Bitcoin Rises, Stocks Volatile as Sanctions Roll on Russia

The STOXX 50 index for major European companies gained 0.2%, but then traded down 0.16% with Nasdaq and S&P500 up by about 0.24% before Nasdaq went red by nearly 1%.

The reason is probably because at least so far any conflict between Russia and Ukraine seems to be limited and may be just political, though the very highest of politics.

Donetsk and Luhansk are the only cities besides Crimea that Russia’s President Vladimir Putin was able to take in 2014 through proxy forces.

Donetsk is where the Ukrainian president that was removed in 2014 was born, Viktor Yanukovych, a president who was previously accused of rigging the elections and who was against signing the European Union accession agreement.

Since then the area has not been under the control of the Ukrainian government, with Putin taking the step last night to formally break up the Russian proxy controlled part of Ukraine by unilaterally declaring it a republic and by sending in Russian troops.

Politically, this is a very big move. Otherwise, nothing quite changes. There is no destruction as such, there is no ‘war’ in the proper meaning of that word, at least as things stand.

Ukraine, What Now?

Ukraine’s president Volodymyr Zelensky gave a speech at 2am his local time in front of the internationally recognized borders of Ukraine.

That says all you need to know, but there is the question of how do you checkmate here.

There are three options. You cut off the areas that now have Russian troops and were under Russian control since 2014 and set a hard border there for the rest of Ukraine either through EU membership, Nato membership, or a hard security guarantee that involve troops on the ground by maybe UK, Germany and France.

Or you try to get the same but without cutting off those parts at least in understanding if not technicalities. Or the unrealistic third is trying to get back those parts.

For the first option, if these people want to be part of Russia, then they can enjoy staying poor and the dictatorship, although it isn’t very clear just how much they want to be under Russian control.

This generation has not seen many celebrations of independence, but the few we have seen tend to be a very joyous affair involving pretty much the whole country and its people in actual festive celebrations where one wants their children to see an historic day.

The ‘celebrations’ in Donetsk involved about 10 people and a very professional fireworks display that no one appeared to want to come out and see.

That says the people of Donetsk are not the ones writing their own history, it is being written for them. This also clearly wasn’t a joyous day for the vast vast majority of them. Maybe because being friendly to Russia and being under the Russian government are two different things.

And thus objectively it’s not a question of if they want to be with Russia, but more a question of they are under Russia, they’re occupied.

A cutting off of these regions for the Ukrainian government thus would probably be a difficult decision, but one can employe creativity where third parties are concerned for security guarantees or EU membership to extend to only the areas currently controlled by the Ukrainian government.

What if this government then tries to take these other areas by force? Well, you’d have a proxy war between Russia and Ukraine, a war that takes a very different new level if it breaches Russia’s internationally recognized borders or Ukraine’s secured borders.

Alternatively the European great powers can have that security guarantee under the condition that Ukraine does not attempt to take these other areas by force.

The big question so being if Russia took these two cities, should Ukraine now have what it wanted in a way that ends these tensions and in a way that secures the peace and prosperity of Ukraine.

Doing that in a legitimate and checkmate manner clearly is possible, whether there’s the will however, is a different matter.

The Actual Response

There has been none from America, at least not any real response and not so far. Instead, they have sanctioned only the occupied areas. Victim blaming?

The United States is, cowardly some would say, fleeing all of Ukraine. They set shop in a Ukrainian city near Poland, Lviv, but now have relocated even from there to inside Poland.

Something that might make one wonder whether Russians are feeding them so much disinformation they scared their own embassy would be targeted, which is an act of war.

A US embassy, in any nation, is US territory. If it is non state actors, you have to deal with just them, but if it is a country attacking the territory of a global superpower, then you act like a superpower.

Obviously there’s plenty of potential gray like in Iran in 1970s, but Germany and France are not fleeing a nation that is still very much at peace.

Germany instead has imposed proper sanctions in cancelling Nord Stream 2. That’s a big step, but Germany is or was one of the guarantors of the Minsk peace agreement which Russia just breached, and so their own reputation is a bit at stake.

The United Kingdom has imposed sanctions on a number of Russian banks and two publicly traded companies, as well as some individuals.

In complete unity, the leaders of all British parties condemned the occupation and some of them even argued sanctions don’t go far enough.

They held back in case Russia goes into Ukrainian controlled territories, but even this incursion so far is being seen as a very serious matter at least for the United Kingdom and Germany, two of the world’s great powers.

A Backfiring Adventure?

It’s not too clear whether Putin is a bit red faced today with it left to the former Russian president, Dmitry Medvedev, to suggest Germans may have to pay more for gas.

The loss of a pipeline that has been in development for years and has cost so many billions, in addition to the loss of opportunity for more gas transfers to Germany, must of course raise the question among the people that do run Russia regarding what exactly is the point of all this adventure?

If Putin expected an easy win in poll numbers, then the speech he gave during Europe’s prime time rather than Russia’s will be of little assistance as anyone that tried to hear it will for the first time have been introduced to a very simple question: Are Russians always tortured like this by their president, for more than two decades!

Rambling, does it no justice. Unprofessional, neither. Ineffective, is too soft. The worst oratory in history still leaves out the feeling of insult that he does not respect one’s time.

He had the ear, and he chose to make it deaf. That suggests contrary to the desire to persuade, he wanted to dictate.

And so he failed to do his one job, to answer the one question in every Russian mind: what’s the point of all this? What’s the gain?

They can see the losses. A 35% crash in their stocks, maybe less opportunities to now go to rich Europe, or America, less trade, less money, and that’s even without proper sanctions.

But what’s the gain? What’s the gain of turning down a seat at G7, which was made G8 just for Russia? What’s the gain of losing Germany?

This is most probably a question going through the mind of those that actually do hold power in Russia, in the Kremlin civil service and in Russian businesses.

What is the gain of Romanticism?

That’s perhaps the history that Putin should study, and then be a TV sixth grade teacher lecturing university students.

Because we know history very well, especially the history of extreme nationalism and that of blundering adventures.

And if he thinks this would satisfy his people, well what’s in it for them?

All of which may well suggest this is the acts of an old man trying to re-live his youth, trying to use the same playbook as before in the hope it works again, oblivious perhaps to the changing world and the changing mood in his own country, or unable to adapt to it.

Because we expected to see a statesman addressing the world. Unfortunately we received more an understanding of how and why Russia declined so much in the past decade under the leadership of Putin who clearly it appears after his second term stopped caring about the wellbeing of his own people, and about Russia itself.

A Russia that had it all after Putin’s second term, and now stands as but a shell of itself with useless time-wasting theatricals that clearly suggest they no longer quite have a president working to improve their country, but a hasbeen that is so used to his position to the point he has completely lost touch with the new world and the new generation to whom, someone in his position, was primarily speaking to without much success.