Realpolitik In Ukraine

Tyler Durden's picture

Submitted by Anatole Kaletsky via Evergreen-Gavekal,

Oscar Wilde described marriage as the triumph of imagination over intelligence and second marriage as the triumph of hope over experience. In finance and geopolitics, by contrast, experience must always prevail over hope and realism over wishful thinking. A grim case in point is the Russian incursion into Ukraine. What makes this confrontation so dangerous is that US and EU policy seems to be motivated entirely by hope and wishful thinking. Hope that Vladimir Putin will “see sense,” or at least be deterred by the threat of US and EU sanctions to Russia’s economic interests and the personal wealth of his oligarch friends. Wishful thinking about “democracy and freedom” overcoming dictatorship and military bullying.

Financial markets cannot afford to be so sentimental. While we should always recall at a time like this the famous advice from Nathan Rothschild to “buy at the sound of gunfire,” the drastically risk-off response to weekend events in Ukraine makes perfect sense because Russia’s annexation of Crimea is the most dangerous geopolitical event of the post-Cold War era, and perhaps since the Cuban Missile crisis. It can result in only two possible outcomes, either of which will be damaging to European stability in the long-term. Either Russia will quickly prevail and thereby win the right to redraw borders and exercise veto powers over the governments of its neighbouring countries. Or the Western-backed Ukrainian government will fight back and Europe’s second-largest country by area will descend into a Yugoslav-style civil war that will ultimately draw in Poland, NATO and therefore the US.

No other outcome is possible because it is literally inconceivable that Putin will ever withdraw from Crimea. To give up Crimea now would mean the end of Putin’s presidency, since the Russian public, not to mention the military and security apparatus, believe almost unanimously that Crimea still belongs to Russia, since it was only administratively transferred to Ukraine, almost by accident, in 1954. In fact, many Russians believe, rightly or wrongly, that most of Ukraine “belongs” to them. (The very name of the country in Russian means “at the border” and certainly not “beyond the border”). Under these circumstances, the idea that Putin would respond to Western diplomatic or economic sanctions, no matter how stringent, by giving up his newly gained territory is pure wishful thinking.

Putin’s decision to back himself into this corner has been derided by the Western media as a strategic blunder but it is actually a textbook example of realpolitik. Putin has created a situation where the West’s only alternative to acquiescing in the Russian takeover of Crimea is all-out war. And since a NATO military attack on Russian forces is even more inconceivable than Putin’s withdrawal, it seems that Russia has won this round of the confrontation. The only question now is whether the new Ukrainian government will accept the loss of Crimea quietly or try to retaliate against Russian speakers in Ukraine—offering Putin a pretext for invasion, and thereby precipitating an all-out civil war.

That is the key question investors must consider in deciding whether the Ukraine crisis is a Rothschild-style buying opportunity, or a last chance to bail out of risk-assets before it is too late. The balance of probabilities in such situations is usually tilted towards a peaceful solution—in this case, Western acquiescence in the Russian annexation of Crimea and the creation of a new national unity government in Kiev acceptable to Putin. The trouble is that the alternative of a full-scale war, while far less probable, would have much greater impact—on the European and global economies, on energy prices and on the prices of equities and other riskassets that are already quite highly valued. At present, therefore, it makes sense to stand back and prepare for either outcome by maintaining balanced portfolios of the kind recommended by Charles, with equal weightings of equities and very long-duration US bonds.

Looking back through history at comparable episodes of severe geopolitical confrontation, investors have usually done well to wait for the confrontation to reach some kind of climax before putting on more risk.

In the 1962 Cuban Missile Crisis, the S&P 500 fell -6.5% between October 16, when the confrontation started, and October 23, the worst day of the crisis, when President Kennedy issued his nuclear ultimatum to Nikita Khrushchev. The market steadied then, but did not rebound in earnest until four days later, when it became clear that Khrushchev would back down; it went on to gain 30% in the next six months.

Similarly in the 1991 Gulf War, it was not until the bombing of Baghdad actually started and a quick US victory looked certain, that equities bounced back, gaining 25% by the summer. Thus investors did well to buy at the sound of gunfire, but lost nothing by waiting six months after Saddam Hussein’s initial invasion of Kuwait in August, 1990.

Even in the worst-case scenario to which the invasion of Crimea has been compared over the weekend—the German annexation of Sudetenland in June 1938—Wall Street only rebounded in earnest, gaining 24% within one month, on September 29, 1938. That was the day before Neville Chamberlain returned from Munich, brandishing his infamous note from Hitler and declaring “peace in our time.” The ultimate triumph of hope over experience.

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NOTaREALmerican's picture

Just some Roosky Freedum-Spread,  nothing to worry about.

johngaltfla's picture

The bigger problem for the hapless Ukrainian government and the inept West is when the Russians decide to "protect" the citizens of Donetsk and other cities in the Eastern Ukraine. There are no options for NATO then and if the West imposes sanctions, Germany and France lose their natural gas supplies. Gee, wonder what the surrender for world peace crowd will do now.

Manthong's picture

Give him another week or so..

He cannot tolerate the maniacs running Kiev and they will soon be history.

semperfidelis's picture

Putin`s days are numbered. The sharks in Moscow will get him heavily irradiated in no time. 6 months at best. Ukraine was a epic blunder for Putin, oligarchs will never forgive him.

semperfidelis's picture

Between Putin and Yanukovych there are no differences of substance, the Ukrainian puppet was imitating his overlord. If Obama would do in the US what Putin is doing in Russia you would have civil war. Good thing Russians have no weapons. I guess the communist forgot to mention that in the constitution.

sessinpo's picture

Please give an analogy of your statement regarding Obama vs Putin.

And BTW, isn't Ukraine facing civil "disagreements" that could quite easily lead to armed combat?

Maybe you are just being sarcastic and I am missing it.

semperfidelis's picture

The Ukrainians have no guns ( So someone would actually have to `arm` the 2 sides of the civil war. Civil war in eastern Ukraine would spill into Russia instantly. Check this out -> . Putin is upset because he lost his bitch in Kiev, that makes him look bad at the KGB meetings. This is how it always worked in Russia and the USSR. Putin is not Mao, Russia in not China, they don`t have Confucius.

PhilB's picture

How anybody can see this a Putin getting the upper hand on the West is just ridiculous. Putin is trying to salvage a horrible situation that Ukraine has become for him. He only has downside risks and West upside. If Russia stays with Crimea and West gets the rest of Ukraine, its a huge victory for the West and a crushing defeat of Putin's reassertion of Russian geopolitical influence. Outside of insanity, WWIII, its Russia that has much more to lose in the situation and is currently in the process of losing it.


post turtle saver's picture

if Merkel thinks Putin's not "all there" that's telling... those two are tied at the hip with their DDR history and I imagine have grown used to reading each other very well

fooshorter's picture


Putin salvages crimeria, but kiev has already become a western symphatizer.



Omen IV's picture

Putin will take ALL the south and east of the UKraine  in time - and leave the debt behind and charge market rates for the gas to the  western Rump - sounds pretty good in the end

Obama gets Vlad to impale him on his pile of endless speeches and Bullshit!

semperfidelis's picture

... and then Putin will walk on water and feed all the worlds hungry.

TheReplacement's picture

Aw now wouldn't that be a brilliant move by the west?  Imagine if Kiev up and held a referendum in the west to secede from Ukraine and become West Ukraine or some such thing.  They could break to the west AND leave all their debt to the Ukraine (eastern Ukraine and Crimea) and Putin holding the bag for conquering all that debt.  LMAO that would be funny as hell.

Too bad our leaders are not imaginative nor daring enough.  Hmm, I guess they wouldn't bother because West Ukraine would be independent and debt free while still holding the keys to the gas.

Dr. Destructo's picture

If that sort of thing comes to pass I'm blaming you for giving them ideas.


Rock On Roger's picture

How does west Ukraine hold the keys to the gas when the gas is owned by Russian interests and produced in Russia and Belarus? Ukraine is a transit station, the gas can go other directions or stay in the ground for another day.

Ukraine has no levers what so ever. Ukrainians are fucked thanks to 'our leaders'.

'Our leaders' are traitors to humankind.


Stack On


TungstenBars's picture

Yes, broke NATO has the upper hand on 'gas-man' Putin



Element's picture



" .... and West gets the rest of Ukraine, its a huge victory for the West ..."


So where the hell are all the Ukrainians going to live?!

The west would get nothing but a strategic liability and a massive insurgency, in a country that is beyond broke. But at least they will be in good company in that case. But Washington already said a military response was out of the question, and if the West was in Ukraine, in a strategic power-projection role, then there would indeed be a massive military response from Russia.

So the West is getting nothing.

The Russians are on home turf, they control the whole area, they own that, they have logistics capability and dedicated well trained very ready combat capability in that region, up the wazoo. The west has zero chance in Ukraine.

All that resulted was instability and a big headache for Russia, that Putin is addressing via taking Crimea to remove the western incentive to undermine Ukraine, in order to get at the Black Sea fleet, to weaken its influence in the Mediterranean, as that could have undermined Syria, and Tartus, and thus it would have made Israel happy-chappies, as well.

So Putin Annexes Crimea, to take the western incentive away to undermine Ukraine, and thus the Black Sea Fleet is not going anywhere, ever.

Strategic situation improves for Russia, not weakens, while NATO and Washington are left looking weak as water and outwitted and out manoeuvred ... again. 

TheReplacement's picture

Part of me thinks it's all just part of the plan to shift manufacturing (east Ukraine in this case) to the east (Russia/China) and debt to the west (US and EU).  Sure the bankers get some slaves for a while but eventually the real powers that be will hang them in the final takeover.  The bankers are indeed evil but they could simply be evil useful idiots.  They are really breaking down western civilization hand in hand with the leftists like Obama.  The problem is they only have wealth.  The politicians have intelligence and military.  Has there ever been a dictatorship takeover by bankers?  Nope.  Politicians and military do takeovers.  Bankers line the walls that catch bullets.  But I digress... lol.

Cloward-Piven on a global scale.  Empires moving chits around a board in order to create an epic collapse.  Everyone's in on it except the people.

Independent's picture

I am very confused by this situation, you've got Jews supporting Neo Nazis and even fighting alongside them in Kiev.  Nuland who is a Jew is actively courting these far right groups and funding them.  Do they think they can control them?  Perhaps as with Islamic terrorist once the support money stops these groups just fall apart.  Why are the Jews so hell bent on joining the EU.  Or does Israel want to force the Ukrainian Jews to move to Israel so it can settle them on Syrian land if they are able to dismember the country and create a greater israel?  If Assad falls one can see Israel greatly expand its security zone outside of the Golan Heights and possible grab Syrian coastal region as a security pretext.  Syria would definitely make for greater living space, South are the Egyptians and East the Jordanians but out towards the goland heights there is room for growth especially in a failed state that Syria would become without Assad.  I suspect that once the Euros get in control of Ukraine the neo nazis will be marginalized once they have served their purpose.  They are the shocktroops for the mass army of Euro slave merchants and traders ready to set upon Ukraine and steal its assets, frack its heartland, and enslave its people.

john39's picture

the Zionists and orignal (german) nazis had a treaty, the transfer agreement, which basically facilitated the forced transfer of European Jews to Palestine.   another piece of history put into the memory hole.  so what is going on in Ukraine is not surprising or new.

Dewey Cheatum Howe's picture

And that was before WWII started and before the holocaust started in 1933. That was before anyone knew how the Nazi's honored their agreements.... So Zionists bad for making agreements with Nazi's but British not prior to WWII? Hindsight is fucking nice and all.

Context would be nice before joooo bashing. There is plenty to legitimately bash them on without leaving out key pieces of information that undermine your false point there.

john39's picture

better check your dates. The global Jewish economic boycott against Nazi germany was already in place when the transfer agreement was executed.  So, total economic boycott on the one hand, but transfer agreement on the other?  your history doesn't line up.

as for the rest of your post, i don't find it historically accurate either.  that is off topic.

Dewey Cheatum Howe's picture

The Haavara (Transfer) Agreement was agreed to by the German government in 1933 to allow the Zionist movement, in the form of the Haavara company to transfer property from Germany to Palestine, for the sole purpose of encouraging Jewish emigration from Germany. The Haavara company operated under a similar plan as the earlier Hanotea company. The Haavara Company required immigrants to pay at least 1000 pounds sterling into the banking company. This money would then be used to buy German exports for import to Palestine.


After the invasion of Poland and the onset of World War II in 1939, the practical continuation of the Haavara agreement became impossible. In 1940, representatives of the underground Zionist group Lehi met with von Hentig to propose direct military cooperation with the Nazis for the continuation of the transfer of European Jews to Palestine.[7] This proposal, however, did not produce results.


Sounds more like an escape plan than some joooo conspiracy to kill their brethren to me.

john39's picture

Nice try on spinning the fact that zionists were doing business with the very same people they claimed were out to kill them. Btw, odd is it not, that alleged mass murdering fascist nazis who were sworn to wipe Jews from the face of the earth were willing to let them emigrate?

Odder still, the Jews that seved in hitler's government and military:

"Contrary to conventional views, Rigg reveals that a startlingly large number of German military men were classified by the Nazis as Jews or "partial-Jews" (Mischlinge), in the wake of racial laws first enacted in the mid-1930s. Rigg demonstrates that the actual number was much higher than previously thought--perhaps as many as 150,000 men, including decorated veterans and high-ranking officers, even generals and admirals."

History as we know it is almost entirely lies. Better to face it than perpetuate the lies to avoid stigma.

TheReplacement's picture

The german army oath wasn't changed until the mid 1930s, 1934 to be specific.  Then Hitler purged the officers.  Then they started getting tight on who was a german and who could be in the army and all that.  Of course there were plenty of Jews in the army up until the mid 1930s and a few even past that (some men want to watch the world burn).

Hitler wanted the Jews gone.  Before he took over Hindenburgs role he had not power over the military (1934).  Getting them to move out on their own... why not?  If you thought that Asians, for example, were the main problem in the US and you wanted them gone would you accept them moving out or would you feel that you just had to kill them all as soon as possible?  What if you had no power to kill them all?  You would take what you could get.  That's how you are (if you are like Hitler, you take everything you can get).  You take the bargain and let them move.  If you can get them to pay you for it, so much the better. 

History is a constellation not a single pinprick of light.

Optimusprime's picture

Ever hear of Chaim Weizmann?  First President of Israel?  The guy who said that he did not care if all the Jews in Europe died, so long as the Israeli state resulted?  We are dealing with VERY tough customers.

TheReplacement's picture

Sounds like he was a guy who understood the reality of the situation.  All the Jews in Europe were going to die.  They did nothing our founding fathers would not have done in terms of leaving tyranny and making a land of their own.  Like our founders, they have been guilty of some tyranny of their own.  At least it is their own crimes they can pay and repent for now.

logicalman's picture

Mainly the rich ones got to leave.

The average Jew had to stay.

An armed populace would make this kind of thing a lot harder.

Worth looking at Churchill's desperate need for cash and some of the decisions made regarding Palestine, too.

Anyway, none of this is about anything other than money and power. Rich greedy fucks making decisions they have no right to make. If they want to fight, go for it,  just don't involve me or may family.

I'll defend my home and family, that's it.

TheReplacement's picture

"I'll defend my home and family, that's it."

If everyone had a gun and a real education (fundamental rights and the meanings of words) then that would probably be enough.

logicalman's picture

There were many, and some of them make Israel's favourite propaganda piece look almost negligable.


Oh regional Indian's picture

Excellent references and on point. These two dwarf the WWII hollowcost lie.

I'd highly recommend anything by this man:

The hollow Lie...


TheReplacement's picture

"The Holocaust" certainly wasn't the worst but it was part of the worst - WWII.  It is hard to seperate one from the other when considering the scale.  No war would have meant far fewer Jews could have been killed.  No Holocaust and who knows what may have happened.  Well, Nanking would have happened but Europe is unclear.  It would depend on what factor changed to remove the Holocaust from the equation.  A sane Hitler would not have started a two front war nor declared war on the US for no good purpose.  Maybe the German people choose a different leader, Hindenberg lives longer, Hitler dies, or perhaps the crash in '29 doesn't happen...  could have been no European war then.

ILLILLILLI's picture

>> was there a holocaust?

Many of them, apparently...

Reading and understand the Kabbalah is essential to understand the motivations.


downwiththebanks's picture

The 300 year slave trade by Western Capitatlsm murdered 25 million Africans and crippled the continent in a way that has not fully allowed it to recover.

The Capitalist Empire of Britain, run through the East India Company, killed millions of Bengalese in the late 18th and early 19th centuries thorugh govermnet imposed famines.

Same thing with Ireland.  And China.  That British Empire was hard-core.

jaxville's picture

 The Jews have no choice but to support the current circus running/ruining the Ukraine. The useful idiots they used to destabilize the elected government were brushed aside and the ultra nationalists took over with ease. Something tells me though that Jews will be given a pass in the new Ukraine but not so with Russians unless they happen to be Jews. On the other hand....the shoah must go on.

palmereldritch's picture

 "The useful idiots they used to destabilize the elected government were brushed aside and the ultra nationalists took over with ease."

I'm not so sure about that.  Looks like the ultra nationalists were groomed from the get-go.

 From Victoria’s scrapbook:

Featured in the third picture in the link below is US Assistant Secretary of State Victoria Nuland together Neo Nazi Svoboda leader Oleh Tyahnybok on her right.

On her left is Arseniy Yatseniuk, the central bankster PM or ‘Yats’, as the U.S. State Department fondly calls him, who is  featured in this article:

 Central Banker PM Says Ukraine Ready for IMF Auction Block

Yats said Monday that Naftogaz Ukrainy, the national oil and gas company of Ukraine, will be put on the auction block.

Ukrtransgaz, a Naftogaz Ukrainy subsidiary, operates the natural gas pipelines in Ukraine. The pipelines are used to transit Russian natural gas to eighteen European countries, including France and Italy. Naftogaz is the sole importer of Russian natural gas provided by Gazprom, the largest extractor of natural gas and one of the largest companies in the world.

Looks like a good old fashioned shake down.  Criminal thugs employing other criminal thugs to loot and pillage. In this instance, a whole country.


tip e. canoe's picture

Wow, they're not wasting any time are they?

palmereldritch's picture

Democracy in action /sarc


Springtime for Nuland and Ukraine

Element's picture



"I am very confused by this situation, you've got Jews supporting Neo Nazis and even fighting alongside them in Kiev."

You realize Israel is a racist Neo-Fascist State, right? Whence the confusion?

palmereldritch's picture

"I am very confused by this situation, you've got Jews supporting Neo Nazis and even fighting alongside them in Kiev." 

From the links I read some of the gang leaders were IDF (or "ex-IDF"... for what that's worth).

The calculus on this could be: contributing to a de-stabilization of Ukraine would weaken Russia's military commitment and resources defending Assad.

Perhaps there's new military action in Syria planned and pending that will exploit the confusion and focus in the Ukraine to expand the Israeli sphere of influence at home in their ME neighborhood?  

This chess game may have at least two different non-contiguous boards.

aVileRat's picture

Wish there was some way to check the neg arrow IP's.

But yes, Yeltsin was gone 6 months after he fucked with the boys. In every country it is all fun & games until someone is down a billion or two. Unless that guy was a dick.

Big moves like this in Russia are pre-cleared by the donor base and key demographics (the nuclear army working group). Unlike the Chinese PLA, most assets are held by private Oligarchs vs. Army agents so the power base is a bit more at risk to a market panic (today) or a sanctions round (esp. if you are bidding on some India / MENA projects). So unless guys have time to write offset swaps with the asset management corps. to protect against a prolonged sanction round & currency spike, the bullshit tolerance is very low. And with good reason, when you have a few thousand workers to employ and meet payroll on, your high school buddy really can't go start WW III when he feels like it.

Feelings are also pretty raw after the boondoggle that was the Sochi games, which screwed many Oligarchs, and the whole Urea drama. And the SU-35/India contract drama. And the whole Gazprom in Asia drama....

Come to think of it, Valad's not been on a good track record with his donor base for a few months now. I wonder if that has anything to do with his sudden turn to the populist/Slavic-defender motif.




Canucklehead's picture

You don't understand Russia.

Yeltsin was replaced by Putin because Putin felt it was time to step out from behind the curtain.

The oligarchs owe allegiance to Putin. Putin respects the oligarchs so long as they stay in line and don't screw with him. Piss Putin off and the oligarch ends up in serious trouble.

Russia today is a throw back to the Roman-Byzantine times. There is no democracy.

semperfidelis's picture

No, you don`t understand. The oligarchs OWN Putin. He will be changed when needed to assure their survival.

Dewey Cheatum Howe's picture

Wrong, Putin is not only an oligarch he is now THE oligarch owning a 70% stake I believe it is now in the biggest state controlled gas company in the Russian Federation aka Gazprom. There is a coalition behind him no doubt but they don't control him anymore at this point. The Medvedev/Putin dynamic is a business partnership that keeps the fringe elements from taking control of the country like the faux R/D setup here in the US except there they are all on the same page unlike here.

fockewulf190's picture

Damn he´s packing a nice yearly salary as prez if that 70% stake is true.  The Chinese head honchos learned right quick to hide their Rolex watches once they were exposed as somehow being filthy rich despite modest government salaries.  Indeed, Putin is the boss, and any oligarch who would oppose him either does it from overseas or from a prison cell. Putin has the entire FSB answering to him...and that is a very powerful tool indeed. Still, Putin´s move is not without risk however, and his biggest danger is fiscal.  He´s been spending money hand over fist lately, yet the vast majority of Russians are quite poor. He may have taken over Crimea, but he now "owns it" and all the problems which go with it.  If Russian banks start failing, foreign investment dries up and the Rouble and stock market continues to tank, it´s going to hurt ordinary Russians, and russian businesses, severely.  Time will tell how this works out. Mr. Murphy, of Murphy´s Law fame, can be an unforgiving son of a bitch though...and you know he is watching.