Russian President Vladimir Putin has moved at least 100,000,00 troops very close to the Ukrainian border. As a counter move, President Joseph Biden dispatching 3,000 soldiers to Germany, Poland, and Romania, three NATO member nations on Russia’s Western flank.
Q4 2021 hedge fund letters, conferences and more
Wow! We sure showed Putin that we mean business! Now we finally have some skin in the game.
Russia-Ukraine Tensions
Of course, Putin did not have any plans to attack Latvia, Poland, Romania, or any other NATO member. If he did choose to attack anyone, it would be Ukraine.
And yet the negotiations we have been holding with Putin have not been a complete sham. Any military aggression will have a price: The greater the Russian aggression, the higher the price she will pay.
If Russia does attack Ukraine, not one American will die defending that nation, although we are providing substantial military aid. Our main weapon will be the economic sanctions imposed on the Russian economy, which is less than one-tenth the size of our own. The only question is how much damage will we choose to inflict.
For example, if Russia invades just the Eastern quarter of Ukraine, the sanctions will not be catastrophic. But the greater the military onslaught, the greater economic damage we shall impose on Russia.
Vladimir Putin's Options
Nearly all our cards are lying on the negotiating table face up: If you do this, we will do that. Putin will calibrate when and where to move based on his assessment of the price his nation will pay.
Think about Putin’s options. He can eventually withdraw most or all of his forces currently threatening Ukraine. In that case he will completely lose face. On the bright side, there will be no economic sanctions.
Putin can hope that the Russian economy will survive massive sanctions and attempt to take over all of Ukraine. Or, he can approve just a limited strike targeting the takeover of just another slice of that country.
Which course will Putin follow? Well, he’s certainly not going to withdraw all his forces without getting at least some piece of Ukraine in return. So, will he accept just another slice or will he go for broke?
No one knows for sure, but I think Putin will settle for another slice of Ukraine right now, while reserving the option of coming back before not too long to swallow the rest of that nation.
