Geopolitics and Markets Review 17th October 2022:

1) Russia and Ukraine

I mentioned last week Russian population demographics. Sending the working population into war through general mobilisation won’t help. But Russia is known for thinking long-term. Do they have a plan to solve their population demographics involving Ukraine? Was the plan for Russia to take complete control of Ukraine and merge the populations? Would this make a difference now with that many Ukrainians fleeing to Western countries?

It appears Belarus is preparing to join in the Russia and Ukraine war. The Belarusian border is around 100km from Kyiv. This would make access to the capital a lot less difficult.

Another article details how UK intelligence plotted the Crimean Bridge attack and how much it would damage Russian supply lines to Crimea. As Peter Zeihan discussed, if the Ukrainians get control of Kherson, water gets switched off to Crimea. Then Crimean supply lines would be getting damaged from both sides. There are queues of trucks in Russia to get goods to Crimea that could get there on one train, but the rail system isn’t yet back online.

A lot of countries over the weekend urged their citizens to leave Ukraine. After the war has been happening for 8 months, why the sudden messages now? Is it because Belarus is preparing to join the war, or is there some other escalation incoming? It makes sense it will be Belarus joining the war. It gives much easier access to Kyiv. If Kyiv gets taken, it could lead to Russia attempting to install a puppet government in the capital. Or is it Russia’s approach to squeeze Ukraine by attacking infrastructure? Still so much to unfold in this war.

---

2) Production of F-35s – the US announced the resumption of production of F-35 fighters, produced by Lockheed Martin. But, the Chinese hold an important alloy used in their manufacturing. This indicates the power China has with its rare earth commodities. Can alternatives be found or would isolating from Chinese trade leave some products unable to be manufactured? The trade war between the US and China is growing in severity. This adds another aspect.

One of the next books I want to buy is the Financial Cold War by James A.Fok. It explores the relationship between China and the US in the financial markets. Currently, this is the biggest sentiment driver in Chinese assets, so much so that the Shanghai Composite Index is down 15% this calendar year (YTD). Most of the talk in trade and technology is about the US dependence on China. This is due to their significant influence in a lot of commodities trade, whether as an importer, exporter, or producer. But what if it’s the other way around? What if China depends on the US? Wisdomtree and Goldman released Emerging Markets funds excluding China. They must be seeing significant disruption to the Chinese economy to do this. But where could this start to unravel?