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Private Money Manager and Consultant Leverage America's Lifeblood was a phrase I put up here in 2008 as a protest of sorts against the poor quality of our country's economic paradigm. Ideas about history, economics and risk-reward assessments and deep experience shape my investment ideas.... More
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  • Why Obama's Threats To Russia Will Dissipate And Economic Warfare Won't Happen

    Now that Crimeans have overwhelmingly voted to return to Russia, 60 years after they were attached to Ukraine, markets are probably going to be ok on the Crimean issue. Why? It isn't in anyone who matters' interest to fight over this.

    First, despite Kerry and Obama's threats of economic sanctions, it isn't going to play well for the US to try to force Crimeans to be part of Ukraine. It is also obvious to our European allies that it is they who will pay for Obama's economic warfare and that Russia isn't looking for military conquest of anti Russian areas of Ukraine.

    The words coming from Washington right now are tough, but when push comes to shove the debt crises in Europe leaves the EU with few options or stomach to fight a fight that doesn't really have to be fought. Germany's Merkel has already been warned by her business community that $38 billion in exports and Germany's natural gas supply argue for diplomacy.

    Asymmetrically, Russians are really resolved on this issue while Americans and Europeans are not. Historically the first Russian state 12 centuries ago was centered in Kiev. Ukraine and Russia are intertwined culturally, historically and financially. This goes way deeper than Kerry and Obama spin.

    Hopefully, someone has told Obama that Russia still views itself as a great power. Russia's all important Black Sea fleet and centuries of dominance in the region won't be given up without a fight. Russians also have an historical memory that places Obama now in a similar category as the Teutonic Knights, Napleon's Grande Armee and Hitler's Wehrmacht. Increasingly they see Obama trying to surround and shrink Russia, eventually dividing her empire. Russians have crushed these other invaders, why not one who usually backs down anyway?

    Europeans know Putin has an absolute mandate in his country to maintain Russia's strength, protect historic Russian communities and territory and to turn back what Russians view as American attempts to surround and weaken Russia.

    Obama, on the other hand, has no mandate either in Europe or the US to begin a new Cold War and the economic dislocation that would cause.

    The course of the Ukrainian/Russian stand off is most likely heading towards a solution that preserves Russia's vital interests and eventually figures out what Ukraine wants or needs. Ukraine, contrary to media and western political spin, doesn't have a consensus opinion. Western Ukraine has historic ties to Central Europe the eastern half of the country doesn't have. When Ukraine finds out the EU and the US aren't about to give them a huge annuity for leaving Russia's orbit or threaten war with Russia over the issue, their stance is going to change.

    Threatening, shoving and a little shooting aren't going to change the reality. Obama doesn't have the cred or the support to force Putin and Russia to give up what they cannot afford to lose. Merkel will move towards a more diplomatic stance to save the fragile recovery in Europe such as it is. This should blow over.

    Mar 16 10:29 PM | Link | 2 Comments
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