You don’t have to choose sides in the Invasion/”Special Operation” (depends on who you are).
But, it’s pretty clear US psyops are in overdrive with full support of the American Pravda.
Ukraine is not an innocent in all of this nor is the US.
In war, truth is the first casualty. In war, including economic, it’s important to know what the other side is saying because it messages their point of view which you ignore at your own peril.
So, here is the Putin case, courtesy of donsurber.blogspot.com
Before reposting donsurber, I watched Putin’s speech on the eve of the “Special Operation”. It was impressive.
So, here we go
The cable channels have granted Zelensky billions of dollars worth of free air time to sell the public on having Americans finance his war with Russia. So far, he’s received commitments to $13.6 billion in U.S. aid, money he will gladly share with the children of congressmen.
Anyone who questions this is labeled a Putin puppet.
Well, I have been called worse.
There is another side of the story, weak as it may be.
In a speech Power Line called, “The Madness of Vlad the Inhaler,” Putin made a Zelensky-style plea.
Putin’s side of the story about to his colleagues. Most of it was BS. There is no rationalization for the invasion. See for yourself.
But this resonated with me: “I want ordinary citizens of Western countries to hear me too: they are now persistently trying to convince you that all your difficulties are the result of some hostile actions of Russia, that you have to pay for the fight against the mythical Russian threat from your own wallet. All this is a lie.
“And the truth is that the current problems faced by millions of people in the West are the result of many years of actions by the ruling elites of their states, their mistakes, myopia and ambitions. These elites are not thinking about how to improve the lives of their citizens in Western countries. They are obsessed with their own vested interests and super profits.
“Evidence of this is the data of international organizations, which directly say that social problems, even in leading Western countries, have only worsened in recent years, that inequality is growing, the gap between rich and poor, racial and national conflicts are making themselves felt.”
He lashed out at economic sanctions which he has countered by limiting grain and fertilizer exports, which will send soaring food prices even higher. $5 gasoline? Hah. Wait till we have $5 milk.
He pointed out the amorality of the economic sanctions that drew blood.
He said, “All verbal tinsel about political correctness, inviolability of private property, freedom of speech — all this flew off overnight. Even the Olympic principles were trampled on. They did not hesitate to settle scores with the Paralympic athletes – this is such a sport outside of politics.”
That is a reference to a New York Times report, “In Reversal, Paralympics Bars Athletes From Russia and Belarus.”
Those cheering the firing of an opera soprano or requiring a Denunciation of Putin Card for a Russian to play at Wimbledon need to realize that they are next. You can never be woke enough because the rules are constantly changing. Tennis champ, Martina Navratilova, a pioneer in lesbian rights, is now an outcast because she dares question transgenderism.
Putin knows this and he plays against it. He lashed out at oligarchs who have been Westernized.
He said, “I am not at all judging those who have a villa in Miami or the French Riviera, who cannot do without foie gras, oysters or so-called gender freedoms. The problem is absolutely not in this, but, I repeat, in the fact that many of these people, by their very nature, are mentally located precisely there, and not here, not with our people, not with Russia.”
Of course the cable channels label his nationalism as evil while Zelensky’s nationalism is saintly.
I don’t think this war will do in Putin or Zelensky.
Patriotism rings true in sane countries.
History shows that Russians may be dumb as bears but they do love their country. They call World War 2 the Great Patriotic War. Millions of deaths did not bring Stalin down because he saved the country in the eyes of his countrymen.
Putin is of course KGB. That means he knows of the world outside of Russia. He knows it well.
His line about “so-called gender freedoms” echoes across the globe. Many see Uncle Sam now as a drag queen.
In journalism, there are at least two sides of every story or else it is not journalism.
The collapse of the Soviet Union liberated hundreds of millions of people in Poland, Ukraine and all those Stans.
But the collapse also humiliated the Russian people, just as the World War I reparations humiliated Germany.
Russia had no business invading Ukraine.
We have no business being in Ukraine. But we are up to our necks in it because a corrupt government and its corrupt corporations pay Hunter Biden and other offspring of politicians well.
Writing off Putin’s speech as madness may make you feel good and superior, but it also makes you look shallow and weak.
Here is some speeches you won’t likely see – you decide:
……………………………………………….. “I want ordinary citizens of Western states to hear me too: they are now persistently trying to convince you that all your difficulties are the result of some kind of hostile actions of Russia, that you have to pay for the fight against the mythical Russian threat from your own wallet. All this is a lie.
“And the truth is that the current problems faced by millions of people in the West are the result of many years of actions by the ruling elites of their states, their mistakes, myopia and ambitions. These elites are not thinking about how to improve the lives of their citizens in Western countries. They are obsessed with their own vested interests and super profits.
“Evidence of this is the data of international organizations, which directly say that social problems, even in leading Western countries, have only worsened in recent years, that inequality is growing, the gap between rich and poor, racial and national conflicts are making themselves felt. The myth of the Western welfare society, of the so-called golden billion, is collapsing.
“I repeat, today the entire planet has to pay the price precisely for the ambitions of the West, for its attempts by any means to maintain its elusive dominance.
“The imposition of sanctions is a logical continuation, a concentrated expression of the irresponsible, short-sighted policy of the governments and central banks of the US and EU countries. It was they who, in recent years, with their own hands dispersed the spiral of global inflation, with their actions led to an increase in global poverty and inequality, to new flows of refugees around the world. And the question arises: who is now responsible for the millions of starvation deaths in the world’s poorest countries due to the growing food shortage?
“I repeat, a serious blow has been dealt to the entire global economy and trade, to confidence and to the US dollar as the main reserve currency. …………………………………….. “the policy of containing and weakening Russia, including through economic isolation and blockade, is a conscious, long-term strategy. The leaders of the West themselves no longer hide the fact that the sanctions are not directed against individuals or companies, their goal is to strike at our entire domestic economy, our social and humanitarian sphere, every family, every citizen of Russia.
“In fact, such steps aimed at worsening the lives of millions of people have all the signs of aggression, war by economic, political, and informational means. It has a total, undisguised character, and, I repeat, the so-called Western political beau monde does not even hesitate to speak about it in plain text.
“All verbal tinsel about political correctness, inviolability of private property, freedom of speech – all this flew off overnight. Even the Olympic principles were trampled on. They did not hesitate to settle scores with the Paralympic athletes – this is such a “sport outside of politics”.
“In many Western countries, people are subjected to real persecution just because they come from Russia: they refuse medical care, expel children from schools, deprive their parents of their jobs, ban Russian music, culture, and literature. Trying to “cancel” Russia, the West tore off all the masks of decency, began to act boorishly, demonstrated its true nature. It just begs a direct analogy with the anti-Semitic pogroms that the Nazis staged in Germany in the 30s of the last century, and then their henchmen from many European countries who joined Hitler’s aggression against our country during the Great Patriotic War.
“A massive attack has also been launched against Russia in cyberspace. An unprecedented information campaign has been unleashed, which involves global social networks and all Western media, the objectivity and independence of which turned out to be just a myth. Access to information is limited, people are stuffed with a huge number of fakes, propaganda forgeries, in other words, linden. It got to the point that one of the American social networks directly announced the possibility of publications calling for the murder of Russian citizens.
With CoVid now in the rearview mirror, it’s time for a little “wag the dog” – playing war while sticking it to American households.
Economic warfare on “all things Russian” is the top line — while raising energy, food, and inflation costs are the bottom line.
The Regime claims this is for “democracy” while also disrupting energy and food deals through selective limits on Russian use of SWIFT.
How’s that working out?
Well, for those in Russia looking for 8% return on a deposit account, pretty good if you are carrying yuan — the currency set to win from Biden’s policy.
Yuan Deposits Soar At Russian Banks After SWIFT Cut-Off
SUNDAY, MAR 13, 2022 – 04:15 PM
With Russia now officially cut off from both the USDollar and the euro, Russia’s VTB Bank is seeing a surge in Chinese Yuan deposits, attracted by the bank offering significantly higher interest rates as Putin shifts focus to ‘friendly’ nations.
The state-owned bank is offering a Chinese yuan savings account with a maximum interest rate of 8%, hailing the currency as “one of the most affordable and promising options for investing funds” after the country was hit by Western sanctions.
Putting that in context, the three-month deposit rate is 8% in dollars and 7% in euros, while the six-month rate for ruble deposits is 21%, according to VTB.
Existing customers are reportedly able to open deposits remotely on VTB Online with a minimum amount of 100 yuan ($16). At VTB branches, they can deposit a minimum of 500 yuan. VTB also said that over the past week customers have placed more than 2 trillion rubles ($15 billion) in traditional savings products.
“Some Russian banks can’t get access to other currencies, so yuan is probably the best other alternative,”Khoon Goh, head of Asia research at the Australia & New Zealand Banking Group, told Bloomberg.
“Still, the easiest way for Russia to raise yuan would be to receive yuan via trades. Russian banks’ clients who are exporters could sell to China and receive renminbi as payment.”
Self-anointed “fact-checkers” in the U.S. corporate press have spent two weeksmocking asdisinformation and a false conspiracy theory the claim that Ukraine has biological weapons labs, either alone or with U.S. support. They never presented any evidence for their ruling — how could they possibly know? and how could they prove the negative? — but nonetheless they invoked their characteristically authoritative, above-it-all tone of self-assurance and self-arrogated right to decree the truth, definitively labelling such claims false.
Claims that Ukraine currently maintains dangerous biological weapons labs came from Russia as well as China. The Chinese Foreign Ministry this month claimed: “The US has 336 labs in 30 countries under its control, including 26 in Ukraine alone.” The Russian Foreign Ministry asserted that “Russia obtained documents proving that Ukrainian biological laboratories located near Russian borders worked on development of components of biological weapons.” Such assertions deserve the same level of skepticism as U.S. denials: namely, none of it should be believed to be true or false absent evidence. Yet U.S. fact-checkers dutifully and reflexively sided with the U.S. Government to declare such claims “disinformation” and to mock them as QAnon conspiracy theories.
Unfortunately for this propaganda racket masquerading as neutral and high-minded fact-checking, the neocon official long in charge of U.S. policy in Ukraine testified on Monday before the Senate Foreign Relations Committee and strongly suggested that such claims are, at least in part, true. Yesterday afternoon, Under Secretary of State Victoria Nuland appeared before the Senate Foreign Relations Committee. Sen. Marco Rubio (R-FL), hoping to debunk growing claims that there are chemical weapons labs in Ukraine, smugly asked Nuland: “Does Ukraine have chemical or biological weapons?”
Rubio undoubtedly expected a flat denial by Nuland, thus providing further “proof” that such speculation is dastardly Fake News emanating from the Kremlin, the CCP and QAnon. Instead, Nuland did something completely uncharacteristic for her, for neocons, and for senior U.S. foreign policy officials: for some reason, she told a version of the truth. Her answer visibly stunned Rubio, who — as soon as he realized the damage she was doing to the U.S. messaging campaign by telling the truth — interrupted her and demanded that she instead affirm that if a biological attack were to occur, everyone should be “100% sure” that it was Russia who did it. Grateful for the life raft, Nuland told Rubio he was right.
But Rubio’s clean-up act came too late. When asked whether Ukraine possesses “chemical or biological weapons,” Nuland did not deny this: at all. She instead — with palpable pen-twirling discomfort and in halting speech, a glaring contrast to her normally cocky style of speaking in obfuscatory State Department officialese — acknowledged: “uh, Ukraine has, uh, biological research facilities.” Any hope to depict such “facilities” as benign or banal was immediately destroyed by the warning she quickly added: “we are now in fact quite concerned that Russian troops, Russian forces, may be seeking to, uh, gain control of [those labs], so we are working with the Ukrainiahhhns [sic] on how they can prevent any of those research materials from falling into the hands of Russian forces should they approach” — [interruption by Sen. Rubio]:
Nuland’s bizarre admission that “Ukraine has biological research facilities” that are dangerous enough to warrant concern that they could fall into Russian hands ironically constituted more decisive evidence of the existence of such programs in Ukraine than what was offered in 2002 and 2003 to corroborate U.S. allegations about Saddam’s chemical and biological programs in Iraq. An actual against-interest confession from a top U.S. official under oath is clearly more significant than Colin Powell’s holding up some test tube with an unknown substance inside while he pointed to grainy satellite images that nobody could decipher.
It should go without saying that the existence of a Ukrainian biological “research” program does not justify an invasion by Russia, let alone an attack as comprehensive and devastating as the one unfolding: no more than the existence of a similar biological program under Saddam would have rendered the 2003 U.S. invasion of Iraq justifiable. But Nuland’s confession does shed critical light on several important issues and raises vital questions that deserve answers.
Any attempt to claim that Ukraine’s biological facilities are just benign and standard medical labs is negated by Nuland’s explicitly grave concern that “Russian forces may be seeking to gain control of” those facilities and that the U.S. Government therefore is, right this minute, “working with the Ukrainians on how they can prevent any of those research materials from falling into the hands of Russian forces.” Russia has its own advanced medical labs. After all, it was one of the first countries to develop a COVID vaccine, one which Lancet, on February 1, 2021, pronounced was “ safe and effective” (even though U.S. officials pressured multiple countries, including Brazil, not to accept any Russian vaccine, while U.S. allies such as Australia refused for a full year to recognize the Russian COVID vaccine for purposes of its vaccine mandate). The only reason to be “quite concerned” about these “biological research facilities” falling into Russian hands is if they contain sophisticated materials that Russian scientists have not yet developed on their own and which could be used for nefarious purposes — i.e., either advanced biological weapons or dual-use “research” that has the potential to be weaponized.
What is in those Ukrainian biological labs that make them so worrisome and dangerous? And has Ukraine, not exactly known for being a great power with advanced biological research, had the assistance of any other countries in developing those dangerous substances? Is American assistance confined to what Nuland described at the hearing — “working with the Ukrainians on how they can prevent any of those research materials from falling into the hands of Russian forces” — or did the U.S. assistance extend to the construction and development of the “biological research facilities” themselves?
For all the dismissive language used over the last two weeks by self-described “fact-checkers,” it is confirmed that the U.S. has worked with Ukraine, as recently as last year, in the “development of a bio-risk management culture; international research partnerships; and partner capacity for enhanced bio-security, bio-safety, and bio-surveillance measures.” The U.S. Embassy in Ukraine publicly boasted of its collaborative work with Ukraine “to consolidate and secure pathogens and toxins of security concern and to continue to ensure Ukraine can detect and report outbreaks caused by dangerous pathogens before they pose security or stability threats.”
This joint US/Ukraine biological research is, of course, described by the State Department in the most unthreatening way possible. But that again prompts the question of why the U.S. would be so gravely concerned about benign and common research falling into Russian hands. It also seems very odd, to put it mildly, that Nuland chose to acknowledge and describe the “facilities” in response to a clear, simple question from Sen. Rubio about whether Ukraine possesses chemical and biological weapons. If these labs are merely designed to find a cure for cancer or create safety measures against pathogens, why, in Nuland’s mind, would it have anything to do with a biological and chemical weapons program in Ukraine?
The indisputable reality is that — despite long-standing international conventions banning development of biological weapons — all large, powerful countries conduct research that, at the very least, has the capacity to be converted into biological weapons. The work conducted under the guise of “defensive research” can, and sometimes is, easily converted into the banned weapons themselves. Recall that, according to the FBI, the 2001 anthrax attacks that terrorized the nation came from a U.S. Army Research scientist, Dr. Bruce Ivins, working at the U.S. Army’s infectious disease research lab in Fort Detrick, Maryland. The claim was that the Army was “merely” conducting defensive research to find vaccines and other protections against weaponized anthrax, but to do so, the Army had to create highly weaponized anthrax strains, which Ivins then unleashed as a weapon.
A 2011 PBS Frontline program on those anthrax attacks explained: “in October 2001, Northern Arizona University microbiologist Dr. Paul Keim identified that the anthrax used in the attack letters was the Ames strain, a development he described as ‘chilling’ because that particular strain was developed in U.S. government laboratories.” Speaking to Frontline in 2011, Dr. Keim explained why it was so alarming to discover that the U.S. Army had been cultivating such highly lethal and dangerous strains in its lab, on U.S. soil:
We were surprised it was the Ames strain. And it was chilling at the same time, because the Ames strain is a laboratory strain that had been developed by the U.S. Army as a vaccine-challenge strain. We knew that it was highly virulent. In fact, that’s why the Army used it, because it represented a more potent challenge to vaccines that were being developed by the U.S. Army. It wasn’t just some random type of anthrax that you find in nature; it was a laboratory strain, and that was very significant to us, because that was the first hint that this might really be a bioterrorism event.
This lesson about the severe dangers of so-called dual-use research into biological weapons was re-learned over the last two years as a result of the COVID pandemic. While the origins of that virus have not yet been proven with dispositive evidence (though remember, fact-checkers declared early on that it was definitively established that it came from species-jumping and that any suggestion of a lab leak was a “conspiracy theory,” only for the Biden White House in mid-2021 to admit they did not know the origins and ordered an investigation to determine whether it came from a lab leak), what is certain is that the Wuhan Institute of Virology was manipulating various coronavirus strains to make them more contagious and lethal. The justification was that doing so is necessary to study how vaccines could be developed, but regardless of intent, cultivating dangerous biological strains has the capacity to kill huge numbers of people. All of this illustrates that research that is classified as “defensive” can easily be converted, deliberately or otherwise, into extremely destructive biological weapons.
Foreign Policy, Mar. 2, 2022.
At the very least, Nuland’s surprising revelation reveals, yet again, just how heavily involved the U.S. Government is and for years has been in Ukraine, on the part of Russia’s border which U.S. officials and scholars from across the spectrum have spent decades warning is the most sensitive and vulnerable for Moscow. It was Nuland herself, while working for Hillary Clinton and John Kerry’s State Department under President Obama, who was heavily involved in what some call the 2014 revolution and others call the “coup” that resulted in a change of government in Ukraine from a Moscow-friendly regime to one far more favorable to the EU and the West. All of this took place as the Ukrainian energy company Burisma paid $50,000 per month not to the son of a Ukrainian official but to Joe Biden’s son, Hunter: a reflection of who wielded real power inside Ukraine.
Nuland not only worked for both the Obama and Biden State Departments to run Ukraine policy (and, in many ways, Ukraine itself), but she also was Vice President Dick Cheney’s deputy national security adviser and then President Bush’s Ambassador to NATO. She comes from one of America’s most prestigious neocon royal families; her husband, Robert Kagan, was a co-founder of the notorious neocon war-mongering group Project for the New American Century, which advocated regime change in Iraq long before 9/11. It was Kagan, along with liberal icon Bill Kristol, who (next to current editor-in-chief of The Atlantic Jeffrey Goldberg), was most responsible for the lie that Saddam was working hand-in-hand with Al Qaeda, a lie that played a key role in convincing Americans to believe that Saddam was personally involved in the planning of 9/11.
That a neocon like Nuland is admired and empowered regardless of the outcome of elections illustrates how unified and in lockstep the establishment wings of both parties are when it comes to questions of war, militarism and foreign policy. Indeed, Nuland’s husband, Robert Kagan, was signaling that neocons would likely support Hillary Clinton for president — doing so in 2014, long before anyone imagined Trump as her opponent — based on the recognition that the Democratic Party was now more hospitable to neocon ideology than the GOP, where Ron Paul and then Trump’s neo-isolationism was growing.
You can vote against neocons all you want, but they never go away. The fact that a member of one of the most powerful neocon families in the U.S. has been running Ukraine policy for the U.S. for years — having gone from Dick Cheney to Hillary Clinton and Obama and now to Biden — underscores how little dissent there is in Washington on such questions. It is Nuland’s extensive experience in wielding power in Washington that makes her confession yesterday so startling: it is the sort of thing people like her lie about and conceal, not admit. But now that she did admit it, it is crucial that this revelation not be buried and forgotten.
The Russian Army appears to be employing an encirclement strategy intended to isolate and degrade Ukrainian brigades in major cities – rather than incurring the casualties (military and civilian) from direct assault on urban areas.
This move eliminates the bulk of the Ukrainian Army but for ~2 brigades in metro Kiev and scattered National Guard units to the west of the Dnieper.
As it is, the suppression of the helicopter transport and destuction of Ukrainian tactical air units effectively eliminated the Ukrainian Army’s capacity to maneuver a week ago.
Note that as the Donbass Pocket closes in the east, Russian forces are now back on the move to complete the encirclement of Kiev.
Next up is Odessa — likely an amphibious assault on both sides of the city within the next few days supported by armored cavalry support coming in from the northeast.
In other news, Zelensky is now saying he is not seeking entry into NATO.
“Russia demanded on Wednesday that the United States explain to the world why it had supported what Moscow cast as a military biological program in Ukraine involving deadly pathogens including plague and anthrax.
“Foreign ministry spokeswoman Maria Zakharova demanded transparency from Washington over the allegation, which is denied by Kyiv and which a Pentagon spokesman has described as absurd.
“She said evidence of the alleged programme had been uncovered by Russia during what it calls its ‘special military operation’ in Ukraine, which its forces invaded on Feb. 24.
“‘We can already conclude that in Ukrainian biological laboratories in direct proximity to the territory of our country, development of components of biological weapons was being carried out,’ she said.
“Zakharova said Russia had documents showing that the Ukrainian health ministry had ordered the destruction of samples of plague, cholera, anthrax and other pathogens after Feb. 24.
“It was not possible to independently confirm the authenticity of any such documents.”
Hilariously, the National Pulse reports Obama has his fingerprints on these labs – seriously.
The document is addressed to the heads of the northern Kiev, southern Odessa and western territorial departments of the National Guard of Ukraine.
▪️ The order, brought to the command of the National Guard of Ukraine, explains the plan for preparing one of the shock groups for offensive operations in the so-called “Joint Forces Operation” zone in Donbass. The document approves the organizational structure of the battalion-tactical group of the 4th operational brigade of the National Guard, the organization of its comprehensive support and reassignment to the 80th separate air assault brigade of Ukraine.
▪️ Since 2016, this formation of the air assault troops of Ukraine has been trained by American and British instructors under the “NATO standard” training programs in Lvov.
▪️ In accordance with the order, the Deputy Commander of the National Guard was tasked with organizing joint combat training of the battalion-tactical group of the National Guard as part of the 80th separate air assault brigade of the armed forces of Ukraine from February 7 to February 28, 2022.
▪️All events of joint combat training of the nationalists are ordered to be completed by February 28 in order to further ensure the fulfillment of combat missions as part of the Ukrainian “Joint Forces Operation” in Donbass.
▪️The document contains the original signatures of the officials of the command of the National Guard of Ukraine responsible for the tasks.
US-Russian joint tactical victory, European and Ukrainian defeat
Celebrations have been taking place in the self-declared Republics of Donetsk and Luhansk in what is almost universally recognized Ukraine. Having declared independence eight years ago, events have now forced Russia’s hand in which these two nascent entities are now recognized by Moscow, with all the protections that come with it. One cannot help but understand why these people are celebrating.
Another celebration is taking place in the USA. The State Department has achieved its main objective of seeing Nordstream 2 put on ice. American LNG producers are now popping champagne bottles as they can envision huge stacks of cash to be made by overcharging Europeans desperate for gas. The Military-Industrial Complex is chuffed as well, as the arms will continue to pour into Ukraine and into the NATO armies in its periphery.
How did we get here?
Despite assurances to the contrary, NATO is not a ‘defensive organization’. Even though American memories are short, people elsewhere remember the bombing campaign against Serbia, and the removal of Gaddafi from power in Libya. What NATO is in fact is the military arm of US hegemony, a hegemony that has seen it expand eastwards through Europe, right up to Russia’s very own borders.
“Don’t individual states reserve the right to enter into alliances with those they see fit, Niccolo?” Of course they do. But not all countries are islands, and most countries have neighbours. And not all neighbouring states are created equal, and they have their own national security concerns and interests. This is the case with Russia.
Russia has been invaded several times from the west since Napoleon first crossed the border to enter Imperial Russian soil in 1812. Every time since, western powers have been forced out, but have left behind devastation in their wake. This explains why Russia has sought buffers to its west ever since, with the largest buffer being its puppet regimes in eastern and central Europe during the Cold War.
NATO, originally set up to counter the USSR’s expansion into Europe, was left without a raison d’etre after the fall of the Berlin Wall and the collapse of the USSR. Nevertheless, it pressed on eastwards, and thanks to the CIA and MI6, effected Colour Revolutions to put into power friendly regimes that sought NATO membership in places like Tbilisi and Kiev. Where Colour Revolutions weren’t necessary due to historical grievances against Russia, NATO missile systems pointed at Russia have been set up (Romania and Poland).
For Russia, the nightmare scenario of dismemberment from the west is now tangible. You may disagree with their perspective, but what is important is HOW they view the situation. If you can’t understand their views, it is therefore impossible to talk to them, unless you are only willing to lecture to them or threaten them.
And lectures on democracy and threats to their economy and existence are all that have come out of the west towards Russia recently.
Ukraine’s Geostrategic Importance
Zbigniew Brzezinski, Jimmy Carter’s National Security Advisor, wrote in his vital work “The Grand Chessboard” that without Ukraine, Russia goes from a Eurasian power to simply Asian, i.e. a world power demoted to that of a regional one. Since Boris Yeltsin left power, US foreign policy goals sought to detach Ukraine from Russia’s sphere of influence. Why?
Not just for the reason Brzezinski illustrated, but because of a concept known as ‘nuclear primacy’. Nuclear primacy is the condition in which a nuclear power can defeat another nuclear power by eliminating its nuclear weapons before they can be launched against them. The reason why NATO ABM sites have been built in Poland and Romania is to push their reach closer to Russia’s European borders, the part where most Russian citizens live. This already increases the threat to Russia immensely, and has informed their military tech research and manufacturing to focus on anti-missile defence and away from conventional threats.
By capturing Ukraine and incorporating it into NATO, Ukraine could then potentially serve as a much, much closer missile launching site for NATO missiles pointed at Russia. The Ukrainian border is less than 500km from Moscow, for example. Can you blame the Russians for freaking out? I certainly can’t.
For Russia, Ukraine is an existential matter. For the USA, it is only an asset that can be easily sacrificed for the greater objective of surrounding and neutralizing Russia so as to achieve nuclear primacy and ensure is own hegemony.
You Should Be Nice to Your Neighbours, Especially When They Are Much More Powerful Than You Are
Ukraine has the right to rule over its territory as it sees fit. This is called sovereignty. Ukraine also has the right to seek alliances to maintain that sovereignty and to protect its own perceived interests.
Theory is great, but it is only theory. Reality does tend to intrude though. In this case, the Ukrainians have made a mess out of their post-Maidan revolution by exacerbating Moscow’s natural paranoia through its constant requests to join NATO. By doing this, Ukraine antagonizes its much more powerful neighbour which sees itself under existential threat from its smaller neighbour’s invitations to host a hostile organization on its soil. It is therefore only natural that Russia would act to neutralize this existential threat, because it can and it showed in 2014 (and again this week) that it will.
Much like how the USA would never tolerate a Chinese client regime in Mexico with nukes pointed at it, the Russians have shown that they won’t tolerate NATO in Ukraine. For the past few months, head Russian diplomat Lavrov has patiently explained to the West that NATO in Ukraine is a non-starter for them, and that they will take actions to ensure that their national security interests are protected. These security interests come at the cost of Ukrainian sovereignty over Crimea in 2014, and now over the Donbass as of yesterday.
What Are the Ukrainians Thinking?????
Everyone wishes to maximize their own autonomy, and Ukrainians aren’t that different in that respect. The calculation that Ukrainians have made in the past and continue to make going forward is that by tying themselves to the world’s superpower, the USA, they will protect their own state and sovereignty, even if they have to make some painful concessions to the Americans (such as economic and political reforms, and cultural reforms like gay pride parades in this very conservative country). Therefore, get away from Russia > being under the American thumb. The Ukrainians took one look at their neighbours in Poland, Lithuania, and Romania and saw that NATO membership protected them from unwanted Russian advances. They also saw that Georgia was partitioned in between the two para-states known as Abkhazia and South Ossetia, with rump Georgia, a state that wasn’t under the NATO umbrella.
Ukraine’s calculation failed because it didn’t take into account three important points:
historical-cultural ties between it and Russia
Ukraine’s sheer size and geographic position
the fact that the two points above make Ukraine, unlike the other states listed, an existential matter to Russia
There is a fourth point which completely tanks Ukraine’s position:
The forces will move to Estonia, Latvia and Lithuania, Biden said, adding that that these are “totally defensive moves on our part.” “We have no intention of fighting Russia," he said, but US & allies will defend "every inch of NATO territory." https://t.co/jyeHGeYcdH
President Joe Biden has consistently and loudly stated that the American and NATO calvaries are not coming to Ukraine’s rescue if the Russians do invade. The USA, the prime mover in this crisis, is openly stating that it is willing to sacrifice Ukraine and Ukrainian lives for its own larger objectives.
Ukrainian President Shecky Greenberg is fucked beyond belief. I strongly doubt he is as passionate about Ukrainian independence as a Banderista from West Ukraine, but I don’t doubt that he does harbour some desire to see his country free from Russian control. The problem is that he has zero room for maneuver, caught between a Russia breathing down his neck, and a USA that has him by the balls as he is listed in corruption indexes as having overseas accounts with money thieved from his own country’s coffers, no doubt via his sponsor, Ukrainian oligarch Igor Kolomoisky. He has to dance to the USA’s tune, or it’s all over him. Still, he deserves a little bit of respect since he has been actively pushing back against the US Goverment and media’s Peter Cries Wolf act.
Since the 2014 Maidan Revolution, Ukraine has seen the following happen to it:
Crimea annexed by Russia
Donbass now effectively Russian
Russia stating that Donbass extends into presently-held Ukrainian territory
Millions of Ukrainians fleeing/emigrating Ukraine
Collapsed economy
Economic and political reforms stalled
Collapse in birth rate (happening everywhere, of course)
What has Ukraine gained since the Maidan revolution? This is a fair question to ask. Another fair question to ask is “how are you going to get your occupied territories back, since doing so means war with Russia?”
The most important question to ask Ukrainians is: “In light of all the things that you have lost and in light of the USA openly saying that they will not defend you, is ‘freedom’ and ‘democracy’ really worth it, considering that you might even lose more than you have already?
USA Triumphant
Ukraine is disposable in American eyes. That warmongering bitch Vicki “Fuck the EU” Nuland (she runs Russia policy in the US State Department) must be laughing her fat and disgusting ass off at how stupid the Ukrainians are to willingly sacrifice themselves for her project to surround, neutralize, and dismember Russia. All is going according to plan.
This crisis was not about Ukraine. Ukraine only provided the setting for which this crisis is playing itself out. The point of this crisis, from the US perspective, is to effect a final cut off of Russia from Europe economically, so as to reduce Russian influence and increase US dominance on the continent, while cashing in by way of LNG exports to replace Russian gas deliveries. That’s it. The USA is more than happy in seeing Kiev occupied by Russian forces, because it kills the NordStream 2 pipeline, and opens up new business for American LNG companies, as well as bigger business for US arms exporters.
The ideal situation to them is to see the Russians invade, overextend themselves, and fall into an Afghanistan-type quagmire, in which Ukraine is set ablaze, and Ukrainians, backed by massive arms deliveries from the USA, engage in a partizan/mujahidden guerrilla war with Russian forces to drain Russia and to embarrass it. Who cares how many Ukrainian cities are levelled, how many civilians die? It will all be pinned on Vladimir Putler anyway, at the Hague War Crimes Tribunal that they dream of in their sleep.
The USA already dominates Europe by way of NATO and trade agreements, its scheisskultur permeates much of the continent, whether through popular culture or though academic trends such as wokeness. Why not solidify that control by way of controlling its energy sector as well?
US media has made a fool out of itself, as have American talking heads…..but this is what they are there for. Without any accountability for their words and actions, they have every reason to continue lying to us as they have done now for decades in service to their foreign policy designs. Take a look at this one:
Putin’s stated intention to round up, jail or even execute dissidents, LGBTQ and religious and ethnic minorities in Ukraine portends crimes against humanity. That nation’s 200,000 Jews are directly targeted. Sadly, economic sanctions are all we and our NATO allies have available.
Nordstream 2 represented a nightmare scenario for US policy planners: Russia and Germany engaging in cooperation outside of US monitoring. With Russia turning towards China, the apocalyptic vision of a China-Russia-Germany alliance begins to unfold in Washington, DC. Not allowed!
Europe: Led By Cowards
Poland, Finland, the Baltic States, Romania, and others all have their historical grievances towards Russia, which must be understood and accepted. Only time heals these deep wounds. Aside from that, Europe’s interests should be in tapping into Russia’s massive natural resources, and to trade with the USA, China, and others. Instead, Europe is once again paying the price for Amerian foreign policy as the US does very little trade with Russia, while Europe does quite a lot!
The Americans are happy to fight Russia to the last Ukrainian, and to sanction Russia to the last European with five Euros in his pocket. It bears the brunt of sanctions against Russia just like it has with sanctions on Iran.
Much was made of Macron’s shuttle diplomacy these past few weeks, but the Russians saw right through his ‘good cop’ act, which ran in tandem with the US ‘bad cop’. They entertained his overtures due to diplomatic protocol, but that was it. Macron wasted his time and our time.
The Brits continue to yap like the American poodles that they are.
The Germans are the sad figures here. Putting Nordstream 2 on ice due to this crisis politicizes the pipeline, where Scholz’s predecessors insisted on it being independent of politics altogether. Even though it is ‘temporarily’ suspended, this politicization makes it now a white elephant. The Germans are going to have to figure out how to import power in light of decommissioning their nuclear reactors and swearing off of coal. Germany’s Greens are, of course, detached from reality, thinking that they can get renewables to fill in the coming gap:
Cutting itself off completely from Russian gas would leave a big hole in the market that in the first instance would “drive prices higher”, said Habeck of the Green party.
However Germany’s power demands could be “compensated” with other energy sources and suppliers, including an accelerated renewables push set out by the government, he said.
Germany has chosen a negative economic impact, including more inflation, to achieve what, precisely? To make the USA even happier?
Russia Has Had Enough
The Russians have insisted that NATO in Ukraine is a red line for them that cannot be crossed. The USA has called their bluff and Putin is now beginning to show his hand.
Despite Ukraine being technically ineligible for NATO entry due to having border disputes with Russia (Crimea, Donbass), it has undergone a ‘stealth NATO’ in recent years, in which US/UK and other advisors are training Ukrainian forces, and are arming them as well. The Russian fear is that they will use this to attack the inferior Donbass forces, creating a massive refugee crisis for Russia, and a loss of face for Putin.
Up until two days ago, Russia has insisted that the Donbass remain a part of Ukraine, but that its incorporation be guided by the Minsk Agreement. Minsk was dead a long time ago, as Ukraine refused to talk to the separatists, but is now de jure dead as Russia has recognized the two breakaway republics there. By doing this, Russia is creating client states like it already has in Georgia and Moldova. These serve not just as tampon zones, but allow Russia to negate formal entry of these countries into antagonistic organizations.
The precedent for recognizing these breakaway republics was set by the USA when it detached Kosovo from then Yugoslavia, and recognized its Universal Declaration of Independence a few years later. The 1999 NATO bombing campaign against Yugoslavia is what turned Russia away from the West, famously symbolized by then Premier Primakov ordering his jet to turn back to Moscow. It was at this point that the USA tore up international law. Albanian freedom from Serbian rule in Kosovo has now come at the cost of the loss of Crimea and Donbass to Russia.
Vladimir Putin’s speech on Monday reflected the exasperation with the West and the USA in particular. The most important highlights were:
The USA is agreement incapable (meaning it will constantly renege as it changes administrations)
Russia expects sanctions no matter what it does
The USA does not respect Russian national security concerns
For example:
So for Russia, this is apparently an existential crisis. “Many Ukrainian airfields are located close to our borders. NATO tactical aircraft stationed here, including carriers of high-precision weapons, will be able to hit our territory to the depth of the Volgograd-Kazan-Samara-Astrakhan line. The deployment of radar reconnaissance assets on the territory of Ukraine will allow NATO to tightly control the airspace of Russia right up to the Urals.”
The complete rejection of all Russian points by the USA seems to have now cemented the final victory in Moscow of the Siloviki (state security chiefs) over the westernizers, with the most western of faces throwing in the towel:
German Chancellor Olaf Scholz has issued an order to halt the process of certifying the Nord Stream 2 gas pipeline. Well. Welcome to the brave new world where Europeans are very soon going to pay €2.000 for 1.000 cubic meters of natural gas!
This represents the final break of Russia with the West, a break that it has been preparing for now for years. It has amassed a massive foreign wealth currency reserve (north of $600 billion USD), and has sanctions-proofed its economy, ironically thanks to US-sanctions regime forcing it to discipline itself by ways such as import-substitution.
Putin and Xi recently met and with 100% certainty have coordinated their recent actions and reactions. Little wonder, as the USA continues to push Russia into the arms of China.
Russia’s so far unwillingness to invade the rest of Ukraine while recognizing the two breakaway Donbass republics has wrongfooted many in the West. This represents a tactical victory for Russia, as it now increases its buffer zone in Ukraine. But it does not yet resolve the question regarding rump Ukraine and NATO. Russia might now feel the temptation to resolve this issue once and for all. This conflict is far from over.
The USA has also achieved a tactical victory in that it managed to secure itself the cancellation of Nordstream 2 by creating a win-win for itself: Putin acts, NS2 gets cancelled. Putin doesn’t act, NATO moves closer to Moscow and Volgograd, and he loses face.
Tactical victories are tactical for a reason. The strategic perspective is more interesting because it is rather obvious that Russia has moved closer to China. People are left wondering how the Americans plan to take on both Moscow and Beijing at the same time as the US pivots to Asia.
Trying to contain both of these nuclear powers reeks of hubris and detachment from reality. This detachment has become more and more pronounced lately, with the hilarious collapse of the US-backed forces in Afghanistan last summer a prime example.
At 1238 BET, President Zelensky’s 14-hour old ABC News interview was repackaged as a concession:
“In another apparent nod at placating Moscow, Zelensky said he is open to ‘compromise’ on the status of two breakaway pro-Russian territories that President Vladimir Putin recognized as independent just before unleashing the invasion on February 24.
“‘I have cooled down regarding this question a long time ago after we understood that … NATO is not prepared to accept Ukraine,’ Zelensky said in an interview aired Monday night on ABC News.
“‘The alliance is afraid of controversial things, and confrontation with Russia,’ the president added.
…
“‘I’m talking about security guarantees,’ Zelenski said.”
Last week, some on Wall Street were quietly gloating when the “Lehman Weekend” consequences predicted by repo guru Zoltan Pozsar failed to materialize and central banks did not flood global markets with a torrent of liquidity, in a repeat of what happened in September 2008.
In his latest not published late on Friday, the Credit Suisse strategist admits that “Yes, we got central banks’ need to step in to calm funding market pressures this week wrong (still no need yet)” but he counters that “we got the direction of spreads right – on February 24th we warned about an imminent sentiment shift in funding markets. There was no premium last week but there is some funding premium now, and it feels that things can get worse still.” So net-net, he concludes, “our call was absolutely right.”
But how was he “absolutely right” if the funding squeeze he predicted did not materialize? Well, as Zoltan explains in the bulk of his note, what is happening right now is something that nobody really understands, and what is yet to happen may be a combination of the worst parts of the 2008, 2018 and 2020 crises, as a result of one thing: the collapse of commodity-based collateral (something China understands very well after it learned – on more than one occasion – that its thousands of tons of its commodity stockpile, especially copper and aluminum, had been rehypothecated, i.e., used as collateral repeatedly).
As the Hungarian writes, his point with the Lehman analogy last Sunday “was to underscore the point that just as the market didn’t realize the complexity and interconnectedness of the financial system then, it may not realize the same today. Again, we are not saying that we are about to have another Lehman moment, only that things can get much worse than you realize.”
Underscoring the unknown unknowns of a global sanctions blockade against Russia launched not by central bankers but by politicians, Zoltan writes that “when you rip $500 billion of FX reserves from the system, sanction and de-SWIFT banks (which goes live March 12th), and force Western banks and commodity traders to self-police and not trade commodities from the single-largest commodity producer of the world (Russia), unforeseen things can happen and do happen.“
He then writes something that all those pushing for an escalating conflict with Russia will hardly want to hear:
If you believe that the West can craft sanctions that maximize pain for Russia, while minimizing financial stability risks in the West, you could also believe in unicorns.
At this point the former NY Fed monetary plumbing expert pivots to what he failed to realize last weekend, and whose consequences will be more profound over the longer-term than a simple short-term plumbing block: “Yes we were also wrong on Sunday about the trigger of funding pressures – it’s not the Bank of Russia’s inability to roll FX swaps or de-SWIFTing that caused funding pressures to date, but rather the market’s self-imposed unwillingness to buy, move, or finance Russian commodities that’s driving the current massive bid for cash.”
This translated into what Bloomberg called a “historic” commodities rally, manifesting itself in the biggest weekly increase in commodity prices on record…
… and so the margin calls must be historic too, according to Pozsar.
According to Pozsar, the answer is market participants that are long commodities either in the ground or in transit and want to lock in a price by shorting futures:“these include every commodity producer in the world including Russia, and every major commodity trading house, respectively.”
While it is unknown (for now) if that is indeed the case, Pozsar suggest that it’s reasonable to wonder “if Russian commodity producers are experiencing margin calls now, and if they have the resources to pay – could they choose not to pay because their sovereign’s FX reserves were seized?” This is one risk the Credit Suisse strategist says the market needs to carefully consider.
“As for the commodity traders, which are suffering a correlated surge in commodity prices (Russia and Ukraine export pretty much everything imaginable), margin calls can be funded by drawing on credit lines from banks, issuing CP, or swapping FX”, something that may already be happening as suggested by the sharp spike in the FRA-OIS funding stress indicator.
Here, instead of taking readers back to September 2008, Pozsar draws on one of the main lessons from the March 2020 liquidity crisis, which is that corporate credit lines (which have a low drawdown assumption according to Basel III) can be drawn across all industries and across all geographies at the same time in a pandemic, “and the lesson about the present crisis is that you can have a rally in all sorts of commodities from oil to gas, fertilizers, wheat, palladium, and neon during war, especially if the G7 force the world to self-police and boycott Russian stuff.”
Which takes us to the crux of today’s note: the role of commodities as collateral, which is critical because as Pozsar puts it, “every crisis occurs at the intersection of funding and collateral markets.”
Take Urals spot, which Zoltan writes “is trading at a discount to WTI is like subprime CDOs going from AAA to junk” and prompts him to ask if “all commodities sourced from Russia trade at a significant discount?” We put it somewhat differently last week, when we said that while Russian oil is trading bidless, non-Russian oil feels like it will soon go offerless.
Taking the analogy to CDOs further, Pozsar asks if it is possible that the Western boycott of Russian commodities is turning AAA commodities to junk (or bidless): “Does going from AAA to junk trigger margin calls? You bet!”
Besides collateral, the repo guru also reminds us that leverage and liquidity are also important, and takes us on a brief walk down the not too distant memory lane:
In 1998, we had Russian bonds and a leveraged LTCM.
In 2008, we had mortgages and leveraged banks and shadow banks.
In March 2020, we had leveraged bond basis trades.
The pattern Pozsar points to is the following: “Collateral, leverage, funding” – in 1998 and 2008, collateral went bad and a funding crisis hit as a consequence. In 2020, corporations drew on credit lines, which sucked funding away from leveraged bond RV trades, which then triggered a forced sale of good collateral. As he summarizes it, “crises happen either because collateral goes bad or funding is pulled away – that’s been the central lesson in every crisis since 1998.”
Now on to today.
Pozsar points to Glencore’s iconic – if criminal – founder, whose Marc Rich’s legacy in the annals of global finance was to introduce the concept of leverage and borrowed money into commodity trading. It’s simple: a bank lends you the money to lease ships and buy commodities to deliver them sometime and someplace in the future at a locked-in price (via short futures).
The pattern should ring a bell.
Consider your typical, highly levered bond RV fund, such as Millennium and Citadel, is long the bond, short the future, and funds the package in the repo market. It was this bond basis trade that was behind the repo market crash of 2019 and then blew up just a few months later in March 2020; it’s also why hedge funds with regulatory leverage as high as 8x were begging for a Fed bailout when their RV trades blew up, similar to what happened to LTCM in 1998.
That analogy, Pozsar argues, is the same as a commodity trader moving stuff around. But if collateral spoils, funding is impossible to come by and spot price spikes are triggering margin calls, or as he puts it “March 2020 all over again?” While it probably is not the same size, the repo guru advises readers to “be mindful of the parallels and the funding and collateral linkages.”
Which brings us to the punchline of Pozsar’s note:
We could be looking at the early stages of a classic liquidity crisis that has elements of both collateral and liquidity problems (1998 and 2008), where some players – commodity traders – are not regulated and have no HQLA, and some players – state-linked commodity producers – are not liquid enough because their backstop – the Bank of Russia’s FX reserves – has been seized.
The Hungarian then goes on a historical tangent looking at sudden stops in the financial system, or as we call them, repo breaks.
In 1997, we broke some FX pegs because FX reserves we thought were there weren’t, and capital stopped flowing in.
In the present context, we clearly are not worried about funding because “o/n RRP is at $1.5 trillion and banks have reserves coming out of their ears”.
We will note that it is rewarding to see that one of the biggest minds in finance agrees with what we have pointed out previously, namely that the blowout in the FRA-OIS when there is still $1.5 trillion in the overnight repo, is quite a remarkable achievement and suggests that not everything is as smooth as so many self-proclaimed Polyannish financial experts would lead you to believe. Furthermore, as Zoltan notes, “you should worry about a sudden stop of commodity flows for three potential reasons.”
First, gas gets turned off “at the top”.
Second, there is an accident – lots of pipes run through Ukraine and it’s a war.
Third, sabotage in Ukraine to kick-start Nordstream 2.
Reverting again to his analogy on RV pair trades, Pozsar asks “what happens to the gas bit of the commodity derivatives market when there is a sudden stop of physical commodity flows, and what does that do to dealers’ matched books? There is the potential for some exposure there Will it happen? We don’t know, but again, the question itself is worth a spread.”
* * *
Summarizing his latest, mostly stream of consciousness note, Pozsar says that “we have bases creeping in and commodities, like collateral in 2008, are becoming bifurcated.” Meanwhile, spot prices are staging a historic and correlated surge that is driving demand for cash at a time of excessive leverage in the system both overt and covert – think “commodity RV trades” (as an analogue to bond RV trades) – and a lack of FX liquidity because of seized FX reserves.
Pozsar then gives one more thing to think about: “Is the reason why we’ve cocooned energy and other commodity flows and related payments and institutions from sanctions to protect the consumer at the pump, or to protect the commodity derivatives ecosystem? Clearly, the West does not want to turn off the flow of energy, but there are growing risks – more sanctions, more self-policing, and the Russian leadership can act as well.”
Having found himself in his prime, where he is connecting dots and observing causal linkages between his favorite financial topics and seemingly disparate corners of the financial system – in this case the commodity collateral sector – Pozsar is only just warming up, and next writes that “there are links between all this and headline inflation and interest rate hikes, and links between the seizure of Russia’s FX reserves and the dollar and demand for long-term Treasuries”, and asks readers to consider a quote from George Soros carved into the wall of the CEU (Central European University)…
“Thinking can never quite catch up with reality; reality is always richer than our comprehension. Reality has the power to surprise thinking, and thinking has the power to create reality. But we must remember the unintended consequences – the outcome always differs from expectations”.
… and to think about that both in the present context, and in the context of ABN Amro freezing redemptions from its funds in August of 2007 – a year before Lehman: did markets think it would get that bad back then?
Putting it all together, Pozsar writes that while this time systematically important banks won’t fail, some other traders might fold, and losses, even if not lethal, can curb balance sheet provision (see Archegos) for all other stuff that the buy side needs – repo, FX, and equity derivatives.
Pozsar concludes with another quote, this time from Larry Summers (from a speech he delivered in Toronto at an INET event about the lessons learned during the 2008 crisis):
“crises are not about estimating their economic impact and estimating to the decimal point the GDP impact of a shock. Crises are about fear and greed…”
Going back to the spark behind Pozsar’s latest stream of consciousness, commodity collateral, he writes that Russia and Ukraine are the single-largest commodity exporters in the world. And while Russia accounts for just 5% of the world’s GDP, it is financially deeply interlinked – it used to have $500 billion of FX reserves, and owes about as much in debt to the rest of the world, not to mention “off balance sheet” debt that it owes to the world through derivatives when spot commodity prices rally, like they do now.
His parting words are a warning to all those who think that it will be easy to sever all financial ties to Russia:
It’s a bit more complex to de-SWIFT Russia than it was to de-SWIFT Iran… To be clear – your correspondent is a funding expert, not a commodity expert, but I see a link between the two markets at the present, and parallels to 2008. I wasn’t an expert in CDOs in 2007 either, but started to dig the day after Paul McCulley coined the term “shadow banking” at Jackson Hole and I wrote this. My interest was piqued by the legendary Paul McCulley, and current events piqued my interest in the opaque world of the commodity derivatives complex.
The books about 1997, 1998, and 2008 have FX pegs, default and leverage, and collateral and leverage as their central themes, respectively. The books about today’s market events will have commodities as collateral as the central theme.
It’s this “commodity as collateral” theme that Pozsar believes will spark the next liquidity crisis.
Pozsar’s full note is available to pro subs in the usual place.
Mearsheimer is best known for developing the theory of offensive realism, which describes the interaction between great powers as being primarily driven by the rational desire to achieve regional hegemony in an anarchic international system. In accordance with his theory, Mearsheimer believes that China’s growing power will likely bring it into conflict with the United States.
Comment: John Mearsheimer is from Brooklyn and served as a commissioned officer. If you’re from Brooklyn and served as a commissioned officer, you might recognize his life view.
Having that background, I certainly do.
If you don’t know Ray McGovern, he’s is a former CIA Analyst and commissioned officer. Class act and you should check him out. A Fordham graduate makes him a Jesuit product. And, from the Bronx.
I’m fine with the Ignatius Loyola point of view. As for the Bronx, Ray married a Brooklyn girl. So, despite the Bronx thing, he’s ok by marriage.
Reproduced above is the Saker’s summary of the Ukraine theater as seen from the Russian side as of 11 PM local, March 3, 2022.
It is notable that for all the PsyOp news coverage in Western media since Russia invaded, we never see a theater map.
I have no idea how much of The Sakr’s map is correct but some fixed points on his map seem to correlate with a subset of the otherwise emotional news reports.
Also, by way of full disclosure, it’s worth noting how this blogger describes himself:
Born in Switzerland to a Dutch father and Russian mother
Raised by his mother
Started in Swiss military and strategic intelligence
Later worked at the UN Institute for Disarmament Research
BA International Relations, American University and MA Strategic Studies, Johns Hopkins University
The Day 9 map shows the development of an encirclement of Ukrainian forces in Donbass. Russian units appear to moving at the speed of ~10 miles per day. On this front, Russian forces have branched out along two main axes, one northwest along the Pivdennyi Buh River, and another northeast along the coast and inland towards the Donbass region. Assuming the arrows represent those major lines of Russian advance, 10 miles per day translates to complete encirclement of Ukrainian forces in the east within a week.
At that point, the combined Russian forces in the east can advance unimpeded to the Dnieper — splitting Ukraine in two with a Russian population in the east.
We aren’t in WW3 yet – despite worries Russia, not bad weather, just took down a Romanian military helicopter and jet – but this crisis is answering a question I have long pondered: how would our 24/7 clickbait, read-no-history, central-bank-liquidity-addled, algo-driven markets have traded WW2? The answer: stupidly. Every other day for six years they would have wondered if it was over yet. While the Battle of Stalingrad raged, they would ponder waterfront condos in the city centre. On D-Day they would have turned the TVs off and gone back to their desks, exactly like the traders I worked with at another bank did in 2003’s Iraq War after the statue of Saddam Hussein fell. “No more to see here.” “What about insurgency, terrorism, Iran, and regional chaos?” “Shut up and buy assets.” Of course, in WW2 markets were largely closed and stockbrokers had to fight too, as in Ukraine now, which changes one’s view of how to trade life.
In a war where one side is led by a former comedian, our less reality-based traders and analysts are inadvertently the funny ones. How about Moody’s saying Russia’s refusal to allow payments on new FX debts was “a credit risk”(!) and that this decision suggested “a lack of checks and balances” in the Kremlin(!) And how about the attempt to rally on news Russia will talk to Ukraine? Because the Kremlin has never lied: it didn’t claim it would never invade Ukraine; it didn’t just claim it was *Ukraine* which bombed Kharkhiv’s Freedom Square yesterday.
Here’s a clue for analysts: don’t read what leaders or foreign ministers or ambassadors say abroad in English summarised in Bloomberg bullets. Read what they say at home in their own language.And *read who their leaders read* because that tells you what they are thinking. Last year I told people to read Marx vis-à-vis Common Prosperity; to predict this war one should have read Dugin or Ilyin, a fascist so favoured by Putin that he was personally involved in having his body reburied in Russia and his grave reconsecrated. If you can’t read in the original or are pressed for time, let others do it for you. @y_akopov summarised Russian nationalist intellectual thinking on Twitter yesterday thus:
The war is expected to be over in days, or weeks at most. The main bulk of Ukrainian forces in the East is going to be encircled soon, and the main cities are already under siege. The losses are admitted to be “higher than expected”, but it changes nothing. The possibility of resistance after the active phase of war is dismissed, they are confident that after there is a change of power and Ukrainian activists are purged by military police, most people in Ukraine will come to their senses and accept the new reality.
The war is existential in a way that it is supposed to destroy the Ukrainian identity. The desired outcome seems to be not friendly Ukraine with a new government, but at least partial annexation with Ukrainian culture suppressed. There is no talk of a nuclear or further wars yet in these circles. This so far can only be found (albeit quite easily) in ‘normie’ accounts. Europe arming Ukraine is seen like a futile exercise (too little too late) rather than casus belli.
Sanctions. They are widely considered to be survivable thanks to preparations made since 2014, and the most severe ones are expected to be lifted soon after when Ukraine is defeated. Russian billionaires forced to move to Russia with their money is considered to be great. Autarky is believed to be good. The focus is mostly on tech with explanations how Yandex can provide everything Russia needs. Imports from China are expected to cover all reasonable needs in goods, and domestic manufacturing is expected to boom.Overall, complete dehumanisation of Ukraine, dismissal rather than aggressive challenging of the West (yesterday’s hegemon) and the start of a Russian golden era.
Does any of this sound like a regime about to enter into productive peace talks? Meanwhile, Russia just closed its last two semi-independent radio stations and made spreading “fake news” about the war illegal, with a prison sentence of up to 15 years. There are reports that departing airport passengers have to unlock their phones to show their social-media profiles and prove they have not made anti-war statements. Rumours are of mobilisation of men of fighting age and/or an exit ban for those aged 18-60, as in Ukraine: that is where you get an army large enough to occupy a large neighbor from; or more than one neighbor. Or we could see martial law imposed tomorrow. All this suggests a regime doubling down not backing off under pressure. Likewise, for those thinking this is a chance for China to emerge as a good global actor and rebuild bridges to the West by helping broker peace, the US are claiming Beijing knew the invasion was going to happen and asked Putin to delay until after the end of the Olympics.
Of course, Russia is under huge pressure. There are also widespread reports of the Russian military seeing rising troop discontent and self-sabotage: the 40-mile convoy to Kyiv is perhaps a traffic jam, because it isn’t moving into Kyiv proper. There is certainly much more artillery fire to grind out Russian victories across the south of Ukraine. Reportedly, entire residential districts of besieged Mariupol have been leveled; the town of Konotop was told to surrender or be flattened; the key city of Kherson just fell, opening up the roads to the grain port of Odessa; and we already saw the black comedy moment via Belarus’s Lukashenko inadvertently showing the world that Moldova may be next. But if there are to be negotiations, Russia wants to make them with a knee on Ukraine (and Moldova’s?) neck, making any Ukrainian and Western concessions harder to conceive.
As such, Russia and Belarus are being further excised from the international community, economy, and markets. Sanctioned or not, nobody wants to touch Russian goods or assets. As someone on Twitter claims, “I work in the aviation sector, and I can tell you that for all intents and purposes Russian aviation has -at best- about three weeks before it’s show over.” Likewise, no more Apple products; and no more Microsoft. Even MSCI are to remove “uninvestable” Russia from their benchmark market indices (but the big Western accounting firms and management consultancies are staying put). Meanwhile, Ukraine’s foreign minister has stated that coordinated efforts to prevent evasion of sanctions are needed. That says that we are not just in our Ukraine metacrisis Scenario B (war and biting sanctions), but the risks are we are edging towards Scenario C (war and biting sanctions and secondary sanctions – and a bifurcated global economy).
So now let’s pivot to a cliché getting lots of airing by The Street – “You can’t trade geopolitics“. But why not? Is geopolitics inherently different to a natural disaster; or elections with binary outcomes and opinion polls that can be wrong; or economic data which can be six sigma outliers; or central bank policy cycles? It’s either all a random walk or nothing is. The key point is not all “geopolitical” developments matter to markets. In fact, very few do. In order to qualify, one needs to involve either large economies and/or a critical mass of economies, and/or critical inputs/outputs. You shouldn’t try to day-trade a brief firefight in the Middle East. However, that’s not the same as using economic history, political science, sociology, psychology, ideology and theology, heterodox economics, defence studies, and the assumption of complex non-linear dynamics to look for triggers for huge market shifts. That’s just hard to do:it’s not that you can’t trade geopolitics, it’s that *you* can’t trade geopolitics.
As an example, and of more inadvertently funny analysis, see the notes from people who didn’t see this war coming arguing how markets trade during wars – using WW2, the Korean War, the Vietnam War, and the Gulf War as one example, and then averaging them; or the Suez Crisis, the Cuban Missile Crisis, the Soviet invasion of Czechoslovakia (but not Hungary for some reason), the Yom Kippur War, the Soviet-Afghan War, the Gulf War, the bombing of the World Trade Centre, 9/11, the Iraq War, and the 2014 Crimea Annexation as another set, and then averaging them. To put a median through these is like plotting median war deaths in every past conflict (WW2 was 85 million; the Soviet Invasion of Afghanistan was 2 million; the Soviet Invasion of Czechoslovakia was just *249*). It is geopolitically and statistically ridiculous in that it misunderstands the very fat tail risks involved in both. To put it another way, it makes as much sense as saying “This is the average hospital bill for every health event over your lifetime” when we all know that, except for some unlucky folk, the bills when we are young (e.g., a broken arm or a minor op, etc.) are usually a fraction of the ones of when we are older (e.g., for a serious/chronic disease, heart attack, or organ transplant, etc.)
Yes, ‘Gavrilo Princip’ moments don’t happen every day, and looking for them daily is ridiculous. But not looking for them when we know they can happen is a sillier strategy. Did we not flag back in January and again pre-war that if we were to see this war then:
Energy prices would soar: as nobody now wants to touch Russian oil, the US hints at Russian energy sanctions, Brent touches $115, and European gas leaped 55% and coal 30% on the day.
Agri commodity prices would soar: as wheat hits a 14-year high and other key benchmarks move higher with it.
Bond yields would fall: which they had before partially reversing, and even global bellwether US and UK 2s yo-yo like penny stocks. Despite Powell’s statement yesterday that “the near-term effects on the US economy of the invasion of Ukraine, the ongoing war, the sanctions, and of events to come, remain highly uncertain”, which Philip Marey covers in more detail here, January’s huge ADP job losses flipping to huge job gains on revision is more on the Fed’s radar than NATO. Indeed, while they may go slower now due the war, the war risk is they will have to do more later on, despite the yield curve already screaming policy error. And when that occurs, recall the Fed’s website shows during WW2 it “supported the war effort in several ways: it helped finance wartime spending, fund our allies, embargo our enemies, stabilize the economy, and plan the return to peacetime activities.”
Equities would fall: which they have when they remain focused on what matters (which is never for long of course).
The Russian ruble would collapse and perhaps see the FX market frozen entirely, which is the case, while the US dollar would outperform as traditional safe haven, especially vs. the Euro. Meanwhile, with Russia disappearing from the economic map, and so Russian petrodollars disappearing from the global rinse cycle just as rising US dollar commodity prices mean global importers need more greenbacks to feed and fuel themselves, ex-Fed Street guru Zoltan Pozsar argues US sanctions are likely to see demand for the dollar to *fall*(!) Yes: once we find an alternative currency with a massive import-based consumer economy, rule of law, liquid financial assets, an open capital account, and a hegemonic military machine. Until then, not so much. That’s a funny market call when trying to trade geopolitics.
As argued many times previously, this would be the kind of political excuse needed to crack down harder on crypto, which is what we also heard from the Fed yesterday.
How hard is that “geopolitics” to trade? If you want to ignore all of the above then ironically let one market drive your view of geopolitics, not vice versa: are US defense stocks dipping yesterday signal or noise? But then again, what is the off-ramp from here? How does one plot out the roll-back of current sanctions? Oh dear – we are back to difficult questions for The Street: time to say “You can’t trade geopolitics” again!
Econophysics2020 
