Category: Russia & Former USSR

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Aggressive defence | Defence and Freedom

From defence_and_freedom@gmx.de:

Imagine an unfolding crisis, and your government has confidence in its expectations for what’s going to happen next. Couldn’t a couple aggressive*, unexpected actions ruin the opposing sides’ plans, crush their timetable, make their political calculations obsolete, destroy their confidence in their ability to predict your government’s reactions and to predict the costs of the crisis?

Couldn’t such a disruption make a quite acceptable diplomatic settlement more likely? — I’m all for peace and free love and stuff**, but I distrust the notion that escalation is always a bad thing. An escalation to ruin some aggressor’s day may be the right thing to do. To have and obey a defensive and reactionary game plan makes one predictable. The very existence of a crisis should be understood as a hint that someone used this predictability to predict the outcome of a produced crisis – and arrived at the conclusion that it’s a good idea.
A.k.a. failure of deterrence.

* “aggressive”, NOT “aggression against a peaceful country
** Similarly, I don’t think “war as last resort” makes much sense.

Read more at Defence and Freedom: Aggressive defence.

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Novorossiya Is Coming Apart at the Seams

From Anna Nemtsova:

Pro-Kremlin think tank analyst and insider Yuri Krupnov explained the shift to me: “There’s a crisis of management in Russia,” he said. “Moscow elites have managed to convince Putin to give up the idea of Novorossiya. Many in Moscow can’t wait for European Union sanctions to be lifted, so Putin will meet with [Ukrainian President] Poroshenko and [E.U. Commission President] Barroso soon and most probably cut a deal.” But Krupnov hastens to add that Russia’s willingness to bargain with Kiev does not signal an end to the conflict: “Moscow has betrayed Novorossiya,” he says, “but that doesn’t mean it will guarantee peace.”

Read more at Novorossiya Is Coming Apart at the Seams.

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Vladimir Putin’s pointless conflict with Europe leaves it a vassal of China – Telegraph

From Ambrose Evans-Pritchard:

European officials calculate that Mr Putin will not dare to cut off energy supplies, since to do so would bring the Russian state to its knees within months. But even if he tried – as a shock tactic – it would not achieve much. Oil can be obtained anywhere.

Europe’s gas inventories have risen to 81pc of capacity, up from 46pc in March. Britain is at 94pc……Japan has just given the go-ahead for two nuclear reactors to restart in October, with seven likely by the end of the year. Koreans are also firing up closed nuclear reactors. All this frees up LNG.

Whether this is fruit of a co-ordinated strategy, the net effect is that inventories and spare LNG could cover a Russian cut-off for a long time, probably through the winter with rationing. Areas of eastern Europe have no pipeline supply from the West, but “regas” ships could plug some gaps in an emergency. The gas weapon is not what it seems.

The Kremlin is counting on acquiescence from the BRICS quintet as it confronts the West, and counting on capital from China to offset the loss of Western money. This is a pipedream. China’s Xi Jinping drove a brutal bargain in May on a future Gazprom pipeline, securing a price near $350 per 1,000 cubic metres that is barely above Russia’s production costs….

Read more at Vladimir Putin's pointless conflict with Europe leaves it a vassal of China – Telegraph.

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Falling crude prices are good news

Crude oil prices are falling sharply. Nymex Light Crude broke support at $98/barrel and Brent Crude is testing support at $104. Breach of that support level would confirm a primary down-trend.

Nymex WTI Crude

The theory has been bandied about that lower crude prices are a Barack Obama strategy to deter Vladimir Putin in East Ukraine. But there are signs of an economic slow-down in Europe, especially Italy, that would hurt demand for Brent Crude. And the Baltic Dry Index, which reflects bulk commodity shipping rates, indicates global trade is at a low ebb. Whichever is correct, low crude prices are welcome — good for the medium-term outlook of the global economy.

Baltic Dry Index

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Russian Oligarchs Shift Cash To Hong Kong Dollars On Sanctions Concerns | Zero Hedge

From Tyler Durden:

Last week we noted the very significant activity by the Hong Kong Monetary Authority as it bought USDollars in size to support its peg. It appears we have found at least one smoking gun for why they were forced to do this. In what appears to be another sanctions-blowback, Russian oligarchs are de-dollarizing their cash holdings and shifting to Hong Kong Dollars.

Read more at De-Dollarization Continues: Russian Oligarchs Shift Cash To Hong Kong Dollars On Sanctions Concerns | Zero Hedge.

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Ukraine: An opposing point of view

I received this from a long-time subscriber and requested permission to publish in the interest of presenting both points of view:

Dear Colin,
Being a subscriber to Incredible charts for many years and liking it very much, for some external reasons I was not reading articles for a long time, but when I happened to read the latest “Europe leads markets lower” article I was completely taken aback how it is politically charged and how it seems to be based on mass media propaganda, not on unbiased facts and analysis… It does not leave a good impression at all. I don’t mind other people having their own opinion, but I think that it should not be imposed on others in supposedly non-political, business articles, so may we respectfully ask your editors to refrain from politically motivated language and argumentation in the business articles and leave it to politicians and political forums instead ? I am talking about the anti-Russian bias and rhetoric – I am a Ukrainian citizen and lived in Ukraine for 30 years before moving to Australia 20+ years ago and I still have friends living in Ukraine, so I think that I am a bit more qualified on this topic than Mr. Abbott’s speeches or Mr. Murdoch’s newspapers. The plain fact is that neo-nazi thugs came to power in Ukraine as the result of coup-de-tat in February (supported and sponsored by some Western countries) and once the Constitution was thrown out of window, the law and order does not exist any more there (so called theory of “controlled chaos” is in full swing), all power ministry heads and many personnel were replaced with ultra-nationalists, civil war was started and atrocious war crimes are committed as we speak – anyone with the different view to people in power at the moment is declared an enemy, people are disappearing, burned alive (in Odessa on 2nd of May), etc. Ukrainian army and semi-legal “national guards” battalions are bombarding south-east regions after they declared that they are not recognising Kiev’s neo-nazi government and everyone who knows a little bit of history would understand why that was their choice voted in referendum by majority of these regions population. This has nothing to do with Russia, but has everything to do with the people in power in Ukraine and their western supporters. In fact, Russia’s showed and still showing a great deal of patience for so many years and seems to be the only country that tries to find some peaceful solution without depriving people of their basic rights to choose the way of living. As for Crimea, this was Russian people/territory for hundreds of years until year 1954 when it was given (read stolen) by decree from the then General Secretary of USSR communist party of Ukrainian nationality and that decree was not legal even by laws of that time – no one raised strong objections at the time simply because it was the same country anyway. Later, when breaking apart Soviet Union (again not legally and against the will of people who spoke on referendum), no one cared about sorting this out properly and for 23 years Ukraine was ruling in Crimea while Russia and people of Crimea were somewhat patient about it until the February coup-de-tat in Kiev and neo-nazi coming to power. Parliament and people of Crimea made their choice very clear in law and referendum where 97% of people voted to become independent state (not unlike Kosovo so cherished by Western countries) and their natural choice and only protection would be to ask Russia to join it which Russia accepted and why it should not ? People of Crimea were saying at the time that “we may not be joining the Heaven in Russia, but definitely we are escaping the Hell” which is exactly what happens now in the former south-east region of Ukraine. If anything, Mr. Obama and other western leaders should stop baseless and counter-productive aggression against Russia and tell their buddies in Kiev to stop this violence and start diplomatic efforts. My apologies for such a long email, but I am just very saddened by the way how it is portrayed in Western media – brainwashing people who are not multilingual and cannot access alternative points of view.
Regards,
Name Withheld

Dear Name Withheld,
I appreciate you taking the time to write and express your views.

I am very concerned about the state of affairs in Eastern Europe. It is, and always has been, a tinder box. And one unintentional spark can start a fire that none of the parties intended. Respect for borders and for the rights of other countries and their citizens is one of the fundamental safeguards to prevent such outbreaks of war. Russia, no matter how strong a regional power, does not have the right to simply take territory by force because it once belonged to them or because they need the territory as a “buffer” to protect themselves from “encirclement” or outright aggression. If all states acted like that we would be in a constant state of war. They have to respect the conventions designed to safeguard the world from future wars and pursue the matter through negotiation or the international courts.

If history serves me correctly, the territory is neither Russian or Ukrainian, but Crimean. It should be up to the people who reside in the region and those who originate from there, like the Tartars, to negotiate its future and not be subjected to a ballot at the point of a gun.

Please can I post your letter on my blog in the interests of giving both points of view — with your name withheld if you wish.

Regards,
Colin

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Has Vladimir Putin taken a dangerous ideological turn?

Vladimir Putin has long shown himself to be ruthless and cynical. But also pragmatic and rational.

In his third term in the Kremlin, however, and particularly in the Ukraine crisis, Putin appears to have taken a decisive ideological turn.

As pressure mounts from Western sanctions and Russia becomes more isolated, speculation has intensified about whether Putin will seek an exit strategy from the Ukraine crisis, or whether he will escalate yet again.

The answer largely depends on which Putin — the pragmatist or the ideologue — the West is dealing with.

On the latest “Power Vertical Podcast” Brian Whitmore discusses the issue with co-host Mark Galeotti, a professor at NYU, an expert on Russia’s security services, and author of the blog “In Moscow’s Shadows”; and Kremlin-watcher Ben Judah, author of the book “Fragile Empire: How Russia Fell Out Of Love With Vladimir Putin.”

Also on the podcast, Mark, Ben, and Brian discuss how attitudes in Europe about Russia are changing — and changing dramatically.

From Radio Free Europe/ Radio Liberty.

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Europe leads markets lower

Summary:

  • Europe retreats as the Ukraine/Russia crisis escalates.
  • S&P 500 displays milder selling pressure and the primary trend remains intact.
  • VIX continues to indicate a bull market.
  • China’s Shanghai Composite is bullish in the medium-term.
  • ASX 200 may experience a secondary correction, but the primary trend displays buying support.

European leaders are waking up to the seriousness of the menace posed by Russia in the East, summed up in a recent Der Spiegel editorial:

Europe, and we Germans, will certainly have to pay a price for sanctions. But the price would be incomparably greater were Putin allowed to continue to violate international law. Peace and security in Europe would then be in serious danger.

Vladimir Putin will not alter course because of a light slap on the wrist. President Obama is going to have to find Teddy Roosevelt’s “big stick” — misplacement of which is largely responsible for Russia’s current flagrant disregard of national borders. And Europe is going to have to endure real pain in order to face down the Russian threat in the East. Delivery of French Mistral warships, for example, would show that Europe remains divided and will encourage the Russian bear to grow even bolder.

Russian Deputy Prime Minister Dmitry Rogozin said, however, that he doubted France would cancel the deal, despite coming under pressure from other Western leaders: “This is billions of euros. The French are very pragmatic. I doubt it [that the deal will be canceled].”
— The Moscow Times

The whole of Europe is likely to have to share the cost of cancelling deals like this, but it is important to do so and present a united front.

Markets reacted negatively to the latest escalation, with Dow Jones Europe Index falling almost 6% over the last month. 13-Week Twiggs Momentum dipped below zero after several months of bearish divergence, warning not necessarily of a primary down-trend, but of a serious test of primary support at 315. Respect of 325 and the rising trendline would reassure that the primary trend is intact.

Dow Jones Europe Index

The S&P 500 displays milder selling pressure on 13-week Twiggs Money Flow and the correction is likely to test the rising trendline and support at 1850/1900, but not primary support at 1750. Respect of the zero line by 13-week Twiggs Money Flow would signal a buying opportunity for long-term investors. Recovery above 2000 is unlikely at present, but breakout would offer a (long-term) target of 2250*.

S&P 500

* Target calculation: 1500 + ( 1500 – 750 ) = 2250

CBOE Volatility Index (VIX) spiked upwards, but remains low by historical standards and continues to suggest a bull market.

S&P 500 VIX

China’s Shanghai Composite Index broke resistance at 2150, suggesting a primary up-trend, but I will wait for confirmation from a follow-through above 2250. Rising 13-week Twiggs Money Flow indicates medium-term buying pressure. Reversal below 2050 is unlikely at present but would warn of another test of primary support at 1990/2000. The PBOC is simply kicking the can down the road by injecting more liquidity into the banking system. That may defer the eventual day of reckoning by a year or two, but it cannot be avoided. And each time the problem is deferred, it grows bigger. So the medium-term outlook may be improving, but I still have doubts about the long-term.

Shanghai Composite

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

The ASX 200 is likely to retrace to test the rising trendline around 5450, but 13-week Twiggs Money Flow holding above zero continues to indicate buying support. Recovery above 5600 is unlikely at present, but would present a target of 5800*. Reversal below 5050 would signal a trend change, but that is most unlikely despite current bearishness.

ASX 200

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

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