Sometimes Russian Federation President Vladimir Putin just nails the issue in a way that is difficult for western voices to deconstruct. This is one of those examples.

Using the reference of the EU recently raising interest rates in an effort to lower energy costs, a seemingly disconnected approach that attaches energy policy to monetary policy, Vladimir Putin outlines exactly why the EU Central Bank approach is used.  This is a really important dynamic to understand.

For a long time, Russia battled with the EU over the pricing process for oil and gas.  Russia, specifically Putin, wanted to sell oil/gas to the EU based on production prices and fair profits.

Europe wanted to buy Russian oil/gas based on “market prices” which are manipulated by speculation and traders.

Putin doesn’t like this pricing approach because it artificially inflates the price based on speculation, trading and inorganic influences.

Instead, Putin always said the “market approach” makes your energy prices go up, even when production capacitary prices go down (productivity).

Producers can provide increases in energy volume at lower per unit levels just by turning a dial on gas volume.  Why would Europe want to pay more, when the cost to deliver a higher volume lowers the per unit price.  The EU never had a good answer, other than that’s just the way the ‘western market’ works.

Concluding the first day of his working visit to India for the BRICS meeting, Vladimir Putin answered a media question about the EU and used this reference to outline why the financial system of the EU is actually the underlying reason for their need to have conflict with Russia.  This is really interesting.

Question: You have spoken at length today about the BRICS countries. I would like to raise a question concerning a nation which, though geographically more distant from here, is perhaps closer to you personally – Germany. As is known, elections have recently taken place in Saxony, where the Alternative for Germany secured a decisive victory. It appears a similar trend is emerging in Mecklenburg-Western Pomerania as well. How do you view these developments?

President of Russia Vladimir Putin: I do not wish to, nor will I, comment on matters of the internal political developments currently unfolding in the Federal Republic.

However, there are points which merit attention in this context – and I will explain why. In my view, all that is now happening across Europe as a whole is the consequence of systemic errors committed by the so‑called West, or, to be more precise, by the globalist circles of the West, in the political, security and economic spheres.

Everyone is prone to mistakes. We, too, have made numerous mistakes, as has the wider world. Yet the difficulty for the globalist West lies here: following the end of the Cold War and the collapse of the Soviet Union, they perceived themselves as standing atop the “summit of Mount Olympus,” and evidently concluded that, firstly, they were permitted everything and, secondly, that they themselves were incapable of error. From then on, these mistakes began to accumulate and snowball.

In the security sphere – the meaning is clear. This has taken the form of attempts to put pressure on the Russian Federation, initially through the use of terrorists in the Caucasus and separatists, then via other methods, and now – by means of the neo‑Nazi regime in Ukraine. This process continues unabated.

At one time, we were included in the G8. Yet, as I have previously stated, this did not constitute full‑fledged membership. I saw this plainly and saw everything quite clearly. Although, on the surface, all appeared well and all the requisite words were spoken, in practice – I reiterate – they directly supported separatism in the Caucasus and sought to break up Russia. This is a matter of fact. Furthermore, today’s crisis in Ukraine was likewise instigated by them. These are persistent and recurring elements of pressure.

After all, we have repeatedly stated that NATO’s expansion eastward is unacceptable to us. Ultimately, they reached Ukraine. President Yanukovych was removed from office through a coup d’état. I am not now offering any assessment of President Yanukovych’s actions. There were, most likely, numerous mistakes, and probably grounds for the population’s discontent. Yet he was opposed to Ukraine’s accession to NATO. As soon as the regime was changed through, I repeat, a bloody coup d’état, the objective of pulling Ukraine into NATO was immediately set in motion, and this, in fact, became the root cause of today’s tragic events in Ukraine.

They, the Western globalist elites, bear responsibility for this, although they persistently seek to shift the blame onto us.

As for the economic sphere, the most pressing issue at present is, naturally, energy. This represents yet another area – namely, the economic domain – in which mistakes have been made. How many times did we discuss with them the necessity of maintaining our established energy relations? We supplied gas to Europe at a price of $150 – well, $180 dollars – per 1,000 cubic metres. “That is too expensive,” they told us, “we must switch to market pricing.” But what does market pricing mean?

Under our long-term contracts, prices were – and indeed still are – indexed to the price of oil and petroleum products, which are determined by market mechanisms. “No,” they insisted, “prices must be set on the exchange.” We warned them that gas is not a market commodity, or at least not a classic market commodity; this approach will yield nothing and your prices will only increase. And so, it has turned out: prices are now at 1,000 dollars or euros per 1,000 cubic metres. And they may well rise even further.

How, in fact, is the price of gas formed on the European exchanges? It is not determined by producers, but by exchange traders. Currently in Germany – as far as I am aware – the current objective is simply to fill the gas storage facilities to 70 percent capacity –the objective is of filling only to 70 percent.

Whether they will succeed in reaching this target remains unclear. The situation in the Netherlands is even worse. And why is this so? Those who engage in exchange trading are unconcerned with the technical condition of these storage facilities and the physical volumes involved. They believe that today, it is more advantageous to extract gas from storage that was purchased at lower prices, and as for tomorrow – well, we’ll see. This will result in prices rising not just to 1,000, but to 1,500. Thus, yet another mistake has been made, this time in the economic sphere.

I have heard, likewise, that in Germany itself, the current authorities claim to be following the course set by the previous leadership, and the name of Helmut Kohl is often invoked in this context. I was personally acquainted with Mr Kohl. I can state with certainty: he did not hold the views that the present leadership of the Christian Democratic Union espouses – he simply did not. I spoke with him when he was still Chancellor, and after he had left office, he visited us. He believed that the future of Europe, and of the Federal Republic, would be secured only if close, neighbourly, allied relations with Russia were maintained. We must complement one another, he used to say; only thus could the European civilisation preserve itself as an independent centre of intellectual and cultural strength, and, by extension, all that follows in the political and economic domains. Those were Mr Kohl’s words to me.

Yet today’s European elites adhere to a different perspective. They now seek to frighten their populations with a mythical Russian threat, purportedly dating back to the Soviet era. But such a threat does not exist, and never has. We do not threaten, nor do we intend to threaten, European countries – for what reason would we? No one appears to consider that we have no grounds for any conflict with Europe. All issues were resolved by the outcome of the Second World War. Moreover, all that transpired following the collapse of the Soviet Union was undertaken with the consent of the Russian Federation as the successor state. Any actions contrary to these agreements run counter to our interests and are inconsistent with the fundamental principles of international law and the UN Charter. That is the essence of the matter.

Nonetheless, they persist in this course, demanding certain changes. But what changes do they seek? Are they attempting to revise the results of the Second World War? To what end are they steering their peoples? Toward war with the Russian Federation? Now, they speak of contemplating the dispatch of troops to the territory of Ukraine. This would mean war with Russia. And I presume that European citizens understand what is unfolding. {SOURCE}

Speculation, exchange trading, market pricing, etc. these are the reasons why the EU is presenting an increase in central bank interest rates to try and lower energy prices.  The central bank approach has nothing to do with the price of the energy (oil/gas) and everything to do with the financial markets speculating on the prices of oil and gas and profiting from the speculation/trading itself.

As noted by Russian President Putin, allowing hedge funds, financial interests and inorganic market forces to set the prices of an item disconnects that item from the economic principle of supply and demand.  The prices that people suffer for oil and gas are being driven by the mechanisms set up by western financial interests.  This is manipulative and creates pain on the consumer and the people who have to pay more.

[SOURCE}

Posted in Banking and Finance, Big Government, Big Stupid Government, Economy, energy, European Union, media bias, NATO, President Trump, propaganda, Russia, Trade Deal, Ukraine, Uncategorized, US Treasury, USA, World Economic Forum
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