© FT montage/Reuters/EPA/AFP/Getty ImagesRussian President Vladimir Putin and sanction targets
The entire western strategy against Russia is an economic one. The economic implications of the current conflict can be broken down into three broad areas.
The first concerns financial markets over the next few weeks and months, particularly commodity prices. In economics terms, Russia is a large petrol station, with a productive wheat farm attached to it. As well as being the second largest oil exporter in the world, Russia is the world's largest wheat exporter. The prices of energy and food, two of the main components in the West's rate of inflation, will rise. Allied to commodities will be all sorts of financial market gyrations as the news from Ukraine ebbs and flows.
The second area that will be critical over the coming months is the extent to which economic and financial sanctions will deter Moscow. There are various types of restrictions, beginning with the mafia boss approach, where the West treats Putin like a mafia don and makes life uncomfortable for the Russian oligarchs whom he has fostered and who in turn bolster him.
These sanctions would prevent them from traveling, prevent their companies from trading, and prevent them and their specific companies from accessing capital in foreign markets. The aim is to strangle movements and suppress the global lifestyles of Mayfair's Russians, causing them to turn on the boss.
Another area of sanctions will be a ban on Russian oil and gas exports, starving Russia of foreign exchange revenues. Then there are sanctions that will prevent capital market access for all Russian companies, the Russian government bond market and a potential bar on Russian companies and Russian citizens operating the Swift system, which allows Russians to trade overseas.
Excluding Russia from the Swift international payments system would effectively isolate the country from the world economy.
The third economic area of concern will be the impact of this war on the entire global economy. Are we now hurtling towards a recession, as inflation rises and international demand slows, revealing the underlying fractures in the world economy, not least the huge build-up of debt in the West and China?
Is Putin's greatest weapon the very instrument that the West is hoping to use against him, namely the assumed strength of the western economy?In the immediate term, wars cost money; they also cause money to move, which creates opportunities for speculation. Because war causes shortages, the price of some things goes up, while the price of others goes down.
Since Alexander the Great, wars - and news about the prospects of faraway conflicts - have driven the mood of financial gamblers. In the Roman forum, wars created all sorts of manias because the aim of the Roman war machine was to colonise foreign land and grant licences to Roman companies to operate as imperially anointed tax collectors in the new territories.
These companies were called societas publicanorum. We don't appreciate that Rome was the first shareholding oligarchy, where rich citizens traded publicly quoted companies. News of war, then as now, drives speculative frenzies. This is what we are now seeing in global financial markets.
Maybe the most famous episode of war-related financial speculation was the Rothschild family, which had initially bet on Napoleon winning at Waterloo, stocking up on gold in London and selling British government IOUs called "consuls".
Understanding that information was at a premium during wartime more than any other period, Nathan Rothschild set up a network of carrier pigeons to keep him ahead of the pack when it came to intelligence. When the British side unexpectedly won at Waterloo, a Rothschild pigeon flew back to London with the news, ahead of everyone else travelling by boat from Belgium to Britain.Speculation and war are old bedfellows. Right now, in the commodity markets, prices will be bid up for oil, gas and food. This will drive inflation further upwards, not only because of the shortage of wheat from Russia but also because fertilisers and farming machinery are dependent on fossil fuels - when the price of one goes up, the price of the other rises too.
Rothschild promptly sold his gold, bought up British government IOUs, and made the family fortune in the process, substantiating his earlier moniker as the "Napoleon of Finance".
In terms of the sanctions on Russia, unless China signs up, it's difficult to see them working. Iran has been under full sanctions for years, yet has muddled through.
China, the world biggest importer of energy, will happily buy Russian oil and at the same time keep Russia in consumer goods, all the while quite content that the USA and the West are at loggerheads with Moscow. More than 50 per cent of Russia's almost $400 billion (€360 billion) exports are petrol or petrol-related, and now 16 per cent of China's petrol imports come from Russia. By diverting away from the Gulf, China could easily absorb much of the Russian exports that used to go West.
Gas is different as most of it is pumped though existing pipelines to Europe. It will be much harder for Russia to replace this source of demand. Russia exports about $55 billion worth of gas.
However (and here is the weakness of the West's position) Russia has a large trade surplus, and this will get larger if it can't buy German cars or Apple Macs, making its economy less - not more - likely to fracture. And its abundant foreign reserves and gold holdings mean it can maintain the rouble's value.
In short, the West's trade sanction hand is weak.
The financial sanctions aimed at cutting off Russia from the world economy by removing it from the Swift system would be by far the most damaging for the Russian economy.
Russia would not be able to settle any trades and would force the country to be self-sufficient. If the US could seal off the global economy, this might work for the West; 30 years ago, this may have been more achievable, but now everything depends on China.
If China supports Russia, all western bets are off. And why wouldn't China support Russia? After all, it has its own eastern Ukraine in Taiwan, which Chinese president Xi Jinping (like Putin with Ukraine) doesn't recognise as a separate country.
We are in this for the long haul. The global economy doesn't like a long haul characterised by higher levels of inflation, a compromised Federal Reserve, too much debt and uncertainty about world trade. The Fed will now slow its advertised increases in interest rates, making the situation feel less stable as inflation rises.
All the while the presidency of Joe Biden looks more fragile, And with pro-Putin Donald Trump waiting in the wings, things may well work out for the Kremlin.
Reader Comments
Instead of putting all eggs in the Chinese basket, Russia should cut a deal with India regarding Energy. If Russia helps India take over Pakistan occupied Kashmir, India will support Russia and Russian oil and gas can flow into the Indian economy across Kashmir.
However if Russia makes the mistake of helping pakistan, it will give an incentive for India to go into the Western & US camp. This will make Russia completely dependent on China who are shrewd and will extract their pound of flesh from Russia which may be very bitter in taste.
For now Putin has only one option. To subjugate Ukraine and extract losses Russia suffer by using its resources for a 100 years as punishment.
If conventionally Russia cannot do it, it should what US did with Japan.
Your concept of Russia supplying India with energy is interesting. It's a huge country (population-wise) but nowhere near as industrialized as China. India has been sitting on the fence between USA and Russia for many years. Pakistan has been China's client for many years - China helped Pakistan build a bomb in the 1990's, to counter India after India built a bomb in 1974 before Pakistan, which in turn was in response to China building a bomb back in 1962.
Yes, Russia has lost tens of billions of dollars supporting Ukraine economically and energy-wise over the years since 1990. The Ukrainians are too dumb to appreciate when they have/had it good.
Overcrowded China has its eyes on empty Siberia, and Russia knows this quite well. Russia would far rather have been friends with the West, but the West, especially the USA under the Clinton crime cartel, decided to rape Russia instead. Unfortunately it has not worked out as hoped, but the USA keeps doubling down on its abuse of Russia, expecting a different result, which proves the USA is insane.
Though Taiwan produces most of the chips its also part of an ecosystem that involves some European, Japanese and American enterprises without whom Taiwan cannot manufacture the chips. So by owning Taiwain, China cannot simply threaten the world. In fact European and Japanese and American companies can break the ecosystem and threaten to stop Taiwan from being able to manufacture the chips.
Thus no one is going to threaten anyone.
India may not be industrialised as China ( and that may be good environment wise for India) but it has a population that will consume both energy and other stuff like cars or electricity and electronics and this is increasing by the day. So India is ramping up its manufacturing base to locally cater to this demand and get off importing from China which is the case now.
So even though China and Pakistan are both double trying to create trouble for India, India has been resilient and managing both without having to go to war with either. Because its confident about it's own strength. It is no longer worried of Pakistans nuclear weapons or China's as it has enough of its own as a deterrent.
What India lacks is energy and imports 80% of it and thus a lot of its earnings go into this. So cheap Russian gas and oil can help India reach the economic status of China in the future and India can supply goods to Russia.
Also India is no threat to Russia as it does not have any direct borders or a history of confrontation with Russia. In fact it's the opposite.
So it's a win win for both countries.
India should remember Homir Jehangir Bhabha, assassinated by the CIA in an attempt to prevent India from developing the bomb. And also Lal Bahadur Shastri, who I suspect was murdered in Tashkent by the Soviets collaborating with the CIA. (Yes, the intelligence communities of so-called enemies do collaborate - they are above national politics.) India should also remember what Henry Kissinger said: "To be an enemy of the United States is very dangerous. But to be a friend of the United States is fatal."
As for Taiwan, if China took it over, it is China who would decide if it wants to export chips to a certain country or not. The foreign manufacturers with factories in Taiwan would have no say in the matter. Personally, I think it will happen in due course - but right now, China should invite Taiwan to secret talks on reunification, instead of assuming a threatening military posture.
I don't see any energy solution for India - it simply lacks energy resources. I think it has a lot of coal? But that is a polluting source, and India is already one of the most polluted places on earth. Perhaps it can build nuclear power plants - I understand there are newer and safe alternative technologies for that.
Looking down the road many years, India might be the next Great Power after China collapses, but that is far, far in the future. China has not even begun to reach its present phase of peak power yet.
Good luck with what's happening now and what is to come. First fires (remember bush fires in Australia or have your forgotten), then covid pandemic and now the world on the verge of world war 3.
Meanwhile skyscraper size asteroids are whizzing past earth almost every other day, earthquakes in Mexico and elsewhere.
I guess unless everything is lost human beings will not come to their senses.
What is interesting to me is how the banks are freezing and seizing the assets of many Russians. At the same time the European countries are dependent on cheap gas and wheat from Russia. It looks to me like the West is causing a complete financial collapse of the Western economies. I think the globalists see their only hope is that some Russian oligarch or CIA/MI6 operative assassinates Putin, which is a desperation move.
As you said, yes, the 'PutinPlan' - since Babylonian times and before.
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What can we say for certain? The MSM is not going to present a true picture of what is happening. The MSM will promote war because the globalists need chaos and war to survive the revelations coming out about the plandemic, election fraud and manipulation, child trafficking, and all the corrupt government officials making millions of dollars off the war on the people.
I have listened to another of his, I will link below. It still concerns Russian politics but more general.
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If you are inclined to, STORMIE GRACE has a full year of bi-weekly FREE ASTROLOGY from the ground up, and taught by the Net's finest Astrology teachers available on her site (Youtube Academy). We covered costs for this initiative of hers during her last year's Kickstarter I . She also has a whole selection of Eat n Greets (interviews).
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