Hi folks - I’m thinking about changing the name of this publication. Pls reply with suggestions! Thanks.
1: Even before the war began, Russian oil production had not recovered to pre pandemic highs. Given the sanctions, it is unlikely it fully recovers in the near term. While Russian oil (Ural) trades at a steep discount to Brent, global demand for Russian oil will likely shift to other sources were possible. Moreover, capital investment has evaporated as foreign partners flee and Russia faces a liquidity (and possibly a solvency) crisis. This likely means persistent energy market shortages, putting upward pressure on prices. Today West Texas Intermediate oil hit $112 per barrel.
2: With the ongoing geopolitical crisis, Germany recently pledged to increase its military spending to 2% of GDP. Few expected this from Germany, which has traditionally held back on defence spending.
With the Russian invasion, what was once a theoretical threat is now a real threat. Consequently, we may be in a new world of rising military budgets for years to come.
3: After the collapse of the Soviet Union, the western Russian border receded while NATO expanded. Russia now lacks the strategic depth (in geographic terms) it has historically leaned on as a means of defence (look at where Moscow sits on the map today vs 1990). Moreover, as NATO allies expand around the Black Sea - a critical strategic location for Russia’s navy - Russia’s military reach is being choked.
Don’t get me wrong. I don’t condone any war or violence. However, many strategists have pointed to the risk that NATO goes too far backing Russia into a corner. You never want to fight a cornered animal.