January 25, 2022
Confidential
Distribution: WHCS, ANSA, Dept. of State, CIA, NSA, DNC
Executive Summary
[...] The current German economic model is based on two pillars. These are unlimited access to cheap Russian energy resources and to cheap French electric power, thanks to the operation of nuclear power plants. The importance of the first factor is considerably higher. Halting Russian supplies can well create a systemic crisis that would be devastating for the German economy and, indirectly, for the entire European Union. The French energy sector could also soon begin to experience heavy problems. The predictable stop of Russian-controlled nuclear fuel supplies, combined with the unstable situation in the Sahel region, would make French energy sector critically dependent on Australian and Canadian fuel.
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"A reduction in Russian energy supplies - ideally, a complete halt of such supplies -
would lead to disastrous outcomes for German industry." - RAND Corporation, Jan 25, 2022. |
[...] The
only feasible way to guarantee Germany's rejection of Russian energy
supplies is to involve both sides in the military conflict in Ukraine.
Our further actions in this country will inevitably lead to a military
response from Russia. Russians will obviously not be able to leave
unanswered the massive Ukrainian army pressure on the unrecognized
Donbas republics. That would make possible to declare Russia an
aggressor and apply to it the entire package of sanctions prepared
beforehand. Putin may in turn decide to impose limited
counter-sanctions - primarily on Russian energy supplies to Europe.
Thus, the damage to the EU countries will be quite comparable to the one
to the Russians, and in some countries - primarily in Germany - it will
be higher.
The
prerequisite for Germany to fall into this trap is the leading role of
green parties and ideology in Europe. The German Greens are a strongly
dogmatic, if not zealous, movement, which makes it quite easy to make
them ignore economic arguments. In this respect, the German Greens
somewhat exceed their counterparts in the rest of Europe. Personal
features and the lack of professionalism of their leaders - primarily
Annalena Baerbock and Robert Habeck - permit to presume that it is next
to impossible for them to admit their own mistakes in a timely manner.
Thus,
it will be enough to quickly form the media image of Putin’s aggressive
war to turn the Greens into ardent and hardline supporters of
sanctions, a ‘party of war’. It will enable the sanctions regime to be
introduced without any obstacles. The lack of professionalism of the
current leaders will not allow a setback in the future, even when the
negative impact of the chosen policy becomes obvious enough [...] This
will ensure a sufficiently long gap in cooperation between Germany and
Russia, which will make large German economic operators uncompetitive.
[...] A reduction in Russian energy supplies - ideally, a complete halt of such supplies - would lead to disastrous outcomes for German industry. The need to divert significant amounts of Russian gas for winter heating of residential and public facilities will further exacerbate the shortages [...] A complete standstill at the largest in the chemical, metallurgical, and machine-building, plants is likely, while they have virtually no spare capacity to reduce energy consumption. It could lead to the shutting down of continuous-cycle enterprises, which would mean their destruction.
The cumulative losses of the German economy can be estimated only approximately. Even if the restriction of Russian supplies is limited to 2022, its consequences will last for several years, and the total losses could reach 200-300 billion euros. Not only will it deliver a devastating blow to the German economy, but the entire EU economy will inevitably collapse. We are talking not about a decline in economy growth pace, but about a sustained recession and a decline in GDP only in material production by 3-4% per year for the next 5-6 years. Such a fall will inevitably cause panic in the financial markets and may bring them to a collapse.
The euro will inevitably, and most likely irreversibly, fall below the dollar. A sharp fall of the euro will consequently cause its global sale. It will become a toxic currency, and all countries in the world will rapidly reduce its share in their forex reserves. This gap will be primarily filled with dollar and yuan.
Another inevitable consequence of a prolonged economic recession will be a sharp drop in living standards and rising unemployment (up to 200,000-400,000 in Germany alone), which will entail the exodus of skilled labour and well-educated young people. There are literally no other destinations for such migration other than the United States today. A somewhat smaller, but also quite significant flow of migrants can be expected from other EU countries.
The scenario under consideration will thus serve to strengthen the national financial condition both indirectly and most directly. In the short term, it will reverse the trend of the looming, economic recession and, in addition, consolidate American society by distracting it from immediate economic concerns. This, in turn, will reduce electoral risks.
In the medium term (4-5 years), the cumulative benefits of capital flight, re-oriented logistical flows and reduced competition in major industries may amount to USD 7-9 trillion. Unfortunately, China is also expected to benefit over the medium term from this emerging scenario. At the same time, Europe's deep political dependence on the U.S. allows us to effectively neutralise possible attempts by individual European states to draw closer to China [...]
See also:
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