Investment impact of Russia Ukraine crisis

The West is trying to do some weird “oil price cap”, which clearly won’t work in a global market, but maybe makes them feel like they’re doing something other than watching Ukraine bleed.

  • G7 FINANCE MINISTERS HAVE AGREED A PRICE CAP FOR RUSSIAN OIL EXPORTS - SKY NEWS
  • EU COMMISSION CHIEF VON DER LEYEN IT IS TIME FOR A PRICE CAP ON RUSSIAN PIPELINE GAS FLOWING TO EUROPE
  • VON DER LEYEN SAYS A GAS PRICE GAP CAN BE PROPOSED AT EUROPEAN LEVEL
  • GERMAN FINMIN LINDNER: G7 WANTS TO EXTEND OIL PRICE CAP ON RUSSIAN OIL BEYOND G7, TO INCLUDE ALL EU MEMBERS

Russian response this am -

  • KREMLIN: RUSSIA WILL STOP SELLING OIL TO COUNTRIES WHICH SUPPORT PRICE CAPS FOR RUSSIAN OIL
  • KREMLIN: DECISION TO INTRODUCE PRICE CAPS ON RUSSIAN OIL WILL LEAD TO SIGNIFICANT DESTABILISATION OF GLOBAL OIL MARKET
  • KREMLIN: RUSSIA WILL STOP SELLING OIL TO COUNTRIES WHICH SUPPORT PRICE CAPS FOR RUSSIAN OIL
  • RUSSIAN EX-PRESIDENT MEDVEDEV ON POSSIBLE EU ENERGY PRICE CAP: RUSSIAN GAS WILL SIMPLY NOT BE AVAILABLE IN EUROPE
  • KREMLIN: ONLY ONE TURBINE IS OPERATIONAL AT NORD STREAM 1 GAS PIPELINE STATION, RELIABILITY OF THE SYSTEM IS UNDER THREAT

So the energy market will get more fragmented and expensive, which will cost most for those least able to afford it. so the EU guys admit that

  • GERMAN FINMIN LINDNER: WAR IN UKRAINE THREATENS GLOBAL ENERGY AND FOOD SECURITY

But blame the war instead of their own sanctions, etc. OK, well I guess global food security for the 3rd world is a price the EU is willing to pay, kind of like how the US and UK are willing to fight Russia to the last Ukrainian. The EU is definitely paying the price

The German economy is on track to contract for three consecutive quarters starting from this one, according to a Reuters poll of economists, following a dramatic spike in gas prices after Russia slashed deliveries to Europe.

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it’s official, no gas for you.

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As much money as Russia is making off of this deal, they may start a war twice per decade, unless they can keep these sanctions going for more than five years. :unamused:

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Pushing our enemies together longer term.

  • GAZPROM AND CNPC SIGN SUPPLEMENTARY AGREEMENT TO LONG-TERM GAS PURCHASE AND SALE CONTRACT FOR POWER OF SIBERIA GAS PIPELINE - STATEMENT

  • GAZPROM AND CNPC AGREED ON TRANSITION TO MAKING PAYMENTS FOR GAS SUPPLIES TO CHINA IN ROUBLES AND YUAN - STATEMENT RT: GAZPROM AND CNPC SIGN SUPPLEMENTARY AGREEMENT TO LONG-TERM GAS PURCHASE AND SALE CONTRACT FOR POWER OF SIBERIA GAS PIPELINE - STATEMENT

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this has been a net win for the rooskies, and the stalemate continues. Question is will this be long term like the Koreas.

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Looks like the Ukrainians have mounted a relatively successful offensive in the East.

This is the first major UKR offensive we see that is this audacious & successful & involves almost exclusively NATO vehicles and weapon systems

This is in addition to successes in the South striking Russian supplies and weapons behind the front line to good effect. Feels like it’s going to come down to who has better supply lines, and some of the Russian ones may be more vulnerable than was originally thought.

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thrown off a boat, but was it out of a boat window? Executive defenstration watchers want to know.

Discussion of recent Ukrainian military advances -

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Question is how will the markets react to Ukrainian victory (definitely not baked in)

Or, how will Ukraine react to Ukrainian victory? Will they be able to finagle “rebuilding” money, or can they stand on their own, along with their current funding support?

I guess the question is if the Russians are leaving some of these places like this without as yet being attacked,

what are they going to do next?

  • KREMLIN: UKRAINE’S AMBITIONS TO JOIN NATO REMAIN A THREAT TO OUR COUNTRY

Are they just going to give up, or are they going to start bombing everything or using tactical nukes?

A referendum in the captured territories with 97% of the voters “voting” to leave Ukraine and join Russia. Vote in the Duma to recognize the break-away and newly captured territories as part of Russia.

regardless of the outcome, no quick resolution in sight= markets turmoil and no safe haven like gold was back in the day.

I wish the VIX was investable b/c I predict turmoil will be the norm for some time now…

they’re pretty industrious, grow food etc. this won’t be Afghanistan but Germany. IMF is already prepping w/ former Iraq rebuilding chief in charge

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This is why you can’t raise capital for a free market solution to the EU energy crisis - if you make profits, they’ll just steal them.

The EU plan is intended to redistribute some energy companies’ windfall profits and revenue to cushion the blow of high prices for consumers. It marks one of the bloc’s most significant market interventions since the global financial crisis more than a decade ago.

The commission also wants to skim the profits of fossil fuel companies that aren’t covered by the revenue cap. The plan aims to raise €25 billion by demanding companies involved in oil, gas, coal and refinery activities fork over one-third or more of the money the commission deems excess profit. The proposal defines excess profit as taxable profits that surpass a 20% increase on average profits from the previous three years. Revenue from this part of the plan could be used to help vulnerable households, companies and energy-intensive industries, the commission said.

We’re so fortunate to live in the land of the free. Here, the Democrat tax_and_spend controlled congress will just try to pass a law to take that money.

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This is quite a good if longer interview with a group that knows commodity markets well. Two short answers I thought were good, but the whole piece is worth a read.

You thought the U.S. and European attempts to use economic sanctions to cut off Russian oil from the global market was a catastrophic error. Why?

We wrote a piece called “Crazy Pills” where we outlined our views in this regard. This is the type of insight that can only come from direct experience in the commodity sector. It intuitively feels right that if we just choke off Putin’s energy-export volume, we will choke off his revenue. But that’s just not how commodities work, especially when you’re the swing producer like Russia is. If you’re a small country and you produce a de minimis amount of energy and it’s choked off by a naval blockade, the rest of the world can make that up and it’s not a big deal. But when you are the single largest exporter of energy that the world desperately and critically needs, you hold all the cards.

And so here’s the example that we would use. Let’s just stick to round numbers. Putin exports 10 million barrels a day of oil. Assume we were to blockade the country of Russia — which, of course, is an act of war, but let’s just for the sake of analysis run the thought experiment. If we were to take 5 million barrels a day of this oil off the market, shut it in, blow up Russia’s wells, pick your favorite — the price of oil would way more than double, and Putin would make more revenue on the 5 million barrels of oil that are still finding a way into the market than he would lose by our cutting off the supply. It’s the same thing with natural gas. The price of natural gas in Europe today, despite coming down by 40 percent off its peak, is still seven or eight times what it is in the United States.

And if the price skyrocketed after Putin shut off the volume, well, that price is the benchmark he uses when he sells his gas to Asia via liquefied natural gas, or LNG. And so if you’re selling it for 40 and then you cut production and you sell half as much for 80, you’re coming out even. The price elasticity of demand in commodities is such that the only way to crush Putin’s revenue is to flood the world with energy. Oil was at -$37 a barrel when we had a lack of storage at the height of the COVID shutdown. That shows you how volatile oil can be.

During the first Gulf War, we went to all of our oil-producing allies and the coalition and said “Pump” because we were trying to rob Saddam Hussein of his oil revenue. The price of oil can be pushed down, but only with supply. So attacking his volume, which we have been loudly saying is a mistake from the beginning, has indeed proven to be a mistake. And I think the numbers are pretty definitive in this regard. August was perhaps a record revenue month for Putin, and this is how he’s funding his war machine.

What about Europe’s decision to abandon Nord Stream 2 natural gas pipeline?

Insane. The world cannot live without its energy. Again, let’s do the hypothetical and pretend we’ve surrounded the entire country of Russia and cut off all of its oil and gas to the outside world. The world would descend into energy starvation and mass death. The world literally cannot live without Russia’s energy, and we should not want them to. We should be flooding the market with energy. Every molecule that Putin’s willing to sell his enemies in Europe should be accepted.

By the way, we believe that Putin would not have moved into Ukraine had natural gas not already been a crisis. This is the part people forget. The price of natural gas skyrocketed in December in Europe, long before he moved into Ukraine. He likely did the calculation and realized, They don’t have enough molecules. They’re surely going to come to the table and give me what I want in Ukraine. He moved into Ukraine. He was incorrect — they didn’t come to the table. And here they are, weaker than they were if they had. And so he miscalculated Europe’s response. And I think he overestimated the long-term impact of his play. In the medium-to-long term, we think his invasion of Ukraine is a catastrophe for him and for Russia, but in the near term, winter 2022–23 …

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Germany starts seizing energy companies, assets.

  • GERMANY CLOSES IN ON DEAL TO NATIONALIZE GAS GIANT UNIPER
  • PARALLEL TO TAKEOVER, GERMAN GOVT STILL PLANNING GAS LEVY FROM OCT. 1 - BUSINESS INSIDER
  • GERMAN GOVT CLOSE TO UNIPER TAKEOVER, EXPECTS COSTS OF OVER 30 BLN EUR - BUSINESS INSIDER, CITING GOVT SOURCES
  • GERMAN GOVT SEEKING TO TAKE ROSNEFT REFINERY UNDER STATE CONTROL - SPIEGEL
  • ZEW SAYS PROSPECT OF ENERGY SHORTAGES IN WINTER HAS MADE EXPECTATIONS EVEN MORE NEGATIVE FOR LARGE PARTS OF THE GERMAN INDUSTRY

See also my post on the green energy thread about energy prices in Germany

https://www.washingtonpost.com/world/2022/09/20/russia-referendum-annexation-luhansk-donetsk-kherson-ukraine/

Russia doing a “partial war mobilization” to call up extra troops. Also pulling back some of their military from Syria, etc, to fight in Ukraine.