This is the last blog for a couple of weeks, Meg (middle daughter) and myself are heading to the west coast of America to do some research as she plans to work there as a nursery teacher once she qualifies and because she has always wanted to see the Hollywood sign. Nicola is coming to coordinate the trip as I struggle to organise a journey from home to the office, she is invaluable in helping not just clients.
This week started with a stock market dip with the news on Ukraine and potential for escalation of Russian troop movements in the Crimea.
Russia is a conundrum and has been for some time, it continues to reimagine itself in the new world post communism with a desire to regain its prestige and influence, emasculated after the ignominious dismantling of the communist state and it’s militarily coerced empire in the East.
It has since engaged to an extent with Western business and markets but the unease of both sides has been palpable, the West believing that Russian actions would revert to type in times of stress and Russia believing, it’s seems almost pathologically, that it must exercise extreme control over its surroundings to prevent exploitation.
The breakdown and breakup of the USSR occurred primarily not because of a failed ideology but a failed economic model, it was broke in every way. Since then and with the help of the efficiencies and dynamism that new market forces brought the economy has strengthened aided enormously by the natural resource wealth the country possesses (which is why Putin has reclaimed these for the state from the Oligarchs often brutally).
It has been predicted for a time by Western strategists that Putin’s vision for the “new Russia” is to create a trading block similar to the EU, a United States of Eurasia with Russia as its de facto leader. It is possible that a trading block of countries formerly Russian controlled could be created and this would stretch from the borders of Europe to those of China. This in part has been a driver for Europe to seek to integrate the likes of Bulgaria, Poland, the Czech Republic and Rumania into the EU as quickly as possible which has been a hard sell to existing member populations concerned about worker migration. I doubt Mr Farage is mindful of Geo Political issues as they are quite complicated and he seems more comfortable saying the same thing about the same single issue over and over, if only the world was that simple but may be to him it is (if every problem is a nail then every solution must be a hammer).
The Ukrainian situation therefore is the next chapter in this tug of war between Russia and the West. The Ukrainian populace favour moving towards Europe, the Russians with the help of significant political influence in Ukraine seeking to prevent it.
Matters reached a head when the politicians rejected the will of the electorate in favour of an alliance with Russia and riots broke out in protest ultimately causing the prime minister to flee to …….. Moscow.
The reason Ukraine is a big issue for Russia is that economically and militarily it’s highly meaningful.
It accounted in days of old for 30-40% of Russian steel and coal production, if it’s not an ally its a serious economic competitor and the Black Sea port of Sevastopol is strategically important to the Russian navy.
Conclusion
Russia is going to fight hard to retain influence and especially in the Crimea where the naval base is situated and which is around 60% Russian speaking.
In the 21st Century the interconnected nature of Countries and economies makes isolation and war near impossible to consider if rational. Russia needs the West just as Europe needs Russian natural gas which is always a major card Putin holds to exert pressure on the EU.
The rhetoric will be fierce, the troop movements threatening and the threat of measures of retaliation (economic) swinging but the reality is, this is a game of Geo Political chess using countries as pieces and it’s a game that never ends, unlike past history though it will not be military but rather economic forces that hold the key.
NOTE: This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author. This is not a recommendation to buy any product or service including any share or fund mentioned. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.