First, Russian-backed separatists claimed Ukrainian forces fired mortars, heavy machine guns and grenade launchers. Then, later, Ukraine accused separatists of hitting a kindergarten in Stanytsya Luhanska during a bout of shelling which injured a pair of civilians and caused half the town to lose power.
Those incidents are indicative of the potential for tape bombs as traders, carbon-based and otherwise, navigate a veritable minefield of verified and unverified reports in a futile effort to discern the odds of a full-on conflict in eastern Europe.
In a social media post, Ukraine Foreign Minister Dmytro Kuleba blamed separatists for what he called a “severe violation of Minsk agreements by Russia amid an already tense security situation.” Kuleba was referring to the Stanytsya Luhanska incident. Earlier this week, the US State Department warned Russian media is keen to “plant stories in the press, any one of which could be elevated to serve as a pretext for an invasion.”
Violations of cease-fire rules are common, but needless to say, this is a perilous time for potshots. “Small incidents can cause unwanted accidents and trigger a significant escalation,” Rajeev De Mello, a macro PM, said Thursday, suggesting that even a limited incursion by Russia could push 10-year US yields down by as much as 15bps. “Flight-to-safety will dominate inflation worries,” De Mello added.
Certainly, the market reaction to Thursday’s conflicting headlines illustrated how quickly risk-on can become risk-off. Just after 11:00 PM in New York, the yen surged 0.4%, the Aussie careened 0.6% lower and Treasury yields dropped below 2% when RIA Novosti initially reported separatists’ latest claims of cease-fire violations. “Investors should prepare for volatility,” one Singapore-based fixed income analyst remarked, around the same time. “The Ukraine-Russia situation will be a near term driver [and] markets will swing depending on the evolving situation.”
Russia’s claims about troop drawdowns have now been summarily rejected by NATO and the White House. Biden administration officials contend Russia has in fact added around 7,000 troops to its border presence. According to the White House’s account of a phone call, German Chancellor Olaf Scholz agreed that Russia’s troop buildup is ongoing.
Naturally, Dmitry Peskov denied that assessment, calling it another example of “information aggression,” but he didn’t deny that the situation in Donbas is becoming more tense. Somewhat amusingly, he said Ukraine should “explain” why Volodymyr Zelenskiy wants a meeting with Vladimir Putin. (Hint: It’s because of the whole invasion thing.)
Russia still assumes Nord Stream 2 will be launched and as of now, there are no plans for a Biden-Putin meeting, Peskov went on to say.
According to a senior Ukrainian government source who spoke to Reuters, shelling attributed to separatists “went beyond the scale of ceasefire violations routinely reported throughout the conflict.” “It is not typical,” the source said. “It looks a lot like a provocation.”
Writing Thursday, Rabobank’s Michael Every offered a characteristically concise summary of recent events that may have cruised under your radar. “Militarily, among information and misinformation, and allegations each is the other, note [that] Russian troops in Belarus assembled, then disassembled, a pontoon bridge leading to the Chernobyl restricted area that would allow a rapid tank move towards Kyiv, an odd maneuver unless it’s a warning for those Russia knows are watching this by satellite,” he wrote, adding that,
Israel, with good relations with Moscow and Kyiv, has reportedly reached out to Russia for help in evacuating its citizens and diplomats from Ukraine, and is publicly preparing for the temporary flight, or even mass emigration, of the 200,000 Ukrainians eligible for its citizenship and a senior Central African Republic military officer reportedly says many Russian mercenaries, who have established key footholds across the continent, have recently departed — for Ukraine.
Meanwhile, UBS suggested markets (and by “markets,” we’re probably just talking about equities), aren’t priced for a Russian invasion. Of course, stocks really aren’t priced for any kind of seriously adverse scenario.
One takeaway from UBS’s analysis of 2014 tensions is simply that not much happened to financial assets. As ever, “the stocks” probably won’t care for very long — that is, beyond the algo-led knee-jerk down trade that would surely accompany verified reports of an incursion.
Sadly for combatants (not to mention innocent bystanders), people don’t tend to be as bulletproof as glorified poker chips.
Remember that perfect phone call where a sitting US president threatened to withhold already approved funding for Ukrainian arms to defend itself against Russia unless the PM did him a favor and fabricated dirt on his opponent Joe Biden? Good thing we ignored that warning and let him keep his job enabling Putin and likely giving him anything he wanted.
Don’t forget, no one was tougher on Russia, such as having secret meetings with them in the White House or letting your useless stepson set up a a secret back channel with them, or your party spending the 4th of July in Moscow, et al, ad nauseam.
Putin, likely the world’s richest man, is basically the Don of the Russian mafioso and knows he is above the law. He should be viewed and treated as such.
Putin does not want any former Russian satellite countries (i.e. Ukraine) getting to close to anything loosely resembling democracy or any other form of government that is not based on corruption. Above all else, that would threaten his ability to remain as the Don of such mafia organization within Russia. It is not like Putin is loved in Russia- unless one is benefiting financially from the mafia.
Keeping a watch on the Alexei Navalny “trial” going on in Russia. If Navalny is not killed, he could potentially be the “Nelson Mandela” of Russia upon death or overthrow of Putin.
Grammar correction: too, not to.