Except, of course, in the parallel bubble of U.S. mainstream media, which has totally ignored it, or in a few select cases, decided to shoot the messenger, dismissing Hersh as a “discredited” journalist, a “blogger”, and a “conspiracy theorist”.
I have offered an initial approach, focused on the plentiful merits of a seemingly thorough report, but also noting some serious inconsistencies.
Old school Moscow-based foreign correspondent John Helmer has gone even further; and what he uncovered may be as incandescent as Sy Hersh’s own narrative.
The heart of the matter in Hersh’s report concerns attribution of responsibility for a de facto industrial terror attack. Surprisingly, no CIA; that falls straight on the toxic planning trio of Sullivan, Blinken and Nuland – neoliberal-cons part of the “Biden” combo. And the final green light comes from the Ultimate Decider: the senile, teleprompt-reading President himself. The Norwegians feature as minor helpers.
That poses the first serious problem: nowhere in his narrative Hersh refers to MI6, the Poles (government, Navy), the Danes, and even the German government.
There’s a mention that on January 2022, “after some wobbling”, Chancellor Scholz “was now firmly on the American team”. Well, by now the plan had been under discussion, according to Hersh’s source, for at least a few months. That also means that Scholz remained “on the American team” all the way to the terror attack, on September 2022.
As for the Brits, the Poles and all NATO games being played off Bornhom Island more than a year before the attack, that had been extensively reported by Russian media – from Kommersant to RIA Novosti.
The Special Military Operation (SMO) was launched on February 24, almost a year ago. The Nord Stream 1 and 2 blow up happened on September 26. Hersh assures there were “more than nine months of highly secret back and forth debate inside Washington’s national security community about how to ‘sabotage the pipelines’”.
So that confirms that the terror attack planning preceded, by months, not only the SMO but, crucially, the letters sent by Moscow to Washington on December 2022, requesting a serious discussion on “indivisibility of security” involving NATO, Russia and the post-Soviet space. The request was met by a dismissive American non-response response.
While he was writing the story of a terror response to a serious geopolitical issue, it does raise eyebrows that a first-rate pro like Hersh does not even bother to examine the complex geopolitical background.
In a nutshell: the ultimate Mackinderian anathema for the U.S. ruling classes – and that’s bipartisan – is a Germany-Russia alliance, extended to China: that would mean the U.S. expelled from Eurasia, and that conditions everything any American government thinks and does in terms of NATO and Russia.
Hersh should also have noticed that the timing of the preparation to “sabotage the pipelines” completely blows apart the official United States government narrative, according to which this a collective West effort to help Ukraine against “unprovoked Russian aggression”.
That elusive source
The narrative leaves no doubt that Hersh’s source – if not the journalist himself – supports what is considered a lawful U.S. policy: to fight Russia’s “threat to Western dominance [in Europe].”
So what seems a U.S. Navy covert op, according to the narrative, may have been misguided not because of serious geopolitical reasons; but because the attack planning intentionally evaded U.S. law “requiring Congress to be informed”. That’s an extremely parochial interpretation of international relations. Or, to be blunt: that’s an apology of Exceptionalism.
And that brings us to what may be the Rosebud in this Orson Welles-worthy saga. Hersh refers to a “secure room on the top floor of the Old Executive Office Building …that was also the home of the President’s Foreign Intelligence Advisory Board”.
This was supposedly the place where the terror attack planning was being discussed.
Hersh’s source, according to his narrative, asserts, without a shadow of a doubt, that “Russian troops had been steadily and ominously building up on the borders of Ukraine” and that “alarm was growing in Washington”. It’s beggars belief that this supposedly well informed lot didn’t know about the massing of NATO-led Ukrainian troops across the line of contact, getting ready to launch a blitzkrieg against Donbass.
What everyone already knew by then – as the record shows even on YouTube – is that the combo behind “Biden” were dead set on terminating the Nord Streams by whatever means necessary. After the start of the SMO, the only thing missing was to find a mechanism for plausible deniability.
For all its meticulous reporting, the inescapable feeling remains that what Hersh’s narrative indicts is the Biden combo terror gambit, and never the overall U.S. plan to provoke Russia into a proxy war with NATO using Ukraine as cannon fodder.
Moreover, Hersh’s source may be eminently flawed. He – or she – said, according to Hersh, that Russia “failed to respond” to the pipeline terror attack because “maybe they want the capability to do the same things the U.S. did”.
In itself, this may prove that the source was not even a member of PIAB, and did not receive the classified PIAB report assessing Putin’s crucial speech of September 30, which identifies the “responsible” party. If that’s the case, the source is just connected (italics mine) to some PIAB member; was not invited to the months-long situation-room planning; and certainly is not aware of the finer details of this administration’s war in Ukraine.
Considering Sy Hersh’s stellar track record in investigative journalism, it would be quite refreshing for him to elucidate these inconsistencies. That would get rid of the fog of rumors depicting the report as a mere limited hangout.
Considering there are several “silos” of intel within the U.S. oligarchy, with their corresponding apparatuses, and Hersh has cultivated his contacts among nearly all of them for decades, there’s no question the allegedly privileged information on the Nord Stream saga came from a very precise address – with a very precise agenda.
So we should see who the story really indicts: certainly the Straussian neo-con/neoliberal-con combo behind “Biden”, and the wobbly President himself. As I pointed out in my initial analysis, the CIA gets away with flying colors.
And we should not forget that the Big Narrative is changing fast: the RAND report, the looming NATO humiliation in Ukraine, Balloon Hysteria, UFO psy op. The real “threat” is – who else – China. What’s left for all of us is to swim in a swamp crammed with derelict patsies, dodgy cover stories and intel debris. Knowing that those who really run the show never show their hand.
MOSCOW, February 10. /TASS/. Russian President Vladimir Putin will deliver his State of the Nation Address to the Federal Assembly on February 21, Kremlin Spokesman Dmitry Peskov told reporters on Friday.
“The Russian president will address the Federal Assembly on February 21. It will take place at the Gostiny Dvor venue,” he said.
The president delivered his previous address to the country’s parliament in April 2021. Putin explained that there had been no State of the Nation Address in 2022 because the situation was unfolding very quickly and it was difficult “to fix the results at a specific point, as well as specific plans for the near future.” However, crucial messages were included in other presidential speeches.
In the past, State of the Nation Addresses were usually delivered every year but there were some exceptions. In particular, Putin did not deliver an address to parliament in 2017 (it was postponed to March 1, 2018). First Deputy Chief of Staff of the Presidential Administration Sergey Kiriyenko noted back then that delivering an address to the Federal Assembly was the president’s right that he could use “when he deems it appropriate.”
**********
OK, that was Tass. Now for some color.
The Romanov dynasty began on February 21, 1613 and reigned as the imperial house of Russia to 1917.
The house became boyars (the highest rank in Russian nobility) of the Grand Duchy of Moscow and later of the Tsardom of Russia under the reigning Rurik dynasty, which became extinct upon the death of Tsar Feodor I in 1598. The Time of Troubles, caused by the resulting succession crisis, saw several pretenders and imposters (False Dmitris) fight for the crown during the Polish–Muscovite War of 1605–1618. On 21 February 1613, a Zemsky Sobor elected Michael Romanov as Tsar of Russia, establishing the Romanovs as Russia’s second reigning dynasty.
No, I don’t think Putin will declare a new imperial dynasty.
But there is also this:
The Russian mission to the United Nations plans to organize a Security Council meeting on the attack on Nord Stream on February 22, citing “new information” about the attack unveiled in Hersh’s reporting.
And here is the transcript from his speech of February 24, 2022:
I consider it necessary today to speak again about the tragic events in Donbass and the key aspects of ensuring the security of Russia.
I will begin with what I said in my address on February 21, 2022. I spoke about our biggest concerns and worries, and about the fundamental threats which irresponsible Western politicians created for Russia consistently, rudely and unceremoniously from year to year. I am referring to the eastward expansion of NATO, which is moving its military infrastructure ever closer to the Russian border.
It is a fact that over the past 30 years we have been patiently trying to come to an agreement with the leading NATO countries regarding the principles of equal and indivisible security in Europe. In response to our proposals, we invariably faced either cynical deception and lies or attempts at pressure and blackmail, while the North Atlantic alliance continued to expand despite our protests and concerns. Its military machine is moving and, as I said, is approaching our very border.
Why is this happening? Where did this insolent manner of talking down from the height of their exceptionalism, infallibility and all-permissiveness come from? What is the explanation for this contemptuous and disdainful attitude to our interests and absolutely legitimate demands?
The answer is simple. Everything is clear and obvious. In the late 1980s, the Soviet Union grew weaker and subsequently broke apart. That experience should serve as a good lesson for us, because it has shown us that the paralysis of power and will is the first step towards complete degradation and oblivion. We lost confidence for only one moment, but it was enough to disrupt the balance of forces in the world.
As a result, the old treaties and agreements are no longer effective. Entreaties and requests do not help. Anything that does not suit the dominant state, the powers that be, is denounced as archaic, obsolete and useless. At the same time, everything it regards as useful is presented as the ultimate truth and forced on others regardless of the cost, abusively and by any means available. Those who refuse to comply are subjected to strong-arm tactics.
What I am saying now does not concerns only Russia, and Russia is not the only country that is worried about this. This has to do with the entire system of international relations, and sometimes even US allies. The collapse of the Soviet Union led to a redivision of the world, and the norms of international law that developed by that time – and the most important of them, the fundamental norms that were adopted following WWII and largely formalised its outcome – came in the way of those who declared themselves the winners of the Cold War.
Of course, practice, international relations and the rules regulating them had to take into account the changes that took place in the world and in the balance of forces. However, this should have been done professionally, smoothly, patiently, and with due regard and respect for the interests of all states and one’s own responsibility. Instead, we saw a state of euphoria created by the feeling of absolute superiority, a kind of modern absolutism, coupled with the low cultural standards and arrogance of those who formulated and pushed through decisions that suited only themselves. The situation took a different turn.
There are many examples of this. First a bloody military operation was waged against Belgrade, without the UN Security Council’s sanction but with combat aircraft and missiles used in the heart of Europe. The bombing of peaceful cities and vital infrastructure went on for several weeks. I have to recall these facts, because some Western colleagues prefer to forget them, and when we mentioned the event, they prefer to avoid speaking about international law, instead emphasising the circumstances which they interpret as they think necessary.
Then came the turn of Iraq, Libya and Syria. The illegal use of military power against Libya and the distortion of all the UN Security Council decisions on Libya ruined the state, created a huge seat of international terrorism, and pushed the country towards a humanitarian catastrophe, into the vortex of a civil war, which has continued there for years. The tragedy, which was created for hundreds of thousands and even millions of people not only in Libya but in the whole region, has led to a large-scale exodus from the Middle East and North Africa to Europe.
A similar fate was also prepared for Syria. The combat operations conducted by the Western coalition in that country without the Syrian government’s approval or UN Security Council’s sanction can only be defined as aggression and intervention.
But the example that stands apart from the above events is, of course, the invasion of Iraq without any legal grounds. They used the pretext of allegedly reliable information available in the United States about the presence of weapons of mass destruction in Iraq. To prove that allegation, the US Secretary of State held up a vial with white power, publicly, for the whole world to see, assuring the international community that it was a chemical warfare agent created in Iraq. It later turned out that all of that was a fake and a sham, and that Iraq did not have any chemical weapons. Incredible and shocking but true. We witnessed lies made at the highest state level and voiced from the high UN rostrum. As a result we see a tremendous loss in human life, damage, destruction, and a colossal upsurge of terrorism.
Overall, it appears that nearly everywhere, in many regions of the world where the United States brought its law and order, this created bloody, non-healing wounds and the curse of international terrorism and extremism. I have only mentioned the most glaring but far from only examples of disregard for international law.
This array includes promises not to expand NATO eastwards even by an inch. To reiterate: they have deceived us, or, to put it simply, they have played us. Sure, one often hears that politics is a dirty business. It could be, but it shouldn’t be as dirty as it is now, not to such an extent. This type of con-artist behaviour is contrary not only to the principles of international relations but also and above all to the generally accepted norms of morality and ethics. Where is justice and truth here? Just lies and hypocrisy all around.
Incidentally, US politicians, political scientists and journalists write and say that a veritable “empire of lies” has been created inside the United States in recent years. It is hard to disagree with this – it is really so. But one should not be modest about it: the United States is still a great country and a system-forming power. All its satellites not only humbly and obediently say yes to and parrot it at the slightest pretext but also imitate its behaviour and enthusiastically accept the rules it is offering them. Therefore, one can say with good reason and confidence that the whole so-called Western bloc formed by the United States in its own image and likeness is, in its entirety, the very same “empire of lies.”
As for our country, after the disintegration of the USSR, given the entire unprecedented openness of the new, modern Russia, its readiness to work honestly with the United States and other Western partners, and its practically unilateral disarmament, they immediately tried to put the final squeeze on us, finish us off, and utterly destroy us. This is how it was in the 1990s and the early 2000s, when the so-called collective West was actively supporting separatism and gangs of mercenaries in southern Russia. What victims, what losses we had to sustain and what trials we had to go through at that time before we broke the back of international terrorism in the Caucasus! We remember this and will never forget.
Properly speaking, the attempts to use us in their own interests never ceased until quite recently: they sought to destroy our traditional values and force on us their false values that would erode us, our people from within, the attitudes they have been aggressively imposing on their countries, attitudes that are directly leading to degradation and degeneration, because they are contrary to human nature. This is not going to happen. No one has ever succeeded in doing this, nor will they succeed now.
Despite all that, in December 2021, we made yet another attempt to reach agreement with the United States and its allies on the principles of European security and NATO’s non-expansion. Our efforts were in vain. The United States has not changed its position. It does not believe it necessary to agree with Russia on a matter that is critical for us. The United States is pursuing its own objectives, while neglecting our interests.
Of course, this situation begs a question: what next, what are we to expect? If history is any guide, we know that in 1940 and early 1941 the Soviet Union went to great lengths to prevent war or at least delay its outbreak. To this end, the USSR sought not to provoke the potential aggressor until the very end by refraining or postponing the most urgent and obvious preparations it had to make to defend itself from an imminent attack. When it finally acted, it was too late.
As a result, the country was not prepared to counter the invasion by Nazi Germany, which attacked our Motherland on June 22, 1941, without declaring war. The country stopped the enemy and went on to defeat it, but this came at a tremendous cost. The attempt to appease the aggressor ahead of the Great Patriotic War proved to be a mistake which came at a high cost for our people. In the first months after the hostilities broke out, we lost vast territories of strategic importance, as well as millions of lives. We will not make this mistake the second time. We have no right to do so.
Those who aspire to global dominance have publicly designated Russia as their enemy. They did so with impunity. Make no mistake, they had no reason to act this way. It is true that they have considerable financial, scientific, technological, and military capabilities. We are aware of this and have an objective view of the economic threats we have been hearing, just as our ability to counter this brash and never-ending blackmail. Let me reiterate that we have no illusions in this regard and are extremely realistic in our assessments.
As for military affairs, even after the dissolution of the USSR and losing a considerable part of its capabilities, today’s Russia remains one of the most powerful nuclear states. Moreover, it has a certain advantage in several cutting-edge weapons. In this context, there should be no doubt for anyone that any potential aggressor will face defeat and ominous consequences should it directly attack our country.
At the same time, technology, including in the defence sector, is changing rapidly. One day there is one leader, and tomorrow another, but a military presence in territories bordering on Russia, if we permit it to go ahead, will stay for decades to come or maybe forever, creating an ever mounting and totally unacceptable threat for Russia.
Even now, with NATO’s eastward expansion the situation for Russia has been becoming worse and more dangerous by the year. Moreover, these past days NATO leadership has been blunt in its statements that they need to accelerate and step up efforts to bring the alliance’s infrastructure closer to Russia’s borders. In other words, they have been toughening their position. We cannot stay idle and passively observe these developments. This would be an absolutely irresponsible thing to do for us.
Any further expansion of the North Atlantic alliance’s infrastructure or the ongoing efforts to gain a military foothold of the Ukrainian territory are unacceptable for us. Of course, the question is not about NATO itself. It merely serves as a tool of US foreign policy. The problem is that in territories adjacent to Russia, which I have to note is our historical land, a hostile “anti-Russia” is taking shape. Fully controlled from the outside, it is doing everything to attract NATO armed forces and obtain cutting-edge weapons.
For the United States and its allies, it is a policy of containing Russia, with obvious geopolitical dividends. For our country, it is a matter of life and death, a matter of our historical future as a nation. This is not an exaggeration; this is a fact. It is not only a very real threat to our interests but to the very existence of our state and to its sovereignty. It is the red line which we have spoken about on numerous occasions. They have crossed it.
This brings me to the situation in Donbass. We can see that the forces that staged the coup in Ukraine in 2014 have seized power, are keeping it with the help of ornamental election procedures and have abandoned the path of a peaceful conflict settlement. For eight years, for eight endless years we have been doing everything possible to settle the situation by peaceful political means. Everything was in vain.
As I said in my previous address, you cannot look without compassion at what is happening there. It became impossible to tolerate it. We had to stop that atrocity, that genocide of the millions of people who live there and who pinned their hopes on Russia, on all of us. It is their aspirations, the feelings and pain of these people that were the main motivating force behind our decision to recognise the independence of the Donbass people’s republics.
I would like to additionally emphasise the following. Focused on their own goals, the leading NATO countries are supporting the far-right nationalists and neo-Nazis in Ukraine, those who will never forgive the people of Crimea and Sevastopol for freely making a choice to reunite with Russia.
They will undoubtedly try to bring war to Crimea just as they have done in Donbass, to kill innocent people just as members of the punitive units of Ukrainian nationalists and Hitler’s accomplices did during the Great Patriotic War. They have also openly laid claim to several other Russian regions.
If we look at the sequence of events and the incoming reports, the showdown between Russia and these forces cannot be avoided. It is only a matter of time. They are getting ready and waiting for the right moment. Moreover, they went as far as aspire to acquire nuclear weapons. We will not let this happen.
I have already said that Russia accepted the new geopolitical reality after the dissolution of the USSR. We have been treating all new post-Soviet states with respect and will continue to act this way. We respect and will respect their sovereignty, as proven by the assistance we provided to Kazakhstan when it faced tragic events and a challenge in terms of its statehood and integrity. However, Russia cannot feel safe, develop, and exist while facing a permanent threat from the territory of today’s Ukraine.
Let me remind you that in 2000–2005 we used our military to push back against terrorists in the Caucasus and stood up for the integrity of our state. We preserved Russia. In 2014, we supported the people of Crimea and Sevastopol. In 2015, we used our Armed Forces to create a reliable shield that prevented terrorists from Syria from penetrating Russia. This was a matter of defending ourselves. We had no other choice.
The same is happening today. They did not leave us any other option for defending Russia and our people, other than the one we are forced to use today. In these circumstances, we have to take bold and immediate action. The people’s republics of Donbass have asked Russia for help.
In this context, in accordance with Article 51 (Chapter VII) of the UN Charter, with permission of Russia’s Federation Council, and in execution of the treaties of friendship and mutual assistance with the Donetsk People’s Republic and the Lugansk People’s Republic, ratified by the Federal Assembly on February 22, I made a decision to carry out a special military operation.
The purpose of this operation is to protect people who, for eight years now, have been facing humiliation and genocide perpetrated by the Kiev regime. To this end, we will seek to demilitarise and denazify Ukraine, as well as bring to trial those who perpetrated numerous bloody crimes against civilians, including against citizens of the Russian Federation.
It is not our plan to occupy the Ukrainian territory. We do not intend to impose anything on anyone by force. At the same time, we have been hearing an increasing number of statements coming from the West that there is no need any more to abide by the documents setting forth the outcomes of World War II, as signed by the totalitarian Soviet regime. How can we respond to that?
The outcomes of World War II and the sacrifices our people had to make to defeat Nazism are sacred. This does not contradict the high values of human rights and freedoms in the reality that emerged over the post-war decades. This does not mean that nations cannot enjoy the right to self-determination, which is enshrined in Article 1 of the UN Charter.
Let me remind you that the people living in territories which are part of today’s Ukraine were not asked how they want to build their lives when the USSR was created or after World War II. Freedom guides our policy, the freedom to choose independently our future and the future of our children. We believe that all the peoples living in today’s Ukraine, anyone who want to do this, must be able to enjoy this right to make a free choice.
In this context I would like to address the citizens of Ukraine. In 2014, Russia was obliged to protect the people of Crimea and Sevastopol from those who you yourself call “nats.” The people of Crimea and Sevastopol made their choice in favour of being with their historical homeland, Russia, and we supported their choice. As I said, we could not act otherwise.
The current events have nothing to do with a desire to infringe on the interests of Ukraine and the Ukrainian people. They are connected with the defending Russia from those who have taken Ukraine hostage and are trying to use it against our country and our people.
I reiterate: we are acting to defend ourselves from the threats created for us and from a worse peril than what is happening now. I am asking you, however hard this may be, to understand this and to work together with us so as to turn this tragic page as soon as possible and to move forward together, without allowing anyone to interfere in our affairs and our relations but developing them independently, so as to create favourable conditions for overcoming all these problems and to strengthen us from within as a single whole, despite the existence of state borders. I believe in this, in our common future.
I would also like to address the military personnel of the Ukrainian Armed Forces.
Comrade officers,
Your fathers, grandfathers and great-grandfathers did not fight the Nazi occupiers and did not defend our common Motherland to allow today’s neo-Nazis to seize power in Ukraine. You swore the oath of allegiance to the Ukrainian people and not to the junta, the people’s adversary which is plundering Ukraine and humiliating the Ukrainian people.
I urge you to refuse to carry out their criminal orders. I urge you to immediately lay down arms and go home. I will explain what this means: the military personnel of the Ukrainian army who do this will be able to freely leave the zone of hostilities and return to their families.
I want to emphasise again that all responsibility for the possible bloodshed will lie fully and wholly with the ruling Ukrainian regime.
I would now like to say something very important for those who may be tempted to interfere in these developments from the outside. No matter who tries to stand in our way or all the more so create threats for our country and our people, they must know that Russia will respond immediately, and the consequences will be such as you have never seen in your entire history. No matter how the events unfold, we are ready. All the necessary decisions in this regard have been taken. I hope that my words will be heard.
Citizens of Russia,
The culture and values, experience and traditions of our ancestors invariably provided a powerful underpinning for the wellbeing and the very existence of entire states and nations, their success and viability. Of course, this directly depends on the ability to quickly adapt to constant change, maintain social cohesion, and readiness to consolidate and summon all the available forces in order to move forward.
We always need to be strong, but this strength can take on different forms. The “empire of lies,” which I mentioned in the beginning of my speech, proceeds in its policy primarily from rough, direct force. This is when our saying on being “all brawn and no brains” applies.
We all know that having justice and truth on our side is what makes us truly strong. If this is the case, it would be hard to disagree with the fact that it is our strength and our readiness to fight that are the bedrock of independence and sovereignty and provide the necessary foundation for building a reliable future for your home, your family, and your Motherland.
Dear compatriots,
I am certain that devoted soldiers and officers of Russia’s Armed Forces will perform their duty with professionalism and courage. I have no doubt that the government institutions at all levels and specialists will work effectively to guarantee the stability of our economy, financial system and social wellbeing, and the same applies to corporate executives and the entire business community. I hope that all parliamentary parties and civil society take a consolidated, patriotic position.
At the end of the day, the future of Russia is in the hands of its multi-ethnic people, as has always been the case in our history. This means that the decisions that I made will be executed, that we will achieve the goals we have set, and reliably guarantee the security of our Motherland.
I believe in your support and the invincible force rooted in the love for our Fatherland.
OOPS! The Financial Times accidentally confirmed what the Chinese have been saying from day one — the balloons ARE weather balloons pic.twitter.com/e0QewsGiSi
— Nury Vittachi, Fridayeveryday.com (@NuryVittachi) February 14, 2023
You and I in a little toy shop Buy a bag of balloons with the money we’ve got Set them free at the break of dawn ‘Til one by one, they were gone Back at base, bugs in the software Flash the message, “Something’s out there!” Floating in the summer sky Ninety-nine red balloons go by
The military, political and strategic significance of the Zatoka bridge as NATO’s supply route to the eastern front of the Ukrainian forces has become clear since the first demolition attack last April. The US propaganda platform Bloomberg revealed the bridge’s military role last May, when road and rail hubs in the area were hit.
Strikes against the rail lines in the vicinity were recorded in July and in August. Russian targeting of the Ukrainian rail network was analyzed last December by a Russian source here. With each one of these operations, Moscow was sending a warning to Romania, Moldova, France and NATO that if they escalated and attempted to join the Ukrainian battlefield with their weapons, military experts and advisers, running the gauntlet of the Zatoka bridge, they would be attacked.
NATO escalation followed. Romania has been showing off its French tanks, Israeli drones, and US HIMARS missile batteries since last December; it is paying at least $6 billion for the new military equipment, spending 2.3% of its Gross Domestic Product on defence – a higher proportion than any other NATO member state except the US.
The escalation of NATOs warfighting weapons and operational plans in Romania during January put pressure on the Moldovan government next door, and the country’s Prime Minister Gavrilita, to allow the transit of these weapons across Moldovan territory and into the Ukraine, via the Zatoka bridge. Between Smardan, on the Romanian side of the border with Moldova, and Zatoka is a road distance of just over 300 kilometres. Smardan is the location of the French and Romanian “exercises” last month.
The pressure proved too much for Gavrilita who, though pro-NATO personally and willing to agree to the transit herself, was afraid that public and political opposition among Moldovans might block the roads, triggering countrywide protests and visible resistance to Moldova’s joining the war against Russia. The US, French, and NATO reaction was to replace Gavrilita with Dorin Recean. US university-educated like the Romanian President, Maia Sandu. Recean has been paid a US salary for many years, As Recean substituted for Gavrilita and took office in Chisinau, the Russian General Staff delivered its warning to him at Zatoka. That wasn’t the only Russian military warning Recean was given that day.
Gavrilita’s exit statement revealed her reluctance to continue in office. She repeated to the Financial Times of London her personal anti-Russian line and her fear of pro-Russian sentiment among Moldovan voters. “If the government had the same support at home, we would have progressed faster,” she said. To the newspaper she added that “Moldova was being subjected to hybrid warfare by Russia, including disinformation, cyber attacks and influence operations.” . The Japanese-owned propaganda organ against both Russia and China omitted to report the French and US military deployments in Romania, the Russian operation at Zatoka, and the Ukraine supply operation in Moldova.
The Romanian government has now indicated its nervousness, announcing that no Russian missile had entered its airspace last week after Ukrainian President Vladimir Zelensky claimed that it had.
In early 2022 Ukraine had finished the preparations for an overwhelming attack on the renegade People Republics of Donetsk and Luhansk (DPR and LNR).
Half of the Ukrainian army, some 120,000 men recruited and trained during the last 7 years, were stationed near the ceasefire line and ready to go. On the opposing side only some 40,000 men were under arms. They would have little chance to withstand an onslaught.
Russia could not let a Ukrainian attack happen. If Ukraine could regain the renegade provinces it would have been able to join NATO. Russian public opinion was decisively on the side of the Russian speaking DNR and LPR. It would surely demand an intervention. Since the 2014 coup in Kiev some four million Ukrainians had already moved to Russia. There are lots of family ties between the two countries. In sight of this Russia had put some of its own forces on alert and had moved weapons and munition to assembling points near the Ukrainian border.
The U.S. had for months warned of an upcoming Russian attack on Ukraine. It could do that because it knew the Ukraine would attempt to regain the republics by force. It knew that Russia would have to respond. On January 12 2022 CIA director Bill Burns had secretly met Zelensky in Kiev. Burns often carries messages from President Joe Biden.
On Sunday February 13 2022, after a phone call with U.S. president Joe Biden, the Ukrainian president Zelensky gave the final order for the planned Ukrainian attack.
That the decision had been made was immediately leaked in London as well as in Kiev.
In its summary of the day the Guardian listed a lot of activities that were consistent with the imminent start of a conflict. Diplomats and foreign military were moving out of Ukraine. Weapons flew in.
Tipped off by its government the British insurance conglomerate Lloyd stopped reinsurance services for anything Ukraine:
Anatoliy Ivantsiv, head of Ukrainian insurance firm Expo, told Interfax that British reinsurance giant Lloyds announced it would temporarily cease all conflict risk insurance over Ukrainian airspace from Feb. 14.
When the news of the attack order leaked in Kiev, its ‘elite’ oligarchs and some parliament members were ready to leave. On February 13 and the following days they fled the country:
Ukraine’s richest men are fleeing the country with their families as the number of private jet charters jump after the possibility of war spiked in recent days, according to flight traffic information posted on social media on February 13. … Switzerland, Austria and the south of France were the most popular destinations for the charter flights.
Ukrainska Pravda stated that such an exodus on charter flights hasn’t been witnessed in six years of observations. The publication reported that planes belonging the country’s top oligarchs, including Rinat Akhmetov, Viktor Pinchuk, and Boris Kolesnikov, as having left the country. A private plane for 50 people was also ordered by Igor Abramovich, another top business figure. … bne IntelliNews sources confirm that two residential English tutors, both British citizens, working for an MP and a businessman respectively, will leave for the south of France this week. Neither confirmed that the flights had anything to do with increased fears over an invasion, as both families travel regularly with their staff for work holidays. Even last month, when the war drums began to beat more loudly for the first time, tutors and teachers working at private schools in Kyiv reported a large number of children absent, away on holidays.
Some members of the Ukrainian parliament were also bailing out. on February 14 Kiev Independentreported:
More than two dozen lawmakers out of a total 424 MPs, who are due to attend parliamentary sessions starting this week, are not currently in Ukraine. Almost half, or 12 deputies, are from the pro-Russian party Opposition Platform-for Life, five deputies are from the presidential Servant of the People party. Most of the lawmakers, or 20 people, left the country in February.
As part of the Minsk agreement the Organization for Security and Co-operation in Europe (OSCE) had a Special Observer Mission at the ceasefire line in east-Ukraine. Over the weekend of February 12 and 13 the front had been relatively quiet:
In Donetsk region, between the evenings of 11 and 13 February, the Mission recorded 261 ceasefire violations, including 50 explosions. In the previous reporting period, it recorded 114 ceasefire violations in the region.
In Luhansk region, between the evenings of 11 and 13 February, the SMM recorded 114 ceasefire violations, including 24 explosions. In the previous reporting period, it recorded 258 ceasefire violations in the region.
The observed numbers of explosion were less than the average of the last 7 and 30 day periods. Explosions occurred on both sides of the ceasefire line.
Banking profitability is often measured in three ways:
Return on Total Assets (RoA)
Return on Risk-weighted Assets (RoRWA)
Return on Book Value (RoE)
Why different ways for computing profitability?
Not all gains or losses are normally consider in computing profitability. They are only counted when realized, such as when the asset is sold.
Unless realized, gains and losses may be carried over as “Accumulated Other Comprehensive Income” or AOCI. These adjusted are captured on the balance sheet before computing “net retained earnings.”
AOCI filters for investment securities classified as “available for sale”, and reflects accumulated unrealized changes in the fair value of securities held for investment purposes.
Such unrealized gains and losses are not counted towards bank regulatory capital.
However, as part of the implementation of the Basel III capital accord, the AOCI filter is removed for the largest US banking organizations allowing fluctuations in securities market to flow through directly to regulatory capital.
Consider Citi’s recent balance sheet above. For the quarter ending December 31, 2022, Citi has $47.062 billion of unrealized losses — reduced by $1.2 billion from the quarter ending September 2022.
Citi reported a net quarterly income on September 30, 2022 of $3.479 billion. Their December 30, 2022 net quarterly income was $2.513 billion.
Evidently, Citi recognized $1.2 billion of losses from AOCI.
At this rate, it will take Citi about a decade to rationalize to reduce their AOCI.
That’s assuming bank bond portfolios are not increasingly underwater as interest rates rise.
Consider the 2-10 spread – we’re seeing a definite trend repricing short-tenored assets.
One ratio regulators are starting to pay more attention to it since accumulated other comprehensive income, or AOCI, is not included in regulatory capital ratios, for any banks except global systemically important banks, therefore they do not capture the impact of underwater bond books, advisers said.
The majority of bonds that most banks hold are in available-for-sale, or AFS, portfolios, which must be marked to market on a quarterly basis. Changes in the values of the AFS portfolios are captured in AOCI. Higher interest rates have weighed on the value of bonds that banks own since they now carry below market rates. As a result, the vast majority of U.S. banks have recorded a surge in AOCI losses.
“Regulators have been clear that tangible equity is a loss-absorbing capital,” said Matt Resch, managing director and co-head of M&A and capital markets with PNC Financial Institutions Advisory Group. “If the credit cycle turns and there’s now an uptick in credit losses, it’s tangible equity that can absorb those losses. For banks that have seen a pretty significant impact to the tangible capital ratios, if now we end up having a turn of the credit cycle, it’s only going to exacerbate that problem.”
Upticking credit losses are already apparent.
So are falling deposits.
S&P Global reports banks with TCE ratios around 5% face problems, according to Donald Musso, president and CEO of FinPro Inc.
“Everybody that’s falling below certain metrics are getting calls and visits,” he said.
When a bank approaches 2%, 0% or negative TCE, “that’s when the real problem starts to occur,” Musso said, adding that regulators could start putting restrictions on banks through consent orders.
Going into CCAR 2023, expect liquidity and stress test to take closer looks at the AFS portfolio and AOCI trends.
Fierce fighting continues near Bakhmut. The efforts of the Russian troops are focused on the capture of Krasna Gora and Paraskovievka to the north of Bakhmut, the development of success at Sacco and Vanzetti on the right bank of the Bakhmutovka River, and the physical cutting of roads from Chasiv Yar to Bakhmut in the west.
The assault groups of the Wagner PMCs, with the support of regular formations of the Armed Forces of the Russian Federation, actually closed the encirclement ring around the AFU contingent of the 54th Infantry Brigade of the AFU defending in the destroyed village of Krasna Hora
The Ukrainian OTG “Soledar” is not able to rotate personnel and withdraw personnel from the village. One of the AFU’s companies escaped from the front line, suffering irreparable losses.
The withdrawal of a part of the Ukrainian units that were planned to be deployed near Kremennaya and in Terny is being recorded from under the Liman.
The withdrawn formations have been transferred to Kramatorsk, and in the future they are planned to be sent to the front line in Bakhmut.
Separate units of the newly formed 47 oabr of the Armed Forces of Ukraine are also sent there.
Foreign mercenaries operating near Bakhmut occupy mainly the second or third line of defense. Young recruits, mobilized and territorial defense detachments occupy the defense in the first rows.
Per Russian Ministry of Defense reports, high-precision strikes destroyed all energy facilities powering Ukraine defense and transport, halting the redeployment of foreign weapons, ammunitions and reserves by rail to the front.
Rising interest rates have prompted both challenges and opportunities for banks over the past year. Bank supervisors are, understandably, urging bankers to pay close attention to a myriad of ways changing interest rates can affect earnings and capital, or what’s termed interest rate risk.
While rising interest rates give banks opportunities to increase earnings by pushing up rates charged on loans, they also could increase the cost of liabilities and decrease the value of investment securities held as assets. Even unrealized losses—paper losses—in investment portfolios can have negative effects on liquidity and present funding challenges, earnings pressures and, in some cases, issues with capital.
Interest Rates and Bond Prices
The inverse relationship between bond prices and interest rates means the sharp increases in interest rates this year have lowered the value of fixed-rate bonds held as investments, including those of banks. Many banks increased their holdings of bonds during the pandemic, when deposits were plentiful but loan demand and yields were weak. For many banks, these unrealized losses will stay on paper. But others may face actual losses if they have to sell securities for liquidity or other reasons.
Other possible consequences of significant unrealized losses include reductions in or restrictions on borrowing capacity and declining market valuations of the affected institutions, which could have a negative impact on banks looking to engage in merger and acquisition activities.
Just prior to the pandemic, roughly 20% of bank assets consisted of investment securities—primarily mortgage-backed securities and U.S. Treasury securities. By the end of 2021, security holdings had increased to 25% of assets, with most of the growth occurring in U.S. Treasury securities. Many of those purchases were for securities with longer maturities, which drop in value more than short-term securities when interest rates rise.
Effects on Capital and Liquidity
Losses on investment securities—realized or not—can affect a bank’s capital position. In general, banks must classify their securities into two buckets: held for maturity (HTM) and available for sale (AFS).1 The difference between the amortized cost of AFS securities and their current fair value is recorded in a category called accumulated other comprehensive income (AOCI), which is subtracted from equity capital on a bank’s balance sheet. While AOCI is excluded in measures of regulatory capital for community banks, it does affect what’s known as tangible common equity (TCE).2
TCE is declining industrywide because of the negative effect of rising rates on the market value of bank holdings of AFS securities. The number of banks with ratios of TCE to average tangible assets of less than 5% jumped markedly in 2022, with some banks posting negative TCE. Banks in this position largely got there because of an aggressive earnings strategy based on longer-term securities holdings when interest rates were low.
Banks with very low or negative TCE may face funding challenges. Federal Home Loan Banks (FHLBs), for example, are not permitted to extend new loans (called advances) to banks with negative TCE, and existing FHLB loans may not be renewed beyond 30 days unless waivers are obtained by borrowers’ primary regulators.3 That could be problematic for banks facing a runoff in deposits or other liquidity concerns; in a worse-case scenario, a bank might have to sell “underwater” bonds to raise cash, thus realizing losses and reducing regulatory capital.
The Supervisory Perspective
Large unrealized losses in the investment portfolio increase a bank’s risk profile, but the extent varies by bank. Supervisors are less likely to be concerned if the duration4 or maturity of a bank’s assets (loans and investments) and liabilities (deposits and other borrowings) are roughly the same. Concern would be further reduced if assets were funded by stable, non-maturity deposits, such as checking and savings accounts.
To reduce risks to liquidity, capital and earnings from unrealized losses, banks can take several steps, including diversifying contingent funding sources, especially if reliant on FHLB advances. The Federal Reserve’s discount window is one option. Increasing the ratio of HTM to AFS securities through new purchases or reclassification may ameliorate declining or low TCE at some institutions, although reclassification does not eliminate the risks associated with owning fixed-income securities in a rising rate environment.
In general, a bank should carefully analyze its existing capital and liquidity planning for possible adjustments based on current positions as well as the likelihood of further stress.
Notes
Some banks (mostly very large banks) hold securities in trading accounts, and those securities are classified separately. Changes in the fair market value of these holdings flow through the income statement and are counted as current income or expense.
Tangible common equity is calculated as equity capital less goodwill, other intangibles and disallowed mortgage servicing rights.
See this American Banker article for more on the FHLB rule.
The change in the valuation of an asset or liability that may occur given a discrete change in interest rates.
Credit Suisse lost an unprecedented 111 billion Swiss francs ($120 billion) worth of assets during the three final months of last year, most of which departed in the run up to the big strategy announcement on Oct. 27. Yet the bank ultimately reported almost 30 billion francs more in outflows by the end of 2022, despite a frantic campaign to call tens of thousands of wealthy clients around the world.
Plans for the carved-out investment bank under ex-Credit Suisse board-member Michael Klein remain vague, and the outflow tide means the core wealth management business has a smaller base from which to earn profits. While the overhaul started in October is, on paper, a three-year process, Thursday’s results show the urgency of the situation facing Koerner and Chairman Axel Lehmann. It’s unlikely that investors will wait that long without results before demanding an even more radical solution.
When Deutsche Bank AG was in similarly dire straits a few years ago, it took the drastic step of chucking out the entire equities trading unit. It also stopped paying dividends for two years and ended up cutting about 7,000 jobs. While the restructuring, which officially ended at the beginning of this year, is widely seen as successful, it owes much to the tailwind it received from a global trading boom and, more recently, rising interest rates.
Credit Suisse’s assets under management have plunged to a six-year low – down CHF 300 billion from a 2016 high of CHF 1632 billion.
Might have been a Hammerhead or Hawk torpedo — NOT C4
Sputnik, the Russian state-owned news agency and radio broadcast service, analyzed Flightradar 24 data showing US and German Navy aircraft regularly circling the sites during Baltops 24 between June 8 and June 16, 2022. The ASW aircraft descended to low altitudes and disabled their transponders in almost every flight to disguise their trajectories.
On June 8, a US Navy P8 Poseiden circled the sites of three future explosions northeast of Bornholm Island. A German Navy P3 Orion flew over the future blast site east of the island.
On June 9, the Poseiden flew over the sites northeast and east of Bornjolm.
From June 11 to June 15, the Poseiden repeatedly circled over the attack sites every day.
Econophysics2020 