Europe on Tilt
“In times of war, hand all the leverage to your enemy, then complain loudly when they use it.” – Sun Tzu (probably)
In last Thursday’s piece, The Dead of Winter, we introduced the concept of Doomberg’s Law of Antilogic™ under which the current slate of Western leaders can be counted on to select the worst possible path at every critical decision point of the ongoing energy crisis. We then used this framework to predict that Europe’s leaders would implement policies that would delay necessary demand destruction, attack its energy suppliers, and trigger an outbreak of protectionism within the EU.
To be sure, the piece was a little on the cheeky, provocative side. Many disagreed with our assessment, claiming the crisis was vastly overblown, that elevated German natural gas storage levels eliminate the worst possible outcomes, and that, although this winter will certainly be a tough one, Europe would muddle through and emerge from this crisis an even stronger union.
Last Friday, we had the honor of participating in a spirited discussion on the topic organized by the venerable Grant Williams (@ttmygh). Using the relatively new and innovative online public meeting tool Twitter Spaces, Grant brought together the always-brilliant Luke Gromen (@LukeGromen), geopolitical expert Marko Papic (@Geo_Papic), and yours truly. The resulting discussion also included a late (and unfortunately abbreviated) appearance by Sir Steven Wilkinson (@SKNWilkinson) and was listened to by 13,500 people in real-time. Incredibly, as of this writing, the replay is approaching 200,000 listens. Grant later published the conversation, free for all listeners, on his podcast stream, available here.
Just hours before the event began, and shortly after the energy markets in Europe closed for the weekend, an incredible announcement crossed our Bloomberg terminal: Russia’s energy giant Gazprom would keep the critical Nord Stream I pipeline closed indefinitely, dealing a devastating blow to Europe’s energy plans for the upcoming winter. Here’s how the New York Times described it (emphasis added throughout):
“Gazprom said on Friday that it would postpone restarting the flow of natural gas through a closely watched pipeline that connects Russia and Germany, an unexpected delay that appeared to be part of a larger struggle between Moscow and the West over energy and the war in Ukraine.
The Russian-owned energy giant had been expected to resume the flow of gas through the Nord Stream 1 pipeline on Saturday after three days of maintenance. But hours before the pipeline was set to reopen, Gazprom said that problems had been found during inspections, and that the pipeline would be closed until they were eliminated. It did not give a timeline for restarting.”
The news set off a frenzied panic of policy pronouncements from European political leadership which resoundingly validated our Law of Antilogic™, although the speed of the complete collapse in prudent thinking surprised even us. With each passing day, Europe risks crossing the point of no return. What catalyzed the most recent escalation, what new policies are being rolled out, and what can be expected in the months ahead? Let’s dig in.