Mar 08

Today’s News 8th March 2022

  • The US Is Not Trying High-Level Diplomacy To End Fighting In Ukraine
    The US Is Not Trying High-Level Diplomacy To End Fighting In Ukraine

    Authored by Dave DeCamp via AntiWar.com,

    On Friday, Secretary of State Antony Blinken said the US was ready to do what’s necessary to end the fighting in Ukraine, but that doesn’t appear to apply to high-level diplomacy.

    However, Pentagon said Friday that top US military leaders haven’t spoken with their Russian counterparts since Russia’s attack on Ukraine began.

    Pentagon spokesman John Kirby said neither Secretary of Defense Lloyd Austin nor Chairman of the Joint Chiefs of Staff Gen. Mark Milley have spoken with Russian military officials. “I’m not aware of any other senior leaders here at the Department of Defense,” he said.

    Source: EFE/EPA

    Last week, the US and Russian militaries set up a deconfliction line to held avoid miscalculations that could lead to wider escalations. But Kirby said the line is at the “lower operational level.”

    When the Russian attack on Ukraine first happened, President Biden said he had “no plans” to speak with Russian President Vladimir Putin, which the White House reaffirmed on Thursday.

    “We’re not planning a meeting between them or an engagement or a call. The President’s been very, very clear about that. But we’ll have those discussions internally and weigh the range of factors,” White House Press Secretary Jen Psaki said.

    In the months leading up to the invasion, the US and Russia were engaged in intense negotiations. But even then, Biden didn’t give diplomacy much of a chance. Russia made it clear that its main concerns were over NATO expansion and asked for a guarantee from the US that Ukraine won’t ever join the military alliance.

    Even though Biden said it was “not very likely” Ukraine would become a NATO member anytime soon, he refused to make the promise to Russia.

    Tyler Durden
    Mon, 03/07/2022 – 23:30

  • Professor Calls Parents "Ignorant Racist[s]" For Opposing Critical Race Theory
    Professor Calls Parents “Ignorant Racist[s]” For Opposing Critical Race Theory

    Authored by Terrance Kible via CampusReform.org,

    A Vanderbilt University professor recently said that parents who oppose Critical Race Theory (CRT) are “ignorant racist[s].”

    “Meanwhile, ignorant racist [sic] are worried about scaring their kids w CRT,” Gilman Whiting tweeted last month after a bomb threat against Howard University, an historically Black college in Washington, DC.

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    Earlier the same day, Whiting tweeted, “[S]chool boards across the country are banning teaching history while ignorantly calling it CRT.”

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    Between these tweets, Whiting opined that individuals were using their opposition to CRT to disguise their true intentions: eliminating equity in schools and “not teaching Black, Brown, & indigenous history, [and] banning books.”

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    Whiting, whose pinned tweet accuses another user of being “ignorant or simply racist or probably both,” holds three positions at Vanderbilt University. He is an Associate Professor of African American and Diaspora Studies, the Director of the Scholar Identity Institute, and the Director of Graduate Studies for African American and Diaspora Studies.

    Whiting received his Ph.D. in curriculum and instruction with a focus on special education populations from Purdue University in 2004. He also holds an individualized M.A. in multicultural education and urban affairs from Rhode Island College.

    Whiting’s areas of specialization include special needs populations, which he identifies as “at-risk learners, gifted identification, adult learners, incarceration of young Black men, [and] special education”; as well as urban education and achievement, including black identity and masculinity; and race, poverty, and fatherhood initiatives.

    Campus Reform reached out to Vanderbilt University, Whiting, and Dr. Tracy Sharpley-Whiting, the chair of African American and Diaspora Studies, for comment. At the time of publication, none had responded to Campus Reform’s request for comment.

    Tyler Durden
    Mon, 03/07/2022 – 23:00

  • Canada Says Its Oil Could Replace US Imports Of Russian Crude, All It Would Take Is Approval Of The Keystone XL Pipeline
    Canada Says Its Oil Could Replace US Imports Of Russian Crude, All It Would Take Is Approval Of The Keystone XL Pipeline

    By Tsvetana Paraskova of OilPrice.com

    Canada’s oil could replace American imports of Russian crude, the top officials of the oil-producing province Alberta said this weekend.

    As talks about banning Russian oil imports in the United States and its European allies intensify, reports have started to emerge that the U.S. Administration could be looking to persuade Saudi Arabia to pump more oil or lift some sanctions on Venezuela to help fill the gap that a Russian oil embargo would open.

    On Sunday, U.S. Secretary of State Antony Blinken said that the United States and its European allies were in “very active discussions” about banning the import of Russian oil over Putin’s war in Ukraine.

    Even without sanctions on Russian oil, some of the biggest U.S. importers of Russian crude oil have started suspending their purchases of the commodity.

    Canada has long pitched its crude as one that is not produced in rogue government regimes such as Venezuela, Iran, or Russia, and Alberta’s top officials now say that its crude could be the answer to more supply from allied nations to the United States.

    Retweeting Elon Musk’s comments that “we need to increase oil & gas output immediately,” Alberta’s Energy Minister Sonya Savage said on Saturday:

    “Agreed. And it should come from Alberta, home of the 3rd largest oil reserves. Alberta is the answer to US Energy security. Real emissions reductions, reliable, right next door.”

    Alberta’s Premier Jason Kenney said that he and Savage would be attending the CERAWeek conference in Houston this week, where “We will be meeting with decision-makers to secure access to markets, attract job-creating investment to our province, and argue for Canadian energy to displace Russian conflict oil.”

    Kenney also said that Alberta would be delighted to welcome a visit from U.S. President Joe Biden, as one reportedly being considered to Saudi Arabia.

    Kenney noted that in a visit by President Biden to Alberta “We could discuss how to ship nearly 1 million barrels of day of responsibly produced energy every day from the USA’s closest friend and ally! All it would take is his approval for Keystone XL. Easy.”  

    Tyler Durden
    Mon, 03/07/2022 – 22:40

  • How The Narcotic Of Defense Spending Undermines A Sensible Grand Strategy
    How The Narcotic Of Defense Spending Undermines A Sensible Grand Strategy

    Authored by Franklin Spinney via Counterpunch.org,

    The Military-Industrial-Congressional-Complex’s (MICC) grand-strategic chickens are coming home to roost big time.

    While war is bad, the Russo-Ukrainian War has the champagne corks quietly popping in the Pentagon, on K Street, in the defense industry, and throughout the halls of Congress.  Taxpayers are going to be paying for their party for a long time.  

    It is no accident that the United States is on the cusp of the Second Cold War.

    Future historians may well view the last 30 years as a case study in the institutional survival of the American Military – Industrial – Congressional Complex (MICC), together with its supporting blob now saturating the media, think tanks, academia, and the intelligence community.  Perhaps, these future historians will come also to view the Global War on Terror (GWOT) as the bridging operation that greased the transition to Cold War II by keeping defense budgets at Cold War levels after Cold War I ended.  Also, 9-11 may have re-acclimated the American people to the climate of fear now needed to sustain Cold War II for the remainder of the 21st Century.

    The First Cold War’s 40-year climate of fear was something Mikhail Gorbachev tried to end.  But Presidents Clinton and Bush (the 2nd) were busy planting the seed money for a new generation of cold-war inspired weapons.  These weapons required massive future defense budgets that would require a climate of fear to sustain (especially for the across-the-board nuclear modernization program).  President Obama then locked in these programs, and won a Nobel Peace Prize to boot.  President Trump and the Dems in Congress worked overtime to ice the Pentagon’s budget cake by incestuously amplifying the growing Russophobia.  

    No one wants war, but rising tension and the politics of fear … and their bedfellow: demonization … had to be magnified to justify the huge bow wave of defense spending looming in the budgetary offing, particularly the trillion+ dollars to pay for the nuclear modernization program.  This “chicken” takes us back to the “egg” laid in the 1990s.

    As it gradually sank in that the First Cold War had indeed ended when the Soviet threat evaporated in 1991, the titans in the defense industry understood their comfortable market for new hi-tech, high-cost weapons could dry up.  They also knew that sword makers do not have the management and engineering skills to make good affordable  plowshares.  So, they went on a Pentagon subsidized consolidation binge to gobble up access to what threatened to be a stagnating market.  Their collective logic was explained in October 1991 in a speech by William Anders, CEO of General Dynamics (see especially page 13). 

    At the same time, the defense industrialists recognized that market diversification was necessary.  So, it was no accident that a lobbying operation named the Committee to Expand NATO emerged in the early 1990s and was headed by a vice president of Lockheed Martin — see also Why is US Foreign Policy a Shambles?.  At the very least, in the mid-1990s, it seemed that expanding NATO implied dramatically increased requirements for what is known in NATO jargon as weapons interoperability. This promised huge new markets for American weapons, communications systems, and logistics infrastructure, as ex-Warsaw Pact countries trashed their Soviet weapons (e.g., F-16s to replace old Warsaw Pact Migs, etc.).  That this interoperability cornucopia did not materialize to the extent dreamed of is quite beside the point, when it comes to understanding the motives shaping the hopes and dreams underpinning the powerful American impulse to expand NATO — despite promises to the contrary made by leaders in the US, Germany, France, and the United Kingdom (see this page in National Security Archive). 

    Against the background of broken promises not to expand NATO, Mr. Putin has made several speeches explaining why NATO expansion would be a threat to Russian security.  In this sense, NATO expansion has become both the chicken and the egg when it comes to understanding the origins of the Russo-Ukrainian war, which is now on the cusp of locking in the perpetual state of fear needed to sustain a Second Cold War for the remainder of the 21st Century. 

    Washington observers have long argued that the Pentagon doesn’t have a strategy.  As the famous American strategic thinker, John Boyd opined repeatedly, “They are wrong,  … the strategy is simple,” (albeit focused more intensely on domestic politics than international relations).  “It is: Don’t interrupt the money flow, add to it.” 

    But the Pentagon’s strategy of maximizing its budget has created a growing dependency on defense spending in the American political economy.  This grotesque distortion was first recognized by President Eisenhower in 1961.  In 1987, George Kennan, forty years after he fathered the dominant US policy of “Containment” for the entire First Cold War, summed up the narcotic of defense spending, saying prophetically:

    “Were the Soviet Union to sink tomorrow under the waters of the ocean, the American military-industrial complex would have to remain, substantially unchanged, until some other adversary could be invented. Anything else would be an unacceptable shock to the American economy,” 

    Source: George Kennan, At Century’s Ending: Refections, 1982-1995, (New York: W.W. Norton & Company, 1996) pg.118. 

    And that dear reader, is why the Russo-Ukrainian War — a predictable consequence of NATO expansion — has champagne corks popping in the Pentagon, in the defense industry, and in their wholly owned subsidiaries in Congress, think tanks, the intelligence apparat, and the press.  

    Understanding the internal political-economic causes of the American addiction to the narcotic of defense spending is at the heart of the problem.  This understanding is essential to reforming the foreign policy mess exacerbated by NATO expansion.  

    So, there is much work to be done, but a great beginning can be found in reading and updating the late Seymour Melman’s path breaking work, which began in the 1950s (e.g., see Profits Without Production, The Permanent War Economy for an introduction).

    But a first step along a road to clearer thinking is for concerned American citizens to appreciate what Mr. Putin has been saying — and to understand why Mr. Putin thinks he is justified in saying it. 

    *  *  *

    Franklin “Chuck” Spinney is a former military analyst for the Pentagon and a contributor to Hopeless: Barack Obama and the Politics of Illusion, published by AK Press. He be reached at chuck_spinney@mac.com

    Tyler Durden
    Mon, 03/07/2022 – 22:30

  • One Of China's Largest Banks Fails To Pay Margin Call After Today's Monster Nickel Squeeze
    One Of China’s Largest Banks Fails To Pay Margin Call After Today’s Monster Nickel Squeeze

    Around the time Peabody was served with a $534 million margin call on its hedging coal futures short, which it funded with a new $150MM unsecured (10%) revolver from Goldman Sachs, one of China’s largest banks was also served with a margin call for hundreds of millions of dollars on a nickel short gone terribly bad after the price of Nickel did… well this:

    However, unlike Peabody, a unit of China Construction Bank Corp – one of China’s “Big Four” banks – was given additional time by the London Metal Exchange to pay hundreds of millions of dollars of margin calls it missed Monday amid an unprecedented spike in nickel prices. The reprieve from the LME – which just last week sent out thousands of erroneous margin calls on metals contracts – means that the unit, called CCBI Global Markets, is not formally in default, Bloomberg reported citing sources.

    The details of the non-payments aren’t quite clear: Bloomberg notes that the deferred default “isn’t necessarily an indicator of any problems at the parent company” although Bloomberg may be merely trying not to antagonize a major client. Instead, the media conglomerate suggests that the non-payment is more likely due to a failure by one of its metals-industry clients to make margin payments to CCBI Global Markets, which is a broker on the LME’s open-outcry trading floor. That in turn, left CCBI Global Markets struggling to arrange payment of the unusually large margin calls after the end of the business day in Asia, as nickel prices exploded throughout Monday.

    As reported earlier, Monday’s monster squeeze was driven by market participants with short positions being forced to close out as they couldn’t meet margin calls.

    But while a big Chinese bank may have had immunity, others may not be so lucky: Bloomberg previously reported that Chinese entrepreneur Xiang Guangda – known as “Big Shot” – had a large short position on the LME through his company, Tsingshan Holding Group, the world’s largest nickel and stainless steel producer. It’s unclear whether that particular trader received a margin call and if he paid it.

    And so, as we wait for more massively short squeezed names to emerge, we can’t help but wonder if this is precisely the start of the “liquidity crisis” predicted by Zoltan Pozsar; after all, he has called virtually everything else spot on so far…

    Tyler Durden
    Mon, 03/07/2022 – 22:00

  • Energy Stocks Have Huge Upside As They Catch Up With Oil
    Energy Stocks Have Huge Upside As They Catch Up With Oil

    With energy stocks the only green sector in today’s broad market rout as war in Ukraine dominates markets…

    …. on a historic basis the group still has a long way to go before catching up with the broader market, which has benefited from outsized gains in tech according to Bloomberg’s Felice Marantz who notes that since 1990, tech stocks have well outpaced any other sector, followed by consumer discretionary stocks and then health care.

    The energy index, on the other hand, has significantly lagged the broader S&P 500.

    But the base case for investing in long-shunned oil companies may be shifting: oil just had its biggest daily swing ever, surging to ~$140 before retreating, after the U.S. said it was considering a ban on Russian crude imports. Meanwhile, confirming the emerging global supply shock Shell is now limiting sales of heating oil to some wholesalers in Germany, in a bid to ensure it can continue to meet contractual obligations.

    The only potential silver lining for an immediate boost in supply – talks with Iran – have been ridden by tensions, while meetings with Venezuelan officials are likely to take a long time to result in change, and a significant shift to green energy seems distant

    Morgan Stanley analysts agree, noting that US oil & gas stocks are trading at a steep discount to oil futures and have a lot of catching up to do, estimating that the sector is currently pricing WTI at $64 a barrel.

    The analysts add that as WTI oil soars above $125 and stays there, it creates further room for catchup for the likes of Exxon and Chevron. They conclude that if prices hold above $100/bbl in 2022, there is 35% potential upside to consensus Ebitda estimates for exploration & production firms.

    In a separate note from Morgan Stanley’s chief equity strategist Martijn Rats, he writes that he has argued for several months that oil prices need to rise to the level where demand destruction kicks in, which is arguably what oil prices are currently searching for. He then notes that given the elevated level of price volatility, in the event of meaningful disruptions to the flow of oil, large price spikes above $150/bbl are possible. As an indication, the highest oil price ever recorded occurred in 2008 at $147/bbl. Inflation adjusted, that would be approximately $182/bbl today.

    Tyler Durden
    Mon, 03/07/2022 – 21:45

  • Russia "Weaponizes Energy", Warns It Could Cut Off European Gas Supplies Via Nord Stream 1
    Russia “Weaponizes Energy”, Warns It Could Cut Off European Gas Supplies Via Nord Stream 1

    At a moment the Biden White House is coming under bipartisan pressure to end Russian oil imports as a ‘nuclear option’ retribution for Russia’s invasion of Ukraine, Moscow for the first time hinted that it’s ready to use its own energy weapon, after Deputy Prime Minister Alexander Novak said Monday Russia could take the drastic action of cutting natural gas supplies to Germany via the Nord Stream 1 pipeline.

    Novak said such a move would be a “matching decision” in light of the German government halting the regulatory process for Nord Stream 2 as punishment for the military assault on Ukraine.

    “In connection with unfounded accusations against Russia regarding the energy crisis in Europe and the imposition of a ban on Nord Stream 2, we have every right to take a matching decision and impose an embargo on gas pumping through the Nord Stream 1 gas pipeline,” Novak said on state TV, describing the fresh threat.

    He emphasized, however that “so far, we are not taking such a decision”. The words, which may have sparked dread among European governments (most notably Germany) and officials already agonizing how to procure the much needed deficient gas, come after the White House has long expressed concern that Putin could ‘weaponize energy‘, leaving Europe without the bulk of its gas supplies – as 40% comes via Russia – more severely impacting already volatile and ratcheting energy markets.

    If such a drastic step were taken, natural gas princes in Europe would soar even higher – after already hitting a record high, up over 40% from Friday’s close on Monday.

    Days after Russia’s Feb.24 invasion of Ukraine, some Eastern European leaders went so far as to actually call for Nord Stream 1’s closure as a severe but necessary way to punish the Russian economy further and inflict real pain on its energy sector. 

    Germany’s Rheinische Post newspaper reported late last month that German energy giant E.ON rejected calls from Poland to shut down the Nord Stream 1 natural gas pipeline in response to Russia’s invasion of Ukraine. Polish Prime Minister Mateusz Morawiecki had “asked operators of the offshore pipeline – which carries more than a third of Germany’s natural gas imports –  to shut it down after Moscow ordered troops into Ukraine,” the report said.

    Last Thursday, Germany’s Economy Minister Robert Habeck spoke out against a ban on energy imports from Russia in the wake of Moscow’s invasion of Ukraine.

    “I would not advocate an embargo on Russian imports of fossil fuels. I would even oppose it,” he said after meeting German business leaders. “We need these energy supplies to maintain the price stability and energy security in Germany,” Habeck added, warning that “a shortage in supply could threaten social cohesion in Germany.”

    Tyler Durden
    Mon, 03/07/2022 – 21:30

  • A Surprising Explanation Of Russia's Invasion From A Former Top-Level CIA Official
    A Surprising Explanation Of Russia’s Invasion From A Former Top-Level CIA Official

    A surprising op-ed in MSNBC arguing that Russia’s invasion of Ukraine was likely “preventable” if the US and NATO had merely tried to take a path of muscular diplomacy and potential compromise appears to have slipped passed the mainstream media censors and gate-keepers. 

    Since the start of the Thursday Feb.24 invasion, the prevailing narrative concerning Russia’s motives has been largely limited to an ultra-simplistic hollywoodwesque story that goes something like this: one day a big bully and monster named Putin decided he wanted to invade and kill people in a neighboring country, and that he further wants to “resurrect the old Soviet Union”. 

    But in a refreshingly realist op-ed piece, MSNBC political columnist Zeeshan Aleem exposed the self-serving Washington narrative which was intended more for the consumption of masses as false. Aleem points to a much more complex and nuanced reality, reminding the public of what should be obvious to any student of history – that the top diplomats and US officials who oversaw post-Soviet negotiations with Russia over Europe’s security order in the 1990’s knew full well that if NATO ever got expanded up to Russia’s borders, it would be suicide. It was predicted decades ago that war would be triggered in such a scenario.

    AFP via Getty Images

    As the political relations professor and scholar John Mearsheimer put it in 2015, “What’s going on here is that the West is leading Ukraine down the primrose path, and the end result is that Ukraine is going to get wrecked.”

    Relying on some of these past scholars and US statesmen, the recent MSNBC piece describes a war that could have easily been avoided: 

    The fact that the NATO status question was not put on the table as Putin signaled that he was serious about an invasion — so plainly that the U.S. government was spelling it out with day-by-day updates — was an error, and potentially a catastrophic one. It may sound cruel to suggest that Ukraine could be barred, either temporarily or permanently, from entering a military alliance it wants to be in. But what’s more cruel is that Ukrainians might be paying with their lives for the United States’ reckless flirtation with Ukraine as a future NATO member without ever committing to its defense.

    After all, the columnist points out, it was hugely unlikely that Ukraine would have ever become a NATO member for many years to come anyway, given that Article 5 necessitates that any potential member must have control over their own borders. Of course, given the Donbass conflict which has raged since 2014, this alone would preclude Kiev’s entry.

    But neither Brussels nor Washington was interested in “losing face” or making any level of concessions to Moscow, and now Ukrainians are suffering immensely after for years they were promised a “path” to NATO:

    But for the West to offer to compromise on Ukraine’s future entry into NATO would have required admitting the limitations of Western power.

    “It was the desire of Western governments not to lose face by compromising with Russia,” Anatol Lieven, senior research fellow on Russia and Europe at the Quincy Institute for Responsible Statecraft and the author of “Ukraine and Russia: A Fraternal Rivalry,” told me. “But it was also the moral cowardice of so many Western commentators and officials and ex-officials who would not come out in public and admit that this was no longer a viable project.”

    …”Cowardice” which was no doubt linked to the climate of accusations of “everyone’s a Russian agent!” if they don’t fall in line to the dominant narrative of the past five years since the Trump-Russiagate claims.

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    The MSNC op-ed further includes some stunning commentary from a former top level CIA analyst: 

    “The choice that we faced in Ukraine — and I’m using the past tense there intentionally — was whether Russia exercised a veto over NATO involvement in Ukraine on the negotiating table or on the battlefield,” said George Beebe, a former director of Russia analysis at the CIA and special adviser on Russia to former Vice President Dick Cheney.

    Below: the full University of Chicago John J. Mearsheimer lecture, which is now going viral…

    The CIA’s Beebe follows with this almost unbelievable line: 

    “And we elected to make sure that the veto was exercised on the battlefield, hoping that either Putin would stay his hand or that the military operation would fail.”

    Again this illustrates perfectly Mearsheimer’s prior prediction: “…the West is leading Ukraine down the primrose path, and the end result is that Ukraine is going to get wrecked.”

    The MSNBC peice further cites Peter Beinart:

    George Kennan, the living legend who had fathered America’s policy of containment against the Soviet Union, called NATO expansion “a strategic blunder of potentially epic proportions.” Thomas Friedman, America’s most prominent foreign policy columnist, declared it the “most ill-conceived project of the post-Cold War era.” Daniel Patrick Moynihan, widely considered the most erudite member of the US Senate, warned, “We have no idea what we’re getting into.” John Lewis Gaddis, the dean of America’s Cold War historians, noted that, “historians—normally so contentious—are in uncharacteristic agreement: with remarkably few exceptions, they see NATO enlargement as ill-conceived, ill-timed, and above all ill-suited to the realities of the post-Cold War world.”

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    And now tragically the world is witnessing the blowback, suffered most intensely and immediately by the very Ukrainian people that NATO powers claimed to have wanted to protect.

    Tyler Durden
    Mon, 03/07/2022 – 21:00

  • Russia Trying To Recruit Syrian Fighters In Ukraine Conflict: US Official
    Russia Trying To Recruit Syrian Fighters In Ukraine Conflict: US Official

    Submitted by the Epoch Times

    U.S. intelligence officials believe reports of Russians recruiting Syrian fighters in the Ukraine conflict are credible, a senior U.S. military official said Monday. Speaking to reporters in a call, the official said it’s not clear how many have been recruited or if they have been sent to Ukraine as of Monday.

    “We don’t know how many and how good they are and we couldn’t speak to the quality of each individual that they that they’re going to try to recruit or where they would get them from or how they would prepare them if they would even prepare them,” the official said, answering a question about reports Syrian fighters are being recruited.

    “We think it’s noteworthy that [Russian President Vladimir Putin] indicated a willingness to rely on foreign fighters to fight the war in Ukraine,” said the official.

    Over the weekend, reports from the Wall Street Journal and other outlets, citing anonymous U.S. officials, said that Syrians who are skilled in urban combat are being recruited by Moscow. Russia has been operating inside Syria since 2015, while the Kremlin has backed Syrian President Bashar al-Assad.

    Since the Feb. 24 conflict started, there have also been reports of Russia’s military using Chechen soldiers. Ramzan Kadyrov, the head of Russia’s Chechen Republic, was seen in social media videos addressing hundreds, or possibly thousands, of soldiers in the capital, Grozny, in recent days.

    Kadyrov said on Feb. 26 that his forces have been deployed to Ukraine, according to a video posted online. Several pro-Kyiv news outlets have also posted videos to social media that purportedly showed captured or dead Chechen prisoners of war.

    “The president (Putin) took the right decision and we will carry out his orders under any circumstances,” said Kadyrov at the time.

    Meanwhile, fighters have poured in from Western countries to fight on behalf of Kyiv’s government, according to Ukrainian President Volodymyr Zelensky. Last week, Zelensky said in a news conference that some 16,000 foreign nationals signed up to fight against Russia, although the figure could not be independently verified.

    Putin, via state-run media, claimed last week that Ukrainian forces were using human shields as well as “foreign mercenaries” from the Middle East on the ground.

    “The fact that we are fighting specifically against neo-Nazis is shown by the very course of hostilities. Nationalist and neo-Nazi formations, and among them there are foreign mercenaries, including those from the Middle East, are hiding behind civilians as a human shield,” Putin said. He did not elaborate or provide an example.

    More than 1.7 million Ukrainians fleeing Russia’s invasion have so far crossed into Central Europe, the United Nation’s refugee agency said on Monday, as thousands more streamed across the borders.

    Poland, which has the largest Ukrainian community in Central Europe, has received more than 1 million Ukrainian refugees since the conflict began, with the milestone passed late on Sunday.

    “This is a million human tragedies, a million people banished from their homes by the war,” the Polish border guard service wrote in a Twitter post late on Sunday.

    Tyler Durden
    Mon, 03/07/2022 – 20:30

  • On The Cusp Of An Economic Singularity
    On The Cusp Of An Economic Singularity

    Submitted by Doomberg

    “One mustn’t look at the abyss, because there is at the bottom an inexpressible charm which attracts us.” – Gustave Flaubert

    In 1988, Stephen Hawking published one of the best-selling science books of all time. In A Brief History of Time, Hawking made the impossibly complex topics of astronomy and modern physics accessible to a lay audience, inspiring countless young students (and at least one green chicken) to pursue a career in the sciences. It is estimated that the book has sold an incredible 25 million copies worldwide.

    A Brief History of Time | photo credit: BBC

    In Chapter 3 of the book, Hawking introduces the reader to the Big Bang Theory and the concept of a gravitational singularity, which Wikipedia describes as “a condition in which gravity is so intense that spacetime itself breaks down catastrophically.” Essentially, since the laws of physics are eviscerated at a singularity, what happened before it is both irrelevant and unknowable, and one could consider such an event as having reset the universe’s clock. Here’s how Hawking describes it in his book (emphasis added throughout):

    “This means that even if there were events before the big bang, one could not use them to determine what would happen afterward, because predictability would break down at the big bang. Correspondingly, if, as is the case, we know only what has happened since the big bang, we could not determine what happened beforehand. As far as we are concerned, events before the big bang can have no consequences, so they should not form part of a scientific model of the universe. We should therefore cut them out of the model and say that time had a beginning at the big bang. Many people do not like the idea that time has a beginning, probably because it smacks of divine intervention.”

    The simple truth of a singularity applies whether it occurred in the past or will in the future: what transpires on the other side is unknowable from here.

    Given the horrific and still-unfolding events of Vladimir Putin’s invasion of Ukraine and the West’s collective response to it, one can’t help but wonder whether we are on the cusp of an economic singularity in which the laws and bedrock beliefs that formed the foundation of international economic order for decades break down. The consequences are similarly unknowable, but we suspect a great reset may indeed be upon us. Even if a ceasefire is announced moments after we publish this piece, shocking damage to the global economic system has undoubtedly already been done and certain genies won’t easily be put back into their bottles.

    Before proceeding, we should state clearly that what follows is not a critique of the Western response to the invasion but rather an assessment of the potential first- and second-order consequences of these historic moves, as well as speculation on where some of the harshest economic crises might manifest in the near future. While we join in the hope that these measures achieve their desired direct effect, there’s no denying these are truly unprecedented times.

    The most stunning move by the US and its allies was cutting off the Russian central bank’s access to most of its $630 billion of foreign reserves. Without access, one wonders if these funds are really “its” reserves at all? What is ownership without access? No matter how justified that move might seem today, there’s no escaping that this action will reverberate for years to come. In a blunt opinion piece in the Wall Street Journal titled “If Russian Currency Reserves Aren’t Really Money, the World Is in for a Shock,” reporter Jon Sindreu had this to say about how central banks everywhere must now view their reserves:

    “Many economists have long equated this money to savings in a piggy bank, which in turn correspond to investments made abroad in the real economy. Recent events highlight the error in this thinking: Barring gold, these assets are someone else’s liability—someone who can just decide they are worth nothing. Last year, the IMF suspended Taliban-controlled Afghanistan’s access to funds and SDR. Sanctions on Iran have confirmed that holding reserves offshore doesn’t stop the U.S. Treasury from taking action. As New England Law Professor Christine Abely points out, the 2017 settlement with Singapore’s CSE TransTel shows that the mere use of the dollar abroad can violate sanctions on the premise that some payment clearing ultimately happens on U.S. soil.”

    Photo credit: Bloomberg

    In for a shock, indeed. In essence, Sindreu’s piece argues that this move substantially increases the risk that the US dollar loses its privileged status as the global reserve currency and, at a minimum, likely ensures a polarization of the global economy into at least two camps – the West in one and Russia/China/Iran/Saudi Arabia plus other targeted or aligned countries in the other. If $20-30 trillion or more of global GDP spurns the preexisting reserve currency, is it still the reserve currency? If reserves can be negated overnight, are they even reserves? How many other countries must hedge against the possibility of similar sanctions? Should we add India to the list?

    “The Biden administration is weighing whether to impose sanctions against India over its stockpile of and reliance on Russian military equipment as part of the wide-ranging consequences the West is seeking to impose on Moscow over its invasion of Ukraine. 

    Donald Lu, the assistant secretary of State for South Asian affairs, on Thursday told lawmakers in a hearing that the administration is weighing how threatening India’s historically close military relationship with Russia is to U.S. security.”

    Another eyebrow-raising development is the US Department of Justice’s establishment of the ominously-named Task Force KleptoCapture, which has the stated intent of seizing (not freezing) the assets of Russian oligarchs. Here’s how the New York Times describes it:

    “The creation of the task force reflects the harsh scrutiny cast on Russian oligarchs, many of whom built their fortunes because of their ties to Mr. Putin. Even though they may not be directly involved in Russia’s invasion of Ukraine, they enable Mr. Putin by helping him conceal his own assets and remain in power.

    Russia’s oligarchs have invested their fortunes in assets around the world, and their ties to Mr. Putin have helped them gain influence and connections in the worlds of fine art, real estate, Wall Street and Silicon Valley.”

    Oligarch’s not-yacht | photo credit: Forbes

    We are the first to admit that “Russian oligarch” is a less sympathetic faction than “Canadian trucker,” and perpetrating a war on another sovereign nation is way more serious than honking horns in downtown Ottawa, but many of the same questions we raised about the consequences of Justin Trudeau’s impulses seem apropos here. Who gets to define oligarch? What qualifies as enabling? Do the accused have any recourse? If assets in the West are subject to swift confiscation without due process for even indirectly enabling a currently unpopular-with-us national political leader – no matter how justified that unpopularity might be – what sane foreign asset owner wouldn’t at least consider liquidating assets now and onshoring what wealth they can preserve? Have we thought through the dominos that fall by fundamentally rewriting property laws?

    Further down in the same New York Times article, we find another interesting passage. We’ve long argued that a crackdown on cryptocurrencies is imminent. Will the US use the Russian invasion of Ukraine as a pretext for doing so? It sure seems like it:

    “The task force will target people and companies that are trying to evade anti-money laundering laws, hide their identities from financial institutions and use cryptocurrencies to evade sanctions and launder money. The Justice Department said that it would use civil and criminal asset forfeiture to seize assets belonging to people subject to sanctions.

    The department said that its work would complement that of a trans-Atlantic task force announced this past weekend to identify and seize the assets of penalized Russian individuals and companies around the world.”

    Yet another meaningful development is the move by multinational corporations to self-sanction all aspects of their business activity tied to Russia, undoubtedly motivated by the disturbing images coming out of Ukraine and pressured by their stakeholders to do something about it. This is not the first time corporations have been called to action after certain political events – Western governments have a long history of trying to implement controversial policies by leaning on business leaders to do their dirty work for them – but these recent developments likely cause concern even among Western leaders. Perhaps naïvely, the US and its NATO allies specifically tried to carve out Russian oil and gas from the reach of sanctions, recognizing our critical need for these essential supplies (a weakness we’ve been writing about for many months). But as the Financial Times describes in a recent report, if the zeitgeist uniformly labels an entity toxic – even an entire G20 country – there can be no carve-outs:

    “In reality, however, many western banks, refineries and shipowners are in effect ‘self-sanctioning’ — behaving as if Russian oil has already been placed under sanctions. ‘Russia’s oil has effectively become toxic,’ said one banker.

    Some of the biggest buyers of Russian crude have cancelled shipments and orders as companies from banks to insurers and shippers retreat from Russian business.

    Roughly 70 per cent of Russian crude was ‘struggling to find buyers,’ according to consultancy Energy Aspects. As proof, Russia’s flagship Urals crude, a staple for refiners in north-west Europe and the Mediterranean, was quoted at a record discount of more than $18 a barrel on Wednesday.”

    Here are just some of the potentially catastrophic economic consequences to ponder if these events continue to snowball down a steepening slope. The obvious place to start is in the energy sector, where European natural gas prices have been trading like a crypto scam coin, rising and plunging by unthinkable amounts on a daily basis. The economic impact of both the elevated price and the volatility of energy on Europe’s manufacturing sector will be revealed in the coming weeks and months – we suspect the results will stun many.

    Similarly, Russia and Ukraine are among the most prolific producers and exporters of critical foodstuffs in the world, and prices of agricultural goods are flashing red. In a piece we wrote all the way back in October of last year called Starvation Diet, we predicted a global mass starvation event was nearly inevitable, and that was before war broke out in Ukraine. Here’s how the piece opened:

    “We are on the cusp of a significant mass starvation event of our own making. Soon, tens of millions of the world’s most impoverished people will die from an inability to feed themselves, while many of those comfortably getting by now – especially in the Western World – are in for a shock.”

    Unsurprisingly, wheat has traded limit up for several days in a row and prices are reaching levels that condemn vast swaths of the global population to the fate we reluctantly described above. Food inflation is the catalyst for many popular uprisings, and the path from empty shelves to the guillotine has historically been a direct one. Now consider further that the West has outsourced the production of energy and critical mining materials to impoverished countries. What happens when those governments get overthrown and the production assets get nationalized?

    There are countless other alarming consequences which we could document here – ahem, Russia produces 40% of global Palladium supplies and, ahem, Ukraine is responsible for the majority of global Neon gas exports (critical for the production of lasers used to make microchips, which are already in chronically short supply) – but even we are losing the capacity to ponder the totality of the economic doom that awaits.

    Recent statements by US political leaders don’t inspire much confidence in our ability to navigate this crisis without substantial further economic and political escalation. In a single 24-hour period, House Speaker Nancy Pelosi called for a ban on Russian oil imports while simultaneously stating her opposition to the development of US oil to replace them. Meanwhile, Republican Senator Lindsay Graham went on live television and flippantly called for the assassination of the President of Russia. To drive his reckless point home, he then took to Twitter and amplified his message:

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    A big bang is coming. Brace for impact.

    Tyler Durden
    Mon, 03/07/2022 – 20:00

  • US Gas Prices Just Smashed The All-Time Record High
    US Gas Prices Just Smashed The All-Time Record High

    Update (1955ET): Oil Price Information Service (OPIS), the firm that collects and calculates prices for the American Automobile Association (AAA), released new data Monday evening that shows the national average for a gallon of gas at the pump hit a record high, according to CNN. 

    OPIS monitors the pricing data of 140,000 US gas stations and found that at the close of business on the East Coast, gas prices on average broke the previous 2008 record of $4.11 and printed as high as $4.14.

    Gas prices are up 52 cents a gallon in just the last week and 60 cents since Feb. 24, when Russia invaded Ukraine. 

    Tom Kloza, the global head of energy analysis for the OPIS, warned, “we’ll hit $4.50 a gallon before it turns around … the risk is how bad this gets, how long this goes on. Even $5 a gallon nationwide is possible. I wouldn’t have predicted that before the fighting started.”

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    The latest melt-up in gasoline prices comes as the Biden administration considers a US ban on Russian energy imports. Just that very messaging by the administration has sent West Texas Intermediate (WTI) over $121/bbl today. 

    * * * 

    Gas prices were already high heading into the weekend, but new data from American Automobile Association (AAA) shows the national average for a gallon of gas just hit $4 on Sunday, the highest level since 2008, as crude oil supply fears flourish due to Russia’s invasion of Ukraine. 

    According to AAA, the national average for a gallon of regular gasoline rose to $4.009 on Sunday. That comes after prices jumped more than 40 cents from a week ago and 57 from a month ago. With West Texas Intermediate (WTI) at $115/bbl and Brent around $118/bbl, prices at the pump could easily reach 4.50 if geopolitical turmoil in Ukraine worsens or supplies globally tighten. 

    Concerns over Russia’s invasion of Ukraine sent crude prices soaring to their largest weekly gain in history as buyers avoid purchasing Russian supplies (the world’s second-biggest exporter). The price shock has dragged on US consumer sentiment and could impact President Biden’s polling data with another drop.

    Tom Kloza, the head of energy analysis for the Oil Price Information Service, which supplies data to AAA from 140,000 gas stations, told CNN that rising gas prices would continue. 

    “This is not the end of it,” Kloza said, adding that price spikes are “absolutely out of control.” 

    Jim Bianco, founder and chief strategist of Bianco Research, points out gas is just a few cents from the all-time high. 

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

    In another tweet, Bianco said, “when the current crude prices completely filter through the system in the coming days, the national average will be $4.50, and $5.50 in places like NY, IL, and CA.”

    He added: “Premium, which is what most new cars take, will top $6.” 

    Patrick DeHaan, head of petroleum analysis at GasBuddy LLC, said Americans could be paying on average $4.24 a gallon by Memorial Day. 

    DeHaan warned, “Americans should prepare to pay more for gas than they ever have before.” 

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

    Tyler Durden
    Mon, 03/07/2022 – 19:55

  • "Truth Is The First Casualty Of War": What's Really Going On
    “Truth Is The First Casualty Of War”: What’s Really Going On

    Submitted by Maajid Nawaz of The Radical Dispatch. Views expressed in this article are the opinions of the author and do not necessarily reflect the views of Zero Hedge.

    Why Putin Invaded Ukraine – and what’s really going on?

    1) Truth is the First Casualty of War. And War is Permanent

    Truth is the first casualty of war, and the Ukraine conflict has been no exception. Online commentary has kept up where corporatist media has failed. Leaving legacy media outlets catching up with what the public began figuring out almost immediately. To save face, and their credibility, even legacy media “fact-checkers” (read: hopeful arbitrators of acceptable opinion) found themselves belatedly decrying the shameless war propaganda peddled by their own journalists.

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    The BBC reports:

    “Misleading posts have come from “official” sources as well as from “ordinary” social media users. One example was a tweet posted by the verified account of the Ukrainian Ministry of Defence.”

    Reuters reports a thread:

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    Because it became almost impossible to hide this:

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    2) When is an Uprising a Coup?

    To emphasise, this article serves to analyse how to prevent the danger of World War III. Its purpose is not to defend Putin’s actions. To understand the conflict requires understanding the recent history, and what Russia’s national interests are in the region. Ukraine had a long history of cultural and political ties with Russia, dating to Kievan Rus of the 10th century that was founded by the Rurikid dynasty from Swedish vikings. It had been formally a part of the Russian Empire since the 18th century and remained in its sphere of influence.

    In 2010 Ukraine elected the pro-Russia Yanukovych as their president. Leaning towards Russia as he did, the new president Yanukovych was however not the US establishment’s preferred candidate. In 2013, Yanukovych cancelled an association deal between Ukraine and the EU.

    In short, such an action required a response. With the second largest oil reserves in the world, and by controlling most of Europe’s gas supplies (which pass through Ukraine) Russia was perilously close to creating a Eurasian superpower to rival the US and end the hegemony of the US petrodollar. This is something that was recognised by Trump, despite the now proven hoax that he was captured by Putin.

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    The US response came in 2014 as a Western backed bloody Maidan uprising (Putin would call this a coup) led to a change of regime. This uprising was backed and funded by the US establishment and her allies. Most worrying of all, it was perpetrated by the Neo-Nazi group Svoboda, founded by Andriy Parubiy.

    3) We Backed Nazis. Putin Got That Bit Right

    Despite corporatist media denials, the neo-Nazi nature of Ukraine’s new pro-American regime is by now well established, as the previous Radical Dispatch has documented. With western backing, Svoboda swiftly began raising the armed neo-Nazi Azov battalion, which now serves as the Ukrainian National Guard. The US was arming the Nazi Azov battalion for three years, until it finally ended the open part of this cooperation in 2018.

    “House-passed spending bills for the past three years have included a ban on U.S. aid to Ukraine from going to the Azov Battalion, but the provision was stripped out before final passage each year…The Azov Battalion was founded in 2014, and its first commander was Andriy Biletsky, who previously headed the neo-Nazi group Patriot of Ukraine. Several members of the militia, which has been integrated into the Ukrainian National Guard, are self-avowed neo-Nazis..Last year, online posts by the militia’s news service showed members testing U.S.-made grenade launchers at a firing range. The posts have since been deleted”

    Canada was also involved in this arming and funding of Ukrainian Nazis. Replete with Western funds, the group promptly appears to have begun organizing Nazi summer camps for children:

    As well as organizing street patrols for Nazi blackshirts in order to maintain their grip on power. BBC Newsnight reports:

    And mass Nazi rallies, glorifying Nazi collaborators:

    Russia responded to this regime change by helping Crimea secede, and by recognising Luhansk’s and Donetsk’s independence. The above is the background to the eight year war that had been waging in Donbas, which you would be forgiven for not knowing about due to a corporatist media blackout. Perhaps they were ashamed that we directly funded and armed Nazis. Azov were, after all, documented by the UN as having committing war-crimes and atrocities.

    Crime and corruption spiked, and Ukraine spiralled into a trafficking hub:

    4) Thirteen Days of the Cuban Missile Crisis, and What’s Really Going on in Ukraine

    Eventually, matters with this new regime came to a head with Ukraine’s touted and potential NATO membership.

    This was a red line for Russia. In the 1962 Cuban Missile Crisis, America feared Soviet nuclear missiles that were placed 103 miles from the US border, and they took action. This led to thirteen days of attempting to avert all-out nuclear war, known as the Cuban Missile crisis.

    After the pro-American Maidan uprising (or coup) in Ukraine, Russia similarly feared rapid NATO expansion leading to missiles at their own border. We have now returned to similar tensions, but the inverse. This is a map depicting NATO’s Eastward expansion since 1997.

    And the below is a map depicting the asymmetry in US and Russian military power globally.

    These two maps go some way to explaining why Russian felt threatened by the 2014 regime change in Ukraine. US Military officers have been aware of and warning of precisely this reaction by Russia for some time. This is because they are trained to think about international affairs in strategic terms. Here is former senior advisor to the US Secretary of Defence, Colonel Macgregor:

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    What you hear above from Colonel Douglas Macgregor is precisely what Putin has directly stated, multiple times. NATO’s Eastward expansion is unacceptable to Russia.

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    Kremlin analysts have warned about this too. Here is Vladimir Pozner in 2018:

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    5) It’s All Gas and Hot Air

    Russia had been promised that NATO would not expand Eastwards. Alas, it appears that certain US corporate interests became too large for the US establishment to ignore. Whoever controls Ukraine, controls the gas supply into Europe, and in particular into Germany. Perhaps to avoid all-out conflict over Ukraine, Russia had been seeking to bypass Ukraine via the Nord Stream 2 pipeline built in the sea. The Nord stream 2 project, however, was repeatedly thwarted.

    Eventually, Russia moved into Ukraine to secure her interests. After recent Western sanctions, it is reported that Nord stream 2 has filed for insolvency.

    With this background, and context, it is now possible to see what Russia’s interests are in Ukraine, and how to bring this conflict to an end without provoking World War III. The assumption here is that readers do wish to avoid Armageddon. The assumption here is also that – despite the voices of hysterical politicians and geopolitically ignorant media pundits desperately calling for escalation – few war hawks will personally leave to fight Russia themselves.

    We end here as we began: this article serves to analyse how to prevent the danger of World War III. Its purpose is not to defend Putin’s actions.

    With that in mind, and as US Colonel Macgregor has stated in the video above, this will likely end with Ukraine being split into two. Putin will probably maintain control East of the Dnieper river, and insist on a return to a neutral regime West of the river. That is, unless certain rabid Western politicians get their way and manage to spark a nuclear catastrophe. A blackout of reliable geostrategic insight, coupled with now proven and prolific war propaganda in our media, can only provoke precisely that. Only sober political analysis can aid deescalation, but that is precisely what is being discouraged right now. Readers should ponder why. Finally, it may also be an idea to never fund Nazi battalions.

    Tyler Durden
    Mon, 03/07/2022 – 19:30

  • US Set To Impose Further Sanctions On Russia: Here's What They Could Look Like
    US Set To Impose Further Sanctions On Russia: Here’s What They Could Look Like

    The prospects for additional Russian sanctions depend mainly on how the war in Ukraine unfolds, but as Goldman writes in a note this afternoon, at this point further escalation of sanctions seems likely especially with Congress set to vote on a Russian oil import ban.

    If the Biden Administration deems additional steps necessary, Goldman believes that we could expect one or more of the following actions:

    • blocking more Russian individuals and related companies,
    • blocking additional banks or restricting their ability to clear dollar transactions,
    • eliminating exceptions to sanctions for energy transactions,
    • banning imports of Russian energy,
    • raising tariffs on imports from Russia,
    • denying Russia most-favored nation (MFN) status.
    • additional direct sanctions on Russian energy, perhaps starting with a ban on purchasing Russian oil.

    Some more details on all of these:

    • Sanctions on additional individuals and companies: The US has fully blocked several individuals and Russian banks, while imposing lower-level sanctions—primarily debt/equity restrictions and trading restrictions—on several other Russian companies. It appears likely that the Treasury will announce full blocking of additional individuals. This could also apply to companies outside of the banking sector, either by virtue of their relationship to sanctioned individuals or separately.
    • Blocking additional banks: Thus far, the US has fully blocked 25% of Russian banks by assets. Including correspondent account restrictions on Sberbank takes the share to 57%. If the US deems additional sanctions to be necessary, the Treasury could expand the list of banks subject to sanctions. The odds of doing so might also increase if it becomes clear that other smaller non-sanctioned institutions have supplanted the originally sanctioned banks.
    • Tariffs: The US and other countries appear likely to move to revoke Russia’s most-favored nation (MFN) status, which nearly every country qualifies for (the US excludes only two countries from this designation: Cuba and North Korea). This would raise the level of tariffs from the current applied rate—around 3% on average—to more than 10 times that. As the US imported only $29.7bn from Russia in 2021, subjecting US imports from Russia to non-MFN tariff rates would have a negligible effect. However, the US would be unlikely to act alone, particularly as the most likely means of tariff increase is for the World Trade Organization (WTO) to rescind Russia’s membership (this would likely take an affirmative vote of ¾ of WTO members; just over ¾ of WTO membership supported the UN resolution censuring Russia, though this does not guarantee they would vote the same way with regard to WTO membership).
    • Eliminating general licenses for energy transactions: The Treasury has issued limited and time-specific “general licenses” for US entities to transact with some Russian sanctions targets when those transactions involve energy, agriculture, and medical goods. As shown on the left of Exhibit 1, energy exports account for 13% of Russian GDP, and while energy exports to the US are a very small share of this, rescinding the general license for energy could make it more difficult for firms in third countries to transact with Russian energy firms.
    • Imposing a direct ban on the import of Russian energy products: There is growing political support in Congress for a ban on importing Russian crude and if put to a vote, it would likely pass with fairly broad support. While the White House has expressed reluctance to ban US purchases of Russian energy, legislative activity is apt to shine a political spotlight on the issue and increase the odds that the Biden Administration takes this step (over the weekend, Sec. of State Anthony Blinken said that “we are now talking to our European partners and allies to look in a coordinated way at the prospect of banning the import of Russian oil while making sure that there is still an appropriate supply of oil in world markets”). While the situation is fluid, it is more likely than not that the US will ban Russian oil imports, either via an administrative decision or legislation. If the ban is put in place, expect the White House to simultaneously announce offsetting measures, potentially including additional releases from the Strategic Petroleum Reserve (SPR) and measures to encourage domestic production. We are skeptical that Congress would suspend the federal gasoline tax to offset a rise in prices, though this cannot be ruled out.
    • Overall ban on trade, investment, and financing: In 1995, the US prohibited US firms from exporting to, importing from, or investing in Iran, with very few exceptions. This followed a ban imposed earlier that year on investment in the Iranian energy sector. In 1997, the ban expanded to also prohibit export of US goods to third countries if those exports were expected to be re-exported to Russia. Neither the EU nor other allies followed the US lead on an across-the-board investment ban on Iran. In theory, if the US deems it necessary to broaden sanctions to cover most of the Russian economy, this could serve as a precedent. Russia-US foreign direct investment is quite small, but FDI from the EU into Russia is substantial (Exhibit 1, right).

    Perhaps just as importantly, at this time, the US has not indicated whether it will use secondary sanctions to enforce compliance with US sanctions in third countries that have not imposed their own Russia-related sanctions (such as China), but doing so would also increase the severity of any of the sanctions the US has or will impose.

    According to Goldman, in the near-term, the economic effects of additional US or allied sanctions would likely be mitigated by the fact that prices in some markets like oil already appear to be building in a high probability that further sanctions will be imposed, while many firms are voluntarily curtailing business with Russia by “self-sanctioning.” That said, near-term sanctions decisions will still be important as there will be a high bar to reversing them once they are in place.

    More on that point: while expectations of further restrictions appear to be running ahead of actual policy announcements, the actual legal restrictions are likely to eventually become the binding constraint. While there is no precedent for sanctions with this scope on an economy the size of Russia’s, two other precedents suggest that whatever sanctions the US and allies impose could be in place for a while. First, the sanctions of similar or greater severity that the US has imposed on smaller economies like Iran or North Korea have for the most part remained in place since they were imposed, indicating a very high bar for reversing them. Second, the less severe measures the US has imposed on a larger economy—tariffs and export controls related to China—were thought to be temporary but have proved to be durable even with a change in presidential administrations.

    The risks to supply chains and energy supply from the war in Ukraine has also increases the odds for domestic measures in those areas. Goldman had already expected Congress to approve semiconductor manufacturing and supply-chain-related incentives, and this looks incrementally more likely now. The $550bn/10yrs energy and climate provisions in the long-stalled Build Back Better (BBB) legislation are also likely to get renewed attention in Congress. And while Goldman does not see enactment of a scaled-back BBB as the base case at this point, the bank thinks the odds have increased considerably as a result of recent events.

    Tyler Durden
    Mon, 03/07/2022 – 19:15

  • US & Canada Move To Strip Title From Russia's Top IMF Representative
    US & Canada Move To Strip Title From Russia’s Top IMF Representative

    While the US and Europe have frozen (but not confiscated) hundreds of billions of foreign reserves belonging to Russia’s Central Bank, a push to also strip Russia of $17 billion in SDRs has apparently fizzled. 

    So instead, the IMF has decided to remove Russia’s representative to the IMF from his largely ceremonial role, “honorary” dean of the IMF’s executive board. The move was first proposed by Canada, and was immediately backed by the US: Here’s more from FT: 

    Canada, the US and the UK want Aleksei Mozhin, Russia’s representative at the IMF, to relinquish or be stripped of his title as honorary head of the executive board of the multilateral lender following the invasion of Ukraine. Canada first proposed that Mozhin give up the title of dean of the IMF board during a meeting on February 25, a day after Russia unleashed its attack, according to people familiar with the matter.

    The US backed the effort during the same meeting and the UK is also supportive of his removal from the position, the people added. Mozhin has been dean of the executive board since 2015, a largely honorary title conferred to the longest serving member which carries no official responsibilities or authority.

    Kristalina Georgieva, the managing director of the IMF, chairs the board and is responsible for calling meetings, setting the agenda and facilitating the discussion.

    Typically, the dean of the board is a title bestowed on its longest-serving member (which is, in this case, Mozhin). Their only real responsibility is that they step in to speak for the board if there’s ever an issue with the executive director (which actually happened last year when Kristalina Georgieva, the managing director of the IMF, was accused of manipulating economic data on China’s behalf).

    As one former IMF official acknowledged to the FT, the dean role is “kind of irrelevant”. 

    “On an operational basis [the role] is kind of irrelevant,” said a former senior IMF official. “But these are unusual times and certainly the signalling aspect of not having a Russian be in that slot would be meaningful.”

    Mozhin didn’t respond to a request for comment from the FT. He hasn’t shown any “willingness” to give up the title, the FT said, and it’s still unclear whether the west’s mechanism for removing him from the role will work. 

    The FT also noted that removing Russia and its voting power from the organization would be impossible unless Russia stopped meeting its annual financial obligations.

    The bid to strip Mozhin of his title is part of a broader effort by western nations and many others in the international community to isolate and punish Russia for the attack on Ukraine – from economic sanctions to condemnation within multilateral institutions.

    Within the IMF, a much more significant step would be to try to deny Russia its voting rights on the board, but this would require overwhelming support within the board as well as an assessment that Moscow had failed to meet its obligations to the Fund based on economic and financial criteria, which could be hard to prove. Russia’s share of voting power at the IMF is 2.59 per cent, compared with 16.5 per cent for the US.

    Meanwhile, some western IMF members have been weighing how to deny Russia the ability to convert $17bn in special drawing rights, a form of reserve asset issued by the IMF, into hard currencies like dollars, euros or yen, to circumvent the sanctions placed on its central bank.

    The US insists that it’s “committed to taking all measures to prevent Russia from using its SDRs”.

    “The US is committed to taking all measures to prevent Russia from benefiting from its holdings of IMF SDRs,” a US Treasury official told the Financial Times, adding that Moscow “would face significant, even insurmountable, hurdles to use its SDRs.”

    “The United States and our partners, comprising the large majority of available counterparts in the IMF’s SDR transactions system, will not undertake SDR exchanges with Russia.”

    Mozhin arrived at the IMF shortly after the Soviet collapse in 1992, initially serving as an alternate executive director before becoming Russia’s main representative in 1996. He was promoted to dean of the board in 2007.

    Tyler Durden
    Mon, 03/07/2022 – 19:00

  • Another Funding Indicator Is Flashing Red
    Another Funding Indicator Is Flashing Red

    It’s not just the recent blowout in the FRA-OIS funding spread that is hinting at some major funding/liquidity dislocations beneath the market’s turbulent surface (for more details see “FRA-OIS Explodes: Here Is The Only Chart Powell Is Closely Watching, And Why It Is Soaring“).

    Today another key gauge of funding stress in the credit markets started flashing red, signalling that just as Zoltan Pozsar warned last week, banks are bracing for a wave of potential funding disruptions amid the soaring geopolitical turmoil, or may already be scrambling to procure funding to meet commodity margin calls.

    The cost of borrowing in 90 day commercial paper jumped by more than half a percentage point to reach 1.12% on March 4, Bloomberg reported noting that there were 12 issues of financial commercial paper with more than 81 days until maturity totaling $137 million.

    The silver lining is that while commercial-paper costs reached the highest since the onset of the pandemic relative to swap rates, they still remain low relative to past crises. Of course, a big reason for that is that the Fed’s balance sheet is now a record $9 trillion while the Fed’s reverse repo facility holds a massive $1.5 trillion, although as we noted earlier, that amount has been steadily shrinking in the past week hinting that financial institutions are already reaching into the emergency liquidity stash ahead of the start of Quantitative Tightening in the next few months.

    In a comment published last week by Barclays repo strategist Joseph Abate (available to pro subs), he writes that there are two reasons for the pressure on short-term unsecured bank borrowing rates.

    • First, heightened geopolitical uncertainty together with increased market volatility has encouraged banks to build up their precautionary cash holdings. Having a little extra cash on hand—just in case things should deteriorate—might make sense even if borrowing costs are somewhat higher relative to OIS than they were a couple of weeks ago, he writes. After all, it has been many years since there was a full-fledged war in Europe. And it might make sense even if there is plenty of liquidity held on deposit at the Fed. While typically banks do not have much control over their short-term funding needs, often in periods of funding market stress, they will come into the CP market to borrow funds just to demonstrate to investors that they can do so. In addition to raising some precautionary cash this borrowing is meant as a signal to money fund investors that they have no trouble accessing the funding market.
    • Second, this precautionary borrowing is bumping up against a timing constraint. Money market investors are holding back in redeploying cash until the Fed raises interest rates. Not only has this created a pileup of paper that needs to be rolled  after the FOMC meeting, but it also means that issuers have to pay more of a premium to sell term paper. Instead, lenders may only be willing to buy CP with maturities only as far as the next FOMC date. This effect is compounded if there is some uncertainty about the path of rate hikes. If money market investors feel that there is some, non-zero probability, of a 50bp hike at an upcoming FOMC meeting, they may be even more reluctant to lock in at current term rates.

    While Abate remains complacent about the reasons behind the move, keep an eye on both CP and FRA spreads to OIS, which will be among the earliest available indicators of a major market liquidity lockdown.

    Tyler Durden
    Mon, 03/07/2022 – 18:30

  • GOP Says It'll Investigate Fauci If It Retakes House in 2022
    GOP Says It’ll Investigate Fauci If It Retakes House in 2022

    Several Republican lawmakers indicated that if the GOP regains a majority in the House of Representatives in the 2022 midterm elections, they plan to open investigations on White House COVID-19 adviser Dr. Anthony Fauci, the Epoch Times reported.

    “When are we going to have accountability for Anthony Fauci?” Rep. Chip Roy (R-Texas) said on Fox News over the weekend. “Look, he’s missing right now for one reason, and one reason only: The Democrats are looking at the polls.”

    “It wasn’t dead Americans that made Democrats move. It wasn’t dead Americans that made Fauci go away. It was polls. And I want to hold Anthony Fauci accountable.

    “And if you’re watching this, Dr. Fauci, look out because when the Americans give us control in the House of Representatives, God willing, we’re going to get some answers on behalf of the American people.”

    Roy’s remark came just a few days after Rep. Jim Jordan (R-Ohio), the ranking Republican on the House Judiciary Committee, confirmed to Just The News that the GOP will attempt to investigate Fauci and other federal health officials over how they responded to the COVID-19 pandemic.

    Jordan added that Republicans, namely, will attempt to obtain information from the federal government and Fauci’s agency on whether COVID-19 had its origins in a lab in Wuhan, in China’s central Hubei Province.

    “That is because they knew from the get-go [that COVID-19] … likely came from a lab, [with] gain-of-function likely done, and our tax dollars were used,” Jordan said, referring to “gain-of-function,” a controversial form of research that alters an organism in a way that may enhance biological functions such as altered transmissibility, pathogenesis, and host range.

    Fauci was pressed during congressional hearings last year about what some critics say are false or misleading statements about whether his agency, the National Institute of Allergy and Infectious Diseases (NIAID), as well as the National Institutes of Health (NIH), steered taxpayer money to the nonprofit EcoHealth Alliance, which provided funds to scientists at the Wuhan Institute of Virology to research bat coronaviruses.

    Last September, more than 900 pages of documents detailing the use of federal money by EcoHealth were obtained and published by The Intercept. Critics said the documents suggest Fauci misled Congress when he said that his agency never funded gain-of-function research in the Wuhan lab.

    In October, Lawrence Tabak, then the NIH’s principal deputy director, said that EcoHealth provided a five-year report on bat coronavirus research under an NIH grant, finding that “in this limited experiment, laboratory mice infected with the SHC014 WIV1 bat coronavirus became sicker than those infected with the WIV1 bat coronavirus.”

    Fauci told Sen. Rand Paul (R-Ky.) during a hearing in early 2021 that he “never lied before the Congress” and that the NIH didn’t fund the research.

    “You do not know what you’re talking about, quite frankly,” he told Paul at the time.

    In October of last year, Fauci told ABC News that he stood by his assertion that the NIH didn’t fund gain-of-function research.

    “The framework under which we have guidance about the conduct of research that we fund, the funding at the Wuhan Institute was to be able to determine what is out there in the environment, in bat viruses in China,” Fauci said. “And the research was very strictly under what we call a framework of oversight of the type of research. And under those conditions which we have explained very, very clearly, does not constitute research of gain of function of concern.”

    Officials at NIAID didn’t respond by press time to a request by The Epoch Times for comment.

    Tyler Durden
    Mon, 03/07/2022 – 18:00

  • Iowa School Shooting Leaves 1 Teen Boy Dead, 2 Girls Wounded
    Iowa School Shooting Leaves 1 Teen Boy Dead, 2 Girls Wounded

    A teenage boy was killed, while two girls were wounded, during America’s latest school shooting outside an Iowa high school on Monday, authorities said.

    Police and fire personnel from the Iowan capital Des Monies responded to a distress call at East High School following reports of shots fired, the local fire department said.

    The ages of the children who were shot were as follows: the boy was 15 years old and the two girls were ages 16 and 18. They were both hospitalized, according to fire department spokesperson Ahman Douglass, who spoke to Fox News. All threw victims were initially taken to hospitals in critical condition, he said. Authorities said that as of 1600ET, the two girls were “still alive”.

    The school was placed on lockdown as authorities investigated the incident. Students were dismissed around 1:30 p.m. local time, Des Moines Public Schools tweeted. Authorities haven’t said much about the shooting; the suspect hasn’t been named, and few details about the incident have been released.

    The news was originally released via a series of tweets.

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

    Developing.

    Tyler Durden
    Mon, 03/07/2022 – 17:52

  • Hackers Breached US LNG Producers In Run-Up To Ukraine Invasion
    Hackers Breached US LNG Producers In Run-Up To Ukraine Invasion

    Several hackers were able to gain access to computers belonging to current and former employees at nearly a dozen major US natural gas suppliers and exporters in mid-February, including on the eve of Russia’s invasion of Ukraine, Bloomberg reports.

    The targets included Chevron, Cheniere Energy, and Kinder Morgan according to Resecurity CEO Gene Yoo, which discovered the operation and shared its research with Bloomberg. The attacks focused on companies involved with the production of liquefied natural gas (LNG) – “and they were the first stage in an effort to infiltrate an increasingly critical sector of the energy industry,” per the report.

    Resecurity’s investigation began last month when the firm’s researchers spotted a small number of hackers, including one linked to a wave of attacks in 2018 against European organizations that Microsoft Corp. attributed to Strontium, the company’s nickname for a hacking group associated with Russia’s GRU military intelligence service. -Bloomberg

    The attacks occurred as energy markets were already on pins and needles over the Ukraine situation.  

    According to Yoo, the hackers had been seeking access to the personal computers of employees of major LNG companies in the US – which they then used as back doors into company networks.

    Resecurity discovered the activity after identifying a vulnerability in the hackers’ servers, which allowed them to obtain files from the machine and see what the hackers had already stolen.

    The files show that during a two-week period in February, the hackers accessed more than 100 computers belonging to current and former employees of 21 major energy companies, per Bloomberg, which viewed some of the files.

    In some cases, the target machines themselves were compromised, while in others they bought access to computers which had been previously infected with malware, offering as much as $15,000 per target on the dark web.

    While the motive of the hackers is unknown, Yoo believes it was carried out by state-sponsored hackers who were “pre-positioning” – a term for using the hacked machines to tunnel into protected corporate networks. Sometimes, the computers of previous employees can be used because companies often fail to cut off remote access when someone leaves, Yoo aded.

    The hacks began around two weeks before Russia invaded Ukraine, after US officials had urged operators of critical US infrastructure to “adopt a heightened state of awareness” for Russian state-sponsored attacks.

    Out of the roughly five dozen U.S. LNG cargoes on the water on Thursday, March 3, 2022, nearly two-thirds are headed to Europe where the Russian invasion of Ukraine and low storage inventories are driving up prices and demand. (via Bloomberg)

    Of note, the energy sector is one of 16 which US President Joe Biden said he told Russian President Vladimir Putin not to hack during a June 2021 meeting.

    “Recent tensions around Nord Stream 2, global market changes, as well as conflict in Ukraine are obvious catalysts,” Yoo told Bloomberg.

    The infected machines appear to be a mix of home and corporate-owned computers. Yoo said the distinction has become essentially meaningless with the rise of remote work, as hackers have the ability to hijack virtual private network connections into corporate networks. 

    According to the documents provided by Resecurity, the companies whose workers were affected include Houston-based Cheniere Energy, the biggest U.S. exporter of LNG; San Ramon, California-based Chevron, a major oil producer that also owns and operates the Gorgon LNG export terminal in Australia; Pittsburgh, Pennsylvania-based EQT Corp., the largest natural gas driller and producer in the U.S.; and Houston-based Kinder Morgan, the top natural gas pipeline operator in the U.S. and the operator of the Elba Island LNG export terminal in Georgia. -Bloomberg

    Kinder Morgan data showed that seven current and former employees had their computers hacked as part of the campaign.

    “We have confirmed that most of those emails were assigned to former employees. The few that are current have not been compromised,” said a company spokesperson.

    45 Chevron employees were affected according to Resecurity, with a spokesman saying “Chevron takes the threat of malicious cyber activity very seriously. We have implemented the United States government’s recommendations into our cybersecurity safeguards to protect Chevron’s computing environment.”

    Chevron CEO Mike Wirth said just days ago that cyberattacks were the largest risk facing the company. “It’s a never-ending challenge out there right now,” he said at a March 1 investor conference. “We’re in a high-risk environment right now from a cyber standpoint, and we’re in an industry that is a high profile, high-value target for bad actors. So that’s the thing in the short term that I probably would say, in my view is the risk I worry about the most.”

    The attacks come at a time when the FBI and other federal agencies are on high alert. The FBI’s Internet Crime Complaint Center has issued dozens of alerts over the past six years documenting attacks by Russia and other state-sponsored hackers against targets including the oil and natural gas industry. The agency is concerned about increased attacks following Russia’s invasion of Ukraine, said Jason Leigh, a special agent on the FBI Houston’s cyber task force. -Bloomberg

    “In a normal day, prior to the invasion, the U.S. could experience attacks from Russian entities,” said Leigh. “We expect that the invasion may escalate in terms of volume or the number of attacks and the manners in which they attack.”

    Tyler Durden
    Mon, 03/07/2022 – 17:40

  • Boeing Suspends Buying Russian Titanium
    Boeing Suspends Buying Russian Titanium

    Boeing Co.’s big bet on Russian titanium for manufacturing its commercial planes and military jets has come to a standstill since Russia invaded Ukraine, according to WSJ. 

    The planemaker follows many other Western companies who are suspending operations in Russia. The turmoil could create future supply problems in the future for aircraft manufacturing. 

    Since the invasion, Boeing has shuttered engineering offices in Moscow and Kyiv. The company declined to say what would happen with its joint venture with the country’s top titanium supplier, controlled by President Vladimir Putin’s former intelligence colleague, Sergey Chemezov.

    About a third of Boeing’s titanium is sourced from Russia, with the rest coming from the U.S., Japan, China, and Kazakhstan. 

    “Our inventory and diversity of titanium sources provide sufficient supply for airplane production, and we will continue to take the right steps to ensure long-term continuity,” said a Boeing spokeswoman. 

    Boeing has spent decades developing partnerships in Russia since the Soviet Union’s collapse in 1991. The company is heavily invested in Russia and Ukraine. 

    Industry officials told WSJ that Boeing and other aerospace companies have panic hoarded titanium and been in talks with other suppliers for fear Russia would retaliate for Western sanctions. 

    Boeing and other aerospace companies can still import Russian titanium under U.S. sanctions. But further turmoil in Ukraine and additional sanctions on Russia could risk Western businesses losing access to the precious metal that is strong, lightweight, and avoids corrosion. 

    Brian O’Toole, a former Treasury official who crafted U.S. sanctions after Russia’s 2014 Crimea invasion, warned any company “with a Russian supply chain has got a lot of problems on their hands—at least for the medium term.” 

    And maybe that’s why Boeing CEO David Calhoun told investors in a January call that Boeing’s titanium supply could be at risk. 

    “As long as the geopolitical situation stays tame, no problem,” Calhoun said. “If it doesn’t, we’re protected for quite a while, but not forever.” 

    And if Boeing were to experience sourcing issues of titanium, it could very well derail its plans to double 737 Max production by the end of 2023.

    Tyler Durden
    Mon, 03/07/2022 – 17:20

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