Sanctioning Growth

“I wanted to start this post with an apology to all the readers of howtotradeforliving.com for not being very active recently, I’m in the process of writing my thesis but soon it will be over all will be back to normal.”

So what happened recently? This summer was characterized by a worsening of the global geopolitical situation. So while the American creature (ISIS) is generating chaos in the middle-east, Kiev is crying wolf announcing one Russian invasion after the other to justify the failure of their military campain against its own people in eastern Ukraine. NATO on the other end, while is trying to convince the world that there is a meaning to its existence, is trying to find proofs of Russian military presence in Ukraine. But, even with all their satellites and the NSA spying all over the world, so far they failed to produce a shred of evidence. However, until now the most convincing evidence was provided by the Russian Embassy via Twitter as shown in the photo below:

russian-embassy-nato-trolling.si

In short, we are seeing a lot of political non-sense with Europe and US busy in a sanction-hysteria while Putin, the one who supposedly is the “aggressor”, is trying to call for negotiations between the Ukrainian president Poroshenko and the rebels. But how did we get to this point? You can find a comprehensive summary of facts here.  Analyzing some facts, there are some coincidences I would like to point out. First of all we all remember in the beginning of this summer (2014) Europe was quite reluctant on applying sanctions on Russia and was resisting pressure from the US (afterall US doesn’t have much economic ties with Russia, while instead, Europe and Russia only in the 2012 made 270 billion EURO in trades (http://www.bbc.com/news/world-europe-26436291). Then a weird coincidence, while NATO was urging France to reconsider the sale of Mistral Warship to Russia (with France that decided to go ahead despite the criticism), the US was sanctioning a French bank (BP Paribas) for moving money through the United States for countries blacklisted for the government and threatened to do the same for all European banks. In my opinion that helped the European leaders to consider the option of shooting themselves in the foot by sanctioning one of their most important trading partners (and also the key provider of energy). The downing of the Malaysian flight MH17 was a convenient excuse for both Europe and US that without evidence decided to put the blame on Russia and start their sanction-hysteria. Russian then decided to respond to these sanctions with a ban of all the food imports coming from sanctioning countries. From this point we assisted to a worsening of the tensions (apparently the sanctions had the opposite effect) and more importantly to a worsening of the economic indicators in Europe, showing that Europe and its Troll-policies are leading the eurozone to recession. In the meantime, Russia, a country of almost 150 milion people, is trying to diversify away from its non-reliable European partners and started looking east into Asia. Since then it made a deal for gas delivery to China worth 400 billion dollars and for the construction of the world-longest gas pipeline. Although according to Obama, Russia is an isolated country (the map below and new trade deals shows otherwise):

20140901_isolated_0

 

It is looking to cover the void left by the European food ban with more imports from South-America, Turkey, and the Asia countries (and to improve its trade-relationship with China). So analyzing the situation, Europe is trying its best to cut its ties with a country rich in natural resources and that is its main provider of energy and biggest importer of machinery, chemicals, medicines and agricultural products. Russia on the other hand, despite having almost no-debts, has an unhealthy economy reliant almost exclusively on the export of gas and oil. This situation was a wake-up call for this country that started investing in its infostructures and will almost certainly try to use the next round of sanctions to ban manufacturing products from Europe to boost its own production of goods. These sanctions are not based on facts but just misleading information provided by biased intelligence, looking to find any evidence  to convince people of the need of NATO (for example we did not see weapons of mass distruction in Iraq). Europe is playing with recession, I hope they will stop the unsustainable policy of sanctions and will start using some common sense instead.

 

By Gianluca Fontana

Filed in: Blog, Featured Tags: , , , , , , , , , ,

You might like:

See EU: Thoughts on Brexit See EU: Thoughts on Brexit
Will new stimulus keep China afloat? Will new stimulus keep China afloat?
Is the Eurozone doomed to fail? Is the Eurozone doomed to fail?
Review of the year 2014 Review of the year 2014

Leave a Reply

Submit Comment
© 2017 How to trade for a living. All rights reserved. XHTML / CSS Valid.
Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions..