Tuesday, August 12, 2008

GEORGIA [Update] -- Tues August 12, 2008 4:20 PDT -- Getting Ready for Round 2

The Russian advance has stopped. Mikeil Saakashvili has said that Georgia will never allow itself to be broken up. Russia has meanwhile imposed an effective annexation of South Ossetia and Abkhazia and put a ring of armor around those enclaves with air support above.

Two other events are setting the stage for renewed -- and possibly more dangerous -- conflict. First Georgia has resigned from the Commonwealth of Independent States. Second, NATO has announced that it will proceed with plans to admit Georgia to the Alliance. Excuse me...was that the Georgia that existed last week or the Georgia that exists today as a new NATO member? I cannot see NATO admitting a partitioned Georgia. Saakashvili overplayed his hand and will likely lose internal support. So what? Georgia is a U.S. baby no matter who holds office. Russia and NATO do not appear any closer to blinking even though one of them will ultimately have to. And that's where the presuure on geopolitical fault lines has not lessened. This week may have only been a foreshock.

The big mystery is the markets. WASSUP with that? Apparently demand destruction has given the markets a lot of confidence. I'm not sure what they plan to do about China and India. China's demand is down for the Olympics. They're over in a few days. BP has taken three pipelines down and we have no word yet as to when BTC comes back on line. In the meantime, Caspian production is backing up. Gold is being bombed ruthlessly and some are predicting a drop into the $700 ranges. Great, I'll buy more as soon as that happens.

Apparently the pundits and analysts believe that sinking oil prices are NOT going to encourage renewed demand. That's the part I can't figure out. Conspiratorially setting a floor at around $100 only puts money into the producers' pockets and doesn't spur investment in alternative infrastructure.

Well, the summer driving season is over even if the hurricane season is not. All we have to look forward to is back to school, the winter,and the ever hungry beast of 3-5% depletion. Has Cantarell started to refill on the news of a temporary Georgian cease fire? Ghawar? The North Sea? Burgan? Alaska's North Slope? Indonesia?
-- MCR


Anonymous said...

Here is one possible explanation for the dollar's recent turnaround: Central banks propping up the dollar.

xcskwng said...

I found this analysis from Stratfor interesting:

"The Russian invasion of Georgia has not changed the balance of power in Eurasia. It simply announced that the balance of power had already shifted."

The Russo-Georgian War and the Balance of Power

Green2Go said...

That is a must read. Thanks for posting the link.

We sure appreciate your brilliant analysis and comments.

Pandabonium said...

Mark - I came across that today as well. "Very interesting" as Artie Shaw used to say on Laugh In. If so, we could see a 'mysterious' rise of the dollar for the next few months.

Scott said...

J.R. Nyquist has an interesting take on the whole Russia thing.

Or you could listen to some Van Halen


Elaine said...

MCR, what is your analysis of why gold prices are falling? And what do you think of this person's view of falling gold/silver? He considers it another bubble, just like housing, and he says that commodities never do well in recessions.

Tim said...

I live in Iowa. There are plenty of well informed people there.