Notes on a War
The invasion of Ukraine dominates the western brain-scape. Our politicians are responding emotionally and intervening in financial systems they don't understand. I wonder if it will go well …

A few weeks ago, I wondered how crazy 2022 might get. Putin responded, And he shocked the world.
In Ukraine, people are suffering and dying. Beyond that, it is very difficult to tell what is actually happening or why. Some news sources say Russia is winning easily. Other stories say the brave Ukrainians are holding out.
Flipping between rt.com (Russian propaganda) and skynews.com (British propaganda) brings psychedelic levels of unreality. The news is led by frenzied emotion and that tells me public opinion is being heavily manipulated … But to what ends?
Mackinder's geopolitics are being played out in and around Ukraine. The prize is control of trade on the Eurasian landmass which contains the majority of the world’s land, people and natural resources.
Controlling Eurasian energy markets could bring vast wealth, plus political and military power. And history shows that humans will do pretty much anything for wealth and power.
Russia and the post-WW2 order
This, ultimately, is a fight between the US and Russia, centered on Ukraine. They are fighting to achieve different, but overlapping aims. Today, it looks like:
- Russia is winning a land war in Ukraine – primarily for military security. Ukraine joining NATO would put Moscow within 4-5 minutes of NATO missiles. That, Russia will not accept.
- The United States is winning an information war to contain Russia and wrest control of the European natural gas market.
After trying to wriggle out of NATO and the dollar system for years, Germany (and the EU) are recommitting to Cold War politics; increasing defence spending, halting the Nord Stream 2 pipeline, building up a coal reserve, building infrastructure to import US liquefied natural gas (LNG), and putting aside their ambitious climate change measures.
Nord Stream 2
I previously wrote that preventing the Nord Stream 2 (NS2) gas pipeline was a core US interest. Trump did us a favour by being open about why he wanted NS2 stopped:
“I think it is very sad when Germany makes a massive oil and gas deal with Russia … It should never have been allowed to happen … Germany is totally controlled by Russia because they will be getting 60 to 70% of their energy from Russia and a new pipeline … You tell me if that’s appropriate because I think it’s not … I think energy is a whole different story. I think energy is a much different story than normal trade" —US President Donald J. Trump.
This was predicted
Six years ago, John Mearsheimer, Professor of Political Science at the University of Chicago warned:
“The West is leading Ukraine down the primrose path & the end result is Ukraine is going to get wrecked.”
Weaponizing the financial system
In response to Russia's invasion, the EU and US have declared financial war on Russia by restricting their access to the SWIFT payments system (among other measures). Dylan Grice:
Never seen weaponization of money on this scale before … You only get to play the card once. China will make it a priority to need no USD before going for Taiwan. it’s a turning point in monetary history: the end of USD hegemony & the acceleration towards a bipolar monetary order.
Unintended consequences
Our leaders are playing with fire. Namely, weaponizing hugely complex systems that no-one fully understands.
In 2014 some US officials wanted to ban Russia from SWIFT. But former president Barack Obama prevented it, warning of risks to the global, dollar-based currency system:
We cannot dictate the foreign, economic and energy policies of every major power in the world. In order to even try to do that, we would have to sanction, for example, some of the world's largest banks. We'd have to cut off countries like China from the American financial system. And since they happen to be major purchasers of our debt, such actions could trigger severe disruptions in our own economy, and, by way, raise questions internationally about the dollar's role as the world's reserve currency.
His Secretary of State John Kerry agreed:
What happens when we walk in on them and tell them we have to tighten sanctions down on Russia because of Ukraine? There will be an increase in this notion that there ought to be a different reserve currency because the US is misbehaving and not living by the agreements that it negotiates itself.
The EU escalates
The US and Russia have vast experience at waging kinetic, financial, cyber and other kinds of warfare we may not have heard of. EU leaders has no experience in any of this, so declaring financial war on Russia is wild move.
Looking at Stoltenberg (NATO), von der Leyen (EU), Johnson, Truss (UK), Sholz, Habeck, Bärbock (Germany), and Lagarde (ECB). I do not see people cut out for going toe-to-toe with Putin.
The west wants it both ways
The US and EU are imposing financial sanctions on Russia, while buying increasing volumes of Russian oil and gas. The Financial Times reported the following:
The goal will be to avoid undermining mechanisms for western economies to purchase energy from Russia. The allies have not finalised the details, but will either carve out certain energy-focused banks or use product definitions in the Swift system to permit energy-related transactions.
Gold as a weapon
As the US and EU use the financial system as a weapon, Putin looks to be using gold as a counter measure. It response to SWIFT sanctions, the Russian Central Bank has started buying gold:
MOSCOW, Feb 27 (Reuters) - Russia's central bank on Sunday said it would resume buying gold on the domestic market from Feb. 28, as it undertakes measures to try and ensure financial stability during Western sanctions against Moscow for its invasion of Ukraine.
In his book Currency Wars, Jim Rickards gives detailed warnings of how Russia could weaponize gold against the dollar system via the oil market.
As long as Russia accepts payment in US dollars, they are stuck in a system controlled by a hostile power.
A major oil producer switching away from the US dollar would throw a large rock into the centre of the global financial system. Putin could do this by accepting gold as direct payment for oil and gas.

Inflation is coming
War is inflationary. Financial war is inflationary. As usual this will screw the poor. But it's worth it, according to the White House press secretary:
As you heard the President say last week, standing up for our values is not without cost. What we’re trying to do is minimize that cost. So, I don’t have a prediction of it right now because we’re trying to minimize the impact on the global energy markets.
I am not a soothsayer and I don't have a crystal ball, but the global financial system risks a major accident in the near future.
Get real.
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