Things That Make You Go Hmmm... Like Iron Fists And Velvet Gloves

Tyler Durden's picture

Men like Putin understand the ruthlessness required to keep an iron grip on power, and the press is largely an irrelevance to them, while those in the West prefer the velvet glove approach — writing checks to their electorate, taking the softly, softly approach with their foreign policy, and constantly courting the press — desperate for approval (echoes of Sally Field once again).

Russia’s temporary exclusion from the G-8/G-7 and the accompanying sanctions are designed to send a message to Vladimir Putin and force him to the negotiating table over Crimea; but though the sanctions imposed will certainly cause some discomfort in Russia, the Western press is already questioning the validity of moves which impact individual companies such as Rossiya Bank and Rusal (the world’s largest aluminium company, which teeters on the brink of insolvency in the wake of the recently imposed sanctions):

(FT): Rusal warned of “material uncertainty” over its future as the world’s largest aluminium producer reported a $3.2bn loss in its worst annual performance since 2008.

 

The Russian aluminium group, controlled by Oleg Deripaska and listed in Hong Kong, confirmed that it had asked lenders to delay a repayment due next month on part of its $10bn net debt pile.

 

It said that it expected to complete long-running negotiations with its banks to amend the terms of its debt, but warned that there could be no certainty it would succeed.

 

“Management acknowledge that these conditions result in the existence of a material uncertainty with respect to the group’s ability to continue as a going concern,” the company said. Rusal’s auditor, KPMG, included an “emphasis of matter” paragraph in its report on the company’s earnings statement to draw attention to the issue.

Expect no such compassion from Putin. Instead, Russia’s leader is already working to tighten his alliances and broaden his power base amongst the GoP.

Many commentators point to the potentially devastating effect on Russia’s economy that the sanctions put in place by the EU and the US might have, whilst others emphasise Russia’s moves to strengthen their ties to the East and reduce reliance upon their Western trading partners.

One thing is certain: the combination of Putin’s hardline approach and refusal to play by Western rules, along with the West’s desperation not to take any action without the explicit backing of their electorates, means that, for now at least, Putin’s path through what could have been a tricky bracket has been very smooth indeed.

 

 

 

How this plays out is anybody’s guess right now, but this much I know: one should NEVER underestimate the ability of the average Russian to bear hardship, nor should one ever underestimate the West’s lack of fortitude once any situation becomes politically unpalatable.

I also know that everywhere you look around the world, electorates are just itching to vote for change and to hand power to new parties and new leaders, many of which are extreme in nature and possess the ability to seriously upset the status quo.

What else do I know? Well, I know that neither Russia nor China feels the US’s place at the top of the food chain is either justified or indefinitely sustainable, and they both smell weakness.

Ukraine is just one in a series of situations which will shape and reshape the geopolitical sandscape in coming decades, and the squabbles amongst the G-8/G-7 threaten to strengthen existing alliances and forge new ones in the crucible of conflict.

Pay very close attention to the sand beneath your feet, folks. It is unstable and unpredictable, and that is the most dangerous combination of all — ask Vlad.

 

Full Grant Williams letter below...

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