3/19/13 12:01 PM – Recent Russian Actions & Their Effect on Investments This Year

The markets have recently shown pretty much the same apathy toward Russia’s recent aggression in Crimea that most war-weary U.S. citizens have. For most, it’s pretty far away and didn’t the Crimeans vote to reattach themselves to Russia, anyway? Well, maybe with the help of some military intervention, arrests and intimidation, but still, Crimea is overwhelmingly populated by ethnic Russians and their parents were less than happy when Kruschev gave Crimea to the Ukrainians back in the 1950s. Of course, Ukraine was also part of the USSR back then.

Speaking of the old USSR, my view is that Putin would dearly love to put as much of it back together as he can and Crimea was by a mile the easiest first step in doing that, similar to Hitler’s first step in taking over German-speaking Austria, a country that was for many years one country with Germany. Of course, Hitler didn’t stop there, and while Vladimir Putin has a personality far different from the Fuhrer’s, I think the overall strategy may be similar.

What happens in the rest of Ukraine could be very telling. Or, we might find that other former Soviet country with a large ethnic Russian population will (with a little behind the scenes help) get their own notion of a “Russian Spring.” The countries with the heaviest percentage of ethnic Rusians would be Latvia and Estonia (NE of Poland for the geographically challenged). Parts of Estonia are as much as 80%+ ethnic Russian. The percentage is much lower in Lithuania and Latvia, the other “Baltic states,” but once things get rolling, you never know. The Arab Spring spread pretty quickly, though the religious and ethnic makeup is more homogenous in North Africa.

By the way, the percentage of Ukrainians and Kazakhstanians, the latter country being by far the largest former Soviet satellite country and much farther east, are 17% and 24% respectively. Both are down dramatically from the percentages in the late 1970s that were closer to 40%. But as we have seen before, a minority can rule a majority when elections are fraudulent or the military and propaganda machine is rolling.

My politics will show here, but President Obama seems to have graduated with honors from the Jimmy Carter School of Foreign Diplomacy, with a major in Naivete and a minor in Iranian Studies. The Russian “reset” from early in his presidency was a disaster – a first lesson to Putin and others in talking loudly and carrying a small stick. It’s just so odd, because President Obamaa has played real political hardball on domestic issues like no one since LBJ.

That first lesson in foreign wimpyness was followed by lessons in handling the Iranian nuclear enrichment program and Syria. In the latter, the president breathed a big sigh of relief when he was called out on his threat to do something when Assad crossed the red line by using chemical weapons in-country. President Obama was able to get a diplomatic solution in which Assad promised to have his chenmical weapons identified and destroyed. The percentage of his weapons destroyed so far? Try a whopping 5%. Score: Syria 1, US 0. President Obama actually crowed about the Syrian solution in his State of the Union address.

The pattern is plain and it is a green light to Vladimir Putin. What other power will stop him – the amalgamation of little European countries and their little armies? The Chinese? The Japanese?

For now, I have not changed any investments because of the Russian situation and don’t plan on it. But, if I hear strong rumblings in Ukraine, the Baltics or Kazakhstan I may change that tune. In the meantime, best not to fret about investments and wait and see.

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