Russia And Argentina’s South Atlantic Energy Gambit
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Before leaving to meet Pope Francis in Brazil Argentine President Cristina Kirchner told her people she wished she had a little machine to print money.
Argentina has made some problematic business decisions in the hydrocarbons arena and as a result the nation has gone from being a net exporter to a net hydrocarbons importer in less than 24 months. Influential magazines like The Economist charge that the government understates inflation and manipulates other indicators.
President Cristina Kirchner’s controversial policy designed to flush an estimated $160 billion dollars her advisers think are being hoarded in safes and mattresses in Argentine homes into the coffers of her government has caused demand for the “blue dollar” (a tolerated black market for dollars) to be sold at nearly twice the official rate.
Shortly after the reelection of President Cristina Kirchner her cash strapped government last year “renationalized” a large share of the “privatized” formerly state owned hydrocarbon giant YPF.
Back To The Future, Kirschnerismo as Peronismo
This was a complicated and mendacious scheme, a throwback to the old school statism of populist leader General Juan Peron. Old school Peronists called such actions the work of a vendepatria, one who sells out the national patrimony.
It involved the Spanish energy firm Repsol, and the ultimate betrayal of one of Argentina’s most influential business families who were the largest financial supporters of President Cristina Kirchner and her late husband President Nestor Kirchner who held the office from 2003 to 2007.
The “renationalization” and the recent reselling of the reclaimed assets to the American company Chevron for around $1.2 billion was positioned by President Kirchner’s media relations team to the mollified Argentine press as “most important” (importantissimo) for the nation. Richard Matzke, former vice chairman of Chevron, who now sits on the board of LukOil certainly knows how important the deal was.
Sabre Rattling For Dollars
Right now Argentina needs cash now since it has limited access to international credit. President Cristina Kirchner and her influential Vice President Amadou Boudou are redoubling efforts to control and collateralize the hydrocarbon resources on and around the disputed British Falkland Islands (Malvinas Argentinas).
In this context, the recent visit on June 10th of foreign minister Sergey Lavrov to Argentina for talks with his counterpart, minister for foreign affairs and religion Hector Timerman, has provided a basis for a strategic alliance in the areas of trade, energy security and defense.
Discovery in West Antarctica near the Vernadsky Research Base by Ukrainian researchers of major hydrocarbon fields on the basis of geoelectrical sounding last year ups the hydrocarbons stakes considerably.
Mediating A Potentially Disruptive Scenario
Just days after Lavrov’s June 10th visit to Buenos Aires a verbal confrontation occurred at the G-20 Summit in Mexico when Argentine President Cristina Kirchner rejected British Prime Minister David Cameron’s proposal for a referendum vote that would allow residents of the hydrocarbon rich Falklands Islands (Islas Malvinas) to choose whether they want to be British subjects or to accept Argentina’s claim that they are part of Argentina.
That claim turned to war when the Argentine military, hard pressed for funds as the result of their ill-advised economic programs, was defeated decisively by Britain in the Falklands War in 1982, setting the stage for the collapse of the junta.
Now, however, with the 2014 Brazil FIFA World Cup and the 2016 Rio Summer Olympics on the horizon, Argentina has lucked into a window of opportunity to again play out its sabre rattling as a potentially disruptive scenario.
Prospects of Argentine sabre rattling could cause implementation of no-fly zones and exclusion zones for shipping lanes. This could create logistical problems for oil markets and for the sports events in neighboring Brazil, where the government of Cristina’s friend President Dilma Rousseff officially supports Argentine claims to the islands.
A Hangout For Nuclear Subs
The South Atlantic situation becomes more complex since it is drawing more attention from the United States 4th fleet command as it ramps up its doctrinal and intelligence role in South America. As the action heats up it will provide the Pentagon an opportunity to deploy its new stealthy $2.4 billion-each Virginia class nuclear subs in the South Atlantic and Antarctic waters.
According to the London Daily Telegraph Britain sends a hunter-killer nuclear attack submarine into South Atlantic waters near Argentina twice a year. The Defense Ministry has not confirmed when the new $2 billion-each Astute Class nuclear submarines soon to come on line will be posted to the region. But the MOD did indicate that contingency plans for South Atlantic patrols are being developed.
India, which has its own Antarctic research center, is in the process of making a deal to lease its third nuclear powered Akula Class stealthy hunter-killer sub from Russia that can stay underwater for months.
Brazil, which has a research presence in Antarctica, and could file a territorial claim, is developing a submarine that will be modified to operate with nuclear propulsion by French technology.
As a result, while everyone talks about energy security the action in the South Atlantic and Antarctica is making the region a big hangout for nuclear submarine activity and that means military spending that drive the defense driven economy.
This helps facilitate the expanded Russian naval presence that Russian President Vladimir Putin seeks. The scenario also provides more opportunities for the new Russian B-90 Sarov class nuclear attack submarines and their high tech research capabilities.
As the global economy continues to slog through recession and crisis is becomes more apparent that expenditure on strong defense establishments is necessary to protect the fiat money (issuance of paper currency backed by only the reputation of a government) system that has a historical hangover from the Bretton Woods arrangement. The South Atlantic energy gambit and Argentina’s economic plight are reminders of that.
