Tuesday, March 4, 2014

March 4/GLD remains constant/Silver loses 1.154 million oz of silver/Raid on gold and silver today/Turmoil continues inside the Ukraine/

Gold closed down $12.30  at $1337.80 (comex to comex closing time ). Silver was down 26 cents to $21.19  

In the access market tonight at 5:15 pm
gold: $1336.00
silver:  $21.20

Yesterday I wrote the following:

"Today, gold and silver reacted positively to the news of the Russian invasion of Ukraine.  Gold was up well over 2% which is quite abnormal behaviour for gold.
Silver however was up only a modest 25 cents.   The gold/silver equity shares also had a muted response to the higher gold price.  I cannot recall ever seeing gold/silver rise on a second day after a major geopolitical move.  Therefore expect with a high degree of probability that the banking cartel will strike tomorrow. "

the banking boys did not disappoint us with their antics.

After the bankers threw a temper tantrum today, gold and silver should resume their rise in price as the geopolitical scene in the Ukraine continues to deteriorate..

In other good news, the GLD inventory remained constant in London. Koos Jansen reports a big increase in demand for silver coming from India.
The silver inventory, at the SLV  lost 1.154 million oz.

Now let us head over and see the readings for the GOFO rates.

  Here are today's readings with yesterday's comparison:

  Rates still in the negative in  first  month/ slight decrease in backwardation in  months 2 and 3.  Increase in negativity for first and last month.

i) One Month:  -.014000%   vs  yesterday: -.01600000%  (in backwardation)
ii Two Months:  +.004000%.  vs  yesterday:  +.0020000%  
iii) Three Months:+.022000000% vs yesterday:  +.0180000% 
iv) Six months:  +.0420000%  vs   yesterday:   +.042000%

London good delivery bars still in short supply

Let us now head over to the comex and assess trading over there today,

Here are today's comex results:


The total gold comex open interest rose today by a whopping 8,998 contracts from 386,303 all the way up to 395,301 as gold was up $28.70 cents yesterday.  For the March non active gold contract month  the OI fell by 10 contracts down to 141. We had 0 notices file yesterday so we lost again another 10 contracts or 1,000 oz will not stand for the March contract month. With gold advancing smartly yesterday, it just does not make any sense that we would have these many longs giving up. To me, it looks like these contracts were cash settled. The next big active contract month is April and here the OI rose by  4,840 contracts  to 229,442.  The estimated volume today was fair at 135,896 contracts.    The confirmed volume yesterday was  good at 172,700. 

The total silver Comex OI fell by 19  contracts as silver was up slightly in price to the tune of 25 cents on Friday. The total OI now rests tonight at 134,660 contracts. The next big active delivery month for silver is March and here the OI  fell by 628 contracts  to 1,127. We had 635 notices filed yesterday so we gained 7 contracts or 35,000 additional ounces will stand   The estimated volume today was good at 44,050 contracts. The confirmed volume on yesterday was also good  at 48,985 contracts.

Comex gold/ contract month

March 3.2014   the March delivery month.

Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
 74,492.973 oz (HSBC)
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
 30,037.065 (Scotia)
No of oz served (contracts) today
 0  (nil oz)
No of oz to be served (notices)
141  (14,100 oz)
Total monthly oz gold served (contracts) so far this month
2  (200 oz)
Total accumulative withdrawal of gold from the Dealers inventory this month
 1399.97 oz  
Total accumulative withdrawal of gold from the Customer inventory this month

64.29 oz

Today we had no activity in the Comex gold vaults today and still no gold enters the dealer

We had 0 dealer deposit  and 0 dealer withdrawals

total dealer withdrawal:  nil oz

 we had 0  Customer deposits

Total customer deposits:  nil oz

we had no customer withdrawals;

Total customer withdrawals:  nil oz
Today we had 0   adjustments:

Thus tonight, we have the following JPMorgan inventory levels in gold;

JPM dealer inventory remains  tonight at 214,097.318  oz or 6.659 tonnes

JPM customer inventory remains  tonight at: 602,530.808 oz  or 18.741 tonnes

Today, 0 notices was issued from  JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0 contracts  of which 0 notices were stopped (received) by JPMorgan dealer and 0  notices stopped by JPMorgan customer account. 
The total dealer comex gold  remains  tonight  at  637,591.610 oz or 19.830 tonnes of gold . The total of all comex gold (dealer and customer) rests at 7,134,020.058 oz or  221.89 tonnes.

Tonight, we have dealer gold inventory for our  3 major bullion banks(Scotia, HSBC and JPMorgan) with its gold inventory  resting  tonight  at only 16.319 tonnes.

i) Scotia:  157,966.367 oz or 4.913 tonnes
ii) HSBC: 152,612.868 oz or  4.747 tonnes
iii) JPMorgan: 2144,097.318 oz or 6.659 tonnes

total: 16.319 tonnes

Brinks dealer account which did have  the lions share of the dealer gold saw its inventory level remains constant tonight  at only 89,129.259 oz or 2.772 tonnes.  A few months ago they had over 13 tonnes of gold at its registered or dealer account.

Today we  had only 0 notices served upon our longs for nil  oz of gold.  In order to calculate what will be  standing for delivery in December, I take the number of contracts served so far this month at 2 x 100 oz  =  200 oz  x   100 oz  and add the difference between the number of OI for the front month (141 ) minus the number of notices filed today (0) 

In summary:

2 notices x 100 oz per contracts already served this March month or 200 oz + 141) the OI for the front March month - the number of notices served today (0) x 100 oz =  14,300 oz,  the number of oz standing for the March contract month (.4447 tonnes).  We lost 1,000 oz standing for the March contract month.

As you will see below we have only 16.319 tonnes in the registered or for sale category for the big 3 (JPMorgan, HSBC,Scotia) and 19.091 tonnes if you include Brinks.(If you include the tiny Manfra, we end up with a total dealer gold of only 19.83 tonnes). We have witnessed little gold enter the dealer except from Brinks and adjustments

In Summary:

i) the total dealer inventory of gold settles tonight  at  a very dangerously low  level of only 19.83 tonnes.

i)  a) JPMorgan's customer inventory rests tonight at  602,530.808 (18.741 tonnes

ii  b)  JPMorgan's dealer account rests tonight at  214,097.318 oz (6.659 tonnes)

iii) the 3 major bullion banks have collectively only 16.319 tonnes of gold left in their dealer account.(JPMorgan, HSBC,Scotia)

and what is totally remarkable is the fact that little gold entered the dealer comex vaults despite December and February are  the busiest months for the gold calendar .


now let us head over and see what is new with silver:


March 3/2014:

 March contract month final


Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory nil
Deposits to the Dealer Inventory 48,377.40 oz (CNT)
Deposits to the Customer Inventory 655,752.860 oz (Brinks,CNT)
No of oz served (contracts)28 contracts  (140,000 oz)
No of oz to be served (notices)1120 contracts ( 5,600,000 oz)
Total monthly oz silver served (contracts) 1522 contracts  (7,610,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal of silver from the Customer inventory this month808,882.44 oz

Today, we  had fair activity  inside the silver vaults.
 we had 1 dealer deposits and 0  dealer withdrawals.

i) Into CNT  48,377.40 oz

total dealer deposit:  48,377.40 oz

we had nil dealer withdrawals:  nil  oz.

We had 3 customer deposits:

i) Into Brinks:  972.96 oz
ii) Into CNT: 48,026.50
iii) Into Scotia;  606,753.400 oz

Total customer deposit   655,752.86    oz

We had 0  customer (eligible) withdrawals:

total customer withdrawals:  nil   oz

we had 1  adjustments  today and you have to scratch your head on this one:

an addition of 30,322.07 oz as an accounting error.

Registered (dealer) silver   :  52.407 million oz
total of all silver:  182.763 million oz.

The CME reported that we had 28 notices filed for 140,000 oz today. To calculate what will stand for this  active delivery month of December, I take the number of contracts served  for the entire  month at 1522  x 5,000 oz per contract or 7,610,000 oz to which we add the difference between the OI standing for March (1127) minus the number of contracts served today (28) x 5,000 oz

Thus in summary, :  

1522 contracts  x 5000 oz per contract (served) or 7,610,000 oz  +  (1127) OI standing for March - (28)  number of notices filed today  x 5000 oz  = 13,105,000 oz.  We gained an additional 35,000 oz standing.


The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.

***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold.  I can visualize demand coming to the buyers side:

i) demand from paper gold shareholders
ii) demand from the bankers who then redeem for gold to send this gold onto China

vs no sellers of GLD paper.

And now the Gold inventory at the GLD:

March 4.2014: no change  803.70 tonnes (very good news)

March 3.2014:  no change  803.70 tonnes (very good news)

Feb 28.2014: no change:  803.70 tonnes  (very good news) 

Feb 27.2014:  no change/803.70 tonnes

Feb 26.2014:  no change in inventory:  803.70 tonnes

For today, March 4.2014  no change in inventory at of gold into GLD inventory 


The registered  vaults at the GLD will eventually become a crime scene as real physical gold  departs for eastern shores leaving behind paper obligations to the remaining shareholders.   There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat  (same banks). 

As a reminder the total comex gold had inventories of around 11 million oz in 2011. Today the total comex gold remains at   7.134 million oz  (221.89 tonnes).

The total dealer comex gold remains at : 637,591.61 oz or 19.83 tonnes.

GLD gold:  803.70 tonnes.


And now for silver: as of 6 pm est

March 4.2014: we lost 1.154 million oz and this probably went to either India or to Shanghai.

Inception Date4/21/2006
Ounces of Silver in Trust326,923,758.700
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

March 3.2014:  no change

Inception Date4/21/2006
Ounces of Silver in Trust328,077,858.700
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

Feb 28.2014: no change:

Inception Date4/21/2006
Ounces of Silver in Trust328,077,858.700
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

feb 27.2014:  no change

Inception Date4/21/2006
Ounces of Silver in Trust328,077,858.700
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

Feb 26.2014: we gained another 1.442 million oz of silver into the SLV

Inception Date4/21/2006
Ounces of Silver in Trust328,077,858.700
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

Feb 25.2014:  we gained 385,000 oz of silver today into the SLV

Inception Date4/21/2006
Ounces of Silver in Trust326,635,134.700
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

Feb 24.2014:  we gained back 2.116 million oz of silver into the SLV vaults

Inception Date4/21/2006
Ounces of Silver in Trust326,250,394.700
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

Today, we lost 1.154 million oz silver inventory  at the SLV

And now for our premiums to NAV for the funds I follow:

Note:  Sprott silver fund now deeply into the positive to NAV and the gold fund moved into positive terrotiry as well.

Sprott and Central Fund of Canada. 

(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)

1. Central Fund of Canada: traded  at Negative 4.3% percent to NAV in usa funds and Negative  4.3%  to NAV for Cdn funds. March 4/2014)    

2. Sprott silver fund (PSLV): Premium to NAV fell to positive 3.09% NAV   (March 4.2014)
3. Sprott gold fund (PHYS): premium to NAV fell to negative 0.02% to NAV (March 4.2014) 

Note: Sprott silver trust back hugely into positive territory at 3.09%. 
Sprott physical gold trust is back in negative territory at  -0.02%.

Central fund of Canada's is still in jail.

And now your overnight gold and silver trading and comments:

First: trading from Europe and Asia and comments from of Mark O'Byrne/goldcore

1. Putin warns the USA on a crash of the dollar and thus a crash of the USA financial system
2. Gold falls as Putin orders troops back to base after exercises on the border.

(courtesy Mark O'Byrne/Goldcore)

Putin Adviser Warns U.S. On USD As Reserve Currency And “Crash” Of U.S. Financial System

Published in Market Update  Precious Metals  on 4 March 2014
By Mark O’Byrne

Today’s AM fix was USD 1,339.50, EUR 973.90 and GBP 802.87 per  ounce.
Yesterday’s AM fix was USD 1,344.25, EUR 975.58 and GBP 803.50 per ounce.    
Gold climbed $26.80 or 2.02% yesterday to $1,351.40/oz. Silver rose $0.26 or 1.23% at $21.43/oz.

U.S. Dollar Index, 1968-March 4, 2014 - (Bloomberg)
Gold dropped 0.8% today as equities bounced higher after reports that Russian President Vladimir Putin had ordered troops engaged in exercises in an area which borders Ukraine to return to their base.
Gold rallied to a four-month high yesterday after investors sold risk assets following Russia's military intervention, which prompted the United States to look at a series of economic and diplomatic sanctions to isolate Moscow.
As ever, it is always difficult to be prescriptive and pinpoint price movements on specific events. It is arguable, that gold could have risen over 1.5% yesterday even if events in Ukraine were not leading to a deterioration in relations between Russia and the West.
This is because gold still has strong fundamentals which is leading to robust global demand - especially from China.
However, the situation in the Ukraine is potentially one of the greatest geopolitical risks since the end of the Cold War.
A senior adviser to Putin said this morning that if the United States were to impose sanctions on Russia over Ukraine, Moscow might be forced to drop the dollar as a reserve currency and refuse to pay off loans to U.S. banks.
As newswires reported the comments from Putin’s senior aide Glazyev, the USD Index fell marginally to session lows and broke below 80.00 before recovering.
Russia could reduce to zero its economic dependency on the United States if Washington agreed sanctions against Moscow over Ukraine, politician and economist Glazyev said, warning that the American financial system faced a "crash" if this happened.
Sergei Glazyev, a senior adviser to President Putin, added that if Washington froze the accounts of Russian businesses and individuals, Moscow will recommend to all holders of U.S. treasuries to sell their U.S. government debt.
Glazyev is often used by the authorities to stake out a hardline stance. He does not make policy but has the ear of Putin and would be aligned with the more hawkish elements in the Russian government and military.
"We would find a way not just to reduce our dependency on the United States to zero but to emerge from those sanctions with great benefits for ourselves," said Kremlin economic aide Sergei Glazyev.
He told the RIA Novosti news agency Russia could stop using dollars for international transactions and create its own payment system using its "wonderful trade and economic relations with our partners in the East and South."
Russian firms and banks would also not return loans from American financial institutions, he said.
"An attempt to announce sanctions would end in a crash for the financial system of the United States, which would cause the end of the domination of the United States in the global financial system,” he added.
Late Monday, U.S. President Barack Obama said the U.S. plans to impose penalties on Russia unless it withdraws its military forces, and on Tuesday, Russia reportedly called troops on military exercises back to their bases.
Glasyev’s comments were likely sanctioned by the Kremlin and by Putin himself. They would appear to be a warning to the U.S. regarding isolating Russia politically and imposing economic sanctions.
If diplomacy does not prevail, then trade wars and currency wars will ensue with attendant consequences for the already vulnerable financial system and global economy.
The 7 Key Gold Storage Must HavesA diversification into gold remains prudent and will again protect investors, both retail and institutional, pensions owners and savers, over the medium and long term. However, this is only the case if the gold owned is physical bullion coins and bars and not digital gold, pooled gold or paper gold. Fully segregated and fully allocated gold coin and bar storage remains the safest way to own gold.


A must read.........

Russia's intervention in Ukraine could mean economic war with U.S., Turk says

6:40p ET Monday, March 3, 2014
Dear Friend of GATA and Gold:
GoldMoney founder and GATA consultant James Turk tells King World News today that Russia's intervention in Ukraine could lead to economic war with the United States:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


John Embry discusses black swan events with Eric King of Kingworldnews:

(courtesy John Embry/Kingworldnews)

Black swans are all over the place now, Embry tells King World News

11:30p ET Monday, March 3, 2014
Dear Friend of GATA and Gold:
Sprott Asset Management's John Embry tonight tells King World News that "black swans" are popping up all over the place, quite without the world's realization of the role of Western central banks in keeping the gold price down:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Bill Kaye discusses gold with Eric King

(Bill Kaye/Eric King/Kingworldnews)

Gold cartel draws line at $1,350, Kaye tells KWN

1:15p ET Tuesday, March 4, 2014
Dear Friend of GATA and Gold:
Hong Kong-based fund manager William Kaye today tells King World News that the international gold cartel is holding the line at $1,350 but that geopolitical events remain troublesome for gold price control:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


It seems that the big discovery of buried gold last month was in reality a heist from the San Francisco mint. I guess the discoverer of the gold did not check the mint marks as it would be strange that all the coins will have an "S" for the San Francisco Mint.

(courtesy zero hedge)

SF heist at turn of century may explain buried gold

SF Gold heist jpegA story that describes a gold heist from the San Francisco Mint at the turn of the century could explain the source of the gold coins worth $10 million that were found last month in California’s Mother Lode country.
SF Gold heist cropped jpeg copy
The published news item was discovered in the Haithi Trust Digital Library and was provided by Northern California fishing guide Jack Trout, who doubles as a historian and collector of rare coins.
In a story that went global last week, a couple in California’s Sierra Nevada foothills found six buried steel cans that contained 1,427 gold coins dated 1847 to 1894 and worth $10 million. They were walking their dog on their property when they sighted a piece of a rusty steel can that was slightly exposed from surface erosion around it. Inside the can they saw the first glimpse of gold coins.
The value of the coins was enhanced, according to a broker, because they are mostly uncirculated, mint condition. The face value of the coins adds up to $27,000. Those two facts are a match of the gold heist in 1900 from the San Francisco Mint.
In addition, the coins were largely in chronological order, which indicates they were unused. (There are some problems with this theory, though, according to The Chronicle’s Kevin Fagan in an article summarizing the various hypotheses). Kevin noted that one-third of them were unused, and the chronological order was that they spanned nearly 50 years in date.
New information, which adds credibility that the heist was an inside job at the Mint, became available late Monday afternoon from research by historian Jack Trout: An 1866 Liberty $20 gold piece — which did not include the words “In God We Trust” — was part of the haul, a coin that alone is worth more than $1 million.
“This was someone’s private coin, created by the mint manager or someone with access to the inner workings of the Old Granite Lady (San Francisco Mint),” Trout said. “It was likely created in revenge for the assassination of Lincoln the previous year (April 14, 1865). I don’t believe that coin ever left The Mint until the robbery. For it to show up as part of the treasure find links it directly to that inside job at the turn of the century at the San Francisco Mint.”
The largest previous find of gold coins in the U.S. was believed to be worth $1 million, found in 1985 by construction  workers in Tennessee.
Tom Stienstra is The San Francisco Chronicle’s outdoors writer.  E-mail: tstienstra@sfchronicle.com. Twitter: @StienstraTom


Wow!!  India imported 6125 tonnes of silver in 2013  (197 million oz). This is almost 25% of annual global silver production from all mines. Smuggling of gold has replaced normal importation as sthe bribing of custom officials is prevalent.

(courtesy Koos Jansen/In Gold We Trust)

India Imported 6125 Tonnes Of Silver In 2013

I’m glad you’re able to read this post. This website has been suffering from many DDOS attacks in recent weeks that not only prevent people from reading my posts, additionally it makes it very hard for me to reach my own server to publish. I will try to figure out how to protect In Gold We Trust in cooperation with my web host to insure better service for my readers in the future.  

Back to business; India’s customs department DGCIS just came out with their final trade numbers for gold and silver in 2013. Only gross import numbers for both precious metals are disclosed in these reports, the export numbers I grabbed from the Comtrade database (although these numbers are quite insignificant).

Starting from August 2013 all Indian traders had to export 20 % of their gold imports. This was a measure designed by the government, on top of an import duty that was raised to raised to 10 %, to slow down gold import. Of course the only result from these measures was that official gold import dropped like a brick, premiums skyrocketed and Indian supply shifted to smuggling. In this next chart by Nick Laird we can see how the import duty pushed the premiums to 25 % in january.

Indian Premiums 2014

The loss for the Indian government is that they miss revenues since they raised the import duty from 4 % to 10% through 2013 and implemented the 80/20 rule. Crime has taken over gold trading with all due consequences. Sadly history repeats itself. Official import crashed hard through 2013.

India gold tm 2103

India gross imported 173 t in H2 2013, down 73 % from 631 t of in H1. Total gross import in 2013 was 804 t, down 20 % from 999 t in 2012. From Jayant Bhandari, who travels a lot through India, I’ve been told that smuggling gold into India is quite easy as customs at the airport and the army at the border are happy to take a bribe. He wrote me:

Some of it comes via planes (via Dubai and Singapore, legally and illegally), some through the Bangladesh border and a minor part through Nepal and Pakistan. I don’t think it is worth the risk to bring it via China. Bangladesh border is the easiest, a few dollars of bribe to the army guys does the job.

I often hear analysts saying that there is shortage of gold in India. Incorrect. It is more liquid a commodity than water is. The spread is so thin that you can often buy and sell at the same price — the trader makes his margin from making jewelry.

Before the 90s, import of gold was heavily regulated and carried a massive customs duty. Of course, in those days most gold arrived in India through smuggling. A big mafia had built up in Mumbai and Dubai, mostly catering to India’s gold demand. Two things happened as a result: Government lost all prospects of earning revenue from gold imports, and most importantly, smugglers ran a ruthless empire in several Indian cities, particularly in Mumbai, controlling human-trafficking (with horrible consequences for poor girls and children) and financing the real-estate and the film industries. They were the unofficial rulers of Mumbai. When restrictions on gold were eased in early 90s under pressure from IMF, the same smugglers took the shape of what got to be known as terrorists. (All this should not sound strange to those who understand the history of prohibition in the US).

The current restriction and heavy custom duty on gold will repeat the consequences of the era before the 90s. But really in an irrational world where rhetoric has more value, who cares about the real consequences? Indeed, based on my many conversations with traders, all gold that India needs is already coming through smuggling. And smugglers want restrictions on gold imports to stay in place — they haven’t had it this easy for a long time.

The premiums on gold, currently 15 % above international prices, pushed a lot of Indian savers into silver. Indian silver import in 2013 was 6125 t, and all-time record, up 189 % from 2115 t in 2012. In December silver import accounted for 825 t, up 108 % m/m, 6560 %  y/y.

India silver import 2103

I wonder if the current Indian government is satisfied about its 2013 precious metals policy and if the next government will choose the same path.

Koos Jansen (In Gold we Trust)


Russia threatens default to the US banks and also the threatens the massive dumping of USA bonds

(courtesy GATA)

Russia threatens default to U.S. banks, dumping of U.S. bonds

US Sanctions May Lead Russia to Default on US Debts, Official Says
From the Russian Legal Information Agency, Moscow
Tuesday, March 4, 2014
MOSCOW -- As the United States considers imposing sanctions against Russia, concerns loom that Russia may be forced to declare its inability to pay off loans issued by US banks, presidential aide Sergei Glazyev told RIA Novosti.
"Economic sanctions are a double-edged sword, and if the US will freeze our assets, that means our companies' dollar assets will be frozen too. That means Russian banks and organizations won't be able to pay off loans to our American partners," Glazyev said.
According to US Treasury data from the end of 2013, Russian investments in US government bonds total around $139 billion out of a total of $5.8 trillion of US debt held in foreign hands.
Officials in the United States and Europe have told Russia that its actions in Ukraine could lead to economic sanctions and asset freezes.
The Russian ruble hit a record low Monday as stock markets in Moscow fell more than 11 percent after trading began.
Such a crash was widely predicted by experts when Russia's upper house of Parliament approved the use of military force in Ukraine on Saturday, which was criticized by the US and a number of European countries. Notably, US Secretary of State John Kerry told NBC's "Meet the Press" show Sunday that the United States and some of its allies were "prepared to go to the hilt to isolate Russia."
Speaking before the UN Security Council, Russian Ambassador to the UN Vitaly Churkin said that Russia is authorized to place up to 25,000 military personnel in the autonomous republic of Crimea upon bilateral agreement with Ukraine. According to Churkin, the personnel are used for security measures to resist extremists whose actions may put civilians under threat.
On Monday Russian investigators initiated a terrorism case against the leader of ultra-nationalist, far-right Ukrainian movement "Right Sector," Dmitry Yarosh. He is accused of having made a public call to anti-Russian forces to engage in terrorist acts and extremism on Russian territory.
* * *
Putin Adviser Urges Dumping US Bonds in Reaction to Sanctions
From RIA Novosti, Moscow
Tuesday, March 4, 2014
MOSCOW -- An adviser to Russian President Vladimir Putin said Tuesday that authorities would issue general advice to dump US government bonds in the event of Russian companies and individuals being targeted by sanctions over events in Ukraine.
Sergei Glazyev said the United States would be the first to suffer in the event of any sanctions regime.
"The Americans are threatening Russia with sanctions and pulling the EU into a trade and economic war with Russia," Glazyev said. "Most of the sanctions against Russia will bring harm to the United States itself, because as far as trade relations with the United States go, we don't depend on them in any way."
Glazyev noted that Russia is a creditor to the United States.
"We hold a decent amount of treasury bonds -- more than $200 billion -- and if the United States dares to freeze accounts of Russian businesses and citizens, we can no longer view America as a reliable partner," he said. "We will encourage everybody to dump US Treasury bonds, get rid of dollars as an unreliable currency, and leave the US market."
According to US Treasury data from the end of 2013, Russian investments in US government bonds total around $139 billion out of a total of $5.8 trillion of US debt held in foreign hands.
US Secretary of State John Kerry on Saturday warned that Russian military interventions in Ukraine, which have been justified by the Kremlin as protection for residents in heavily ethnic Russian-populated regions, could result in "serious repercussions" for Moscow.
"Unless immediate and concrete steps are taken by Russia to deescalate tensions, the effect on US-Russian relations and on Russia's international standing will be profound," Kerry said.
Kerry mentioned economic sanctions, visa bans, and asset freezes as possible measures.
Former deputy energy minister and lively government critic Vladimir Milov slammed Glazyev's remarks, saying they would put further downward pressure on the ruble, which was pushed down Monday to a record low of 36.5 against the dollar amid fears about the possible outbreak of war.
"That idiot Glazyev will keep talking until the dollar is worth 60" rubles, Milov wrote on his Twitter account.
A high-ranking Kremlin source was quick to distance his office from Glazyev's remarks, however, insisting to RIA Novosti that they represented only his personal position.
Glazyev was just expressing his views as an academic, and not as a presidential adviser, the Kremlin insider said.


You can tell an election is coming in April in India:

(courtesy Reuters/Mineweb)

India's trade minister wants gold import curbs eased

Last year, the government raised import duty on gold to a record 10% and tied gold consumption to exports of gold jewellery to bolster external finances.

Author: Reuters
Posted: Tuesday , 04 Mar 2014 
India's trade minister said on Tuesday he had raised the issue of easing some curbs on gold imports with the finance ministry, as they were encouraging smuggling and hurting the gems and jewellery industry, an important export sector.
The government imposed the restriction on imports last year, in order to narrow a worryingly high current account deficit, and any relaxation of the curbs could revive Indian demand and support global prices. 
"We have to have a balance. Over-regulation, too much of tariffs, lead to another problem ... of smuggling," Trade Minister Anand Sharma told a news conference.
"We have to ensure adequate availability of gold for the gems and jewellery industry, which is a very important sector for our exports."
Finance Minister P. Chidambaram said last month he would cap the current account deficit below $45 billion as against $88 billion last year and he is expected to review the gold curbs by mid-March ahead of an election expected by May.
Last year, the government raised import duty on gold to a record 10 percent and tied gold consumption to exports of gold jewellery to bolster India's external finances, which came under strain from a decision to scale back U.S. monetary stimulus. 
Jewellery exports have suffered a drop of more than 50 percent since the start of the year.
Despite the rule ensuring the supply of gold to exporters, jewellery makers have suffered delays receiving imported gold because of the lengthy customs clearances. 
(Reporting by Manoj Kumar and Rajesh Kumar Singh; Writing by Sanjeev Miglani; Editing by Douglas Busvine and Simon Cameron-Moore)


Dave Kranzler attacks Ross Norman on the fixing of gold:

(courtesy Dave Kranzler/The Golden Truth)


The London Price Fix Is Rigged - Here's Why Ross Norman Is Full Of It

In a mainstream media disclosure that took the gold investment world by surprise, Bloomberg published a report - Article Link - last week which contained data from an academic study that showed that the daily London gold price fixing has been manipulated for at least 10 years. While this is not new information to many precious metals investors, it is the first time that an establishment news outlet has exposed the truth about the widespread and blatant Government-sponsored manipulation of the precious metals market.  It should be noted that the Financial Times also published this report but then retracted and deleted the article.

The London daily gold fix is an event that has been setting the price of gold twice a day since 1919. With the advent of computerized market trading and the gold/silver futures market (1974), it would appear that the London fix is no longer necessary as a mechanism of "price discovery." As we will see, the London fix still exists because it is used by the bullion banks as an overt market manipulation mechanism.

The price "fixing" is conducted by 5 individuals who work for their respective bullion banks. These individuals jointly decide what the "spot" price of gold should be twice a day, once in the morning and once in the afternoon (London time). They committee is allowed to communicate with market participants and their respective banks are permitted to continue trading gold and gold derivatives while these individuals decide what the price of gold should be.  Theoretically this price as "fixed" is determined to be the price which will clear the market of all buy and sell orders up to that point.  Theoretically, it provides a "benchmark" price for the spot price of gold.  Incredibly, the time of fix occurs during the period of time when the Shangai Gold Exchange, the largest physical gold market in the world, is closed for the day.

But how can a closed system like this possibly operate objectively? The gold fix system is inherently ingrained with the conflict of interest and moral hazard the accompanies any system governed by collective "judgment." The Bloomberg News article details a study done by NYU professors which showed that between 2004 and 2013 large price moves during the afternoon "fix" were moves lower at least 66% of the time. In 2010, the large moves were negative 92% of the time.

From their work, the authors concluded that the market in all probability was manipulated by the banks whose representatives establish the price fix every day: "There’s no obvious explanation as to why the patterns began in 2004, why they were more prevalent in the afternoon fixing, and why price moves tended to be downwards" - Rosa Abrantes-Metz, one of the authors of the study.

As it turns out, Ross Norman, CEO of the well-known London-based Sharps Pixley bullion retailer issued a rebuttal to the Bloomberg article and in defense of the London fix (LINK).  Ironically, in his attempted defense of the gold fix process, Norman inadvertently exposes the system's inherent flaws, thereby showing the reader how the London fix committee can easily manipulate the market. In fact nearly every point of assertion about, and defense of, the London fix process is embedded with half-truths or outright lies.

In response to the fact that there are unusually large moves during the "fix" period, Norman explains: "the fix is a price discovery process and as such large buying and selling orders collide here - large moves are therefore to be expected. In fact, the mere fact that it does move confirms some differences in opinion over fair value between the clients dealing in the fix - actually it supports the notion of the integrity of the process."

This explanation is is patently disingenuous. Gold trades in either physical form or derivatives form (futures, forward) nearly continuously during the trading week. The "price discovery" process occurs inherently with every buy/sell transaction. To say that it is only at the time around the p.m. London fix that large orders to buy and sell constitute "price discovery" is entirely misleading. In a continuously functioning market, orders of all sizes are executed and "price discovery" occurs with each trade execution. A committee of five individuals is not needed and collective "judgment" about what the price should be is not required.

In his second point of defense of the London fix, Norman makes these comments: "the fix is used by official institutions (like Central Banks) and many major miners who all require an "objective" and published price because they need to [be] more accountable than say (sic) a proprietary trader. The spot price for example is neither of objective (sic) nor published. Selling by miners in size every day and invariably outweighs (sic) any official buying which is typically large but infrequent. Hedging or financing for the miners have will often (sic) link their financial arrangements to the gold fix."

Just as a note, it's interesting that Norman decided to put quotes around the word "objective." Clearly the London fix is anything but "objective," since by it's very nature it defies the objectivity and price discovery mechanism of a continuously functioning market. I'm not sure why a "fixed" price needs to be "published" at all.  At any given time during the 23 hour trading period of each business day gold trades in either physical or derivative form (futures, forwards). Anyone can go online and "discover" the current trading price of gold.

To be perfectly clear about this, any price which is determined in the market by a buyer and seller is inherently more objective and visible than is a price which is "fixed" by a committee of five individuals saddled with inherent conflict of interest. Mining companies and Central Banks are free to use the standard market mechanisms to execute their trades. To say that a committee operating out of view of the market can determine an official "spot" price is either unintentionally disingenuous or an outright lie. If anything, the London fix process prevents the true price discovery process of an open and free market.

Norman also claims the London fix conference call is not private and is open to clients. Do you have access to this call? Our firm does not. I don't know of anyone who has access to this call. While the price fix committee of five may have information about the large buy and sell orders that are about to "collide" - to use Norman's term - the market as a whole does not. An efficient market functions most efficiently in its price discovery process when as much information as possible about buyers, sellers and size is immediately disseminated to the entire market. The London price fix system not only prohibits the dissemination of information that might help the market achieve its price discovery goals, it leaves the discretion as to the "best" market clearing price at that point in time up to the committee of five who may or may not be on the phone with their best preferred LBMA member clients or their own banks.

Again, to reemphasize this point because it can not be emphasized enough, the price fix committee members have de facto conflict of interest by the very fact that the banks they work for have large capital positions in gold and silver. Furthermore, while detailed LBMA position data is not made available to the public, we know that these banks run large net short positions on the NY Comex. To say the least, the banks have a motivated interest to see a lower price fix every day.

Finally, Norman tries to defend against the findings of the study that the price of gold at time of the p.m. fix is fixed lower a majority of the time - with the statistical evidence overwhelmingly in support of this conclusion - by explaining that if London gold dealers (i.e. the bullion banks) "had consistently shorted gold as maintained" they would have suffered massive losses.

This assertion is absurd because it assumes that the big bullion banks are always long gold. Yet, we know from over a decade of Comex data that the big bullion banks have run massive short positions in Comex gold futures. We don't know whether the big banks are net long or net short on the LBMA because the LBMA does not publish enough information the big bank forward contract and bullion positions. In fact, from the size of the historical net short position of the big banks on the Comex, and the accompanying trading turnover of these positions, any bank with access to information about the level of the price fix before the general market sees it has the ability to net rapid and riskless trading gains on a daily basis.

Finally, Norman tries to deflect the issue entirely by opining on the "vested interest" of Bloomberg in publishing this article and ends by scolding the organization ("shame on you...for lack of journalistic discretion and judgment...and failure to ask the right questions").

As Norman tolls this bell of scorn and disdain for Bloomberg News, ironically he's ringing it at himself, as Norman's disingenuous defense of the LBMA gold price fix surreptitiously exposes the reasons why the gold fix process is highly flawed. Indeed, it is a system of price determination which is susceptible to the moral hazard and market misconduct which accompany any market system in which price level is determined by a small committee individuals, all of whom have a high level of inherent conflict of interest.

One last point, Norman is correct that Bloomberg fails to ask the right questions. Here's a small sampling of the right questions: 1) Given that the gold market trades nearly continuously during the business week, either by auction or computer, why is the London fix needed at all?  3) Why does the fix occur after the Shanghai Gold Exchange, the worlds largest physical bullion market, has closed for the day?  3) Why are the members of the price fix committee allowed to be representatives of the big bullion banks? 4) if #2 is unavoidable, shouldn't the members be from organizations which do not run capital positions in gold and silver or stand to benefit from inside knowledge about the price fix? 5) Why doesn't the LBMA publish more specific and detailed data about the forward contract and bullion positions of its member banks?

And finally Bill Holter:

(courtesy Bill Holter/Miles Franklin)

Who will suffer the most?

Under the category of "what the heck is this?", the news over the last 48 hours surely qualifies. On Sunday I read that President Obama skipped the national security briefing regarding Russia and the Ukraine

 (while looking up the article I Googled "obama skips" and the suggestions were ...national security briefings, memorial day, Arlington, medal of honor ball, Gettysburg, D-day, national day of prayer, and intelligence briefing). Then yesterday Zerohedge forwarded a "tweet" from the White House http://www.zerohedge.com/news/2014-03-03/monday-humor-world-verge-get-some-peace-mind that said "Life is unpredictable. Get some peace of mind: http://ofa.bo/jBQ#TimeToEnroll" regarding Obamacare. In other news, it appears that the U.S. is readying a $1 billion care package to Ukraine and economic sanctions for Russia. The cherry on top of this "chocolate colored cake" is that the U.S. has "barred" Russia from the G-8 talks this week.

Really? Obamacare is more important than the Russian bear even though it's none of our business in the first place? We actually "barred" Russia from the G-8? Are we TRYING to poke a finger in Mr. Putin's eye? If this was not so serious I would say that this is funnier than Moe sticking two fingers in Larry's eyes. Is there really a purpose, ANY purpose to barring Russia from the table? Did we "miss" the story yesterday that "Russia and China are in agreement over Ukraine"
http://news.sky.com/story/1219922/russia-and-china-in-agreement-over-ukraine ? Has anyone in Washington taken even a single step back to look at this forest?
Think about it, we are putting a "package" together worth a whopping $1 billion for the Ukrainians. This will do what exactly? Keep the lights on for a few weeks? We offer this money ...while our biggest creditor China stands in agreement with the "other side"? What must China be thinking (while laughing)? First off the amount of money is like penny candy, secondly and more importantly we can't even afford it. The reality in case no one has thought it through is that we don't have a "spare" $ billion to GIVE anyone!
Don't get me wrong, China is not on a solid footing either because their own economy is debt ridden in many areas but I offer a different view here. Is it possible that "they" not only know that this ship is going down (and them with it) but are also resigned to this fact? Who will be hurt the most? Who's lifestyle will fall the furthest? Do you see where I'm going?
Many nations have been blown up financially several times since WWII, they are "used to" or at least can remember tough times. "Tough times" as in a currency that has become worthless or banking systems that shrunk or closed, empty shelves at stores or what have you...we have not. They toughed it out, they survived, they dealt with whatever it was they were "dealt". I use the word "dealt" because the U.S. has often times "imposed situations" by forcing a price structure. Without going into multiple examples, it is well known that during the Reagan years we crashed the price of oil which in turn crashed the finances of the Soviet Union and led to their breakup...mission accomplished. We did the same thing to China in the early 1900's with silver which was their primary money.

I would ask if you think it is possible that any of these nations have "memories"? I say yes they absolutely do, and it is burned into their memories on national scales. Let me ask you this, do you think that maybe they have already had thoughts of "turning the tables" on us? The next question is of course "could it be done"? In my opinion we have weakened ourselves in so many ways and to such an extent that yes it can be done. Actually, even without "effort" on their part, we have done it to ourselves and carved our own fate into stone. Ask yourself if we are a weaker nation with regards to production, financially, socially and of course our currency itself?
To finish, who will suffer the most when this tent finally does come down? The simplest and most obvious answer is "those who had the most to lose" which of course is "us". Because we grew so grand and large (and on solid footings) and then even 'that" was not enough, we borrowed and levered to live even better. We denied or aborted every recession's effort at "cleansing" the system of bad debt...only to slightly pause before increasing our lifestyle. "We" as a nation do not know truly hard times. Yes there are a few still alive that can tell you stories of the Great Depression but those stories are through the eyes of children, it was their parents who truly dealt with the brunt of it.

In my opinion, it very well may end up that our "foes" are willing to take a little pain, pain that they know they can bear because they already have...to cause us unbearable pain. Our biggest problem will be in rebuilding. We will have to do this from scratch as our industrial base is gone, our infrastructure aged, our morals decayed and yes, our "money" (gold) is gone. Can we recover? Yes of course we can. We have natural resources and can rebuild industry and infrastructure given some time. The toughest area will be in our national "mindset" which is THE most important and will probably take more time than anything else to repair. Our "mindset" has been molded for several generations, it will take at least a full generation to turn this ship around. For you personally, it is your job to get from "here to there" with wealth intact. This is exactly what gold has done at major historical inflection points. Regards, Bill Holter, Miles Franklin Associate writer


And now for our major paper stories which will influence the price of gold and silver:

First your overnight trading from Asia and Europe:

1. Stocks  in the negative in Shanghai  even with  the weaker yen value (climbing back to 101.87).  Only bourse in Asia that is down is Shanghai/ all over bourses in the positive
lb  USA suspending all investments and trade talks with Russia
2 Nikkei closed up 69 points or 0.47%  as USA/Yen rises to just below 102 to close at 101.87. 
3. Europe stocks deeply in the green/Euro up/USA dollar index down. 
4. Putin stops exercises on the border as troops return to base and Putin tones down rhetoric.
5.  USA 10 yr treasury bond at 2.65% early this morning.
6. Details Ransquawk/Bloomberg/Jim Reid/ Deutsche bank

(courtesy zerohedge/)Bloomberg/Ransquawk/Jim Reid/ Deutsche bank)

Global Market Rollercoaster: Full Overnight Event Summary

Tyler Durden's picture

Since Ukraine is the only wildcard variable in the news these past few days, it was to be expected that following i) theend of the large Russian military drill begun two weeks ago and ii) a press conference by Putin in which he toned down the war rhetoric, even if he did not actually say anything indicating Russia will diffuse the tension, futures have soared and have retraced all their losses from yesterday. And not only in the US - European equity indices gapped higher at the open this morning in reaction to reports that Russian President Putin has ordered troops engaged in military exercises to return to their bases. Consequent broad based reduction in risk premia built up over the past few sessions meant that in spite of looming risk events (ECB, BoE policy meetings and NFP release this Friday), Bund also failed to close the opening gap lower. At the same time, USD/JPY and EUR/CHF benefited as the recent flight to quality sentiment was reversed, with energy and precious metal prices also coming off overnight highs.
Despite the apparent reversal in sentiment, stocks were led higher by health care and industrial names, indicating a degree of caution and unwillingness to pare risk premia even further. In terms of macroeconomic data releases this morning, EUR/GBP reversed early losses following the release of lower than expected UK Construction PMI data, while the release of the latest Eurozone PPI data which showed largest Y/Y fall since December 2009 underpinned potential need to ease by the ECB.
Going forward, market participants will get to digest the release of the latest ISM New York report, API oil inventories after the closing bell on Wall Street and the commencement of China’s National People's Congress meeting.
Bulletin news summary from Bloomberg and RanSquawk
  • Treasuries fall, led by 5Y and 7Y; 10Y notes surrender all of yesterday’s flight-to-quality gains as Putin says in press conference there’s no immediate need to send troops to Ukraine
  • Putin accused protestors of overthrowing Yanukovych in illegal coup and that the deposed president had asked for military protection of ethnic Russians
  • Putin also ordered soldiers in western Russia to return to their bases by the end of the week after military exercises ended on schedule
  • China’s money-market rate jumped the most in six weeks, rebounding from a nine-month low, as the central bank withdrew excess cash from the financial system
  • Citigroup and JPMorgan are bracing investors for a fourth straight drop in 1Q trading, a period of the year when the largest investment banks typically earn the most from that business
  • Sovereign yields higher. EU peripheral spreads narrow as bund yields rise from 7-month low. Asian equities mostly higher; Shanghai Composite -0.2%. European equity markets, U.S. stock-index futures gain. WTI crude and gold fall; copper higher
US Event Calendar
  • 9:45am: ISM New York, Feb. (prior 64.4)
  • 10:00am: IBD/TIPP Economic Optimism, March, est. 45.3 (prior 44.9)
  • 11:00am: POMO - Fed to purchase $1b-$1.25b notes in 2036-2044 sector
Ukraine Update
Russian President Putin says no need to send troops to Ukraine yet, military exercise had been planned long ago; use of force in Ukraine is a choice of last resort.
Russian President Putin says we reserve the right to use all legitimate means to protect residents of Eastern Ukraine.
Russia is not considering the annexation of Crimea, says President Putin.
Asian Headlines
JGBs finished the session little changed, with super-longs outperforming on touted dip buying. At the same time, in spite of Shanghai Comp trading lower following liquidity draining op, the Nikkei 225 index managed to settle in positive territory and was supported by a weaker JPY, with USD/JPY and EUR/JPY remaining bid this morning.
The PBoC drained CNY 35bln via 14-day repos and CNY 50bln via 28-repos. (BBG)
EU & UK Headlines
Eurozone PPI (Jan) M/M -0.3% vs Exp. -0.1% (Prev. +0.2%)
Eurozone PPI (Jan) Y/Y -1.4% vs Exp. -1.3% (Prev. -0.8%) - largest fall since December 2009.
UK PMI Construction (Feb) M/M 62.6 vs. Exp. 63.2 (Prev. 64.6) - rains and floods hit home-building, according to Markit.
There will be unanimous agreement on ending the sterilization of bond purchases under the Securities Market Programme (SMP), according to predictions from an ECB source. (DAWN.COM) This comes ahead of this Thursday's ECB rate decision, where analysts remain split on whether the ECB will act to stem deflation risk.
US Headlines
The White House on Monday night touted middle-class tax breaks it is including in its 2015 budget proposal set for release on Tuesday. The expanded tax breaks were mostly called for in President Obama’s State of the Union address last month, in which the president stressed combating income inequality as a top goal. (TheHill.com)
Oil & gas related stocks underperformed this morning after reports of an end to war games in Crimea prompted an aggressive slide in energy prices. At the same time, with gold trading lower by over USD 10.00 meant that the heavily correlated Fresnillo also traded with losses close to 10%.
Lower precious metal prices failed to weigh on commodity linked AUD/USD, which remained bid, albeit marginally, as the overriding risk on theme supported flows into higher yielding assets. Elsewhere, it was reported this morning citing an advisor to Putin, Glazyev, saying that Russia can dodge any proposed US sanctions by switching to other currencies and creating its own payment system. However, Kremlin official later clarified that Glazyev's comment on USD do not reflect official position.
Reserve Bank of Australia Cash Rate Target (March 4) 2.50% vs. Exp. 2.50% (Prev 2.50%)
The RBA repeated it sees likely period of interest-rate stability and that monetary policy remains accommodative.
The RBA also commented that the exchange rate remains high by historical standards, adding that resource investment is to decline significantly and that non-mining improvement is only tentative. (BBG)
Heading into the North American open WTI crude futures trade lower following the news released this morning indicating that any imminent military conflict in Ukraine has lessened following reports of the conclusion of Russian military exercises, with Putin also stating that there is no need to send troops to Ukraine yet.
Sanctions on Russian oil would be infeasible and ineffective, according to Morgan Stanley, as Russia is integral to the global oil market, representing 13% of global crude production. (BBG)
Gazprom is set to cancel gas discounts to Ukraine, starting in early April. (Interfax)
BNP Paribas has upped its 2014 NatGas price estimate to USD 4.90/mmbtu, up from USD 4.60/mmbtu, as production gains are expected to fall short of exuberant market expectations. (BBG)
Saudi Arabia looks set to produce up to 11mln bpd in Q3 with Saudi oil output gain to gut global spare capacity to near zero, according to Energy Aspect. (BBG)

* * *
We conclude with the traditional Jim Reid (DB) overnight event recap
The Crimean standoff remains the focus for markets, and after the flurry of events yesterday, developments appear to have slowed down in the last 12 hours or so but it’s still too early to say whether we’ve reached a temporary stalemate. As we type this morning, Reuters is reporting that Putin has ordered troops engaged in military exercises to return to their bases, although its not clear if that refers to troops in Crimea or in Russian territory. As we await the next move by the protagonists, attention is turning to Putin’s motivations for seizing control of the Crimean peninsula over the weekend. Opinions are split on whether Putin is looking for leverage in the formation of a new Ukrainian government, or looking to seize the Crimean region as a precursor to potentially reconstructing Ukraine’s eastern border (DB thinks that the latter is unlikely). Others including the FT’s Peter Spiegel think that after last week’s exit of the Russian-backed Ukrainian President Yanukovich and reported threats to Russian interests, the focus is on finding a face-saving Ukraine exit for Vladimir Putin. One way of doing so would be through the EU potentially offering international monitors for Crimea, which could meet the Russian president’s public demand that the peninsula’s Russian-speaking majority is protected. Indeed, Russia’s envoy to the UN argued that the ousted Ukrainian president had asked Putin to use military force in Crimea to restore law and order.
Late Monday, the US government said it was suspending all trade and investment talks with Russia as well as all “military-to-military” engagements. So far there have not been wider military reactions from the West. The US confirmed that there was no change in US ship movements in the Black Sea region. The USS Mount Whitney, a command ship sent into the Black Sea to assist with security surrounding the Sochi Olympics, was due to return to its home port in Italy on either Monday or Tuesday (FT).
In terms of the economic impact on Russia, this will in some part depend on sanctions. On this the international community appears split, with the US seemingly more interested in imposing economic restrictions, while its EU allies are less inclined to do the same. We’ll hear more about this today when US Secretary of State John Kerry meets with officials in Kiev. Our EM strategists think that there are significant doubts about whether the West could agree on meaningful economic sanctions, not least given Europe’s reliance on Russian energy (it still imports almost 30% of its natural gas from Russia, about half of which is shipped through Ukraine). However, the CBR’s rate hike yesterday will have a negative consequence via a squeeze in the domestic liquidity conditions which will be problematic for the banks and an already weak economy. Even without sanctions, a more isolated Russia will likely compound already low investment levels and a diminished growth outlook on long-standing lack of reforms (both economic and institutional). On the whole, our EM strategists believe that there is further upside pressure to Russian CDS spreads. In terms of the Ukraine, the focus remains very much on the potential for near-term aid. According to the FT, the IMF could tap its recently-created “rapid financing instrument”, which would allow it to loan Kiev $1bn without the detailed negotiations needed for a full-scale aid programme. The European Commission has proposed adding €1bn of its own money to the IMF’s loan. Our EM strategists think that the market has not yet priced in a pessimistic scenario of a Ukrainian sovereign default and there is likely further downside to bond prices in their view.
Turning to overnight markets, sentiment is certainly firmer compared to yesterday with small gains seen on the Nikkei (+0.3%) and Hang Seng (+0.4%) on the back of lower risk aversion. In keeping with this theme, gold (-0.01%) has given up some of its 1.8% gain on Monday and US treasury yields (+1bp) have edged off YTD lows. S&P500 futures are up 4.5pts or 0.25% as we type. A number of EM bourses continue to lag though, including the KOSPI (-0.37%), HSCEI (-0.11%) and Jakarta Composite (-0.3%) partially catching up to what was a very weak day for EM assets yesterday. Chinese stocks (-1.0%) are leading the region’s losses ahead of the National People’s Congress. In Asian fixed income, the 5bp rally in UST yields on Monday is boosting demand for Asian credit. A number of high beta EM sovereign credits are 3-4bp tighter as investors see them being relatively isolated from the issues of their Eastern European counterparts. The AUDUSD is 0.1% lower this morning after the Reserve Bank of Australia said that it will be keeping rates on hold for a “period” and reiterated its reference to the AUD’s strength.
Coming back to yesterday, in Western Europe markets spent much of the day combing through the financial sector looking for banks which had the highest exposure to Russia and the Ukraine. Judging by stock price moves, Raiffeisen (- 9.6%), Unicredit (-6.2%), ING (-5.6%) and Soc Gen (-5.5%) came under the most scrutiny, leading European financials (-2.7%) lower as the worst performing sector in the Stoxx600 (-2.27%). A number of banks scrambled to release press statements yesterday quantifying their exposure to the two countries in question. ING Bank disclosed that it has EUR8.5bn in commercial bank loan exposure in Russia and Ukraine and Socgen generated some worries as the foreign bank with largest bank network in Russia (Bloomberg), but it said that its Ukranian exposure was negligible. Raiffeisen as the owner of the biggest foreign lender in Ukraine was forced to suspend the sale of its Ukraine unit. Unicredit said that it has temporarily closed some branches in the Crimean region and said that it will limit ATM cash withdrawals from Ukraine to a maximum of UAH1500 per 24 hours (equivalent to around US$150). The European senior financials credit index (+6.125bp) underperformed the broader European main index (+4.125bp).
Across the Atlantic, the S&P 500 (-0.74%) rebounded off the intraday lows after the Russian military downplayed talk of an ultimatum to Ukrainian forces in the Crimea (the ultimatum passed this morning without major incident). Financials (- 0.93%) also were the worst performing sector in the US and investors shrugged off the better data flow with Ukraine headlines driving market direction. Though it was largely ignored, yesterday’s data flow gave some hope that US is finally emerging from its weather-induced slowdown – but you could be forgiven for thinking the opposite if you were in Washington DC area where yet another heavy snow storm hit accompanied by extremely low temperatures on Monday evening. Nevertheless, looking at the Bloomberg US Economic Surprise index, negative surprises bottomed at a two-year low in late February and have been rising since.
January US personal income (0.3% vs 0.2% expected) and personal spending (+0.4% vs 0.1%) were both above consensus though there were downward revisions to December spending numbers. The ISM manufacturing (53.2 vs 52.3 expected) also beat estimates, rebounding in February following a sharp fall in January. The ISM result was driven by gains in new orders (54.5 vs. 51.2) and inventories (52.5 vs. 44.0). Brent and WTI closed 2% higher apiece on talk of supply disruptions but NYMEX natural gas fell 2.5% as expectations that the worst of the cold weather conditions have passed. The government bond complex across the Core was well bid, perhaps supported by Draghi’s comments to the European Parliament where he warned that the longer that inflation stays at the current level, the greater the risk that it won’t go back to 2% in a reasonable time period. Towards the end of the US session, Citigroup’s CFO warned that the bank faces a weak 1st quarter with trading revenues down in the high mid-teens year-on- year. This is a consistent message to JPM’s comments last week suggesting that markets revenues would be down 15% yoy this quarter.
Looking at the day ahead, we have a relatively quiet day ahead in terms of data releases but there will no doubt be plenty of attention paid to the developments in the Crimean region. On Capitol Hill, the Senate Banking Committee has postponed a confirmation hearing for the nominations of Stanley Fischer, Jerome Powell and Lael Brainard to the Fed Board of Governors. The postponement was because of government office closures on Monday as a result of snow storms. A new date has not been set for the confirmation hearing, according to a statement from the banking committee.


Your chronological order of events inside the Ukraine today (Tuesday)

Early Tuesday morning:

Key points:

1. Exercises over and troops returned to base
2. Troops still in Crimea
3. Putin does not intend to occupy the Crimea
4. Gas contracts with the Ukraine over and the discount removed
5. Putin obviously worried about sanctions and stock markets.

(courtesy zero hedge)

Futures Soar, Near Record As Putin Speaks, Softens Russian Stance On Ukraine

Tyler Durden's picture

Futures are soaring and are just shy of their record high first following news that the Russian military drill has ended, even if Russian troops stationed in the Crimea remain, but more importantly driven by a just completed press conference by Vladimir Putin in his residence outside of Moscow, in which the Russian leader appears to have softened his stance on Crimean aggression, saying he does not consider adding Crimea to its territory. What the market is focusing on is the repeat of Putin's stance that he will not be sending troops to the Crimea yet (even though they are there already), and that he suddenly appears concerned about the impact on markets and the fallout from sanctions.
The key highlights from the speech from Blooomberg.
On the oh so sensitive topic of Russian gas:
So is this Putin offering an olive branch to the West and de-escalating Crimea, or just more smoke and mirrors for the media to consume even as Putin fully entrenches in the territory? Expect to find out shortly.
Finally, here is Reuters recap of events:
President Vladimir Putin said on Tuesday that Russia saw no need to use military force in the Crimea region of Ukraine for now, in remarks apparently intended to ease East-West tension over fears of war in the former Soviet republic.

The use of force by Russia in Ukraine would be a choice of last resort, Putin said, and sanctions being considered against Moscow by the West would be counter-productive.

Putin told a news conference at his state residence outside Moscow there had been an "unconstitutional coup" in Ukraine and ousted leader Viktor Yanukovich, an ally of Russia, was still the legitimate leader of the country despite giving up all power.

Earlier on Tuesday, Putin ordered troops involved in a military exercise in western Russia, close to the border with Ukraine, back to their bases.

Russian financial markets rebounded after sharp falls on Monday, and the euro and dollar rose in Japan, though Moscow's forces remained in control of Ukraine's Crimea region, seized bloodlessly after Yanukovich was ousted last month.

Russia paid a heavy financial price on Monday for its military intervention in Ukraine, with stocks, bonds and the rouble plunging as Putin's forces tightened their grip in Crimea, whose population is mainly ethnic Russian.

The Moscow stock market fell more than 10 percent on Monday, wiping nearly $60 billion off the value of Russian firms, but Russian stock indexes rose more than 4 percent early on Tuesday before slipping back again slightly, though still up on the day.

Putin said the turmoil in Russian markets was a "tactical, temporary" decision by investors.

U.S. Secretary of State John Kerry will propose ways for a negotiation between Russia and Ukraine to be overseen by a multilateral organisation when he visits Kiev on Tuesday.

NATO allies will hold emergency talks on the crisis on Tuesday, for the second time in three days.


In further pressure on Kiev, Russia's top gas producer Gazprom said it would remove a discount on gas prices for Ukraine from April, Interfax news agency cited the company's chief as saying on Tuesday.

However, Gazprom chief Alexei Miller also said the company could offer Ukraine a loan of $2-3 billion to pay off the country's debt of more than $1.5 billion after Ukraine said it was unable to pay in full for gas deliveries in February, Interfax news agency said.

Putin said at the weekend that he had the right to invade Ukraine to protect Russian interests and citizens after Yanukovich's downfall following months of popular unrest. Russia's Black Sea Fleet has a base in Crimea.

But the military exercises in central and western Russia, which began last week and raised fears that Russia might send forces to Russian-speaking regions of east Ukraine, were completed on schedule.

"The supreme commander of the armed forces of the Russian Federation, Vladimir Putin, gave the order for the troops and units, taking part in the military exercises, to return to their bases," Kremlin spokesman Dmitry Peskov was quoted as saying by Russian news agencies.

Although the end of the exercises had been planned, the announcement sent a more conciliatory message than much of the rhetoric from Russian officials, who say Moscow must defend national interests and those of compatriots in Ukraine.

Putin is dismayed that the new leadership in Ukraine, the cradle of Russian civilisation, has plotted a course towards the European Union and away from what had been Moscow's sphere of influence during generations of Soviet Communist rule.

Moscow's U.N. envoy told a stormy meeting of the Security Council that Yanukovich had sent a letter to Putin requesting he use Russia's military to restore law and order in Ukraine.

Ukraine said observers from the Organization for Security and Cooperation in Europe, a pan-European security body, would travel at its invitation to Crimea in an attempt to defuse the military standoff there.


Then this was greeted with warning shots fired by Russians against Ukrainian soldiers in the Crimea:

(courtesy zero hedge)

Watch As Russian Troops Fire Warning Shoots Against Ukrainian Soldiers In The Crimea

Tyler Durden's picture

Amicable resolution between Russia and the Ukraine as the market seems to be suggesting, or not? Watch this clip of what happened just hours earlier at the Belbek air force base, in which Russian troops fired warning shots aat approaching Ukrainian soldiers and you decide.

(see zero hedge for the video)

From Euronews:
Russian forces fired warning shots in to the air as ranks of unarmed Ukrainian soldiers marched towards them at Belbek air base in Crimea on Tuesday (March 4).

Russian troops backed by armoured personnel carriers took over Belbek military airport near the port of Sevastopol last Friday (February 28). Russia's Black Sea fleet is based in Sevastopol.

On Tuesday a column of Ukrainian soldiers marched towards the Russian forces while chanting and carrying the Ukrainian flag. As they approached the line of armed Russian soldiers and military vehicles guarding the base, the Russian forces fired warning shots into the air and warned them not to approach any further.

Once the Ukrainian soldiers reached the line of Russian forces, the Ukrainian and Russian commanders spoke as armed Russian soldiers surrounded them. There were no incidents.
Luckily, this time there were no injuries and the Ukrainians retreated. What about next time?

View image on Twitter
Belbek standoff ends. RT "@mike_giglio: Marching away from the Russians pic.twitter.com/2kLedNuNdM"


This is scary!!  If Turkey blocks the Dardanelles and the Bosphorus, that will be World War III.
Remember that the Tatars have some Turkish blood in them.

(courtesy zero hedge)

Turkey Scrambled 8 F-16 Fighter Jets To Track Russian Plane

Tyler Durden's picture

In a brief statement this morning, Turkish military authorities have admitted that:
Which appears odd given this was a "military exercise" that we are sure the Russians had cleared with neighboring nations that it would be entering their airspace. The Turkish air force has been busy recently following the failed 'drunk' Sochi hijacking and Syrian intercepts.

The Turkish Air Force scrambled eight F-16 fighter jets after a Russian surveillance plane flew parallel along its Black Sea coast, the military said on Tuesday, amid increased tensions between Russia and the West over Ukraine.

The incident occurred on Monday and the Russian plane remained in international airspace, according to a statement on the website of the military General Staff.

Ukraine's Crimea peninsula, which juts into the north of the Black Sea, is at the center of the current standoff between Russia and Ukraine's new pro-Western government. NATO member Turkey forms the southern coastline of the Black Sea.

Gazprom warns that European Gas supply disruptions are very possible.  The Putin removes the discount to take effect April 1.2014. Putin also stated that the Ukrainians owe $2 billion usa dollars from overdue gas sales.

(courtesy zero hedge)

It Begins: Gazprom Warns European Gas "Supply Disruptions" Possible

Tyler Durden's picture

We had previously warned that Putin's "trump card" had yet to be played and with Obama (and a quickly dropping list of allies) preparing economic sanctions (given their limited escalation options otherwise), it was only a matter of time before the pressure was once again applied from the Russian side. As ITAR-TASS reports, Russia's Gazprom warned that not only could it cancel its "supply discount" as Ukraine's overdue payments reached $1.5 billion but that "simmering political tensions in Ukraine, that are aggravated by inadequate economic conditions, may cause disruptions of gas supplies to Europe." And with that one sentence, Europe will awaken to grave concerns over Russia's next steps should sanctions be applied.

It would appear this is the most important map in Europe once again...

Some recent history...
In late January, Ukraine asked Russia for deferral of payments for gas supplied in 2013 and in early 2014. President Vladimir Putin said Ukraine’s debt totalled $2.7 billion then.
and then...
On March 1, Gazprom’s spokesperson Sergai Kupriyanov said the gas holding could cancel its gas supply discount for Ukraine as its overdue debt for gas reached $1.5 billion. This figure includes debts not only for last year’s supplies, but also for the current deliveries.

"The situation with payments is worrying," said Andrei Kruglov, Gazprom's chief financial officer.
"Ukraine is paying but not as well as we would like it to. We are still thinking about whether to extend the pricing contract into the next quarter based on current prices."
And now today...
Russia’s gas giant Gazprom said on Monday itdid not rule out possible disruptions of gas supplies to Europe over Ukraine’s political situation.

Simmering political tensions in Ukraine, that are aggravated by inadequate economic conditions, may cause disruptions of gas supplies to Europe,” the monopoly said in its materials, adding that it would do its utmost to reduce export risks.

“We will further invest into other export-oriented projects such as South Stream and will enhance our LNG (liquefied natural gas) production and export capacity. We also increase our access to underground gas storage facilities in Europe.”

Andrei Kruglov, Gazprom’s chief financial officer, said at the moment Russia had been supplying gas to Ukraine according to schedule, although the latter failed to fulfil its debt obligations.
With that last sentence providing exactly the 'real world' cover Gazprom needs to cut its supplies "through" Ukraine and thus to Europe...
And, as The Guardian notes, this would...
not the first time Russia has used gas exports to put pressure on its neighbour – and "gas wars" between the two countries tend to be felt far beyond their borders. Russia, after all, still supplies around 30% of Europe's gas.

In late 2005, Gazprom said it planned to hike the price it charged Ukraine for natural gas from $50 per 1,000 cubic metres, to $230. The company, so important to Russia that it used to be a ministry and was once headed by the former president (and current prime minister) Dmitry Medvedev, said it simply wanted a fair market price; the move had nothing to do with Ukraine's increasingly strong ties with the European Union and Nato. Kiev, unsurprisingly, said it would not pay, and on 1 January 2006 – the two countries having spectacularly failed to reach an agreement – Gazprom turned off the taps.

The impact was immediate – and not just in Ukraine. The country is crossed by a network of Soviet-era pipelines that carry Russian natural gas to many European Union member states and beyond; more than a quarter of the EU's total gas needs were met by Russian gas, and some 80% of it came via Ukrainian pipelines. Austria, France, Germany, Hungary, Italy and Poland soon reported gas pressure in their own pipelines was down by as much as 30%.
Short of an actual war, the consensus appeared to be, Europe's gas supplies are unlikely to be seriously threatened (since Putin relies on those revenues)... that is clearly about to change with Gazprom's comments.
As the following image from Agence France Presse (created at the end of last year) indicates, things are about to get a lot more problemati for Germany, France, and Italy...


Kerry lands in Kiev and states that sanctions will be issued against Russia in a matter of days.
The USA prepares for a one billion USA loan for the UKraine:

(courtesy zero hedge)

Kerry Lands In Kiev, Sanctions Against Russia "In Matter Of Days", US Prepares $1 Billion Loan For Ukraine

Tyler Durden's picture

While the world digests the recent Putin press conference in which he appeared to superficially soften his stance on the Ukraine, US SecState John Kerry lands in Kiev while the state department announced that sanctions against Russia are "coming in a matter of days", and as the US announces it is preparing a $1 billion aid package for the Ukraine, which despite the toned down rhetoric by Putin just lost the Gazprom discount for natgas due to non-payment meaning its reserves will be depleted even faster, suggesting a far greater urgency to providing funding for the Ukraine in what some have said is now a fight between Putin and the IMF, as the latter tries to drain what little funds remain in the nation, while the former urgently seeks to keep it afloat.

Here are your important tweets;

View image on Twitter
US Sec of State John Kerry has landed in Kiev for talks with Ukraine govt

BREAKING: As John Kerry arrives in Ukraine, State Dept. official says sanctions against Russia coming in a matter of "days"

Ukraine Steps Up Protection Of Its Nuclear Power Plants, Cites "Grave Russian Threat"

To Celebrate Detente Russian Navy Blocks Channel Between Crimea And Russia

Ukrainian, Russian Warships Cross Bosphorus, Enter Black Sea

Russia Warns "Will Have To Respond" For US Sanctions

Stock Rally Stalls As Russia Test-Fires Inter-Continental Ballistic Missile

Ukraine Defense Ministry Says Repelled Armed Attempt To Capture Warship

Realpolitik In Ukraine

Tyler Durden's picture

Submitted by Anatole Kaletsky via Evergreen-Gavekal,
Oscar Wilde described marriage as the triumph of imagination over intelligence and second marriage as the triumph of hope over experience. In finance and geopolitics, by contrast, experience must always prevail over hope and realism over wishful thinking. A grim case in point is the Russian incursion into Ukraine. What makes this confrontation so dangerous is that US and EU policy seems to be motivated entirely by hope and wishful thinking. Hope that Vladimir Putin will “see sense,” or at least be deterred by the threat of US and EU sanctions to Russia’s economic interests and the personal wealth of his oligarch friends. Wishful thinking about “democracy and freedom” overcoming dictatorship and military bullying.
Financial markets cannot afford to be so sentimental.While we should always recall at a time like this the famous advice from Nathan Rothschild to “buy at the sound of gunfire,” the drastically risk-off response to weekend events in Ukraine makes perfect sense because Russia’s annexation of Crimea is the most dangerous geopolitical event of the post-Cold War era, and perhaps since the Cuban Missile crisis. It can result in only two possible outcomes, either of which will be damaging to European stability in the long-term. Either Russia will quickly prevail and thereby win the right to redraw borders and exercise veto powers over the governments of its neighbouring countries. Or the Western-backed Ukrainian government will fight back and Europe’s second-largest country by area will descend into a Yugoslav-style civil war that will ultimately draw in Poland, NATO and therefore the US.
No other outcome is possible because it is literally inconceivable that Putin will ever withdraw from Crimea. To give up Crimea now would mean the end of Putin’s presidency, since the Russian public, not to mention the military and security apparatus, believe almost unanimously that Crimea still belongs to Russia, since it was only administratively transferred to Ukraine, almost by accident, in 1954. In fact, many Russians believe, rightly or wrongly, that most of Ukraine “belongs” to them. (The very name of the country in Russian means “at the border” and certainly not “beyond the border”). Under these circumstances, the idea that Putin would respond to Western diplomatic or economic sanctions, no matter how stringent, by giving up his newly gained territory is pure wishful thinking.
Putin’s decision to back himself into this corner has been derided by the Western media as a strategic blunder but it is actually a textbook example of realpolitik. Putin has created a situation where the West’s only alternative to acquiescing in the Russian takeover of Crimea is all-out war. And since a NATO military attack on Russian forces is even more inconceivable than Putin’s withdrawal, it seems that Russia has won this round of the confrontation. The only question now is whether the new Ukrainian government will accept the loss of Crimea quietly or try to retaliate against Russian speakers in Ukraine—offering Putin a pretext for invasion, and thereby precipitating an all-out civil war.
That is the key question investors must consider in deciding whether the Ukraine crisis is a Rothschild-style buying opportunity, or a last chance to bail out of risk-assets before it is too late. The balance of probabilities in such situations is usually tilted towards a peaceful solution—in this case, Western acquiescence in the Russian annexation of Crimea and the creation of a new national unity government in Kiev acceptable to Putin. The trouble is that the alternative of a full-scale war, while far less probable, would have much greater impact—on the European and global economies, on energy prices and on the prices of equities and other riskassets that are already quite highly valued. At present, therefore, it makes sense to stand back and prepare for either outcome by maintaining balanced portfolios of the kind recommended by Charles, with equal weightings of equities and very long-duration US bonds.
Looking back through history at comparable episodes of severe geopolitical confrontation, investors have usually done well to wait for the confrontation to reach some kind of climax before putting on more risk.
In the 1962 Cuban Missile Crisis, the S&P 500 fell -6.5% between October 16, when the confrontation started, and October 23, the worst day of the crisis, when President Kennedy issued his nuclear ultimatum to Nikita Khrushchev. The market steadied then, but did not rebound in earnest until four days later, when it became clear that Khrushchev would back down; it went on to gain 30% in the next six months.
Similarly in the 1991 Gulf War, it was not until the bombing of Baghdad actually started and a quick US victory looked certain, that equities bounced back, gaining 25% by the summer. Thus investors did well to buy at the sound of gunfire, but lost nothing by waiting six months after Saddam Hussein’s initial invasion of Kuwait in August, 1990.
Even in the worst-case scenario to which the invasion of Crimea has been compared over the weekend—the German annexation of Sudetenland in June 1938—Wall Street only rebounded in earnest, gaining 24% within one month, on September 29, 1938. That was the day before Neville Chamberlain returned from Munich, brandishing his infamous note from Hitler and declaring “peace in our time.” The ultimate triumph of hope over experience.


Charles Hugh Smith on Russia becoming less dominant in the supply of the natural gas.

(courtesy Charles Hug Smith)

Ukraine: Follow The Energy

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Scrape away the media sensationalism and geopolitical posturing and it boils down to a simple dynamic: follow the energy.
Though many seem to believe that internal politics and geopolitical posturing in Ukraine are definitive dynamics, I tend to think the one that really counts is energy: not only who has it and who needs it, but where the consumers can get it from.
Let's cut to the chase and declare a partition along long-standing linguistic and loyalty lines a done deal.Let's also dispense with any notions that either side can impose a military solution in the other's territory.
Media reports on the weakness of Ukrainian military forces abound (for example, Ukraine Finds Its Forces Are Ill Equipped to Take Crimea Back From Russia), but Russia's ability to project power and hold territory isn't so hot, either.
A knowledgeable correspondent submitted these observations:
RE: Russian Army. Effective draft evasion is running 80%. Morale is low, training is very poor and poorly funded. The Russian army has also gone through 22 years of near continuous contraction.
And this standing army has heavy commitments in the Caucasus and Far East Siberia. Moreover, at least half of these Russian ground troops are short term 12 month conscripts. I don't think these kids will produce many usable and motivated troops. The low morale recently seen in the Ukrainian Berkut and other police will be multiplied by at least 10x.

Russian speaking Ukrainian bands are rumored to already be crossing the borders into Russia territory. They're to be ready to sabotage bridges and infrastructure and generally retaliate. Fluent Russian speakers with many years experience of living in Russia. Who can say for sure if this has already happened or is just being threatened? We can say this is a very real danger. These people look just like "Russians."

And we can also say this threat will seriously complicate Russian rear area security and logistics. And speaking of logistics, the distances in south Ossetia and Abkhazia were very short and the populations were entirely friendly. Neither condition prevails in the Ukraine outside the Crimea.

Supplying moving armored units over hundreds of miles of occupied country is very difficult logistically. The logistics for air assault helicopter units are just as bad. These helo units look mobile but they're a lot like a yoyo being twirled around your head on the string. They only go fast within a fixed radius anchored by logistics that are about as heavy to move as an armored division's supply columns. That is years in the 101st Airborne Division talking. The fuel consumption rates are immense. Stuff starts breaking down fast.
Conclusion: a de facto partition is already baked in because neither side can force a re-unification. Various jockeying and posturing will undoubtedly continue for some time, but the basic end-game is already visible: de facto partition.
Let's move on to correspondent A.C.'s observations about energy.
This map rounds out the European energy Rosetta Stone. When they hear that Italian fighter jets are over Tripoli, or that the French Foreign Legion has returned to the deep Sahara Desert, they can can better understand the reasons and real objectives of such operations.

Many have noted that the Russia economy is critically dependent on oil and gas exports to the EU. It should be noted that the converse is less true every day about EU dependence on Russian oil and gas. The Wall Street Journal even had a line about an EU proposal to push natural gas EAST to the Ukraine. It's hard to understand that passage or where the natural gas could come from unless one understands the North Africa to southern Europe gas pipelines.

The factors bringing the conflict in Ukraine to a head are:

1. The natural gas discoveries in eastern Poland and western Ukraine played the largest role.

2. The reduced importance of the gas pipeline running through the Ukraine to Europe as compared to 2009. Since that time the Nordstream lines have been finished and Gazprom acquired commercial control of the Belarus pipeline. The South Stream lines are well along in development.

3. Fast developing liquid natural gas (LNG) seaport terminal infrastructure.

Events in Libya, Mali and Algeria are not hermetically isolated from this. They are part of a comprehensive energy policy problem being dealt with by the same leaderships. It increasingly looks like a series of peripheral Energy Wars that are being fought out for control of Europe.
LNG exports are going to become a weapon in the struggle for geopolitical influence and control.

This highlights another problem for Russia/Gazprom. Its present natural gas advantage in Europe now rests mainly on its pipeline infrastructure. This advantage is fading due to the current and proposed pipeline projects running through Turkey to Europe, plus LPG terminal & ship developments, plus the five trans-Mediterranean pipelines from Libya, Algeria and Morocco to southern Europe, plus local shale gas plays...

The Ukraine is not the only country becoming less systemically important to Europe for natural gas supply. So is Russia. Current events will only accelerate everyone's efforts to diversify away from such an unstable and apparently dangerous supplier.

I think the long-term fallout from the Ukrainian Crisis will be similar to China's attempt to exploit its temporary low price monopoly position in rare earth metals a few years ago. The result is rare earth metals are becoming less rare by the day as alternate mines outside China are opened and reopened.
Thank you, A.C. Scrape away the media sensationalism and geopolitical posturing and it boils down to a simple dynamic: follow the energy.


A discussion on what sanctions might be imposed on Russia:

1. Closing of the Dardanelles (and the Bosphorus) in Turkey (this would be deadly and probably start World War iii)
2. Sanctions on Russia similar to Iran  (Swift)

(courtesy Tannock/zero hedge)

Guest Post: Putin's Kampf

Tyler Durden's picture

Authored by Charles Tannock, originally posted at Project Syndicate,
Russia’s seizure of Crimea is the most naked example of peacetime aggression that Europe has witnessed since Nazi Germany invaded the Sudetenland in 1938.It may be fashionable to belittle the “lessons of Munich,” when Neville Chamberlain and Édouard Daladier appeased Hitler, deferring to his claims on Czechoslovakia. But if the West acquiesces to Crimea’s annexation – the second time Russian President Vladimir Putin has stolen territory from a sovereign state, following Russia’s seizure of Georgia’s Abkhazia and South Ossetia regions in 2008 – today’s democratic leaders will surely regret their inaction.
In Western capitals, the response so far has been mixed.The punishments being considered – expulsion from the G-8, for example – would be laughable were the threat to Europe’s peace not so grave. Putin regards the breakup of the Soviet Union as the greatest catastrophe of modern times, and he has sought relentlessly to refashion Russia’s lost empire. If the West intends to be taken seriously, it needs to act as decisively as Putin has.
Putin’s many successes in his imperial project have come virtually without cost. His Eurasian Economic Community has corralled energy-rich states like Kazakhstan, Uzbekistan, and Turkmenistan into Russia’s camp. Georgia was dismembered in 2008. Armenia’s government was bullied into spurning the European Union’s offer of an Association Agreement.
Now the greatest geostrategic prize of all – Ukraine – may fall into Putin’s hands. Russia without Ukraine, former US National Security Adviser Zbigniew Brzezinski wrote, “ceases to be an empire, but Russia with Ukraine suborned and then subordinated, Russia automatically becomes an empire.” And, because the vast majority of Ukrainians have no desire to join Putin’s empire, we can be certain that the state Putin will lead from this point on will be a highly militarized one, rather like the Soviet Union but without the ruling Communist Party.
Given the scale of Putin’s adventurism, the world’s response must be commensurate. Canceled summits, trade deals, or membership in diplomatic talking shops like the G-8 are not enough. Only actions that impose tangible economic sanctions that affect Russian citizens – who, after all, have voted Putin into power time and again – offer any hope of steering the Kremlin away from its expansionist course.
Which sanctions might work?
First, Turkey should close the Dardanelles to Russian shipping, as it did after the 2008 Russo-Georgian War. Back then, Turkey closed access to the Black Sea to prevent the US from intervening, though the US, it is now clear, had no intention of doing so. Today, it should close the Turkish straits not only to Russian warships, but to all commercial vessels bound for Russia’s Black Sea ports. The impact on Russia’s economy – and on Putin’s military pretensions – would be considerable.

Turkey is permitted to close the Dardanelles under a 1982 amendment to the 1936 Montreux Convention. Indeed, Turkey could turn Putin’s justification for seizing Crimea – that he is protecting ethnic Russians there – against him, by arguing that it is protecting its Turkic Tatar kin, who, given Russia’s ill treatment of them in the past, are anxious to remain under Ukrainian rule.

Turkish Foreign Minister Ahmet Davuto?lu turned his plane around in mid-air this week to fly to Kyiv to offer support to the new interim government. Prime Minister Recep Tayyip Erdo?an, no pushover himself, as Putin well knows, should follow up on that gesture of support by immediately closing the straits to Russian shipping – until Putin recalls all troops in Crimea to their Sevastopol bases or to Russia proper. And Turkey should be offered an Article 5 guarantee from NATO should Russia seek to intimidate it.

Second, US President Barack Obama should impose the type of financial sanctions on Russia that he has imposed on Iran for its nuclear program. Those sanctions have crippled Iran’s economy. Similarly, denying any bank that does business with a Russian bank or company access to the US financial system would create the kind of economic chaos last seen in Russia immediately after the fall of Communism. Ordinary Russians should be made to understand that permitting Putin – whose primary claim to leadership is that he ended the penury of the first post-Soviet years – to continue with his imperialist aggression will cost them dearly.

Third, Obama should emphasize to the Chinese their stake in Eurasian stability.Putin may regard the Soviet Union’s disintegration as a tragedy, but for China it was the greatest geostrategic gift imaginable. At a stroke, the empire that stole millions of hectares of Chinese territory over the centuries, and that threatened the People’s Republic with nuclear annihilation, simply vanished.

Since then, Central Asia’s independent states, and even Ukraine, have become important trading partners for China. Russia’s conquests in Georgia greatly displeased China, as was seen at the post-war summit of the Shanghai Cooperation Organization (a regional grouping that includes ex-Soviet countries that share borders with China and Russia). Russia pushed the SCO to recognize the independence of Abkhazia and South Ossetia. But the SCO balked. The group’s Central Asian members – Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan – would not have stood up to the Kremlin without China’s support.

Today, however, Chinese President Xi Jinping may need to be less cryptic in his response to Putin’s adventurism. Indeed, the real test of China’s claim that it is a responsible stakeholder in the world community will come soon at the United Nations. Will it back Putin’s clear flouting of international law, or will it back Ukraine’s territorial integrity?

There are other possible punitive measures.Visas can be denied and canceled for all Russian officials. Assets can be frozen, particularly those laundered by oligarchs close to Putin. Only when the pain becomes intolerable, particularly for the elite, will Putin’s kampf be defeated.
The cost of inaction is high. Countless countries, from Japan to Israel, rely on America’s commitment to act robustly against grave breaches of the peace. Moreover, when Ukraine surrendered its nuclear weapons in 1994, it did so with the express understanding that the US (and the United Kingdom, France, and Russia) would guarantee its territorial integrity. Should Crimea be annexed, no one should gainsay Ukraine if it rapidly re-nuclearized its defense (which it retains the technological capacity to do).
When Chamberlain returned from Munich, Winston Churchill said, “You were given the choice between war and dishonor. You chose dishonor and you will have war.” Obama and other Western leaders face a similar choice. And if they choose dishonor, one can be certain that an undeterred Putin will eventually give them more war.


Your opening 10 year Portuguese bond yield Tuesday : up 3  basis point from Monday night

Portuguese 10 year bond yield:  4.87%

Your closing Portuguese 10 year bond yield Tuesday night:  (par in basis points  on the day) Mrs Watanabe of Japan is still buying European debt like crazy. Looks like they are front running for direct QE from the ECB

Portuguese 10 year bond yield:  4.83%


Your closing Japanese yield Tuesday morning: par   in  basis points: yield  .58%

Japanese 10 year bond yield:  .58% 

And now for your closing Japanese 10 year bond yield from NY/ up 1 in basis points from the morning  (THE ECONOMY IN JAPAN IS NOT PERFORMING TOO WELL AS RATES ARE PLUMMETING)

Japanese 10 year bond yield:  .59%  


 Early Tuesday morning USA 10 year bond yield:  2.65%   up 5 in basis points  from Monday night/ 

USA dollar Index early Tuesday morning: 79.98 down 10 cents ( still not good!!)


Your opening currency crosses for Tuesday morning:

EUR/USA:  1.3760  up   .0026
USA/JAPAN YEN  101.87   up  .460
GBP/USA  1.6692  up .0030
USA/CAN  1.1062 down .0018   

This morning the Euro is a little stronger trading just below the 1.38 level at 1.3760.  The yen is a lot weaker this morning, trading just below the all important  102 cross. It closed in Japan down 46 basis points at 101.87 yen to the dollar  (dollar up). The pound  is now showing minor strength as it trades just below the 1.67 level  to 1.6602.  The Canadian dollar is up again this morning with its cross at 1.1062 to the USA dollar.

The NIKKEI Tuesday morning: closed up 69 points or 0.47%

Trading from Europe and Asia : 1) Europe all positive with all bourses deeply in the green; 2) Asia bourses mostly positive with the major bourses in the green,  but Shanghai the only major bourse  in the red.  

Gold early morning trading:  $1333.00

silver:$ 21.15 



Your closing Spanish 10 year government bond: Tuesday down 6  in basis points in yield  from Monday night.  (Mrs Watanabe is buying European bonds and shunning Japanese bonds and front running for a possible QE from the ECB

Spanish 10 year bond yield:  3.44% 


Tuesday closing Italian 10 year bond yield: down 3 in basis points and trading 5 basis points below Spain.

Italian 10 year bond yield;  3.42%


Closing currency crosses for Tuesday night/USA dollar index/USA 10 yr bond: 

Euro/USA:  1.3736 up.0001
USA/Japan:  102.24 up   .820
Great Britain/USA:  1.6668  up .0014
USA/Canada:  1.1094  up .0014

The euro fell a lot  in value during this afternoon's  session,but it was narrowly up on the day , closing just above the 1.37 level to 1.3736.  The yen fell quite a bit during  the afternoon session, and it lost 82  basis points on the day closing well below the magical support 102 level to 101.39 (dollar down). A breach below the 102 usually sends the Dow and many bourses southbound as many key on this cross and as well if breached many of the yen carry traders must unwind their trades.  The market is now quite convinced that Japan will engage in another round of QE to help the moribund economies. The British pound lost considerable  ground  during the afternoon session but was up on the day as it closed at  1.6668. The Canadian dollar fell a lot during  the afternoon session, and was down  on the day closing at 1.1094.  Currency wars at their fullest.  

Your closing USA dollar index:

80.16 up 8 cents on the day

Your closing 10 year USA bond yield up a huge 10   basis points on the day

USA 10 yr Bond Yield:  2.70%. 


Closing bourses figures for Tuesday: 

i) England/FTSE  up 115.42 or 1.72%

ii) Paris/CAC up   105.03 or  2.45%

 iii) German DAX: up 230.26 or 2.46%
iv) Spanish ibex up  245.00 points or 2.51%

v) Italian bourse (MIB)  up  715.43 or 3.62%

and the Dow down 228 or 1.41%


And now the big USA stories:

Obama plans to extend Obamacare by one year:

(courtesy zero hedge) 

White House Set To Extend Obamacare Deadline By 1 Year

Tyler Durden's picture

With the world distracted by Putin and ICBM launches, The White House, according to the WSJ, is about to extend Obamacare deadlines by another year:
Allowing insurers to keep selling policies that do not meet standards for another year. It seems, if you like your healthcare policy, you can keep it for one more year...(most importantly past the Midterms)

The Obama administration plans to allow insurers to continue selling policies that don't meet the federal health law's requirements for at least another year, an insurance industry official confirmed Tuesday.


The move would push a potential political furor over canceled insurance plans past this year's midterm elections. It would extend a policy reversal announced by President Barack Obama in November, in which he said insurance commissioners could let health plans reinstate for one year policies they had canceled because they didn't meet the Affordable Care Act's new standards.
The abrupt shift came after millions of Americans received cancellation notices from their carriers but were unable to use the HealthCare.gov website to apply for new coverage. That created a firestorm because Mr. Obama frequently promised during the passage of the health law that "if you like your plan, you can keep it."


Kansas Insurance Commissioner Sandy Praeger, an elected Republican who has been supportive of some parts of the federal health law, ... said Tuesday commissioners remained worried that allowing people who are typically healthier to keep skimpy policies would leave a riskier population in the main insurance market, which in turn would drive up rates.
Read more here


Well that is all for today
I will see you tomorrow night



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