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Russia and China Rapprochement Akin to Porcupines Mating

Politics / GeoPolitics Nov 22, 2014 - 10:07 AM GMT

By: Casey_Research

Politics

That was how the slow and careful rapprochement between Russia and China has been described by Eric Margolis, one of my favorite geopolitical writers.

US shenanigans in Eastern Europe and the East China Sea—fomenting so-called colored revolutions in Ukraine and Georgia (both on Russia’s periphery) and egging on China’s neighbors to make aggressive territorial claims—have pushed the Russian bear and Chinese dragon together. In May, the two uneasy neighbors reached a de facto alliance represented by a 20-year, $400 billion deal for Russia to supply China with natural gas.


A Russia/China alliance shifts the Earth’s geopolitical axis. Historians may look back at the energy deal as the moment the post-Cold War era and the US’s singular position came to an end. The Russia/China team is now a consequential economic and military counterweight to the US. It will operate as an attractant for every country and every faction that for any reason resents the US’s giant footprint in world affairs.

For example… Russia is making strides in assembling a massive new trading bloc known as the Eurasian Union. When it opens for business on January 1 of next year, Russia, Belarus, and Kazakhstan will be a barrier-free market with 170 million people and a GDP of $2.7 trillion. Armenia, Kyrgyzstan, Tajikistan, and Uzbekistan likely will join in the near future, which would expand the Eurasian Union to 217 million people and a GDP of $2.8 trillion.

In the military and security realm, there’s the Shanghai Cooperation Organization (SCO), an intergovernmental security organization shared by China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan. India, Iran, Mongolia, and Pakistan will join in the near future.

The two organizations add up to exactly what Zbigniew Brzezinski and other American geostrategists feared the most—the emergence of a power bloc in Eurasia that could stand up to the West.

And it’s certainly not for lack of trying that the US failed in preventing this. It was just outplayed and outmaneuvered at every turn by Vladimir Putin.

Love him or love to hate him, Putin is one smart, tough, ruthless SOB. He’s not the kind of opponent I would want to have. The point of all this should be that regardless of Russia’s troubles at the moment, the country is not going to blow away.

Brzezinski’s concern about an emerging Eurasian power is one of the reasons the US has tried to knock Ukraine out of the Russian orbit. Absorbing Ukraine into NATO would further the goal of isolating Russia, and that is exactly what the US attempted to do—however clumsily.

We’re not referees charged with deciding which political players are good guys and which are bad guys. As potential crisis investors, what we want to know about Russia is its staying power, which we rate as high. The portrait of Putin as a Hitler or a crazy man leading his country toward disaster—the picture you get from the mainstream media and from many politicians—is suitable only for propaganda posters.

As things stand now, the effort appears to have backfired on the US. Putin likely will walk away with de facto control of all the militarily and economically strategic parts of eastern Ukraine, while the US/NATO will end up with the bankrupt western parts—like a Greece on steroids. It seems Russia will emerge from the Ukraine crisis stronger.

In the end, Russia’s economic and geopolitical cooperation with China and other non-Western Eurasian powers means that whatever happens in the West, it has real and arguably more attractive alternatives.

This is exactly why the current negative sentiment and cheap valuations of Russian stocks makes them an excellent speculation. This is just what Doug Casey and I are looking for in Crisis Speculator.

Baron Rothschild may have been an unsavory character in many ways, but he was absolutely correct when he stated that, “The time to buy is when blood is in the streets.”

This statement perfectly captures the essence of speculating in crisis markets.

Huge investment returns have been made throughout history where astute investors took advantage of the semi-hidden opportunities wrapped in an outward cloak of apparent danger in crisis markets.

Doug and I aren’t just blindly running toward disasters. We’re looking for hated markets with cheap valuations that, critically, have an identifiable catalyst. Russia fits the bill perfectly, and that leads us to our latest investment recommendation in Crisis Speculator. It’s a solid Russian company selling at a steep discount and is easily accessible to US investors (and no, it’s not Gazprom).

We believe it will be a profitable financial adventure. If you want to join the party, be sure to check out Crisis Speculator.

The article was originally published at internationalman.com.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Casey Research Archive

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