sanctions on sale of Western aircraft will disengage Russia from the West and make this much harder but ultimately we must get back to it. It’s a pity we didn’t get to it after glasnost.
-Sanctions need to be applied carefully. 1 Damage them, not us as badly. 2 Don’t burn bridges. One of the silliest things I heard was Russia being thrown out of the European Human Rights Council. The last time Russia did not participate in the Hague conventions on land warfare and the Geneva conventions on treatment of prisoners it left minimal rules in place and horrors developed on the Eastern front. Now they quipped that they might restore the death penalty because of this.
Military occupation of Jordanian land and territory of Syria, with the backing of you know who. International rule? What international rule?
The Soviets may decide to choke off the flow of titanium. Time to work on supply assurance. They pulled all launch personnel from the FR Guyana over the weekend. This will happen everywhere. Unfortunately, it is time to chose sides.
What a tragedy. But it will not end well for our Russian friends. The antitank and shoulder fired weapons will be there by the end of the week. At the front line. How do you take and hold a 3M people city when they don’t want you to be there. Grozny anyone?
Russian tragedy. A lot of 18y old people will die 🙁
Mad man. We saw that in 1938. No more.
20% of the population of Greater Russia will be Ukrainian and hate Russia,Putin really hasn’t thought this through. God its hard to stay on topic, but they will have plenty of excellent aircraft engineers.
Not so . Thats 20% roughly the population of Ukraine itself
Its more like 1.9 mill according to a popular source and a lot of those are ‘labour migrants’ who are on work visas for better jobs/pay and can speak Russian
Population of Russia 144 million
Population of Ukraine 44 million
Therefore, after incorporating Ukraine into greater Russia, greater than 20 %of the population will be anti Russian even though some Ukrainians are pro Russian. The young educated people will leave and then they will have to pay for the pensions of the old people and the rebuilding of Ukrainian cities.
We don’t know yet if Putin intends to stay in Ukraine: he may just put in a new regime and then leave.
This is what a certain other western power has done on more than one occasion.
@Bryce
Actually, we know a lot more than what you seem to believe.
–
https://ahvalnews.com/vladimir-putin/what-accidentally-published-article-reveals-about-putins-ukraine-miscalculations
–
https://twitter.com/Tom_deWaal/status/1498310064117059585?cxt=HHwWgsC48ZPEiMspAAAA
-> “Ahval is an *Emirati-funded* online news website
State propaganda
@Pedro
It was quite predictable that you would be getting all hung up about that first link.
Relax — it was just a bait. 😉
It was the second link that was important to read. (BTW, the author* was mentioned in the first link).
* https://twitter.com/Tom_deWaal
Haven’t you heard that USG estimated 1 to 5 million (those who have the fin. capability), over 10%, would run away to the “West”??
Most flights from Europe to Asia go through Russian airspace. But also flights from the US to Asia. Dramatic re-routings / scheduling going on.
But unimportant to what is happening on the ground in Ukraine and the political / strategic implications of all this. A fundamental and far reaching one being that current Russian leadership seems unpredictable, irrational.
I think Putin is causing a lot of harm to his country. His government looks afraid of him from what we see. But they must be thinking, discussing in the background. Including the militairy, olichargs, Doema and secret services. They love their country too.
Europe starts flooding Ukraine with anti tank weapons, Stingers and intelligence, while people in Russia take to the street stating they love their country, but hate war.
This is getting really messy 🙁 Hoping for a reasonable way out for everyone.
Maybe he will face his Beria moment too.
I noticed Qantas daily non stops via Darwin to London a few days ago went north over China and then west over Russia to come out via Estonia and Gulf of Finland area towards UK.
Now route via Middle east and southern Europe which may mean ATC delays
This AirInsight article indicates that AB and BA are (approximately) equally hurt by the ban on aircraft sales to Russia — their backlogs for Russian customers are of similar magnitude.
https://airinsight.com/who-feels-the-pain-of-russian-aircraft-sanctions/
Referring to the article above, it’s not just the UK that has closed its airspace to Russian aircraft — the whole EU has done so. Russia has reciprocated in kind, and this effectively cuts off direct air traffic between Europe and Japan/China.
Re: “The UK banned Aeroflot from flying to London or using UK airspace. Russia closed its airspace to all airlines.”
As of 2-27-22. all EU airspace is closed to all Russian airlines.
“BRUSSELS (AP) — The European Union agreed Sunday to close its airspace to Russian airlines, spend hundreds of millions of euros on buying weapons for Ukraine and ban some pro-Kremlin media outlets in its latest response to Russia’s invasion, EU officials said.”
https://apnews.com/article/russia-ukraine-business-europe-olaf-scholz-nato-91c93ef0dc7e759d202c0eee9c070ea5
Re: “The European Union will ban sales of aircraft and parts to Russian airlines. Aeroflot alone has 116 Airbus and 59 Boeing aircraft. Only 10 are Russian-made airliners. Three are 14 Airbus A350s on order.”
The US has also restricted sales of avionics and aircraft parts to Russia.
“New Export Restrictions
In parallel, the Bureau of Industry and Security (“BIS”), within the U.S. Department of Commerce, announced the following six new categories of export restrictions targeting Russia:
First, BIS added a new license requirement for all Export Control Classification Numbers (“ECCNs”) included in Categories 3 through 9 of the Commerce Control List (“CCL”), which covers a broad swath of technologies subject to the Export Administration Regulations (“EAR”), including microelectronics, telecommunications items, sensors, navigation equipment, avionics, marine equipment, and aircraft components. This step dramatically expands the universe of items (58 separate ECCNs) that now require BIS authorization for export to Russia.
Second, BIS adopted a general presumption of denial for all authorization applications for exports, reexports, and transfers (in-country) to or within Russia, subject to limited exceptions described below. As a result, most requests for export-controlled items to Russia will be presumptively denied. BIS adopted a more lenient, case-by-case review policy for applications related to flight safety, maritime safety, humanitarian needs, government space cooperation, civil telecommunications infrastructure, government-to-government activities, and transactions in support of limited operations of partner country companies in Russia.”
https://www.ropesgray.com/en/newsroom/alerts/2022/February/Russia-Ukraine-Crisis-The-Second-Tranche-of-US-Sanctions-and-Export-Controls
There seems to be a small typo in the last para of Early impacts chapter:
Three are 14 Airbus A350s on order.
Do you mean:
There are 14 Airbus A350s on order.
Presumably the Middle Eastern super airlines and Asian (including the Chinese) carriers will pick up the slack of EU and US flight sanctions etc. So I suspect Anchorage is not going to revitalise unless US airlines get price support for the extra distance.
High oil prices may accelerate the rollout of SAF.
A relatively strong alliance has formed between China and Russia as well so sanctions will be blunted by that.
“A relatively strong alliance has formed between China and Russia as well so sanctions will be blunted by that.”
Indeed — in the same way that China managed to severely blunt the US sanctions against Iran.
Things will really heat up if China forms a bloc with Russia and imposes retaliatory sanctions on “the west”.
It looks like the sleeping giant (Europe) has been awakened.
That giant can make the world choose between supporting Europe (minus Belarus and Russia) or Putin’s Russia — for example, by banning airlines from landing at EU airports if they continue to operate flights into Russia and Belarus.
I don’t think the EU wants to emulate the behavior of a certain other western power that has — of late — made a lot of enemies with its unconditional policy of “our way or the highway”.
I would agree in principle, but as things stand now, there only seems to be “one way”. The IOC, FIFA etc. are kicking the Russians out of all international sports and Russia do seem to have few friends left at the UN. Even the Putinverstehers seem to be starting to come to terms with their naivety.
@ OV
With regard to “Putinverstehers”:
Those living in the Americas have the luxury of being separated from the rest of the world by two oceans; the USA, in particular, essentially only has friends north and south of it, and some small annoyances in the Caribbean.
However, Europe, Asia and Africa are literally “joined at the hip”, and it’s not really an option to just ignore your neighbor. There are plenty of sub-optimal relationships here, but we all try to get along. Russia and China have been trading partners for centuries — trade is a good thing, because it tends to foster some degree of trust. Sometimes things go sour — but it’s still a good idea to try to keep the relationship from going into a deep freeze. I wouldn’t brand the Germans as “naive”: there’s nothing wrong with trying to avoid alienating the Russians. Russia is more than just Putin and his cronies — there are also “normal” people living there.
@Bryce
It will be difficult for Russia to rejoin the international community if the majority of the population — who seem to believe in anything Putin is telling them — is not de-indoctrinated. It appears that the majority of the Russian population still believe that this is a “special military operation”. Apparently, the majority of the Russian population are not aware of the fact that Russia has massively invaded Ukraine.
For Russia to rehabilitate its international reputation, therefore, the Russian people will have to be de-indoctrinated and reconcile with the people of Ukraine and all the victims of the war, and acknowledging the atrocities Russia has committed in the Ukraine — just like Germany did after WW2.
BTW, I’m not living in the Americas.
–
https://www.nytimes.com/2021/12/21/world/europe/russia-military-putin-kremlin.html
–
https://www.atlanticcouncil.org/blogs/ukrainealert/children-as-a-tool-how-russia-militarizes-kids-in-the-donbas-and-crimea/
Yep, invading other countries is sort of getting alone, unless you are the people being killed.
Wake up and smell the Soviet Gas!
Many Americans still believe the other guy won the 2020 election. Time to kick it out of the “international community”???
Putinverstehers. Made me snort my coffee. Devastating term but we need to understand why the west failed to integrate Russia into the west. I suspect we won’t be allowed to in the mass media.
“fight against fascism, and integration with the Russian Federation.”
Didn’t an American Governor once quip that when fascism comes it will be in the form of anti fascism.
Russia under a fresh President Putin tried to be friends for a decade and a half. ( See some of his speeches from that time, especially the one in the Bundestag presented in German.
https://www.bundestag.de/parlament/geschichte/gastredner/putin/putin_wort-244966)
After that he turned elsewhere. The current conflict is the culmination of western rejection.
Rinse, wash, repeat
The point of sanctions is that you hurt the other guy more than you hurt yourself. In this case the airline sanctions can be bypassed by flying Moscow to Dubai or Doha etc. Obviously it will hurt Aeroflot, S7 etc. Russia but the blow back is harming western airlines to the benefit of Chinese airline or Middle eastern one has its own goal aspect. Technically the Russians and Chinese will evolve work arounds as the west will to titanium. The idea is to cause so much pain they moderate their invasion and demands.
The point here is that the the EU has enough power as to force airlines such as Emirates, Etihad and Qatar, having to choose between flying to Moscow or to airports in the EU. They can’t do both.
So, how many airlines around the world would really choose Moscow (and other Russian destinations ) over having access to airports in the EU?
From the sounds of it China is telling Russia to “work it out”. I’d doubt Beijing expected this type of response and is sort of at a point of choosing a side, seeing that they won’t be having an easy choice. Choosing Russia will accelerate some trends of second sourcing away from China that have occurred due to COVID across all industries. It’s another wake up call to not become reliant on single nations for too much. We’ve seen Chinas reaction to NK going off the rails before, I suspect there are some not nice phone calls happening over the last few days.
On the other hand:
“China says it opposes sanctions after SWIFT ban on Russian banks”
“BEIJING: China’s foreign ministry on Monday (Feb 28) reiterated its opposition to the use of what it calls illegal and unilateral sanctions, after Western countries moved to block some Russian banks from the SWIFT international payments system.
“Foreign ministry spokesman Wang Wenbin, speaking at a regular daily news briefing, also brushed off a call from the White House on Sunday for China to condemn Russia’s invasion of Ukraine, saying that China always stands on the side of peace and justice and decides its position on the merits.
“China has refused to condemn Russia’s attack on Ukraine or call it an invasion, and has repeatedly called for negotiations while acknowledging what it describes as Russia’s legitimate security concerns.”
https://www.channelnewsasia.com/business/russia-ukraine-conflict-china-opposes-sanctions-swift-russian-banks-2525446
of course, because now Russia can’t pay them in $$$$, only rubles or raw materials.
SPFS, CIPS and more:
https://www.google.com/search?client=firefox-b-d&q=alterntives+to+swift
Russia — and various Russian figureheads — also have stores of Bitcoin.
And let’s not forget gold.
Pretty easy for China to act as an off-the-radar financial intermediary between Russia and the rest of the world.
As it currently stands, the only ones suffering from the financial measures taken against Russia are its citizens. We’ve seen this before, of course, in Iran and North Korea.
And of course we should have let the Nazi do whatever they wanted to ALL of Europe?
The Quislings are tolerated until they have no further use.
-> of course, because now Russia can’t pay them in $$$$
There was bartering b4 there’s money.
@Uwe
Also digital yuan. Invisible to those you know who.
Confused 1950s commenter is now drawing Nazis into a discussion of 21st century sanctions policies…
China want to do to Taiwan what Russia is doing to Ukrain.
Our war game strategist wannabe surprisingly has little to say what would happen next in real-life when a real war broke out!?!
Always drag tirelessly off-topic to shut down the post!
It’s impossible to stay on topic with this one. But I will say that I am beginning to suspect that regime change may end up being the opposite of what Putin intended.
More on topic, I sold some scrap aluminium last week and the price had shot up from its already much higher price following the pandemic. I suspect that this is because energy is the main cost of production, so I think that we are going to have to endure a energy /inflation crisis until the bad man is gone.
Russia is the world’s second largest supplier of aluminium — though its production is still one tenth the size of China’s.
It’s also one of the world’s biggest suppliers of palladium and platinum.
At the very least, we can expect prices to rise.
As fuel prices increase less fuel efficient aircraft with enough Titanium content migh quickly be disassembled and Titanium harvested for remelt. I can see CFM56/ V2500 / CF6 engines as well as A380 aircrafts being inputted into excel sheets to look for profits as recycled.
The revenue from exports of titanium and the other raw materials that Russia exports, are systematically and unashamedly stolen by Vladimir Putin and his criminal associates. I hope that, sometime in the future, the people of Russia can stand to benefit from the resources of their country.
Yea it would be nice. At least the people in the West get some crumbs!~
What has struck me is the resilience of the global airline supply chain through the pandemic, this could be fundamentally challenged by the geopolitical fallout of a long drawn out campaign. At a cursory glance here is no alternative source for titanium, especially in the volumes required. I noted the emphasis on the relationship between the main contractors and airlines, what I am more concerned about is tier 2 resilience. the stop-start nature of trying to maintain some level of production must be causing havoc on cash flow.
Every element of the periodic table can be found in abundance in Russia. The globalists want it, they want all of it and will stop at nothing to get it. This is why as the Warsaw pact retreated NATO expanded. It led to this.
Iraq’s fictitious WMD’s and the sanctions that preceded that episode were a symptom of the phenomenon. They led to the death of 500k+ Iraqi children which, when questioned on this matter, Madeleine Albright the architect of the sanctions said:
“The price is high but we think it’s worth it”
The CIA led failed coup d’etat in Kazakhstan in January was another episode. This is how “The Great Game” is played.
That great Russian genius Leo Tolstoy, in an essay that became the second epilogue to the greatest novel ever written, War and Peace, tackled this issue which he called the Calculus of History and puts such events and individual experience as we are experiencing today into historical context.
War & Peace fits into that category TL|DR for some and indeed none of us may have the time left to read or re-read it before being consumed in the cleansing white flash (giving the Globalist “Build Back Better” slogan real meaning for those unfortunates left behind) therefore his essay would lose its context too so I can glibly sum it up by quoting the final line of the equally brilliant movie Dr Stranglove: “Mein Furher – I can WALK!”
Sorry for the off-topic post.
I’m on record saying that POTUS#43 is a war criminal and that the invasion of Iraq was a geopolitcal disaster. However, the U.S. has left Iraq to the Iraqis after having occupied the country for some time; also, the U.S. never questioned the territorial integrity of Iraq; and finally, the U.S. didn’t threaten those countries not supporting the invasion with nuclear weapons.
In contrast, Putin has effectively been threatening the entire world with nuclear war, when he threatened to use nuclear weapons against NATO member countries if they dare to “interfere” in Ukraine.
This is a man who’s been claiming that Ukraine is not a legitimate state, that Ukraine is Russia and that it should never have existed as anything else.
As I said in the other thread; the fact of the matter is that by invading Ukraine, the indiscriminate attacks in violation of the laws of war in Ukraine, and now, by threatening the World with a nuclear exchange, Vladimir Putin has demonstrated to the World that he is a war criminal of the highest order — a war criminal not seen since the death of the Bohemian corporal.
Of course, Putin’s useful idiots* will always be ranting about “globalism” as the root of all evil, while continuing supporting that former KGB macho-man through thick and thin, no matter what happens.
* https://en.wikipedia.org/wiki/Useful_idiot
Time to remind revisionist:
-> “Every nation, in every region, now has a decision to make. Either you are with us, or you are with the terrorists.”
?
GWB had said pretty clear what he/his admin. meant.
It sent a chill down others’ spines.
2001 =/= today.
When you were the world’s ONLY superpower, you didn’t have to say explicitly. Missiles and bombs were threatening and immediate.
@Pedro
This is getting ridiculous. Do you have anything (negative) to say about what’s transpiring in Ukraine, or are you only able to rant about what transpired 20 years ago?
No disagreement on Bush II and what happened in Iraq.
If that can happen in a so called Democracy?
Read John Mearsheimer
https://www.mearsheimer.com/wp-content/uploads/2019/06/Why-the-Ukraine-Crisis-Is.pdf
He said this like in 2015, almost seven years ago.
Where’s the adult in the room??
The sad reality is:
if the other side treat Putin seriously and negotiate, not turning a deaf ear and drawing unacceptable “red line”.
Would the war be prevented??
As I posted separately, we are easily rolling down the same path that started W.W. I with all you cheerleaders clapping singing and dancing.
Those headless would simply repeat propaganda. Sad.
@Pedro
Robert Mearsheimer???
You’ve got to be kidding. He had a few good points about the unmatched power of the Israel Lobby. However, he’s long since turned into a Putinversteher and useful idiot.
Now, instead of repeating yourself in a nauseating pattern, why don’t you read what Russian-born Alexander Boot has to say about Putin’s useful idiot:
http://www.alexanderboot.com/useful-idiots-are-out-in-force-armed-with-moral-equivalence-and-realism/
War monger has little to say in his/her own words, has to quote extensively what others said repeating propaganda => A lack of objective, independent thinking!
@Pedro
My response is down-thread.
@FASTSHIP. There’ll be no fighting in the War Room!
> @FASTSHIP. There’ll be no fighting in the War Room!
😉
Merkin Muffley to the courtesy phone..
My comment above was unnecessarily cryptic:
I’ll be watching Dr. Strangelove again tonight.
Sellers was just too damned good in it, esp as the Doctor and as Group Captain Lionel Mandrake (!)- the right movie for now, I think.
The weapons-eroticism might suit some, as well; nicely done, if you’re into that sort of thing. 😉
Might be worth remembering, in a time virtually (intentionally?) without memory, which country has actually used nuclear weapons.. twice.
To show the world, who had become the new superpower.
China has been able to take territory in the China Sea. Israel has been chipping away territory from Palestine. But I don’t think Russia taking Kiev is going to be accepted by the free world.
The Brit and Americans conspired to kick heritage people out, took over their island and turned it into a military base.
https://academic.oup.com/ejil/article/21/1/257/363335
https://www.google.com/amp/s/amp.theguardian.com/world/2021/jan/28/un-court-rejects-uk-claim-to-chagos-islands-in-favour-of-mauritius
UK refused to follow what the court ruled. Did the U.S./”international community” raise a fuss??
I also can’t stand this type of inconsistency: preaching to others about “rules-based” government, while concurrently applying more selective rules to oneself. All that this achieves is further disdain toward “the west”.
The next time “a certain western country” invades another territory, the sanctions should be heaped on!
Dear Scott:
I wish to take exception to your description of an “international lying amoral thug”. There is nothing amoral here! Amoral is beyond or without morals. Such is the case of a rock, a chair, a banana or a giraffe. Human action is either moral or immoral. This individual and his behaviour is deeply immoral, ought to be branded as such, and dealt with accordingly.
If the war drags on (and I’m not convinced. Some seemingly well read analysis suggests Russia simply doesn’t have the ammo etc to go beyond 10 days at this rate, nor the ability to produce replacements fast enough. Quite apart from that, surely there must be serious discussions somewhere among senior Russians about an overthrow)…
1) Covid must have focused the minds of any manufacturer to look at the resilience of all of their supplies. OK, not easy if Russian enterprise is above 50% market share. But I’d find it astonishing and utterly negligent if they haven’t worked up plans on how to establish suitable production volumes elsewhere. Or does estabishing eg Ti productin take the same multi-years it takes to set up semiconductor fabs?
2) Re-routings. How does this affect the balance between the competing big twins, and also the shift to long range 321s?
Metals don’t grow on trees: they come from big, ugly, dirty, hazardous, CO2-producing mines, which are no longer “fashionable” in the US and EU. Even if new mines open in “the west”, who’s going to want to work there — labor immigrants? And what about the associated environmental footprint — which we’ve conveniently “exported” to far off countries in recent decades?
The current crisis in Ukraine is further showing the huge weaknesses in global supply chain constructs — in addition to the weaknesses that were exposed by recent trade wars and the CoViD pandemic. The whole system urgently needs to de-couple — even among “friendly” countries, because today’s friend can be tomorrow’s enemy.
Todays western mines is way different from before with automation and much less workers below ground. A bit like the development of oil rigs.
How about in your backyard?
It’s fine as long as the mines are located far, far away, in “others” territory.
https://www.google.com/amp/s/amp.theguardian.com/australia-news/2020/jun/16/rio-tinto-repeats-apology-for-blasting-46000-year-old-rock-shelter-to-expand-mine
I had a very brief look online to see where Ti comes from these days. The fount Wiki references the USGS in saying something called Titanium sponge is produced in China (52%), Japan (24%), Russia (16%) and Kazakhstan (7%). But https://www.statista.com/statistics/759972/mine-production-titanium-minerals-worldwide-by-country/ shows actual mining very differently, with China still easily top, but followed by South Africa, Australia, Canada, Mozambique, Ukraine (of all places), Norway, Senegal, on and on with no Russia or Kazakhstan. Or Japan.
So, if both stats are usably accurate the issue would appear to be ability to process the raw mineral to sponge rather than actually access teh stuff in the earth. Which goes back t me query re how long it actually takes to establish alternative production volumes.
And there have been suggestions in the past decade for new, much less energy intensive production processes. Maybe the high energy requirements are why Russia is strong in Ti processing?
Anyway:
https://pubs.acs.org/doi/10.1021/ja408118x
https://www.technologyreview.com/2015/02/26/110750/new-titanium-making-process-could-result-in-lighter-aircraft/
for once, bryce is somewhat correct.
all those same materials exist in great abundance in north and south america, however the cost of labor and environmental compliance makes the extraction and refinement financially non-viable in light of the artificially low prices China and Russia charge (they have not only lower labor and environmental compliance costs (no environmental compliance costs whatsoever in some cases), but their governments also subsidize and set pricing at a level designed to keep western mining uneconomic.
it would take several years to re-establish bulk ore mining and refinery capabilities in “the west” and the cost of labor and environmental mitigation would likely triple the cost of finished raw material.
For once, bilbo is somewhat gracious.
How about just making your comment without the jibes?
There’s another commenter here who can’t help himself with (automatic) jibing — not really something you should try to emulate 😉
Thats not going to happen inside 10 years.
What will happen is sanctions waivers will apply just like they are now for nice to haves like wheat, oil gas etc
Dear Scott:
I wish to take exception to your description of an “international lying amoral thug”. There is nothing amoral here! Amoral is beyond or without morals. Such is the case of a rock, a chair, a banana or a giraffe. Human action is either moral or immoral. This individual and his behaviour is deeply immoral, ought to be branded as such, and dealt with accordingly. Also it would be best to call the situation for what it is: Ukrainian War, not Cirisis.
Regarding long term, there are two options:
– Either Vladimir fails, Russia comes back to a more co operative behavior, but trust will be very difficult to come back regarding aviation… it was never easy to sell russian planes, even with good design and plenty of occidental hardware, engines and avionics. Only future for the russian talents will probably be subcontracting jobs design and components..
– Or Vladimir succeeds, but sanctions will push him into the arms of Xi Jingping .
Widebody C929 will be developped with maximum priority, and could even reach certification with russian help! Not easy though as occidental avionics and engines will probably not be available.
Relationship between Russia and China will be terribly unbalanced, Siberia will eventually become part of the chinese empire. But this is long term.
If Vladimir succeeds, the Taiwanese issue could become very hot, very quick…
flying frog:
Vlad the destroyer is already in Xi’s warm arms. It just has not had time to blossom to its fullest depth.
As for the C929, you can forget it. Russian recognition will be terminated. No one but China would buy it.
And the Soviets are going to be very busy rebuilding their shot up air force.
Plenty of potential MC-21, C919 and CR929 customers in the Middle East, central Asia, parts of SE Asia, Africa and South America.
Only a relatively small number of countries has jumped on the sanctions bandwagon.
Totally agree with Bryce!
If invasion succeeds, a new iron curtain will fall over the world!
on one side, the West plus Japan ,South Korea, Australia, India
on the other side Russia China and its many vassals in Africa Asia, south America….
A rather large market for MC 21, C919 and CR 929….
Agree- except India will be (mostly) in the latter bloc, I think.
@FF
India refused to condemn Russia, would continue to trade.
Hint: Russia is a major military supplier of India, they also have a JV.
… Indians are pragmatic, they are not as stupid to cut off their noses to spite their faces
Dear Scot:
I wish to take exception to your description of an “international autocratic amoral lying thug”. Amoral is what lies beyond morals or is devoid of it. Such is the case of a stone, a tree, a chair, or a giraffe. Human sction is either moral or immoral, the latter description being appicable in this instance, and he should be so branded and dealt with accordingly. Further, the situation ought to be properly called Crimean War 2022. A crisis is something else, and by now this description falls far short of reality.
Expelling Russia from the SWIFT financial system may not have the envisioned effect:
“China’s SWIFT alternative may undercut US sanctions
China’s Cross-Border International Payments System could give Russia a lifeline and accelerate de-dollarization”
“China’s Cross-Border International Payments System (CIPS), founded in 2015, is still under development and includes only 80 foreign banks. But there is no reason in principle that CIPS can’t substitute for SWIFT. And if Russia successfully shifts its trade payments out of the dollar system, the blow to American prestige and power would be enormous.
“…In addition, the decoupling of Russia and China from the US dollar would be accelerated. Both countries are already working on competing payment systems.”
“Russia also has developed an interbank messaging system, which now covers about 20% of domestic financial payments.”
Who cares?
China lost the plot with the EU when they threatened Lithuania .
Also, trying to appease everyone by abstaining from voting on UN Security Council resolutions which condemning the Russian invasion of Ukraine, will not work indefinitely.
–
https://www.lrt.lt/en/news-in-english/19/1569623/china-threatens-to-sweep-lithuania-into-garbage-bin-of-history-mulls-sanctions
>Who cares?
China lost the plot with the EU when they threatened Lithuania. <
Have you any thoughts on the various dependencies
between the EU and China?
As I see it, China (productive capacities and rare earths metals) and RU (energy energy energy and other nat'l resources) are being driven closer
together by the actions of other, perhaps-fading power blocs; with India as a *quite* interesting, nuclear-enabled wild-card.
Sleeping giant ?
Awakening of the sleeping giant:
Putin is turning the EU into a foreign policy superpower
https://www.axios.com/putin-eu-foreign-policy-superpower-ukraine-8c1bc3df-0e97-4e27-9de4-66f5911dd0c1.html
Ukraine crisis has seen the EU undergo a profound and rapid transformation
https://www.irishtimes.com/news/world/europe/ukraine-crisis-has-seen-the-eu-undergo-a-profound-and-rapid-transformation-1.4814477
After Russia invaded Ukraine, Europe changed its entire foreign policy
https://www.washingtonpost.com/world/2022/02/28/europe-new-era-russia-ukraine/
–
Now, the Chinese tend to be quite pragmatic. They know they are a big beneficiary of the current world order, under which China prospered tremendously.
As for the situation with Rare Earths, it doesn’t look all that bad. For the medium-term, there are plenty of opportunities to create a supply chain independent from China:
https://www.ispionline.it/en/pubblicazione/rare-earths-there-room-western-alternative-china-31344
–
As for the situation with Rare Earths in the long-term, the most promising prospects are the mining of space-based resources. For example, mining of Near Earth Asteroids (NEA) etc.
https://www.mining.com/nasa-finds-rare-metal-asteroid-worth-more-than-global-economy/
–
As for energy options in the long-term, solar power satellites do look quite promising. We’ve come a long way since Peter Glaser’s SSPS design/architecture from 1977:
Link a)
https://www.esa.int/Enabling_Support/Preparing_for_the_Future/Discovery_and_Preparation/ESA_reignites_space-based_solar_power_research
Link b)
https://ieeexplore.ieee.org/document/1454931
Never thought I would be on the same page as OV-O99, but he sure nailed that one.
A real light from the applogists
Printing Dollars causes inflation.
This inflation applies _not_ to the national domain_ but the _trade domain_ . If this trade domain is contracted $ inflation will accelerate. over 12 month 1.4% –> 7.5%
https://www.statista.com/statistics/273418/unadjusted-monthly-inflation-rate-in-the-us/
Hello Uwe,
Re: “Printing Dollars causes inflation.”
So does printing Rubles or any other currency, or having the value of your currency drop by 18% or more in one day relative to trading partners, or having your central bank increase their benchmark loan rate from 9.5% to 20% in one day, as Russia’s Central Bank did on 2-28-22. Annual inflation rate in January 2022 was 8.73% in Russia and 7.5% in US. After the Russian Central Bank’s increase of its benchmark loan rate to 20% yesterday, inflation in Russia for March 2022 will quite likely be in the 10% to 20% range. See the excerpts below from the 2-28-22 MarketWatch article at the link after the excerpt.
“The Russian central bank more than doubled interest rates to 20% on Monday, as the ruble plunged following further sanctions by Western powers to over the country’s invasion of Ukraine.
The ruble USDRUB, -3.24% hit an all-time low of 119.25 per dollar on Monday, according to FactSet. In volatile, sporadic trade, it was last down 18% to 98.94. The interest-rate hike, meanwhile, ratcheted up the key lending rate from the already high level of 9.5%.”
““Stopping the Russian central bank from using a decent chunk of its $630b FX reserves to support the ruble – in fact, the EU have approved banning all transactions with Russian central bank– we will see a collapse in the RUB…banks runs are happening in Russia, and this could lead to massive inflationary pressure,” said Chris Weston, head of research at Australian forex broker Pepperstone, in a note to clients.
“This weekend’s events now mean that no G-7 banks will be able to buy Russian rubles, sending the currency into free fall, with the end result we could see a huge inflationary shock unfold inside Russia,” said Michael Hewson, chief market analyst at CMC Markets, in a note.
Russia’s credit rating was cut to junk by S&P Global Ratings on Friday.”
The link to the MarketWatch article I quoted from above seems to keep any post that it is included in from going through, so here is the article’s title, so that anyone anyone who is interested in seeing the article can Google it.
“Russian central bank lifts interest rates to 20% as ruble plunges over Western sanctions.”
More on inflation in Russia and the US.
Below is an excerpt from the 2-27-22 Wall Street Journal Article at the link after the excerpt.
“The ruble was quoted at 110 to 120 per dollar by Russian banks on Sunday. It had traded at 75 before Russia’s invasion of Ukraine and 83 on Friday. That plunge in the currency’s value of 30% to 40% would add about 5 percentage points to inflation, said Sergey Alekashenko, who was a senior Russian central-bank official in the late 1990s and now lives in the U.S.
Inflation had already climbed to 8.7% in January, more than double the central bank’s 4% target. Mr. Alekashenko added inflation could rise even more if disruptions to the payments system reduce the supply of goods.
Earlier this month, Russia’s central bank raised its key interest rate a full percentage point to 9.5% to combat inflation. The bank, which Western economists generally see as committed to controlling inflation, is likely to raise rates significantly further, pushing Russia into recession.”
https://www.wsj.com/livecoverage/russia-ukraine-latest-news-2022-02-26/card/GMz1Z1wtWswDAPme44GV
The following excerpts are from tradingeconomics.com
“Russia’s annual inflation rate accelerated to 8.73 percent in January of 2022, from 8.39 percent in the previous month and slightly below market estimates of 8.8 percent. That was the highest rate since January of 2016.”
https://tradingeconomics.com/russia/inflation-cpi
“The annual inflation rate in the US accelerated to 7.5% in January of 2022, the highest since February of 1982 and well above market forecasts of 7.3%, as soaring energy costs, labour shortages, and supply disruptions coupled with strong demand weigh.”
https://tradingeconomics.com/united-states/inflation-cpi
Backward looking statistics don’t represent the future!
Attention should be paid to what happens in the future, not the past!
U.S. admin has tried every tool it has to stoke the beast (endemic inflation, don’t think otherwise 🙄), there’s a price to pay down the road.
Oil market predicts massive shortage coming.
Those who are oblivious can blame no one but themselves for not seeing this.
Back in 1990/91, oil price jumped from $18 to over $40, av fuel price more than doubled. There was a debate whether it caused a recession or exaggerated it. Trans-Atlantic fell more than half. A major U.S. airline filed for bankruptcy.
-> European natural gas prices have jumped >55% to a record high this morning (Mar 2nd) …
=> Retail gas (i.e. petrol for those outside N. Am.) price jumps up 6% in two days and this is just the beginning.
Haha. Do your links tell you any of these???
… imagine what would happen later this year: lineups for gas (petrol), general price increases, endemic inflation!
Pretty good explanation but you dance aournd what I pointed to:
namely that the US printing vast amounts of money caused no significant inflation due to the US dollars reach and use as a clearinghouse and reserve currency.
IMU inland effective inflation of the Ruble requires trade into other monetary domains. Which is currently cut short.
finaly: during the cold war German trade with the SU was done on a barter basis. With some funny fallout: MIAG AG, Braunschweig received a big load of kerosin lamps (Sturmhand replica) that they sold to interested citzizens 🙂
The Russian „elites“ – aka higher up level of Russian Mafia – need to get the money to where they prefer to live and that is not China.
The EU airspace ban on Russian aircraft includes private owned aircraft. Bye-Bye Monte-Carlo, Baden-Baden, Marbella, …
Catch a plane to one of the ‘stans or China or India even. Then onward travel by air to destination of choice.
Its a connected world so that ‘direct connections’ have work arounds. Private planes can be registered in various places in EU for tax reasons place like Malta or Cyprus- the last is a favourite of Russian middle class as well as the time zones align
And any time they touch down in a nice place, they get seized.
For every work around, if there is a will, there is a work around.
Never thought I would see the day of the EU actually taking action.
One interesting aspect which I would have liked to see here discussed is the impact of the sanctions on the existing russian fleet. As of now there are a couple of hundred airplanes leased from western lessors by russian airlines. What will happen to those planes? They will have to be returned pretty fast probably. How will that affect the market ? How will it affect the OEM’s ? Lots of questions which this article isn’t covering.
Hello transporter,
Re: ” As of now there are a couple of hundred airplanes leased from western lessors by russian airlines. What will happen to those planes?”
See the excerpt below from the 2-28-22 CNBC Article at the link after the excerpt.
“Lessors are set to terminate hundreds of aircraft leases with Russian airlines following Western sanctions over the invasion of Ukraine that require the contracts be canceled.
AerCap Holdings, the world’s biggest leasing company, said on Monday it would cease leasing activity with Russian airlines, while BOC Aviation said most of its leases in Russia would now have to be terminated by March 28.
Russia warned the West it would retaliate against sanctions targeting its aviation industry.
Russian companies have 980 passenger jets in service, of which 777 are leased, according to analytics firm Cirium. Of these, two-thirds, or 515 jets, with an estimated market value of about $10 billion, are rented from foreign firms in the mainly Ireland-based industry.”
https://www.cnbc.com/2022/02/28/hundreds-of-russia-plane-leases-to-be-axed-after-eu-sanctions.html
See also the ch-aviation article at the link below.
“Having initially targeted Russia’s leasing sector, Western-backed sanctions have now taken aim at the country’s airline and aerospace sectors as international outrage over the invasion of Ukraine mounts.
In its latest round of punitive measures aimed at crippling Russia’s economy and therefore its ability to wage war, the European Commission announced on February 26 the ban on the export and sale or transfer of all aircraft, aircraft parts and equipment to Russia and on all related repair, maintenance and financial services. The leasing of aircraft to Russian entities is therefore prohibited as well.
The ch-aviation fleets advanced module shows Aeroflot (SU, Moscow Sheremetyevo) to be the only Russian operator with a firm order commitment with Airbus for fourteen A350-900s while lessor Ilyushin Finance has fourteen A220-300s due. Concerning Boeing, UTair (UT, Khanty-Mansiysk) has twenty-eight B737-8s due while Volga-Dnepr Airlines (VI, Ulyanovsk Vostochny) is expecting six B777-Fs.
However, it is recalled that Aeroflot Group’s Pobeda (DP, Moscow Vnukovo) subsidiary was also planning to acquire B737 MAX 8s via lessors for its fleet renewal drive while S7 Group had commitments with lessors for A320/A321neo jets for both its S7 Airlines (S7, Novosibirsk) and imminent Citrus subsidiary, now on hiatus. Ural Airlines (U6, Ekaterinburg) also has A320neo Family commitments and B737 MAX aspirations. smartavia (5N, Arkhangelsk Talagi) has just taken formal delivery of the first of seven A320neo aircraft it planned to take from lessors this year.”
https://www.ch-aviation.com/portal/news/112990
Don’t forget, unlike you know who, Russia has a functional and operational passenger rail network. It would cause inconvenience, but not fatal.
Aercap/GECAS has over 100 used aircraft that would be returned. The market is likely in extreme depress.
There’s action, and there’s reaction.
Those P.E. guys look like they caught and chopped by a falling knife.
Pedro:
Is that wonderful rail network include the single line to Siberia?
I do have a suggestion of who the Soviets should put on it!
@TW
???
That rail network worked back in 1941 or so. Soviet moved their forces in F.E. to Europe after defeating the Japanese. I guess your amnesia has a significant impact on you or history was not your strong suit. 🙄
Pedro, dial it back. See my comment at the bottom of this comment session.
Scott:
No issues. Pedro clearly does not understand how well versed I am about WWII and will try to continue his education program.
In reality Russia again has pulled forces from the Far East to invade a country this time.
That said, when you commit something like 65% of your forces to one area? Hmmm.
Its absurd to think rail travel on the messed up Soviet rail system replaces air travel. As I recall, Eastern Russia is 13 time zones away from (what was Western Russian, may have added a time zone in Ukraine though arguably Belarus is further West.
Together with a railway through Kazachstan, that “single line to Siberia” carries thousands of freight trains per year between China and the EU.
https://newseu.cgtn.com/news/2021-05-27/World-s-longest-rail-network-turns-China-Europe-trade-green-10nbLEjo9Tq/index.html
And the point is?
China clearly is leery of the Russian Briar Patch.
Nothing China makes we can’ replace. Russia is actually more strategic there though it can also be replaced with time and higher prices.
Former possession in fact means Taiwan has a legitimate claim on the mainland, they were there first! Ironic
Scott, I understand your intent with this article and thank you for bringing this to attention. However, most of the comments are getting deep political – I guess sometimes it’s warranted, but this is an aviation blog.
But, if we think this Ukraine is troubling, just wait until the Chi-coms invade Taiwan.
What are Chi-Coms?
something similar to bible thumping rednecks from flyover country 🙂
your polarizing use of cuss words devalues your comment.
OK, it is difficult to go below absolute zero.
@Uwe
Chinese Communist’s. They themselves use the term CCP, Chinese Communist Party. Nope, not a cuss word, get educated.
Polarizing huh?
But it’s ok to use the term “bible thumping redneck”. Really?
holding a mirror.
but I see you are blind to the world.
If the past is any guide, Scott tends to accept some (minimal) amount of “necessary” politics in a discussion of trade issues, such as sanctions, tarriffs, trade wars, etc. However, he objects to purely political posting, e.g. with regard to “left vs right”, human rights, etc.
I imagine he’ll intervene here if things vere more toward the latter than the former. As long as things remain civilized, the discourse is interesting.
@Bryce is correct.
Hamilton
@Bryce
Thanks Bryce, agree with you. My friend and I always enjoy your candid comments on the subject at hand. But I need to be careful and let this get to your head.
Canada has also banned all Russian owned (and I think Russia origin?) air transport. Even though the US has not yet banned (has it?) this in effect blocks most long-distance flight paths running west from Russia.
Update from AirInsight on the effect of sanctions on aviation OEMs:
“Impact of sanctions on Airbus and Boeing still unclear”
https://airinsight.com/impact-of-sanctions-on-airbus-and-boeing-still-unclear/
Scott:
Don’t you think a SWIFT ban would halt most, if not all, trade between “the West” and Russia, excluding energy trade?
@Pedro: I’m the wrong guy to ask. What I’ve seen on TV is that there are some selected energy exemptions. But I only know what I read in the papers and see on TV.
So no more Ti for BA’s 787, at least in the short-term??
Pedro:
Please note Boeing has Ti stashed.
787 are in very low rate with 100+ that can fill the deliveries which is now roughly 10 a month, talk about the good old days (well 10 a month once they get a process to fix the gaps)
Low rate =/= no production!!
No more new landing gears will hit sooner or later.
Emirates has openly questioned BA’s ability to deliver their 787s as scheduled. Planes built for other airlines can’t substitute, don’t you know?? 🤔
You seem to forget the very nasty contaminated 787 wings issue!
Very difficult to imagine a way to green light the frames with weak wings!!!
Below extract of Seattle times:
“Contamination of composite material
The internal FAA memo relates how, early this year, Boeing reported to the FAA that Mitsubishi Heavy Industries in Japan — which builds the jet’s carbon composite wings — had discovered contamination of the composite material during fabrication that could potentially weaken the bonding when two composite parts are bonded together with adhesives.
For example, when a stiffening rod is bonded to the inside of the wing skin.
In the fabrication process for composites, carbon fiber tape impregnated with epoxy resin is laid on a mold, then hardened in a high-pressure oven called an autoclave.
Bags are placed around the composite material to create a vacuum, and a thin sheet may be placed between the composites and the mold to facilitate release when it comes out of the autoclave. The contamination occurred because some of the bagging and release materials contained polytetrafluoroethylene — commonly known by the brand name Teflon.
The use of PTFE, which left a residue after removal, did not comply with Boeing’s manufacturing specifications.”
Germany insisted on not hampering energy trade, I suspect suppliers for airbus wont be blocked either.
And european view on the US is that Biden probably doesnt want to block oil imports for fear of loosing the election over a gas price hike.
We’ve yet to see how Putins “reteliation” on the sanction turns out, if there are any.
> And european view on the US is that Biden probably doesnt want to block oil imports for fear of loosing the election over a gas price hike. <
Elections? In the US? Surely you jest. The two
*least-popular candidates* in the D Party's Primaries (check out the curious events during the South Carolina Primary, in particular) somehow became that Party's candidates for President and VP, and the eventual "winners"..
"elections.."
signed / former Democrat Voter
2020 D primary total votes for Biden 19 mill, runner up 9 mill.
Its like selling planes, the one with most planes sold in a year is the winner.
Electronic Voting Machines.. get whatever result an entity wants.
See worldwide Election Transparency and security statistics- USA USA is not even in the Top Ten.
Bill7:
Right Mel. Let the Tin foil reign supreme
Funny how even the partisan right wing Repub audits of the PAPER shows they are spot on accurate.
The only issues are tech ones and the audits catch and fix those.
Germany insisted on not having half its citizen suffer from cold, hypothermia and respiratory diseases from lack of heating gas. What the plan is on how NATO is supposed to fight a war do defend Estonia, Finland, Latvia as the Putin regime restores the empire is restored is a plan I don’t think exists.
Rather melodramatic, don’t you think? Shall we also chide other countries for their reliance on Saudi oil, or American grain? Don’t forget that the US imported record amounts of Russian oil last year.
Putin is currently only in Ukraine, and having a tougher time there than he foresaw; he’s even thinking of calling in Belarus to help him.
No sign of any movement toward other countries in Europe, and certainly not any countries in the EU or NATO.
The EU has a full-time army of ca. 1.5 million soldiers, and it spends as much on defense as China does (and 5 times as much as Russia does). As you’ve heard in recent days, several EU countries are now upping their spending. That’s good news for European security, and also for EU industry.
Bryce:
Nope, its all in flux.
A hoot to see the appeasement structure tumbling down.
Like China, there is nothing Russia produces we HAVE to have. Its all what was an economic decision
We just pay more in the short term and the system adjusts (well unless like certain EU countries you are dependent on the Soviets)
But the good old USA will bail you out once again.
@ TW
A “certain country” can’t even muster up enough money to get its crumbling infrastructure in order — it’s not in a position to “bail anyone out”. Nobody has asked it to, either.
@TW
Have you stocked up wood chips, just in case …. just in case. 🤣
Bryce:
Me thinks Fiona Hill has your number
“Hill: Exactly. What stops a lot of people from pulling out of Russia even temporarily is, they will say, “Well, the Chinese will just step in.” This is what every investor always tells me. “If I get out, someone else will move in.” I’m not sure that Russian businesspeople want to wake up one morning and find out the only investors in the Russian economy are Chinese, because then Russia becomes the periphery of China, the Chinese hinterlands, and not another great power that’s operating in tandem with China.”
And as you have suddenly seen in Germany, when you get the politics on your side its is amazing what you can do.
As Japan found out in WWII, we have awakened a sleeping giant.
Never ever discount the ability of the United States when it has the will.
I am beyond impressed the EU is learning that let alone implementing it for itself.
@ TW
“Never ever discount the ability…when it has the will”.
Yes, we saw that in various military campaigns in recent years…
KC-46: a lack of “will”? Or capability??
I am confused.
@TW
I heard Fiona was busy talking/writing about DJT.
SWIFT is a messaging system that facilitates transfers between corespondent banks. It is not a clearing system and hence does not move money. The way this works is a follows:
Barclays and Citi agree they trust each other to the tune of say 1million. If a Citibank client wants to send 100,000GBP to a Barclays account Citi takes the money from their client and then sends a message to Barclays (previously via telex, now via SWIFT) asking Barclays to deposit the funds into the destination account. And of course the reverse happens. And then from time to time the difference is netted out and the two settle up.
The point is SWIFT is just the secure, no-reputable mechanism by which the message is sent. It is not a clearing/settlement system like FEDACH, SEPA etc. Banks can still fall back on using telex, email or anything else they care to use to communicate. Thought this is all very awkward and really slows things down.
The real kicker in the sanctions is the provision that no American or European or Japanese is allowed to facilitate payments with any element of the Russian central banking system as well as select sanctioned banks. This effectively freezes many Russian assets held in those currencies. But it does not stop payments where still allowed, for oil, gas or titanium say.
It will be interesting to see how far sanctions are expanded. The final level is putting Russia on the OFAC list totally closing off economic activity with Russia.
Reuters: “Factbox: China-Russia trade has surged as countries grow closer”
https://www.reuters.com/markets/europe/china-russia-trade-has-surged-countries-grow-closer-2022-03-01/#:~:text=Total%20trade%20between%20China%20and%20Russia%20jumped%2035.9%25,agriculture%20commodities%2C%20running%20a%20trade%20surplus%20with%20China.
“Surged”, well it increased by 20 billion in 2021. The symbolism is important, but that does not mean they are major trading partners. Currently Russia and China do about 140 billion of trade per year, Canada does over 600 billion in trade with the US. Heck one bridge carries more trade than the entire Russia/China relationship.
There’s only one direction it will now go in: UP.
As always, sanctions just serve to re-direct trade flows.
Bryce clearly is in the Nevil Chamberlain camp!
What has Neville Chamberlain to do with Sino-Russian trade?
Looks like someone is a bit confused on his history.
-> Canada does over 600 billion in trade with the US.
The same parts cross borders six or seven times!?!
Another backward looker. Do you walk like that? 😛
https://wits.worldbank.org/countrysnapshot/en/RUSSIA
Sigh.
China is the biggest trading partner with Russia. Period.
China 13.4% ; Netherlands 10.5% ; Germany 6.6% and Belarus 5.1% ….
If Russians can’t buy iPhone etc, who would they turn to??
@ Pedro
Not all Russian banks have been banned from SWIFT (for now).
Certain banks have been exempted, so that they can act as a passage for “essential trade” payments, e.g. relating to energy, raw materials, etc.
Just an opening salvo I believe, Bryce
It’s enough to induce banks to pause “normal” processing.
So far it looks like “sanctions theatre” to me.
Ambrose Evans-Pritchard’s current take:
https://www.telegraph.co.uk/business/2022/02/24/greater-russia-now-full-spectrum-commodity-superpower-less-vulnerable/
I guess those which can’t fly BA or AB any more would have no choice but to switch to domestic OEM.
After the collapse of Norwegian, more excess lease returns to pick from.
With hindsight, massive orders by P.E. firm(s) seem premature??
Under a new name …Norse Atlantic Airways as a longhaul LCC
Go the vikings
Leases repriced with (substantial?) discounts I believe
I’d not be surprised demand destruction on the horizon.
> I’d not be surprised demand destruction on the horizon. <
Which would fit interestingly with other events of the last couple of years.
To turn an economic war into a real one? Watch your tongue.
From 1919 -> 2022 back to 1914?
Some interesting background from Matt Taibbi, who was working as a journalist in Russia in the 90s, if I remember correctly: https://taibbi.substack.com/p/putin-the-apostate
-> Europe won’t transfer fighter planes to Ukraine. Poland decided not to …
https://www.thedrive.com/the-war-zone/44501/reports-that-ukraine-is-about-to-get-70-donated-fighter-jets-dont-add-up
PEOPLE: Several of you are making remarks about and toward each other that violate the Reader Comment rules.
Knock it off, or I will close comments.
Hamilton
Interesting comment on deadline for lessors with planes in Russia:
“Around 515 Russian jets with an estimated market value of about $10 billion are rented from foreign firms, according to analytics firm Cirium.
“The lessors have until March 28 to wind up contracts under EU sanctions, but industry executives have expressed concern over whether Russian airlines will comply with orders to return the planes.”
https://www.rappler.com/business/boeing-suspends-parts-maintenance-russian-airlines-ukraine-invasion/
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As regards spare parts, it will interesting to see to what extent Russian aerospace manufacturers step up to the challenge of making substitute parts.
Iranians still have “western” planes to fly after all these years suffering under unilateral (and repeated) sanctions. What’s the big deal??
Interesting that some posters can only see one side of the coin, but not the other side.
What a glut of planes, who need new planes at a price BA wants to charge to pay off its debt?
Toasted!
Reposession of assets in Russia could turn out impossible.
Freezing RU assets in the West may turn out to be a suboptimal activity.
The “West” closed their airspace one after another, how on earth you retrieve those aircraft (most are Russian reg. I believe)?
Another case of kids playing with guns and shot an innocent or their feet.
https://www.google.com/amp/s/www.businessinsider.com/12-billion-worth-leased-aircraft-stranded-in-russia-ukraine-sanctions-2022-3%3famp
A honorable way out for Putin, that’s what is needed.
You’ll probably get pounced upon for making that statement, but you’re actually 100% correct. Of course, the word “honorable” could better be replaced by a less charged term — such as “face-saving” — but the basic idea is the same: Putin withdraws hurriedly from the wasps nest while proclaiming some sort of manufactured “victory” to his cronies. The sanctions imposed by “the west” run the risk of further enraging a “cornered cat”, at which point all rationale gets flushed — it’s a bad idea not to leave the cat at least one way of getting out of his predicament.
The problem is the “West” is now run by kids. Little/no visions => no strategy. Plan? What plan? They are reacting day by day according to news cycle.
The UAE — and some other states in the ME — have not condemned the Russian invasion of Ukraine. Neither has India. So, taken together with China, these countries still offer trade/finance routes between Russia and the rest of the world. Interestingly, the UAE traditionally exports many aircraft parts to Russia.
https://www.cnbc.com/2022/03/02/uae-cancels-visa-free-regime-for-ukrainians-amid-russian-invasion-.html
Was this widely reported?? Why not?
India is the largest democracy and has 1.4 billion people. International community? What “international community”???
Everything works according to plan. NOT.
https://mobile.twitter.com/JavierBlas/status/1498924567548596226?cxt=HHwWhMC4nfv8n80pAAAA
-> The six-month Brent oil time-spread tells everything that needs to be said: maximum tightness. Oil buyers are avoiding Russian crude and scrambling to find alternatives.
-> The thermal coal market is in absolute panic mode, with main benchmarks surging north of $350 per tonne to an all-time high (Newcastle, API4, API2). Russia is a major thermal coal exporter and demand is high as many utilities prepare for gas-to-coal switch.
https://mobile.twitter.com/JavierBlas/status/1498990830920605700?cxt=HHwWiIC56f-Nvs0pAAAA
-> ” One of the biggest daily freaking moves in bonds I have ever witnessed: 21 bps in a day in Bunds = biggest move in 10+ years.
https://mobile.twitter.com/MacroAlf/status/1498756104033087488
-> ” IEA: we are releasing 60 mln bbls of oil to help
Oil market: lol
WTI now above $104 a barrel (session and multi-year highs)
https://mobile.twitter.com/Devikakrishnak/status/1498686575315759112?cxt=HHwWkMC99f7fs8wpAAAA
-> OxfordEnergy paper on Russian oil crisis: “This ‘self-sanctioning’ is already having an impact on oil supplies. At its peak impact, such a scenario could result in a disruption between 3 mb/d to 4 mb/d of Russian crude oil production”
https://mobile.twitter.com/JavierBlas/status/1499117053373992966?cxt=HHwWjMCysY7B980pAAAA
-> Brent #crude surpassed $115 to touch the highest level since 2008 after settling at $112.93 a barrel
https://mobile.twitter.com/Devikakrishnak/status/1499115908509351937?cxt=HHwWgoCyvbz-9s0pAAAA
In order to continue to fly over Russian airspace:
-> “Japan Airlines Suspends European Codeshares With British Airways, Finnair
Quite an interesting quote, certainly has relevance to the supply end (aka Soviet and Germany WWII where Germany cut itself off from tungsten and other critical metals and proceeded on for 4 years roughly )
George Orwell:
The human tendency to persist in “believing thing which we know to be untrue then finally proved wrong, impudently (love that) twisting the fact to show they were right.
The check on it is that sooner or latter a false belief comes up against stark reality, usually on a battlefield.
Reality is that we can adjust to the loss of minerals and the Soviets cannot advance without the advance tech of the West. You can throw China into this but they too depend on outside tech and if they come under sanctions then nothing they supply is not easily replaced.
Again, sorry for the off-topic post.
This is a quote from @Pedro from up-thread:
So, again @Pedro is violating the Reader Comment rules — this time around with a nasty ad hominem attack. Of course, that’s what trolls typically do. For how long will he be allowed to carry on?
Now, let’s see what @Pedro said in his previous response: “Read John Mearsheimer” and provides a link to Foreign Affairs and an article from the September/October 2014 edition. @Pedro: “He said this like in 2015, almost seven years ago. Where’s the adult in the room??”
https://www.mearsheimer.com/wp-content/uploads/2019/06/Why-the-Ukraine-Crisis-Is.pdf
So, @Pedro is referring to John Mearsheimer, who appears to be his hero and who, apparently, has explained why “its all the fault of the West” — and that conclusion seems to fit squarely into @Pedro’s worldview. @Pedro doesn’t bother writing a long exposé of the issue at hand, but refers instead to what the good professor had to say about it.
Yet, he has the nerve to say this:
War monger has little to say in his/her own words, has to quote extensively what others said repeating propaganda
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Now, Russian-born Alexander Boot had already written a critique of Mearsheimer’s “theory” in September, 2014 — an article which I took the liberty to quote from:
http://www.alexanderboot.com/useful-idiots-are-out-in-force-armed-with-moral-equivalence-and-realism/
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Interestingly, Stathis N. Kalyvas, the Gladstone Professor of Government and fellow of All Souls College, University of Oxford, published this essay on 1st March 2022.
How we got Putin so wrong
https://iai.tv/articles/how-we-got-putin-so-wrong-auid-2063
Addendum
Here’s the latest article from Russian-born Alexander Boot:
http://www.alexanderboot.com/putins-error-is-worse-than-bidens/
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Hamilton