I return to my desk after two glorious weeks of sun, sand and maybe the odd rum punch. I am patently aware that the age of proper holidays is gone as that other fruit cocktail, Blackberry and Apple, brings the office to us, irrespective of where in the world we may happen to be. Even when “glamping” on a beach, ubiquitous wireless broadband keeps the machines pinging their little heads off.
Alas, by and large I resisted the draw to persistently read news and check prices although, with all the will in the world, it would have been hard to escape the headlines reaching us from Ukraine. Perhaps the greatest surprise is that anyone would be at all surprised by the robust stance taken by Putin’s Russia.
George W. Bush, President of the USA, in a fit of unspeakable naivety said in 2001, having met Vladimir Putin for the first time “I looked the man in the eye. I found him to be very straightforward and trustworthy. We had a very good dialogue. I was able to get a sense of his soul; a man deeply committed to his country and the best interests of his country.”
Yippee! We’ve just acquired another near-bankrupt country! Meanwhile, there will quite probably be a rapid influx of Crimean Tartars to the New York cab trade.
I guess he got half of it right. I recall clearly how many of us rolled our eyeballs at this assessment but it seems no more mad than was the blind confidence which Presidents Franklin D. Roosevelt and Harry S. Truman placed in Joe Stalin at the conferences of Casablanca in 1943 and Potsdam in 1945, respectively. I am, however, truly staggered by the – I can think of no better term – blatant stupidity of the EU when it comes to dealings with Kiev. At what point did the mighty of Brussels, along with those in the national capitals, ever believe that Moscow would let Ukraine, the closest it has to a Crown Dependency, go sailing off into the sunset with the blue and gold flag fluttering all over town?
Stalinism has been as alive and kicking in Ukraine as it has been in Belarus and in Russia for a long time now; the appalling treatment of the nearly forgotten former Ukrainian Prime Minister Yulia Tymoshenko must have borne witness to that. And yet, in one field after the other the EU continues to dance its Panglossian quick-step. If ever I have seen a case of the diplomatic gates being closed after the horse has bolted, this is it.
Naivety
In the 1980s, before the fall of the Berlin Wall and the Soviet empire, I worked for the London subsidiary of the National Bank of Hungary. There I sat with people who had studied banking in Moscow – that was banking the Western way. It was miles away from the Communist rhetoric and it drew on the intellectual elite who had been trained to the highest level and who knew as much or more about us than we did ourselves. Anyone who thought that the Eastern European bankers were naive country bumpkins in ill-fitting suits had another thing coming. These guys read us like a comic book.
What President O’Bama was thinking also escapes me. “There will be costs…”? Will there really? The Russians can and will move around with impunity and the Americans can and will do nothing about it. The latter had their Monroe Doctrine and they are the last nation in the world which will not understand what the Russians are up to when intervening in “their own back yard”.
Although risk asset markets are across the board weaker this morning, everything is in a contained range and there is no sign of panic. Best is to sit back, accept that Crimea will secede and move on. Nobody is going to do anything about it. Meanwhile, Russia will withdraw whatever economic and financial support it ever offered to Kiev and the EU, that paragon of moral rectitude, will be left with an unavoidable moral obligation to fill the gap. Yippee! We’ve just acquired another near-bankrupt country! Meanwhile, there will quite probably be a rapid influx of Crimean Tartars to the New York cab trade.
Are markets right to be sanguine? Yes they are because they reckon that, once the shock is over, the world will go on just as it was – other than that the Russians can mess with the Western Europeans’ heads when it comes to energy supplies. Natural gas traded as low as US$4.00 in January and, having spiked at US$6.15 ten days ago, was trading back down at US$4.50 at the end of last week. We could see some decent volatility in that space this week but as far as mainstream financial assets are concerned, I continue to be a better buyer on dips.
Nice to be back? You tell me….
