By Michael Every of Rabobank
It’s Friday the 13th, traditionally a day when bad things happen - so far we have bad omens; not just a spike in JGB and Australian bond yields this morning, but that Microsoft Outlook and Teams are both down, so I don’t know who will be able to read this.
The US has decided it can’t reach a deal to end the Ukraine war without Europe, yet the Ukrainian press says, ‘Europe wants a seat at the table with Russia. It can't agree on who gets it.’
There seems little chance of any agreement being struck regardless of who gets that hot seat. Putin stated deploying foreign peacekeeping troops to Ukraine after a peace agreement is "absolutely unacceptable" and would be a continuation of war, implying risks of a military conflict with Moscow. Europe is preparing those peacekeepers now.
Worse, Russia’s demands re: security architecture are obviously unacceptable to Europe. Moscow wants limits on future NATO expansion, a rollback of NATO forces from post-1997 members, restrictions on military exercises near Russia's borders, and a ‘sphere of Influence’ granting it effective ‘Finlandising’ vetoes over the sovereignty, foreign policy, and defence choices of neighbouring EU, European, and NATO nations.
That only seems to leave escalation, the questions being how soon and to what level.
In the Middle East, things look little better. Yemen's Houthis attacked a pumping station on Saudi Arabia's East-West oil pipeline again, underlining that key energy infrastructure remains a target – yet oil doesn’t seem too excited about all the above yet with Brent at $95 at time of writing. Indeed, some see the market having adapted to the level of physical disruption in Hormuz. A former Iranian regime journalist claims the UAE is now buying Gulf oil at a $30 discount, then shuttling it via Oman for large enough profits to offset the security
