The Ukraine Crisis Plot Twists Again

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Things are hotting up nicely for our World War D conference. The lineup couldn’t be better to discuss the new rising geopolitical tensions. Then again, they aren’t new at all if you think about it…

So who’s coming? James Rickards was part of the Pentagon’s first economic war games. Marc Faber is a specialist at securing wealth internationally and brings a very Swiss perspective to geopolitics. Security expert John Robb knows what’s going on behind the scenes. And Satyajit Das will explain just how ridiculous the whole shenanigans are in his brilliantly eloquent style.

We plan on ruining the excitement though. The Cold War stayed cold for a reason. The question is how far tensions can flare. And the economic impacts those tensions will have. But we don’t think either will be a serious issue.

Russian President Putin made our point nicely. Here’s a headline from Russian newspaper Itar Tass: ‘Putin: Those [foreign nations] who are talking about imposing sanctions on the Russian Federation should first consider the impact of those sanctions.‘ On the list of retaliations is the confiscation of European and American assets in Russia. The Russian Parliament’s upper house is already debating the measures.

Investors are getting a lesson in country risk. We’ll be sure to ask Marc Faber about this one, as he has high hopes for Russia.

But Putin was mostly referring to Europe’s reliance on Russian gas. Much of it happens to flow through pipelines in the Ukraine. Siemens CEO Joe Kaeser was asked about this at an energy conference in Texas:

‘Maybe the American people or the government or whoever raises their eyebrows can say how could the Europeans be so moderate on the debate over sanctions. Guess what? You don’t want to sanction anyone you depend on.’

Good old globalisation, ay? Preventing conflicts around the world by forcing leaders to back down or face a cold, hungry and grumpy population. Unfortunately Kaeser also commented that the Americans are in a better position to impose meaningful sanctions. So maybe Mr Kaeser is doing what all CEOs do when asked about politics – saying whatever avoids harm to the company.

For now, Russia is very much playing ball. Ukraine owes nearly US$2 billion to Russia for gas delivered over the past months. Letting an antagonistic government’s nation buy your gas on credit is not exactly a war footing.

Ironically, foreign aid promised to the Ukraine by the US and EU might end up going to pay that bill. That means European and American cash will and end up in Russian hands even as sanctions are imposed on Russia by the same countries!

Wait. The EU is promising aid money? Yep, 11 billion euros worth over several years. It’s the broke leading the broker. But that’s another story.

Meanwhile, the Ukrainian plot has significantly thickened. Remember when that evil President Yanukovich sent his snipers to shoot those gallant Ukrainian protesters in Maidan? Well, it turns out the same snipers may also have shot the police. Hmm.

In a leaked phone conversation the EU foreign minister summed up the situation for the EU foreign policy chief: ‘So there is now stronger and stronger understanding that behind the snipers, it was not [then President] Yanukovych, but it was somebody from the new coalition,‘which is now in government.

The leak has been confirmed as real by the Foreign Minister, but not the Foreign Policy Chief.

So it seems the new Ukrainian government may have hired the snipers to kill some of their own protesters to make Yanukovich look bad. And, surprise, surprise, the new Ukrainian government says it isn’t planning on investigating.

Conveniently, the leak came shortly after Vladimir Putin pointed out that the snipers could’ve been opposition forces trying to destabilise the situation. Clever clogs.

Not only that, but the news also vindicates the EU’s initial caution over supporting the opposition in the Ukraine. Remember, the Americans decided ‘F*** the EU’, let’s get our men into government in the Ukraine. And they did. But now the question is what sort of guys those men are.

Of course, this plot follows just about every American-backed overthrow in history. It sounds good and turns out bad.

While Eastern Europe looks on edge, it’s all good news on the home front. Aussie GDP growth came in at 0.8% for the December quarter, slightly better than expected, taking the annual rate to 2.8%. That’s fairly good, especially in the face of public sector cuts and inventory run downs (which reduce GDP because inventory created was recognised in previous years).

The 2% year-on-year fall in public sector spending was the first fall in sixty years. And the annual GDP growth rate gave the lucky country its 22nd year of consecutive economic growth. 

Hinting at trouble, new dwelling and non-mining capital spending both fell in the quarter to December. So a housing construction boom isn’t replacing the mining boom just yet.

But it might soon. Building approvals and commercial finance commitments rose and the export phase of the mining boom is having an impact on the trade balance.

Better still, our already enormous finance and insurance sectors took the services PMI out of contraction to 55.2, the first expansion for two years.

All this adds up to escaping any economic recession according to John Edwards of the Reserve Bank board. We’re in for another run of prosperity.

Given that Melbourne and Sydney are about 20% more expensive to live in than New York, we’re not sure how much more prosperity Australia can handle.

The good news is, you don’t have to find out the hard way.

Regards,

Nick Hubble+
for The Daily Reckoning Australia

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Nick Hubble
Nick Hubble is a feature editor of The Daily Reckoning and editor of The Money for Life Letter. Having gained degrees in Finance, Economics and Law from the prestigious Bond University, Nick completed an internship at probably the most famous investment bank in the world, where he discovered what the financial world was really like. He then brought his youthful enthusiasm and energy to Port Phillip Publishing, where, instead of telling everyone about The Daily Reckoning, he started writing for it. To follow Nick's financial world view more closely you can you can subscribe to The Daily Reckoning for free here. If you’re already a Daily Reckoning subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Daily Reckoning emails.
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2 Comments on "The Ukraine Crisis Plot Twists Again"

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shortchanged
Guest
Who’d have thunk it, the conspiracy theoriests are right again, the rebels, aka terrorists, shooting their own people. Typical for an CIA/USA/IDF attempted coup, yes, they are there too, and they ballsed that one up as well. They forgot Putin can run rings around that decadent lot in washington, a very clever man is he, a plan very well thought out and well executed. His soul reason is the good of Russia, as it should be. As for the 2billion owed to Russia, what if he ‘asked’ for it in gold, and I wonder how much is invested in Russia… Read more »
Lachlan
Guest

ha, those conspiracy theories are nowhere near as grand as mine, crumbs sc they’re just looking mainstream now days

wpDiscuz
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