Putin creates new facts with his Ukraine war
After the atrocities against helpless civilians in Buchma, the EU reacted – without waiting for detailed investigations – with new sanctions against Russia. There is now an import ban on coal, wood and vodka from Russia. There is no end to the military escalation of alleged or even actual war crimes in Ukraine – now even a railway station in Kramatorsk has been bombed (only by whom?). Consequently, there is no end to the spiral of sanctions by the USA and the EU. Sooner or later, the EU, which is already struggling with far too high inflation, will suffer the most. But a new world order is also emerging with considerable consequences for globalisation and the world. The world monetary system may also come apart at the seams. But also the danger of a 3rd world war has not yet been averted as long as there is no peace and security treaty for Russia and Ukraine.
Investors and the population are now very unsettled and in fear. But panic is also spreading among politicians. Far-reaching decisions are being made now that will be regretted later. Share prices were relatively stable last week and some commodity prices also consolidated somewhat. In Moscow, share prices even rose sharply. The rouble was recently one of the strongest currencies in the world.
The central banks must and will raise interest rates due to the strong increase in inflation. Andreas Männicke gives his assessments on the background of the Ukraine war, but also on future opportunities and risks in this unfriendly environment also in his stock market letter EAST STOCK TRENDS (www.eaststock.de) and in his new EastStockTV video, episode 195 at www.YouTube.com .
The escalations in the war are increasing and so is the EU’s spiral of sanctions
After the mass murder of civilians in Buchma – a suburb of Kiev – on 1 April and the rocket attack on a railway station in Kramatorsk with civilians on 8 April, the emotions are running high. The TV images that reach us daily are horrific, but unfortunately they are not live images during the act, otherwise we would all know more. Ukraine and Russia are now blaming each other for the massacre, with Russia assuming it was staged after the fact without publishing verifiable evidence.
Sanctions often too hasty
Without further forensic and criminal investigations into who the real perpetrators of these inhuman atrocities were, the EU immediately imposed new sanctions with an import ban on coal, wood and vodka, which is tantamount to a prejudgement in its speed one day after the massacres became known. Russia wanted to bring the unresolved issue immediately to the UN Security Council to allow an open discussion and to present the Russian evidence. However, this was rejected by the British Prime Minister Johnson. Was the British secret service also behind these actions or why then the refusal?
The missile attack on the railway station in Kramatorsk is also said to be, from the Russian point of view, Totschka U-missiles, which only the Ukrainians have. This should at least be checked and investigated before jumping to conclusions. We are already familiar with this rapid and hasty imposition of increasingly severe sanctions from the Crimea crisis, whereby one must fundamentally ask whether these severe sanctions are also purposeful and “effective” if Putin does not change his behaviour as a result, but on the contrary acts even more aggressively. Moreover, sanctions should always be refrained from if their own people are harmed more than Russia itself. Incidentally, the effect of such sanctions is also questionable if it is not the political elite that is changed in its behaviour or even overthrown, but only the Russian people and employees who suffer. Moreover, it should be examined whether the expropriation of assets and even of currency reserves are in accordance with international law or not. There has never been such a wave of expropriation as now in the post-war period.
The rouble is rolling again – despite all the prophecies of doom
China has already spoken out against such sanctions because it is also suffering from some US sanctions. But Russia is now sanctioned more than Iran, China and North Korea combined. If the rouble is the yardstick of the sanctions, then the sanctions have so far gone completely nowhere, because the rouble has been one of the strongest currencies in the world in recent weeks after the slump. First the euro rose against the rouble from 85 to 145 EUR/RUB after Russia’s exclusion from SWIFT, but then the euro collapsed from 145 to below 80 EUR/RUB, now at 87 EUR/RUB. Thus, the rouble was temporarily even higher at the beginning of April than just before the war. Joe Biden hoped for an exchange rate of 200 and the decline of the Russian economy, but it has not come to that yet. Russia’s main export revenue so far has been from oil/gas in Europe. But the most important trading partner in 2020, with an 18 per cent share of foreign trade, was China and relations with China are now being expanded. The next most important trading partners for Russia after that in 2020 were Germany with 8.7 per cent, the Netherlands (through oil/gas trade) with a 5.1 per cent share, Belarus with 5.0 per cent and the United Kingdom (UK) with 4.7 per cent.
Russian economy needs to rethink and redirect towards Asia
The most important trading partner for Russia in exports was the EU with a share of 33 per cent followed by China with 14.7 per cent, Netherlands with 7.5, United Kingdom (UK) with 6.8 per cent and Germany with 5.5 per cent. In terms of imports, the EU is also the most important trading partner with a share of 33.9 per cent followed by China with 23.7 per cent, Germany with 10.1 per cent, United Kingdom (UK) with 5.7 per cent and Belarus with 5.4 per cent. It is hard to imagine that Russia can quickly compensate the losses with foreign trade with the West (EU/USA) by Asia (China/India). It will take years, but it will come down to the fact that this compensation will take place in the future.
Last year, foreign trade between Germany and Russia actually increased by 30 per cent to €60 billion. Goods worth € 33 billion were imported from Russia, 56 percent of which came from the energy sector, and goods worth € 26 billion were exported to Russia. At only 2 per cent of total foreign trade, Russia is a relatively insignificant country for Germany, while Germany and the EU are very important trading partners for Russia. Russia is only the 15th most important partner in foreign trade. Energy imports from Russia were particularly important for Germany. 36 percent of coal imports came from Russia, 30 percent of oil and 55 percent of natural gas imports. Now no more coal comes from Russia, gas imports have been reduced to 40 per cent. Now the EU is thinking about what else it can do about oil.
Facts on foreign trade between Germany and Russia
Here are the precise facts on Germany’s foreign trade with Russia (source www.destatis.de)
“Raw materials, vehicles and machinery are primarily traded between Russia and Germany. Germany imported mainly oil and natural gas worth €19.4 billion in 2021 – this was an increase of 49.5% and accounted for 59% of all imports from Russia. Russia also supplied Germany mainly with metals (€4.5 billion, +72.1% compared to 2020), petroleum and coke products (€2.8 billion, +23.0%) and coal (€2.2 billion, +153.0%).
In contrast, Germany exported mainly machinery (5.8 billion euros, +5.7 %), motor vehicles and motor vehicle parts (4.4 billion euros, +31.8 %) and chemical products (3.0 billion euros, +19.7 %) to Russia in 2021.
The linkages between German and Russian companies are at a similar level to foreign trade. 1.9 % of the turnover of all foreign-controlled companies in Germany was generated by those headquartered in Russia in 2019. By comparison, companies headquartered in the US accounted for 17.9 % of turnover. There were 164 Russian-headquartered companies in Germany in 2019. They employed a good 8,100 people and generated turnover of 31.6 billion euros in the process.
Conversely, according to the Deutsche Bundesbank, 472 companies in Russia were controlled by German investors in 2019. These employed just under 129,000 people and generated an annual turnover of a good 38.1 billion euros. This corresponds to a share of 1.5 % of the global annual turnover generated abroad by companies of German investors in 2019. By comparison, 21.1 % of this global turnover by companies of German investors was generated in the USA (545.4 billion euros).”
Russia’s foreign trade with the EU (source: www.statista.com )
“In January 2022, the total trade volume of the European Union¹ (EU-27) with Russia was around 26.1 billion euros. The countries of the EU imported goods worth around €19 billion from Russia in January 2022 and exported goods worth around €7.1 billion to Russia in January 2022. Accordingly, the European Union recorded a trade deficit of around €11.91 billion in goods with Russia in January 2022.”
Last year, the Federal Republic imported 14.5 million tonnes of hard coal from Russia, making it by far the largest importer in the EU, followed by Poland and France. These imports are now falling away.
Russian oil/gas companies earn more than ever before
But we will only see the traces at the Russian companies later, when all export bans come into effect. Who is earning much more than before the war is the oil/gas sector at the moment, although China and India now have to pay dumping prices of less than 70 USD/barrel for the Urals brand. The oil/gas companies from Russia such as Gazprom, Rosneft and LUKoil will earn a third more this year than last year because of the high oil/gas prices, if there is no oil/gas embargo. The fact that the German subsidiary Gazprom Germania GmbH, based in Berlin, is now being managed in trust by the Federal Network Agency after the dubious sale in a cloak-and-dagger operation to a straw man, which is virtually tantamount to expropriation, will annoy Gazprom – and thus also Putin – but will not put much of a financial strain on it. Now, however, German companies that have left Russia but still have operations in Russia must also reckon with expropriation. Rosneft, where ex-Chancellor Schöder is on the supervisory board, also owns 3 large refineries in Germany and we will see what happens there. The USA imported 60 per cent more oil last month than the year before. Supposedly, according to Russia, even oil exports to the US increased by 43 per cent, but this has yet to be verified.
Russian stock market one of the world’s top performers after reopening
The Russian stock market was also one of the best performing stock markets in the world after reopening after a month since 24 March, admittedly excluding foreign investors. Since the suspension of trading on 25 February, the RTS index has risen by 16 per cent in US dollars, far more than the DAX and the S&P index. It remains to be seen whether Russia will go bankrupt immediately, as the world is rashly assuming with a 99% probability. On the contrary: on the one hand, Russia wants to have all commodity exports paid for in roubles in the future, on the other hand, the Russian central bank is offering a fixed price of 5,000 roubles for gold purchases, which is roughly 1,800 USD/ounce, i.e. somewhat less than the current gold rate of 1945 USD/ounce.
Is a gold-backed currency coming to Russia?
Putin, together with China, probably wants to introduce a gold-backed currency in the future, possibly also a gold-backed cryptocurrency, but issued by the Russian central bank. China and Russia have already developed their own internal payment processing system in order to be able to settle internally without SWIFT. In the medium term, Russia and China want to replace dollar dominance. The IMF is already sounding the alarm and wants to introduce special drawing rights instead of the US dollar. What Russia and China are planning, possibly in combination with India, could trigger a huge financial crisis in the medium to long term in the very heavily indebted USA and thus in the whole world.
And the winner is: USA (still)!
At the moment it looks like the USA is the big winner of the Ukraine crisis, but in the medium to long term this could boomerang. Most OPEC countries are also turning away from the USA and they will probably no longer invoice in dollars in the future, but in bilateral currencies. This would cause a problem for the USA, which is heavily indebted at 130 per cent of GDP. Russia has only 47 billion USD in national debt but over 500 billion USD in corporate debt in foreign currency. The EU and the USA, however, have many times that amount. The national debt in Russia is only 20 per cent of GNP, but in the USA it is already over 130 per cent of GNP. Nevertheless, some large corporations in Russia will probably have to be supported by the state, as was already the case in 2014/15.
In the event of an oil/gas embargo, the EU would be the loser.
But in the event of an oil/gas embargo, the EU would also face a major energy crisis and inflation would rise more and more. Most recently, the inflation rate was already above 7 per cent. Liquid gas from the USA is already 30 percent more expensive than Russian gas. The consequence will be that German industry will no longer be internationally competitive because costs will rise too much. In contrast, Indian and Chinese producers will then benefit from the enormously low energy costs. Energy costs in Germany are already among the highest in the world. The current EU and US sanctions could therefore boomerang. Instead of Russia, some Western countries would then be threatened with national bankruptcy. The EU and Germany could also slide into recession.
What will China do now?
Now that Russia has had two-thirds of its currency reserves stolen by the sanctions, China will consider whether to invest the 1 trillion US dollars in US government securities. China will consider whether to keep the 1 trillion US dollars in US government securities, because in the event of a Taiwan war China could also simply steal the 1 trillion US dollars from the USA. US dollars could simply be stolen from it by the USA. Putin calls that thieves’ steel. Without this, the sanctions should actually be evaluated under international law, because they are only imposed more or less arbitrarily by politicians and not by the courts, and often too quickly without clear evidence. This was already the case with the crash of MH 17. Normally, all this should be brought before an international court, which the USA, however, wisely does not recognise – for good reasons, because otherwise the USA would have to be sued much more often than Russia for war crimes without a UN mandate.
Putin alone is responsible for the suffering of civilians in Ukraine through his war of aggression.
EU President Ursula von der Leyen even travelled by train to Kiev in order to assist the Ukrainian president. Regardless of what further investigations reveal, Putin must be held primarily responsible for this massacre of civilians, even if his soldiers did not carry out this horrific mass murder of defenceless civilians, because he started an unnecessary war in Ukraine in violation of international law, which will have far-reaching consequences for the whole world.
Are there biochemical weapons laboratories in Ukraine on the part of the USA?
Russia is now also assuming further false flag attacks by Ukraine (or by the British or US intelligence services), including the use of biochemical weapons, in order to then hold Russia responsible and bring about an oil/gas embargo. Allegedly, the USA had bioweapons laboratories in Ukraine, where even the son Hunter Biden is said to have helped finance them via a fund. This, too, still needs to be investigated, although Russia is said to have evidence. A laptop that was found is supposed to shed light on this.
Was Buchma a staging?
Russian Foreign Minister Lavrov assumes that the massacre in Buchma was a staging. In his view, collaborators are sought out, tortured or murdered in cold blood everywhere in Ukraine. Here, the bodies of them are said to have been deliberately dumped on the street after the Russian soldiers withdrew, in order to lay the blame for the massacre at Russia’s door. Strangely, however, the Russians had previously distributed food to the inhabitants of the village. Lavrov also believes that Ukraine did it deliberately to drag out the awaited peace negotiations in Turkey.
But perhaps it was special groups that perpetrated these cruel acts. However, there is ample video evidence that the Ukrainian side also tortured civilians and soldiers, even when they were defenceless, or shot them in the leg. Moreover, in war there are always staged and improvised videos that do not correspond to the truth. It is very difficult to keep track of all this, even for journalists “on the ground”. According to statements by fellow residents from Buchma, however, it seems that it was Russians who captured civilians and probably also shot them.
How can a peace agreement be reached now?
The big question is how a peace treaty can be reached quickly now, when emotions are running high and the sanctions spiral is getting faster and bigger. Russia is now targeting eastern Ukraine in particular militarily. Ukraine is now demanding heavy weapons such as artillery rockets and tanks to be able to repel the feared large-scale attack. British Primer Johnson was now also in Kiev and promised Selenski new heavy weapons. Mariupol is already 80 percent in Russian hands. Only the port and a few industrial plants are still being fought over. But the Russians will advance in eastern Ukraine to create new facts there. Ukraine wants to fight this off. In the process, more people will strive.
Are there authoritative and significant Nazis in Ukraine?
In the peace talks in Turkey, Selenski will probably not decide alone, but there will probably be consultations with Joe Biden, possibly even with his foster father, the Russophobe and oligarch I. Kolomojskyj, who owns the dreaded and brutal Azov regiment. This is said to consist mainly of Nazis with almost 30,000 volunteer mercenaries. Ambassador Melnyk, who constantly demands heavy weapons of war from Germany, is of the opinion that these are only a few and not decisive, but this would have to be closely examined by German and Western journalists. For Putin always talks about denazification. Here, however, Putin should also name horse and rider. Selinskyi himself is Jewish and so is Kolomojskyj.
But it is known that Nazis were instrumental in overthrowing the government after the Maidan revolution, when the incumbent president Yanukovych fled the country. So it was a violent coup, where afterwards, during the temporary formation of the government, 4 Nazis from the Svoboda party actually got important ministerial posts, including the Ministry of the Interior. The Azov regiment is indeed under the control of the Ministry of the Interior. But whether there is a detailed investigation into whether they are also Nazis still needs to be done, where even Western media do not look that closely and hardly do any questioning and research. Nazis no longer play a role in the Ukrainian parliament at the moment.
Election in France with uncertain outcome
On 10 April, the presidential election took place in France. Here, the current president Macron is considered to have the better chances, but the candidate from the right-wing camp Le Pen, who gets on well with Putin, is catching up strongly. And is scoring points with the issue of purchasing power for the French population. According to the first results, Macron is clearly in the lead with 28 percent, ahead of Le Pen with 23 percent. However, this could still change in the run-off election in two weeks’ time on 24 April, because the right-wing camp has become very strong. It will now be decisive for whom the voters of Jean-Luc Mélenchon, who received 20 percent of the votes (according to preliminary election results), will vote. If Le Pen should surprisingly win the run-off, the EU would be shaken up. It could even mean the end of the euro.
Increasing confrontation and isolation may lead to World War 3
At the moment, everything boils down to mutual confrontation. Russia has now not only denied Euronews broadcasting rights in Russia, but banned 15 civil societies and non-governmental organisations. Russia is closing itself off more and more, following the example of China, which is not a good sign. Dialogue, including with critical press and dissenters, must always be maintained. It is also dangerous that some Baltic countries have closed or expelled Russian embassies. More and more Russian diplomats are being expelled from Germany as alleged agents. When the channels of communication fall silent, only the weapons speak. This must be brought back. Otherwise it will lead to a third world war.
The evil Putin as persona non grata
Putin has been declared “persona non grata” by German President Steinmeier and many Western politicians and media think similarly. Putin is a war criminal, murderer and dictator, in other words the embodiment of evil. Cooperation with him as before the war is no longer conceivable after the war. China has already won over some African countries. Certainly, Putin has destroyed many bridges to the West with the Ukraine war, but before that, too little attention was paid to Putin and his security needs were taken seriously in NATO’s eastward expansion.
A new world order ante portas, but do we really want it?
There is now the threat of an Iron Curtain that will last for years and the constant danger of a third world war. The media will promote the division of the economic blocs with their own propaganda through one-sided reporting. Which economic blocs will cooperate more closely in the future and which will fight each other through cyber, financial, monetary and economic wars – hopefully not through a third world war – remains to be seen.
Possible and probable is, on the one hand, the EU bloc together with the USA, Canada, Japan, Great Britain, Israel and Australia against the China/India bloc in cooperation with Russia. This “Eastern alliance” will probably be joined by some Arab countries, some countries from South America and some African countries, of course also Iran, Syria, North Korea and Venezuela. But do we want such new fronts of the “Cold War”, from which a hot 3rd World War can arise at any time? We need global cooperation, also on climate change issues, and not global confrontation, otherwise the beautiful planet Earth will soon perish or destroy itself. But who can see that far and take to the streets for world peace to prevent World War 3?
First inform, then invest
Inform yourself now in detail about the background and the development of the Ukraine/Russia crisis but also about the future recovery potential of undervalued shares from Eastern Europe. There are also new opportunities in the Baltics, Romania and Ukraine, with the respective stock indices all up in 2019. For example, some Ukrainian agricultural stocks have already more than doubled in price since 2016, and in 2018 the PFTS index was already up over 70 per cent again. Kazakhstan stocks were among the top performers in the world in 2017 (+56 per cent), but not in 2018 and not in 2019, but again in 2020/21.
In 2018, 10 stock markets from Eastern Europe were already among the best-performing stock markets in the world, all of which clearly outperformed the DAX and also the US stock market. In 2019, the Moscow Stock Exchange was once again the clear outperformer among all global stock markets, with a plus of over 46 percent in euro terms. However, the Bucharest Stock Exchange (Romania) also rose by over 32 per cent in 2019. The stock markets in Southeast Europe and also in the Baltic countries remained very stable on the plus side (Croatia +13 per cent). In 2020, 6 stock exchanges from Eastern Europe were among the 30 best performing stock markets in the world and last year even 11 stock exchanges from Eastern Europe. So it is still worth looking beyond the Ukraine war to Eastern Europe.
Order a trial subscription (3 issues by e-mail for only 15 €) of the monthly stock exchange letter EAST STOCK TRENDS (EST) with another Ukraine/Kazakhstan/Russia special and a dividend special as well as with a lot of background information and new investment suggestions such as the “Stock of the Month” and lucrative certificates at www.eaststock.de, there under Stock Exchange Letter. The last EST was published on 31 March 2021.
TV/radio notes: On 25 February Andreas Männicke was interviewed on Aktionärs TV about opportunities and risks on the Eastern European stock markets and the crash on the Moscow Stock Exchange. The last interview with Rainer Hahn for the YouTube channel Investainment was in February 2022. The last radio interview was on 24 February 2022 in Börsen Radio Networks. The next radio interview on Börsen Radio Networks will take place in May 2022. Also watch the latest EastStockTV video on YouTube about the Ukraine war and the new outperformance opportunities for Eastern European stock markets. You can download the interviews at wwww.eaststock.de, there under the heading “Interviews” as well as the EastStockTV videos. On 5 April, Mr. Männicke gave a lecture at VTAD Hamburg. By the way: have you already subscribed to the EastStockTV YouTube channel?