Issue 126
March 6, 2022
_____ _ _____ _ _ _ _ _ | __ \ (_) |_ _| | | | | | || | (_) | |__) |_ _ ___ ___ _ __ _ | | _ __ __ __ __ _ __| | ___ ___ | | | || | __ _ __ __ _ _ _ __ ___ | _ /| | | |/ __|/ __|| | / _` | | | | '_ \\ \ / // _` | / _` | / _ \/ __| | | | || |/ /| '__|/ _` || || '_ \ / _ \ | | \ \| |_| |\__ \\__ \| || (_| | _| |_ | | | |\ V /| (_| || (_| || __/\__ \ | |__| || < | | | (_| || || | | || __/ |_| \_\\__,_||___/|___/|_| \__,_| |_____||_| |_| \_/ \__,_| \__,_| \___||___/ \____/ |_|\_\|_| \__,_||_||_| |_| \___|

The reasons Vladimir Putin ordered the invasion of Ukraine are multi-faceted and encompass far more than what can be conveyed in this post. The mainstream press, on both sides of the political divide, has reported on the invasion without interruption. That is good.

Before last week, many Americans had no idea where Ukraine was located or knew anything about the former Soviet Republic. Some still do not. Indeed, an overly apathetic America, especially those individuals born after the Cold War, must understand and appreciate the seriousness of Mr. Putin’s actions, what they mean for Ukraine, Europe, democracy, and their own freedom.

Putin’s unprovoked atrocities have finally awoken America and its NATO allies after a decades-long, post-cold war induced, coma. Coordinated sanctions levied against Russia have been sweeping, SWIFT (excuse the pun), and severe. Military, financial, and logistical assistance is now being provided to Ukraine.

After its transgressions in Word War 2, Germany forswore providing any lethal weapons to other countries. In a stunning policy reversal spearheaded by Chancellor Olaf Scholz, Germany suddenly pivoted, agreed to send Ukraine weapons, and announced it would ramp up defense spending. Even Switzerland, a bastion of international neutrality, has condemned and slapped sanctions on Russia.

In this post, we will provide two (very) abbreviated summaries of the events leading up to Russia’s invasion. However, as we feel the coverage of what is transpiring has been comprehensive, we will dedicate a part of this post to another, less reported concern stemming from the war: rapidly rising prices for agricultural commodities and how this translates into food insecurity across the world. We will end this post with some interesting facts about Ukraine.

A (Very) Abbreviated Summary Part 1: Ukraine

In 2014, most Ukrainians were delighted that an association agreement with the European Union (EU) had been signed, sealed, and delivered. The vast majority (~75%) of Ukrainians envisioned themselves as members of the EU; this agreement portended membership into the club. However, President Viktor Yanukovych, corrupt to the core and puppet of Vladimir Putin, scuttled the deal, and pivoted towards Russia. Ukrainians were horrified. Mass protests took place across the nation. Yanukovych’s thugs – at the prodding of Putin & Co - responded by muzzling protestors with force. Civilians fought back and violence ensnared the nation. Activists were beaten and many were killed. The international community strongly condemned Yanukovych. Under mounting pressure, he fled to Russia in disgrace.

New elections were held, and pro-west candidate Petro Poroshenko was sworn into office. Poroshenko – pro Europe but far from perfect - was succeeded by the current President Volodymyr Zelenskyy, a former comedian, actor and political novice. Zelenskyy ran on a platform to root out the odious corruption and self-dealing that had permeated Ukrainian politics.

A (Very) Abbreviated Summary Part 2: NATO

Vladimir Putin has argued that the collapse of the Soviet Union was the greatest geopolitical disaster of the 20th century. Putin worked as a KGB agent in (East) Germany when the Berlin Wall fell, and democracy prevailed. In 1991, the USSR disintegrated; its leaders were humiliated.

At the turn of the century, thanks in-part to its large oil & gas reserves, Russia regained its economic (and military) footing. Ever since, Mr. Putin has worked to re-establish Russia’s standing in the global world order. Being flanked on all its borders by puppet governments was a way to facilitate that. To that end, Putin invaded Georgia in ’08, annexed Crimea in ’14, and, as we all are painfully aware, just launched a full-scale invasion of Ukraine. One puppeteer, President Alexander Lukashenko of Belarus offered his country – which borders Ukraine – as a launching ground for Russia’s attack.

Another fixation of Vladimir Putin is the assertion Russia was lied to by Western politicians who promised that after the collapse of the USSR, NATO would not expand into eastern Europe. Specifically, Putin insists that former secretary of state James Baker assured Mikhail Gorbachev that NATO would not expand if the Soviets accepted Germany’s reunification. In a 2007 speech in Munich, Putin formally accused the West of going back on its word and violating international law. Putin's claim is not exclusive to himself. For instance, Boris Yeltsin and other former Soviet politicians have harped on this point for decades.

When NATO welcomed former Soviet Republics Estonia, Latvia & Lithuania along with once-communist nations including Hungary and Poland, into its alliance, Putin was enraged. And as Ukraine continued to gravitate towards the West and aspired to join not only the EU, but also NATO, Putin became increasingly paranoid and hostile. This culminated with Russia amassing close to 200,000 troops on Ukraine’s doorstep. On February 24th, in a delusional speech, Putin declared the West was trying to “finish us off, to destroy us completely.” Then, he invaded Ukraine.

Food Insecurity

Ukraine is a tier 1 producer and exporter of quality foodstuffs. Situated in the “wheat belt,” the country produces 8% of the worlds wheat, 13% of corn, and almost 20% of cottonseed oil.

According to Bloomberg:

“From fields to processing plants to ports, Russia’s invasion is paralyzing Ukrainian agriculture, an industry that produces tens of millions of tons of grains and oilseeds and ships crops across the globe. The sector is so core to Ukraine’s identity that its flag depicts blue skies blanketing yellow farm fields.”

Russia is also a major supplier of wheat, corn, and other crops. For specific context, together Russia and Ukraine export almost 1/3rd of the world's wheat and are major suppliers of other agricultural products to the rest of the world. (The United States is also a major producer / exporter of wheat, corn, soy, etc.)

Most of Russia’s and Ukraine’s agricultural products are shipped via the Black Sea. Naval blockades and port seizures have already prevented goods from reaching their respective destinations. And many Ukrainian farmers have been forced off their tractors and into tanks to help defend their nation.

Said David Beasley of the World Food Programme, “…this is going to affect supply chains, and particularly the cost of food…” Mr. Market has already taken notice. This week, the price of wheat traded on the Chicago Board of Trade (CBOT) rose by 40%, the largest weekly price gain ever. Since the invasion, the price of corn, soy, and other food staples have also surged by double digits.

In wealthier nations, higher food prices typically prove annoying, but manageable. However, in middle income and especially poor countries where a larger percentage of people’s income is spent on subsistence, elevated food bills equate to a daunting prospect for millions of people going hungry.

A decade ago, rising food prices were a catalyst for the Arab Spring protests. And bear in mind, a disproportionate amount of Ukrainian and Russian agricultural products is purchased by Middle Eastern nations. In fact, Egypt is the biggest wheat buyer in the world. Tunisia and Yemen are also large net importers. As the price of food staples go parabolic, the seeds will be sown for civil unrest, and worse.

Beasley continues, “The bullets and bombs in Ukraine could take the global hunger crisis to levels beyond anything we’ve seen before.” Indeed, if Vladimir Putin does not stop this madness, tens of thousands of innocent civilians will be killed, and millions more will face the prospect of starvation.

A Few Interesting Facts About Ukraine:

• Ukraine is the largest country in Europe as measured by land mass. Despite its size, its population of ~45m is smaller than that of Germany (83M), France (67M), and Italy (60M).

• Ukraine’s largest city and nation’s capital is Kiev; ~3 million people call it home. Other major metropolises include Kharkiv in the east, Odessa in the south, and Lviv to the west bordering Poland.

• Ukraine borders seven countries (Belarus, Hungary, Moldova, Poland, Romania, Russia, Slovakia).

• Ukraine is the only nation other than Israel that has both a Jewish president (Volodymyr Zelenskyy) and prime minister (Denys Shmyhal). Just 0.2% of Ukraine’s population is Jewish.

• The Arsenala subway station in Kiev is the deepest metro station in the world. To reach the subway, passengers must descend on an escalator the length of a football field, for 5 minutes. Arsenala is located far underground to bypass the Dnieper River, which bisects the city. Regrettably, Arsenala is now serving as a bomb shelter.

• Ukrainians are well read, literally. Over 99% of Ukrainians can read and write and ~70% have college and or advanced degrees, making Ukraine one of the most educated nations in the world. The Klitschko brothers – famous for their boxing acumen – both have PhD’s.

• A Vyshyvanka is a costume (shirt) worn by both sexes embroidered with traditional Ukrainian art. They are typically hand made.

• An estimated ~1,000,000 Ukrainians live in the United States. The New York Metro Area is home to America’s largest Ukrainian community.

Wars are typically started by wealthy, paranoid, and powerful older people. They are often fought by poor and powerless, young people. Vladimir Putin ordered close to 200,000 young Russians, many not old enough to buy a beer in America, to invade and destroy a neighboring nation in a senseless, entirely unprovoked attack. Reports indicate rank and file Russian troops have been lied to, told they were conducting training exercises or going on a peace keeping mission and would be welcomed with open arms.

As of this reporting, ~1.5 million Ukrainians, mostly women and children, have been forced from their homeland. Thousands of innocent people have already been maimed and killed. The Ukrainian people are in our thoughts. This cannot end soon enough.