Checkmate
It was all Russia, all day on the news front to kick off the new week. That'll remain the case for the foreseeable future.
It's been quite a while since geopolitics mattered this much for market participants. There's now a very real chance of a geopolitical fracas morphing into a market "Event," with a capital "E."
There are myriad spillover channels, with the most obvious being commodities, and thereby inflation, but severing Russia's SWIFT access and the West's decision to target Russia's ce
Russia may be forced to launder its gold? I hear there are some nice units available in Trump Tower.
Checkmate? More like Zugzwang? This all seems to be a matter of oil and global instability.
From 2014:
“Lavrov began by emphasizing that Moscow sees Crimea as an integral part of Russian territory. He then stated that Moscow has a military doctrine that “very clearly” outlines how Moscow would respond to threats to its territorial integrity. The military doctrine “very clearly” states that the “Russian Federation reserves the right to utilize nuclear weapons”
I am okay with that doctrine. All nuclear powers have a fairly similar version of that and, “if not then, when” would you use nukes? when your capital has fallen to the enemy?
The key point here is that no one is threatening Russian territorial integrity and/or proposing to cross its borders to achieve any kind of war aim. So, by their own lights, they do not have a casus belli for nuclear retaliation.
Now that I have seen something I never thought so would see, the sanctioning of a Central bank, I would think the final nail in Putins coffin would be to convince Saudi Arabia to turn on the spigots and drive the price of oil to the 50’s.
The Saudi’s do not have the ability to turn on the spigots. They are basically tapped out. We are heading into a world where the demand is going to be greater than supply that exists, within 12 months. Then we have another problem altogether.
If Germans are willing to wear one or two extra jumpers for the next month or two, then the warmer weather of spring will arrive along with the seasonal slow down in the demand for natural gas.
Is a significant (enough) subset of humanity willing to sacrifice for the benefit of another group? It absolutely has happened in our history, but not as often as one might hope. It might come down to how threatened the Germans are by Putin’s current and potential future actions.
+1.
Is it possible for Russian citizens and businesses to transact in Bitcoin or another crypto to avoid sanctions?
In theory, Russian govt, companies, individuals could buy BTC with rubles then pay for things with BTC.
But their rubles are devaluing fast, BTC transaction fees are punitive, how many sellers are taking BTC (you know, find that specialized industrial pressure valve you need to keep your factory running and ask the German manufacturer if it takes bitcoin) or shipping to Russia (airspace closed, FedEx and UPS not delivering) or willing to transact with a Russian company at all.
I’m sure that some high priority transactions are moving to BTC, but bitcoin transactions are public, many of the exchanges and wallets are within the jurisdiction of countries that have sanctioned Russia, and the non-Russian transacting party may be as well.
If BTC adds sanction-evader to cybercrime-enabler and terrorism-funder to it’s list of prime use cases, that’s not going to end up well for crypto.
I was with you till “If BTC adds sanction-evader to cybercrime-enabler and terrorism-funder to it’s list of prime use cases, that’s not going to end up well for crypto.”
Because, as you stated, BTC ledger is transparent, BTC is only semi-anonymous (vs cash – which is entirely anonymous) and therefore, so far, blackmailers and criminals who have tried to use BTC for their crimes have not had much luck with evading law enforcement.
If you’re a cybercriminal, a terrorist or a smuggler, be smart. Ask for dollars, in cash. Or raw diamonds maybe?
Note both Powell and Yellen making crypto = sanctions-evading comments. Most governments want to suppress/control unregulated crypto and/or substitute their own digital currency. Linking crypto to Putin is strategic and purposeful in my opinion.
Slate has a decent geopolitical article on Putinism that provides perspective in terms of Americans interactions with him, over the course of four presidents. The Atlantic Council also has interesting stuff. This Ukraine dilemma will probably not go away anytime soon.
George W. Bush Carries Some Blame for the Current Conflict With Putin
BY FRED KAPLAN
Checkmate works in games where the two sides are rational.
Yes, and the equivalent of kicking over the board is not a pleasant thing to think about.
The sanctions have been carefully constructed to allow payment for oil & gas, with select banks allowed access to the swift system.. can only presume this was a required carve out to get German support over the weekend ?
Truss can suggest sanctions, the UK buys zero (as close to zero as matters) Russian oil or gas.. they would suffer a financial cost in higher prices, but not go dark/cold. In reality when she says G7, she means Germany & Italy. Some estimates put German reliance on gas supplies at 55 %.. you cannot replace this, there is not the LNG, there are not the import terminals, there are not the ships. It is a closed system. The loss in supply can’t really be shared, can’t be made up by other countries.. Typically German gas “reserves” will draw, despite the imports, until June, so there is no reduction in demand for 3 months. Escalating sanctions to include energy therefore means domestic electricity blackouts, industrial shutdowns & lack of domestic heating, on a huge scale. I may be wrong, but I don’t think this is a sustainable choice for the German population.. I don’t know how this ends, but I don’t think it is energy sanctions
Truss’s day job is battling EU politicians over the Northern Ireland protocol & remaining Brexit issues, I may be cynical but I think her comments are designed to put Germany under pressure (in her mind anyway).. If in any doubt as to her ability to make ill thought out statements, reference her Sunday morning television appearance where she expressed support (help ?) for British citizens wanting to go to Ukraine to fight Russian forces..
“I do support that and of course that is something people can make their own decisions about. If people want to support that struggle I would support them in doing that.”
The government was subsequently forced to distance themselves from these comments, and other loose statements suggesting the current situation could result in “conflict with nato”
Energy traders are self-sanctioning as are trade finance providers. Increasing reports of Russian oil going no-bid. With Western majors pulling out of Russia and flow of technology / equipment interrupted, Russia’s production may be less stable. In short, Russian energy exports are not going untouched.
I am not sure this can be resolved via checkmate by either side. A checkmate on a lunatic with nukes does not necessarily yield a victory. The has to be a way out that’s acceptable by both sides for this to resolve
“A checkmate on a lunatic with nukes does not necessarily yield a victory”
How’s North Korea’s economy holding up these days?
That’s a good analogy 🙂
However, the nuclear (or military in general) capabilities of North Korea can hardly be compared with those of Russia (despite their leaders actively competing for the “craziest dictator of the century” prize). Hopefully it will never get to this but as things escalate it doesn’t feel like much is off the table.