Tag Archives: Natural Resources

How Ukraine Lost Its Riches, by Moon of Alabama

Ukraine has already lost most of its top-grade farmland and mineral resources. From Moon of Alabama at moonofalabama.org:

On February 24, the day Russian troops crossed the borders to Ukraine, I wrote about the potential end state of the operation:

Looking at this map I believe that the most advantageous end state for Russia would be the creation of a new independent country, call it Novorussiya, on the land east of the Dnieper and south along the coast that holds a majority ethnic Russian population and that, in 1922, had been attached to the Ukraine by Lenin. That state would be politically, culturally and militarily aligned with Russia.


biggerThis would eliminate Ukrainian access to the Black Sea and create a land bridge towards the Moldavian breakaway Transnistria which is under Russian protection.

The rest of the Ukraine would be a land confined, mostly agricultural state, disarmed and too poor to be build up to a new threat to Russia anytime soon. Politically it would be dominated by fascists from Galicia which would then become a major problem for the European Union.

On March 19 I revisited the question and added Kryvyi Rih (Kriwoi Rog in Russian), the yellow part of the map, to the list:

Novorossiya roughly includes the red and yellow areas in the above map. It also includes the valuable Soviet developed iron ore mines and factories of Kryvyi Rih west of the Dnieper river.

I especially want to point out that I spoke of a “mostly agricultural state, disarmed and too poor to be build up to a new threat to Russia anytime soon.”

I could say that because nearly all of Ukraine’s resources and industries are in the south and east. If Russia takes those or creates the new state of Novorossiya the ‘rest of Ukraine’ will be mostly de-industrialized. Also of note is that the south and east include most of the famous black soil areas, which consists of a half meter deep humus layer that allows for good agricultural results without using much fertilizers.

Much of the steel and heavy machine industries in the south and east have been neglected over the last 30 years under Ukrainian rule or were destroyed during the wars that are raging since 2014. It will require very large investments to revive them but the potential profits will be great.

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Why The West Lusts After Ukraine, by Larry Johnson

Notwithstanding that Ukraine has one of the poorest economies in Europe, it’s loaded with natural resources and is an agricultural powerhouse. From Larry Johnson at sonar21.com:

Until Joe Biden took office I thought that George W Bush had dibs on the “stupidest foreign policy blunder in history” award. His decision to invade Iraq rather than eliminate Al Qaeda hurt the United States and fueled international terrorism. But leave it to Joe Biden to one-up W by imposing sanctions on Russia that are inflicting an economic holocaust on the United States and Europe. Heck of a job, Joe.

The ostensible reason for “punishing” Russia with sanctions that actually pummel the west was Putin’s invasion of Ukraine. Now we all know that Ukraine was/is the poorest nation in Europe. Right?

Ukraine is one of the worst off countries after the collapse of the USSR. It is the poorest country in Europe despite having a huge aerospace industry, natural resources and some of the most fertile land for agriculture. During the communist era, Ukraine was the breadbasket of the Soviet Union. Despite all this, Ukrainians have experienced terrible famines such as the Stalinist Holodomor.

Today, the situation is not much better. Apart from enduring a war with Russia, its political system is particularly corrupt. Almost the entire economy is in the hands of big oligarchs: millionaires who amass fortunes thanks to their connections with political power.

Let me share with you some critical facts about Ukraine and its economic potential. When you consider these facts you will likely wonder why Ukraine is not one of the richest nations in Europe.

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These Charts Show Russia’s Invasion Choking World Of Natural Resources, by Tyler Durden

When it comes to natural resources, Russia has the world by the balls. From Tyler Durden at zerohedge.com:

For weeks, we’ve detailed how Russia’s invasion of Ukraine has sparked one of the most significant commodity shocks the world has ever experienced. It even supersedes changes to commodity markets in the 1970s and involves every commodity from grain to fertilizer to crude to metals.

In a series of charts (provided by Bloomberg), we will show just how the Ukrainian conflict and Western sanctions on Russia are choking the world’s supply of natural resources, driving up prices.

Russia is a top exporter of many commodities.

Here is the share of Russian exports for each region of the world. The U.S. and allies implementing bans on Russian crude and other commodity exports have disrupted global trade and unleashed supply constraint fears (here’s why banning Russian crude imports is risky).

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Pop Goes The Alpha ( Natural Resources), by David Stockman

Coal miners, like frackers, like Puerto Rico (see “They Said That, 8/3/15“) are going bust as the debt expansion gives way to debt contraction. It will soon be impossible to pretend that such insolvencies are isolated and will remain contained, just as it became impossible to pretend that declining house prices and worthless mortgage securities and derivatives would not spread on the last go around. From David Stockman at davidstockmanscontracorner.com:

If you want a cogent metaphor for the central bank enabled crack-up boom now underway on a global basis, look no further than today’s scheduled chapter 11 filling of met coal supplier Alpha Natural Resources (ANRZ). After becoming a public company in 2005, its market cap soared from practically nothing to $11 billion exactly four years ago. Now it’s back at the zero bound.

Yes, bankruptcies happen, and this is most surely a case of horrendous mismanagement. But the mismanagement at issue is that of the world’s central bank cartel.

The latter have insured that there will be thousands of such filings in the years ahead because since the mid-1990s the central banks has engulfed the global economy in an unsustainable credit based spending boom, while utterly disabling and falsifying the financial system that is supposed to price assets honestly, allocate capital efficiently and keep risk and greed in check.

Accordingly, the ANRZ stock bubble depicted above does not merely show that the boys, girls and robo-traders in the casino got way too rambunctious chasing the “BRICs will grow to the sky” tommyrot fed to them by Goldman Sachs. What was actually happening is that the central banks were feeding the world economy with so much phony liquidity and dirt cheap capital that for a time the physical economy seemed to be doing a veritable jack-and-the-beanstalk number.

In fact, the central banks generated a double-pumped boom——first in the form of a credit-fueled consumption spree in the DM economies that energized the great export machine of China and its satellite suppliers; and then after the DM consumption boom crashed in 2008-2009 and threatened to bring the export-mercantilism of China’s red capitalism crashing down on Beijing’s rulers, the PBOC unleashed an even more fantastic investment and infrastructure boom in China and the rest of the EM.

During the interval between 1992 and 1994 the world’s monetary system—–which had grown increasingly unstable since the destruction of Bretton Woods in 1971——took a decided turn for the worst. This was fueled by the bailout of the Wall Street banks during the Mexican peso crisis; Mr. Deng’s ignition of export mercantilism in China and his discovery that communist party power could better by maintained from the end of the central bank’s printing presses, rather than Mao’s proverbial gun; and Alan Greenspan’s 1994 panic when the bond vigilante’s dumped over-valued government bonds after the Fed finally let money market rates rise from the ridiculously low level where Greenspan had pegged them in the interest of re-electing George Bush Sr. in 1992.

From that inflection point onward, the global central banks were off to the races and what can only be described as a credit supernova exploded throughout the warp and woof of the world’s economy. To wit, there was about $40 trillion of debt outstanding in the worldwide economy during 1994, but this figure reached $85 trillion by the year 2000, and then erupted to $200 trillion by 2014. That is, in hardly two decades the world debt increased by 5X.

To be sure, in the interim a lot of phony GDP was created in the world economy. This came first in the credit-bloated housing and commercial real estate sectors of the DM economies through 2008; and then in the explosion of infrastructure and industrial asset investment in the EM world in the aftermath of the financial crisis and Great Recession. But even then, the growth of unsustainable debt fueled GDP was no match for the tsunami of debt itself.

At the 1994 inflection point, world GDP was about $25 trillion and its nominal value today is in the range of $70 trillion—-including the last gasp of credit fueled spending (fixed asset investment) that continues to deliver iron ore mines, container ships, earthmovers, utility power plants, deep sea drilling platforms and Chinese airports, highways and high rises which have negligible economic value. Still, even counting all the capital assets which were artificially delivered to the spending (GDP) accounts, and which will eventually be written-down or liquidated on balance sheets, GDP grew by only $45 trillion in the last two decades or by just 28% of the $160 trillion debt supernova.

To continue reading: Pop Goes The Alpha