Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21
Why Tether USDT, Stable Scam Coins Could COLLAPSE the Crypto Markets - Black Swan 2021 - 6th Jun 21
Stock Market: 4 Tips for Investing in Gold - 6th Jun 21
Apple (AAPL) Summer Correction Stock Trend Analysis - 5th Jun 21
Stock Market Sentiment Speaks: I 'Believe' We Rally Into A June Swoon - 5th Jun 21
Stock Market Russell 2000 After Reaching A Trend Channel High Flags Out - 5th Jun 21
Money Is Cheap, Own Gold - 5th Jun 21
Bitcoin and Ravencoin Cryptos CRASH Bear Market Buying Levels Price Targets - 4th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will Russia Go to War Over Ukraine? Don’t Bet on It

Politics / Russia Mar 04, 2014 - 06:22 PM GMT

By: Vitaliy_Katsenelson

Politics

It is hard for me to see a full-blown war between Russia and Ukraine. There are so few cultural differences between these two countries. Ukraine has its own language, but almost everyone (outside of small villages) speaks flawless Russian. If there is a war between these two countries, it will be a civil war.


Ukraine is being pulled in three directions. The western side of the country, the one that is geographically closest to Europe and more industrialized, wants to be part of Europe and wants to retain its Ukrainian culture. The eastern part is heavily populated by Russians and wants to be part of Russia. And then there is Crimea, the stepchild that feels it has been neglected by its new parent (Ukraine) and wants to be closer to its biological parent (Russia). Just like Sochi, which is also on the warm Black Sea, Crimea is a tourist destination, and from what I’ve heard it generates a lot of tax revenue that it sends to Kiev but gets little back.

I don’t see Russia conquering Ukraine for one simple reason: Ukraine is not Norway, which has an $800 billion sovereign fund and is extremely wealthy. (I hope I’m not giving Mr. Putin new ideas here.) Ukraine is as poor as Russia would be without oil and gas. At $3,867, the country’s GDP per capita is barely one quarter that of Russia’s ($14,037). There are no synergies between the two countries except that if they merged Russia would have to worry less about the natural gas pipeline that goes through Ukraine to Europe. Putin is anything but dumb or economically illiterate; integrating Ukraine into Russia would be like tying a giant weight to Russia’s neck.

Trying to read Putin’s true intentions is difficult — or maybe not. Putin wants to walk a fine line and not veer too far from the Russian constitution. (In another life he would be a great U.S. lawyer.) Let me give you an example of how he operates. The Russian constitution allows the president only two consecutive (important word) terms. Putin probably could have done a Bloomberg and changed the constitution to run for a third term, but he didn’t. He helped his then-puppet prime minister, Dmitry Medvedev, to become president and then championed change in the Russian constitution to extend the presidential term from four to six years. At the end of Medvedev’s first term, Putin then ran for president again and won. He guaranteed himself power for 12 years without violating the constitution.

Putin wants to nudge Crimea toward autonomy from Ukraine. Crimea was going to hold a referendum on May 30, which now will be pushed up to March 25. You may say, didn’t Putin just invade another sovereign nation? By placing troops in Crimea, Russia violated international law, but a strong country can justify breaking international law if it considers its actions morally right. The U.S. broke international law by sending Team Six to Pakistan to kill Osama Bin Laden. The U.S. did not ask and never got permission from Pakistan for our military to cross their borders, so we did violate international law; but not a single U.S. citizen (including present company) was upset about it.

Also, the Russians don’t consider Crimea to really be part of Ukraine because until 1954 it belonged to Russia. Half of its population is Russian. Currently, Russians see their troops in Crimea as peacekeepers, protecting their fellow Russians from “Ukrainian nationalists.” Putin is placing a bet that the upcoming referendum will legitimately (at least in Russian eyes) make Crimea autonomous from Ukraine. Ukrainian law doesn’t recognize this referendum as legitimate, but a few thousand troops on the ground and the presence of the Russian Navy may change Kiev’s mind.

An autonomous Crimea is a Russian Crimea. Maybe Putin, by taking advantage of political instability in Ukraine, will achieve what he really wants: control of a very strategic warm-water port without spilling a single drop of blood. He hinted at as much on Tuesday in his first public comments since the incursion, telling Russian media that he saw “no need” to use force in eastern Ukraine.

The international community, including the U.S., may show their outrage, but their options are limited to unfriending Russia on Facebook or — worst case, if things really escalate — unfollowing Russia on Twitter. We will not go to war with Russia over a peninsula that used to belong to Russia. If this story ends at Crimea (no Russian troop movements toward Kiev), then Europe and the U.S. will issue some empty threats and the G8 will revert to the G7 for a while. But international rhetoric will die down, especially if Crimean voters opt for autonomy. Russia will keep its “peacekeepers” in Crimea with the blessing of newly minted “autonomous” republic (which on paper will still be part of Ukraine).

Finally, as a bonus to Russia, Ukraine may become ineligible to join NATO, as its charter prohibits new members that have ongoing territorial disputes. So Putin may be playing three-dimensional chess while the rest of the world is still learning checkers. Or perhaps he is just an egotistical maniac who wants to bring the gang (the former Soviet republics) back together. Time will tell.

Vitaliy N. Katsenelson, CFA, is a portfolio manager/director of research at Investment Management Associates in Denver, Colo.  He is the author of “Active Value Investing: Making Money in Range-Bound Markets” (Wiley 2007).  To receive Vitaliy’s future articles my email, click here.

© 2014 Copyright Vitaliy Katsenelson - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in