D-Day Ukraine
Political risk does exist in Europe. The invasion of Ukraine could begin any day now, at least according to the Americans. Foreigners are being urged to leave the country. China has given Putin what he needs to defy the Americans. Where Biden threatened that natural gas will never flow through Nordstream 2, Putin was ahead of Biden anyway. On February 4, at the opening of the Winter Olympics, a new $117.5 billion gas and oil deal was signed between China and Russia. The timing of the deal also signals China’s support for Russia in the conflict over Ukraine. Because of the deal between China and Russia, U.S. threats of sanctions are given little weight. In a joint statement, China and Russia indicate that the relationship between the two countries is superior to the political and military alliances of the Cold War era, adding that the friendship between the two countries knows no boundaries, there are no forms of cooperation that are not possible. Yet we will not see the Chinese People’s Army in Ukraine any time soon. According to Biden, if there is an invasion, severe economic sanctions will follow. Talks are still being held, however. On Monday, Antony Blinken meets with his colleague Sergei Lavrov. On Monday, the German Chancellor will also go to Kyiv, after which he will fly to Moscow on Tuesday to meet Putin.
In the short term, a possible Russian invasion is particularly relevant to the development of gas and oil prices. Russia is one of the largest oil and gas producers in the world and today an explicit part of OPEC+. At the time of sanctions, Russia may decide to cut off gas and oil supplies to Europe. As much as 40 percent of Europe’s natural gas comes from Russia. Gas supplies here are already low. Putin wants to prevent Ukraine from becoming part of NATO. He also wants Ukraine to return to Moscow’s sphere of influence. To do so, Russia does not need to conquer the country, preferring that a friendly head of government in Kyiv invite him for additional protection, rather than occupy the entire country, something that will not be an easy task even with the current 130,000 troops.
