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Russia, China and the new world order

 The war in Ukraine has now moved into its winter phase, and will not start in earnest again until the end of  March as the "mud" season comes to an end.  The recent wins by Ukrain's military forces (unexpected by most commentators) have left the country and the world with several interesting options (1) the threat of a Nuclear strike is now off the table since the reason for such an attack on the West was driven by a desire to disrupt the flow of arms; the Ukrain military forces find themselves with five or six more times the amount of weapon than they did during the opening sequence of the war nearly 8 months ago, (2) There is only one waterway access to the Crimean peninsula without that water more than 2 million Ukrainian Russians and the Russian military forces are at risk of running out of water (3) Sanctions against Russia are only now starting to really bite, and it's going to get worse before it gets better (4) the real issue for Russia is the potential shutting down of its Siberian oil production -- last time this happened it took 30 years for Russia to recover.

Russia is beginning its second mobilization -- which will probably be the same as the first one, where 100,000 soldiers were conscripted and were offered minimum armament and equipment.  It ended poorly, and now the Russian Army is looking for more than 500,000 new soldiers... its likely to end the same way especially if the Ukrainians remain well-armed, but again it's unclear.

So far Russia has survived the whole sanction thing, sure they are having to do with fewer things from the West, but it remains a powerful economy that exported Food and Energy, and will continue to do so, but at a much-reduced level.

For China the lesson has been brutal, first, should the same sanction that was applied to Russia were applied to China it would be catastrophic, China is a substantial food and energy importer -- especially oil from the middle east.  Second, covid is proving to be a disaster, and third, the Ukraine invasion shows how difficult it is to invade another country -- and there is only a land border between Russia and Ukraine -- not the same for Taiwan.

More bad news, America has lost all interest in being the policeman of the world, and it doesn't see the value added anymore.  Only 12% of the US GDP is from international trade, half of which is from Canada and Mexico (and rising).  For the European and the Chinese, the problem is who is going to replace the Americans as the policemen of the world.  By the end of 2027 America will have 11 supercarriers -- warfare platforms and only 63 destroyers -- the tool of the policeman of the world.  Since the arrival of Barack Obama in the White House there has been an official policy of disengagement from the world.  There are fewer American troops in the Middle East now than at any time over the past 100 years. America warned Europe not to trust Russians (natural gas) it warned the world that Russia was going to invade Ukraine and it was ridiculed by leaders in most of Europe's capital.

The new world order will not include America as the policeman of the world, they may be engaged in the conflict but they will not be the policemen.  The impact on global trade is certain to be important.  In addition, the European Parliament has announced that oil prices are capped at US$ 60 per barrel if the source is Russia.  There will no longer be a single price for commodities worldwide, there will be three prices (minimum), North America, Europe, and Asia.  

As an investor where do you bet your money?  In a place that is not only energy independent but also produces a surplus of food, and has an attractive labor pool or in a place that is in conflict and where prices are set to explode.  

It would seem obvious


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