Tensions are rising across the globe and commodities will benefit.
The geopolitical events of summer 2014 may go down in history as a decisive turning point in world affairs. Tensions across the Middle East and the European continent are reaching a high point and may soon reach a point of no return.
In this report, we examine the global macroeconomic scenario and what impact this will have on the performance of commodities. This will allow us to pick our investment spots as we move into the final quarter of the year.
Tumultuous Times In Europe
A storm is brewing in Europe and the Middle East that could drag the world’s superpowers into regional conflicts that could escalate into a much broader war encompassing several countries across several continents. Let’s start in Europe.
The last time events similar to those in 2014 happened in Europe were right before the outbreak of World War II in the late 1930s. In the summer of 2014, Putin-led Russia annexed Crimea, a province that had been part of Ukraine for decades.
The annexation took most of the international community by surprise, as much by its speed as by its effectiveness. Almost overnight, Russian troops entered the Crimea, and Moscow declared it a part of the Russian Federation. The annexation was so swift and complete that a few months later, Vladimir Putin signed a law legalizing gambling in the Crimea.
The response from NATO countries was to issue warnings and targeted sanctions against Russian individuals and companies. Those sanctions seem to have done nothing; in fact, the situation has only deteriorated since then.
During the last week of August, Russia sent 1,000 Russian soldiers into Eastern Ukraine, well inside Ukraine’s international recognized borders. This 1,000-man army came in with tanks and antiaircraft and heavy artillery military equipment.
Furthermore, Russian-backed militants have been inside of Eastern Ukraine for some time now. These militants shot down a Malaysia Airlines civilian aircraft that was flying from the Netherlands to Malaysia, claiming more than 200 victims.
The response from NATO has been to increase sanctions which, in a previous column, I argued didn’t have any real teeth and would do little to spur a change of behavior from the Kremlin.
The rhetoric has become so heated that Vladimir Putin explicitly warned to “not mess with Russia” because of its status as a nuclear power with thousands of nuclear warheads at its disposal.