Tag Archives: Russia

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Falling crude threatens gold

Nymex Light Crude broke long-term support at $76/barrel, signaling a further decline. Sharply falling 13-week Twiggs Momentum reinforces this. Brent crude is in a similar down-trend. Long-term target for WTI is $50/barrel*.

Nymex Crude

* Target calculation: 80 – ( 110 – 80 ) = 50

Supply is booming and OPEC members appear unwilling to agree on production cuts [Bloomberg]. Goldman Sachs project WTI prices of around $74/barrel in 2015 [Business Insider], but the following chart of real crude prices (Brent crude/CPI) suggests otherwise.

Nymex Crude

Prior to the 2005 “China boom”, the index seldom ventured above 0.2. The subsequent surge in real crude prices produced two unwelcome results. First, higher prices retarded recovery from the 2008/2009 recession, acting as a hand-brake on global growth. The second unpleasant consequence is a restored Russian war chest, financing Vladimir Putin’s geo-political ambitions.

I suspect that crude prices are not going to reach the 2008 low of close to $30/barrel, but the technical target of $50 is within reach. Given the propensity of gold and crude prices to impact on each other, the bearish effect on gold could be immense.

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Russian policy follows “organized unpredictability”

From Der Spiegel:

….Russian policy, says [German diplomat Gernot Erler], is currently following the “principle of organized unpredictability.

“Foreign Minister Frank-Walter Steinmeier, who sought to establish a “positive agenda” with Moscow when he took office, is particularly frustrated. In recent weeks, Steinmeier has complained several times of significant breaches of trust perpetrated by the Russians and says he doesn’t foresee relations with Moscow normalizing any time soon. Merkel is of the same opinion….

One official at Merkel’s Chancellery says that in some ways the situation is even more difficult than it was during the latter phases of the Soviet Union. Back then, the official says, Moscow at least adhered to agreements.

Read more at Germany Worried about Russian Influence in the Balkans – SPIEGEL ONLINE.

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Chaos in Eastern Ukraine rebel government

From Christian Neef at Der Spiegel:

….the disputes between leaders in Donetsk and Lugansk are growing — a development Moscow views with dismay. Their citizen militias are disintegrating into different groups that are each pursuing different agendas. Some are refusing to recognize the leaders of the People’s Republics and others don’t want to accept the terms of the Minsk Protocol. One of the biggest problems is the Cossacks, who control 80 percent of the Lugansk region and have now proclaimed their own state, the Lugansk Democratic Republic. The situation in Lugansk itself is especially complicated given that the city is partly under the control of criminal gangs.

Resistance is even stirring in Donetsk. Three weeks ago, a party calling itself “New Russia” held a protest in the city center and pilloried leaders of the separatist republic for agreements they had made with Kiev. Speakers at the demonstration said the cease-fire must be ended immediately and that attacks against Ukrainian positions should resume. A short time later, assailants perpetrated an assassination attempt against New Russia’s leader, who as recently as this spring had been the “people’s governor” of Donetsk….

Read more at The Chaos Republics: The Real Test for Rebels Will Come in Winter – SPIEGEL ONLINE.

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Europe’s Energy Essentials by Ana Palacio | Project Syndicate

Ana Palacio on Europe’s energy challenge:

Energy’s emergence as a focal point for European leaders makes sense, given that it lies at the confluence of the three existential threats facing the European Union: a revisionist Russia, the declining competitiveness of European businesses, and climate change.

….The most tangible element of the EU’s emerging energy-policy framework is the internal energy market, which, once completed, will allow for the unimpeded flow of energy and related investments throughout the EU. Such an integrated energy market would lead to significant savings – estimates go as high as €40 billion ($51 billion) annually by 2030 – thereby providing a much-needed competitiveness boost.

The internal energy market would enhance Europe’s energy security as well…. individual countries are often excessively dependent on a single source and, more dangerously, a single supplier: Russia. Unrestricted energy flows within the EU would mitigate the risks of supply disruptions or shocks.

Read more at Europe’s Energy Essentials by Ana Palacio – Project Syndicate.

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Poland Prepares for Russian Invasion | The XX Committee

A top Polish MoD official, a man of “sober and strongly pro-American views” opines about Barack Obama and his national security staff:

“…You have no idea how many promises we’ve been given, even by the President himself, but there’s never any follow-up, it’s all talk. He thinks he’s on Oprah.” When I asked if he thought America would come to Poland’s aid in a crisis, he said laconically, “I’d flip a coin.”

Read more at Poland Prepares for Russian Invasion | The XX Committee.

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Russia’s Ruble in a world of pain

Russia’s ruble is in a world of pain, having lost one-third of its value against the Dollar over the last 40 months. The down-trend is accelerating, emphasized by two large 13-week Twiggs Momentum peaks below the zero line.

RUBUSD

Vladimir Putin has backed himself into a corner and has no way out but to escalate. His current strategy in Eastern Europe of one-step-back-two-steps-forward is becoming predictable and the European Union is likely to run out of patience, responding with further sanctions. Increasingly threatening behavior in the Baltic is also unlikely to intimidate, merely strengthening alliances and resolve.

George Soros on the Ukraine crisis:

Former Swedish PM Carl Bildt seems to agree:

Ambrose Evans-Pritchard weighs in on Russia’s economic woes:

https://twitter.com/Colin_Twiggs/status/525096169311977473

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In Milan, Germany’s leader strikes the right note on Russian sanctions | Washington Post

Opinion from the Washington Post:

To her credit, Ms. Merkel is staking out a firm position, perhaps because she has spent more time than any other Western leader talking to Mr. Putin about Ukraine. On Monday she said, “There’s a long way to a cease-fire, unfortunately,” and added that Russia would have to respect Ukraine’s territorial integrity “not just on paper” before sanctions could be lifted. That added weight to comments last week by Secretary of State John F. Kerry, who — even as he tried to promote U.S.-Russian cooperation on other issues — said Russia would have to withdraw “heavy equipment” and allow its border with Ukraine “to be properly monitored and secured” to win sanctions relief.

Mr. Putin is unlikely ever to meet those terms. To do so would doom Novorossiya, which can’t survive without military and material support from Russia. As the sanctions bite, he is as liable to escalate his aggression as to offer concessions….

Further escalation is not likely — it’s inevitable. Decisive action now will save much pain later. Read Putin’s Coup, Ben Judah’s piece on how Vladimir Putin has consolidated his hold on power. The parallels with Germany’s NSDAP in the 1930s are chilling — using fear to quell dissent.

Read more at In Milan, Germany’s leader strikes the right note on Russian sanctions | The Washington Post.

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Ukrainian Soldiers Provide More Evidence of Russian Military Participation in Eastern Ukraine

Matthew Aid reports that captured Ukrainian soldiers offer new evidence of direct Russian military involvement in eastern Ukraine:

Stepping out of a bus on at dusk on Sunday during a prisoner exchange, Alexei Koshelenko said he was captured during heavy fighting on Aug. 24-25 near the town of Ilovaysk, east of the separatist stronghold of Donetsk…..

“We were hit by multiple rocket launcher Grads and after that the troops just swept us away. We were completed defeated within 20 minutes. Many of us were killed, others are missing,” Koshelenko told reporters.”They were Russians,” he said, standing among unshaven and exhausted-looking soldiers being counted before the swap was completed. Referring to a city 300 km 200 miles northeast of Moscow, he said: “They said they were an airborne assault battalion from Kostroma.”

Read more at 2 Ukrainian Soldiers Provide More Evidence of Russian Military Participation in Fighting in the Eastern Ukraine – Matthew Aid.

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Putin: If you love someone set them free…

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“The Russians fear us far more than we fear them” | Nigel Farage

Not often I agree with Nigel Farage, but his prescient 2008 warning about Russia and the Ukraine makes you wonder about EU foreign policy:

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Is Russia making preparations for a great war? | OSW

Andrzej Wilk asks “Is Russia preparing for a large-scale war?”

In total, these armed exercises involve over 200,000 soldiers and several thousand combat vehicles, hundreds of planes and helicopters, and about a hundred ships…… military spending has become the undisputed priority of Russia’s financial policy. For 2015, this will reach the value of 4.0% of GDP (compared to 3.5% of GDP in 2014), a rise of more than 10% in real terms (to a level of at least US$84 billion). The increase in the Russian army’s activity and military spending is being accompanied by an information campaign which is increasingly intense, and is being channelled to meet public expectations, according to which Russia must defend itself against the aggression of the West.

….At present, it is increasingly relevant to question whether the spiral of militarisation which the Kremlin has set in motion has already reached the point of no return. The only way out in such a situation would be, in the best case, to achieve a spectacular success along the lines of Russia reducing the whole of Ukraine to a vassal state… and in the worst case, for Moscow to start a war on a far bigger scale than its actions in Georgia in 2008, or currently in Ukraine.

Read more at Is Russia making preparations for a great war? | OSW.

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The risks in a galvanized Nato | Business New Europe

From Mark Galeotti, Professor of Global Affairs at New York University:

…Of course, Nato still has a role, not least to ensure there is no temptation for rather more robust pressure from Moscow on Europe. But to think that it can or even should try to respond to the full range of challenges of the new age of conflict is foolish — and even dangerous.

First of all, the task of inoculating bordering states from potential Russian mischief — whether stirring up disgruntled minorities, subtle destabilization or unsubtle economic pressure — is more properly handled by other agencies. National governments, obviously, need to pay more attention to what, in military terms, would be called “target hardening.” Those minorities need to be integrated, due diligence should identify flanking Russian buyouts, political finance regulated. The trouble is that this means not just taking action now that Russia looks problematic, but sustaining it — turning away potential investment, alienating a neighbor and so on — even when things look quieter.

Of course, the EU could also play a positive role here, but to date the EU’s capacity to mobilize and maintain this kind of action is also questionable. But the second serious concern is that the more Nato eases itself comfortably back into its role as the defender of the West from the Russian hordes, the more it consolidates the current dangerous and zero-sum confrontation. It also plays to a nationalist, even xenophobic constituency within the Russian elite, especially strongly represented within the security agencies and the Orthodox Church, who actually appreciate any opportunity to cut themselves off from the West and its dangerously infectious notions of egalitarianism, transparency and rule of law. This faction is currently in the ascendant, but it need not be so, especially given the evident concerns of many within the Russian business community at the prospect of being locked away from the West.

This is the challenge. Nato patently still has a role. But it is far too blunt an instrument to be able to deal with the range of subtle, deniable or downright devious tactics Russia would deploy. Instead, the West will have to develop new, more appropriate defenses — and try to avoid playing into the hands of the ultra-nationalist wing in the Kremlin happy to find excuses to see their country surrounded and beleaguered.

Read more at STOLYPIN: The risks in a galvanized Nato | Business New Europe.

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Must-watch interview with Edward Lucas on Latvian TV

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Trouble in the East

Poland, Ukraine and Lithuania plan to form a common brigade:

Ben Judah, author of Fragile Empire: How Russia Fell In And Out Of Love With Vladimir Putin observes:

“This emerging military alliance between Ukraine and Poland/Lithuania is a sign that the US/EU ability to control it allies decreasing fast.”

Lack of leadership from their Western allies is forcing Eastern NATO states to form their own alliances, which could drag NATO into a conflict with Russia. Garry Kasparov in an interview with Maria Bartiromo sums up the situation:

“If you try to lead from behind no one will follow you….Obama shows unwillingness to engage the challenges that are there.”

Garry Kasparov on Putin

Click on image to play video

Obama is no Ronald Reagan and his reluctance to confront Putin is encouraging further risk-taking. As Petro Poroshenko told the House:

We appreciate the blankets and night-vision goggles that you sent us….but we cannot fight a war with blankets.”

The ceasefire in the East is tenuous and likely to collapse at any time.

If the ceasefire does collapse, Putin will continue to escalate, destroying Obama’s and NATO credibility with their allies in the East. Sanctions have not worked as a deterrent. Brent crude is falling

Nymex and Brent Crude

But the impact on Russia is cushioned by the falling Rouble.

RUBUSD

In the long-term this will cause inflation. But the immediate deterrent effect is negligible.

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Trouble in the East

Poland, Ukraine and Lithuania plan to form a common brigade:

Ben Judah, author of Fragile Empire: How Russia Fell In And Out Of Love With Vladimir Putin observes:

“This emerging military alliance between Ukraine and Poland/Lithuania is a sign that the US/EU ability to control it allies decreasing fast.”

Lack of leadership from their Western allies is forcing Eastern NATO states to form their own alliances, which could drag NATO into a conflict with Russia. Garry Kasparov in an interview with Maria Bartiromo sums up the situation:

“If you try to lead from behind no one will follow you….Obama shows unwillingness to engage the challenges that are there.”

Garry Kasparov on Putin

Click on image to play video

Obama is no Ronald Reagan and his reluctance to confront Putin is encouraging further risk-taking. As Petro Poroshenko told the House:

We appreciate the blankets and night-vision goggles that you sent us….but we cannot fight a war with blankets.”

The ceasefire in the East is tenuous and likely to collapse at any time.

If the ceasefire does collapse, Putin will continue to escalate, destroying Obama’s and NATO credibility with their allies in the East. Sanctions have not worked as a deterrent. Brent crude is falling

Nymex and Brent Crude

But the impact on Russia is cushioned by the falling Rouble.

RUBUSD

In the long-term this will cause inflation. But the immediate deterrent effect is negligible.

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A Premature Party for Poroshenko

From Leon Aron, Director of Russian studies at the American Enterprise Institute:

…By withholding military assistance to Ukraine — the only thing that could have changed Putin’s mind by giving Kiev a chance to turn the tide on the battlefield — the West has greatly contributed to [Ukrainian President] Poroshenko’s decision to accept a very bad deal. No amount of ovation, not even a standing one, during Poroshenko’s address to the joint session of Congress today can obscure this grim reality.

Read more at A Premature Party for Poroshenko.

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Defence With A “C”: The Russian Bear Cometh!

From Chris at Defence with a C:

Russia has spent the last decade talking about programs to upgrade its armed forces and spend more money on things like training, logistics and maintenance. The fruits of this investment, or even just the investment itself, appear to be taking a very long time to actually materialise.

This is not to say that NATO shouldn’t sleep with one eye open, or that NATO should stop investing in its collective defence. Vigilance is the first stage of preparedness after all. But to say that Russia is an imminent threat to NATO is over egging the pudding I feel….

Read more at Defence With A "C": The Russian Bear Cometh!.

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Putin Attacks the West’s Soft Underbelly | World Affairs Journal

From Arthur Milikh at the Heritage Foundation:

Alexander Hamilton lamented long ago, in Federalist 25, what may become our tendency to act as if “all that kind of policy by which nations anticipate distant danger and meet the gathering storm must be abstained from.” Putin knows we want to be deceived. But what nation would choose, as Hamilton puts it, to “receive the blow before we could even prepare to return it”?

Putin’s new genre of war in part stems from our Western intellectual deficiencies. He knows we cannot countenance full-on conventional warfare in such a critical region—but we can swallow ambiguity. He knows that we will likely intervene only on account of moralism or shame, but we will not act strategically, trusting in our judgment. Putin will provide us with empirical data to sufficiently muddy the waters and thereby destroy our confidence in our own intuition. The incursion of a “humanitarian” convoy of 200-plus trucks into Ukraine last month was a masterful example of this….

Read more at Putin Attacks the West's Soft Underbelly | World Affairs Journal.