On the third attempt, the West finally got hold of the nettle in Ukraine. The draconian measures this weekend are too late for deterrence Vladimir Putinbut it’s not too late to cause real pain and perhaps the beginning of the destruction of his regime.
His market judgment on the previous, minimalist, lowest denominator efforts to punish Russia is almost shameful. Moscow’s MOEX Equity Index jumped 20pc on Friday, with relief rallies for Russian bonds and the ruble. Oil prices fell.
It is a common perception among hardline traders that the West is not willing to go beyond symbolic gestures, and that business will continue as usual even if a sovereign democratic Ukraine removed from the map.
Saturday night was the time when Western democracies took a deep breath and began to use their crushing economic and financial might, all aware of the impending counterattack through a shock. commodities and multiple channels of financial spread.
A joint decision by the US, UK, EU and Canada to sanction Russia’s central bank will prevent Mr Putin from deploying a large part of his $635 billion (563 billion euros) foreign exchange reserves.
It is believed that two-thirds are located in the New York Fed, or in London, Frankfurt and other Western jurisdictions. Reserves may be frozen. Mr. Putin still has gold under his control, so be prepared for a fall in gold prices as he sells 400-ounce Soviet bars on the Dubai market, all the way to the tsar’s last bars pictured royal eagle.
If these estimates are correct – and it may not be so simple – Mr. Putin will no longer be able to stabilize the ruble, or help Russian companies cover some $330 billion (293 billion euros) in debt. abroad when the debt is due.
This is how hyperinflation started. A vicious cycle ensues in which devaluation turns manageable foreign debts into systemic insolvencies.
“Something really big happened. It would be illegal for Western banks to buy the ruble, and the risk is that the currency will fall into free fall. This has never happened before for a G20 country,” said Christof Ruhl from the Center for Global Energy Policy at Columbia University.
Mr. Ruhl said the sanctions were more important than removing Russia from “targeted” areas of Swift’s international payments relationship. That in itself will not stop Russia’s energy trade or sales of oil, gas, coal and grain. “Brokers will be established and will find ways to solve that problem. Costs will be higher but eventually trade will continue,” he said.
Even a partial suspension of Swift would cause some havoc. How will Russian companies pay their outstanding debts to Swiss-based commodity traders such as Glencore and Vitol?
Adi Imsirovic, from the Oxford Institute for Energy Research, says we should be prepared for an energy shock. “I’m surprised oil isn’t trading at $115 or $120. The whole world will be affected by this in a very tight market,” he said.
It would be complacent to think that the market convulsions would stop here. We have to take into account the real possibility that Putin will retaliate by cutting off the flow of gas to Europe completely.
Many assumed he would never do this because he needed the revenue to fund his machine. But the Kremlin’s real source of revenue is crude oil. Gas is a small part of this.
The income stream from the sale of Gazprom to Europe is not decisive in the overall commodity picture, at least in the short term.
Mr. Putin may be tempted to launch an immediate European energy crisis, as he has no credibility left to maintain as a reliable supplier.
Mild weather and LNG shipments from the US have slowed the rate of depletion of gas stocks in Europe, however, inventories remain at the bottom of historic seasonal ranges. “If all Russian gas were cut off, Europe would not have a chance to cope,” said Kateryna Filippenko, Europe gas analyst at Wood MacKenzie.
“In the event of a prolonged disruption, gas inventories cannot be rebuilt during the summer. We will face a dire situation of near-zero gasoline stocks for next winter. The price will be sky high.
“The European energy crisis is very likely to cause a global recession, she said.
The assumption that Mr. Putin does not do this is to repeat the series of mistakes of the past 8 months. At every stage, the West has failed to think more than one move ahead on the chessboard, only to be awed by each of his escalating gamblers.
But the first important thing is the delivery of anti-tank weapons, Stinger surface-to-air missiles, combat drones, rifles and conventional ammunition, and whether these weapons can be transported to the surface. battle fast enough without getting Nato into a war with Russia. .
War is coming. The heroic resistance of the Ukrainian people in arms led to a moral struggle to be seen and counted in the melee..
Germany’s decision to transfer arms to Ukraine is a strategic turning point in this crisis.
In a single speech, Chancellor Olaf Scholz dismantled decades of German Ostpolitik and embarked on a dizzying rearmament of the army. No other country in Europe can hide behind Germany anymore.
Western democracies can still regain the status quo, turning what seemed at first a disastrous defeat into something closer to victory..
But let’s not be delusional. Yes, four days of war showed that Russia’s tactic was on foot; The machinery was mediocre, logistics and supplies were lacking, and the morale of the soldiers was poor. After all, there is nothing special about Mr. Putin’s forces.
But we shouldn’t come to the other conclusion that the invasion has been stopped.
It can take direct action by Nato forces to turn the balance decisively.
My assumption is that some Nato states were more deeply involved in combat support of Ukrainian forces than is acknowledged.
The next surprise for markets could be the discovery that we are closer to war with Russia than anyone thought. (© Telegraph Media Group Ltd 2022)
https://www.independent.ie/opinion/comment/finally-the-gloves-are-off-against-putin-as-west-goes-beyond-symbolic-gestures-41392644.html Finally, gloves against Putin as the West goes beyond symbolic gestures