At the precipice of World War 3
After the SCO summit in Samarkand, Russia is shifting gears.
Clash of the two systems of governance, as George Soros formulated it in his remarks to the World Economic Forum conference in May, seems to have reached a phase transition. Russian President Vladimir Putin has returned from last week’s summit of the Shanghai Cooperation Organization conference in Samarkand with a palpable sense of confidence and determination, and it does appear that he has obtained reassurances of support from all the key leaders during the event, including China’s Xi Jinping, India’s Narendra Modi, Turkey’s Recep Tayyip Erdogan, Iran’s Ebrahim Raisi, and even the new PM of Pakistan, Shehbaz Sharif.
Russia is ready to shift gears
Now, the leadership of Russia is prepared to shift gears in Ukraine. While annexation of the Donbas region wasn’t part of the objectives set out at the outset of the “Special Military Operation” in February, this could be about to change. Namely, public referendums have been announced and will be held between 23 and 27 September in all the key regions controlled by Russia. The people will be voting on whether they want to become absorbed in Russian federation. This move will have a massive impact and remove any legal strictures the Russian leadership observed by waging war in foreign territory. Soon, this could become Russian territory and any attacks on Kherson, Donetsk, Lugansk or Zaporozhye will be regarded as attacks on Russia proper.
Laws for thee, rules for me
This prospect has triggered quite a consternation in Washington, London and Bruxelles where political and military leaderships are sure to reject any such changes. American Secretary of State Antony Blinken wasted no time to declare that, “Any Russian sham ‘referenda’ in Ukraine would be illegitimate and an affront to the principles of sovereignty and territorial integrity…”
Some might disagree, however. In July 2010, the International Court of Justice issued an “Advisory Opinion” on Kosovo (previously part of Serbia) in which it determined a few important points of international law. Namely:
Unilateral declarations of independence are not illegal under international law.
People’s right to self-determination supersedes territorial integrity.
But some restrictions do apply, so these principles don’t extend to the likes of the people of Catalunya. Or Crimea. Or for any people in Ukraine for that matter. You see, there’s international law and then there’s the rules. We use rules to determine which laws we observe and which ones we disregard. So rules must necessarily supersede the law. I think.
Rules based order or bust…
Jest aside, western empire is now overtly and explicitly committed to this “rules based global order,” and Russia is clearly the greatest threat to that order. At last weekend’s NATO’s Military Committee Conference held in Tallinn (16-18 Sep. 2022), Estonia’s Defence Forces Chief Martin Herem delivered a speech stating as follows: “Collectively we must deny Russia the possibility to change today’s rules-based international order.” On that same occasion, the Committee’s chairman Admiral Rob Bauer announced “the biggest overhaul of our military structures since 1949.”
This morning’s news from Russia are more ominous still. Russia’s Defence Minister Sergei Shoigu made it explicit that, “The time has come when we are at war with NATO and the collective West.” Apparently, Russia is now preparing to mobilize another 300,000 reservists and we know that such a force is not required in Ukraine alone. Another rumor from Russia this morning is that the Governor of the Central Bank of Russia, Elvira Niabullina has tendered her resignation to President Putin.
It appears that we are at the precipice of a major escalation and the channels of de-escalation are falling silent. For reasons that are still unclear, a call between Vladimir Putin and French President Macron failed to even take place yesterday (according to some reports, it was Vladimir Putin who wanted to speak to Macron but Macron declined the call while other reports stated the opposite – Macron tried to get through but Putin declined).
Boris Johnson’s excellent adventure
We should recall that only a few months ago Henry Kissinger warned the collective west to stand down and avoid this conflict even at the price of ceding Ukraine’s territory, but his warnings fell on deaf ears. That was in late May. In fact in April and in July of this year negotiated settlement of the Ukraine crisis was being seriously discussed between Kiev and Moscow. But on both occasions, Boris Johnson intervened to torpedo the negotiations and abruptly flew to Kiev to persuade Ukraine’s President Zelensky to end the talks.
This was the same Boris Johnson who announced this conflict in a speech to the dignitaries in – where else – the City of London last November. On that occasion, he issued a warning to the European governments: “We hope that our friends [in Europe] may recognize that a choice is shortly coming between mainlining ever more Russian hydrocarbons in giant new pipelines and sticking up for Ukraine and championing the cause of peace and stability.”
When the history of this conflict is being written in the future, it will have to answer how it was possible for one deeply unpopular leader to wiled such disproportionate influence on events so far from his own nation’s borders, why he acted as he did and on whose behalf he did so. What is certain is that his actions benefited neither the British nor the Ukrainian people.
What of the markets?
The coming changes will likely lead to much turmoil in the markets. What we can predict is that we’ll see many large-scale price events (LSPEs) both in financial and in commodity markets. While such events themselves are unpredictable (their timing and magnitude), one thing we do know for sure is that they tend to unfold as trends over sustained time periods that might span weeks, months or even years. The best and perhaps only reliable way to navigate them is through systematic trend following. At the very least, this should be your ‘reality check’ and a source of second opinion. I-System TrendCompass is one of the best CTA newsletters on the market; check it out, one month trial is always free of charge.
Alex Krainer – @NakedHedgie is the creator of I-System Trend Following, publisher of TrendCompass reports and contributing editor at ZeroHedge. The books are free.