None of the electorate in the NATO countries voted for another of these inconclusive, forever wars, so profitable for a select few and so costly in life and treasure for regular people. Surely no one in the developing nations signed on to pay for sanctions with their food budget. It is time to figure out a) What our goals are and b) What the hell we are doing, period and in furtherance of those goals. This isn't some game of RISK with let's try this, or let's try that and no consequences at the end of the night. Since the Maidan coup in 2014 the West has had eight years to plan for this.
Do it or don't do it; because trying to finesse a halfway reaction is nuts.
As the philosopher asked the generals and armaments producers some time ago:
"When was the last time you b****es won a war?"
From Zoltan Pozsar at Credit Suisse, April 14, 2022:
The “G-SIB” of Commodities
Regular readers of our dispatches are familiar with our framing of J.P. Morgan as the “Bakken Shale” of global dollar funding markets, and as the system’s Lender of Next-to-Last Resort: J.P. Morgan cannot print reserves like the Fed, but it has the most amount of reserves at the Fed relative to other banks, and the bank that has the most reserves backstops the liquidity of the system during non-systemic episodes of liquidity shocks. In the world of commodities, the equivalent of J.P. Morgan is the Russian Federation. Not only did Russia own as much in FX reserves as J.P. Morgan owns in reserves at the Fed, but Russia’s exports of commodities (like J.P. Morgan’s “exports” of reserves) exceed the exports of every country in the world, including the United States.
What J.P. Morgan is to dollar funding, Russia is to the world of commodities – both are G-SIBs in a way, with similar phraseologies (“fortress balance sheet”; “Fortress Russia”). In today’s dispatch, we map Russia’s commodity fooprint...
...which, as the size of the country’s geographic reach would imply, is very big, or, rather, systemic. The first chart shows that the Russian Federation is the single largest exporter of commodities, and the U.S. is a very close second. Saudi Arabia comes third, but they export much less than the U.S. or Russia.
Russia’s dominant position spans many commodities. Similar to how J.P Morgan is a dominant player as a marginal lender (the marginal lender) in the repo, FX swap, and equity funding markets, as well as in Treasury underwriting and trading, Russia is a dominant exporter of energy, grains, metals, and other commodities.
The next set of charts (all in the form of Sankey diagrams) shows Russia’s commodity exports across a range of commodities, starting with energy exports.
In terms of crude oil, Russia is the single largest exporter outside of OPEC, and most of the oil Russia exports goes to Europe. The second biggest market for Russian crude is China, and the re-routing of Russian oil from Europe to China will lead to severe shipping bottlenecks as we discussed in detail here.
In terms of refined oil products (for example, diesel fuel), Russia is the third largest exporter in the world, and sends most of its refined exports to Europe.
In terms of natural gas (gas through pipelines), Russia is the biggest exporter in the world serving primarily Europe: Germany, the Baltics, and Eastern Europe. In terms of LNG (liquefied gas, seaborne) Russia is not a significant player, but the point about LNG is that it’s much smaller than the piped gas market, and (potential) disruptions to the flow of piped gas is impossible to replace with LNG. Not only in a “spot” sense but also over the medium term. That’s an issue.
In terms of coal, Russia is the world’s third biggest exporter after Australia and Indonesia, and much like with oil and gas, its biggest market for coal is Europe.
Now onto foodstuffs.
Russia is the single largest exporter of wheat, and Russia and Ukraine combined are an even more systemic source of wheat exports to the world. Combined, Russia and Ukraine export as much wheat as the U.S. and Canada combined. Unlike energy, most of the wheat exports of Russia and Ukraine go to emerging economies – Egypt and Turkey and other countries in Africa and Asia.
In other words, while in Europe industry is reliant on Russian energy to function, in EM, people are reliant on Russian grains to sustain themselves. Either way, much like you need funding to survive, and J.P. Morgan ensures your survival in that sense, you need energy to sustain industry and food to sustain yourself, and in those departments, Russian exports to Europe and EM countries ensure survival. That’s how you define systemic. Russia is a “commodity G-SIB”.
In terms of fertilizers, Russia is systemic again – it is the single largest exporter of fertilizers, and much like reserves in finance, nothing gets done without fertilizers in an age of industrialized agriculture when land is never given a chance to rest: unless you stuff earth with potash, you can’t grow stuff, and everything from peppers to tomatoes, potatoes, strawberries, and watermelons needs lots of potash. No reserves, no harvesting of basis points. No potash, no harvesting of fruits or veggies. No good harvest, higher headline inflation, not to mention the extra costs to growing vegetables that come from higher energy costs (to heat a greenhouse) and from the higher cost of plastic wraps used to build greenhouses and to cover the soil to keep the produce “tucked in”.
Now onto metals...
....MUCH MORE
If you've forgotten what was decided regarding G-SIB's after the Great Financial Crisis, the Canadian Office of the Superintendent of Financial Institutions has a handy infographic.
And as far as the "a)" question above, on conceptualizing and communicating goals, this guy seemed to understand the need for clarity in matters of great importance:
"You ask, what is our aim? I can answer in one word: victory; victory at all costs,
victory in spite of all terror, victory, however long and hard the road may be..."
No ambiguity, no finesse, just straight talk.
