Earlier today I wrote Part 3 about this situation (which you can find here) however I did not know President Biden was set to announce sanctions or Putin's attempt to move borders already.
Around 1 PM EST today major news began to break about the Ukrainian/Russian crisis. A mixture of both snippets from speeches and rumors emerged and the implications cannot be undersold. The President of the United States was initially supposed to speak to the public and reporters at 1 PM EST however, that did not happen and the time was moved to 2 PM EST. Like normal with political news conferences, it was delayed but I won't lie it was worth it. Before I dive into what the President said it is important to highlight what he is responding to and a lot of that goes back to Putin's speech last night and the comments from the Kremlin since then.
Putin Speech and Comments
Putin has continued his revisionist ways for Russia however this time he further went after Ukraine by challenging its right to exist itself. This is a sharp escalation and something that worries leaders across Europe as he claims he does not want war. While it is true that Ukraine as we know it is mostly due to Lenin's creation that does not mean that it has no foundation to exist. Putin doubled down on a prior claim that Ukrainians are Russians and Russians are also Ukrainians however that is not true in the slightest. Ukraine even earlier this year passed legislation aimed at this by declaring the indigenous people of Ukraine including the Crimean Tatars, Karaites, and Krymchaks.
After his comments further information trickled out about has he claims the borders of these two new Republics are. Which itself opens up a whole new issue. These borders are not where the borders currently are as the separatists have a much smaller area under their control while Ukraine controls these other areas.
The map above highlights the border issue. Currently, the borders are where the separatist-held areas are however Putin has stated that they are actually the entire Donbas region which is outlined as well. What does this mean? Well as of writing this nothing besides we have two different borders. If Putin decides to use his army to expand to the Donbas region he is going to flat out instigate war as Ukrainian forces have surrounded the separatist regions for years now and have had plenty of time to dig in. The Port of Mariupol is also a HUGE city for Ukraine and is not one they would just give up willingly.
Even more interesting is that some cities under Ukrainian control have recently held celebrations and declarations of being Ukrainian and not Russian cities. These celebrations have included ethnic Russians as well which shows that not all ethnic Russians want to join Russia. Since I am not in the room with the Russian decision-makers I cannot be 110% certain but what I can say is that this does not make capturing territory or town easy. If the people do not want to be part of your country you are going to have a hard time controlling them especially long term as seen with other wars that both Russia/USSR and the US have fought. It is vital to be wanted and if you are not wanted even with brut force you will run into issues like insurgencies.
Biden Administration Response
I will admit I am very impressed though with the Biden Administrations' response to what Russia has done. There were several pretty large things to take away from his conference but I believe that the biggest one was calling Russia's deployment of troops what it is. An invasion.
The scope of the sanctions is vast and significant. Included in these sanctions are two of Russia's largest banks, Russia's ability to offer sovereign debt, and the elites and their families of Russian oligarchs. American financial institutions will no longer be able to transact with Russian bank VEB but also its military bank. While it does not cut Russia off from USD it will cause issues with its payments and in particular impact how its military deals are transacted since USD is the global reserve currency. To continue to apply pressure not just now but for the foreseeable future, no Western Financial institutions will be allowed to trade or invest in new Russian debt. Western institutions are big in investing in all types and kinds of sovereign debt so to be cut off from it in the future is going to cause an issue when Russia tries to raise more. Tomorrow the first list of Russian elites sanctioned and their families will come out. While this will not impact the average Russian citizen what it will do is irritate and complicate things for Putin's closest friends and allies. The scope could be able to range considerably but the biggest thing announced with this was that family members were also going to be hit as well. Thus preventing the assets from being moved to a wife, son, or daughter and forcing the issue to be addressed.
A huge part of this is that this is a united front with all Western powers. Germany earlier today froze the Nord Stream 2 project which is something that Russia itself spent $11 Billion on and now it will just sit there unused. Since oil and gas are roughly 1/3 of Russia's exports this is going to hit them where it hurts... right in the money. It was also pivotal to see that the US and other allies will continue to provide defensive assistance to Ukraine something Putin had demanded stop. This should reaffirm to Ukraine and other allies that the US isn't going to leave them behind and will continue to do what they can to protect and arm them up to the point of putting boots on the ground.
President Biden's statement that this is just the beginning and if Russia continues or even advances that the next steps have already been agreed to by the West to move forward. In response to the Kremlin stating Russian troops will not leave Belarus when the military exercises are over additional US forces and equipment are being deployed to Baltic allies. Last night Putin also attacked these countries' right to exist as he had done with Ukraine. It is important to note that these deployments and the equipment that is being brought along are all defensives in nature and to act as a deterrence.
I did not expect to say this but President Biden hit the nail on the head when he stated the following about Russia moving medical equipment to the border with Ukraine
"You don't need blood unless you plan on starting a war"
While the President did state that it appears a massive attack would be launched. He followed it up with how he hopes he is wrong and that the US remains open to diplomacy on the condition that Russia is/becomes serious about it. From the start of this Russia has really lagged in showing any sense of actually utilizing diplomacy and the US is aware of this.
Final Thoughts
For now, I expect to see all of the markets from stocks and bonds to crypto to be pretty turbulent as this standoff unfolds. Last night for example we saw Bitcoin and all of the alts get smashed before rebounding throughout the day. The markets are going to have a hard time really getting any momentum with the idea of war in Europe hanging overhead. While I wish that what was done today would cause Putin and Russia to pause I have my doubts about that occurring. Due to that I expect to see more pain due to Russian aggression and can only hope that cooler heads prevail.
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