War!

Generali

There are some interesting and very obscure things (for the media at least which utterly fails to understand finance) going on in the 'War' against Russia over the Crimea.

Take Gunvor for example, a Cyprus-based oil and commodities trading company. They have a 'clear as mud' ownership structure but it is widely believed that President Putin is a large shareholder, perhaps owning half of the company.

As a result, the yield of their bonds (the opposite of price) has done this:



Now Russia can fire back. They own half a trillion dollars worth of US dollar debt. They could simply dump that onto the market. The most likely outcome would be that the Fed would simply print money to buy them up and then steralise those purchases (a technical measure which means that a Government buying bonds doesn't create inflation). That wouldn't be a risk free event but it would be a policy response.

The elephant in the room however is gas and oil. The US is awash with both. It has huge amounts. Russia's state revenues and the oligarchs/gangsters that prop up Pres Putin rely on high oil and gas prices to remain rich.

There is a law at present, dating from the 1970s, that prevents the US from exporting crude oil. Oil derivatives like petrol or diesel can be exported but oil cannot. There is a bottleneck in exporting gas AIUI due to a disputed potential gas pipline to a port to allow LNG to be exported. If Russia really pushes things, the US could destroy the Russian economy simply by slashing the cost of hydrocarbons.

Let us not forget that the USSR and Eastern Bloc fell apart because they simply couldn't afford the arms race. Perhaps it's the oil exports race that will do for the Russians this time.

https://www.youtube.com/watch?v=r-bA9FYB8HY

As a coda, there would be plenty of collateral damage in the Middle East. The Saudis have problems running their economy with sub-$100/bbl oil prices. $20/bbl prices may well mean revolution.

ruggedtoast

And for a completely opposite view:

http://www.resourceinsights.blogspot.co.uk/2014/03/ukraine-russia-and-nonexistent-us-oil.html

dryhat

The mainstream media seem to think that a missing plane is more important news.

wotsthat

Generali wrote: »

Let us not forget that the USSR and Eastern Bloc fell apart because they simply couldn't afford the arms race. Perhaps it's the oil exports race that will do for the Russians this time.

America isn't prepared for an energy war - driving a 4 litre car is still seen, bizarrely, as being part of the American way of life. They're p**ssing away their best weapon at a rate of knots.

CLAPTON

the price being paid for the useless rush for 'green' energy rather than developing an infrastructure ensuring security of supply

plus in Germany's case their mad response to the Japanese nuclear incident

vivatifosi

There was an interesting debate on Russia on the Andrew Marr show this morning. Martin Sixmith spoke, as did John McCain (separately).

Sixsmith made the point that Crimea, to anyone who had been there, feels very Russian and that it was always going to be hard to keep in Ukraine. He said if there is a group who should feel aggrieved it would be the Tatars, not the Ukrainians.

He looked at a group of people who Putin was close to. Some of these are on the sanctions list, some aren't. He pointed out that those that aren't are those that have the ability to cause real economic problems for Europe.

McCain, not surprisingly, was making more chilling, cold war and even 1930s comparisons. He said that there was a lot that Europe couldn't do due to the oil/gas dependency issues. He felt that other parts of Europe were vulnerable to Russian annexation, most specifically Moldova, as it has neither EU nor NATO membership.

The question is whether Putin will stop at Crimea or will take Crimea as a signal to go elsewhere, such as Moldova or eastern Ukraine (or worse still, the Baltics). I don't think there will be much more in the way of sanctions over the Crimea. It is now Russian and I will eat my hat if that situation changes. Eastern Ukraine would ratchet up the tensions, as would Moldova.

The Baltics I think would be the real problem. The issues being:
* The Baltics have been given membership into the EU
* Estonia and Latvia have joined the Euro, Lithuania is scheduled to join 1 Jan 2015
* The Baltics have substantial Russian speaking minorities: 28% in Latvia, 25% in Estonia (far fewer in Lithuania).
* There's also the elephant in the room that is Kaliningrad: an entirely Russian enclave that only has land boundaries with EU countries (Lithuania and Poland) and a sea boundary to the Baltic.

Who knows where this will go. It certainly has the potential to ratchet up much more. I doubt that war is on the cards at this stage, though there will undoubtedly be tensions between Ukraine and Russia if there is further incursion.

vivatifosi

dryhat wrote: »

The mainstream media seem to think that a missing plane is more important news.

Interesting isn't it? I think it is also interesting to see what else is being reported. For example, there has been a landslip in the western USA that has killed some people. We are far more readily fed news from the USA, which is at least c4,000 miles away, rather than news from countries on the periphery of Europe which may be far more important. For example unrest in Turkey, what is happening in the Ukraine, the concerns of Poland and the Baltics to name but a few.

dryhat

The uprising in Ukraine was sponsored and supported by America to destabilise the country and provide the final piece of the NATO jigsaw along Russian borders. The people now in power are neo-nazi thugs fully supported by the west.

The hypocrisy of the west talking about freedom and self-determination only when it suits is astonishing.

No wonder the people of Crimea voted to disassociate themselves from them and to join what they consider their country.

michaels

Yep - has anyone explained why the people of Scotland should get self determination but not those in Crimea?

dryhat

michaels wrote: »

Yep - has anyone explained why the people of Scotland should get self determination but not those in Crimea?

And don't forget the people of Ireland who voted against the troika bailout, but were sent back to the polls until they voted the right way.

And the people of Egypt - they democratically elected the "wrong" person and had to vote again until the west's preferred candidate won.

If you follow the logic of the west, it appears that in Ukraine a violent coup led by neo-nazis is good, but a peaceful, democratic vote by people in Crimea to get away from these thugs is not good.

You couldn't make it up.

Incidentally, the people of Venice have just voted 89% in favour of independance from Italy.

vivatifosi

michaels wrote: »

Yep - has anyone explained why the people of Scotland should get self determination but not those in Crimea?

I don't have a problem with the people of Crimea getting self-determination. However I would like to know if it is true that there were only two options on the ballot paper 1) do you want to join Russia now, or 2) do you want to join Russia at a later date; not the obvious default 3) would you like to stay part of the Ukraine. Actually, I don't think many would have voted 3, but it would have helped democratic legitimacy.