Risks from Ukraine

Investment Analysis Clubs Macro Economic Trends and Risks
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I will try to make this short.

Other than the obvious gas, oil, wheat and thermonuclear war, there are other risks and consequences of this war.

First, as Russia has failed to take Kyiv and the last report is that the majority of the Russian troops are still 20 miles outside of Kyiv we can expect that one of two things will happen.

  1. Russia will up the military game by using drones and more modern weapons and increase attacks on civilians.

Or

  1. Settle in for a protracted war and then insurgency.

The latter is a losing proposition for Russia however we must take it into consideration.

In either case there are some significant Macro things happening.

First, 1 percent if the Ukrainian population has left the country. In a area where all labor is in short supply and getting shorter due to demographics, this will have a significant impact in the economics of the area.

Second, remember, oil and to a great extent, wheat is fungible, so a barrel of oil sold to China is very close to the same as a barrel of oil sold to Germany. If that barrel of oil is 50 percent more money, well, good for the seller. This means to me that the SWIFT system will be replicated and Russia will get its primary export to market. Also something along the same lines will happen with wheat.

(If Russia survives at all)

Risk 1 - This will weaken the power of the SWIFT system if the situation is prolonged.

Additionally, we have not seen a lot of advance espionage. In the run up to the invasion Biden revealed just how weak a hand he had by sacrificing sources and methods to expose and attempt to thwart the invasion. Putin should have listened as the assessments revealed just how many leaks his system has. On the other hand, the U.S. is extremely vulnerable to an espionage attack. The extensive computer breach a few years ago left every government employee open to being compromised. If an escalation in espionage attacks occurs and Russia was privy to the information gleaned from the U.S. Government systems hack, then a lot of bad things can happen in the USA. As this is extension of an economic war, I would expect these to subtle but painful.

So Risk 2 - Significant economic pain in the USA and EU brought on by a series of unfortunate events.

Cheers
Qazulight

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Second, remember, oil and to a great extent, wheat is fungible, so a barrel of oil sold to China is very close to the same as a barrel of oil sold to Germany. If that barrel of oil is 50 percent more money, well, good for the seller. This means to me that the SWIFT system will be replicated and Russia will get its primary export to market.

Singapore Banks Halt Russia Commodity Lending as Sanctions Mount
https://ca.news.yahoo.com/singapore-banks-halt-russia-commod…
Singapore’s biggest banks are restricting trade financing for Russian raw materials, as the war in Ukraine spurs lenders in Asia’s largest energy and commodities trading hub to reduce exposure to the sanction-hit country…

Lenders in the city-state, a key trading hub for commodities trade and finance in Asia, join at least two of China’s largest state-owned banks and some banks in Europe in restricting the ability to purchase Russian commodities.

DB2

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so a barrel of oil sold to China is very close to the same as a barrel of oil sold to Germany.

If ONLY it was that easy.

There is NO WAY in the next few weeks, or probably even months, that Russia will be able to divert all that oil and wheat to China. Additionally, China likely has existing contracts (as is usually the case with commodities) to buy from other countries. Even if Russia is eventually able to off load their goods on China, it will be sold at massive discounts and there will be significant opportunity costs with the additional logistical hurdles to change the shipment of those commodities from destinations like Egypt (who currently is the #1 importer of Russian wheat) to China.

In the run up to the invasion Biden revealed just how weak a hand he had by sacrificing sources and methods

Oh poppycock. Telling the world that we knew this was coming doesn’t reveal weakness. Saying (lying) that we didn’t know would have been weakness post invasion. Talking heads would instead be cyring that we “should have know” and “why didn’t the admin tell everyone this was coming?!?”

Biden may be outplaying Putin in one critical way
https://www.washingtonpost.com/outlook/2022/02/09/biden-puti…

The Russians seem a bit shell shocked by the information onslaught and perhaps a bit unsure of how to respond. Their accusations of U.S. fearmongering are those of an extortionist who is surprised to have the focus shift to his threats when he intended to keep attention on his demands.

This represents a marked shift from eight years ago, when Putin combined military action, disinformation and surprise to occupy part of Ukraine.

And now, our honestly not only moved much of the rest of the world to do the same (UK also released some of their intel), it likely brought Ukraine much closer to America in their eventual realization of the truth.

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Excellent analysis and perfect link, Hawkwin.

The best way to deal with bullies is to shine a light on them as they attempt their nefarious deeds.
Keep it out in the open, where all can see the results, instead of complaining afterwards. Brilliant tactic.

“Judo (Japanese for “the gentle way”) emphasizes winning in combat by using your opponent’s weight and strength as weapons against him, while preserving your own mental and physical energy. It embodies the principle that good technique can win out over sheer strength.” --The Art of Business Judo - Fast Company (Google)

Age is a benefit to wise people for life is a great teacher.

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There is NO WAY in the next few weeks, or probably even months, that Russia will be able to divert all that oil and wheat to China. Additionally, China likely has existing contracts (as is usually the case with commodities) to buy from other countries. Even if Russia is eventually able to off load their goods on China, it will be sold at massive discounts and there will be significant opportunity costs with the additional logistical hurdles to change the shipment of those commodities from destinations like Egypt (who currently is the #1 importer of Russian wheat) to China.

Also, if the Russians can’t get fuel to their military forces in Ukraine, how the heck are they going to fuel the transport of wheat to China?

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Oh poppycock. Telling the world that we knew this was coming doesn’t reveal weakness.

When you sacrifice intelligence assets to make diplomatic moves you reveal other weaknesses.

Cheers
Qazulight

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When you sacrifice intelligence assets to make diplomatic moves you reveal other weaknesses.

“Diplomatic moves?”

You state that so benignly. You mean, moves to stop a war, right? Moves to stop war crimes, the dislocation of millions, and possible famine.

This isn’t some negotiation over a trade dispute or the theft of the latest cell phone tech.

What the heck are intelligence assets for if you don’t use it to try and stop a war? What else would you be saving them for, or are are Ukrainian lives not worth the truth?

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What the heck are intelligence assets for if you don’t use it to try and stop a war? What else would you be saving them for, or are are Ukrainian lives not worth the truth?

I cannot make that judgement call. Biden in fact did. If you think it was a good call, well ok. Still, if you knew when and where Putin was going to invade, simply not saying anything and forward positioning troops that completely matched the offensive positions, or moving assets in such a way that troops would be trapped and neutralized would be a lot less damaging to the intelligence posture than saying, “I have intelligence on this, this, this and this. The only reason to give specific details of intelligence that sacrifices years, maybe decades of work and will take years or decades to replace, is if you have few or no good options.

In fact, as I write this, it is apparent that the sharing of military intel was early and significant and it was used to trap and delay Russian troop convoys moving south from Belarus. Kyiv should have been under siege 48 hours ago, the fact that it is not indicates that the exact route was known, what was proceeding down it, who was commanding it, and what the moral and training of the troops were.

I fear that this war has cost the U.S. a huge portion of its intelligence assets in Russia.

Cheers
Qazulight

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fear that this war has cost the U.S. a huge portion of its intelligence assets in Russia.

Oh horsefeathers. Russia is fighting a conventional war using conventional arms and conventional tactics. You can see any and all of this from the lebenty zillion satellites we have up in the sky and the Russians know it. They, like we, know where the satellites are, how often they pass overhead, and probably what the VIN number is on the solar panels that power them.

Russia was massing troops at the border for more than a week; I remember because I was paying attention. You simply can’t hide 150,000 troops and all the support vehicles and supply lines from the satellites. This isn’t the Ghost Army or something.

I am quite sure we are “sharing intelligence” with Ukraine, and I am equally sure there are steps being taken to keep any compromising details obfuscated. That might turn out not to be perfect, but I have little doubt that we’re not giving away human intel sources within Russia.

And no one should be surprised to find that there are drones flying overhead 24/7. The Pentagon has a bunch at a million dollars a pop, or you could strap an iPhone to a $400 drone from WalMart and accomplish much of the same thing.

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What the heck are intelligence assets for if you don’t use it to try and stop a war?

How about using those intelligence assets to gain intelligence that you can use to try and stop a war - and, if that fails, to try and win it?

To achieve that, you generally don’t want the other side to see just how much you know until you actually use that knowledge (details extremely variable), and almost never want the other side to see how you know.

During WWII the Allies had copies of the Germans’ encryption machines (largely thanks to the Polish Resistance, who had members working in the factories that made the things), so were able to read most Axis military communications almost immediately. They used that information quite frequently - when it wouldn’t reveal that they were reading the enemy communications. They also knowingly and deliberately let people die, when there was no plausible way they could have gotten the relevant information other than having free access to Axis military communications.

(And in one case they used the information and then arranged for an “anonymous” gift to arrive at Germany’s embassy in Switzerland, addressed to a particularly competent German general who reasonably could have been - but wasn’t - the source of the information used. He disappeared a few days later and was never heard from again.)

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When you sacrifice intelligence assets to make diplomatic moves you reveal other weaknesses.

Serious question: Were any intelligence assets sacrificed?

For example, reference this BBC article that came out just before the war started:

https://www.bbc.com/news/world-europe-60158694

The BBC showed massive Russian troop movements based on commercial satellite imagery and social media. There were literally Tik Tok videos of convoys of Russian armor on flat beds headed towards Ukraine. The Russian troop movements were not a secret.

Today, Wendy posted that she saw a Russian armored column on the news. If it is one the news, it isn’t a secret. Over the past few days, I’ve seen commercial satellite photos of Russian columns and laagered helicopters. It seems the position of major Russian troop builds up are well known.

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Nowadays it’s pretty hard to hide where anything large - such as a tank platoon - is.

Exactly where it intends to go, on the other hand, is often quite a bit simpler. As are what it’s prepared to do in order to get there.

Sometimes there’s an obvious destination and route… which is the first place you put defenses against that platoon, making it a less-than-optimal plan for them to follow and maybe they are planning something else instead.

If you happen to somehow actually know what they intend, you do NOT want THEM to know that. First because they can alter the plan in response, and second because they might figure out HOW you know - which can be hard on certain sorts of “intelligence asset.”

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If you happen to somehow actually know what they intend, you do NOT want THEM to know that. First because they can alter the plan in response, and second because they might figure out HOW you know - which can be hard on certain sorts of “intelligence asset.”

The claim was intelligence assets were compromised. Be specific, what is the evidence of that claim?

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The claim was intelligence assets were compromised. Be specific, what is the evidence of that claim?

That is not the sort of thing an intelligent intelligence agency reveals if it doesn’t have to, until long after it ceases to be relevant to current events.

AKA you don’t freely offer the other side’s intelligence agency confirmation of what they got right, or clarification of what they got wrong.

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When you sacrifice intelligence assets to make diplomatic moves you reveal other weaknesses.

“In wartime, truth is so precious that she should always be attended by a bodyguard of lies.” Winston Churchill.

During WWII breaking the Enigma code was one of the great allied successes and secrets. One particular difficulty was how to use the info without revealing the fact the Enigma had been broken.

In brief, “Loose lips sink ships.”

The Captain

Bodyguard of lies: https://www.archives.gov/iwg/research-papers/weitzman-remark…

Loose lips: https://en.wikipedia.org/wiki/Loose_lips_sink_ships

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