Mar 07

Today’s News 7th March 2022

  • Record Commodity Prices Pose Dilemma For Beijing
    Record Commodity Prices Pose Dilemma For Beijing

    By Ye Xie, Bloomberg Markets Live strategist and reporter

    Three things we learned last week:

    1. Soaring commodities put Beijing in a quandary. China set its growth target at about 5.5%, the higher end of economists’ estimates. That implies more stimulus is in the cards. But stimulating the economy via infrastructure and housing construction may further lift commodities. An index tracking China’s local commodity prices has already climbed to an all-time high, reflecting a global rally following Russia’s invasion in Ukraine. China’s weak consumption – retail sales growth has slowed to 1.7% from 8% in 2019 – means that manufacturers, especially small firms, cannot fully pass on the costs, squeezing their margins.

    To curb commodity prices, Beijing has imposed price controls and curbed speculation. It also offered relief to struggling small enterprises through loan deferments and tax cuts. Still, “the dilemma facing policy makers is how to stimulate demand in those parts of the economy struggling with weak demand and disinflationary trends, without also lifting demand in those sectors that are seeing destabilizing levels of inflation,” said China Bull Research.

    2. One way to shore up the economy is to ease the zero-Covid policy, and Beijing signaled that such a move is possible. China is looking for ways to reduce the “social costs” of its strict Covid restrictions, an official said last week. The question is when and how. It’s another dilemma Beijing is facing. The Covid crisis in Hong Kong underscores the dangers of virus spread in a place where immunity is low. Meanwhile, the new Covid cases are rising on the mainland, showing the current strategy is less effective to contain fast-spreading omicron.

    3. With the exception of the ECB, central banks appear to be pressing on when it comes to tightening of monetary policies, despite financial market turmoil amid the Russia-Ukraine war. The Bank of Canada raised rates for the first time since 2018, as expected, and signaled more tightening is coming. The Fed’s Jerome Powell said he supports a 25bp hike this month and didn’t rule out a larger move at some stage. By comparison, ECB officials, who meet on March 10, are set to take a timeout from plotting the exit from stimulus. Euro-zone financial conditions have tightened to a level last seen during the depths of the pandemic in 2020.

    Tyler Durden
    Sun, 03/06/2022 – 23:00

  • Embargo Of Russian Oil Spreads To Kazakhstan
    Embargo Of Russian Oil Spreads To Kazakhstan

    By Lori Ann LaRocco of FreightWaves

    The Stealth Haralambos is one of three ships with canceled loadings. (Photo: Stealth Maritime Corp.)

    The self-imposed embargo of Russian oil is spreading to Kazakhstan crude, with three shipments canceled in the past 24 hours.

    The Wonder Vega, Free Spirit and Stealth Haralambos, all Marshall Islands-flagged vessels, were Black Sea-bound for the Port of Novorossiysk.

    S&P Global informed clients of the three canceled loadings, citing the war risk premium associated with the grade of oil.

    These latest cancellations led the Chevron-led consortium at Tengiz — Kazakhstan’s highest-producing oil field — to issue a statement that it was “monitoring developments.” Production is continuing, according to the consortium.

    Andy Lipow, president of Lipow Oil Associates LLC, told American Shipper that Kazakhstan crude oil, which is the light sweet variety like Brent and WTI, is trading at a discount. The crude is currently being offered at a $9-per-barrel markdown to Brent. 

    Prior to Russia’s invasion of Ukraine, Kazakhstan crude was sold at a slight premium to Brent. 

    “CPC Pipeline (Caspian Pipeline Consortium led by Chevron), which originates in Kazakhstan and ends at the Russian port of Novorossiysk on the Black Sea, carries both Kazakhstan and Russian oil,” said Lipow. “Buyers are hesitant because of the risk of Kazakhstan’s oil being ‘tainted’ with ownership from a sanctioned individual or entity.”

    The state of Russian oil for the United States is still in play. Seven tankers are traversing the Atlantic carrying crude.

    One, the Bahamas-flagged Seoul Spirit, has been anchored since Tuesday over at Big Stone Beach off of Delaware.

    One thing is certain: While some Russian oil imports might be on their way because the transactions took place more than a month ago, they are going to decline to very low levels in the coming months. Said Lipow: “I doubt any major oil company in the U.S. will enter into a new transaction for Russian oil under these circumstances.”

    Tyler Durden
    Sun, 03/06/2022 – 22:30

  • All Hell Breaks Loose On Russian Oil Embargo Fears: Futures, Stocks Plunge As Oil Soars To $139, Gold Hits $2,000
    All Hell Breaks Loose On Russian Oil Embargo Fears: Futures, Stocks Plunge As Oil Soars To $139, Gold Hits $2,000

    All hell is breaking loose in the Sunday evening session where S&P equity futures and Asian markets tumbled, while havens such as sovereign bonds and gold soared amid fears of an inflation shock in the world economy as oil soared on the prospect of a ban on Russian crude supplies.

    Emini futures were down 1.6% as of 9:00pm ET, while Nasdaq 100 futures plunged 2% and European futures were down 3%.

    Meanwhile, the stock MSCI Asia-Pac index was on course for a bear market — a drop of more than 20% from a February 2021 peak, while Hong Kong’s Hang Seng index plunged more than 5%, and below the March 2020 low…

    … as Brent oil briefly hit $139 a barrel at the open when stops were hit, and West Texas Intermediate $130 a barrel, before trimming some of the rally…

    … even as Jen Psaki earlier tweeted a humorous tweetstorm about how the US plans to achieve energy security in 9 “specific” steps:

    https://platform.twitter.com/widgets.js

    The catalyst for the sharp move higher in oil was the earlier commentary from Secretary of State Antony Blinken who said the U.S. and its allies are looking at a coordinated embargo following Russia’s invasion of Ukraine, while ensuring appropriate global supply.

    It is the latest spike in energy prices, which are now dangerously close to levels last seen in 2008 just before everything collapsed, that threaten to spark a global recession, something we have been warning about for months, and is a risk that is sending tremors across markets.

    The risk carnage sent funds flowing into safe havens: in one of the clearest signs of risk-off markets, the swiss franc just broke below parity with the euro for the first time since the SNB depegged back in January 2015, even though a governing board member of the Swiss National Bank said it’s ready to intervene to tackle rapid strengthening.

    ..

    … while 10Y yields have tumbled back below 1.70%.

    … sending odds of a March rate hike down to just 0.86%.

    Having ignored it for long – despite our repeated warnings to the contrary – traders are finally realizing that stagflation is here: “for the U.S. economy, we now see stagflation, with persistently higher inflation and less economic growth than expected before the war,” Ed Yardeni, president of Yardeni Research, wrote in a note. “For stock investors, we think 2022 will continue to be one of this bull market’s toughest years.”

    Making matters worse, there is absolutely nothing central banks can do to offset the commodity supply shock which as Zoltan Pozsar explained earlier today, threatens to spill overs into a “classic liquidity crisis.”

    “Central banks are facing an exogenous stagflationary shock they cannot do much about,” Silvia Dall’Angelo, senior economist at Federated Hermes, wrote in a note.

    And if comparisons to 2008 were not enough, markets now also have to freak out about the possibility of another Russian default which led to the 1998 collapse of LTCM.

    As we discussed earlier, Russian president Vladimir Putin signed a decree allowing the government and companies to pay foreign creditors in rubles, seeking to stave off defaults while capital controls remain in place. Sanctions will determine if international investors are able to collect payments, the Finance Ministry said.

    Meanwhile, as Bloomberg notes, fears about the war overshadowed China’s signal that more stimulus is on the cards after officials set an economic growth target that topped forecasts. Premier Li Keqiang vowed at the opening of the National People’s Congress to take bold steps to protect the economy as risks mount.

    Finally, those wondering what happens next, may want to reread our Friday post “”A World At War” – Global Recession Next, And Then QE5“

    Tyler Durden
    Sun, 03/06/2022 – 22:10

  • Grains Cheatsheet: Part 1
    Grains Cheatsheet: Part 1

    Part 1 out of 3 in a weekly miniseries, by Macro Ops Substack

    Quick Summary

    • Commercial year starts on September 1st and ends on August 31th.
    • Grains are almost never a Buy and Hold (for a long term portfolio).
    • Corn Dec, Soybean Nov are the New Crop futures.
    • On a normal year October 1st, or the first Friday of October is the lowest point in price for the Soybeans and Corn market.
    • Weather has an asymmetrical effect on crops. It doesn’t have to materialize to influence prices.
    • Weather Risk Premium is the rise of prices due to concerns on production.
    • Grain prices have a seasonal pattern, but this doesn’t mean that prices are easy to predict every year.
    • Be aware of exports bans and laws like Ethanol quotas for Corn.
    • During February, because of China’s New Year, Soybeans prices go down during festivities, then go up as they come back to the market.
    • Corn to Soybean Ratio: if it’s over 3, it pays to grow soybeans.
    • If the Contango is too steep there might be an opportunity for an old crop/new crop calendar spread
    • Storage costs and arbitrage plays explain the shape of the contango forward curve.
    • If the market is at backwardation there´s a supply concern and people need the grain now.
    • WASDE is out the second week of every month.
    • USDA is benchmark but be aware of consensus.
    • Don’t focus on forecast numbers, focus on price reactions.
    • Don’t follow the record crop trap.
    • When open interest is trending down it is time to roll over.

    Volatility Summary 

    • Prices Up, Volatility Up.
    • Prices Down, Volatility Down.
    • Stock to use ratio High, Volatility Low.
    • Stock to use ratio Low, Volatility High.

    Seasonality Summary

    The weekly average price must be seen as a reference of a normal commercial year without any significant supply or demand shocks. It captures the grains seasonality pattern.

    Crop Calendar

    If we track prices along with the Crop Calendar it’s easier to know at which stage of the commercial year we are at any time. If prices don’t follow the normal seasonality it means that there´s new relevant information from either the demand or supply side. You should expect a commercial year where prices don’t follow their usual seasonality pattern.

    Building Blocks

    The most important factors use in the analysis of agricultural commodities are:

    Supply

    1. Current Year Production.
    2. Surplus stocks left from the previous year also known as carry in or inventory.
    3. Imports from other countries.

    Demand

    1. Domestic Use.
    2. Exports.

    Commercial Year Is Key

    Soybeans and Corn commercial year starts on September 1st. The 2015-2016 commercial year starts on September 1st 2015 and ends August 31th 2016. A minor but important trick is to arrange all your data, like exports, Commitment of Traders data, and price data so that they all start on a commercial year basis instead of the calendar year. Big players like producers, elevators, and grain processors will make most of their trading decisions this way. 

    Grains Seasonality

    You’ve probably heard that commodities prices follow a seasonality pattern, Grains are no exception to this. It makes sense for prices to be low when the harvest just finished and there isn’t enough room to store all the grain. The only option left for a producer is to sell his bushels.

    Also notice that the farmers have bills to pay. They also have to pay interest on the loans they acquired to finance the year’s crop. So the first part of the crop going out to the market is probably going to pay all of their production costs. But since everybody is doing that, supply outweighs demand and prices sink lower.

    On the other side of the spectrum, the month before harvest only the grains in storage from last year’s crop are available, Supply is tight, and if something goes horribly wrong with the current year´s crop, prices should spike higher. 

    Keep in mind grain seasonality isn’t a perfect indicator. Not all years will follow this price behavior.

    Grains As A Story: How To Follow The Narratives For A Commercial Year

    Planting Season – April To June

    It all starts on the last day of May with the USDA prospective planting report. Producers will reveal their intention for the new crop. This is the first key information the market will receive regarding this year’s crop.

    Next, everybody will follow the planting pace on the Crop Progress report which is published every Monday by the USDA. If pace is within the average, nothing happens. But if rain or other types of delays happen, the planting pace starts to deviate from the average and production concerns will start to fester.

    (Corn and Soybeans have an ideal window of planting. If they are not in the ground by this time, yields will suffer.)

    This will continue until the USDA Acreages reports are out in June. By this time the market knows how much acres of Corn and how many of Soybeans are effectively on the ground.

    Grains on the Ground – July To August

    The next big thing will be yield. If you know how many acres are planted, and if you also know how much corn each acre will give you, you will able to calculate the size of this year´s production.

    Crop progress will show if the grains are in great, good, or bad condition. This is the time when grains are most susceptible to weather, the number one risk in this market.

    This time of the year is when you can expect high levels of volatility. Traders have more opportunities to speculate since prices can change rapidly. Weather news is really important during this period.

    The Harvest – September To November

    Next is harvest season. The Crop Progress report will show the pace at which the grain is being picked up from the ground. Just like in the planting pace, the market expects it to be close to average. If it goes too fast, it could imply a short term supply glut. And if it goes too slow it could lead to quality issues. 

    Rains aren’t friendly at this point, besides slowing the harvest pace, they could damage perfectly good crop, or damage its quality, and as usual the market will focus on weather.

    Demand Market – December To January

    Now that the harvest is done, the supply driven market will turn into a demand driven market. Everybody will focus on the weekly exports report.

    The expectation is for good numbers and a great start to the commercial year. If exports are strong it means the market is healthy and everything is going smoothly. 

    If bad weather impacts distribution and exports that’s actually bearish for the CME grain contracts. Since the grain cannot be delivered people will buy it from other sources.

    No More Information Left – February To March

    The market will keep an eye on demand for the time being until February. At this point everything is known like the size of the crop, and how the demand is shaping up. Unless some new story comes into play, there is not going to be new key information released for a while. The markets tend to be quiet until it’s planting season once again.

    The whole cycle then repeats.

    Grains Are Almost Never Buy and Hold

    Whenever you’re trading grains, you’re trading the specific crop condition for that year. (Supply and demand expectations for that year.)

    When you buy a company it’ll (hopefully) still be there after one year, 5 years, 10 years, etc. It´s not like their buildings and infrastructure will suddenly disappear out of thin air. Market conditions can change, like new competitors, or new consumer preferences, but a company can adapt and still be in business. If it has added value through time you should be rewarded with a higher price for the stocks you own.

    Grains on the other hand are literally destroyed every year. This condition is known as “Fungible” and is a property of most commodities. It means that in order for it to be used it must be destroyed. If you want more Corn it needs to be created from the ground once again. You can’t reuse an old crop. 

    Every time a crop is destroyed or (used) you will be trading whatever is left in inventories plus the next crop’s conditions and expectations. The new crop will have a completely different set of circumstances than what happened a year before.

    For the new crop, demand could be growing at a faster rate than production. Or maybe there´s a huge weather threat this year that wasn’t around last year. 

    These characteristics are what give grain prices their seasonality.

    So unlike a business that grows and adds value, corn can´t add value. Therefore it makes no sense to hold corn in a portfolio for years at a time. 

    It´s important to remember that each time you step into this market you are trading the specific conditions and expectations for that year’s crop plus what´s available in storage.

    The only time you’re going to want to hold grains for over a year is when a Food Crisis hits. A really bad crisis can take years for the production side to solve.

    Seasonality Tricks

    On a normal year October 1st, or the first Friday of October is the lowest price point for the Soybeans and Corn.

    Tyler Durden
    Sun, 03/06/2022 – 22:00

  • LBMA's Fear Of Stoking The Russian Bear: From ETF Concerns To Monetary Mayhem
    LBMA’s Fear Of Stoking The Russian Bear: From ETF Concerns To Monetary Mayhem

    Submitted by Ronan Manly, BullionStar.com

    Last week, on 24 February, when the UK Government introduced a raft of sanctions against Russian banks and Russian oligarchs, the cogs in the UK financial system began moving with British financial institutions rushing to distance themselves from the Russian financial sector.

    Silence turns to Stalling

    With gold as the ultimate reserve assets of the Bank of Russia, and with London a critical hub in the global gold market through the London Bullion Market Association (LBMA) and its famous London Good Delivery lists of accredited gold and silver refiners, it therefore begged the question as to what would the LBMA do about the large number of Russian gold refineries on the LBMA Good Delivery Lists, refiners which are embedded with the Russian banks in the Russian gold market.

    Which was the reason for the tweet as follows on 24 February:     

    “While today the UK Gov imposed a huge list of sanctions against Russian banks, companies & elites, the LBMA still has 6 Russian gold refineries on its LBMA Good Delivery List. This is odd given that in 2018, the LBMA suspended 1 Russian gold refinery due to ‘ownership issues’.”

    https://platform.twitter.com/widgets.js

    And which also, because the LBMA by 28 February still hadn’t made any comments about Russian refineries nor made any changes to its Good Delivery Lists, was the reason for publishing the BullionStar article titled “LBMA a deer in headlights as Western Sanctions show up Russian Gold Refiners”.

    That article raised a number of issues, including:

    • Summarized the US – EU – UK sanctions which are targeting Russian banks (including VTB, Bank Otkritie, Sovcombank, Sberbank, Gazprombank)
    • Identified the 6 Russian refineries on the LBMA Good Delivery Lists for gold and silver (which are Krastsvetmet, Prioksky, Novosibir, Moscow Special Alloys Plant, Uralelectromed, and Shyolkovsky), 2 of which are also Russian refineries in the LPPM Good Delivery Lists for Platinum and Palladium (namely Krastsvetmet and Prioksky)
    • Explained that these 6 Russian refineries are either fully-owned by the Russian Federation or owned by Russian oligarchs
    • Highlighted that the LBMA had quietly and without notice, revoked the LBMA membership of two Russian banks – VTB and Otkritie (update – it was actually 3 Russian banks which were removed from the LBMA including the very recent member Sovcombank – see below).
    • Explained that due to the nature of the Russian gold industry where the Russian commercial banks (namely VTB, Sovcombank, Orkritie, Sberbank and Gazprombank), dominate the market and buy domestic Russian gold and then send the gold to be refined in the LBMA refineries before selling the gold (chiefly) to the central bank of Russia, that the LBMA Russian refineries, through their very structural positioning and client base, are, through no fault of their own, in breach of the LBMA Good Delivery Rules as regards sanctions.

    Why? Because the LBMA’s very own Good Delivery (GDL) Rules state that:

    “Under LBMA Good Delivery Rules, all GDL Refiners are required to comply with UN, EU, US, UK, or any other relevant, economic and/or trade sanction lists. Breach of any of the relevant Sanctions list would lead to removal from the GDL.”    

    The BullionStar article also highlighted that the LBMA had released a ‘sterilised’ notice on 24 February titled ‘Sanctions: Timely Reminder’ which was bereft of any actions and literally a  damp squib. As the conclusion to the article stated:

    “Why did the LBMA issue an empty statement on 24 February titled “Sanctions: Timely Reminder” which didn’t even mention the word Russia, didn’t mention that VTB and Otkritie are no longer LBMA members, and didn’t mention any of the 6 LBMA Russian Good Delivery refiners?

    Because I looked up all of that information about these Russian refineries in less than an hour and matched it against the US – UK – EU sanctions, and if I can do that, so can the LBMA.”  

    Something close to Nothing

    As the days passed by from 01 March to 02 March to 03 March, the LBMA had still not addressed the issue of the Russian refiners on the Good Delivery Lists, despite the BullionStar article getting picked up on ZeroHedge’s front page and being read by 45,000 people, and despite (or maybe because of) the fact that there are a massive number of Russian refiner gold and silver bars being held in the world’s largest gold and silver ETFs such as GLD, IAU and SLV in the JP Morgan and HSBC vaults in London.

    Then on the afternoon of 3 March London time, a full week after we had highlighted the LBMA – Russian Refineries – Sanctions conundrum, Reuters published a story titled “LBMA asks Russian gold refineries if they have links to sanctioned entities”

    Let’s look at the Reuters article, which is by the LBMA’s favoured reporter Peter Hobson:

     “The London Bullion Market Association (LBMA) told Reuters it has asked six Russian gold refiners it accredits if they have commercial links with sanctioned Russian entities and that such links, if found, could affect their accreditation.”

    The association is working with the refiners, as well as with lawyers and officials, to understand what relationships they have and aims to make a decision on their accreditation in the coming days, the LBMA’s general counsel, Sakhila Mirza said.

    “The good delivery rules are very clear,” she said. “We’ve asked for compliance with our rules.”

    Hold on. Let that sink in. The LBMA has ‘asked’ the Russian refiners if they have commercial links with sanctioned Russian entities? Merely ‘asked’. Can this be for real?

    The Dog Ate My Homework 

    Does the LBMA seriously not know that the entire customer base of these Russian refineries are the large Russian banks such as VTB, Sovcombank, Orkritie, and Sberbank? Does the LBMA not know that the Russian refiners are either owned by the Russian government or by Russian oligarchs, and that the main buying client of Russian refinery bars is Russia’s central bank. Even the dogs on the street know this. So why would the LBMA have to ‘ask’ its own accredited refiners anything about their operations?

    And bizarrely why does the LBMA need to work with “the refiners as well as the lawyers and officials to understand what relationships they have”?  

    Even Reuters in its article points this out:

    “In Russia, commercial banks buy gold from miners and send it to refineries before exporting it. The Russian central bank is also at times a big buyer and this week said it would resume purchases of gold in the local market.”

    “Refineries typically have relationships with banks that finance their activities. EU leaders have said their sanctions target 70% of the Russian banking market.”

    This also is the same LBMA which claims that it is the ‘“global authority for precious metals” and states that:

    “Accreditation to LBMA’s Good Delivery List is globally recognised as the benchmark for the quality of gold and silver bars, due to the exacting criteria that an applicant must satisfy.

    Refiners seeking acceptance to the list of accredited refiners must undergo stringent checks regarding their history in the market, their financial standing and their ability to produce bars that meet the exacting standards of London Good Delivery (LGD) Rules.

    Additionally, they must implement LBMA’s Responsible Gold and/or Silver Guidance prior to accreditation.”

    Overwhelming Evidence 

    This is the same LBMA which in its responsible sourcing programme for precious metals, requires each LBMA refinery to go through annual third-party audits from approved auditors. For Russia, this auditor is PwC Russia, which has a registered office at 10 Butyrsky Val Str. 125047 Moscow (http://www.pwc.ru), and whose contact point for the LBMA is Alexei Fomin, E: alexei.fomin@ru.pwc.com, T: +7 495 967 6000. Source.  

    If the LBMA ‘global authority’ is really struggling about understanding the operations of the Russian refinery sector as it claims to be, could not PwC Russia brief the LBMA on how the Russian gold market supply chain works and how the Russian refiners fit into the Russian gold market?

    Krasnoyarsk – Home of the massive Krastsvetmet refinery

    After all, all of these responsible sourcing audits by PwC Russia for the LBMA accredited Russian refiners check everything from internal controls to account opening procedures to due diligence on potential precious metal supplying counterparty to testing a sample refiner transactions to checking counterparties in the Russian gold supply chains.

    You can see this from the most recent audit reports for the LBMA Russian refiners, which except for one, were all conducted by PwC Russia, can be seen for:

    • Krastsvetmet here 16 April 2021 by A.B Fomin (Alexei Fomin), PwC certified auditor
    • Prioksky here 12 March 2021 by A.B Fomin. PwC certified auditor
    • Novosibirsk here 29 March 2021 by Yuri Muravlev, PwC certified auditor
    • Uralelektromed here 31 March 2021 by A.N. Rusanov PwC certified auditor
    • Moscow Special Alloys Processing Plant here 27 May 2021 by A.B Fomin. PwC certified auditor
    • Shyolkovsky here 15 July 2020 (not by pwC) but by the Russian consultancy RBS

    In addition, in late 2020 the LBMA, as the self-proclaimed global authority on precious metals, contacted 12 International Bullion Centres (IBCs), including Russia, and dictated to each of these 12 IBCs that they should have:

    • Effective scrutiny and verification of local and regional supply chains;
    • Effective regulation of local and regional supply chains;

    The 12 IBCs = China, Hong Kong SAR, India, Japan, Russia, Singapore, South Africa, Switzerland, Turkey, UAE, UK, USA.

    Before it could contact these 12 IBCs, the LBMA would intimately acquainted with the regional and local precious metals supply chain of each, including Russia.

    We don’t know any Russian Banks

    Furthermore, how can the LBMA claim to not know about the operations and client base of the Russian refineries when up until last week (week of 21 -25 February), there were still 3 Russian banks as members of the LBMA. These banks were VTB, Bank Orkritie, and Sovcombank, and all 3 of these banks are heavily involved in the Russian gold market.

    VTB Bank had been a member of the LBMA since March 2015, and Bank Otkritie Financial Corporation (Bank FC Otkritie), which was formerly known as Nomos Bank, had joined the LBMA in November 2011. How can the LBMA claim to not know about the client base of the Russian refiners given that these banks were LBMA members?

    Believe it or not, the third Russian bank member of the LBMA, Sovcombank, actually only joined the LBMA on 9 February 2022, just two weeks before it then got kicked out of the LBMA. The entry of Sovcombank to the LBMA would have also been an occasion for ‘Team’ LBMA to brush up on its Russian gold market knowledge. For the Sovcombank press release on 9 February 2022 stated that:

    “Sovcombank joined the London Association of Precious Metals Market Participants (LBMA), becoming the third Russian bank member of the association. The new status will strengthen the Bank’s position in the promising precious metals trading markets..

    Sovcombank entered the precious metals market in 2018 and is currently the largest buyer of gold in Russia.

    In 2021, the Bank purchased 80 tons of gold bullion, which is about 20% of the total trade volume in Russia.

    Sovcombank provides services for the purchase, sale and export of precious metals, financing of the gold mining season, leasing and factoring, hedging of price risks, opening of metal bank accounts. Participates in the financing of gold mining projects. The Bank exports precious metals to India, the USA, the UK and European countries.”

    In the press release, Mikhail Autukhov, Deputy Chairman of the Management Board and Head of the corporate investment business of Sovcombank said that:

     “LBMA is an authoritative and globally recognized organization of precious metals market participants, which not only regulates trade, but also provides practical assistance to members of the association.

    I am sure that membership in LBMA will allow us to strengthen our positions in the precious metals market …in the current and subsequent years.”

    Unfortunately for Mikhail, that wasn’t to be, as the LBMA unceremoniously revoked the LBMA membership of Sovcombank just two weeks later, which by the way has to be a record for the shortest LBMA membership in history.

    Sovcombank

    But to grant Sovcombank membership of the LBMA, the LBMA would have known that Sovcombank is “the largest buyer of gold in Russia” and that Sovcombank, as well as VTB, Otkritie, Sberbank and Gazprombank etc, all use the LBMA Russian refineries to refine the precious metals that they buy from the Russian miners and then sell downstream (including to the Bank of Russia), and that they finance said refiners.

    If 3 Russian bank members of the LBMA is not enough, then its useful to know that beyond VTB, Otkritie and Sovcombank, other big name banks involved in the Russian gold trade have also held membership in the LBMA, namely MDM which was an associate of the LBMA since 2010, and Sberbank, which was an associate of the LBMA since June 2014.

    Don’t Mention the Moscow Forum

    As long ago as June 2004, the LBMA also held one of its “Bullion Market Forums” in Moscow. See the content of that LBMA Moscow Bullion Market Forum here.  And the opening address to the Moscow conference by the then LBMA Chairman, Simon Weeks, here. 

    LBMA Bullion Market Forum, Moscow, June 2004

    So enough of the LBMA disinformation.   

    Given all of the above, the LBMA well knows whether “the six Russian gold refiners it accredits… have commercial links with sanctioned Russian entities” or not? And the LBMA well can “understand what relationships” the six LBMA Russian refiners have.

    The LBMA’s explanation to Reuters is thus theatre and a stalling exercise, and a complete reluctance to address the sanctions head on. It actually is like some amateur dramatics old school theatre.

    LBMA to Russian refiners: “I say chaps, if you don’t mind awfully, do you chaps have a relationship with the sanctioned Russian banks?”

    Russian refiners: “Nyet!”

    LBMA: “Jolly good show then, carry on. Sorry to bother you. I know its frightfully imposing. But I’m sure we’ll see each other in Lisbon at the conference. Pip pip.”   

    From SLV to IAU to GLD

    But then why the LBMA stalling? Could it be because there are so many Russian 400 oz bars in the London gold and silver vaults that the LBMA banks such as JP Morgan and HSBC want the issue to be swept under the carpet?

    Peter Hobson’s Reuters article gives another clue:       

    “The loss of LBMA accreditation would make it difficult for the refiners to sell gold and silver in the London market, the world’s largest, as major international banks typically only deal with LBMA-approved refiners.”

    While Reuters says that traders think that “Russian metal would still find buyers in places such as China and the Middle East”, that’s not true in the London market, and doesn’t solve the problem of 1000s of Russian bars currently sitting in the London vaults.

    Did you know that there are 1890 gold bars from the Russian refiners currently being held by the world’s largest gold-backed ETF, the SPDR Gold Trust (GLD)?

    Yes, specifically, at the time of writing (4 March 2021), GLD holds 1308 Krastsvetmet gold bars, 406 Prioksky gold bars, 55 Novosibir gold bars, 105 Uralelectromed gold bars, and 16 Shyolkovsky gold bars. With GLD currently claiming to hold 83,293 gold bars, that’s 2,2% of GLD holdings in the form of Russian refiner gold bars. The SPDR Gold Trust (GLD) vault custodian is HSBC in London.

    Or did you know that there are 4354 Russian gold bars currently being held by the iShares Gold Trust (IAU)? The Russian gold bar holdings in IAU are even more concentrated than in GLD.

    At the time of writing (4 March 2021), the iShares Gold Trust holds 3595 Krasnoyarsk gold bars, 598 Prioksky gold bars, 160 Novosibirsk gold bars, and 1 Uralelectromed gold bars, which comes to a grand total of 4354 Russian gold bars from these four LBMA accredited Russian refiners, all of which are held in the JP Morgan vault in London (as JP Morgan is custodian for IAU).

    With iShares Gold Trust holding a total of 40,333 gold bars, this means that the Russian gold bars comprise 10.8% of IAU’s total gold bar holdings. Between them, IAU and GLD hold 6244 gold bars from LBMA Russian refineries.

    If you think that’s a lot of Russian bars, wait until you see what’s in SLV, the iShares Silver Trust. At the time of writing (4 March 2022), the massive SLV holds a whopping 39451 Silver bars from LBMA Russian refiners, which is 7.07% of SLV’s total silver bar holdings (SLV holds 557,730 silver bars in total). These are the big 1000 oz wholesale Good Delivery Silver bars. The SLV holdings of Russian refiners, per refinery, are:

    SLV holds 24024 Krastsvetmet sivler bars, 7044 Prioksky silver bars, 3996 Uralelectromed silver bars, 2198 Shyolkovsky silver bars, 630 Novosibir silver bars, and SLV even holds 1559 Ekaterinburg silver bars.

    Ekaterinburg has been suspended from the LBMA Good Delivery List for Silver since 15 May 2018 due to sanctions against its controlling company Renova Group and its controlling Russian oligarch and largest shareholder, Viktor Vekselberg.

    Conclusion  

    It doesn’t matter that, as Reuters says, “Russian metal would still find buyers in places such as China and the Middle East”, if Russian refiners were removed from the Good Delivery Lists, the point is that no trader in the London market would want to hold or receive Russian bars which were not on the current Good Delivery Lists.

    It also too does not matter that the LBMA claims that “when the LBMA removes a refiner’s accreditation, the metal that refiner produced when it was accredited remains acceptable in the London market”, the point is that no London trader wants those tainted bars.    

    As Reuters wrote in May 2018 after Ekaterinburg was suspended:

    “Suspension from the list makes it harder for buyers and sellers to trade bars in the mainstream precious metals market, traders said.

    ‘”Our company would not touch any bars that are not LBMA-accredited,’ one trader at a major precious metals house said. ‘Most probably they are going to be in a secondary market.’

    Fast forward back to now, and Reuters, to its credit, did contact the 6 LBMA accredited Russian refiners in question. But alas, “Shyolkovsky declined to comment. The others did not respond to requests for comment.”

    For the LBMA’s sake, we hope that the LBMA has better luck in getting an answer from the 6 Russian refiners than Reuters had.

    Beyond the fact that GLD, IAU, SLV and other precious metals backed ETFs hold a large amount of Russian bars, the reluctance of the LBMA to sanction any Russian refinery could conceivably be based on a fear of triggering a reaction from the Bank of Russia and Kremlin.

    For if you ban Russian gold bars in the London market, this would surely accelerate the use of Russian gold as the ultimate currency for non-Western trade, and the deployment and use of this same Russian gold everywhere else in the global market, from Shanghai to Mumbai, from Dubai to Minsk, from Islamabad to Riyadh, from Astana to Sao Paulo and from Pyongyang to Johannesburg. Maybe that is the LBMA – HM Treasury – US Treasury’s worse case nightmare, and the real reason why the LBMA is stalling.

    This article was originally published on the BullionStar.com website under the same title “LBMA’s Fear of Stoking the Russian Bear – From ETF Concerns to Monetary Mayhem“.

    Tyler Durden
    Sun, 03/06/2022 – 21:30

  • Clintons To Revive Foundation Arm That Jeffrey Epstein Said He Helped Conceive
    Clintons To Revive Foundation Arm That Jeffrey Epstein Said He Helped Conceive

    In what some might say is the strongest indication that Hillary Clinton is running in 2024, former President Bill Clinton just announced the revival of the Clinton Global Initiative (CGI), an arm of their infamous foundation which was shuttered nearly five years ago after Hillary Clinton’s loss to Donald Trump in the 2016 US election.

    In a Friday letter, former President Bill Clinton announced that the Clinton Global Initiative would be reactivated to tackle ‘urgent needs’ such as climate change and the situation in Ukraine

    “The need for that kind of cooperation and coordination has never been more urgent than it is now,” wrote Clinton, adding, “The COVID-19 pandemic has ripped the cover off of longstanding inequities and vulnerabilities across our global community.”

    “The existential threat of climate change grows every day. Democracy is under assault around the world, most glaringly in Ukraine where Russia has launched an unjustified and unprovoked invasion that has put millions of lives in grave danger.”

    “The number of displaced people and refugees worldwide is higher than it has ever been — more than one in 95 of all people alive on the planet today has been forced to flee their home,” Clinton added.

    Ahem:

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    The former US president, who stayed at Vladimir Putin’s house just seven short years ago on the same trip where he collected a $500,000 check for a speech at a Russian investment bank, founded CGI with former adviser Doug Band – who left CGI in 2010.

    Notably, Jeffrey Epstein lawyer Alan Dershowitz wrote in a 2007 letter to prosecutors that the dead pedophile helped conceive CGI.

    “Mr. Epstein was part of the original group that conceived the Clinton Global Initiative, which is described as a project ‘bringing together a community of global leaders to devise and implement innovative solutions to some of the world’s most pressing challenges,” wrote Dershowitz.

    Bill Clinton is the co-chair of the foundation, while daughter Chelsea is its vice chairwoman.

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    Tyler Durden
    Sun, 03/06/2022 – 21:00

  • Elon Musk Calls For Europe To Restart Nuke Plants, US To Boost Oil & Gas Output "Immediately"
    Elon Musk Calls For Europe To Restart Nuke Plants, US To Boost Oil & Gas Output “Immediately”

    Elon Musk has some urgent advice for world leaders…

    In a series of weekend tweets, the richest man in the world called for Europe to “restart dormant nuclear power stations and increase power output of existing ones,” calling it “*critical* to national and international security.“

    He also offered to eat “locally grown food on TV” from the “worst location” to prove that there’s no radiation risk, and called nuclear energy “vastly better for global warming than burning hydrocarbons for energy”

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    On Friday, Musk raised eyebrows when he tweeted: “Hate to say it, but we need to increase oil & gas output immediately.“

    He continued: “Extraordinary times demand extraordinary measures.”

    Musk’s change of heart comes as a result of the worsening geopolitical scenario in Ukraine. 

    “Obviously, this would negatively affect Tesla, but sustainable energy solutions simply cannot react instantaneously to make up for Russian oil & gas exports,” he wrote in a follow up Tweet.

    Questions still remain as to whether or not the Biden administration is going to take a potential ban of Russian oil and gas seriously. White House Press Secretary Jen Psaki said late last week that the administration wasn’t considering the option yet – likely because gas prices are going parabolic and the administration is stuck between a rock in a hard place with trying to prevent further damage to the American consumer’s wallet.

    It appears Elon Musk thinks increased production would help the issue.

    Now, if we only hadn’t spent the last 3 years campaigning on, and then instituting policies that choke the supply of gas and energy domestically…

    Tyler Durden
    Sun, 03/06/2022 – 20:00

  • Most Americans Oppose Sending US Troops To Ukraine To Fight Russia: Polls
    Most Americans Oppose Sending US Troops To Ukraine To Fight Russia: Polls

    Authored by Zachary Steiber via The Epoch Times (emphasis ours),

    US soldiers walk in Poland near the border with Ukraine on March 3, 2022. (Wojtek Radwanski/AFP via Getty Images)

    Most Americans don’t support the idea of sending U.S. troops to Ukraine to help Ukrainian forces fight against Russian personnel, according to surveys.

    Just 19 percent of respondents to an Economist/YouGov poll said sending U.S. soldiers to Ukraine is a good idea, compared to 54 percent who thought it was a bad idea. The rest weren’t sure.

    More respondents, 33 percent, said it was a good idea to send soldiers to Ukraine “to provide help,” but not to fight Russian soldiers.

    Sixty-three percent of respondents to a Reuters/Ipsos poll (pdf) said the United States should not send troops to Ukraine to help defend Ukraine from the Russians. The rest said troops should be sent.

    The same division was seen when asked if the United States should conduct airstrikes against Russian forces, and a plurality of respondents to the YouGov survey opposed the United States conducting drone strikes against the Russians.

    A majority of respondents to a poll (pdf) from SSRS for CNN also opposed the United States taking military action to stop Russia.

    President Joe Biden has vowed not to send U.S. troops to Ukraine in the wake of the Feb. 24 Russian invasion.

    “Let me be clear: Our forces are not engaged and will not engage in the conflict with Russian forces in Ukraine,” the Democrat said during his State of the Union speech.

    Biden’s administration has sent troops to Europe and the president has committed to joining the fight if Russia attacks any North Atlantic Treaty Organization (NATO) allies.

    The administration has also shipped weapons and other military aid to Ukraine to help Ukrainian troops fight back against the invasion.

    According to the surveys, most Americans support helping Ukraine.

    A plurality of respondents told YouGov that it would be a good idea to impose a no-fly zone over Ukraine, even though many experts have warned that would mean the United States had joined the war on the Ukrainian side.

    Many respondents to the polls support providing weapons to Ukraine and imposing additional sanctions against Russia. Nearly half of respondents to YouGov said Ukraine should be allowed to join NATO; about a third were unsure.

    A minority of U.S. lawmakers say the United States should impose a no-fly zone or otherwise get more directly involved in the war, but most have said the current level of involvement is appropriate.

    The YouGov poll was conducted from Feb. 26 to March 1 and had 1,500 respondents and a margin of error of about 3 percent. The Ipsos survey was conducted from Feb. 28 through March 1, had a sample of 1,005 adults, and had a margin of sampling error of 3.8 percent. The SSRS survey was conducted on Feb. 25 and Feb. 26, with a sample of 1,001 respondents. It had a margin of sampling error of about 4 percent.

    Other countries have also opposed so far sending their troops to Ukraine, including 40 percent of British respondents to a poll by Redfield and Winton.

    Tyler Durden
    Sun, 03/06/2022 – 19:30

  • Ukraine/Russia: Beware The False Flags
    Ukraine/Russia: Beware The False Flags

    Authored by Techno Fog via The Reactionary,

    Beware the false flags. But also beware the fake news and false promises, as they are the means for dangerous ends: increased U.S. and NATO involvement in the war between Russia and Ukraine.

    On Thursday, Senator Lindsey Graham – a longtime member of the Washington D.C. war party – called for the assassination of Russian President Vladimir Putin.

    Florida Senator Marco Rubio soon followed with claims that Putin would “use chemical or biological weapons” and “slaughter millions.” This same Marco Rubio has been a proponent of NATO expansion – the very policy that contributed to the environment that led to Russia’s invasion.

    If Putin’s goal is to “slaughter millions” (or even if that is a secondary result of his goals), he sure is going about it the wrong way. Hundreds of thousands of Ukrainians have sought security in Hungary and Romania. More than 700,000 Ukrainians have fled to Poland, Ukraine’s neighbor to the west. Certainly Russia has the means to target these fleeing civilians. Even when Russia seized the Ukrainian port city of Kherson, there were reports of 300 dead civilians after “days of intense fighting.” We can grieve the loss of life and still demand U.S. politicians convey accurate information to Americans.

    Those Ukrainians who have remained at their homes have taken to the streets to protest Russia’s occupation of their country. Have they not heard Senator Rubio’s warnings?

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    We assume the purpose of Rubio’s comments are not to advance the truth, but to spur increased U.S. involvement in Ukraine. To us, this means a no-fly-zone over Ukrainian airspace and NATO boots on the ground in Ukraine. After all, according to Rubio what is the alternative to intervention? “Millions” dead. It’s Rubio’s indirect call for the U.S. to enter this war.

    No doubt much of this is being fueled by Ukraine President Zelensky, whose fight for his people includes spreading falsehoods to goad the West into action. Zelensky is now demanding a no-fly-zone over Ukraine and is asking for more American weapons. West Virginia Senator Joe Manchin is receptive, stating this morning “I would take nothing off the table.”

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    Back to Rubio. We should be scared to think that Rubio believes what he says. It’s just as likely, however, that Rubio’s comments – and the similar statements of those in power – are the result of Russian advances in Ukraine.

    In other words, the window for their desired U.S./NATO intervention in Ukraine closes as Russia continues to take more territory. Desperation leads to escalated rhetoric, and explains the unhinged statements about the re-emergence of Stalin and warnings that Putin will use nuclear weapons.

    To the credit of Secretary of State Anthony Blinken, the Biden Administration is shutting down talks of a no-fly-zone. From this morning:

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    All the while, there persists, due to social media and western press, a large degree of false hope concerning Ukraine’s chances for victory. The theory being that Ukraine will thwart Russia if only they could get a little more help. In reality, Russia is winning this war. Cities are encircled (if not outright taken), Kyiv faces Russian troops from its west and its east, and Russia may soon own the Ukrainian coast.

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    Meanwhile, per the latest reports, negotiations between the countries are to resume on Monday. According to Reuters, Russian news reported that “the Ukrainian side had shown some openness in the second round to reaching an agreement.”

    Right now, Zelensky has a tough decision: continue fighting or come to terms with Russia. The decision becomes less difficult as Russia advances, if only because Russian success limits Ukraine’s options and bargaining power. This desperation and the diminished likelihood of Ukrainian success only increases the potential for a false flag operation to justify Western involvement in this war.

    We’ve seen lies to get us into war. We’ve seen lies to continue a war. And now, in real time, we’re seeing lies to get us into another’s war. What will they do if the lies aren’t enough?

    *  *  *

    Subscribe now

    Tyler Durden
    Sun, 03/06/2022 – 18:30

  • Pozsar: "We Could Be Looking At The Early Stages Of A Classic Liquidity Crisis"
    Pozsar: “We Could Be Looking At The Early Stages Of A Classic Liquidity Crisis”

    Last week, some on Wall Street were quietly gloating when the “Lehman Weekend” consequences predicted by repo guru Zoltan Pozsar failed to materialize and central banks did not flood global markets with a torrent of liquidity, in a repeat of what happened in September 2008.

    In his latest not published late on Friday, the Credit Suisse strategist admits that “Yes, we got central banks’ need to step in to calm funding market pressures this week wrong (still no need yet)” but he counters that “we got the direction of spreads right – on February 24th we warned about an imminent sentiment shift in funding markets. There was no premium last week but there is some funding premium now, and it feels that things can get worse still.” So net-net, he concludes, “our call was absolutely right.”

    But how was he “absolutely right” if the funding squeeze he predicted did not materialize? Well, as Zoltan explains in the bulk of his note, what is happening right now is something that nobody really understands, and what is yet to happen may be a combination of the worst parts of the 2008, 2018 and 2020 crises, as a result of one thing: the collapse of commodity-based collateral (something China understands very well after it learned – on more than one occasion – that its thousands of tons of its commodity stockpile, especially copper and aluminum, had been rehypothecated, i.e., used as collateral repeatedly).

    As the Hungarian writes, his point with the Lehman analogy last Sunday “was to underscore the point that just as the market didn’t realize the complexity and interconnectedness of the financial system then, it may not realize the same today. Again, we are not saying that we are about to have another Lehman moment, only that things can get much worse than you realize.”

    Underscoring the unknown unknowns of a global sanctions blockade against Russia launched not by central bankers but by politicians, Zoltan writes that “when you rip $500 billion of FX reserves from the system, sanction and de-SWIFT banks (which goes live March 12th), and force Western banks and commodity traders to self-police and not trade commodities from the single-largest commodity producer of the world (Russia), unforeseen things can happen and do happen.“

    He then writes something that all those pushing for an escalating conflict with Russia will hardly want to hear:

    If you believe that the West can craft sanctions that maximize pain for Russia, while minimizing financial stability risks in the West, you could also believe in unicorns.

    At this point the former NY Fed monetary plumbing expert pivots to what he failed to realize last weekend, and whose consequences will be more profound over the longer-term than a simple short-term plumbing block: “Yes we were also wrong on Sunday about the trigger of funding pressures – it’s not the Bank of Russia’s inability to roll FX swaps or de-SWIFTing that caused funding pressures to date, but rather the market’s self-imposed unwillingness to buy, move, or finance Russian commodities that’s driving the current massive bid for cash.”

    This translated into what Bloomberg called a “historic” commodities rally, manifesting itself in the biggest weekly increase in commodity prices on record…

    … and so the margin calls must be historic too, according to Pozsar.

    But who is getting the margin calls, the Credit Suisse strategist asks rhetorically, besides all those metals traders who got a barrage of “erroneous” margin calls last Wednesday and Thursday from the LME?

    According to Pozsar, the answer is market participants that are long commodities either in the ground or in transit and want to lock in a price by shorting futures: “these include every commodity producer in the world including Russia, and every major commodity trading house, respectively.”

    While it is unknown (for now) if that is indeed the case, Pozsar suggest that it’s reasonable to wonder “if Russian commodity producers are experiencing margin calls now, and if they have the resources to pay – could they choose not to pay because their sovereign’s FX reserves were seized?” This is one risk the Credit Suisse strategist says the market needs to carefully consider.

    “As for the commodity traders, which are suffering a correlated surge in commodity prices (Russia and Ukraine export pretty much everything imaginable), margin calls can be funded by drawing on credit lines from banks, issuing CP, or swapping FX”, something that may already be happening as suggested by the sharp spike in the FRA-OIS funding stress indicator.

    Here, instead of taking readers back to September 2008, Pozsar draws on one of the main lessons from the March 2020 liquidity crisis, which is that corporate credit lines (which have a low drawdown assumption according to Basel III) can be drawn across all industries and across all geographies at the same time in a pandemic, “and the lesson about the present crisis is that you can have a rally in all sorts of commodities from oil to gas, fertilizers, wheat, palladium, and neon during war, especially if the G7 force the world to self-police and boycott Russian stuff.”

    Which takes us to the crux of today’s note: the role of commodities as collateral, which is critical because as Pozsar puts it, “every crisis occurs at the intersection of funding and collateral markets.”

    Take Urals spot, which Zoltan writes “is trading at a discount to WTI is like subprime CDOs going from AAA to junk” and prompts him to ask if “all commodities sourced from Russia trade at a significant discount?” We put it somewhat differently last week, when we said that while Russian oil is trading bidless, non-Russian oil feels like it will soon go offerless.

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    Taking the analogy to CDOs further, Pozsar asks if it is possible that the Western boycott of Russian commodities is turning AAA commodities to junk (or bidless): “Does going from AAA to junk trigger margin calls? You bet!”

    Besides collateral, the repo guru also reminds us that leverage and liquidity are also important, and takes us on a brief walk down the not too distant memory lane:

    • In 1998, we had Russian bonds and a leveraged LTCM.
    • In 2008, we had mortgages and leveraged banks and shadow banks.
    • In March 2020, we had leveraged bond basis trades.

    The pattern Pozsar points to is the following: “Collateral, leverage, funding” – in 1998 and 2008, collateral went bad and a funding crisis hit as a consequence. In 2020, corporations drew on credit lines, which sucked funding away from leveraged bond RV trades, which then triggered a forced sale of good collateral. As he summarizes it, “crises happen either because collateral goes bad or funding is pulled away – that’s been the central lesson in every crisis since 1998.”

    Now on to today.

    Pozsar points to Glencore’s iconic – if criminal  – founder, whose Marc Rich’s legacy in the annals of global finance was to introduce the concept of leverage and borrowed money into commodity trading. It’s simple: a bank lends you the money to lease ships and buy commodities to deliver them sometime and someplace in the future at a locked-in price (via short futures).

    The pattern should ring a bell.

    Consider your typical, highly levered bond RV fund, such as Millennium and Citadel, is long the bond, short the future, and funds the package in the repo market. It was this bond basis trade that was behind the repo market crash of 2019 and then blew up just a few months later in March 2020; it’s also why hedge funds with regulatory leverage as high as 8x were begging for a Fed bailout when their RV trades blew up, similar to what happened to LTCM in 1998. 

    That analogy, Pozsar argues, is the same as a commodity trader moving stuff around. But if collateral spoils, funding is impossible to come by and spot price spikes are triggering margin calls, or as he puts it “March 2020 all over again?” While it probably is not the same size, the repo guru advises readers to “be mindful of the parallels and the funding and collateral linkages.”

    Which brings us to the punchline of Pozsar’s note:

    We could be looking at the early stages of a classic liquidity crisis that has elements of both collateral and liquidity problems (1998 and 2008), where some players – commodity traders – are not regulated and have no HQLA, and some players – state-linked commodity producers – are not liquid enough because their backstop – the Bank of Russia’s FX reserves – has been seized.

    The Hungarian then goes on a historical tangent looking at sudden stops in the financial system, or as we call them, repo breaks.

    In 1997, we broke some FX pegs because FX reserves we thought were there weren’t, and capital stopped flowing in.

    In the present context, we clearly are not worried about funding because “o/n RRP is at $1.5 trillion and banks have reserves coming out of their ears”.

    We will note that it is rewarding to see that one of the biggest minds in finance agrees with what we have pointed out previously, namely that the blowout in the FRA-OIS when there is still $1.5 trillion in the overnight repo, is quite a remarkable achievement and suggests that not everything is as smooth as so many self-proclaimed Polyannish financial experts would lead you to believe. Furthermore, as Zoltan notes, “you should worry about a sudden stop of commodity flows for three potential reasons.”

    • First, gas gets turned off “at the top”.
    • Second, there is an accident – lots of pipes run through Ukraine and it’s a war.
    • Third, sabotage in Ukraine to kick-start Nordstream 2.

    Reverting again to his analogy on RV pair trades, Pozsar asks “what happens to the gas bit of the commodity derivatives market when there is a sudden stop of physical commodity flows, and what does that do to dealers’ matched books? There is the potential for some exposure there Will it happen? We don’t know, but again, the question itself is worth a spread.”

    * * *

    Summarizing his latest, mostly stream of consciousness note, Pozsar says that “we have bases creeping in and commodities, like collateral in 2008, are becoming bifurcated.” Meanwhile, spot prices are staging a historic and correlated surge that is driving demand for cash at a time of excessive leverage in the system both overt and covert – think “commodity RV trades” (as an analogue to bond RV trades) – and a lack of FX liquidity because of seized FX reserves.

    Pozsar then gives one more thing to think about: “Is the reason why we’ve cocooned energy and other commodity flows and related payments and institutions from sanctions to protect the consumer at the pump, or to protect the commodity derivatives ecosystem? Clearly, the West does not want to turn off the flow of energy, but there are growing risks – more sanctions, more self-policing, and the Russian leadership can act as well.”

    Having found himself in his prime, where he is connecting dots and observing causal linkages between his favorite financial topics and seemingly disparate corners of the financial system – in this case the commodity collateral sector  – Pozsar is only just warming up, and next writes that “there are links between all this and headline inflation and interest rate hikes, and links between the seizure of Russia’s FX reserves and the dollar and demand for long-term Treasuries”, and asks readers to consider a quote from George Soros carved into the wall of the CEU (Central European University)…

    “Thinking can never quite catch up with reality; reality is always richer than our comprehension. Reality has the power to surprise thinking, and thinking has the power to create reality. But we must remember the unintended consequences – the outcome always differs from expectations”.

    … and to think about that both in the present context, and in the context of ABN Amro freezing redemptions from its funds in August of 2007 – a year before Lehman: did markets think it would get that bad back then?

    Putting it all together, Pozsar writes that while this time systematically important banks won’t fail, some other traders might fold, and losses, even if not lethal, can curb balance sheet provision (see Archegos) for all other stuff that the buy side needs – repo, FX, and equity derivatives.

    Pozsar concludes with another quote, this time from Larry Summers (from a speech he delivered in Toronto at an INET event about the lessons learned during the 2008 crisis):

    “crises are not about estimating their economic impact and estimating to the decimal point the GDP impact of a shock. Crises are about fear and greed…”

    Going back to the spark behind Pozsar’s latest stream of consciousness, commodity collateral, he writes that Russia and Ukraine are the single-largest commodity exporters in the world. And while Russia accounts for just 5% of the world’s GDP, it is financially deeply interlinked – it used to have $500 billion of FX reserves, and owes about as much in debt to the rest of the world, not to mention “off balance sheet” debt that it owes to the world through derivatives when spot commodity prices rally, like they do now.

    His parting words are a warning to all those who think that it will be easy to sever all financial ties to Russia:

    It’s a bit more complex to de-SWIFT Russia than it was to de-SWIFT Iran… To be clear – your correspondent is a funding expert, not a commodity expert, but I see a link between the two markets at the present, and parallels to 2008. I wasn’t an expert in CDOs in 2007 either, but started to dig the day after Paul McCulley coined the term “shadow banking” at Jackson Hole and I wrote this. My interest was piqued by the legendary Paul McCulley, and current events piqued my interest in the opaque world of the commodity derivatives complex.

    The books about 1997, 1998, and 2008 have FX pegs, default and leverage, and collateral and leverage as their central themes, respectively. The books about today’s market events will have commodities as collateral as the central theme.

    It’s this “commodity as collateral” theme that Pozsar believes will spark the next liquidity crisis.

    Pozsar’s full note is available to pro subs in the usual place.

    Tyler Durden
    Sun, 03/06/2022 – 18:00

  • Putin Orders Companies To Make Debt Payments To Foreign Creditors In Rubles
    Putin Orders Companies To Make Debt Payments To Foreign Creditors In Rubles

    Last week, following reports that as part of its countersanctions, the Russian central bank had banned payments to foreign owners of ruble bonds known as OFZ, we said that it was now just a matter of days if not hours, before Russia was in technical default (similar to what happened in 1998 when a Russian default led to the collapse of a little-known hedge fund known LTCM, which was bailed out and ushered in today’s era of moral hazard). And sure enough, late on Friday Bloomberg reported that ahead of the weekend foreign holders of Russia’s local-currency government bonds still haven’t received coupon payments three days after they were due, citing financial data provider CBonds and five investors at American and European firms. 

    Russia’s National Settlement Depository received the interest – 11.2 billion rubles ($98 million) on 339 billion rubles of bonds known as OFZs due February 2024 – from the government on Wednesday and paid local investors, they said. But international investors weren’t paid because of the Russian central bank’s order barring foreign payments.

    “Money is in NSD, payments to Russian bondholders were made,” said Elena Avdonicheva, Head of Russia & CIS Fixed Income Department at CBonds. “Payments to non-residents weren’t made due to government ban, this money is frozen in NSD until further notice. Technically we can expect that money will reach bondholders later.”

    And with a bevy of both local and foreign bond coupon payments on deck in the coming days, it’s just a matter of time before something snaps.

    So is it time to declare Russia officially in default? Not quite yet: local Russian debt has a grace period of 10 working days after the Moscow Stock Exchange (assuming it ever reopens) publishes what it calls a technical default, according to Cbonds. Adding to the confusion, it also unclear if that will happen because technically, Russia paid.

    “Officially in Russia it is not called a default,” Avdonicheva said. “But if we follow the logic: money hasn’t reached bondholders in the right time and investors couldn’t reinvest coupon payments, then it is a technical default.”

    Ultimately, the determination of whether or not Russia has defaulted will come from the rating agencies, which will announce some time in mid-March that Russia has entered what is known as “Selective Default”, at which point it will be in default across its entire bond universe.

    Meanwhile, even while Russia did make a partial payment on its reuble-denominated debt, all eyes are now on Russia’s foreign-currency debt, where the government is due to pay more than $100 million of coupons on two dollar bonds on March 16. It also has another interest payment due on March 21 and a $2 billion bond maturing on April 4. International bonds have a 30-day grace period and a failure to pay in that time could trigger credit-default swaps, though there’s concern about whether those would pay out as well.

    Furthermore, with Russia effectively prohibited from making outbound dollar transactions, a dollar-denominated default is now just a formality.

    So in an innovative attempt to circumvent this eventuality, on Saturday Vladimir Putin signed a decree allowing companies to pay foreign creditors in rubles, even though we doubt any of Russia’s foreign creditors have any interest in being paid in rubles which have lost 50% of their value in the past week.

    The decree establishes temporary rules for sovereign and corporate debtors to make payments to creditors from “countries that engage in hostile activities” against Russia, its companies and citizens. The government will prepare a list of such countries within two days.

    According to Saturday’s decree on servicing foreign-held debt, payments will be considered executed if they are carried out in rubles at the central bank’s official rate.

    While most Russian corporate bonds denominated in foreign currencies have plunged to deeply distressed levels in recent days as investors weighed the impact of sanctions imposed on the country in the wake of its invasion of Ukraine, on Friday JPMorgan published a list of companies whose bonds it believes are money-good including Lukoil, Novolipetsk Steel and Magnitogorsk Iron and Steel. The Russian government responded to the sanctions by reducing dramatically access to foreign currencies, which could restrict the ability of bondholders to receive interest and principal payments.

    In a separate announcement on Sunday, the Central Bank of Russia said it will temporarily ease reporting requirements for Russian lenders in an effort to shield them from the pressure of sanctions. Commercial banks will no longer have to publish their monthly accounts on their websites, though they will still have to submit them to the central bank and then can disclose them to counterparties, the regulator said.

    * * *

    It’s unclear how Putin’s orders will take place in practice, as clearing houses Clearstream and Euroclear have stopped accepting the ruble as settlement currency and have excluded all securities issued by Russian entities from all Triparty transactions, barring a traditional channel used to make payments to bondholders.

    Furthermore, while some of Russia’s foreign sovereign bonds allow payments in rubles, the new measure will pose a big headache for holders of credit-default swaps. That’s because, given the capital controls in Russia and the sanctions, the payment in rubles “may render these bonds out of scope for CDS as ‘obligations’ and ‘deliverable obligations’,” JPMorgan strategists led by Trang Nguyen wrote on Friday. In total, CDS cover a gross $41 billion of Russian debt, according to the DTCC.

    In any case, an event of default even according to the loosest possible terms is now just at most ten days away – Russia has $117 million worth of coupons on dollar bonds coming due on March 16 that don’t have the option to be paid in rubles, the JPM strategists said.

    Elsewhere, companies with upcoming maturities of dollar-denominated notes include state oil producer Rosneft PJSC, whose $2 billion bond matures on Sunday, and state-controlled energy giant Gazprom PJSC, which has a $1.3 billion note due on Monday. The latter was already in the process of settling that payment, Bloomberg reported earlier.  

    Here is a list of upcoming corporate maturities…

    … and upcoming coupon payments:

    Tyler Durden
    Sun, 03/06/2022 – 17:44

  • Morgan Stanley: Investors Needs To Understand Something Else The Russian Offensive May Bring About
    Morgan Stanley: Investors Needs To Understand Something Else The Russian Offensive May Bring About

    By Michael Zezas, Head of Public Policy Research at Morgan Stanley

    “There are decades where nothing happens, and there are weeks where decades happen.”

              – Vladimir Lenin

    While I certainly don’t count myself a fan of Lenin, I have to admit that he grasped the way that changes in geopolitics can shift from a crawl to a sprint in the twinkling of an eye. He’d likely identify the actions of his native Russia over the past two weeks as one of those catalyzing moments. And while focus is rightfully on their terrible humanitarian toll, investors would also do well to understand something else this offensive may bring about: an acceleration of ‘slowbalization’, with clear implications for how global governments, corporates, and consumers allocate resources going forward.

    Consider some of the apparent results of the invasion of Ukraine:

    • A more unified ‘West’ than we’ve seen in nearly a generation: Poker players will recognize the upshot of the invasion as a ‘hammer bluff’ gone wrong. The Russian government may have assumed that Western nations were too disorganized and too inward looking to respond with forceful sanctions and substantial support for Ukraine. They appear to be wrong, given the coordinated actions that seemed unlikely just a few weeks ago. These include sanctioning Russia’s central bank, Germany abandoning its policy of not exporting weapons to conflict zones, and Turkey cutting off Russian military access to the Black Sea. Russia may ultimately achieve regime change in Ukraine, but at the cost of rekindling Western unity and risking its own long-term economic isolation.
    • An incomplete China-Russia partnership: While many investors commented to us that the bilateral ‘Olympic communiqué’ meant a clear bloc was forming, the past two weeks have seen some daylight appear between the countries, with China’s message on Ukraine focused on a negotiated solution. Surely China is still interested in the possibility of partnering with Russia in an economic bloc that rivals the West (i.e., one world, two value chains, payment systems, etc.). But China may prefer to play the long game, viewing global stability as supportive of its economic ascendancy and growing geopolitical bargaining power. Russia’s actions suggest that it did not similarly see time as on its side. This dynamic, plus other wedge issues (i.e., India) risk keeping the Sino-Russian relationship skewed more toward convenience than alliance.
    • A potential acceleration of ‘slowbalization’: These points seem to underscore that global powers have de facto realized the limits of globalization. To put it in investment terms, powers are acting like we’re beyond the efficient frontier on the trade-off between GDP and security. That’s the message I see from Europe’s embrace of tough sanctions, which implicitly risk higher energy costs in return for security. The US is doing the same by, among other things, limiting its semiconductor exports business and potentially promoting the development of an alternative global payments system. It’s all part of the ‘slowbalization’ and ‘multipolar world’ policy playbooks we first highlighted a few years ago. Then it was mostly US led and incremental, but now it is accelerating.

    For investors trying to look beyond the short term, that last point is crucial – we may see a rapid rewiring of the global economy consistent with slowbalization: The preferences revealed by the world’s reaction to the Ukraine crisis are compatible with the creation of economic spheres where supply and tech chains are insulated from geopolitical concerns. While this has myriad potential market implications, we see the following most clearly:

    • Amped-up investment in defense and cybersecurity: The US has long pressed its NATO allies to boost their defense spending, in vain. But in response to Russia’s actions, Germany announced that it will increase its defense spending to 2% of GDP, in line with the 2006 NATO agreement. We see other countries following suit, with our colleagues estimating the potential for an extra US$60 billion annually in defense spending within NATO. The defense and software sectors could be key beneficiaries. Further down the road, this could also be a step toward more coordinated fiscal action by Europe in general, with broader macro implications.
    • Elevated commodity costs for a time: Russia and Ukraine are key producers of several metal, energy, and agricultural commodities. While sanctions on Russian banks were designed to permit payments for various commodities, there are still restrictions on and disruptions to their transport. Consider oil, where supply was already tight. With Russia producing 10% of the world’s oil, it’s not surprising that global oil inventories have declined. Hence, our colleagues see the price of a barrel of oil remaining above US$100 and resulting potential for the oil E&P sector to outperform.
    • Elevated supply chain costs for a time: While many multinationals were already investing in geographically diversifying their supply chains in the wake of US/China trade tensions, recent events may accelerate this trend. Sanctions, and Russia’s response to them, included fresh non-tariff barriers and capital controls. This may remind corporate decision-makers of the jurisdictional risks in emerging markets. That could add to cost pressures, underscoring our equity strategy team’s view that earnings estimates may be too high and, accordingly, equity markets overall may remain choppy, even as the sectors we note above could outperform.

    Tyler Durden
    Sun, 03/06/2022 – 17:30

  • IAEA "Extremely Concerned" Zaporizhzhia Nuclear Plant Is Under Russian Control, Communications Switched Off
    IAEA “Extremely Concerned” Zaporizhzhia Nuclear Plant Is Under Russian Control, Communications Switched Off

    On Sunday the International Atomic Energy Agency (IAEA) confirmed that the Zaporizhzhia nuclear power plant in Ukraine is now under the command and operation of Russian forces, and that its communications are now restricted to the outside world. 

    The UN nuclear watchdog agency further said it is “extremely concerned” with these developments, following the Thursday night into Friday widespread reports that it had witnessed heavy fighting and shelling. In those several alarming hours Ukraine’s government leaders claimed there could be massive radioactive fallout and sought to use the episode to attract greater Western military help and intervention. The IAEA itself later rejected that assertion.

    Ukraine’s Zaporizhzhia Nuclear Power Station, file image

    Citing Ukraine’s nuclear regulator, the IAEA said Sunday, “Ukraine reports that any action of plant management – including measures related to the technical operation of the six reactor units – requires prior approval by the Russian commander.”

    “In a second serious development, Ukraine has reported that the Russian forces at the site have switched off some mobile networks and the internet so that reliable information from the site cannot be obtained through the normal channels of communication,” it added.

    IAEA chief Rafael Grossi made an urgent appeal to Moscow on Sunday, saying “In order to be able to operate the plant safely and securely, management and staff must be allowed to carry out their vital duties in stable conditions without undue external interference or pressure,” he said.

    A Ukrainian narrative and contrasting Russian version of events at the plant has emerged in the last few days, with each side blaming the other for acts of aggression which damaged some administration buildings there. Kiev had initially painted a picture of the Russian’s shelling nuclear reactor sites, however, but it was later admitted that a fire was at the plant’s training facility and had not threatened the most sensitive parts of the plant.

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    Reuters detailed further of the weekend aftermath as it became clear the plant is firmly in the Russian military’s hands now:

    The Ukrainian regulator said it was “facing problems communicating with personnel” at Chernobyl, said the IAEA, adding that communication was only possible via email.

    The report said additionally, “More than 200 people there, both technical staff and guards, have not left since Feb. 23, the day before it was seized, the IAEA said, despite the UN agency’s calls for the technical staff to be rotated out on safety grounds.”

    Tyler Durden
    Sun, 03/06/2022 – 17:00

  • One Bank Sees 10% Chance Of "Civilization-Ending Global Nuclear War", Says Buy Stocks Anyway
    One Bank Sees 10% Chance Of “Civilization-Ending Global Nuclear War”, Says Buy Stocks Anyway

    In recent days with tensions of a global war running at the highest level in decades, an apocryphal story from Art Cashin has been making the rounds across trading desks: one in which the venerable trader explains why when Wall Street was gripped by a selling panic during the Cuban Missile Crisis, the right move was the buy everything:

    There was the lesson I learned during the Cuban Missile Crisis. At the time I was studying with “Professor Jack” under a Moosehead, in a saloon called “Eberlin’s” down the block from the exchange. The tuition was paid in scotch “old fashions.” Classes lasted until either you ran out of money to buy drinks or Jack ran out of the ability to stand.   Jack was actually a 62 year-old trader in silver stocks but he had more in his head than is in most university libraries.

    Anyway, it was the Cuban Missile Crisis and there were rumors that Russia had launched rockets and the Dow took a dive near the bell.

    I cleaned up my desk and raced to the Moosehead, as animated as only an 18 year-old can be. Jack was already there and as I burst through the door, I shouted: “Jack! Jack, there was a strong rumor that the missiles were flying and I tried to sell the market but failed.”

    Jack said “Calm down kid! First buy me a drink and then sit down and listen to me.” I ordered the drink and meekly sat down.

    Jack said – “Look kid, if you hear the missiles are flying, you buy them. You don’t sell them.”

    “You buy them?” I said, somewhat puzzled.

    “Sure you buy them!” said Jack. “Cause if you’re wrong, the trade will never clear. We’ll all be dead.”

    That’s a lesson you won’t learn in the Wharton School.

    Fast forward almost 50 years when on Friday, BCA Research global chief strategist Peter Berezin published a rather bizarre note echoing much of the above.

    In a note published with the shocking title “Rising Risk Of A Nuclear Apocalypse”, Berezin writes that “the risk of Armageddon has risen dramatically” and is now at an “uncomfortably high 10% chance” for the following reasons:

    • if Putin feels that he has no future, he may try to take everyone down with him. The collapse in the ruble, and what is sure to be a major plunge of living standards across Russia, could foment internal opposition to Putin. A quiet retirement is not an option for him.
    • Although there is a huge margin of error around any estimate, subjectively, we would assign an uncomfortably high 10% chance of a  civilization-ending global nuclear war over the next 12 months. These odds place some credence on Brandon Carter’s highly  controversial Doomsday Argument.

    Source: Robin Wigglesworth

    Berezin caveats that even if World War III is ultimately averted, “markets could experience a freakout moment over the next few weeks, similar to what happened at the outset of the pandemic. Google searches for nuclear war are already spiking.”

    Berezin the writes that “the market today reminds me of early 2020” noting that he wrote a report on February 21 of that year entitled “Markets Too Complacent About The Coronavirus,” in which he said that a full-blown pandemic “could lead to 20 million deaths worldwide,” and that “This would likely trigger a global downturn as deep as the Great Recession of 2008/09, with the only consolation  being that the recovery would be much more rapid than the one following the financial crisis.”

    “Many saw that report as alarmist, just as they saw our subsequent decision to upgrade stocks in March as cavalier.”

    While admitting that a global thermonuclear outcome is still unlikely, Berezin adds that “just to be on the safe side, I picked up a  couple of bottles of Potassium Iodide earlier this week. When I checked the pharmacy again yesterday, all the bottles were sold out. They are now being hawked on Amazon for ten times the regular price.”

    Does the spike in risk of a civilization ending event mean one should sell their investments and enjoy what little time may be left? On the contrary, according to the BCA strategist, “despite the risk of nuclear war, it makes sense to stay constructive on stocks over the next 12 months.” 

    Why? Because as Art Cashin explained a while back, “If an ICBM is heading your way, the size and composition of your portfolio becomes irrelevant. Thus, from a purely financial perspective, you should largely ignore existential risk, even if you do care about it greatly from a personal perspective.”

    And while his forecast over the next 12 months is especially nebulous, in light of the risk of a global nuclear war, Berezin turns more bearish when looking out beyond the next year or two, when “the new cold war will lead to higher, not lower, interest rates. Increased spending on defense and alternative energy sources will prop up aggregate demand, especially in Europe where the need to diversify away from Russian gas is greatest.”

    Meanwhile, “the shift to a multipolar world will expedite the retreat from globalization”, which was an important force restraining inflation – and interest rates – over the past few decades.

    Lastly, Berezin warns that the ever-present danger of war could prompt households to reduce savings: “It does not make sense to save for a rainy day if that day never arrives. Lower savings implies a higher equilibrium rate of interest.”

    As a result, BCA expects that after raising rates modesty this year, the Fed will resume hiking rates towards the end of 2023 or in 2024, “as it becomes clear that the neutral rate in nominal terms is closer to 3%-to-4% rather than the 2% that the market assumes.”

    At that point, Berezin concludes that “the secular bull market in equities will likely end.“

    Tyler Durden
    Sun, 03/06/2022 – 16:54

  • Countries Flood Ukraine With Military Support After Zelensky's Appeal
    Countries Flood Ukraine With Military Support After Zelensky’s Appeal

    By Autumn Spredemann of Epoch Times

    After Russia invaded Ukraine on Feb. 24, President Volodymyr Zelensky shared a video two days later saying he needs “ammunition, not a ride,” referring to the United States’ offer of asylum to the besieged head of state. Since then, 15 countries have sent military hardware to Ukraine amid Russia’s further invasion.

    The majority of arms and supplies from ally nations are being sent via Ukraine’s 310-mile border with Poland, which has become an important lifeline both for supplies and equipment, and refugees looking to flee the conflict.

    Some border nations have chosen not to allow military equipment bound for Ukraine to pass through their territory out of fear of Russian retaliation.

    On Feb 28, Hungarian Foreign Minister Peter Szijjarto said his country won’t allow “deadly weapons” to be transported through Hungary’s territory while reiterating the government doesn’t want to be involved in the Russia-Ukraine war. Szijjarto cited security concerns for Hungarian citizens as one of the primary factors in the decision.

    Despite supply chain and shipping challenges, millions of dollars of ordnance continue to flow into Ukraine from two continents.

    Airmen and civilians from the 436th Aerial Port Squadron palletize ammunition, weapons, and other equipment bound for Ukraine at Dover Air Force Base, in Delaware, on Jan. 21, 2022. (U.S. Air Force/Mauricio Campino/Handout via Reuters)

    United States

    On Feb. 26, U.S. President Joe Biden authorized the State Department to send $350 million in weapons to Ukraine. Among the list of hardware on the list are Javelin anti-tank weapons, anti-aircraft systems, ammunition, and body armor.

    Regarding the Russia-Ukraine war, U.S. Acting Permanent Representative Aud-Frances McKernan said, “The United States reaffirms its unwavering support for Ukraine’s sovereignty and territorial integrity within its internationally recognized borders, extending to its territorial waters.”

    McKernan then added, per Biden, neither the United States nor NATO has any desire or intention to engage in a conflict with Russia, clarifying that there is no threat to Moscow from either.

    This is the third time Biden has used his presidential drawdown authority to send emergency security assistance, now totaling $1 billion, from U.S. reserves to Ukraine.

    “It is another clear signal that the United States stands with the people of Ukraine as they defend their sovereign, courageous, and proud nation,” Secretary of State Antony Blinken said.

    Canada

    The Canadian government approved an additional $25 million in military aid to Ukraine on Feb. 27.

    Prime Minister Justin Trudeau announced the country would send $7.8 million worth of “lethal equipment” to the European nation during a press conference back on Feb. 14 in anticipation of a Russian attack.

    Regarding the initial shipment, Trudeau said, “The intent of this support from Canada and other partners is to deter further Russian aggression.”

    Germany

    German Chancellor Olaf Scholz speaks during a news conference in Berlin, on Jan.18, 2022. (Hannibal Hanschke/POOL/Reuters)

    Chancellor Olaf Sholz announced on Feb. 26 that Germany would deliver 1,000 anti-tank weapons and 500 Stinger missiles to “our friends in Ukraine.”

    Scholz said Feb. 24 marked “a watershed in the history of our continent,” asserting that Russian President Vladimir Putin is jeopardizing the long-term security of Europe, which he said can’t be achieved in opposition to Russia.

    Sweden

    In a departure from its decades-long neutrality, the Swedish government approved the shipment of 5,000 anti-tank weapons, 135,000 field rations, 5,000 helmets, and 5,000 pieces of body armor.

    “My conclusion is now that our security is best served by us supporting Ukraine’s ability to defend itself against Russia,” Prime Minister Magdalena Andersson said on Feb. 28.

    She added this is the first time Sweden has sent weapons to a country at war since the Soviet Union attacked Finland in 1939.

    France

    On Feb. 26, an army spokesperson said France would send “defensive military equipment” to Ukraine to aid in the resistance effort against Russia.

    President Emmanuel Macron said, “It’s not only the Ukrainian people who are bereaved by the war … it’s all the peoples of Europe.”

    United Kingdom

    Back on Jan. 17, Secretary of Defense for the United Kingdom, Ben Wallace, said the UK would provide “self-defense” weapons and training to Ukraine amid the build-up of Russian troops near the border.

    Prime Minister Boris Johnson told Parliament on Feb. 23, “In light of the increasingly threatening behavior from Russia and in line with our previous support, the U.K. will shortly be providing a further package of military support to Ukraine.”

    He elaborated that the second military support package included both lethal and non-lethal aid.

    British Prime Minister Boris Johnson speaks during a joint press conference with Prime Minister of Estonia and Secretary-General of NATO at the Tapa Army Base in Tallinn, Estonia, on March 1, 2022. (Leon Neal/Pool/AFP via Getty Images)

    Belgium

    Responding to a direct request from Kyiv, the nation opted to send 2,000 machine guns to the Ukrainian army and 3,800 tons of fuel on Feb. 26.

    Netherlands

    As of Feb. 26, the Dutch government said it’s delivering 50 Panzerfaust 3 anti-tank weapons with 400 missiles to Ukraine to help with the resistance effort against Russia. Additionally, 200 Stinger anti-aircraft missiles were promised along with helmets, shard vests, and sniper rifles.

    Czech Republic

    Formerly occupied by Russian troops during the Soviet era, the Czech government sent 4,000 artillery shells worth $1.7 million to Ukraine in January. The Czech Ministry of Defense released a statement on Feb. 26 saying it will also ship machine guns, submachine guns, assault rifles, and pistols, together with ammunition at an estimated value of $8.6 million.

    Italy

    Joining the growing list of countries providing military aid to Ukraine, on Feb. 28 the Italian cabinet pledged to dispatch Stinger missiles, mortars, and Milan or Panzerfaust anti-tank weapons. Among the items included in the defense package are Browning heavy machine guns, MG-type light machine guns, and counter-IED systems.

    Portugal

    Upon request from Ukrainian officials, the Portuguese Ministry of Defense announced on Feb. 26 that it will deliver military equipment including vests, night vision goggles, grenades, ammunition, complete portable radios, analog repeaters, and automatic G3 rifles.

    A German soldier holds a Heckler & Koch G36 assault rifle at a military training ground on Feb. 13, 2014, near Weisskeissel, Germany. (AP Photo/Arno Burgi)

    Greece

    The Balkan nation sent “defense equipment” and medical supplies on two C-130 aircraft from Athens on Feb. 27 at the request of Ukrainian authorities.

    Romania

    Another former satellite state of the Soviet Union, Romanian government spokesman Dan Carbunaru said the country would ship “ammunition and military equipment” on Feb 27.

    Spain

    On March. 2, Spanish Minister of Defense, Margarita Robles, announced the nation will send defensive equipment to Ukraine.

    “In this first shipment that will go aboard two planes, we expect to send 1,370 anti-tank grenade launchers, 700,000 rifles, and machine-gun rounds, and light machine guns,” Robles said.

    Finland

    President Sauli Vainamo Niinisto decided to send an arms support package to Ukraine on Feb. 28. The delivery will include 2,500 assault rifles, 150,000 cartridges, 1,500 single-shot anti-tank weapons, and 70,000 combat ration packages.

    Tyler Durden
    Sun, 03/06/2022 – 16:30

  • Deutsche Bank Braces For Massive Disruptions Due To Reliance On Russian IT Workers
    Deutsche Bank Braces For Massive Disruptions Due To Reliance On Russian IT Workers

    While Credit Suisse (and, by extension, its clients) face brutal margin calls on their Russian assets, Deutsche Bank is struggling with a different, but equally vexing, issue involving it Russia exposure: the bank is bracing for the loss of more than 25% of its investment bank IT specialists as sanctions against Moscow threaten to cut off the bank’s key tech centers in Moscow and St. Petersburg.

    According to the FT, the German lender employs some 1,500 people in its Russian tech centers. These employees are responsible for developing and maintaining the software the bank uses for its global trading business, as well as software used by its may corporate banking arm. Since the start of the conflict in Ukraine, the German banking giant has been conducting “stress testing” and “disaster recovery” exercises to simulate the impact should it no longer be able to operate or pay its Russian staff.

    The bank has already frozen hiring of IT staff in Russia, and is already looking into moving more of its IT capabilities to other countries, according to the FT.

    “All options are currently on the table,” one senior DB executive said.

    It has also reportedly told German regulators that there was “no immediate systemic risk” to its IT infrastructure, something the bank reportedly confirmed via a three day stress test.

    Fortunately for DB, the hardware it uses to store data is all within the EU. Still, losing such a massive chunk of its IT staff would likely have serious repercussions, rendering the bank’s order book effectively inoperable.

    “No quotes can make it out to the market, no negotiations can make it back from the market without passing through this software,” they said. “Trading is complicated and requires real-time support every day…without co-operation from the Russian teams things could start to go wrong almost immediately.”

    Other executives within the bank (speaking anonymously) told the FT that building up such a heavy reliance on Russian IT talent was a huge mistake. One even described the situation as a “big mess” for Deutsche Bank, which is in the middle of a mostly successfu turnaround campaign led by CEO Christian Sewing.

    Still, things could be worse.

    Another senior manager called the bank’s heavy dependency on Russian IT expertise “a big mess”. Deutsche told the FT that “Russia is just one of multiple tech centres that we have around the world” and that it was “confident that the day-to-day running of our trading business will not be affected” by the war. “We have no code and no data housed in the Russia tech centre,” the bank added.

    Let’s not forget, DB has a checkered past in Russia. Who can forget the infamous “mirror trading” scandal that led to hundreds of millions of euros in fines by EU regulators. The trades allegedly helped Russian oligarchs and organized criminals launder assets worht $10 billion.

    Tyler Durden
    Sun, 03/06/2022 – 16:00

  • US Senate Passes Bill To End COVID-19 National Emergency
    US Senate Passes Bill To End COVID-19 National Emergency

    Authored by Zachary Steiber via The Epoch Times (emphasis ours),

    President Joe Biden speaks to reporters before the start of a cabinet meeting in the Cabinet Room of the White House on March 3, 2022. (Anna Moneymaker/Getty Images)

    The U.S. Senate on March 3 approved a measure that would end the national emergency over COVID-19.

    The resolution passed 48–47 on a party-line vote.

    All Republicans voted for S.J.Res. 38, which would end the national emergency declared by President Donald Trump on March 13, 2020. All Democrats voted against the declaration, which has been extended twice by President Joe Biden.

    Five senators missed the vote, including three Democrats.

    “After nearly two years of living under this state of emergency, the American people are worn out and yearning to breathe free; they long for their God-given freedoms, and for leaders to take their side. There is no doubt, it’s time for our nation to learn to live with COVID,” Sen. Roger Marshall (R-Kan.), who introduced the measure, said in a statement after the vote.

    “I am proud my colleagues came together to repeal this emergency declaration and delivered a symbolic victory to our citizens that normalcy is around the corner and that limited government and our constitutional rights still reign supreme. It’s high time to stop talking about restrictions and the unknown. We must chart a new course to victory today that respects the virus and our freedoms.”

    Before voting began, Senate Majority Leader Chuck Schumer (D-N.Y.) urged senators to vote no. He argued that it isn’t the right time to end the emergency declaration, which enables the president to take certain actions, because new variants of the virus that causes COVID-19 may emerge.

    The proposal “would precisely handicap the Biden administration’s ability to fight the pandemic and heighten the danger that all our progress is suddenly unraveled in the future,” he said, claiming the declaration “has been one of the most powerful and best tools for mobilizing the federal government to combat the pandemic.”

    Sen. Mike Braun (R-Ind.) disagreed, telling the body that the number of people who have been vaccinated combined with those who enjoy natural immunity means “a large majority of the nation are already protected” and that the virus has become endemic.

    “When this emergency was first declared two years ago this week, it was needed,” he said, but “it’s past time for the president and governors across the country to give up the extra powers granted to them under the COVID emergency declarations.

    “If we’re going to live with this virus and move forward as a country, we must end the national emergency authorization and then other governors across the country should follow suit.”

    The measure now heads to the House of Representatives, which is controlled by Democrats, who have generally been more in favor of restrictions during the pandemic than the GOP. Even if the House were to approve the measure, the White House said on March 3 that Biden would veto it.

    A spokeswoman for House Speaker Nancy Pelosi (D-Calif.) didn’t respond by press time to a request by The Epoch Times for comment.

    Tyler Durden
    Sun, 03/06/2022 – 15:30

  • Anti-War Protests Grow In Russia As Putin Rejects US Charge Of "Deliberate" Civilian Attacks
    Anti-War Protests Grow In Russia As Putin Rejects US Charge Of “Deliberate” Civilian Attacks

    In fresh Sunday statements, Russian President Vladimir Putin has said he will not stop military operations in Ukraine until Kiev government forces stop fighting, at a moment evacuation efforts in Mariupol where there are reports that some 200,000 civilians remain have been stalled due to reported Russian shelling. 

    The statements were issued through the Russian presidency’s press office, which reaffirmed “the Russian side’s readiness for dialogue with Ukraine’s authorities and foreign partners in order to settle the conflict.” Putin also stated of the past more than half-decade of fighting in Donbass that “13,000-14,000 of them [people in pro-Russian Donetsk and Luhansk] have been killed there over years. More than 500 children have been killed or crippled.”

    “That said, the futility was noted of any attempts to stall the negotiation process used by the Ukrainian army to regroup its forces and means. In relation to that, it was stressed that the suspension of the special operation is possible only if Kiev ceases the military actions and fulfills Russia’s demands that were made perfectly clear,” the Kremlin said. “A hope was expressed that during another planned round of talks, Ukraine’s representatives will display a more constructive approach that fully takes into account the current circumstances,” the press service added of Putin’s message.

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    A third round of Russian-Ukraine delegation talks are expected for Monday, but prior agreed upon local ceasefires for the sake of allowing civilians to evacuate through a ‘humanitarian corridor’ have largely broken down, after they were enacted for an initial five hours on Saturday morning.

    Putin’s office reiterated further that the military effort was “going to plan” – even after Western reports on Saturday cited some nine Russian aircraft shot down within about a 24-hour window, though which is hard to confirm. 

    Secretary of State Antony Blinken during Sunday talk shows, including on CNN, charged Moscow with having committed war crimes against civilians during the campaign, now a week-and-a-half in:

    “We’ve seen very credible reports of deliberate attacks on civilians, which would constitute a war crime. We’ve seen very credible reports about the use of certain weapons,” Blinken told CNN’s Jake Tapper on “State of the Union.”

    Battle map via “Graphic News”…

    But the Kremlin has continued denying that it’s targeting civilians, according to the Kremlin press release:

    “Vladimir Putin informed about the progress of the special military operation on protecting Donbass, conveyed principal approaches and assessments in this context, explained in detail basic set goals and tasks. It was emphasized that the special operation is proceeding according to a plan and is on schedule,” the statement said. It was noted that Russia’s armed forces “were doing everything possible to preserve the lives and guarantee the security of civilians, precision strikes are targeting exclusively the facilities of military infrastructure.”

    Meanwhile anti-war protests within Russia itself appear to be growing, coming also as Visa, Mastercard, and PayPal have suspended services in the country – greatly adding the woes of the average Russian amid an already battered economy due to a series of drastic sanctions measures from the West, including targeting the central bank.

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    “Police detained more than 4,300 people at Russia-wide protests against president Vladimir Putin’s invasion of Ukraine, according to an independent protest monitoring group,” reports Reuters.

    And further: “Anti-war protests took place around the world on Sunday including in Russia itself, where police detained around 3,500 demonstrators. TASS news agency reported the interior ministry as saying arrests included 1,700 people in Moscow and 750 in St Petersburg.”

    Tyler Durden
    Sun, 03/06/2022 – 15:10

  • Russian Banks Switch To Chinese Card System As AmEx Joins Visa & MasterCard In Suspending Russian Operations
    Russian Banks Switch To Chinese Card System As AmEx Joins Visa & MasterCard In Suspending Russian Operations

    Yesterday, when reporting that both Visa and MasterCard had suspended operations in Russia just hours after Ukrainian President Volodymyr Zelenskiy called on the companies to halt all business in Russia during a video call with U.S. lawmakers, we said that “with this latest escalation in Russia’s comprehensive expulsion from the western financial system, expect a surge in usage for China’s UnionPay credit card system as millions of former Visa/MC users in Russia look east.”

    One day later, Reuters has confirmed this development, writing that “several Russian banks said on Sunday they would soon start issuing cards using the Chinese UnionPay card operator’s system coupled with Russia’s own Mir network, after Visa and MasterCard said they were suspending operations in Russia.” State-owned UnionPay is the provider of most card payments in China.

    Announcements regarding the switch to UnionPay came on Sunday from Sberbank, Russia’s biggest lender, as well as Alfa Bank and Tinkoff. 

    As Bloomberg adds, the move could allow Russians to make some payments overseas, with UnionPay operating in 180 countries and regions. Visa and Mastercard said that any transactions initiated with their cards issued in Russia will no longer work outside the country from March 10. 

    The Bank of Russia is also temporarily reducing the amount of information commercial banks are required to publish in an effort to limit the risks from international sanctions. Starting with statements for February, banks will no longer have to release accounts prepared to national standards or make any additional disclosures on their websites, the central bank said in a statement.

    The central bank of Russia advised its citizens to use cash abroad. It said Mir cards could also be used in Turkey, Vietnam, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan and the breakaway territories of South Ossetia and Abkhazia.

    Meanwhile, on Sunday afternoon American Express said it also was is suspending its operations in Russia and Belarus, becoming the latest credit card giant to respond with measures denouncing Russian President Vladimir Putin’s decision to invade Ukraine.

    Globally issued American Express cards will no longer work at merchants or ATMs in Russia, while cards issued locally by Russian banks will no longer work outside of the country on the American Express global network, the company said in a statement Sunday.

    The moves are “in addition to the previous steps we have taken, which include halting our relationships with banks in Russia impacted by the U.S. and international government sanctions,” American Express said.

    On Saturday Visa said that customers in Russia who have a card issued there can still pay for goods and services in the country, but the company won’t process the transactions. Processing will be left to Russia’s National Payment Card System, or NSPK, according to Bloomberg.

    Visa and Mastercard products issued by Russian banks will continue to work until they expire, according to the Russian central bank.

    On Saturday, PayPal also announced it has shut down all its services in Russia due to “the current circumstances”. The announcement was made in a letter PayPal CEO Dan Schulman sent to Ukraine’s Deputy Prime Minister Mykhailo Fedorov expressing solidarity with the Ukrainian people.

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    The global payment processors are the latest companies to join a growing list of US tech and internet sector giants who are boycotting Russia over the Putin-ordered invasion, currently in the middle of its second week.

    Tyler Durden
    Sun, 03/06/2022 – 14:50

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