Page 17 - ISQ UK_October 2017

JANUARY 2022

It seems certain that Russian tanks are not going to sweep into
Kiev, the Ukrainian capital, and onward to the Black Sea coast KEY TAKEAWAYS:
without disrupting Chinese interests. For its part, having con- • A mutual dependency exists between Russia and the
structed what is surely an extraordinary piece of engineering European Union. The EU is very dependent on Rus-
architecture, China can deploy its own troops and equipment to sian gas, while Russia is reliant on the revenue to run
the Ukraine at least as fast as any other interested global military its government and finance foreign currency debts.
power. Thus, it represents a critical step, if Russia were to make
a move on the Ukraine to assume control of the latter’s gas and • China has a substantial economic interest in the
coal fields, that it does so with the overt support of Beijing. Ukraine, the consequence of heavy investment in its
“Belt and Road” initiative.
• Any escalation of the current situation would be sig-
nificantly adverse for financial markets, but economic
“Western powers have expressed concern
regarding the overly friendly nature of Mr Putin interests may trump military adventurism.
and Mr Xi’s mid-December video conference...”

Western powers have expressed concern regarding the overly
friendly nature of Mr Putin and Mr Xi’s mid-December video con-
ference; it smacks of a plan possibly to divvy up the Ukraine to
further both Russian interests and China’s economic reach to
mutual advantage. A Russian invasion, precipitating a shooting
war with Ukrainians, might trigger a shooting war with the
United States and Europe, over and above the imposition of
far-reaching financial and economic sanctions. How would the
Chinese respond? Any escalation involving that great super-
power would surely turn the geopolitical screw to maximum
and have significantly adverse consequences for global financial
markets.

“…at the time of writing, an uneasy quiet has
descended on Europe’s Eastern front.”

Financial markets have never been great at properly discounting
geopolitical crises; a major event (whilst without doubt at the
back of all investors’ minds) lying at the outer reaches of the
spectrum of discountable risks. It is very much to be hoped that
military conflict can be avoided as 2022 begins and, as at the
time of writing, an uneasy quiet has descended on Europe’s
Eastern front.

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