Why Should We Care About The Ukraine?

Last week a client asked me why shoudl we care what happens in Ukraine. Aside from teh fact that we are a worl leader and should care what happens elsewhere in teh world, I decided to give a brief answer to him so we cold move on to other issues. Mainly eyh performance oif hjis portfolio over teh last 2 years.

Here is my response.

Why do we care? Forget Russian hegemony and imperialist desires of Putin we need to visit what really happens if things go south in a big way.

1. The European Union (EU) economy is and has been fragile for decades. Their ever growing dependency on natural gas from Russia and satellite countries highlights a weak point that Putin is sure to exploit if he has to do so. If the flow of natural gas is disrupted or stopped altogether the economies of the EU could grind to a halt. The EU as a whole is a huge trading partner for the United States and the repercussions would surely be felt in our own economy.

2. Russia is the number 3 (behind the Philippines and Indonesia) producer of nickel a key component in the making of modern steel. The U.S. does not even crack the top 15 in the world since we have limited deposits. The current world supply is constrained because of events in Indonesia (another article) so Russia has the goods that the world needs, at least the EU. See comments about the economy in number 1. Russia also has other deposits of minerals that are needed with the same possible effect.

3. A dominant Russia can have adverse effects ranging far beyond the Ukraine. The former Soviet bloc nations are unsure as to whether they are next in line if Ukraine is “reabsorbed”. These uncertainties restrict development of new markets for U.S. and EU goods. Our economy depends on the free flow of goods all over the world and adding areas of instability is another road block to future growth.

4. Finally, we see Russia as a competitor in the world market and if they are willing (and able) to subvert the government and free will of Ukraine, can we trust them in the market place to be a stable business partner? That is the real question

Have a good week and I look forward to hearing from you.

Steve