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Global Research: Ukraine

DISCLAIMER: Since filming in February, geo-political events have rapidly unfolded in Ukraine. Despite recent events, Eric Fine's investment perspective remains steadfast.


Ukraine


ERIC FINE: I've been looking at Ukraine for over twenty years and I often go there thinking that there's no point in going. You think you can get information but it's not clear if what you hear is going to be true the next day. Despite that, I still try to go.


It seems to me that there’s an intractable conflict between the East and the West, and it could be a fight to the end. Current political authorities see their loss as not just a loss of fighting another day, but rather imprisonment or worse.  The same holds true for the so-called opposition.  If the opposition loses, it's not as if they will have a revolution in a couple years; they will end up in jail or worse.


The broader context also seems intractable.  What is Russia going to do to help Ukraine?  They already promised $15 billion.  Russia gave Ukraine $3 billion as the first tranche and Ukraine blew through the $3 billion in one month defending their currency, which is what you're not supposed to do with the money.  What is the U.S. and the West going to do? Are they going to give money and if so to whom?  The current government?  The current government has to go before the Ukraine government is going to get any money.  Moreover, the IMF staff have a lot of experience with Ukraine.  The staff definitely doesn't want to deal with Ukraine but I'm not discounting the idea that top-down people from the White House, Brussels, and the IMF can just decide that it's important. They have to at least know whom to give the money to, and they can't give it to the current government.  The narrow political context seems intractable and the broad context seems intractable.  I don't see how U.S. or Russia can get involved constructively.  If anything, it seems like a proxy for the tension between the U.S. and Russia.


Lastly, the economy is falling apart. Reserves are declining and Ukraine is putting on capital controls instead of devaluing their currency.  I wouldn’t be surprised by a run on the banks. I think the scenario of civil war and perhaps a civil war that has broader implications for the region is a scenario we have to think about.  It's hard to assign probabilities to that, but the market seems to be saying it's zero and I think zero is definitely the wrong answer. As a result, we’ve had many conversations about how normally this is what we would think of these countries but now we need to put a little minus next to it because of the situation in Ukraine.


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