Australian (ASX) Stock Market Forum

War threat in Ukraine

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Value Collector said:
If china had to choose between Russian Trade or Trade with west I wonder which they would choose
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If it was only that simple the world wouldn't be in its current turmoil.

The world has become dependent on china for not only manufactured goods but also processed raw materials such as rare earths.

Can you really see the the west stopping all imports from China? Imagine the shortages that would create, and the massive increase of inflation, breakdown of vehicles waiting on parts, emergency services, and so on.

Nothing is impossible. Governments of the west could be strong enough to call a stop to China imports. Are the people strong enough to support the governments through the shortages, disruptions, higher inflation than what is already coming?
 
The world could be plunged into another recession if Russia ends its energy exports into Europe due to the invasion of Ukraine, analysts warn, while Australian motorists face further pain at the pump as global oil prices threaten to push above $US100 ($138) a barrel.

As Germany put an $11bn natural-gas pipeline on hold and traders fretted that Moscow would withhold gas in retaliation, pushing gas prices higher, Mr Taylor said Australian gas prices remained 77 per cent below Asian and European prices.

Russia is the world’s third-largest oil producer and, following Russia’s incursion into Ukraine, Brent oil futures traded just above $US99 a barrel before settling closer to $US96 a barrel.

Outgoing chair of the Australian Competition & Consumer Commission Rod Sims said the tension in Ukraine would contribute to escalating petrol prices, declaring there was not much the federal government could do to make fuel more affordable.

“The tension around Ukraine had just built on supply demand problems in the energy market worldwide because we came out of Covid,” Mr Sims said.

“Demand returned for oil and gas and the supply just wasn’t there. Ukraine has just made that worse.”

But Mr Sims played down the prospect of higher gas prices, saying there was no reason for suppliers to charge more than $10 a gigajoule regardless of geopolitical tensions.

He said gas suppliers were aware the government would crack down on them if they raised their prices.

“I’d be very surprised if gas prices go up much above $10 a gigajoule no matter what happens internationally. They’re making a lot of money, the gas producers, at the moment … and they don’t want anything to interfere with their ability to export so I think they’ll tread very carefully.”

CBA commodities analyst Vivek Dhar warned there was “still considerable risk that oil prices may surge above $US100 a barrel if Russia’s invasion in Ukraine continues to escalate”.

For Australian motorists already struggling with record petrol prices, the prospect of more pain at the pump looms. Households are on average spending a record $251 a month on petrol, up $67 over the past year, according to CommSec numbers.

With much of Europe dependent on Russia for gas and thermal coal, Credit Suisse analyst Matthew Hope warned that “if Russian energy exports to Europe were cut by either side, there would be large power cuts to Europe, a sharp slowing in industrial production, and the threat of a global recession”.

“We believe this is unlikely, as it would be detrimental to both sides, but with tensions high and few good solutions, it can’t be ruled out,” Mr Hope said.

The prospect of a war in Europe also comes at a fraught time for the continental and global economy. Surging power costs have already helped drive inflation higher, complicating the post-pandemic rebound and forcing central banks to raise rates.

Disruptions to supply chains as a result of the pandemic are yet to be resolved, and global shipping costs remain massively inflated.

A Department of the Prime Minister and Cabinet spokesman said Australia was not immune from some supply chain impacts but was “largely shielded from major disruptions”.

“We have very limited direct trade exposure to Russia and Ukraine,” he said.

He added that the government was “well-placed to respond to global events that may impact supply chains through the Office of Supply Chain Resilience and other relevant agencies.”

With investors moving to reduce their exposure to the potential fallout of an all-out war between Russia and Ukraine, AMP Capital chief economist Shane Oliver said Australian stocks had held up better than those on Wall Street, where prices had retreated to their lowest levels since January.

Dr Oliver said an invasion of all of Ukraine with significant sanctions and interruption to European gas supplies – but no NATO military involvement – would trigger “a stagflationary shock to Europe, and to a lesser degree globally, as oil prices rise further”.

Dr Oliver said share prices would likely drop a further 10 per cent, and the market would take about six months to recover.

Should NATO forces become involved in an armed conflict, sharemarkets could drop by a fifth “as war in Europe, albeit on its edge, fully reverses the ‘peace dividend’ that flowed from the end of the Cold War in the 1990s,” he said.

Russia and Ukraine together also account for a quarter of global wheat exports and Ukraine alone accounts for 13 per cent of global corn exports.

“The food price inflation risk stemming from this conflict appears acute,” RBC Capital head of global commodity strategy Helena Croft told clients this week.

Opposition Treasury spokesman Jim Chalmers said “the situation in Ukraine could have consequences for our economy, particularly when it comes to energy prices (and) food security … and all of these issues around inflation, which is so important to working families in Australia”.
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Agreed with the assessment RE: oil.
Biden alluded to some measures that would be implemented to help ease prices at the pump (and IIRC he alluded to the impact that would have on inflation). Saudi's have said that they wouldn't be adjusting their output. Iran seems to be preparing for a possible increase in demand pending resolution of nuclear talks with the US. Meanwhile, current sanction against Russia haven't disrupted crude supply, but that doesn't mean Russia won't decide to stop selling the US!
 
JohnDe said:
The world has become dependent on china for not only manufactured goods but also processed raw materials such as rare earths.

Can you really see the the west stopping all imports from China? Imagine the shortages that would create, and the massive increase of inflation, breakdown of vehicles waiting on parts, emergency services, and so on.
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I can't see either side wanting to stop the flow of goods, China and the west are mutually dependent on each other, hence why China is trying to dance along the fence line on the Ukraine issue.

China wants to side with Russia for its defence and to maintain a strong and intimidating front against possible "western aggression", but it knows it is economically linked to Ukraine, and the rest of Europe and the USA.

If china could say FU to the west and not cause economic and political pain in china, they would, but they can't.
 
Value Collector said:
I can't see either side wanting to stop the flow of goods, China and the west are mutually dependent on each other, hence why China is trying to dance along the fence line on the Ukraine issue.

China wants to side with Russia for its defence and to maintain a strong and intimidating front against possible "western aggression", but it knows it is economically linked to Ukraine, and the rest of Europe and the USA.

If china could say FU to the west and not cause economic and political pain in china, they would, but they can't.
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Same goes for the west, we will never say FU to China if China keeps sending goods to Russia.
 
Rumours are now circulating that Russia could be looking at beginning their attack in the coming hours, as the breakaway regions have asked for military assistance.

Gold is extending its gains after closing at new highs, while the ASX200 has dropped close around 2%. If the rumours end up being accurate, it could see the current price action accelerate. However, if they end up being false, it could help improve risk appetite, at least temporarily.

This is, of course, speculation, so it's important to remember all trading carries risk, and to closely monitor the situation as it develops.
 
JohnDe said:
Same goes for the west, we will never say FU to China if China keeps sending goods to Russia.
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If china started military action against the west, you can bet the west would say FU to china, and their economy would crumble, and civil unrest would cause the down fall of their government.

That is why China will support Russia with words, but not militarily, as I said China is dancing a fine line, it wants to be the world factory and have a strong export economy, but it also wants to be seen as being defiant to the USA .

China has far more to gain economically from its relationship with the west than it can ever gain from its relationship with Russia, and they know that, they aren't dumb, they rely on having their people employed and feed, and thats all funded by their exports to the west.
 
Value Collector said:
If china started military action against the west, you can bet the west would say FU to china, and their economy would crumble, and civil unrest would cause the down fall of their government.

That is why China will support Russia with words, but not militarily, as I said China is dancing a fine line, it wants to be the world factory and have a strong export economy, but it also wants to be seen as being defiant to the USA .

China has far more to gain economically from its relationship with the west than it can ever gain from its relationship with Russia, and they know that, they aren't dumb, they rely on having their people employed and feed, and thats all funded by their exports to the west.
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How did this conversation escalate from trade to 'military action'?

We started on your comment "If china had to choose between Russian Trade or Trade with west I wonder which they would choose"

China can afford to trade with both the west and Russia. The west needs China made goods and processed materials. The west will never shut down all trade with China, and China knows this.

Do you know how many of the worlds biggest companies have manufacturing and industrial facilities in China? Do you think that governments in the west will involve themselves in the loss of all that?
 
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JohnDe said:
How did this conversation escalate from trade to 'military action'?

We started on your comment "If china had to choose between Russian Trade or Trade with west I wonder which they would choose"

China can afford to trade with both the west and Russia. The west needs China made goods and processed materials. The west will never shut down all trade with China, and China knows this.

Do you know how many of the worlds biggest companies have manufacturing and office facilities in China? Do you think that governments in the west will involve themselves in the loss of all that?
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I was giving an example of what would cause the West to shut down trade with China.

My original comment was simply stating that China values its economic relationship with the west far more than it’s relationship with Russia.

If China doesn’t support Russia militarily, then the whole “red bloc” concept is a bit dead in the water, and it’s just Russia on the footy field by itself against almost every other power in the world.

Just wait and see, you will see that Chinas Support of Russia is just a facade, sure China will trade with Russia, just like it wants to trade with everyone, but they aren’t blood brothers.
 
Value Collector said:
I was giving an example of what would cause the West to shut down trade with China.

My original comment was simply stating that China values its economic relationship with the west far more than it’s relationship with Russia.

If China doesn’t support Russia militarily, then the whole “red bloc” concept is a bit dead in the water, and it’s just Russia on the footy field by itself against almost every other power in the world.

Just wait and see, you will see that Chinas Support of Russia is just a facade, sure China will trade with Russia, just like it wants to trade with everyone, but they aren’t blood brothers.
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Yes, war between countries will always shut down trade.

Shutting down trade will lead to war, just as it did when oil trade was banned to Japan just before WWII.

China will not stop trading to Russia, they may make some conciliatory actions such as no more water pumps for Ladas to Russia but they'll keep trading. And the west will not want to or be able to force China to stop trading with Russia.
 
If the west can convince (negotiate) with China to join in a common good to change Putin's views and bring order back, the world could be back on track for world prosperity and peace. Fingers crossed.

As Western leaders struggle to respond to Vladimir Putin’s unexpectedly dramatic challenge to the post-Cold War order in Europe, the record so far is mixed. The West has assembled something approaching a united stance on the limits of the concessions it is prepared to make and on the nature of the sanctions it is willing to impose should Mr. Putin choose war. Neither hyperactive grandstanding in Paris nor phlegmatic passivity from Berlin has prevented the emergence of a common Western position. This is an accomplishment for which the Biden administration deserves credit.

Yet this is a defensive accomplishment, not a decisive one. As Mr Putin demonstrated in his speech Monday, the Russian president is still in the driver’s seat, and it is his decisions, not ours, that will shape the next stage of the confrontation. Russia, a power that Western leaders mocked and derided for decades (“a gas station masquerading as a country,” as Sen. John McCain once put it), has seized the diplomatic and military initiative in Europe, and the West is, so far, powerless to do anything about it. We wring our hands, offer Mr. Putin off-ramps, and hope that our carefully hedged descriptions of the sanctions we are prepared to impose will change his mind.

At best, we’ve improvised a quick and dirty response to a strategic surprise, but we are very far from having a serious Russia policy and it is all too likely at this point that Mr Putin will continue to outmanoeuvre his Western rivals and produce new surprises from his magician’s hat.

The West has two problems in countering Mr. Putin. The first is a problem of will. The West does not want a confrontation with Russia and in any crisis the goal remains to calm things down. That basic approach not only makes appeasement an attractive option whenever difficulties appear; it prevents us from thinking proactively. When Russia stops bothering us, we stop thinking about Russia.

The second is a problem of imagination. Western leaders still do not understand Mr. Putin. Most of them see that he is not just another colorless timeserver who thinks that appointing a record number of female economists to the board of his central bank constitutes a historic accomplishment. They are beginning to see that he is in quest of bigger game and that he means what he says about reassembling the Soviet Union and reviving Russian power. But they have not yet really fathomed the gulf between Mr. Putin’s world and their own—and until they do, he will continue to confound their expectations and disrupt their agendas.

Mr. Putin is, first and foremost, a gambler who is accustomed to taking large risks against long odds with a cool head. He is not infallible by any means, but he has years of experience in taking calculated risks, defying the odds, and imposing his will on stronger opponents. Like Napoleon Bonaparte, he can surprise and outmanoeuvre his opponents because he is willing to assume risks they would never consider, and so to attack in times and ways they can neither imagine nor plan for.

Beyond that, Mr. Putin is a Soviet nostalgist. He is the product of a system in which power produced truth and truth reinforced power. Soviet power rested on lies that state power imposed on society as unquestionable truths. If Comrade Stalin said that the sun was green and the sky was pink, his ability to impose such outrageous falsities on a captive society only demonstrated and reinforced the extent of his power. Exposing Mr. Putin as, by our standards, a liar does not weaken him at home or, in his view, in Ukraine.

In the same way, accusing Mr. Putin, even accurately, of planning or committing atrocities may weaken him among human-rights activists in the West, but it may strengthen him at home and in Ukraine. Stalin’s well-earned reputation for utter ruthlessness did not undercut his power. Letting the world know that Mr. Putin has a kill list for Ukraine is more likely, Mr. Putin may believe, to reduce resistance to his rule in Ukraine than to boost it.

Mr. Putin is an immensely skilled ruler, the most formidable Russian figure since Stalin, but he has his problems, too. Russian power remains limited by material and demographic constraints — and the rise of China is a geopolitical factor that no ruler in the Kremlin can permanently afford to ignore. If Western leaders can overcome their posthistorical parochialism and develop coherent strategies for the actual world as opposed to the world of their dreams, effectively countering Vladimir Putin is an eminently achievable goal, though in no way a simple or a trivial one.
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JohnDe said:
If the west can convince (negotiate) China to join in a common good to change Putin's views and bring order back, the world could be back on track for world prosperity and peace. Fingers crossed.




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Has China ever brokered peace? Why would we expect them to do so this time?
The only nation China has managed to have some diplomatic influence over is North Korea... Not the greatest outcome...

I don't think they see themselves as "World Police" as does the US - to the benefit of many nations.
 
sptrawler said:
Just need to get the renewables in faster, they are cheaper anyway, sounds familiar?
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Bit glib SP. "Faster" is not next month is it ? Creating a massive highly expensive energy shortage in the next few months would just be disastrous. Check oil crisis 1973 , 1979.

www.theguardian.com

Background: What caused the 1970s oil price shock?

The 1970s oil crisis knocked the wind out of the global economy and helped trigger a stock market crash, soaring inflation and high unemployment - ultimately leading to the fall of a UK government
www.theguardian.com www.theguardian.com
 
JohnDe said:
Yes, war between countries will always shut down trade.

Shutting down trade will lead to war, just as it did when oil trade was banned to Japan just before WWII.

China will not stop trading to Russia, they may make some conciliatory actions such as no more water pumps for Ladas to Russia but they'll keep trading. And the west will not want to or be able to force China to stop trading with Russia.
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I wasn’t suggesting China would stop trading with Russia, I am just suggesting that they won’t do anything that will jeopardise their lucrative western markets.

the reason I mentioned this is that some people seem to think russia and China could form some self supporting economic and military union, I am just pointing out this is not possible.

hence I believe the russia-China union some people are worried about is over stated.
 
“Simply put, China has to back Russia up with emotional and moral support while refraining from treading on the toes of the United States and European Union,”

For China, supporting a Russian invasion of Ukraine would harm already deteriorating ties with Western nations, but Beijing is also eager to bolster its burgeoning relationship with Moscow to counter what it sees as U.S. efforts to suppress its rise as a global power.

China did not explicitly endorse Moscow’s latest moves toward Ukraine but still recognized on Tuesday what it called Russia’s legitimate security concerns, in Beijing’s latest tightrope act over the crisis in Eastern Europe.

Chinese Foreign Minister Wang Yi called on all parties involved to “exercise restraint” and resolve the crisis through negotiation, in a phone conversation with U.S. Secretary of State Antony Blinken. He still, however, referred to countries’ legitimate security concerns, a nod toward Russia’s assertion that Ukraine represents a threat.

“The situation in Ukraine is getting worse,” he said.

Speaking at an emergency U.N. meeting Monday night, Zhang Jun, China’s representative to the United Nations, urged all parties to “seek reasonable solutions” and address each country’s concerns based on “equality and mutual respect.” China’s Foreign Ministry said Tuesday that it was in communication with all “relevant parties.”

The comments from top Chinese diplomats — coming after the Russian commitment to deploy troops to the breakaway regions of Donetsk and Luhansk, which Putin recognized as independent — underline Beijing’s conflicted position as the Ukraine crisis unfolds against the backdrop of warming ties between Moscow and Beijing.

Beijing has long said that noninterference and respect for territorial integrity form the core of its foreign policy — principles of international law that China often cites when pushing back against criticism of its measures to exert more control in Hong Kong, Tibet or Xinjiang or its claims to the self-governed democracy of Taiwan.

For China, supporting a Russian invasion of Ukraine would harm already deteriorating ties with Western nations, but Beijing is also eager to bolster its burgeoning relationship with Moscow to counter what it sees as U.S. efforts to suppress its rise as a global power.

Beijing has long said that noninterference and respect for territorial integrity form the core of its foreign policy — principles of international law that China often cites when pushing back against criticism of its measures to exert more control in Hong Kong, Tibet or Xinjiang or its claims to the self-governed democracy of Taiwan.

For China, supporting a Russian invasion of Ukraine would harm already deteriorating ties with Western nations, but Beijing is also eager to bolster its burgeoning relationship with Moscow to counter what it sees as U.S. efforts to suppress its rise as a global power.

“China wants to preserve its ties with Moscow, abide by its principles and avoid harming relations with the United States and the European Union,” said Bonnie Glaser, director of the Asia Program at the German Marshall Fund of the United States. “Navigating this crisis may be one of the toughest diplomatic challenges that [Chinese leader] Xi Jinping has had to face.”

At the start of the Winter Olympics in China, the two powers signed a joint statement pledging a strategic relationship of “no limits.” As the Ukraine crisis has escalated, Beijing joined Moscow in repeatedly criticizing the United States and NATO for provoking what it says are Russia’s legitimate security concerns.

Significantly, Russia’s latest moves toward Ukraine happened one day after the Beijing Olympics had concluded.

Still, over the weekend, Wang, the foreign minister, said the “sovereignty, independence and territorial integrity of any country should be respected and safeguarded,” adding, “Ukraine is no exception.”

In China, media outlets described the crisis as “escalating under American provocation.” A China Central Television report Tuesday on unverified footage of Russian troops in the breakaway Ukrainian enclaves reminded viewers that Moscow, as an ally, is obliged to protect the two areas. Horizon News, a social media account under Beijing News, appeared to accidentally post instructions on Ukraine coverage to its Weibo account. The message, later deleted, said that no posts unfavorable to Russia or with pro-Western content should be published.

Still, over the weekend, Wang, the foreign minister, said the “sovereignty, independence and territorial integrity of any country should be respected and safeguarded,” adding, “Ukraine is no exception.”

In China, media outlets described the crisis as “escalating under American provocation.” A China Central Television report Tuesday on unverified footage of Russian troops in the breakaway Ukrainian enclaves reminded viewers that Moscow, as an ally, is obliged to protect the two areas. Horizon News, a social media account under Beijing News, appeared to accidentally post instructions on Ukraine coverage to its Weibo account. The message, later deleted, said that no posts unfavorable to Russia or with pro-Western content should be published.

Chinese commentator Hu Xijin, former editor of the state-run Global Times, went slightly further than his government’s carefully neutral official statements, describing Russia’s recognition of the breakaway regions as a measure to “break the deadlock” of the crisis. “With these concrete actions, he is showing Russia’s strategic determination,” Hu wrote in a blog post Tuesday.

China’s embassy in Ukraine on Monday issued a warning to its citizens to “avoid unstable areas” but did not order an evacuation as many other countries have.

The crisis comes at a low point of U.S.-China relations, a few days before the 50th anniversary of the signing of the Shanghai Communique during President Richard M. Nixon’s landmark visit, which paved the way for the normalization of relations between the two rivals — a diplomatic breakthrough made possible by the fracturing of China’s relationship with the Soviet Union at the time.

“China faces quite a pickle in this situation,” said Amanda Hsiao, senior China analyst at the International Crisis Group, noting Beijing’s efforts to maintain solidarity with Russia without further antagonizing the United States and Europe.

“Beijing will not condemn Russia’s moves nor recognize Donetsk and Luhansk’s independence, but it will also likely provide moral support — and perhaps a degree of financial support in the event of Western sanctions,” she said.

Worsening ties with the United States make that alliance even more critical to China. When speaking with Blinken, Wang, the foreign minister, criticized the Biden administration’s new Indo-Pacific strategy, in which China is deemed a top regional concern. This focus on “competition and containment” by some U.S. officials, Wang said, is “likely to evolve into full-scale confrontation between China and the United States.”

Local commentators stressed the balance their country has to strike. “Simply put, China has to back Russia up with emotional and moral support while refraining from treading on the toes of the United States and European Union,” Ming Jinwei, a popular commentator and senior editor at Xinhua News Agency wrote Tuesday in his WeChat blog.

It doesn’t hurt to be moderately pro-Russian in words, he added, because in the longer run, Beijing is trying to get Russian support on Taiwan. “In the future, China will also need Russia’s understanding and support when wrestling with America to solve the Taiwan issue once and for all,” he wrote.
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