One of the most famous lines in all of finance is a quote from Baron Rothschild, who made a significant fortune buying into the panic following the Battle of Waterloo. He is credited with saying, “Buy when there’s blood in the streets, even if the blood is your own.” These past weeks have seen the streets of Ukraine filling with blood, so who stands to benefit?
Anti-government protests, initially resulting from the Ukrainian government rejecting a trade agreement a few months ago with the EU (European Union), have lead to actual “blood in the streets” and roiled markets across the globe. The President of Ukraine, Viktor Yanukovych, has been issued a warrant for mass murder by its new government, causing him to seek safer refuge in the friendlier eastern, Russian-leaning part of the country. These protests are not peaceful gatherings to “Save the Whales.”
Political battle lines are being drawn as ethnic groups splinter along an east/west axis. This should not be a surprise to those in the know, as these divisional issues have been brewing below the surface for some time now. As we have seen in other parts of the world (Japan and China), economic hardships have a way of resurrecting once forgotten rivalries.
Image: Wikimedia Commons
Russia will not sit this one out and look to the court of world opinion for guidance, not as long as Vladimir Putin is at the helm. It is important to point out that the U.S. has ZERO national interest in this matter. The real issue here is if Russia will allow itself to be economically replaced by the EU and militarily become vulnerable to encroaching NATO alliances.
From the Russian point of view, NATO has been following a policy of encirclement since the collapse of the former Soviet Union back in 1991. The Russians are in fact being backed into a corner, despite what Washington spins. Thus far, this strategy has worked effectively for NATO, but we are now seeing pushback as the noose grows increasingly tighter. Cornered bears can be both unpredictable and dangerous.
The Crimean peninsula, made up mostly of ethnic Russians, is the keystone in this conflict. Officially part of the Ukraine since 1954, this area will NEVER be up for negotiation due to its strategic (military) relationship with Russia. So in reality, this is more a Russian national security issue than western news sources would care to admit.
If it weren’t for the large stockpiles of nuclear missiles being removed back in 1996, today the world would probably be worrying about an accidental missile launch and, possibly, Armageddon. For decades, Ukraine was home to the world's third largest stockpile of nuclear weapons. In a bizarre way, it took the now lamented, strong-handed Russian government to prevent the proliferation of the thousands of WMDs that were once spread out across the Soviet Union. Now, that same leadership style is a threat to peace. Oh, the irony of it all.
Ukraine, which is about the size of Texas with twice the population, has no real bargaining chips to play. Lacking in any meaningful GDP numbers and serving as a transportation route for Russian gas to Western Europe, its economic clout is weak. The real story behind the false humanitarian arguments is about the West’s concerns over maintaining the flow of abundant natural gas. The failure of NATO countries to source energy from friendly countries is the key takeaway here. Never give a probable enemy control over your thermostat.
Society’s ascension from poverty over the last century and a half is about the access to cheap and abundant energy (re/read The Prize, by Daniel Yergin, for a greater perspective). When you give your rival the ability to turn off your heat in the middle of the winter, and subsequently then pin your hopes on windmills and solar panels (as the Germans have done), you’re only inviting trouble.
The real winner in this fight will probably be the military industrial complex. Currently facing significant budget cuts, any conflict in the world will only further fan the fires of those defending this bloated leviathan, which is often misused as the world’s policemen. The future role for the military is the real battleground for the American public right now, not another country that most people can’t even find on a map.
This watershed moment presents the United States with a unique opportunity to take command and profit, not through weapons of war, but through the unleashing of American ingenuity. The freeing of domestic energy firms to export American-sourced natural gas can offer a peaceful solution to this dilemma in the long run without the exorbitant cost that militarization entails. In a period of five years, dependence on Russian sourcing could end if the NATO players were truly committed to finding a peaceful solution – a solution that, I might add, would pour billions into the U.S. economy, rather than deepening the pockets of the Russian oligarchs.
To the naysayers, I must remind you that in less than five years we won a world war. Lessening the influence Russia has on world energy markets, from a strategic point of view, will be more effective than building another carrier group or stationing more troops around the world. I’m suggesting our aim should be for no more blood in the streets; we should instead be filling them with American energy. And lastly, we should be following the direction of Thomas Jefferson: "peace, commerce, and honest friendship with all nations, entangling alliances with none."
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