- Will sanctions finally stop Putin?…
- Up the dangerous escalation ladder…
- “Dumb” money is buying stocks. But “smart” money is quietly shifting to a specific gold play. And a government meeting on October 29th could send this strategy stratospheric.
Dear Reader,
Yesterday the United States government announced sanctions against Russian oil behemoths Rosneft and Lukhoil — along with their multiple offshoots.
They will enter effect in one month.
Their intended purpose is to kink Russian oil revenues. Mr. Putin requires these revenues to fund his “special military operation” in Ukraine.
India and China are central consumers of Russian oil.
Yet refiners in both countries have announced they will limit Russian oil imports against the sanctions.
Will Sanctions Finally Work?
Will these sanctions succeed where others have failed?
Foreign Policy Magazine:
- Coupled with fresh rounds of sanctions from the European Union (approved Wednesday) and the United Kingdom (announced earlier this month), the Western chokehold on Russia’s golden goose is finally taking devastating shape.
- And while the Trump administration has given customers of Russian oil a month before the sanctions take effect, oil markets clearly believe that the hammer has dropped.
- Benchmark crude oil prices jumped 5 percent on Thursday, back to the mid-$60s a barrel, as the market expects at least some of the Russian barrels that formerly made their way to India and China will now be left unsold.
Just so. Yet I am not half so convinced these latest sanctions will work the intended trick.
Mr. Market Works Around Sanctions
Some previous 18 rounds of sanctions have not sunk Mr. Putin to his knees.
I do not believe the 19th round of sanctions will lower him down. That is because sanctions are less vices than sieves.
Sanctions spawn profit-inducing incentives to which rational economic actors will respond.
As I have written before:
Mr. Market is a highly resourceful fellow.
Slam the front door and he will smuggle his goods through the rear door.
Bar the rear door and he will slip through a window.
Seal the windows and he will tunnel his way into the basement.
Oil is a good. Thus I expect it to penetrate the cordon.
More Than Just a Gas Station
What is more, the Russian economy boasts greater diversification than many believe.
Russia is more than — as the late Sen. McCain labeled it — “a gas station masquerading as a country.”
While still substantial, the percentage of Russian government revenues derived from energy have declined steadily.
Some 50% ten years past… the percentage of Russian government revenues derived from energy reduced to some 30% by last year.
Meantime, Russia can afford to assume debt to make sanction-induced funding shortages good.
It registers a debt-to-GDP ratio of merely 16%. The United States — in high contrast — registers a scandalous debt-to-GDP ratio nearing 130%.
In addition, Russia’s official gold reserves are the fifth largest on Earth.
My agents inform me that Russia possesses the wherewithal to wage war for three additional years at minimum — even under sanctions.
In brief, I do not believe these latest sanctions will quail Russia or its leader.
They will not force Mr. Putin to terms. What will they likely accomplish?
An Act of War Against Russia
Sanctions will thrust the United States and Russia further up the escalation ladder upon which they perilously perch.
Former Russian president Dmitry Medvedev:
- The US is our enemy, and their talkative ‘peacemaker’ has now fully embarked on the warpath with Russia. The decisions taken are an act of war against Russia. And now Trump has fully aligned himself with loony Europe… now it’s his conflict.
It is true, Mr. Medvedez is given to boastful and menacing snarls. His fluency in the language of bellicosity has no equal.
Yet you can be certain — depend on it — that he talks only with Mr. Putin’s imprimatur.
He speaks what Mr. Putin thinks but cannot speak.
He is, in a sense, the “bad cop” to Mr. Putin’s understated “good cop.”
Yet they are both cops. And they share a common enemy.
Putin Can’t Afford to Back Down
In reality, Mr. Putin cannot afford, politically, to yield to American economic coercion.
He will not walk away until Russia’s central war ambitions are attained.
These include a neutered, neutral Ukraine untethered to the North Atlantic alliance.
Yet I do not believe the businessman dealmaker — Trump — understands the Russian statesman’s intransigence.
He does not appreciate the distinction between the boardroom and the foreign office.
The distinction nonetheless obtains.
And I have long feared that President Trump would attempt to coerce the Russian into a peace the Russian would not accept.
That when one form of arm-twisting fails… he will attempt a more painful variation.
I’m Afraid I Was Right
I warned in February of this year that:
- [President Trump] has promised peace. He believes he must therefore deliver peace… Thus he is out to “win.”
- Here is my concern: That the president may “double down” to get a handshake from the implacable Russian.
- I fear the president will not decrease United States assistance to Ukraine — but increase United States assistance to Ukraine.
- Here I refer to both financial and martial assistance.
- I fear the president may likewise bless Ukrainian missile assaults deep within the Russian landmass. These missile assaults are not possible absent direct American assistance…
- Up the escalation ladder the two men would go… rung by perilous rung.
- Who will jump down first? I do not believe either man will jump down first.
- And so I fear President Trump may be vacuumed into the dismal quagmire.
Love Is Like War
I had hoped to be proven incorrect. Yet I fear I am being proven correct.
I have cited the very late Henry Louis Mencken before. Today I cite him again:
“Love is like war: easy to begin but very hard to stop.”
President Trump’s exhaustive experience with love should caution him.
It appears it has not.
Regards,
Brian Maher
for Freedom Financial News
