Russia-Ukraine war and related tensions Megathread

[Storr]

https://twitter.com/BLSchmitt/status/1501410173943955474?s=20&t=jQPiyzUstZOY...

[brucejoel99]

In addition to tough hypotheticals that are getting all too close to reality on no fly zones, we have another one lurking out there:

Saudi, Emirati Leaders Decline Calls With Biden During Ukraine Crisis
Persian Gulf monarchies have signaled they won’t help ease surging oil prices unless Washington supports them in Yemen, elsewhere

https://www.wsj.com/articles/saudi-emirati-leaders-decline-calls-with-biden-during-ukraine-crisis-11646779430

Should Biden bend over on this one as the lesser evil?

No. They'll increase production on their own as prices surge to maintain market share and cash in; political pressure is not relevant. They're not going to cut off their noses to spite Biden, so call their bluff.

This feels like a misrepresentation of how petroleum markets work. Biden is asking them to ramp their production up in order to decrease prices, whereas Saudi Arabia & the UAE would rather have prices remain high so that they can benefit from the highest possible margins. If they further increase production, then they'll see diminishing returns with falling prices. So, yeah, Biden is asking them to do something that they genuinely don't seem willing to engage in at this time, meaning that the Saudis & Emiratis do genuinely have something to gain from their perspective by pressuring him on Yemen. Granted, this perspective that's presently being shared by Saudi Arabia & the UAE is rather short-termist insofar as the elasticity preferences of consumers are concerned, but OPEC has never really been known for the long-game anyway.

[NOVA Green]

US weighing sanctions on Russian members of parliment:

The White House is weighing new sanctions against lawmakers in the upper-chamber of the Russian parliament, as the United States seeks to increase financial pressure on Russia over its invasion of Ukraine, two people with knowledge of the matter said.

The potential U.S. sanctions on members of Russia’s Federation Council — also known as the country’s senate — would represent just the latest measure of at least a half-dozen major actions already taken by the White House to harm Russia’s financial elite and its economy more broadly over the assault on Ukraine.

The European Union on Wednesday moved to impose financial penalties on approximately 150 members of the Federation Council who voted to ratify Russian President Vladimir Putin’s authorization of military force in the Donetsk and Luhansk sections of eastern Ukraine.

The U.S. could target a similar list as the one sanctioned by the E.U., according to the people familiar with the matter, who spoke on the condition of anonymity to discuss a matter not yet made public. The people stressed that no final decisions have been made on the matter and that the sanctions are not imminent.

https://www.washingtonpost.com/us-policy/2022/03/09/russian-federation-sanctions-white-house/

[Tintrlvr]

In addition to tough hypotheticals that are getting all too close to reality on no fly zones, we have another one lurking out there:

Saudi, Emirati Leaders Decline Calls With Biden During Ukraine Crisis
Persian Gulf monarchies have signaled they won’t help ease surging oil prices unless Washington supports them in Yemen, elsewhere

https://www.wsj.com/articles/saudi-emirati-leaders-decline-calls-with-biden-during-ukraine-crisis-11646779430

Should Biden bend over on this one as the lesser evil?

No. They'll increase production on their own as prices surge to maintain market share and cash in; political pressure is not relevant. They're not going to cut off their noses to spite Biden, so call their bluff.

This feels like a misrepresentation of how petroleum markets work. Biden is asking them to ramp their production up in order to decreases prices, whereas Saudi Arabia & the UAE would rather have prices remain high so that they can benefit from the highest possible margins. If they further increase production, then they'll see diminishing returns with falling prices. So, yeah, Biden is asking them to do something that they genuinely don't seem willing to engage in at this time. Granted, this perspective that's evidently being shared by Saudi Arabia & the UAE right now is rather short-termist insofar as the elasticity preferences of consumers are concerned, but OPEC has never really been known for the long-game.

The Saudis do want lower (than present) prices. Higher prices are a risk for them because they are a low-cost supplier compared to many other suppliers. High prices mean producers in the US, Canada and elsewhere become profitable and start increasing production and market share. What the Saudis care about is profitability while maintaining market share, which means prices that are somewhat high (maybe in the $70 range) but not too high. Prices as they are right now are much higher than the Saudis want.

[NOVA Green]

Russian Auto Maker Lada halts Production:

Iconic Russian Car Maker, Known for Cold War Self-Reliance, Halts Production

Disruption shows how Russia’s economy is beginning to feel the bite of Western sanctions

Lada cars have been a symbol of Russia’s self-reliance since they began rolling off assembly lines during the depths of the Cold War.

On Wednesday, Lada’s factory floors ground to a halt as Western sanctions deprived its parent company of the parts and supplies it needs to make cars, according to people familiar with the matter. Thousands of workers have been placed on leave.

The disruption shows how Russia’s economy is beginning to feel the bite of sanctions the West imposed on Moscow after Russian President Vladimir Putin decided to invade Ukraine. Russia’s exclusion from the Swift interbank payments system has made it hard for Russian companies to transact with suppliers. Supply routes, particularly through Ukraine, are shut and the ruble’s devaluation has made paying for parts from outside Russia much more expensive.

Such a stoppage was once unthinkable. During Soviet times, Lada’s parent company AvtoVAZ erected a giant factory on the banks of the Volga River, capable of nurturing a homegrown supply chain.

Today, however, AvtoVAZ is owned by French car maker Renault SA and the Togliatti plant relies on a Renault factory in Romania for subassembly and components. More than 20% of AvtoVAZ’s parts—from connectors to key electronics—come from outside Russia, people familiar with the matter said.

“If trade stops, AvtoVAZ stops,” said one former AvtoVAZ board member. “Putin knows that he can’t do it by himself.” It would take months or even years to get production up and running again without the support of Renault, the former board member added.

An AvtoVAZ spokesman said the company planned to idle its plants until at least March 11 due to the global chip shortage that has affected car makers world-wide. He declined to comment on the sanctions.

....

https://www.wsj.com/articles/russian-car-maker-known-for-cold-war-self-reliance-idles-factories-11646828796?reflink=desktopwebshare_permalink

[Silent Hunter]

https://twitter.com/SkyNews/status/1501512022470635521

American defense officials say, reported on CNN's live feed, that Russia still has 90% of its combat power ready for use, that doesn't sound like "losing significant equipment" or "running out of available troops" to me. I understand this forum is unabashedly cheerleading for Ukraine but believing in obvious pro-Ukrainian propaganda and exaggerated reports is a sure way to be disappointed when reality hits.

Russia has about “90% of their available combat power still ready for their use” in Ukraine, a senior US defense official told reporters on Wednesday.

The US assesses Russia no longer has “several hundred vehicles of different stripes and sizes” available to them, but the US does not know if those vehicles were captured, destroyed or abandoned, the official added. 

CNN first reported Tuesday that the US estimated that as much as 8% to 10% of Russian military assets used in the invasion of Ukraine are now destroyed or inoperable, according to a US official familiar with the latest intelligence as of Tuesday.

The equipment lost includes tanks, aircraft, artillery and other military assets. That is close to double the losses that CNN reported last week when it was estimated Russia had lost 3% to 5% of its military assets.

"Ready for use" means still operational, I imagine. But that does not mean they can use it.

[jaichind]

A Bloomberg economic analysis shows that Russian inflation surged 2.2% in just the week after the war started.  It expects inflation to peak in July at 19%.  For 2022 various investment banks estimate overall Russian inflation to be anywhere from 13% to 22%.  Still with reference interest rates at 20% the lower middle class savings are mostly protected with the upper class getting hit hard since the produces they buy are much more import intensive and the inflation they are facing must be far worse than 20%.

You need to define your rates as to whether they are monthly or annualized. I assume that you know what I am talking about.

Agreed.  The Bloomberg economic rate of 2.2% is not annualized. The Bloomberg economics peak of 19% was also not annualized.  But the various investment bank estimates are annualized and ergo comparible to reference interest rates.

So now we know that having money in a Russian bank earning a 20% annualized interest rate has a negative real interest rate return of about 8% in one month not annualized. It seems like the net worth of most Russians is going to be wiped out.

But if the inflation is a one time spurt and then declines like Bloomberg Economics expects the best thing to do is to look at 2022 overall inflation and compare that to reference interest rate.  Now it is very possible the investment banks will underestimate 2022 Russia inflation and then even with interest rates at 20% the result is still negative returns on bank deposits.

[Torie]

In addition to tough hypotheticals that are getting all too close to reality on no fly zones, we have another one lurking out there:

Saudi, Emirati Leaders Decline Calls With Biden During Ukraine Crisis
Persian Gulf monarchies have signaled they won’t help ease surging oil prices unless Washington supports them in Yemen, elsewhere

https://www.wsj.com/articles/saudi-emirati-leaders-decline-calls-with-biden-during-ukraine-crisis-11646779430

Should Biden bend over on this one as the lesser evil?

No. They'll increase production on their own as prices surge to maintain market share and cash in; political pressure is not relevant. They're not going to cut off their noses to spite Biden, so call their bluff.

This feels like a misrepresentation of how petroleum markets work. Biden is asking them to ramp their production up in order to decreases prices, whereas Saudi Arabia & the UAE would rather have prices remain high so that they can benefit from the highest possible margins. If they further increase production, then they'll see diminishing returns with falling prices. So, yeah, Biden is asking them to do something that they genuinely don't seem willing to engage in at this time. Granted, this perspective that's evidently being shared by Saudi Arabia & the UAE right now is rather short-termist insofar as the elasticity preferences of consumers are concerned, but OPEC has never really been known for the long-game.

You have a point, but it may be that may be that their increase in production 1) does not cause a reduction of revenue from their existing production due to lower prices by as much as they get in additional revenue from more production, and 2) as to the additional production, if they don't sell those extra barrels now, when they sell them later it will be a lower price, particularly now with the full court press to move towards green now in effect, as well as because it will not be that long before others are pumping more oil at the margins as prices go up . It may be an excellent business decision to pump baby pump and sell baby sell, while the iron is hot, rather than others rake in the "excess" profits.

This is something of a plate tectonic shift. We all knew that using fossil fuels was bad for the planet, although there was disagreement on the urgency and the amount of costs to incur to phasing them out faster than otherwise. Now we know that it finances too many bad boy nations, which I guess now has some of Gulf states as junior members. So oil becomes "weaponized," and accelerating weaning of the West from oil, saves not only the planet from flood and pestilence and famine, but also from autocracy and evil. Being overly dependent on exports from anywhere that is subject to going bad is a bad investment decision.

I assume oil market specialists are cranking these equations as we speak. It also of course would be useful to look at the oil futures market. What does it predict oil will be selling at a year from now? How about 3 years from now? And then convert it into real dollars, not nominal dollars.
 
PS: And perhaps the Keystone Pipeline should be built but not used. But it is there to turn on in a pinch. Drill baby drill, but don't pump baby pump. Have a rainy day energy backup supply, and consider it a cost of living into a world suffused with hate and evil and sin. The riskiest scheme of all is to make oneself vulnerable to be taken hostage by the devil.

[Torie]

A Bloomberg economic analysis shows that Russian inflation surged 2.2% in just the week after the war started.  It expects inflation to peak in July at 19%.  For 2022 various investment banks estimate overall Russian inflation to be anywhere from 13% to 22%.  Still with reference interest rates at 20% the lower middle class savings are mostly protected with the upper class getting hit hard since the produces they buy are much more import intensive and the inflation they are facing must be far worse than 20%.

You need to define your rates as to whether they are monthly or annualized. I assume that you know what I am talking about.

Agreed.  The Bloomberg economic rate of 2.2% is not annualized. The Bloomberg economics peak of 19% was also not annualized.  But the various investment bank estimates are annualized and ergo comparible to reference interest rates.

So now we know that having money in a Russian bank earning a 20% annualized interest rate has a negative real interest rate return of about 8% in one month not annualized. It seems like the net worth of most Russians is going to be wiped out.

But if the inflation is a one time spurt and then declines like Bloomberg Economics expects the best thing to do is to look at 2022 overall inflation and compare that to reference interest rate.  Now it is very possible the investment banks will underestimate 2022 Russia inflation and then even with interest rates at 20% the result is still negative returns on bank deposits.

You need to match terms J. The 20% Russian bank rate has a term of one hour. It can be changed at any time. It is not a guaranteed rate for a week, a month, a year, etc. Surely you know this. And that is before you factor in default risk.

[brucejoel99]

In addition to tough hypotheticals that are getting all too close to reality on no fly zones, we have another one lurking out there:

Saudi, Emirati Leaders Decline Calls With Biden During Ukraine Crisis
Persian Gulf monarchies have signaled they won’t help ease surging oil prices unless Washington supports them in Yemen, elsewhere

https://www.wsj.com/articles/saudi-emirati-leaders-decline-calls-with-biden-during-ukraine-crisis-11646779430

Should Biden bend over on this one as the lesser evil?

No. They'll increase production on their own as prices surge to maintain market share and cash in; political pressure is not relevant. They're not going to cut off their noses to spite Biden, so call their bluff.

This feels like a misrepresentation of how petroleum markets work. Biden is asking them to ramp their production up in order to decreases prices, whereas Saudi Arabia & the UAE would rather have prices remain high so that they can benefit from the highest possible margins. If they further increase production, then they'll see diminishing returns with falling prices. So, yeah, Biden is asking them to do something that they genuinely don't seem willing to engage in at this time. Granted, this perspective that's evidently being shared by Saudi Arabia & the UAE right now is rather short-termist insofar as the elasticity preferences of consumers are concerned, but OPEC has never really been known for the long-game.

The Saudis do want lower (than present) prices. Higher prices are a risk for them because they are a low-cost supplier compared to many other suppliers. High prices mean producers in the US, Canada and elsewhere become profitable and start increasing production and market share. What the Saudis care about is profitability while maintaining market share, which means prices that are somewhat high (maybe in the $70 range) but not too high. Prices as they are right now are much higher than the Saudis want.

In a vacuum, you're correct: the substitution effect would apply. But at least part of your point is negated by the fact that it's the European petroleum market which is being hit the hardest: we export LNG to Europe but not crude, & it's their primary supply chain that's been disrupted, but we don't have the crude oil capacity to fill the Russian void; the Saudis do.

[Inmate Trump]

Is there any real chance that Russia’s crippled economy and anti war sentiment in general could lead to a coup in Russia with Putin being overthrown?

[Silent Hunter]

Depends if people can get food.

[jaichind]

You need to match terms J. The 20% Russian bank rate has a term of one hour. It can be changed at any time. It is not a guaranteed rate for a week, a month, a year, etc. Surely you know this. And that is before you factor in default risk.

Fair.  I am pretty sure as long as Russia is able to export gas and oil and get paid for it (even if it is less than before) they will have plenty of RUB without having to monetize it.  The Bloomberg economic report also points out that their inflation estimates differ greatly depending on the product (just like anywhere else) with inflation for imported goods being massive while domestic good prices increase is much more muted.   That again plays into the narrative that the upper class is getting hit hard and the lower middle and working class have limited impact.  This war will be a good test which of the two is Putin's real political base.

[Torie]

https://twitter.com/SkyNews/status/1501512022470635521

American defense officials say, reported on CNN's live feed, that Russia still has 90% of its combat power ready for use, that doesn't sound like "losing significant equipment" or "running out of available troops" to me. I understand this forum is unabashedly cheerleading for Ukraine but believing in obvious pro-Ukrainian propaganda and exaggerated reports is a sure way to be disappointed when reality hits.

Russia has about “90% of their available combat power still ready for their use” in Ukraine, a senior US defense official told reporters on Wednesday.

The US assesses Russia no longer has “several hundred vehicles of different stripes and sizes” available to them, but the US does not know if those vehicles were captured, destroyed or abandoned, the official added.  

CNN first reported Tuesday that the US estimated that as much as 8% to 10% of Russian military assets used in the invasion of Ukraine are now destroyed or inoperable, according to a US official familiar with the latest intelligence as of Tuesday.

The equipment lost includes tanks, aircraft, artillery and other military assets. That is close to double the losses that CNN reported last week when it was estimated Russia had lost 3% to 5% of its military assets.

That is a cheap shot, really. Yes, it appears that about 95% of us hate Putin's war, and about 90% of us think he is a war criminal, but many of us also fear for the worst, and are very worried about it, and while we hope the good news is true, know full well it might not be for various reasons. So yeah, you have the sentiment right, but I don't think the perception that forumites are naive fools on this one is accurate at all. In fact my perception is quite the opposite. The forum has been at its best in this conflict, and I salute them for that.

[jaichind]

Equities markets are rallying while energy and food futures are falling (by a lot) on news that Ukraine is open to discussing Russia’s demand for neutrality.  I think they are counting their chickens before they hatched.  While I think Putin should take this deal and end this war I suspect his position would be "this would have been fine before the war but now it is not enough"

[Buffalo Mayor Young Kim]

https://twitter.com/SkyNews/status/1501512022470635521

American defense officials say, reported on CNN's live feed, that Russia still has 90% of its combat power ready for use, that doesn't sound like "losing significant equipment" or "running out of available troops" to me. I understand this forum is unabashedly cheerleading for Ukraine but believing in obvious pro-Ukrainian propaganda and exaggerated reports is a sure way to be disappointed when reality hits.

Russia has about “90% of their available combat power still ready for their use” in Ukraine, a senior US defense official told reporters on Wednesday.

The US assesses Russia no longer has “several hundred vehicles of different stripes and sizes” available to them, but the US does not know if those vehicles were captured, destroyed or abandoned, the official added.  

CNN first reported Tuesday that the US estimated that as much as 8% to 10% of Russian military assets used in the invasion of Ukraine are now destroyed or inoperable, according to a US official familiar with the latest intelligence as of Tuesday.

The equipment lost includes tanks, aircraft, artillery and other military assets. That is close to double the losses that CNN reported last week when it was estimated Russia had lost 3% to 5% of its military assets.

10% of equipment lost in two weeks is allot. Like a staggering amount.

[Torie]

Equities markets are rallying while energy and food futures are falling (by a lot) on news that Ukraine is open to discussing Russia’s demand for neutrality.  I think they are counting their chickens before they hatched.  While I think Putin should take this deal and end this war I suspect his position would be "this would have been fine before the war but now it is not enough"

When there is some slow down in the military push by Russia while talk chat ensues, yeah maybe. Absent that, it is all in the Putin play book. Talk peace prospects and possibilities while waging war, until there is no one left to talk to. So I agree with your instincts on that one.

[Middle-aged Europe]

My eye witness account: If you come by Berlin Central Station at night you will still see lots of Ukrainians with lots of suitcases waiting to be directed to their buses. An average of ca. 15,000 people arrive in Berlin per day now. At this rate that's half a million in a month.

[NOVA Green]

Per The Guardian ~ 7 Minutes ago:

Russia’s foreign ministry has confirmed the use of the TOS-1A weapon system in Ukraine, Britain said. The UK’s ministry of defence said the system uses thermobaric rockets, creating incendiary and blast effects.

https://www.theguardian.com/world/live/2022/mar/09/

[Torie]

Per The Guardian ~ 7 Minutes ago:

Russia’s foreign ministry has confirmed the use of the TOS-1A weapon system in Ukraine, Britain said. The UK’s ministry of defence said the system uses thermobaric rockets, creating incendiary and blast effects.

https://www.theguardian.com/world/live/2022/mar/09/

https://www.theguardian.com/world/live/2022/mar/09/ukraine-news-russia-war-ceasefire-broken-humanitarian-corridors-kyiv-russian-invasion-live-vladimir-putin-volodymyr-zelenskiy-latest-updates

[President Johnson]

Chernobyl is cut off electricity and the emergency power system, run by diesel generators, only lasts for about two days. Ukraine is calling for a cease fire in the region to repair the damaged power grid. At least reason to concern, although the IAEA says there's no immediate danger because the water tanks are enough for a cooling effect. I hope the Russians aren't that dumb, as they put themselves at risk here, too.

https://twitter.com/DmytroKuleba/status/1501531432031858690

https://twitter.com/iaeaorg/status/1501545852715905029

[(no subject)]

Jane Smith: "My daughter would be heartbroken by Vladimir Putin’s war against Ukraine"

http://www.bangordailynews.com/2022/03/08/opinion/letters/letter-my-daughter-would-be-heartbroken-by-vladimir-putins-war-against-ukraine/

[Storr]

It's literally The Simpsons USSR returns "that's what we wanted you to think!" meme:

https://twitter.com/RALee85/status/1501647699975852039?s=20&t=2nJZp80B11wmbJ...

[Person Man]

Chernobyl is cut off electricity and the emergency power system, run by diesel generators, only lasts for about two days. Ukraine is calling for a cease fire in the region to repair the damaged power grid. At least reason to concern, although the IAEA says there's no immediate danger because the water tanks are enough for a cooling effect. I hope the Russians aren't that dumb, as they put themselves at risk here, too.

https://twitter.com/DmytroKuleba/status/1501531432031858690

https://twitter.com/iaeaorg/status/1501545852715905029

With spring coming, it probably causes the fallout to be spread on the winds coming off the Black Sea into Russia. If there’s a public health crisis in Russia about this, what do you think will happen?

[Storr]

There's no way on God's green Earth that the Russians will be able defeat a country with people willing to defuse a 500 kilogram unexploded bomb during active fighting (shelling is heard in the background) wearing no protection beyond a police vest, using only a pair of gardening gloves and a water bottle.

https://twitter.com/COUPSURE/status/1501654247619842049?s=20&t=KR_reohmoWJhs...