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US Sanction Policy Drives China Into Russia's Loving Arms

The global response to Russia has one huge beneficiary, China. The war accelerates a trend in place set in motion by Trump.
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Image WhiteHouse.Gov, Caption by Mish

Image WhiteHouse.Gov, Caption by Mish

The China Connection

My March 6 Comments

  • Outside of hard currency, what does Russia need? 
  • Technology? 5G? Parts and supplies from the US via China?
  •  Look for China to take advantage in many ways.

March 7 Eurointelligence: China Will Bail Out Russia

Please consider China Will Bail Out Russia by Eurointelligence founder Wolfgang Münchau.

We read about a small, but revealing anecdote of how Huawei, itself sanctioned by US, is helping the Russian government fend off western hacker attempts. This is not what we call a verified story. It appeared on a Chinese website, and was then deleted. But Huawei later said that it would use its capacity to train 50,000 technical experts in Russia. The two most sanctioned entities in the world, Huawei and the Russian government, are colluding.

Huawei is a cautionary tale for trigger-happy sanctions advocates. Trump’s sanctions mean that Huawei was no longer able to use Google’s Android operating system for Huawei smartphones. Nor could Huawei source US developed microchips. Huawei’s phone sales plummeted. Its flagship model launched last year was not available for sale in Europe and the US. But Huawei has since replaced its Android with its own operating system, HarmonyOS. Western sanctions had a negative impact on Huawei’s sales and profits in the short term. But they will make the company stronger in the long run.

The whole idea of economic sanctions is premised on the notion of western monopolies and monopsonies. This was the world of a bygone age. The only real monopolies we see emerging are China’s and Russia’s hold on important raw materials, which the west needs to import. Western-dominated financial infrastructure, like the Swift payment communications system, are losing their monopoly status. China and Russia have built their own infrastructure. And when Visa, Mastercard and American Express stopped business in Russia over the weekend, Russia switched to a Chinese system.

Russia vs Germany and France

Münchau notes seriously wrong analysis of Russia by Western media along this line of thinking: Russia is only the economic size of Belgium. That line of reasoning is based on the plunging Ruble.

But the Russian 2020 population is 144 million. The German population is 83 million and France 67 million, totaling 150 million. 

That's a better comparison. But here's an even better way of looking at things.

Russia and Ukraine Exports

  • Russia and Ukraine are key exporters of C4F6 and neon gas. Ukraine produces about 25% of the neon used in global semiconductor production.
  • Russia produces about 12 percent of platinum and 40 percent of palladium used in automotive catalytic converters. 
  • Russia produces 3.9 metric tons of aluminium (6% of world supply). Russia and Ukraine together account for about 10% of global steel exports, according to SteelMint.
  • Russia is the third-largest producer of petroleum after the U.S. and Saudi Arabia, exporting almost 5 million barrels a day of crude oil in 2020, according to the U.S. Energy Information Administration.
  • Russia produces about 12 percent of the world's oil and 17 percent of its natural gas, according to estimates from J.P. Morgan. 
  • Russia and Ukraine account for about one third of global wheat exports.
  • Russia supplies about half of Airbus titanium needs, while a U.S. industry source said  Russia provided a third of Boeing's requirements.
  • Caspar Rawles, chief data officer at specialist consultancy Benchmark Mineral Intelligence (BMI), said that while Russia accounts for 5% of global nickel production, it supplies about 20% of the world's high-grade nickel.

Spotlight Titanium 

Reuters reported yesterday that Boeing Suspends Russian Titanium as Airbus Keeps Buying

"We have suspended purchasing titanium from Russia. Our inventory and diversity of titanium sources provide sufficient supply for airplane production," Boeing said in an emailed statement.

The head of state-controlled VSMPO-AVISMA hit out at Boeing's decision to suspend the contract, which had been renewed four months ago at the Dubai Airshow where Boeing pledged to keep the Russian company as its largest titanium supplier.

For now it appears Boeing had a stockpile and Airbus doesn't. Then again, Barron's says Boeing Might Have a Russian Titanium Problem

Given US sanctions forced Boeing to halt business with Russia, Boeing's statement reads a bit hollow.

Spotlight Nickel

Yesterday I commented Nickel Market Breaks, Price Doubles to $100,000 In 1 Day, Deliveries Fail

Palladium, Lead, Tin, Zinc

Oil Question of the Day

My Comment to US Senator Ed Markey

Not That Simple

Dear Venezuela Please Send Help!

How stupid is this?

U.S. Officials Meet With Regime in Venezuela, to Discuss Oil Exports to Replace Russia’s

Scroll to Continue

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Gold 

Ban Bans?

We can safely rule that idea out.

Senator Rubio says "I am working on legislation that would impose sanctions on #China if we catch trying to use their Cross-Border International Payments System (CIPS) to help #Russia get around SWIFT sanctions"

Great Idea Senator! 

Let's halt global trade altogether! 

What can possibly go wrong? I am sure Biden can work out a deal with Venezuela that will save us all. 

Let's ban all of Russia and China too (on top of Venezuela and Iran). 

Six Reasons Huge Demand Destruction Coming Up

  1. Stimulus wearing off
  2. Fed tightening
  3. Mortgage rates low but rising will kill cash-out refis and reduce purchases
  4. Wealth effect of stock market collapse will be enormous
  5. Neither China nor the US can save the global economy
  6. Massive commodity inflation

Not to worry, nearly everyone tells me "No Recession".  A few brave souls agree with me.

Buy Gold

In case you missed it, please see Macro Dream Team Videocast Parts One and Two

A Recession Looms, Blame the Fed and Biden, Not Russia

A recession fueled by collapsing demand, a liquidity crunch, and fading stimulus effects is coming up. Inflation sure doesn't help.

My March 3 Call: A Recession Looms, Blame the Fed and Biden, Not Russia

To stem off ridiculous replies, Russia will not be the "cause" but the war in Ukraine and the global reaction to it will make things dramatically worse.

Oil Irony

Today we have Oil Irony: US and UK to Ban Russian Oil, Russia Threatens the Same

Question to Fed: Can you print oil, titanium, nickel, wheat, aluminum, neon, or gold? 

If not, what do you propose?   

Meanwhile, let's all pray Biden does not follow Rubio's suggestion and start a global depression.

This post originated on MishTalk.Com.

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