Truss' energy package: unintended consequences ahoy!

It's a bit difficult to be definitive on the new PM's 'energy price guarantee' package, because "details are awaited".   The Funeral is the pretext, but actually of course they're making it up as they go along.

So: politics first.  She has to do something extraordinary, or she'll be defenestrated by poll-tax style riots before Xmas.  As has always been the case, announcements like this shut Starmer up immediately - he never knows what to say.  All the commentary has essentially been technical, save for a little peep of "it's not progressive - the wicked rich benefit too": true, but since all eyes are on the Bier, that's not getting any traction.  

We might also note that Truss obviously considers it politically unacceptable to announce any form of rationing.  it's gonna happen anyway (and we know the Grid already has the power to do it unilaterally), so I think this mealy-mouthed cowardice is stupid.   The time to ready the populace for what's to befall is right now, as Macron is doing quite purposefully.

As regards the economics, not that I'm your man here and we look to CU for more; but quite obviously, in the short term the package does almost nothing to increase supply, and not much that I can see to curtail demand (no mention of rationing or compulsory reductions in usage).  So the fundamental issue - i.e. this is a genuine (if artificial, as regards Putin's actions) global supply crisis - is being glossed over:  it's been decided the state will underwrite whatever the energy is going to cost.  So the first big takeaway is: cost-push inflation will go roaring on.

What about spontaneous demand-side response?  Industry will certainly retreat in the face of even the newly capped level of price it's paying: some of this might be in the shape of a bit of efficiency, but mostly it will be outright demand destruction (or 'demand export' - to N.America, which won't be suffering so badly).  Likewise, even at the capped level, which is 'merely' twice last year's rather than three times, residential energy consumers will definitely use less.  I don't think anyone knows by how much domestic demand will fall - some of it has historically been totally inelastic, but we may find that changes.  Again, some of this will be efficiency (and putting on a jumper) but for sure, problems of illness and damp will arise over time.  The housing stock won't benefit at all, and nor will sickly people.   

All that said, my best guess is that rationing will still be required, certainly if anything like the Beast from the East (meteorological beast, that is) comes along, or even its small brother.  This is an outright, absolute energy commodity shortfall, with Europe being as badly affected as any region.

I'm disinclined to bang on about too many of the details just now, because we await so many more.  Likewise, the longer-term aspects (North Sea licensing, fracking, nukes) designed to improve supply are for another day, in every sense**.  I will say, however, that there is to be a 'commercial' strand of activity undertaken, as Truss favours buying out the generating sector windfalls with secure long term offtake contracts (on a voluntary, negotiated basis!) instead of windfall-taxing them.  This is really stupid, in my judgement.  Any ideological resistance to windfall-taxing has long since lost its virginity; and the idea that the civil service is up to this 'commercial' task flies in the face of all experience.

Jury is out: but on this and indeed the whole complex package, I'm not even slightly confident a Truss / Kwarteng government is up to the task either.  It's just so big.  As is the parallel EU effort, by the way (and over there, it's very fraught politically, too: and their grasp of how markets work is really awful).  In both cases, there will turn out to be equally big gaps; and overall, the unintended consequences will be legion.

ND  

_______________

** ditto the global aspects of the crisis, of which there are many

A grandfather's pride

So while we await my digesting of the Truss energy masterplan ...

... at the weekend, granddaughter Drew (9) entered a 'roar race'.  Nope, me neither.  These racers are small electric bikes with a 'reverse megaphone' attachment.  The louder the kid roars into the megaphone, the more power they get!   Bloody brilliant, I wish they'd been around several decades ago.

Anyhow, gD was pretty confident of her decibel potential, and so it proved.  Overcoming a severe jostle-induced wobble at the start - did I say this is fiercely competitive stuff? - she got well into her power-yelling, and snatched the lead around the outside in the closing couple of yards, to take first place on the podium.

Grand-paternal pride, or what?!

To round things off nicely, gD's cousin (8) had staked her pocket money on gD to win, knowing all too well the power in her playmate's lungs.   We're talking Yorkshire here, where people seem to make a book at the drop of a hat (is this a legacy of whippet racing, or summat?).  The cousin cleaned up.

A very satisfactory outing.  The energy stuff can wait.

ND

Reasons to be, errr, cheerful?

I must be joking, right?  Death of the Monarch; new PM with the most shocking lack of appropriate qualifications, or abilities, or 'ear'[1]; economic crisis; crazy energy plans issuing from every western orifice; war raging.

Well, yes.  But here's a list of the straws I'm clutching at this morning:

• As Kev noted BTL a propos the Harry/Meghan thing, Charles has been well advised - that speech of his last night was smart in all sorts of ways: "I'm not rowing back on the 'Queen Consort' thing; I'm not writing any more Green Ink letters; I know what the constitution means" etc etc
• Much as Starmer rushed to frame Truss as "nothing new"[2], with the passing of HMQ and the Winter Crisis about to break there's actually no possibility of thinking of Truss as continuity-anything.  If she's smart, (OK, sorry: if she has a team of half-way decent advisers) she'll hitch herself to the new Carolian age every way she can: a huge vicarious honeymoon period with goodwill and benefit-of-the-doubt swilling around everywhere - it's there for the taking.  Starmer?  he's that old Johnson-era bore.  See what we're doing here?
• BBC is on eggshells.  Troublemakers can't get a peep right now.  Bloody right, too.  That'll last for a while, also.
• Oh, and: Ukrainian counter-offensive is being conducted very adroitly.  Putin entering another round of screw-ups (to be continued ...)  

Go on trolls, you know you want to tell us Russia is winning hands-down. 

ND

____________

[1] in her statement she told us that the Queen was "the very spirit of Great Britain".  Does she have the slightest idea how hurtful that is to an Ulsterman?  How it convinces them they are completely forgotten in Westminster?  Anyone wanting to be PM has to be the instinctive master of this stuff (as well as needing staff who are even cleverer still).  Sheesh.  Maybe she is beyond redemption after all.

[2] you can always spot Framing - they can't help themselves saying it three times in a row and twenty times thereafter

Plans to "solve the energy crisis"

The EU and, we are assured, newly-minted PM Liz Truss, are hatching plans to cater for - I can't immediately think of a better phrase - the energy crisis this winter and maybe beyond.  Well, they certainly have to do something: "Devil take the hindmost" doesn't count as public policy (even if a handful of commenters seem to favour the bracing Nietzschean approach). 

Whatever these plans turn out to be in detail, by definition they will be epic in scope and scale.  In such extreme and complex circumstances, with so many moving parts, I don't trust any bureaucrat to do anything adroit; so we may be equally sure the "unintended consequences" will be monstrous.  We could all guess at a few.  Greta thinks she can guess, too - and she's not happy.

I particularly don't trust the EU in general, and Germany in particular, to do anything half-way intelligent by way of intervening in markets that are international (electricity, carbon) if not global (oil, gas, coal).    As opined here many times before, there is a profound shortfall in German understanding of how markets actually work, which is inevitably and amply reflected in Brussels.  

Come to that, the much-hyped G7 plan for a "cap on oil prices" also sounds cracked.

And do we trust Truss, to invoke a recent coinage?   

But of course we await details on all of this high-minded blundering; so perhaps we should calmly wait and watch, with equanimity and an open mind ...   

ND

The Strange Case of Cressida Dick

The Winsor report into Sadiq Khan's hounding of Cressida Dick leads us to a very odd place, where Dick reportedly found Khan "intimidating".

WTF?   There's many a nastier beast in the world of top-end criminality than Mayor Khan, unprincipled little opportunist that he is.  What we need in our Metropolitan Police Commissioners is someone who can look absolutely any mortal man squarely in the eye, unblinking, and read his fortune for him.  Stick it up your arse, Mr Mayor. 

Before I am accused of sexism (or being a neocon shill, or whatever it is our sub-marxist trolls like to say), let us immediately add that in my varied career I have met several women quite capable of facing down the Khans of this world.  Yes, bullies exist and yes, the Fred Goodwins, the Maxwells and the Bernie Madoffs make ground too easily in a world where most people back off from confrontation at the narrowing of a glowering eyebrow.  

But it shouldn't be too much to ask that the top police job spec includes backbone.  Moral fibre.  Character.

ND

Ukraine: counter-offensive begins

 ... and we needn't expect much detailed news on it.  There's a very good essay as to why this should be so, in the opening 4 paragraphs of Wednesday's assessment from the excellent ISW.  Obviously this development has been widely anticipated, and Ukraine's systematic, highly successful interdictions into Russia's lines of communications and supply over the past few weeks have reinforced that expectation.

In strictly observer mode (OK?):  another reason why there won't be much detailed news is that we needn't expect any sweeping arrows on the map, as we were treated to in February when Russian armoured convoys and air-assault operations burst clean through the borders on their way to Kherson, Mariupol, Kharkiv and, errrr, Kyiv.   My assumption would be that Ukraine will prosecute this campaign largely as a foot-infantry operation, kilometre by kilometre.  

Why?  Well, (1) as we periodically remark hereabouts, there's no such thing as strategic surprise, but there can be tactical surprise.  In this case, Ukraine has at least pulled off several of the latter - the supply interdictions mentioned above, particularly in Crimea: but such is the ubiquity on both sides of persistent / loitering aerial reconnaissance these days (drones), a covert build-up of armour is well-nigh impossible.  So a "surprise" lightning armoured thrust, so beloved of 20th C military writers, is highly unlikely, at least at an early stage.

(2) It doesn't seem likely Ukraine has major tank forces left to it (western material aid has mostly been in terms of artillery and lighter weapons); and anti-tank defences for a set-piece action aren't difficult to muster when you've had four months to prepare (i.e. since I wrote my little memo to Putin, saying that defence of Kherson should be his primary strategic goal).

(3) Ukraine's massive advantages are (a) near-perfect intelligence (from western sources, plus the fact that the population of Kherson oblast is very hostile to its occupiers, with a long tradition of partisan warfare) ; and (b) the morale, determination and tactical skills of their infantry - up against what is, on average, the ultimate in non-coherent, unmotivated, rag-bag rabble.  In infantry actions, this matters more than almost anything.  It's a rabble that turns and flees.

Artillery?  Both sides will have made sure they are as well-placed as possible in this dimension.  Russian preponderance is clear: but their supply lines are very ropey into this part of the occupied territory (right bank of the Dnipro), the bridges having been put out of commission and the ammo dumps having been blown up.  Obviously they have effectively limitless reserves, but they are relying on pontoons to get ammo etc forward.  If they stream forward in large numbers on known crossing-points, there will be carnage.

And while artillery is great against (e.g.) armoured build-ups or static targets, that isn't going to be what Russia is faced with.  You can't easily use artillery against 1,000 adroit platoon-sized attacks across a 100 mile front.

Russian response?  We're already seeing it.

• laughable PR
• stirring up trouble in Moldova again (and probably Belorussia shortly) to conjure the spectre of new fronts opening up
• more bombardment of civilian targets deeper in Ukraine (particularly when the main IAEA mission has left)
• presumably some enhancement of their stunts at Zaporizhzhia in the coming days
• simultaneous diversion of troops to the south, away from the Donbas front; and increasing fireworks at the latter (this combo achieved by maintaining artillery there)

What else might we get?  Termination of the grain export programme is an obvious one, either by formal revocation and /or merciless pounding of Odesa and the other ports, and grain silos. Non re-opening of Nord Stream 1 (currently shut for "3 days maintenance").   Etc etc: the opportunities for mischief are constrained only by the limits of the imagination.

The biggie will come, if and when Kherson city is recaptured, or even on the brink.  Worst case?  This happens, say, in October, after the Russians have conducted the spurious "referendum" they have long been trying to carry out**, and which presumably records 104.6% of the population of Kherson declaring itself to be now a province of Mother Russia.  Then Putin can declare - see that second link again - that Russia herself is in mortal peril, and ...

Have a great weekend!

ND 

__________

** now looks like a colossal mistake by Putin not to have done this already 

Euro-dollar parity!

There's a thing, eh?

You'll see it described as "pound collapses" - but against the EUR, Sterling is where it was back in 2013, and higher than has been across most of 2017-2021.  OK, not as high as the blip in 2015, but still ... "despite Brexit" ... 

Nope: this is about the USD.  Always the safe haven.  Never underestimate ... etc etc.

OK - now back to all your favourite Ukraine themes. 

ND

Price cap £3,549 - and consequences

 Thar she blows, £3,549.  What now?  Some observations and considerations:

1. Electricity prices[1] are driving gas prices now (in case you didn't know), thanks to France and its chronic dependency on chronic nukes.  Ironic, huh, Macron?
2. Speaking of which: no point in whimpering about Ukraine.  Completely out of our hands.  Always was.  Might as well be hung for a sheep as a lamb.   (Please don't tell me that if we, alone in the west[2], had told Zelensky to surrender and begged Putin to give us a special supply of cheap gas and oil, this would all have gone away.)
3. Courtesy of CU (constructively engaged elsewhere): unless you can reduce demand for energy (and/or increase supply), whatever your chosen means of paying for this, it's massively inflationary.  Which we've been talking about since Feb last year - the only surprising thing is, how long it's taken. 
4. Truss[3] needs to get her act together right now - the political vacuum will leave her gasping for air in three weeks time[4].
5. All the "big schemes" floated so far are for residential customers only: what about business?
6. Where are the plans for rationing?  Up until now, "ministers have let it be understood" they think that energy use is a matter for individual choice.  Suddenly, they are starting to talk about "encouraging people to use less".  Won't wash.  Germans and French seem to recognise this.
7. This is war.  The population needs to understand that their politicians understand.  Will somebody kindly act accordingly?

Only one chance for Truss.  Get into Downing Street: forget everything she's said & promised up until now: "declare war": give it everything she can muster, blood / toil / tears / sweat, and be seen to be doing so.  This is an economic May 1940.  Might even need to give Starmer a seat in the Cabinet.

ND

_________________

[1]  Q:  So what's the driver of electricity prices now?  A:  Industrial demand destruction, in Europe and in China.

[2]  As I said in March, the ignorance of western politicians (particularly in Germany), as to what the Ukraine thing would mean in energy terms, was complete.  Putin has been undone by this ignorance: and so have we all.

[3]  Q:  Who'd want to be PM at a time like this?  A: They all would!  That's what they're like!

[4]  Government silence is allowing every grandstanding opportunist, Lab/ Lib/SNP, to say "just freeze the cap for [6][12][24] months" [circle your choice here].  Soon, people will assume that'd be something we could just do, rather easily.  Even the BBC accepts that isn't true, but it won't be long before it takes hold. 

Can Russia sustain this indefinitely?

On this blog we've all, contributors and commentators alike, recognised from the start that Russia has enormous powers of endurance.  So that's not at issue.  

But what of its political stability for the long haul?  Its ability to re-equip?  To raise adequate manpower?  For a very good essay on this, I recommend Can Russia Continue to Fight a Long War from the esteemed RUSI, whose Ukraine coverage is generally quite excellent. 

To the question of whether Russia has the political capacity to sustain a prolonged conflict, the answer must be a qualified yes.  What of the material capacity of Russia to generate military power?  Here, the answer is more ambiguous. A key consideration will be how Russia’s major manufacturers function in the absence of Western components – which, notably, they have failed to substitute in the last decade...

The growth of China as Russia’s largest supplier of machine tools may provide a margin of safety for the Russians, but Western suppliers still account for a large percentage of machine tool imports. The more important point, however, is what an inability to produce machine tools domestically tells us about the state of Russian industry and its potential to achieve import substitution.  As such, Russia is likely to struggle with many areas of import substitution even if it accepts lower quality products and higher costs. There are certain things it simply cannot make. Russia will not replace nonfungible military capabilities without external help from China ...

If Russia has to keep a steady stream of resources flowing to the front lines because it is not allowed the luxury of a pause or because a second offensive also fizzles out, its material capacity to conduct a long war will be limited...

Moreover, the Russian military training system will struggle to generate combat-effective units in numbers – even if it can push new recruits into existing understrength units ... Russia can generate a large number of new troops, but only if it avoids intensive refresher training and trickles new recruits into existing units, which risks mixed units on the front underperforming. If it seeks to generate fully formed units during an operational pause for a second phase of offensive activity, its training pipeline may substantially limit its capacity.

ND 

Ofgem: price cap + a very unusual resignation

In my experience, the reasons for someone resigning are rarely revealed by the ostensible account.  Sometimes they've actually been fired.   Sometimes they were at the end of their tether - maybe out of their depth - and looked for some convenient pretext, or picked a fight on a semi-spurious 'point of principle'.  Sometimes they are just one of life's serial resigners with a track-record of flouncing off.  And sometimes, I suppose, the whole thing should be taken at face value.

Anyhow, last week there was an interesting one: "Ofgem director Christine Farnish resigns over price cap change".  Who she?  Good question.  Is the precise mechanism of the Ofgem price cap a resigning matter?  Well, it's incredibly technical, as a glance at Ofgem's many publications on the topic indicates: a helluva balancing act in fraught circumstances, with lots of competing strategic desiderata in play.  Only Theresa May ever wanted this cap thing, and the weight now resting upon it is wildly more than it was ever designed to bear.

The underlying complexity is a genuine one: what should be the hedging strategy of a utility supplier in ultra-volatile market conditions?   An answer to this is required because the price cap logically needs to take it into account.  What's being hedged is technically a short option - always ultra-problematic.  There's no single "right" answer, not least because high volatility (and we are talking off-the-scale vol here) is naturally accompanied by thin liquidity in the hedging markets, and acute pressure on lines of credit, all for very logical technical reasons.  In case anyone imagines there's an element of crying wolf here, just consider the number of suppliers who've gone bankrupt or otherwise exited the market in the past 12 months.  Much of that was Ofgem's fault for licensing minnows in the first place, but Bulb (e.g.) isn't in that category and Bulb is languishing under state control at the expense of all of us.  The government, for one, has no idea how Bulb should hedge, and so it ruled that it wasn't to be allowed to.

For those interested, there's another technically fascinating phenomenon at work in the hedging arena: backwardation in the gas market.  This is where the forward curve is trading at lower prices than the spot market - generally not something seen in the gas market, except ultra-fleetingly**.   But since last year when this whole thing kicked off (starting in the Far East - see this blog from Feb 21 - long before Putin played his hand about 12 months ago, but made much worse by his subsequent actions) there have been unprecedently sustained periods of deep backwardation.  This, incidentally, is the only reason the big players like Centrica are still alive and kicking: they've been able to lock in at prices they are fairly sure will end up looking OK, relative to spot prices.  They may still have had to take the risk of an open long position for quite a while, however.   The small players might have wanted to go the same way - but didn't have the credit standing to take on the same position.  The strain on even Centrica's lines of credit is enormous.

The last 8 weeks have seen astonishing movements along the forward curve - prices for calendar '23 and '24 have more than doubled.  Even with this, there's still a degree of backwardation.

I don't know if the "£6,000 price cap" forecast is warranted - putting numbers on predicted commodity prices is a mug's game; and I've no idea who "Auxilione" are, except that they seem to be attention-seeking.   (As an MP acquaintance of mine says, you can always get on the news if you are willing to take your trousers down in public.)  Doesn't detract from the difficulties ahead, though.

But resigning over the technicalities of the price cap?  She should have done that a long time ago: it's been a can of worms since the very start.

ND

___________

**There are all manner of pseudo-science theories about this - e.g. "backwardation can't ever be sustained in the gas market" - but, like econometrics in general, they are mostly bullshit 

Rough Gas Storage: A Long, Odd Tale

I last wrote at length about the 'Rough' gas storage facility five years ago, and the story is taking another turn; so, once again by popular request ...

Many moons ago it was discovered by offshore operators (Amoco) that the 'Rough' gas field they'd developed in the North Sea had almost uniquely favourable reservoir geology.  The sandstone is incredibly regular, making it highly suitable for gas storage.  So, only a few years after commencing production, they sold it (at a very handsome price) to the old monopoly British Gas, which had decided it could use a mammoth offshore storage facility for seasonal storage (pump gas in during summer, pump it out in winter).

More: BG declared it was an absolute necessity, to support the heavily winter-biased demand of its residential customer base - the first of many porkies it has told in this tale.  Pre-privatisation, BG was, remarkably, an unregulated monopoly, though it was still liable to the occasional inquiry into its capital expenditures (which it was of course foisting on us captive customers): so it made a bit of a case for why Rough was essential.  I won't bore you with it now, not least because it turned out to be entirely spurious when, a decade later, the privatised BG was being split up and the division which handled BG's residential customer base - still a monopoly at that stage - was invited to bid for whatever capacity in Rough it required to meet customer demand.  It bid for ... precisely zero: yes, somehow when push came to shove Rough wasn't essential - it was in fact totally unnecessary.

Anyhow, in the meantime they'd spent around £1bn - quite a lot of money in the 1980s - on converting the offshore production facilities to be able to inject and withdraw gas at will, coupled with substantially upgraded onshore facilities for the same purpose.  When anyone tells you (as they often will) that essential utilities are too important to be in private ownership, and that monopolies are the right way to go for efficiently ensuring security of supply etc, remind them about Rough - and apply to me for yet more examples of grotesque monopoly gold-plating at our expense, because they are legion.

Well, the thing had had been built, so it was sunk costs by then.  No need to record the complex chain of transactions by which the facility was separated out from what became Centrica, passed through various hands, and eventually was bought back by Centrica to become part of their complex and quite cleverly managed portfolio.  (Just in case anyone thinks I have a down on Centrica, read back through the Centrica-tagged posts by clicking on the label below: you'll find I used to have a high regard for them.  It's their recent subsidy-farming manifestation I dislike.)  Suffice to say, Centrica ran Rough quite intelligently on an open-access commercial basis for many years.  Over time, seasonal storage (pump in for 180 summer days, then pump out across the winter period) became less attractive in the face of much more flexible new (and smaller) onshore gas storage facilities, plus increasing access to a big surfeit of storage capacity on the continent (another long story) via two big cross-channel pipelines, plus burgeoning LNG import capacity of a very flexible nature.  Even then, Centrica was able to respond with clever, more flexible storage packages which they delivered via use of Rough.

Eventually as the beast grew older, they needed to think about how long it would last.  There was a small explosion at one point, and other old-age mishaps.  Ten years or so ago, they started angling for government money, firstly to build more storage, then to bail them out at Rough itself.  They started spinning yarns about safety, and how much new drilling would be required to replace the old wells, and how only a subsidy would allow them to do this, and how we'd all freeze in winter if they closed it down.  They didn't convince anyone, so five years ago they shut it down, saying they would pump out the rather large amount of "cushion gas" - the minimum inventory a gas storage facility requires to operate at all - and that would be the end of it.  Amazingly enough, once again, it turned out that UK plc managed quite nicely without Rough, thank you very much.  The wonders of the free market, which was comfortably delivering all the necessary seasonal flexibility without any subsidy whatever.

More recently, Centrica somewhat unexpectedly started hinting that all might not be over at Rough.  First, they suggested it might be converted for CO2 storage ... then (as hydrogen started to become all the rage) for hydrogen storage - all somehow needing a big subsidy (because, of course, it's all totally uneconomic).  And there was everyone believing they'd pulled the plug forever / it was rickety and unsafe / etc etc.

Now ... it turns out they think they can press it back into service as a regular natural gas storage facility - by October!  FFS!  They've just obtained two of the permits they need to be able to do so - and, needless to say, are in intense negotiations with the ever-gullible Civil Service for what public money is going to be sent their way for coming to the rescue this winter, when Putin's punishment reaches its wintry worst.  Inventing a whole new rationale - a strategic reserve of gas (equivalent to a whole couple of days' worth to start with, maybe rising to 10 days' worth with a big refurb job.  10 days, just think ...)  Well, fair to say, times are different now. 

We can only hope someone in Whitehall is playing back to Centrica its bullshit statements of many years, and giving them a very hard time.  Somehow, though, I doubt it.

ND 

Russia and leaking methane: the anecdote

By popular request ... (BTL here)

One of the few noteworthy outcomes from Cop26 in Glasgow was an international agreement to reduce methane leakage, CH4 being a far worse GHG than CO2, albeit much less persistent in the atmosphere.  Until then the gas had never received the attention it deserved, though if we get to the point where trapped methane from the Siberian permafrost starts escaping big-time, it certainly will.

There are many places in the western world - OK, in some states of the USA, to be precise - where regulatory standards for methane leakage and/or their enforcement, are essentially non-existent.  But the technology for tightening up on this is very straightforward, so it should be low-hanging fruit.  It's important for every reason under the sun, but not least that methane leakage from the natural gas system as a whole gives shale fracking a bad name:  if you've ever paid close attention to the notorious anti-fracking film GasLand, the genuine problems it highlights are not really to do with fracking per se, but rather the leaky infrastructure downstream of the drilling.   

Needless to say, (a) the COP26 agreement is being resisted by the oil & gas lobby in America; (b) Russia, China, India et al didn't sign up to it anyway; and (c) by far the greatest culprit is of course Gazprom and the entire Russian gas system, which is as leaky as all Hell (and there's a lot of leaking methane in Hell), on a scale hard to comprehend.  The World Bank has for 30 years been promoting schemes for doing something about it in Russia, whose own technology is not up to the job.

So to the story.  When I was in Moscow some years ago, one of the Russians I was on after-work-beer terms with told me this.  He was a mathematician working in the gas sector, and one day he was assigned to a small team that had been set the following challenge.  There were no gas meters to speak of in the entire Russian gas system, from one end to the other (domestic heat control was famously achieved by opening the windows in winter), but in order to satisfy certain World Bank requirements they needed to quantify gas leakage across the network.  They had some basic pressure readings etc at various points on the system, but they would need to develop some kind of modelling technique to derive an estimate of the methane lost.

Diligently, they worked on the task, and after some months came up with a complex formula for making the required estimate, in classic Russian fashion.  This they presented to the relevant Board member of Gazprom, who received their conclusions with interest.  He thanked them for their hard work, but told them that they'd overlooked something, namely the "environmental factor".  What is that? they queried.  Well, he said, you take the formula you've come up with, and multiply the whole thing by 0.1.  Why? they asked.

He leaned forward, and quietly but pointedly said: Because we couldn't be losing that much gas - could we, hmm?

ND

Lefties and personal material wealth, haha!

Dunno how many of you know who Aaron Bastani is, so we'll start with a brief and hopefully fair pen-picture.  Bastani is highly articulate, apparently well-read, and sharp.  He's in the category I tend to describe as "honest lefties": with notable blind-spots and a distorted worldview (usually a variant of sub-marxism), they'll nevertheless generally bow to truth and logic when confronted inescapably.  (The code for this is that they've noticed something is "problematic" - i.e. sits very awkwardly with their worldview, making them deeply uncomfortable, exactly because they feel the force of the logic and the truth.)

Plus, Bastani is a tough cookie, a serious and driven entrepreneur who Gets Things Done: notably, his impressive Novara Media creation, now a burgeoning mini-empire of alternative media.  At the start of this project, his purposeful and businesslike conduct could have been labelled "social entrepreneurship", but it must now fast be reaching the point where he can start to cash in, if he wants to.  (His commitment to leftism is clearly intellectual rather than temperamental, and he has many very traditional conservative traits: enthusiasm for family & becoming a house owner; married in church; etc etc.)

And now, hahah! he gets to interview "The World's Biggest Political Streamer", Turkish-American Hasan Piker, "arguably the most influential political voice on livestreaming service Twitch".  Mr Piker, we very quickly realise, makes a shedload of money from his own ultra-successful leftie media activity.

Bastani is just wide-eyed & drooling with pleasure at talking to this guy.   54 minutes in, he gets to ask his new friend about ... his big, new, nice-part-of-LA *ahem* mansion and his costly new electric Porsche.   Now to be fair to Bastani, he does kinda try to get his man to justify such expenditures; but boy, he let's him off the hook easily.  They quickly agree that the Red Line is, never to become a landlord ...  oh, and not to have three Porches - "that would be ridiculous!".  Right, right.  Everyone should have nice things that are within their means "... as long as your morals are not compromised."  Ah yes, of course.

It's just so funny.  Because it looks for all the world like Bastani is casting for arguments as to how he's gonna justify his own Porche in a year or two's time.  Go for it, Aaron!  You know that a part of you is capitalist, really.

ND

Edging closer to winter 2022-23 in Europe

Neither Tory leadership candidate really wants to acknowledge what's coming down the line for Xmas.  They'd much prefer to trade upbeat, positive-sounding stuff.  Boris sure as Hell doesn't want it to be discussed: anything that goes tits-up will be the exclusive responsibility of Whomever Follows, because, hey, there was no delinquency on his watch.   The same reticence can be seen across Europe.  We mulled this over four weeks ago; but as I return from a short hol, evidently the prospects for winter still remain too scary for anyone to acknowledge in full detail.  I suppose we must credit Gordon Brown (not a man who ever got much credit from C@W, and who has much to atone for) for at least having a try.  Even he only talks about domestic energy bills, as if the energy itself is not at issue.  And what of the food?

At the time of writing, only Italy and Slovakia are receiving any Russian gas to speak of: supplies to Germany are down to a trickle.  The gas systems of Europe are so stressed and constipated as they try to replace this with 'reverse-flow' sources - LNG terminals to the west of Europe, pushing gas eastwards - that various technical limitations have been reached and there's even spare capacity at UK LNG terminals right now: the amount we can onward-export via cross-channel pipelines is maxxed out.  The UK, and even more so, Spain (which is similarly well-provided with LNG terminals, but really can't export much to France at all) are islands of 'low' (relatively low) wholesale gas prices.  Demand destruction looms across industrial Europe.  And it's a really hot summer!

(Speaking of which, hot weather sends electricity prices up, too ...)

Presumably, Putin is showing his hand, gas-wise, as early as this in order to give European politicians a low-impact (relatively low) demo of what's to come.   If, despite the inclinations of France / Italy / Hungary / many German businessmen towards an "accommodation", Europe actually has to wear this in winter 2022-23, the dynamics of world trade will be monumentally distorted.  To say nothing of the politics.  Ukraine may be planning a spectacular counter-offensive for the weeks to come, and China continues its firework display: but otherwise, all eyes are on Germany.  What will Scholz do?

ND 

Cultural Stereotyping: Shock, Horror!

So, hot-foot from the metropolitan political hurlyburly, the sophisticated Drew family block vote of two is in Devon, in a fabulous waterfront fish'n'chips establishment.  Well, the food and drink is fabulous - but on the telly in the corner (sadly) is the BBC's Commonwealth Games coverage, blaring out "It-a-Brom-Ting, It-a-Brom-Ting".

Says the proprietor:  I'll tell you what's a Brum thing.  The Brummies all order a jug of gravy to go with their fish!  Yes!  They all do! 

Cultural stereotyping?  Oh, they have absolutely no inhibitions down here!

ND

Truss & Sunak: from the front line

Writing as a paid-up member of the elite selectorate, I can report on what we found from each of the candidates over the weekend.  Mrs Drew and I don't lightly wield our block-vote of 2, so we went in as open-minded as possible.  

Sunak was first, on Friday morning.  He was slick, cheerful; the meeting was a simple church hall affair, and very open.   If I say it all went without a hitch, you'll wonder why (so just read on).  Sunak has his set lines, but answered questions plainly and with nuanced answers; he didn't (always) just give questioners what they were asking for.  The invited audience was card-carrying South London Tories, and the demographic attending was what you find these days, on average, in South London - not remotely the "70-year old white" Tory profile of legend.  The pic below indicates clearly enough the straightforwardness of it.  We were promised refreshments and there were some.  We were promised a signed bottle of champagne to auction, and there was one.  No entry fee.

(That's himself in the throng, below, talking to the blue-turbaned Sikh.  Yes, he really is that small.)

Then Truss.  All very cloak-and-dagger: a "secret" special guest (turned out to be Tugendtwat as warm-up act); apply by eventbrite and you'd only be told the secret venue a few hours beforehand.  Which was ... an aircraft maintenance hangar at Biggin Hill Airport.  There were no chairs (- why would there be, in an aircraft maintenance hangar, ho ho! -) until someone told the airport staff there'd be a walkout if they couldn't rustle up a few.  Airport security telling people not to take photos inside the hangar (this was relaxed for photos of herself).  Stewards coming round pressing envelopes on attendees for "contributions" and entry to a raffle for a bottle of gin; and there wasn't one.  We were promised water, juice and "Hon Nobs" (sic!), and there was water.  Perhaps Tugendtwat was the Hon. Nob.

Truss was awful.  Wild, unqualified promises.  "I will reform the ECHR" (has she told them this?) etc etc.  The invited audience was South London Tories again ... and the demographic attending was almost entirely white.

And she's the favourite?  Blimey, this is dire.

ND

UK Nukes, part 3: FFS, why?

OK, so HMG is hell-bent on Sizewell C, to the extent that they are kissing the Frenchman's arse to get it done.  Since last week's announcement there has only been bad news from France, on Flamanville and the operations of the existing French fleet.  This follows upon well over a decade of nothing but bad news on the EPRs; so why SZC will be any better, no man can tell.  If ministers had half a wit, but were still that determined to go ahead, they'd be striking a much harder bargain than appears to be the case - and experience tells us the actual bargain will be even worse than anything that's ever made public prior to the inevitable public inquiry that will follow when everything goes pear-shaped.   (For a modest fee, I offer to act as commercial consultant in the matter.) 

Even if were to be concluded on intelligent commercial terms, literally nobody would dare hazard a guess as to when this chunky bit of capacity would come on line.  That's pretty dreadful for long-term planning in a perilously-balanced sector of crucial national importance; and gives the lie to the "only nukes deliver predictable baseload electricity at scale" line, which is about all EDF has to offer.

The question therefore arises: why in the name of Hell is HMG so bent on SZC?

Here are three answers:

1. Keynesian job creation.   That's the explanation I have always favoured.  You can see the attraction of HPC, for example: a project creating thousands of fairly decent civil engineering jobs (albeit the workforce holed up in portakabin hotels in the middle of Zummerset is not a particularly happy body of men) that drags on for year after year, being paid for by the French & Chinese, at their ultimate risk.  RAB-financed SZC, though, looks to be under-written by HMG and paid for concurrently on electricity bills - a rather different equation.
2. Support for the UK nuclear deterrent.  They bang on about this at great length at SPRU (Sussex University), essentially suggesting that the civil nuke programme is tacitly subsidising the military.  Maybe: it's not something I've ever studied: and I'm instinctively suspicious of deep-state conspiracy theories.  But the logic is obvious enough: you can take a look for yourself.  
3. A new one:  getting HMG off the legal hook.  So I now add this 3rd explanation: HMG can use SZC as something rather concrete** they can adduce in front of the judge as evidence they are actually doing something - however crass.  I've written here before about the stupidity of legislating for targets like Net Zero 2050 by making them "legally binding".  It simply invites court actions by the Green Blob, and indeed the courts gratify it by entertaining them, and sometimes finding in their favour.  Just last week, the High Court agreed that HMG's NZ2050 strategy was too woolly and has given it a few months to sort it out (plus costs for the Blob).  This is of course bloody ridiculous, but what does anyone expect?

What do readers think?  What other explanations might there be?  Is anyone convinced by SPRU's military hypothesis?  

Over to you.

ND  

___________

** and I do mean concrete - unbelievable amounts of the stuff, even more than at HPC: 40% of the new plot they'll be building on at the northern end of the site is bog, with very poor and deep underlying bedrock.   EDF screwed up the geology at Hinkley, so the scope for real and very costly nonsense at SZC is huge. 

Interlude: кто кого? - Putin's MO

No, not his medical officer (the US seems to be giving him something of a clean bill of health just now, despite the shakes and the dreadful steroid-y appearance of May).  In between posts on UK nuclear power plants, here we refer to a detail of the way Putin is conducting his operations, military and 'civil'.

Exhibit A: Odessa and the grain deal

No sooner has Russia signed the grain export deal, it bombards Odessa, the very port in question.

Exhibit B: Nord Stream 1

Despite much nervousness on the subject, gas deliveries from Nord Stream (1) did indeed recommence last Friday after its routine summer maintenance - albeit at the level of only 40% of capacity (despite demand for 100%), just as had been the case for several weeks before the maintenance, on a pretext the Germans and many independent sources insist is spurious.  Two days later, this flow is reduced to 20% on an even more spurious pretext.

There's a pattern here.  Make a modest conciliatory gesture, followed immediately by a punch in the face.  Proves who's boss.  кто кого?  Don't imagine we ever take any of our options off the table: we reserve our rights to do Absolutely Anything.  

I imagine they taught this stuff at KGB interrogation school. 

ND

New nukes in the UK - part 2

So EDF won't (and, by itself, can't: it's bankrupt) take construction risk on nukes any more (Part 1).  But it needs to parlay its supposed expertise into anything that can defray its appalling future liabilities and monetise its sunk costs - at other nations' expense.  Hence, its relentless pressure on HMG, (a) to proceed with Sizewell C, and (b) do so on a completely different financial footing to that of Hinkley Point C.  Oh, and (c) HMG must put its hand in its pocket right away to fund the ongoing engineering, because "EDF has almost run out of money".  And HMG has agreed.

The new finance basis will be "Ratable Asset Base", whereby approved developments call on guaranteed periodic payments from, well, taxpayers ultimately**, during the construction phase.  The logic is, this reduces risk to the point where cheap institutional finance will swing in, attracted by the state-backed cash-flow stream.  By "reducing the cost of capital significantly" vs the "commercial" margin EDF claims it needs to charge in return for taking construction and cash-flow risk on (e.g.) HPC, the overall cost - which was always to be borne by UK bill-payers anyway, if over many more decades - is brought down by a noticeable amount.  In capital intensive sectors, attracting the least-cost capital has always been vital (true).  As a throwaway line it is added that RAB is how loads of big infrastructure projects are financed in the UK and elsewhere (true): and of course almost the whole of the US utility sector has been built on this basis (also true).  How heartening!

Heartening for the French, maybe, but open to many heavyweight challenges.

• EDF, having just been re-nationalised, is now essentially the French state, which can raise money (almost) as cheaply as any western nation.  If they are so strategically keen on SZC, let 'em get on with it.  They already have a put option for the project, complete with UK-guaranteed electricity price.
• Yes, RAB is used in big infra projects.  The difference is, those are traditionally based on conventional technology, proven construction methods, and low strategic risk.  SZC?  Pull the other one: it comes from a stable with truly appalling previous in these matters.  To trust them to get their act together on this one, in the face of all history, is some kind of madness.  RAB as 'conventionally' practised is not at all suitable for nukes: ask the Americans, who've tried it.
• In particular, tax-payers are open to the following scenario (as HMG freely admits).  SZC construction gets underway, and taxpayers make regular payments, year by year.  For the first N years, the work is all civil engineering anyway (HPC is still in the civils phase, five years after commencement), and the construction risks are moderate (though by no means nil) - so the chances are, the payments will properly fall due, more or less.   After several billions of this and a monstrous scar inflicted on the East Anglian countryside + precarious heritage coastline, EDF says that's it, we're stuck - we need a lot more £££, in order to finish the project.++  HMG says 'no'.  EDF declares its project affiliate bust, and says, maintenant mes braves, whatchagonnado?  There is no answer to this question, short of having the French government guarantee construction which, naturellement, it refuses to do: that's the whole point!  So the UK taxpayer bears the ultimate risks of construction, delay and budget overrun, as part of its exposure to (it bears repeating) an organisation that is legendary for its grotesque, world-scale failures in all these regards.  
• It's not at all clear big institutional money is looking for the kind of home represented by SZC.  Nuclear risk lies at the heart of this, despite attempts to dress up the financial proposition as just another annuity stream.  In particular, everyone knows the Big Contract between HMG and EDF will be secret.  So the institutions will also ask for secret protections - and they won't take their sharpest pencils to the rates they charge, either - if indeed they are interested at all. 

This is just the headlines of the RAB stuff:  I'm not even talking about the massive strategic issues of (e.g.) China having a 20% stake that needs squaring away; and whether a large chunk of deeply uncertain nuclear capacity commencing probably 10 / 11 / 12 years from now (who'll ever have a firm handle on that?) can contribute meaningfully to a national electricity requirement which places an ever greater premium on reliability, flexibility, and certainty in both these vital dimensions.   Still less am I addressing the plethora of SZC- and East Anglia-specific environmental issues involved, which themselves are multi-dimensional and acute.

And yet, HMG ploughs on regardless.  As we said at the end of Part 1:  FFS, why?   Some suggestions towards an answer in Part 3 ...

ND

___________

** I say 'ultimately taxpayers' but in the first instance it will probably be electricity bill-payers.  Not a huge amount of difference, in practice. 

++ Ample proof of EDF's approach to contractual obligations comes very recently from this FT revelation: 

EDF is in negotiations with the British government over penalty clauses in [the] agreement struck in 2013 to finance the building of [HPC]. The subsidy deal guarantees EDF a price [for] electricity it produces for the first 35 years of its life ... Penalty clauses ... reduce the 35-year term if Hinkey is not generating electricity by May 2029 [by] one year of guaranteed payments for every year of delay up to 2033. If the delays extended beyond that date the government has the option to terminate the subsidy contract. EDF ... has repeatedly pushed back its completion date while costs have spiralled. In the latest setback, EDF warned ... that the first of Hinkley’s two reactors would not be completed until June 2027 .... [and] the company cautioned that there was the possibility of a further 15-month delay to September 2028, adding that date could slip again ...

New nukes in the UK: Sizewell, RAB etc (part 1)

For well over fifteen years here we've periodically asserted that France has a critical strategic objective of getting other nations, not least the UK, to pay for its monstrous nuclear liabilities.   As soon as EDF came away with Osborne/May's outrageously generous gold-plated deal for Hinkley Point C, they started lobbying for the next one, Sizewell C (CGI above); and - significantly - that this should be on a different contractual basis.  To remind ourselves of the salient details of HPC, bad and good:

• there is no HPC completion date!  In fact, EDF isn't obliged, contractually, to build it at all!  
• ... but if they don't, all the ever-increasing sunk costs are for the account of the project (80% EDF, 20% the Chinese)
• any problems encountered along the way that are down to HMG, and most specifically any more-than-trivial changes in nuke-related regulations, are for the account of HMG (even if, for example, another nuke accident happens somewhere in the world that inevitably means every government everywhere will insist on a new type of widget being fitted on all nukes everywhere).  In other words, EDF - arguably the world's leading nuke institution - refuses to accept fundamental nuke-risk
• the electricity sales contract strike-price (technically a CfD) of £92.50/MWh, was base-year 2012, indexed to inflation (it is now well over £100).  At the time that was some three times higher than prevailing wholesale baseload electricity, although obviously it looks a lot better right now, as our good friend Mr Wendland noted BTL the other day
• the HPC deal gave EDF a put option on SZC at £89.50 (indexed) (which would then apply to them both); said (by EDF) to be a good deal at the time, since "of course" SZC would be cheaper to build than HPC, being able to call on all the HPC experience and the established construction labour force etc.
• any problems encountered along the way that are NOT down to HMG are for the project's account
• certain very mild contractual disadvantages (I won't call them penalties because they are trivial) kick in if EDF isn't finished by 2029; and the whole contract is cancelled in they aren't finished by 2035.   This for a plant that EDF told us in 2008 would be operational by Xmas 2017! 

But, pleased though they were to get this deal inked in 2016, this wasn't good enough for EDF - a company that is technically bankrupt, although as a recently fully-re-nationalised French state entity, this might not be as fatal as it would be for most companies being relied upon to undertake huge and critical enterprises.  Why not good enough?  Because EDF retains HPC construction risk, and is only remunerated (if at all ..! - see 2035 above) via electricity sales in due course, albeit at a price underwritten by HMG.

Construction risk?  Well, needless to say, at HPC there have been many problems along the way.  Obviously Covid wasn't expected - although hey, any firm undertaking projects with a construction period of more than a decade, and a lifespan of maybe a century, had better reckon on Shit Happening, no?  But Brexit happened before the contract was signed, so no sympathy there.  And likewise no sympathy for the many purely technical and design cock-ups perpetrated by EDF and its (mainly French) major contractors, e.g. getting the geology wrong on the bedrock at Hinkley, FFS.  So costs have been steady rising, and timetables steadily slipping.  Oh yes, there's construction risk aplenty.

So what about SZC?  Surely, as we've been assured by EDF ad nauseam, just as HPC was going to be a breeze, because of the prior experience obtained with EPRs at Flamanville (France) and Olkiluoto (Finland), so SZC in its turn would be an absolute shoe-in.  Hah!  All three European pre-SZC EPR projects have been fiascos; and the two EPRs built in China, apparently much more efficiently and on time / on budget, are in trouble already: one is shut down and the other on limited running, due to unresolved problems that the French nuke authorities are very troubled by.

And aside from the entire history of EPRs, there are SZC-specific reasons to believe it'll be more costly than HPC.  I won't bore you with the details, but every site is always different and SZC will bring all manner of new challenges, some of them pretty fundamental.  Nothing that engineers can't solve, mind - at a cost ...

SO.  We can easily see why EDF refuses to bear construction risk at SZC.  They are "even more bankrupt" today than they were in 2016.  In the next post we'll look at how HMG proposes to steam ahead with SZC anyway - and we'll ask the obvious question:  FFS, why?

ND 

Germany not so sure-footed

We are no fans of Russian aggression here, but sadly do recognise that Putin is better at Realpolitik than the West.

As Russia sells ever more gas to China, it is starting to turn the taps down substantially to Europe. Italy, Poland and Germany will be the main victims. As a result, the German President of the EU, Ursula Van de Leyen, has demanded all EU countries reduce gas consumption by 15%.

This has not gone unnoticed by Spain and others that are not reliant on Russian gas. Germany is also closing its nuclear power stations and burning more coal to reduce its reliance on gas. There is little appetite to tag along to German needs. 

Putin is showing again how the virtue signalling of Western governments is so contradictory to their needs. The West is going to find it very hard to stay united this coming winter. The US is not keen on riding to the rescue, either, due to its own inflationary problems, even though there is plenty of gas for export. 

Sad to admit that Russia has the upper hand in geopolitics at the moment, but they planned this for a long time and are executing this well, even if the war in Ukraine is much harder than they anticipated. 

Truss or Sunak?

Turns out, Conservative MP’s are mad after all. They want Sunak so much they have put a lemon up against him. 

They won’t look so clever when if the Lemon wins.

What a high risk strategy this is by Team Sunak.

A solution to the world's energy problems

 ... and also the issue of, errr, removing plastics from the ocean.

Yes, fortunate we are that the genius who is Terrence Howard is alive at this time of peril, with his novel solution to the Grand Unified Field theory.  It has lots of beneficial outworkings, which he is now offering to the good people of Uganda.  To solve many of their most pressing problems.  Of course.

The Gruaniad, (home of George Moonbat), describes this as "impenetrable batshit" - but what do they know?  Bunch of racists.

Anyhow, pour yourself a cool drink and enjoy his presentations, starting with this gem.  Then graduate to his lengthier expositions.  Don't let the sun get to you: it can lead to hallucinating ...

ND  

German economy harmed by ... pensioners?

So the story is:  the Greek tourism industry is suggesting German pensioners winter in Greece, to save on fuel bills (and indeed bills for food and almost everything else).  Fair enough - it has more logic than the blarney the Irish tourist board feeds to Americans ("we know you all like to think you have Irish roots, so you all need to come 'home' at least twice a year wearing a clip-on ginger beard and a silly green hat" etc etc, cue twiddledy-dee music).  And of course the association of German travel agents agrees, and suggests a government subsidy for the travel. 

But ... 

Opposition politicians have said the idea has to be treated with caution, not least because it could have a negative effect on Germany’s economy.

Wow.  If that's what they think is going to harm the German economy, they have a very big surprise coming.  

Is any politician, anywhere in the West, levelling with voters on how bad it's going to be?  Don't they need to, in order to get the public best-positioned for whatever can be done by individuals, or inevitably will have to be done by government?  Or is everyone relying on the local equivalent of Martin Lewis, in the hope he's best placed to break the bad news?

ND

Where is TINA?

 In the aftermath of Boris, where is she? Where is she?

Margaret Thatcher famously said, to get her middle of the road right-wing policies through, that;

THERE IS NO ALTERNATIVE

This surely is what the Conservative Party is looking for. The obvious anti-dote to the Boris sleaze poison with the added benefit of being more electable that Keir Starmer. 

On paper, this should not be too hard. Starmer occasionally comes out with policies still written in deepest Corbynism that won't be very popular at the ballot box and has shunned the idea of going for Rejoin the EU which likely would grab a big chunk of votes in the aftermath of a non-event Brexit which is not proving to be very helpful.

However, Boris has left a big trap for his successor. Boris was a very leftwing and big state Tory politician. Yes some of his henchmen like Cummings may have been against all that, but the facts are big state Boris threw the Government into the pandemic, offering furlough and all sorts and has nationalised the railways by stealth. He has then instructed his Chancellors to raise taxes to higher levels than Gordon Brown dreamt of. 

This of course has solidified the Northern seats which the Tories gained and has outfoxed Labour who still need to release Corbynite madness to try and outflank the Tories. Meanwhile the mad online world of lefties is busy trying to say the Tories are the new nazi's and it is a charge that does not stick. 

But who can re-balance the party, towards more conservative social and liberal economic policies, that will be needed to manage down the mad Government spending of Boris?It will need someone good at communications and also at home with some basic economic theory. For this, they may well lean towards Rishi Sunak, but a non-dom billionaire is a very bad choice for leader during a prolonged recession and it is his stupid policies that have put us in this mess. 

Penny Mordaunt and Jeremy Hunt show little sign of understanding economics of the broad changes needed to reduce Government interference in the economy and the constant mis-allocation of resources that increases our debts to no effect. They are focused on themselves with no concept of what a Government could or should do beyond having them as leaders. 

This will leave in reality a true right-winger needing to come through. The only one I can see at all being capable is Kemi Badenoch, who like Thatcher herself, is young and untried but very bright and determined. 

If she gets to the final two it would be amazing. However, I doubt this will happen, a nothingness run off between Sunak and Hunt or Mordaunt will produce a caretaker Government keen to hand the problems onto Labour for a decade or so. 

The beast that is Boris

From Clive, BTL on yesterday's Boris post, expanding on a short comment he'd been picked up on:

Re: "The energy inputs for creating and sustaining media (and political) momentum are much higher here..." ... What I was getting at, tricky to explain, was it only took a Howe resignation speech, a leadership contest and some cabinet members talking Thatcher into resigning. All mundane stuff. The merest hint from a few, largely behind closed doors, and Thatcher resigned. There wasn't any inclination in her to keep fighting through the second round of the leadership contest. Contrast with what it took to get Johnson to go (not that he's actually gone yet, but we have to -- stifle a guffaw here please -- take him at his word he really will go, really he will), literally every, bar a few exceptions, cabinet minister to tell Johnson, in public he must go and/or resigning. Plus a great gaggle of PPSes and junior ministers. It was touch-and-go whether the 1922 Committee might have to blast him out of Downing St with heavy artillery. Both the parliamentary party and the mainstream media had to throw everything at him, 27x7, for weeks. Months, even     [my emphasis] 

Interesting.  Yes, Boris is unusually obdurate.  In fact, he's a pretty extreme case in many dimensions, a fact easily forgotten when he's in smiley, jokey-witty-banter, all-out charm mode.  That "really rather good" resignation speech with it's nicely crafted phrasing.  Lots of 'extreme' politicians can do that to people, particularly in the flesh ...  And what will it still take now, actually to get him out of the door?  Oh yes indeed - another big input of energy still needed, to drive the stake home.

Here's a thesis.

Most people in societal contexts (and also many people even when they are cast adrift from company) are not much under the sway of any kind of inner primordial beast that knows only the urge for gratification, the Will to Power (Wille zur Macht), survival in all circumstances and against any odds; never say 'die', only 'attack': the cornered alpha predator, wounded but still fighting.  Most people recognise social constraints: the price we pay for the benefits of living in a society. 

Those who are thus possessed of the demon, but who still partake of society to some degree (and are 'successful' enough to be prominent), are generally to be found in the ranks of callous and bullying corporate warriors, big-swinging-dick traders, sportsmen in the fighting arts, ruthless lords of organised-crime, aggressive soldiers, manic artists, ambitious politicians.  With a few constraints still being observed - on a good day.  But if completely beyond the pale, they are Johnny-Byron wild men of the woods, pirates and bandit chiefs ... or the occasional politician leader who hacks his way into a position of outright dictatorship.  Not much social inhibition with William of Normandy, Peter the Great, or Kim Jong-un.

Boris Johnson famously knows almost no social restraints on his hedonistic and status-seeking pursuit of personal gratification.  Lying?  No problem.  Loyalty?  Never heard of it.  Family responsibilities?  None that he can think of.  Consistency?  Don't be daft.  Integrity?  No interest.  Shame?  You're kidding.  Respect for the rules?  They don't apply, he was given a permanent pass at birth.  Modesty in lifestyle?  Gimme gimme gimme.  Fellow feeling?  ... etc etc.  As he apparently told Cummings when musing that he ought to be his own chief of staff and head of communications: so I'll fuck it up - so what?  What's the point if I can't do whatever I want?

And then look at the face, whenever he's in any kind of sporting endeavour - even with children.

That's naked aggression, unabashed will to win.  'King of the World'.  Will to Power.

And now ask why it took what it did, to get him to resign; more even than Thatcher or Gordon Brown.  And consider that, if he isn't forcibly defenestrated right now, he'll still be plotting ways to hang on during whatever process the Tories will now go through to find a successor.

You might think what follows a little extreme; but if you want a graphic portrayal of the animality of the Will to Power in its rawest human form, read Robert Harris' Archangel.   The historical backdrop is Stalin's reign of terror but by the time of the action of the novel, that's at one remove; it's the past.  What's chilling, truly chilling, is the appearance in the book of Harris' most menacing creation** - the long-lost Son of Stalin, a beast of pure, undeflectable Will to Power.  It's through this device that Harris conjures up what it must have been like, even to think about dealing with Stalin, let alone opposing him.  Lenin knew he was too dangerous for power.  Probably everyone did.   Much good did it do them.

OK, 'personable' Boris also has the buffoon about him and is not (so far as we know) given to personal violence, even if he was famously willing to facilitate it.  But his will to win, to survive, to prevail in all circumstances and on his own terms, is not, errr, easily deflected.

Why are high inputs of energy needed to get him out, Clive?  That's why. 

ND

___________

** Even more chilling than his Cherie Booth in The Ghost 

Bedtime for Boris

Finally, if disingenously, cabinet ministers have had enough.  Why it takes l'affaire Pincher, a trivial and sordid little occasion, to precipitate matters is a bit of a puzzle, but here we are.  A Geoffrey Howe / Nigel Lawson moment; and it's off to the bookies for MSM editors everywhere.  Of the runners & riders I noted here less than a month ago, Mordaunt appears to have risen to the top just now.  And Starmer's puppetmaster will be hoping and anticipating there's more than one Big Vacancy in the offing as the dominos fall.  That strategy of simply being there looks better than ever. 

... Johnson is always going to self-destruct: possibly sooner rather than later: the key is to be in position for when it happens ...

So what happens now.  My guesses:

• Boris, being copper-bottomed shameless and utterly desperate, not least for money but also for fame and glory, will not quickly see his way to the exit
• The remaining Cabinet ministers will be in agonies of indecision.  Has Sunak stolen a march on them all and restored his earlier, pre 'non-dom moneybags' standing?  Or does the rule about wielding the knife hold good?
• The 1922 Committee, proven to be able to act with lightning speed when the mood takes it, will move into permanent session, making it clear they have the power to change the rules in whatever manner they choose (just watch them) 
• Team Boris (which exists, and will also be pretty desperate now) will have been up all night plotting his next moves.  They may be fairly adroit, in a last-chance sort of way.  Expect to see him abroad very soon (he is scheduled to be in Poland next week, and there may be ways of advancing this), wrapped in the Ukrainian flag again.  Mention of tax cuts was near-instantaneous.  Expect also to see hints that if directly threatened, he'll bring down the pillars of the temple in some unspecified way.  
  

'Unspecified'?  Obviously all his instincts are for après moi... but I'm not at all sure he can call a GE unilaterally: all he can do is go to the Queen, who must then cast around for someone who can form a government.  But remember always: the lines of logistics in politics are very short, and power in the hands of someone with imagination is a mighty thing.  For example, unilateral commitments made publicly to international parties would be very difficult for a successor to row back from.

We must thank the Lord there is no UK equivalent of the Presidential Pardon, or there'd be no saying what else he might do. 

Have at it!

ND

Putin's next roll of the dice

Can you believe it, Putin declined my carefully reasoned military advice of 8 weeks ago! 

... much as he evidently wanted to achieve more, Putin's orders must surely now be: Define a defensible subset of what we now occupy - categorically including whatever it takes to water Crimea.  Dig in; set up the resupply lines; and hold that territory to the last mercenary.  Lay waste and abandon the rest.

... and plugged on with his "main aim" (as hastily re-defined shortly after the attack on Kyiv foundered in such a humiliating manner), being to take the whole of the Donbas.  In practical terms this meant rolling up the major Donbas towns of Severodonetsk and Lysychansk which, 8 weeks later he has just "achieved" (by levelling the former and all-but levelling the latter) - at a formidable cost in blood and treasure ... and time.

Although he was always going to be able to do this - he has the artillery - this was a highly questionable enterprise.  At best, he's gained a PR point for use with his compliant home media.  (Nobody else is even slightly impressed, and his homegrown 'milibloggers' are scathing.)  At worst, his casualties may very well force his hand as regards some kind of call-up by stealth, should he wish to carry through with his stated whole-Donbas objective.

The aforementioned towns were not at all ideal for the defenders.  Even so, the Ukrainians inflicted high casualties on the attackers, as street-by-street fighting does - the very reason Soviet military doctrine was clear that it should always be avoided.  And (unlike at Mariupol), the surviving defenders were able to withdraw before total encirclement, their job complete. 

But the next objectives to the west will be a different story, despite all the diversionary hints of reopening the fronts at Kharkiv and Kyiv.  In particular the next target necessarily to be engaged (if he seriously intends to take the whole of Donbas) is the area around Slovyansk and Kramatorsk, an even better-prepared killing ground than the two riverside towns that have occupied him for two months.  And Ukraine is tooling up with long range artillery.  As noted here and elsewhere many times already, Russia has proved itself surprisingly inept at the offensive; and such "lessons" as it may have learned in the field during the "victories" in built-up, unfortified Mariupol, Severodonetsk and Lysychansk will not serve for very much in the next phase.  Everything the Russians plan is being telegraphed to its opponents and meticulously prepared-for:  up and down, up and down, fly the planes of NATO aerial reconnaissance.  

How much of his airforce is he willing to hazard in this operation?  What can he hope to achieve before winter, when his gas-supply weapon finally comes into its own against his NATO tormentors?  Unhappy will be the troops of the first echelon for the next stage of Putin's adventure.  

ND