Streetwise Professor

April 15, 2022

It Sank

Filed under: History,Military,Russia,Ukraine — cpirrong @ 3:10 pm

In a rather amazing development, the Russian cruiser Moskva was hit by two Ukrainian Neptune surface-to-surface missiles, caught fire, and experienced a major munitions explosions. It subsequently sank, allegedly while under tow, although that is according to the Russian side which (as will be seen) was even more deceptive during this incident than it has been in the rest of the war–which is saying something..

Perhaps some latter day Larry King can get Putin on his show and ask him what happened to the Moskva:

Somehow I doubt Putin would be so smug now.

Would that the sinking of two major combatants provide the bookends to Putin’s malign reign.

This episode was even murkier than the rest of the war. The Ukrainians almost immediately claimed that they had struck the ship. The Russians merely acknowledged that it had experienced a severe fire and an ammunition explosion, but that the entire crew had been evacuated.

These things did not hang together. Fires and explosions sufficient to sink a ship with no casualties? Or had the crew failed so miserably in fighting fires that the captain ordered abandon ship before the fires triggered the ammunition explosion? And if there was no missile, what could have caused such a devastating fire, and the failure of the crew to be able to control it?

The missiles that allegedly hit the Moskva are powerful, but not that powerful. Far smaller ships, e.g., the USS Stark, a frigate that displaced about 1/3rd of the Moskva, was hit by an Exocet (which had a bigger warhead than the Neptunes) and survived–though only after heroic efforts by the crew (as an exhibit at the UNSA Museum documents). The HMS Sheffield, which was only slightly larger than the Stark, was hit by Exocets. It eventually sank under tow, but only after several days. The bigger Moskva should have been able to absorb these hits.

Perhaps they were very lucky hits. But hits devastating enough to put such a large ship in mortal danger would have almost certainly killed large numbers.

My guess is that Russian damage control was very poor. Damage control is a war winner, and a force multiplier. It was the US Navy’s saving grace throughout WWII in the Pacific, and has also proved invaluable in later conflicts, e.g., the fires on the carriers Oriskany, Forrestal, and Enterprise during Vietnam. (When I was at Navy we had to watch a film about the Forrestal fire as part of our education on the importance of damage control. Pretty sobering watching.) If Russian damage control was poor, either due to bad training, bad doctrine, or bad equipment (e.g., DC gear being stolen, or not maintained) that would explain fires getting out of control and forcing abandonment of the ship, and a subsequent explosion.

There is also the issue of whether the ship should have been struck in the first place. Apparently its primary role in the Ukraine war was to provide air surveillance and defense for other Russian fleet units operating in the Black Sea. It had a rather extensive suite of long range and short range air defenses, including point defense systems that are intended to take out threats like the Neptunes. So why did it fail so spectacularly to defend itself?

One story circulating is that the ship was “distracted” by several Turkish made drones. Really? That shouldn’t happen. If true, that smacks of lack of situational awareness and target fixation. Or a smug confidence that the Ukrainians had nothing that could hit them. It also suggests that the drones have taken up residence in Russian heads.

The US contributed to the fog of war. Initially the US said that it could not confirm that missiles had struck the ship, or that it was in a sinking condition, or had sunk. Then today the US said yes, it was able to confirm that Ukrainian missiles had taken it out.

I find this purported ignorance to be implausible. The Black Sea has to be blanketed with US surveillance and reconnaissance assets, in space, in the sky, on land, and in the ether. The US is likely sucking up visual, photographic, and electronic information (radar emissions, communications intercepts) at a prodigious rate. The very fact that the Moskva’s electronic emissions would have largely disappeared when it was in extremis would have been one clue that it was hors du combat. And no doubt all all Russian fleet radio transmissions were sucked up and analyzed in near real time. It’s plausible that the US Navy was more informed about developments than the Russian.

This would explain the pains to which the American went to appear mystified by what was happening with the Moskva. “Hey, we can’t see nothin’. Big mystery to us!” In reality the US sees a lot. A lot. Ex ante and ex post. Those ex ante observations, if provided to Ukraine, could have made possible a strike that Ukraine could not have carried out on its own.

And here’s another thing. The Moskva was hit relatively far offshore–approximately 100 kilometers, or well over the horizon. Over-the-horizon target acquisition is not easy. (This might be another reason the Moskva felt secure.) Did the Ukrainians have the requisite targeting capability, or did a little birdie tell them? That is, one very plausible hypothesis is that the US fed Ukraine the necessary targeting information, again relying on the extensive array of sensors upon which the US can call.

If Ukrainian assets targeted the Moskva, that would only raise other issues. Why didn’t Russia take them out over the past 6 plus weeks? Again, US doctrine prioritizes going after the eyes. It’s a lot easier fighting a blind enemy.

What are the broader implications of this sinking. It is unlikely to have a first order effect on the fighting. It does make an amphibious assault less likely, but I always thought that was a remote prospect in any event.

Its main impact is most likely psychological. A fillip for Ukraine, a humiliation for Russia. And in particular humiliation for one specific Russian–Vladimir Putin. No doubt this will stoke even further his incandescent rage against the Ukrainians–and his own military. It will represent yet another ignominious defeat in a litany of ignominious defeats to be avenged. That bodes ill for any prospect of seeing this war end soon.

Print Friendly, PDF & Email

April 9, 2022

What Ukraine Needs

Filed under: History,Military,Russia — cpirrong @ 6:45 pm

The prospect that the war in Ukraine will drag on for some time has rendered urgent the question of how the west can support the country militarily. Specifically, what weapons can and should the west supply?

Retired General Barry McCaffery recommends supplying the full panoply of an American force–armor, air defense, aircraft. This is unnecessary, and unrealistic.

The immediate answer to the question hinges on the nature of the battle, the time frame, and the ability of the Ukrainian military to absorb and use equipment.

The nature of the battle is now clear: Ukraine is fighting a defensive battle, and will almost certainly do so on a relatively restricted front in the eastern part of the country.

The time frame is compressed. Although it will take some time for the Russians to generate sufficient combat power in Donbas given the necessity of reconstituting units devastated by the last six weeks of combat, Putin is clearly impatient and needs to demonstrate progress soon.

Military hardware can be complex and require considerable training to use effectively. Ukraine doesn’t have the time to train on unfamiliar equipment.

Given these realities, what are the priorities?

Number one, clearly: artillery. Artillery. More artillery. And lots of ammunition. Given that Ukraine is defending, towed tube artillery would do just fine, although self-propelled guns would have some benefits. Also, rocket artillery (MLRS) would be extremely useful.

Ukrainian troops could readily employ conventional artillery and it could play a decisive role in smashing any Russian advance. The stocks of European countries and the US should be adequate to provide a healthy upgunning of Ukrainian forces in relatively short order.

Relatedly: equipment to leverage the effectiveness of artillery. Specifically, counter battery radars (of which the US has already supplied some) and drones (for reconnaissance and battle damage assessment as well as for carrying out precision strikes).

Number two: air defense weapons, especially longer range SAMs. This could be something of an issue. The Ukrainians are trained up on Soviet/Russian weapons (e.g., S-300). It would take time to get them up to speed on western equipment (e.g., Patriots). Further, the US has legitimate security concerns about supplying these weapons, due to the risk of capture and reverse engineering.

A stopgap would be more MANPADs. The Ukrainians have made good use of those, and to the surprise of virtually all, have prevented the Russians from achieving air superiority, or even executing an effective air campaign.

Number three: more artillery.

Armor would be nice, but not necessary. The Ukrainians have already demonstrated a remarkable ability to defend against armor using ATGMs. So more of those, please. A Ukrainian armored assault is not in the offing, which reduces the need for more tanks beyond the T-62s, T-64s, T-72s already in its arsenal. (Not to mention captured Russian armor.). They likely have enough for the local counterattacks that they will need to execute as part of an active defense.

Aircraft would assist Ukraine in denying Russia air superiority, but it is uncertain how many decent pilots Ukraine has, and they would be limited to ex-Soviet aircraft types. Further, the bases would be vulnerable to Russian missile strikes. I doubt they would be decisive.

Get them the big guns, and the shells to feed them. That’s the priority. They would prove essential in a defensive battle.

Although Russia already has its hands full in Ukraine, and has proved to be a military paper tiger, amazingly it is looking to pick other fights. Latvia (the least anti-Russian of the Baltic countries) had the temerity to announce a commemoration of Ukrainians killed by Russians during May, the holy Victory Month. Which caused the Russians to lose their shit (I know, it’s a day that ends in “Y”, but still), and call the Latvians Nazis (of course!) and make threatening noises.

On cue, Russia state television trotted out a mouth breathing ex-military type to lay out how Russia would (and by implication, should) invade not just the Baltics, but Poland and Sweden (specifically Gotland):

Pointing a the map, Colonel Igor Korotchenko [Ukrainian name, interestingly], formerly of the Russian General Staff and air force and currently a reserve officer, said at the start of the invasion ‘a massive Russian radio-electronic strike is inflicted’ as ‘all Nato radars go blind and see nothing’, according to the Sun.

This was how the scenario for capturing the countries might look, he added.

Sweden has been politically neutral throughout its recent history, but Russia’s invasion of Ukraine brought the prospect of the Nordic country joining NATO to the fore of political discussion.  

Russia has threatened Sweden and Finland over NATO membership repeatedly since the invasion began.

‘At this time, on the Swedish island Gotland, Russian military planes land, delivering S-400 anti-aircraft missile systems, and Bastion coastal anti-ship systems,’ said Colonel Korotchenko. 

In the video, a border area labelled the ‘Suwalki gap’ is shown – the gap between Belarus and Russia’s Kaliningrad exclave, a leftover territory annexed from Germany after the Second World War.

Colonel Korotchenko explained how Russia would push up from Kaliningrad towards the Suwalki corridor separating Poland and Lithuania, blocking NATO reinforcements from the West.

Is this guy Ripski Van Winkle? Has he been asleep the last 6 weeks? Russia has not been able to blind Ukrainian radars, FFS. It’s vaunted electronic (and cyber) warfare capabilities have proved to be as Potemkinesque as its armored and air forces. And as if Russian transport planes would get anywhere near Gotland: they would all go down in flames due to Nato (and Swedish) SAMs and AAMs. And has Col. Korotchenko noticed that the airborne units that would necessarily spearhead such a mission (a) failed to achieve a similar mission outside Kiev on the opening day of the invasion, and (b) have been torn to shreds in the subsequent combat.

Gotland is an island, you know. Amphibious assault? The Russians haven’t had the stones to do that against Odesa or elsewhere, and the odds of pulling it off in the Baltic are far longer. Ain’t happening.

As for tearing through the Suwalki gap, the Russians haven’t torn through anything in Ukraine. And they could pull this off logistically how, Colonel? Your army has no clothes. Literally, in some cases.

This is the best part:

‘The astonished West and NATO will know that Russia declares a no-fly zone of 400km,’ added the enthused Colonel.

The only thing that is astonishing is that Russia has not been able to create a no-fly zone in Ukraine.

One would have to think this has to be for domestic consumption, to feed the image of a Russian juggernaut capable of taking on Nato to Russia’s northwest, thereby to distract the nation’s attention from the reality of its abject failure against Ukraine to Russia’s southeast. They really can’t be thinking of doing this, can they?

Six weeks ago I would have thought not. Now I am not so sure. The detachment from reality in Moscow is palpable. Ironically, the failure in Ukraine appears to have made the Russian leadership and the Russian people more delusional, not less. The shocking reality has led to denial, and a desperate need to fantasize about military glories to be won elsewhere to compensate for the fact of devastating losses in Ukraine.

Meaning Nato has to be ready for anything. They are just crazy enough to try it.

And in the meantime: send artillery to those who can use it.

Print Friendly, PDF & Email

When People Talk About Zero This or Net Zero That, Zero Is a Good Approximation of Their IQ

Filed under: China,Climate Change,CoronaCrisis,Economics,Politics — cpirrong @ 11:34 am

The optimal amount of any “bad” (e.g., crime, cancer) is very, very seldom zero.* This is because the marginal cost of reducing a harm increases (typically at an increasing, and often rapidly increasing, rate): eventually the cost of reducing the harm further exceeds the benefit, usually well before the harm is eliminated.

Unfortunately, a good fraction of the world is in the thrall of those with Zero obsessions who ignore this fundamental reality. COVID and climate are the two most telling examples.

Countries pursuing “zero COVID” strategies have subjected their citizens to draconian measures that have deprived them of the blessings of normal human interaction, and freedom of thought and movement. Children especially have been brutalized, losing two years of schooling, socialization, and even the ability to speak and understand and interpret the non-verbal due to absurd masking requirements.

This brutality has unsurprisingly reached its zenith (or nadir, if you prefer) in China, a nation of 1.3 billion governed by a despotic regime that has gone all in on Zero COVID. The outbreak of COVID in Shanghai after years of restrictions proves the futility of the objective. The CCP’s response to the proof of the futility shows its insanity.

In response to the outbreak, the regime has locked down a city of over 26 million people. And this ain’t your Aussie or Kiwi or American or Brit or Continental lockdown, boys and girls: this is a hardcore lockdown. Mandatory daily testing, with those testing positive sent right to hospital, symptomatic or no–despite the fact that this has overwhelmed the medical system and is depriving truly sick people of vital care. Children separated from parents. People locked in their abodes, often without adequate food. Pets slain.

It is draconian–and dystopian.

The other prominent example is “Net Zero” carbon emissions. This has become the idol which all the right thinking bow down before, especially in the West. Governments, financial institutions, and other businesses (especially in the energy industry) are judged based on a single criteria: do their actions contribute to achieving “net zero” emissions of greenhouse gases? And woe to those who do not pass this judgment.

It is absurd. And it is absurd because the monomaniacal focus on a single measure immediately banishes all considerations of trade-offs, of costs and benefits. The implicit belief is that the cost of carbon is infinite, and hence it is worth incurring any finite cost–no matter how huge–to achieve it.

And the costs are immense, have no doubt. In particular, the environmental costs–the production of battery metals involves massive environmental costs, for example–are huge. Yet they are ignored by people who preen over how green they are. Because to them, Only One Thing Matters.

This is beyond stupid. Those who will impose any cost, and force others to bear any burden, in order to achieve some Zero reveal that that number is a good approximation of their IQ.

Upon reflection, I believe that the worship of Zero is a mutation of the worship of central planning with dominated the pre-WWII era, and which was supposedly discredited by experience (e.g., the USSR) and intellectual argument (e.g., Hayek, von Mises). Central planning involved the determination by an elite of an objective to be achieved by a society, and the use of coercion–at whatever level necessary–to achieve that objective. Actually, compared to the Rule of the Zeroes, central planning was quite nuanced: it usually did involve some acknowledgement of trade-offs, whereas the Rule of the Zeros does not, with everything–literally everything–being subordinated to the One Zero.

But ultimately, central planning foundered on the reef of its internal contradictions. Attempting to impose a singular objective on a complex, emergent system consisting of myriad individuals pursuing their own idiosyncratic goals was doomed to failure. And it did. But only after inflicting tremendous costs in terms of human lives and human freedom, not to mention human prosperity.

The fundamental inconsistency between emergent and imposed orders meant that central planning required the application of massive coercion. The same is true in the Rule of Zeroes. This has been particularly evident in the case of COVID: what is going on in Shanghai proves this beyond cavil. But the same is inevitable for Net Zero. To impose a centrally dictated objective, and a unidimensional one to boot, on complex societies comprised of billions of individuals with extremely diverse preferences and capabilities is to wage war on human nature, and humanity. Sustaining it necessarily requires the application of massive, and massively increasing, coercion. Because it requires people to “choose” what they would not choose of their own volition.

The populism so scorned by the elite is a natural reaction to this fundamental inconsistency. Whether Le Pen prevails in France or no, the mere fact that it is a possibility reveals the seething discontent of large numbers of folks at the presumptions of their betters. And this is just the latest example of the disconnect between the Zeroes who presume rule, and those whom they presume to rule.

It is a disconnect born of a fundamental misunderstanding of the basic social reality that life involves trade-offs, and that different people value trade-offs differently. That supposedly Smart People have Zero understanding of this reality is a shocking commentary on our “progressive” age.

*Note that I do not say “is never zero.” That would be a paradox, no?

Print Friendly, PDF & Email

April 5, 2022

Vlad the Accursed

Filed under: History,Military,Politics,Russia — cpirrong @ 6:25 pm

Apologies for the hiatus. Was traveling in Europe for my annual teaching gig in Geneva. Other than the unseasonably cold weather in Geneva it was a great trip.

And now that I am pretty much recovered from the travel, some new material:

Vladimir Putin no doubt imagines a sobriquet being attached to his name. You know, like “the Great,” as in Peter the Great or Catherine the Great, or Vladimir I the Great. He probably wouldn’t even mind “Grozny,” as in Ivan IV Grozny–under either of the offered translations of “Formidable” or “Terrible.”

What are some other possibilities that would appeal to his penchant for history?

Well, I think we can definitely rule out “the Humblest” (Alexei Mikhailovich). We can also clearly rule out “the Peacemaker” (Alexander III).

Putin no doubt views himself as “the Liberator” like Alexander II, who earned that nickname not for freeing the serfs, but for freeing the Balkans: Putin thinks he is liberating Russians in Ukraine and Georgia from a foreign yoke, and no doubt yearns to do the same in the Baltics. He also no doubt dreams of being known as “the Blessed” after Alexander I, who defeated the hated westerners (namely Napoleon), enforced autocratic rule in eastern Europe, and made Russia a world power.

But the trajectory of events suggests that other historical sobriquets are more likely to stick. “The Bloodstained” (Nicholas II) is certainly in the running. But I think that the best candidate is . . . “the Accursed” (after Sviatopolk, a Kievan prince, ironically).

Yes, Putin is riding a wave of popularity in Russia right now. But he is clearly cursed in Ukraine, the rest of eastern Europe, and much of the world. And I think that once the propaganda fueled euphoria fades, and reality intrudes, Putin will be known as The Accursed in Russia as well.

The invasion of Ukraine is a bloody fiasco. Stymied on the battlefield, Russia is resorting to indiscriminate bombardment. In the wake of its withdrawal from the Kievan front, evidence of atrocities is mounting. And just as the Soviets responded to German announcements of the discovery of mass graves at Katyn by claiming that the Germans were the actual murderers, the Russians claim that the mass graves and civilian corpses littering the streets of places like Bucha were not their doing, but the Ukrainians’, thereby proving Russia to be the true successor state to the USSR–and wrecking even further Russia’s already dismal credibility.

Russia had become a pariah state before these revelations. Russians going all Russian has made it even more of one, and it will always remain such as long as Putin is in power. This will relegate the country to persistent penury that propaganda will not be able to paper over for much longer. To maintain his stubby little fingers’ hold on power, Putin will resort to even more draconian measures and oppressions. Defeat (or even Pyrrhic victory), poverty, isolation, and oppression will, sooner or later, make Putin Vladimir the Accursed even in his own land.

As for the military situation, Russia has clearly experienced a major defeat in the north, to the west, north, and east of Kyiv/Kiev. It is withdrawing post haste from those areas, leaving the Ukrainians in control–and allowing them to uncover and broadcast the evidence of Russian atrocities.

One narrative is that the withdrawing units will be redeployed to the Donbas front, and bring a victory there by Victory Day (May 9). Quite frankly, this is delusional bullshit. Claims of redeployment are as convincing as Michael Palin’s insistence that the dead parrot is merely resting.

Units that have been as thoroughly thrashed as those around Kyiv/Kiev take weeks, if not months, to regenerate. And doing so requires a stream of men–which Russia does not have. (Note the extreme difficulty that the US had in keeping infantry units up to strength in the ETO during WWII.) No doubt Putin will find some way to circumvent the legal obstacle against deploying conscripts outside of Russia (e.g., by dragooning them into “volunteering” as kontraktniki, or claiming that Donbas is really Russia), but the new lot of conscripts are just being called up, and it will take them months just to figure out how to put on their gear and find the latrines. And once they are integrated into these units, why should it be expected that they will be any more militarily competent than their predecessors who died in droves while accomplishing nothing? Indeed, the experience of their predecessors means that they will no doubt start out with morale at rock bottom levels, even before they see any of their comrades incinerated by a Ukrainian ATGM. And their training will be, frankly, shit. They will be missile fodder, and nothing more.

Further, there are stories that replacement stocks of equipment are largely unusable. Not that that really matters, I guess, given how ineffective the front line equipment has proved to be. The best stuff blowed up real good. Just think what’s in store for the not so good stuff.

Moreover, if the Russians can redeploy, so can the Ukrainians now that the threat to the north has been reduced. And they can do so with less attrited units, and on interior lines. Adding more mass to the Donbas front–especially given the low quality of the mass to be added–will just add to the body count.

Putin’s alleged focus on 9 May/Victory Day is pathetic, and illustrates Marx’s maxim about history repeating, first as tragedy, then as farce. Even if by some miracle the Russians achieve some simulacrum of a tactical victory in Donbas . . . it is still Donbas, not Berlin–or even Kyiv/Kiev. A farcical achievement, at best.

So Putin is doomed to either a humiliating climb down (which I doubt he will choose, precisely because it would be humiliating), continuing a grinding, pointless battle that will kill thousands of Russians and Ukrainians (and bring more atrocities in its wake), or heaven forbid, escalating with nuclear or chemical weapons.

Whatever option he chooses, he will be cursed for it. By virtually the entire non-Russian world certainly, and eventually in the Russian world as well. He is deserving of the sobriquet The Accursed, but what death and destruction and poverty he will cause in order to well and truly earn it.

Print Friendly, PDF & Email

March 24, 2022

The London Mulligan Exchange

Filed under: China,Clearing,Commodities,Derivatives,Economics,Regulation — cpirrong @ 3:58 pm

The LME restarted trading of nickel. Well, sort of. In the first five sessions prices were limit down, and trading stopped as soon as the limits were hit. The LME deemed two subsequent sessions “disrupted” and declared the trades in these sessions “null and void.”

In other words: more mulligans after the trade cancellations that followed the spike to $100K/tonne prices. The LME should change its name to the London Mulligan Exchange. Which is not a good look.

Departing LME CEO Matthew Chamberlain tried to shift blame last week, claiming that the problem was that the exchange did not have visibility into risk due to the fact that approximately 80 percent of Tsingshan’s nickel position was in the form of OTC trades with big banks, such as JP Morgan. This is weak excuse. It is highly likely that the banks hedged their Tsingshan exposure on the LME, so the exchange saw the positions, but just didn’t know for sure exactly who was behind them. But the LME has known for months (years actually) that Tsingshan was the elephant in the nickel ring, and that the banks who were short the LME were almost certainly hedging an OTC exposure. The LME should have been able to add two and two.

The price increases today and in the previous session suggest that the short covering is ongoing, and that the “I’m going to hang on to my position” rhetoric from Tsingshan, and the insinuations that the banks were allowing it to extend and pretend, are therefore not correct. It (and perhaps other shorts) are trying to reduce positions. Continued gyrations are therefore likely, and a default that would make recent “disruptions” look like child’s play is not out of the question. The fear of this is likely what is causing the LME to take actions (voiding trades) that only further blacken its already dusky reputation. To a fox caught in a trap, chewing off a leg is the best option.

Print Friendly, PDF & Email

Stalemate . . . And Then What?

Filed under: Civil War,History,Military,Politics,Russia — cpirrong @ 3:36 pm

The Russian invasion of Ukraine has ground to a shuddering halt. Not that it was ever that dynamic, but with the exception of meager gains achieved at great cost in Mariupol, the Russian army is not advancing. Indeed, in crucial sectors, including Kiev and Mykolaiv it is giving ground in the face of local Ukrainian counterattacks (not a counter offensive–that’s something different) and digging in. For now, at least, Russia has shot its bolt. And that bolt did not travel far.

Some of the stories that have been reported are rather remarkable. Most come from Ukrainian sources, so they must be taken with some skepticism, but given the situation on the ground, and a knowledge of the nature of the Russian military they are plausible. For example, desertions of large numbers of soldiers; orders to shoot deserters and malingerers (a tradition dating back to the Russian Civil War and World War II); large numbers of frostbite casualties; appalling medical care; failures to recover the dead; killing of officers (including one story of a tanker driving his vehicle over the legs of his commander in a unit that had suffered 50 percent casualties). Even discounting the most lurid of these stories, this is a picture of an army on the verge of collapse (if not past it). This would be consistent with the near cessation of offensive operations.

Perhaps the most remarkable data point is the largely confirmed (including by official Russian sources in some instances) spate of fatalities among generals and colonels. A handful of generals (including a lieutenant general) have been killed, and many handfuls of colonels are also apparently dead.

These are American Civil War rates of casualties among army, division, brigade, and regimental commanders–and those guys were on horses on the front lines under fire from massed musketry from a hundred or two yards away. Modern warfare has (until now) much safer for colonels and generals.

The explanation being floated by Ukrainian and western sources is that a breakdown in communications has forced these officers to go right to the front to get things under control, where they get taken out by snipers. Well, I’m pretty sure that communications have something to do with it, but I doubt it’s that simple: if it were, casualties among the rank and file would be greater than the (already appalling) 20-25 percent that has been estimated by US and UK sources.

My conjecture is that the communications problems (which I alluded to in earlier posts) have allowed the Ukrainians (likely with US help) to hack and monitor Russian communications, allowing them to target the Russian commanders. In other words: hack them, track them, and whack them.

Regardless, this has to be very demoralizing to both officers and enlisted alike. Further, it exacerbates the command and control problems that the communications issues already created.

So what next? Most likely stalemate, and increased Russian reliance on indirect fire–including most horribly largely indiscriminate shelling and bombing of urban centers, notably Kiev, in an attempt to break the as of now unshaken will of the Ukrainian people and government. The Russians do not have the manpower to mount serious infantry and armor attacks into the cities. They have already taken appalling casualties (human and materiel), and urban combat is a notorious consumer of men and machines.

The biggest potential for a dramatic change in the battle is if the Russians are able to break through on one of the shoulders of the salient in eastern Ukraine, thus allowing them to trap large numbers of the Ukrainian army. This is something I’ve warned about in previous posts. Western military sources have expressed a similar concern lately.

I suspect the Americans and Nato militaries have been telling the Ukrainians about this, but they are reluctant to leave. Hence, “defense officials” are making these concerns public in order to pressure the Ukrainians.

Giving up territory would be a bitter pill to swallow, especially given the success that Ukraine has had on the battlefield. But a flexible defense that trades space for time is advisable if the Russians threaten the bases of the salient. Withdrawal under pressure is difficult, and requires skill. But with well-timed counterattacks and indirect fire to interfere with Russian attempts to press the retreat, the demonstrated inability of the Russians to advance rapidly and to coordinate the movements of their various units, and the lengthening of Russian communications that the Ukrainians have already proven adept at attacking, a withdrawal that takes a far bigger toll on the attackers than the retreaters is very achievable.

So what next, if indeed a stalemate emerges? For better or worse, the initiative is in Putin’s hands. He can choose to accept defeat, fight it out by shelling Ukraine back into the stone age, or escalate in some way. Any escalation (e.g., use of a nuke, tactical or otherwise, attack on a Nato country–such as an attempt to build a corridor between Russia and Kaliningrad, or an attack on staging areas for supplies going to Ukraine) would be a horrible prospect, but cannot be ruled out.

The tone emanating from Russia is increasingly hysterical. Dmitry Medvedev’s recent diatribe on VKontakt is an example. Medvedev claims that the US wants to end “our Motherland,” and

“This means that Russia must be humiliated, limited, shaken, divided and destroyed,” Medvedev wrote, saying if Americans succeed in that objective, “here is the result: the largest nuclear power with an unstable political regime, weak leadership, a collapsed economy and the maximum number of nuclear warheads aimed at targets in the US and Europe.”

One interpretation of this is that Medvedev views the war in Ukraine as being an existential issue for Russia, and merely a battle in a Manichean struggle between the US and Russia, defeat in which would represent the end of the Russian state. Put this together with Kremlin spokesman Peskov’s statement that Russia would use nuclear weapons if the existence of the state is threatened, and the potential for nuclear escalation is very real.

Is this a bluff? Do we want to find out?

The US and Nato have to walk a fine line here, between concessions that could encourage Putin to pocket gains today and seek more tomorrow (and not just in Ukraine) on one hand, and an aggressive response that leads a paranoid, bitter, aggrieved Putin to play Sampson.

Print Friendly, PDF & Email

March 16, 2022

The Current Volatility Is A Risk to Commodity Trading Firms, But They are Not Too Big to Fail

The tumult in the commodity markets has led to suggestions that major commodity trading firms, e.g., Glencore, Trafigura, Gunvor, Cargill, may be “Too Big to Fail.”

I addressed this specific issue in two of my Trafigura white papers, and in particular in this one. The title (“Not Too Big to Fail”) pretty much gives away the answer. I see no reason to change that opinion in light of current events.

First, it is important to distinguish between “can fail” and “too big to fail.” There is no doubt that commodity trading firms can fail, and have failed in the past. That does not mean that they are too big to fail, in the sense that the the failure of one would or could trigger a broader disruption in the financial markets and banking system, a la Lehman Brothers in September 2018.

As I noted in the white paper, even the big commodity trading firms are not that big, as compared to major financial institutions. For example, Trafigura’s total assets are around $90 billion at present, in comparison to Lehman’s ~$640 billion in 2008. (Markets today are substantially larger than 14 years ago as well.). If you compare asset values, even the biggest commodity traders rank around banks you’ve never heard of.

Trafigura is heavily indebted (with equity of around $10 billion), but most of this is short term debt that is collateralized by relatively liquid short term assets such as inventory and trade receivables: this is the case with many other traders as well. Further, much of the debt (e.g., the credit facilities) are syndicated with broad participation, meaning that no single financial institution would be compromised by a commodity trader default. Moreover, trading firm balance sheets are different than banks’, as they do not engage in the maturity or liquidity transformation that makes banks’ balance sheets fragile (and which therefore pose run risk).

Commodity traders are indeed facing funding risks, which is one of the risks that I highlighted in the white paper:

The extraordinary price movements across the entire commodity space have resulted in a large spike in funding needs, both to meet margin calls (which at least in oil should have been reversed with the price decline in recent days–nickel remains to be seen given the fakakta price limits the LME imposed) and higher initial and maintenance margins (which exchanges have hiked–in a totally predictable procyclical fashion). As a result existing lines are exhausted, and firms are either scrambling to raise additional cash, cutting positions, or both. As an example of the former, Trafigura has supposedly held talks with Blackstone and other private equity firms to raise $3 billion in capital. As an example of the latter, open interest in oil futures (WTI and Brent) has dropped off as prices spiked.

To the extent margin calls were on hedging positions, there would have been non-cash gains to offset the losses on futures and other derivatives that gave rise to the margin calls. This provides additional collateral value that can support additional loans, though no doubt banks’ and other lenders terms will be more onerous now, given the volatility of the value of that collateral. All in all, these conditions will almost certainly result in a scaling back in trading firms’ activities and a widening of gross margins (i.e., the spread between traders’ sale and purchase prices). But the margin calls per se should not be a threat to the solvency of the traders.

What could threaten solvency? Basis risk for one. For examples, firms that had bought (and have yet to sell) Russian oil or refined products or had contracts to buy Russian oil/refined products at pre-established differentials, and had hedged those deals with Brent or WTI have suffered a loss on the blowout in the basis (spread) on Russian oil. Firms are also likely to handle substantially lower volumes of Russian oil, which of course hits profitability.

Another is asset exposure in Russia. Gunvor, for example, sold of most of its interest in the Ust Luga terminal, but retains a 26 percent stake. Trafigura took a 10 percent stake in the Rosneft-run Vostok oil project, paying €7 billion: Trafigura equity in the stake represented about 20 percent of the total. A Vitol-led consortium had bought a 5 percent stake. Trafigura is involved in a refinery JV in India with Rosneft. (It announced its intention to exist the deal last autumn, but I haven’t seen confirmation that it has.). If it still holds the stake, I doubt it will find a lot of firms willing to step up and pay to participate in a JV with Rosneft.

It is these types of asset exposures that likely explain the selloff in Trafigura and Gunvor debt (with the Gunvor fall being particularly pronounced.). Losses on Russian assets are a totally different animal than timing mismatches between cash flows on hedging instruments and the goods being hedged caused by big price moves.

But even crystalization of these solvency risks would likely not lead to a broader fallout in the financial system. It would suck for the owners of a failed company (e.g., Torben Tornqvuist, who owns ~85 percent of Gunvor) but that’s the downside of the private ownership structure (something also discussed in the white papers); Ferrarri and Bulgari sales would fall in Geneva; banks would take a hit, but the losses would be fairly widely distributed. But in the end, the companies would be restructured, and during the restructuring process the firms would continue to operate (although at a lower scale), some of their business would move to the survivors (it’s an ill wind that blows no one any good), and commodities would continue to move. Gross margins would widen in the industry, but this would not make a huge difference either upstream or downstream.

I should also note that the Lehman episode is likely not an example of a domino effect in the sense that losses on exposures to Lehman put other banks into insolvency which harmed their creditors, etc. Instead, it was more likely an informational cascade in which its failure sent a negative signal about (a) the value of assets held widely by other banks, and (b) what central banks could or would do to support a failing financial institution. I don’t think those forces are at work in commodities at prsent.

The European Federation of Energy Traders has called upon European state bodies like European Investment Bank or the ECB to provide additional liquidity to the market. There is a case to be made here. Even though funding disruptions, or even the failure of commodity trading firms, are unlikely to create true systemic risks, they may impede the flow of commodities. Acting under the Bagehot principle, loans against good collateral at a penalty rate, is reasonable here.

The reason for concern about the commodity shock is not that it will destabilize commodity trading firms, and that this will spill over to the broader financial system. Instead, it is that the price shock–particularly in energy–will result in a large, worldwide recession that could have financial stability implications. Relatedly, the food price shocks in particular will likely result in massive civil disturbances in low income countries. A reprise of the Arab Spring is a serious possibility.

If you worry about the systemic effects of a commodity price shock, those are the things you should worry about. Not whether say Gunvor goes bust.

Print Friendly, PDF & Email

March 11, 2022

Direct Clearing at FTX: A Corner Solution, and Likely a Dead End With Destabilizing Potential

In a weird counterpoint to the LME nickel story, another big clearing-related story that is causing a lot of consternation in derivatives circles is FTX exchange’s proposal to move to a direct clearing model that would dispense with FCMs as intermediaries. Instead of having an FCM interposed between a customer and the clearinghouse, the customer interfaces directly with the FTX Derivatives Clearing Organization (DCO).

What is crucial here is how this is supposed to work: FTX will utilize near real time mark-to-market and variation margin payments. Moreover, the exchange will automate the liquidation of undermargined positions, again basically in real time.

The mechanics are described here.

FTX describes this as being the next big thing in the derivatives markets, and a way of addressing systemic risks. Basically the pitch is simple: “real time margining allows us to operate a pure no credit/loser pays system.”

FTX touts this as a feature, but as the nickel experience demonstrates (and other previous episodes demonstrate) it is not. Margining generally can be destabilizing, especially during stressed market conditions, and the model FTX is advancing exacerbates the destabilizing potential of margining.

The mechanical means of addressing margin shortfalls on a real time frequency increases the tight coupling on the exchange, and is tailor made to create destabilizing positive feedback loops: prices move a lot leading to margin shortfalls in real time that trigger real time trades that accentuate the price movement. It is like seeding the market with huge numbers of stop orders, which are inherently destabilizing. Further, they can create incentives to manipulate. Anyone who can get some idea of where the stops are can “gun the stops” and trigger big price moves.

This instability potential can be exacerbated by the ability of traders to hold collateral in the form of the “underlying” (i.e., crypto, at present). Well, the collateral value can fluctuate, and that can contribute to margin shortfalls which again trigger stops.

Market participants can mitigate getting stopped out by substantially over-margining, i.e., holding a lot of excess margin in their FTX account. But this is a cash inefficient way of trading.

It’s not clear to me whether FTX will pay interest on collateral. It seems not. Hmmm. Implementing a model that incentivizes holding a lot of extra cash at FTX and not paying interest. Cynic that I am, that seems to be a great way to bet on higher interest rates! Maybe that’s FTX’s real game here.

I would also note that the “no leverage” story here reflects a decidedly non-systemic view (something that I pointed out years ago in my critiques of clearing mandates). Yes, real time margining plus holding of substantial excess margin reduces to a small level the amount of leverage extended by the CCP/DCO. But that is different than reducing the amount of margin in the system as a whole. People who have borrowing capacity and optimal total leverage targets can fund their deposits at FTX with leverage from other sources. They can offset the leverage they normally obtain from FCMs by taking more leverage from other sources.

In sum, FTX is arguing that its mechanism of direct clearing and real time margining creates a far more effective “no credit” clearing system than the existing FCM-intermediated structure. That’s likely true. But as I’ve banged on about for years, that’s not necessarily a good thing. The features that FTX touts as advantages have very serious downsides–especially in stressed market conditions where they tend to accelerate price moves rather than dampen them.

Insofar as this being a threat to the existing intermediated system, which many in the industry appear to fear, I am skeptical. In particular, the cash inefficiency of this mechanism will make it unattractive to many market participants. Not to be Panglossian, but the existing intermediated system evolved as it did for good economic reasons. It trades off credit risk and liquidity risk. It does so in a somewhat discriminating way because it takes into account the creditworthiness of market participants (something that FTX brags is unnecessary in its system). FTX is something of a corner solution that the market has not adopted despite the opportunity to do so. As a result, I don’t think that corner solution will have widespread appeal going forward.

Print Friendly, PDF & Email

A Nickel is Now Worth a Dime: Is the LME Too?

Filed under: China,Clearing,Commodities,Derivatives,Economics,Energy,Regulation,Russia — cpirrong @ 12:18 pm

If you use the official LME nickel and copper prices from Monday, before the exchange stopped trading of nickel, you can determine that the value of the metal in a US nickel coin is worth a dime. As the shutdown lingers, one wonders whether the LME is too.

The broad contours of the story are understood. A large Chinese nickel firm (Tsingshan Holdings, largest in the world) was short large amounts of LME nickel, allegedly as a hedge. But the quantity involved seems very outsized as a hedge, representing something like two years of output. And if the position was concentrated in nearby prompt dates (e.g., 3 months) it involved considerable curve risk.

The Russian invasion juiced the price of nickel, not surprising given Russia’s outsized presence in that market. That triggered a margin call (allegedly $1 billion) that the firm couldn’t meet–or chose not to. That led its brokers to try to liquidate its position in frenzied buying on Monday evening. This short covering drove the price from the close of around $48,000 to over $100,000.

That’s where things got really sick. The LME shut the nickel market. It was supposed to reopen today, but that’s been kicked down the road. But the LME didn’t stop there. It decided that these prices did not “[reflect] the the underlying physical market,” and canceled the trades. Tore them up. Poof! Gone!

Now in a Back to the Future moment echoing the 1985 Tin Crisis, the LME is trying to get the longs and shorts to set off their positions. “Can’t we all just get along?” Well likely not, because it obviously requires agreeing on a price. Which is obviously devilish hard, if not impossible given how much money changes hands with every change in price. (In my 1995 JLE paper on exchange self-regulation, I argued that exchanges historically did not want to intervene in this fashion even during obvious manipulations because of the rent seeking battles this would trigger.)

So the LME remains closed.

Some observations.

First, told ya. Seriously, in my role as Clearing Cassandra during the Frankendodd era, I said (a) clearing was not a panacea that would prevent defaults, and (b) the clearing mechanism was least reliable precisely during periods of major market stress, and that the rigid margining mechanism is what would threaten its ability to operate. That’s exactly what happened here.

Second, clearing is supposed to operate under a “loser pays/no credit” model. That’s really something of a misconception, because even though the clearinghouse does not extend credit, intermediaries (brokers/FCMs) routinely do to allow their clients to meet margin calls. But here we evidently have a situation in which the brokers (or Tsingshan’s banks) were unwilling or unable to do so, which led to the failure of the loser to pay.

Third, by closing the market, the LME is effectively extending credit (“you can pay me later”), and giving Tsingshan (and perhaps other shorts) some time to stump up some additional loans. Apparently JPM and the Chinese Construction Bank have agreed in principle to do so, but a deal has been hung up over what collateral Tsingshan will provide. So the market remains closed.

For its part, Tsingshan and its boss Xiang “Big Shot” Guangda are hanging tough. The company wants to maintain its short position. Arguably it has a strong bargaining position. To modify the old joke, if you owe the clearinghouse $1 million and can’t pay, you have a problem: if you owe the clearinghouse billions and can’t pay, the clearinghouse has a problem.

The closure of the market and the cancelation of the trades suggests that the LME has a very big problem. The exact amounts owed are unknown, but demanding all amounts owed now could well throw many brokers into default, and the kinds of numbers being discussed are as large or larger than the LME’s default fund of $1.2 billion (as of 3Q21 numbers which were the latest I could find).

So it is not implausible that a failure to intervene would have resulted in the insolvency of LME Clear.

The LME has taken a huge reputational hit. But it had to know it would when it acted as it did, implying that the alternative would have been even worse. The plausible worst alternative would have been a collapse of the clearinghouse and the exchange. Hence my quip about whether the exchange that trades nickel is worth a dime.

Among the reputational problems is the widespread belief that the Chinese-owned exchange intervened to bail out Chinese brokerage firms and a Chinese client. To be honest, this is hard to differentiate from intervening to save itself: the failure of the brokerages are exactly what would have brought the exchange into jeopardy.

I would say that one reason Xiang is hanging tough is that the CCP has his back. Not CCP as in central counterparty, but CCP as in Chinese Communist Party. That would give Tsingshan huge leverage in negotiations with banks, and the LME.

So the LME is playing extend and pretend, in the hope that it can either strongarm market participants into closing out positions, or prices return to a level that reduce shorts’ losses and therefore the amounts of variation margin they need to pay.

I seriously wonder why anyone would trade on the open LME markets (e.g., copper) for reasons other than reducing positions–and therefore reducing their exposure to LME Clear. The creditworthiness of LME Clear is obvious very dodgy, and it is potentially insolvent.

Fourth, in an echo of the first point, this episode demonstrates that central clearing, with its rigid “no credit” margining system is hostage to market prices. This is usually presented as a virtue, but when markets go wild it is a vulnerability. Which is exactly why it is–and always was–vain to rely on clearing as a bulwark against systemic risk. It is most vulnerable precisely during periods of market stress.

All commodity markets are experiencing large price movements that are creating extraordinary variation margin flows, potential positive feedbacks, and the prospect for troubles at other clearers. Further, the broader economic fallout from the Ukraine war (which includes, for example, a large recession resulting from the commodity price shocks, or a Russian debt default) has the real potential to disrupt equity and bond markets. This would put further strains on the financial markets, and the clearing system in particular. Central Banks–notably the Fed–had to supply a lot of liquidity to address shocks during the Covid Panic of March 2020. Two years later, they may have to ride to the rescue again.

Print Friendly, PDF & Email

March 6, 2022

Putin in Zugzwang

Filed under: History,Military,Politics,Russia,Ukraine — cpirrong @ 7:13 pm

A chess player is said to be in zugzwang when he has to make a move, but any available move worsens his position. I think it is fair to say that Putin is currently in zugzwang in Ukraine due to the myriad operational, tactical, logistical, and intelligence failures of his invasion forces.

What are his available moves?

One would be just call the whole thing off, withdraw to Russia, and say “never mind.” That would represent an admission of humiliating failure, which would be not just completely out of character, but an act that usually seals the doom of autocrats. And it would probably not result in a return to the status quo ante: Russia would still be a pariah, and subject to myriad non-military punishments.

The other is to forge ahead. But that will almost certainly entail protracted battles on urban terrain, especially Kiev. (I seriously doubt Russia has the wherewithal to fight simultaneous city battles in Kiev, Kharkov, Odessa, etc.) Urban battles are notorious consumers of men and materiel. Given Russia’s manpower limitations, the most likely approach will be to utilize massive quantities of artillery, turning cities to rubble while killing countless civilians. To paraphrase French General Koechlin-Schwartz speaking to Patton about American infantry in WWI: “The poorer the infantry, the more artillery it needs; the [Russian] infantry needs all it can get.” Further, Putin evidently has no scruples about employing the firepower against civilians.

So which of these two bad options will Putin choose? From Putin’s perspective, the second is decidedly superior. He is willing to fight to the last Ukrainian, his paeans to the unity of the Russian and Ukrainian people notwithstanding. Moreover, he can see some prospect of “victory” from this approach: if terror breaks the will of the Ukrainian government or the Ukrainian people, they will capitulate to his demands, and he will achieve his stated objective of subjugating Ukraine and removing it from the Western orbit.

This means that to Putin, the center of gravity of this conflict has now become the Ukrainian people and government. But history and operational realities are not on his side. Throughout the 20th century in particular, campaigns designed to win victory through terror (e.g., the London Blitz, the Allied bombing campaigns against Germany and Japan) have not broken the will of the enemy populace, and have often strengthened it. If Ukrainian will holds, Putin is unlikely to succeed. Given his limited numbers, their demonstrated tactical incapacity, and his army’s appalling logistics, the voracious maw of urban battle will consume the Russian army. All of his paper advantages–especially air power (not that he has utilized it effectively–are largely negated once the battle moves to the streets. Then it becomes war to the knife. Thus, Putin’s odds of taking control of Ukraine are low, but they are not zero. So it the best of his bad options.

It is important that the Ukrainians avoid a mistake that would help Putin redeem his currently grim prospects. In particular, their forces in the east are vulnerable to an attack breaking out of the Black Sea coast. They need to be willing to trade space for time and withdraw if that flank appears at any risk of cracking (assuming that they can manage the logistics of a withdrawal, and Russian air power does not exhibit a competence that has been lacking so far). Politically this is challenging because it sacrifices territory to a hated enemy: even an autocrat like Alexander I faced bitter criticism when employing it. But it has proved time and again the best way to prevail–eventually–against an invader on the steppes. As Russians have showed on multiple occasions. And I would argue that it is likely to be particularly effective given the Russians’ obvious logistical deficiencies: a withdrawal would extend their already groaning supply lines, and make them even more vulnerable to a variety of different kinds of attack (drones, guerrilla raids).

Ironically, Putin’s center of gravity is the same as his enemy’s: his population. Putin can continue a murderous campaign as long as the Russian people support it. At present, it appears that scattered protests aside, that flank is secure. Chauvinism combined with propaganda and a ruthless control of the information that Russians receive mean that at present there is either broad support for, or at least not broad opposition to, his invasion.

Severe economic distress resulting from sanctions is the most likely threat to this support. No doubt Putin’s regime will portray any such distress as evidence that Russia’s enemies truly intend to destroy it, and this will resonate with many Russians. But perhaps enough will realize that he is consigning them to misery for no prospect of real gain that Putin’s center of gravity will begin to crack.

Given all this, I estimate that the most likely outcome is a protracted, bloody stalemate lasting for months on the streets of Ukraine’s cities. If it could be guaranteed that the conflict would remain conventional, Nato intervention (through air power alone) could be decisive in days. But Russian doctrine has a low threshold for the employment of nuclear weapons, and that threat has to be taken very seriously. Thus, it is likely that Putin will grind on, under the cover of his nuclear shield.

Not a pretty prospect, but it’s hard to see Putin choosing differently.

Finally, a comment on some domestic US effects of this conflict. It is a depressing picture. Those on the Trump right detest Ukraine for its involvement with various efforts to undermine–and indeed, unseat–Trump. As a result, they are are clearly anti-Ukraine, and in many cases pro-Putin.

It must be said that Ukraine did make some horrible misjudgments. Thoroughly enmeshed in the US foreign policy establishment (Victoria Nuland, anyone?) and the Democratic Party (Hunter Biden, anyone?), and buying into the narrative that Trump was Putin’s puppet and therefore inimical to their interests, Ukraine played a part in the anti-Trump campaign that consumed his administration.

For that they are paying a price. Indeed, their fate would almost have certainly been better had Trump been reelected: it clearly could not have been worse. A Russian reporter friend asked me if this would be happening if Trump were still president. I cautioned against putting too much credence in alternative history, but made one observation. Putin’s ambitions haven’t changed, but his actions have.

Regardless of the folly of Ukrainian involvement in US politics, they do not deserve their current fate. They made a miscalculation about the best way to protect themselves against Putin, but it was clearly not wrong to seek desperately such protection–as current events bloodily demonstrate.

There is a single individual responsible for the current calamity: Vladimir Putin. Even if some Ukrainian actions enabled him, that does not mean that they deserve their current miseries. It is therefore beyond disgusting that a clique of Trump right chatterers cheer on Putin and fight against efforts to aid Ukraine.

And insofar as American interests are concerned, Putin’s public statements make it clear that subjugating Ukraine is not the limit of his ambitions. He has demanded the abandonment of everything east of the Elbe to Russian domination. Ukraine has laid bare his inability to achieve that using conventional military force, but that should hardly be consoling, given the only alternative available to him. He must be fought in Ukraine, and since direct US and Nato involvement is extremely risky due to the nuclear threat, that means finding all means to support a war of attrition in Ukraine. Ukraine has demonstrated its will to fight that grim war, and interest and compassion compel the US to support them.

It is important to avoid false choices. (I consider it ironic that the anti-Ukraine right in the US constantly offers false choices–e.g., “how can you defend the Ukrainian border when you don’t defend America’s?”–given that Obama was the master of the false choice. Imitation is the sincerest form of flattery.) It is possible to deal with those in the US whose misjudgments and manipulations greatly contributed to the current situation at the proper time while making the best choices on how to proceed from where we are–even if where we are is largely the product of those misjudgments and manipulations.

You have to play it as it lies. Sunk costs are sunk. The current lie is hardly ideal, the product of locust years, but the best play is not to abandon Ukraine and embolden Putin. The reverse is true.

Print Friendly, PDF & Email

« Previous PageNext Page »

Powered by WordPress