White House Chronicle

News Analysis With a Sense of Humor

Political Class Isn’t Leveling With Us About the Hard Times Ahead

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There is a rough road ahead for the world, and our political class isn’t leveling with us.

As Steve Odland, president and CEO of The Conference Board, one of the nation’s premier business research organizations, said in a television interview, inflation will continue at least until 2024, and longer if things continue to deteriorate with the supply chain and the war in Ukraine.

Particularly, Odland, who serves as a director of General Mills, fears a global food crisis with famine in Africa and many other vulnerable places if Ukrainian farmers don’t start seeding spring crops to start this year’s harvest. Already, Ukraine — known as the world’s breadbasket — has cut off exports to make sure there is enough food for their own people, as war rages.

Odland sees U.S. inflation continuing at 7 percent to 8 percent for several years at best. But his primary worry is global food supplies, as countries face a crisis of new and frightening proportions.

His second worry is stagflation. If the rate of productivity falls below 3 percent, “then we will have stagflation,” Odland told me during a recording of “White House Chronicle” on PBS, the weekly news and public affairs program I produce and host.

Odland faults the Federal Reserve for being timid in raising interest rates to counter inflation.

I fault the political class for not leveling with us — both parties. As we are in a state of perpetual election fervor, we are also in a state of perpetual happy talk. “Get the rascals out, and all will be well when my band of happy angels will fix things.” That is what the political class says, and it is a lie.

We are in for a long and difficult period, which began with the pandemic that disrupted supply chains and set off inflation, and now the war in Ukraine has compounded that. Supply chains won’t magically return to where they were before COVID-19 struck, and more likely they will have further constrictions because of the war. New supply chains need to be forged, and that will take time.

For example, nickel, which is used in the batteries that are reshaping the worlds of electricity and transportation and for stainless steel, will have to  come from places other than Russia. At present, Russia supplies 20 percent of the world’s voracious appetite for high-purity nickel. Opening new mines and expanding old ones will take time.

The world’s largest challenge is going to be food: starvation in many poor countries, and high prices at the supermarkets in the rich ones, including the United States. There are technological and alternative supply fixes for everything else, but they will take time. Food shortages will hit early and will continue while the world’s farms adjust. There will be suffering and death from famine.

The curtailing of Russian exports will affect the United States in multiple ways, some of which might eventually turn out to be beneficial as the creative muscle is flexed.

In the utility industry, someone who is thinking big and boldly is Duane Highley, president and CEO of Tri-State Generation and Transmission Association in Denver. Highley told Digital 360, the weekly webinar that emanates from Texas State University in San Marcos, the challenging problem of electricity storage could be solved not with lithium-ion batteries but with iron-air batteries.

In its simplest form, an iron-air battery harnesses the process of rusting to store electricity. The process of rusting is used to produce power when it is exposed to oxygen captured on site. To charge the battery, an electric current reverses the process and returns the rust to iron.

Clearly, as Highley said, this won’t work for electric vehicles because of the weight of iron. But in utility operations, these batteries could offer the possibility of very long drawdown times — not just four hours, as with current lithium-ion batteries. And there is plenty of iron stateside.

Another Highley concept is that instead of dealing with all the complexities of transporting hydrogen, it should be stored as ammonia, which is more easily handled.

This isn’t magical thinking, but the kind of thinking that will lead us back to normal — someday.

Politicians should stop the happy talk and tell us what we are facing.

Europe Faces Winter on the Edge of the Abyss

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BURGENLAND, Austria –There is another world crisis brewing – and one for which President Obama cannot be blamed. The Europeans and have made a mess of things, and now the wolves are at the door.

The first snarling wolf is deflation. Europe’s economies are so weak, so close to recession, that the very real danger of deflation – falling prices – has its economists petrified. It ought also to have its politicians in anguish, but whether it does is less clear.

Europe’s big-driver economy, Germany, as well as France and Italy, are on the edge. The German miracle is ailing, and Berlin may have been writing the wrong prescriptions for the rest of the 18 countries that share the euro as their currency. It has been aided in this effort by the International Monetary Fund.

That prescription, which often seems to harm the patient, as in Greece and Spain, is for austerity – which appears to work better on paper than in the real world. Germany worries about profligate borrowing throughout the European Union. But if the German economy is to escape recession, Chancellor Angela Merkel may have to borrow some money herself and inject it into infrastructure spending to keep Germany competitive and its workers on the job.

The European Central Bank (ECB) has been slow to institute a badly needed program of buying qualified bonds, known as quantitative easing. In the United States, the Federal Reserve, in a program that is now ending, has pumped more than $1 trillion into the economy and helped pull the economy out of recession. But ECB has been timid because it has no clear direction from the European political establishment — pointing up how cumbersome and directionless the European Union structure has become. It has a parliament, which has no power, and is increasingly attracting members who are actually opposed to the European project.

The European Commission has arguably too much power centered in the bureaucracy in Brussels, but no clear direction form its controller, the Council of Ministers. Trouble is the ministers can disagree and veto needed courses of action.

The economic crisis points up the ungovernable nature of Europe and its present institutions. If Washington is gridlocked, Europe is by structures that cannot deal with crisis and what often appear to reflect as many policies as there are members (28) in the EU.

But it is not just the economic wolf that is at Europe’s door. The Russian bear is there, too. Already there is an undeclared war raging in Ukraine.

At the Association of European Journalists' meeting here, a spokesman from the Ukrainian government, who asked not to be identified by name, expressed the sense in Ukraine that it has been betrayed by EU bungling.

“Europe sees Ukraine as its European neighborhood partner. But in Ukraine, the truth is different: Ukraine’s view is that Europe let us down. We are hurt, bleeding. We have been betrayed by a neighbor that, six months ago, we saw as a brotherly nation,” he said.

What was not said was that Europe may freeze this winter if the Putin regime — a growling wolf — wants to punish Ukraine and its neighbors. Europe is hopelessly dependent on Russian gas, which is used mostly for heating. Germany gets 40 percent of its gas from Russia, and Finland, Estonia, Latvia and Slovakia get 90 percent. Russian gas makes its way — largely through Ukraine — down into Italy, and even the United Kingdom has some small exposure.

If the gas goes off, Europe freezes and its economies go south in an avalanche. The most hopeful thing for Europe this winter is that with the world oil price falling, Russia’s own fragile economy may dictate that it keeps the gas flowing — but it will force up the price where it can.

Washington, with a new Congress, might want to brace for Europe’s winter of crisis and disaster. If Europe goes into severe recession, can the U.S. economy escape major harm? The new Congress will be on a sharp learning curve. — For the Hearst-New York Times Syndicate

Step on the Gas, Europeans Plead

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To hear Brenda Shaffer, a peripatetic academic specializing in European and Eurasian energy issues, currently on a research fellowship at Georgetown University, natural gas is the predominant fuel of the 21st century, and it will be used copiously as time goes on. It will become the fuel of transportation as well as heating, manufacturing and electric generation.

But, at this point in time, moving natural gas from supplier to user presents special problems. It is not as easily transported as oil, and it is not as fungible.

Ideally, natural gas is transported by pipeline. Less desirably, it is converted into a liquid at -260 F and shipped around the world, where it has to be regassified. The freezing and the regassification processes for liquefied natural gas (LNG) require hugely expensive plants: over $5 billion at the originating end, and half that at the receiving end. This makes the gas expensive and its shipment inflexible.

Oil is put on tankers and unloaded wherever it is needed. LNG is shipped in special cryogenic tankers to dedicated terminals on long-term, take-or-pay contracts.

The United States is in the middle of a natural gas boom of unprecedented proportions; the result of extraordinary reserves in shale and the development of sophisticated hydraulic fracturing (fracking) technology linked to horizontal drilling. The pressure to export is on, balanced by environmental concerns and the fear of manufacturers tat the price will rise.

In the current crisis over Ukraine, a question has arisen as to whether we can help our European allies by shipping them LNG. The answer is “yes and no.”

We do not have any terminals ready to begin exports; the first LNG exports will be loaded from the Sabine Pass terminal in Louisiana late next year and will be shipped to Asia. Nor does Europe have enough receiving terminals.

But the Europeans argue strongly that the mere presence of the United States as a player in the natural gas export business will have a huge impact on the world market, signaling that we are on the way and, hopefully, warning Russia that its captive gas customers in eastern and central Europe are looking at alternatives, and want to lift the yoke of dependence on Russia.

With the invasion of parts of Ukraine by Russian troops or their surrogates, gas has become a weapon of war. Russia's giant, state-owned gas monopoly, Gazprom, has been an arbitrary supplier to Europe for years. Most troublesome is that the bulk of Europe's gas supplies transit Ukraine, and that Gazprom has never behaved like anything but an arm of the Kremlin, dangerous and capricious.

In 2009, Gazprom cut off supplies over alleged contract and payment issues; in the cold of winter, the Russian bear was merciless. Also, it posts a different gas price for each customer, regardless the distance from Russia's border or cost of delivery.

Desperately, Europe is looking for a defense against Russia freezing supply to Ukraine this winter and cutting off some countries, particularly those wholly dependent on Russian gas, like the Baltic states and Slovakia.

That is why the Visegrad Group, consisting of Poland, the Czech Republic and Slovakia, under the chairmanship of Hungary, has been intensively lobbying Congress to pass a bill that would simplify and speed up the licensing of export terminals in the United States. At present, seven terminals have provisional licenses from the Department of Energy, and Sabine Pass is fully licensed.

Visegrad members swarmed Capitol Hill this week, lobbying for the legislation. They were accompanied by officials from Bulgaria, Croatia, Latvia, Romania and Ukraine.

Their message was simple: the legislation would convince the Russians that they had to play by market rules because the entry of the United States as a player in the world of LNG — even if the gas cannot be offloaded in Europe in the near future — will send a strong market-stabilizing message.

Where possible, eastern and central European countries are improving their interconnections and adjusting their systems so they can reverse the flow of gas to help Ukraine in a dire emergency. But no one believes that it will make enough of a difference; besides, as most of that gas will have originated in Russia, some Russian contracts specify the use of the gas.

Almost all of the gas in the region is used for heating rather than electric generation or manufacturing. Central and eastern Europe is dreading winter and imploring the United States to send strong signals, even if it will be a long time before Pennsylvania or Ohio gas warms the people of Ukraine and its neighbors. — For the Hearst-New York Times Syndicate

 

Postcards from Maastricht, Netherlands

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A Frenchman, a Mercedes and a Morceau of Limburger

I had an encounter with the southern Dutch province of Limburg, long before my visit to its capital, Maastricht, last month. It was a close encounter of the rind kind—with Limburger cheese—in France.

As a teenager, I spent a couple of summers with a French family in Hossegor, a beach town located on the Basque Coast. Albert Barrieu, husband to Marie-Josee and father of seven, was a man of taste, especially for old things. For starters he had a collection of pre-Colombian and African artifacts, amassed in Peru and Africa after World War II and coveted by museum curators all over the world. At the family’s main residence in Pouillon, also a small town in the Basque Country, the commode in one of the bathrooms was encased in a heavily carved, dark-wood chair. Albert told everyone it was “the throne of the queen of Cameroon.”

Most of Albert’s antiques were displayed in the 18th-century stone house in Pouillon. The stucco villa in Hossegor (which he named Chasquitambo, after a town in northern Peru) was a museum under construction. During the summers I spent there, Albert filled it with antiques, mostly purchased from dealers in southwestern France. He could sniff out antiques like pig sniffing out a black Perigord truffle.

Albert was a regional sales manager for Gaston Jaunet, a women’s ready to wear firm. His oldest child, Dominique, and I accompanied him on some of his summer sales trips.

It was on one of those trips that I encountered Albert’s passion for old cheese—old Limburger cheese, to be precise.

One morning as I was finishing my breakfast at the long, pine table in Chasquitambo’s dining room, and was ready to hit the plage sauvage (a favorite with surfers), Albert asked Dominique and I to accompany him to St. Jean de Luz, a fishing port not far from the Spanish border.

I was thrilled to have a chance to see more of France’s Basque region. But Dominique, normally a dutiful daughter, refused to go.

Was it because Albert would be driving the black Mercedes sedan, and one of us would be peering at the scenery from the back seat, through the clothing samples? No, that was not why she refused to go.

Was it because her father threw a fit in just about every restaurant he took us to? Once, in Hendaye, he advised me that the best French food is served in restaurants with the shabbiest exteriors. He found a run-down restaurant, ordered poulet basquaise for lunch, took one mouthful and pronounced it to be “as filthy as the restaurant floor.” As we left the restaurant, Albert told me that very occasionally there were exceptions to his French restaurant rule.

No, Dominique did not care about her father’s restaurant rows. The reason she did not want to go with him was because of the Limburger cheese that he kept in the glove compartment of the Mercedes and ate as he drove the French national roads at Le Mans speed.

I volunteered to sit next to Albert. But Dominique insisted that even if she sat behind the clothing samples, they would not be a strong enough barrier to the smell of the cheese. “Deglas,” she said, which is a stronger word than “disgusting.”

Marie-Josee came to her daughter’s rescue, telling Albert that Dominque had to help the other children with their summer homework. Alas, she made no excuse for me.

Albert put on his misshapen Panama hat, stuffed more clothing samples onto the rack over the Mercedes’ back seat, and off we went to St. Jean de Luz.

Not 20 miles into the trip, Albert said he was hungry. I knew what that meant: time for the terrible, smelly cheese. He popped open the glove compartment, and I held my breath. He pulled out a crumpled piece of white paper, and I kept holding my breath. A small piece of cheese fell out of it onto the floor.

William Shakespeare had it right, when he wrote in “The Merry Wives of Windsor” that Limburger was “the rankest compound of villainous smell that ever offended a nostril.”

I stuck my head out the window and took a deep breath as Albert reached for the cheese on the floor and popped it into his mouth.

The boutique owner we were going to see in St. Jean de Luz was one of Albert’s best clients. She was as impossibly chic as she was frank.

As we pulled the samples out of the car, she implored, “Albert, please keep the cheese in the glove compartment. You are selling Gaston Jaunet, not the Limburger line.”

In Maastricht, where I attended the Association of European Journalists’ annual meeting in November, I learned two things about Limburger cheese: first, it is mostly made in Germany now; and second, there is a great benefit to its much-mocked odor. A 2006 study, which showed that the malaria mosquito is attracted equally to the smell of Limburger and to the smell of human feet, earned a Nobel Prize in the area of biology. Limburger has now been placed in strategic locations in Africa to combat the epidemic of mosquito-borne malaria.

A French Musketeer in Maastricht

In another French connection, Maastricht is where the captain of musketeers, Charles Ogier de Batz de Castelmore, also known as Compte d’Artagnan, fell in battle in 1673. He is the person upon whom Alexandre Dumas based d’Artagnan, the hero of “The Three Musketeers” and other novels.

In June 1673, as part of the Franco-Dutch War of 1672-78, the French laid siege to Maastricht. As Compte d’Artagnan, commander of King Louis XIV’s First Musketeers Company, prepared to attack the city’s Tongerese Gate on the night of June 25, he was killed by a single musket shot. The night attack was portrayed in “The Vicomte of Bragelonne: Ten Years Later,” the third and last of Dumas’s D’Artagnan Romances.

Maastricht surrendered to French troops on June 30, 1673. The French occupied the city until 1678. It was subsequently restored to Dutch rule. The French again took the city in 1748, during the War of Austrian Succession, but it was restored to the Dutch that year.

The French would return once more in 1794, annexing Maastricht to what would become the First French Empire. The following year, it became the capital of a French province (departement de la Meuse-Inferieure).

In Maastricht’s city park (Stadspark) there is a cast-iron statue of d’Artagnan drawing his sword. Dumas wrote, “A person who doubts himself is like a man who would enlist in the ranks of his enemies and bear arms against himself. He makes his failure certain by himself being the first person to be convinced of it.”

That is what the statue of d’Artagnan looks like he is thinking. Or is he thinking, as Dumas also wrote, “I prefer rogues to imbeciles because they sometimes take a rest.”

Floriade 2012

Once a decade a world horticultural exposition, Floriade, is held in the Netherlands. The sixth Floriade, themed “Living Nature,” will be held from mid-April until mid-October 2012 in Venlo.

“In addition to the most exquisite and exceptional flowers, plants, trees, fruit and vegetables, each day at the expo features a cultural program of music, dance, literature, theater and visual art from all over the world,” Sven Stimac, director of projects for Floriade 2012, told the Association of European Journalists.

Floriade 2012 aims to get visitors to use “all their senses, so they can experience the influence horticulture has on the quality of their daily lives; be part of the theater in nature, get closer to the quality of life,” according to its organizers.

Venlo, the site of the world expo, is located in the province of Limburg, close to the borders of Belgium and Germany. “More than 30 million people live within a two-hour distance by car,” Stimac said, adding, “The Greenport Venlo agrologistics area and the Lower Rhine Agrobusiness region together form the largest area of horticultural production in Europe.”

Besides the horticultural highlights, there is another reason to visit Floriade 2012: the green buildings and landscaping.

Exhibitions of this nature often leave a legacy in the form of spectacular buildings, such as the Eiffel Tower in Paris, the Atomium in Brussels and, after Floriade 1960, the Euromast in Rotterdam, Stimac said.

“This Floriade will also have a number of imposing structures. The buildings and landscapes will leave a legacy by becoming the site of GreenPark Venlo: an innovative, sustainably developed business park where economy, ecology and knowledge transfer go hand in hand,” the organizers said.

Floriade 2012’s organizers anticipate more than 2 million visitors, and 35,000 peak-day visitors.

Press Freedom and ‘Jeans’ in Ukraine

There was much revelry at the Association of European Journalists’ meeting in Maastricht, notably at the dinner hosted by the Provincial Council of Limburg in the building where the Maastricht Treaty was signed on Feb. 7, 1992, and at the APG Group-hosted dinner among the ruins of an ancient Roman temple and forum.

But there was also much to dampen the spirits of the journalists, especially the presentations on media freedom in Europe and two former Soviet republics, Belarus and Ukraine.

In their report on freedom of speech in Ukraine, where the media benefited from the Orange Revolution, Arthur Rudzitsky, Diana Dutsyk and Mykhailyua Skoryk wrote that journalists are often pressured by media company owners. “Most owners of the media in Ukraine have political interests and partially implement them through the media,” they wrote.

Media companies are so cash-strapped that they mostly depend on “donations” for their operating capital. “The number of such media is increasing because of the advertising market’s fall by 40 percent for the first half of 2009, compared to the same period in 2008,” they wrote, adding, “The main donors for the media are Ukrainian businessmen and state and local budgets. This grant nature of media has led to mass layoffs in the media … and the closure of many television projects and programs.”

While the Ukraine’s Ministry of Justice opened access to the state register of print media and news agencies last December, “this information is still not enough to make a complete picture of the owners of Ukrainian media companies. In particular, owners of leading Ukrainian TV channels, according to the documents, are offshore companies; so it is difficult to determine who actually owns them,” they wrote.

In 2009, there was a spike in the number cases of violence against journalists. These appalling cases include:

  1. On Feb. 16, someone blew up a car owned by Valery Vorotnyk, owner of the Antenna media group, headquartered in Cherkasy.
  2. On March 16, unknown assailants beat up Anatoly Ulayanov, journalist, art critic and editor of the Kiev-based Prosa Web site, who has criticized the National Expert Committee on the Protection of Public Morals.
  3. On June 24, Kiev Pharmacy guards used tear gas against a TV crew attempting to film a stand-up in front of the company.

The saddest statement in their report was “most journalists rarely come to court in cases when the violation of their rights takes place because they do not believe in justice and do not consider it worth their time; and the rest of the journalists simply do not know how to do it. The cases that reach the court are not always resolved in favor of journalists.”

Not stated in their report was the corruption of journalists.

“ ‘Dschinza’, which means ‘jeans,’ is the name commonly used for the system of paid contributions, as the money vanishes immediately into the jeans pocket of the journalists. That this practice forms part of everyday journalistic life is an open secret among those working in the media in Ukraine,” journalists Cristoph Kersting and Dorthe Ziemer wrote in the latest edition of Kontakt, the newsletter of the social and cultural arm of the Erste Bank Group in Central and Eastern Europe.

“Volodymyr Mostovoj, editor in chief of the critical political weekly newspaper Zerkalo Nedeli, also complains about the dubious work methods of many of his colleagues. He believes that one reason for the attitude of many journalists to professional ethics lies in their poor training. ‘When I studied journalism, in what was still the Soviet Union, there were three faculties in the entire Ukraine where I could study. Today there are, believe it or not, 41 – of questionable quality,’ ” wrote Kersting and Ziemer, whose report has been picked up by Deutsche Welle and other media outlets.

Apple Park Hotel’s Polished Service

The Association of European Journalists’ meeting was held at the Golden Tulip Apple Park Hotel, located in a sports park area not far from Maastricht’s historical center.

The hotel’s Big Apple theme had a few sour notes, like the dark halls with shadow boxes filled with New York mementos hanging outside the guest rooms. The one outside my room contained pictures from the rowdy American television comedy of the 1960s, “The Three Stooges,” and Grand Street in Manhattan’s Lower East Side. As a child, I could not stomach the three knuckleheads. It was even harder to do so as a hungover adult entering a hotel room.

The hotel service was sweet and polished, especially at the front desk and in the Dreamz restaurant.

How Russia Coerces Europe

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No building in Moscow so much says “Soviet Union” as the headquarters of Gazprom, the Russian gas monopoly. It is more foreboding than the Lubyanka, the former headquarters and torture emporium of the KGB. The romantic charm of the czarist era, epitomized by the Kremlin itself, is wholly absent. Like the state monopoly itself, the structure is gigantic, threatening and very hard to get into.

It is set back from the road, and there are layers of security a visitor has to negotiate to see an official. It is easier to get into the Kremlin, No. 10 Downing Street or the White House than it is to get into Gazprom HQ. I know because I have gotten into all of them. No wonder old KGB hand Vladimir Putin loves the gas company.

As president, and now as prime minister, Putin grew Gazprom and its oil counterpart, Rosneft, not to be normal companies but agents of political implementation. Between them, they were tasked to gobble up the pieces of Yukos when its luckless founder, Mikhail Khodorkovsky, was thrown in jail.

But even more than Rosneft, it is Gazprom that has emerged as the right hand of Russian policy in Europe.

At the moment, in the dead of winter, it is Gazprom that has cut off supplies of gas to more than 12 European countries. Ostensibly, the argument is over the price paid for gas by Ukraine, the transshipper of gas to all of Europe. But the Russian political agenda is not concealed. Putin, and the siloviki (the men of power around Putin and President Dimitry Medvedev) are angered by the defiance of former members of the Soviet Union, especially Ukraine. Despite its large Russian-speaking minority (about 40 percent) it has talked of joining NATO and the European Union–a red rag to Russia. Russia is angry at the West, in general, for trying to route new pipelines from Central Asia through Georgia, avoiding Russia. It is also mad at the West for recognizing Kosovo, and has responded by buying the Serbian gas fields.

Russian gas, which now makes up 30 percent of Europe’s need, does not look such a good idea–particularly to Germany, where pressure from the Green party led to the retreat from nuclear and the push for gas turbines. Before Germany turned its back on nuclear, it was a leader in the development of promising pebble bed technology. Now, sadly, Germany depends on Russia for nearly 40 percent of its gas supplies.

The gas crisis is worst in countries like Bulgaria, where there is very little gas storage and demand is in real time. But it is also affecting Italy and Southern Europe. Having closed their coal-fired power plants and shelved their nuclear plans, those countries now feel the full pain of the Russian bear’s embrace: gas droughts and electric shortages are leaving their populations cold and hungry in the dark.

So dependent has Europe become on Russian energy that every step to ameliorate the situation is a possible irritant to Moscow. If the pipelines bypass Russia, or the hub in Ukraine, that is a provocation. If new gas comes by ship from North Africa, that is an excuse for Russia to try and price its pipeline gas at the higher price of liquefied natural gas.

Belatedly, Britain and Finland commissioned new nuclear power plants. But Germany, whose former chancellor Gerhard Schroeder took a lucrative job with Gazprom, has chosen to increase its energy dependence on Russia.

Most observers believe that the current crisis will not last. Most likely, it will conclude with a jump in the price of gas, and some satisfaction in the Kremlin that Europe has been taught a lesson. But that lesson may have to be repeated over issues far from energy–such as the expansion of NATO and the European Union.

While the Russians appear to take some satisfaction in upsetting Western Europe, it is their Soviet-era satellites that most annoy them. Why, they wonder, can’t all of Eastern Europe remain suitably deferential, like Belarus and Armenia? Both toady to Moscow.

For the rest of Europe, the message is clear: build more gas storage, arrange more imports and diversify away from gas turbines.

For our part, we can help our friends and allies by thinking through our own actions, from the European missile shield to the willy-nilly expansion of NATO. This is a European problem. But if Europe has to make geopolitical compromises with Russia, it becomes problem for the Western alliance. That is us.