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August
25
2022

Into the Black Hole
James Rickards

The war in Ukraine has been dragging on for six months with no end in sight.

Russia is slowly and systematically advancing, while the Ukrainian military is being ground down in the Donbas region of eastern Ukraine.

On balance, Russia is winning the war, although progress is slow.

Russia will next likely move to take Odesa, a strategically key Black Sea port. Russia has staged missile attacks on Odesa in recent days. If Russia ultimately takes Odesa, it removes Ukraine’s access to the sea, effectively rendering it completely landlocked.

But there don’t appear to be any plans for an imminent Russian attack on Odesa. At any rate, a negotiated peace settlement is nowhere in sight. Neither side will accept the other’s demands.

Meanwhile, a car bomb killed the daughter of “Putin’s brain” this past weekend near Moscow. Alexander Dugin is an ardent Russian nationalist whose thinking is said to have influenced Putin. His daughter was killed in the blast, although many suspect he was the intended target.

Russia blames Ukraine for the attack, which Ukraine denies. How Russia responds remains to be seen.

What’s the Endgame?

As the war drags on with no end in sight, there’s also no end in sight to the flow of U.S. aid to Ukraine. It’s an open-ended commitment with no clearly defined objective.

Both the Democratic and Republican parties support the spending, except for a minority who are vilified as Putin stooges and apologists.

Supporters talk about standing up for democracy, but Ukraine is a corrupt oligarchy that’s just about as corrupt as Russia. It’s far from a model democracy.

But the aid’s for a good cause, they say. We’re helping defeat aggression and assisting a weaker nation stand up against a much stronger attacker.

Well, that’s fine, but there’s little to no oversight to supervise the transfers. Where’s the U.S. aid to Ukraine going?

The aid is being stolen off the top or diverted to corrupt officials. Goods are often stolen and resold on the black market. Weapons are also sold on the black market. In all, very limited amounts of aid are actually going to the war effort.

Massive Corruption

One Ukrainian volunteer fighting in the Donbas has said:

In Ukraine, people cheat each other even in war. I’ve watched the medical supplies donated to us being taken away. The cars that drove us to our position were stolen. And we have not been replaced with new soldiers in three months, though we should have been relieved three times by now…

If I had known how much deception there was in this army, and how everything would be for us, I never would have joined. I want to go home, but if I flee, I face prison.

Here’s what a Ukrainian journalist has to say:

The corruption related to the war aid is shocking. The weapons are stolen, the humanitarian aid is stolen and we have no idea where the billions sent to this country have gone.

Of course, your tax money is paying for this swindle.

Wartime Sacrifice?

Here’s an idea of where at least some of the billions have gone. Last month, the Ukrainian parliament voted to give itself a 70% pay raise, while the army is collapsing and the Ukrainian people are suffering.

So much for wartime sacrifice. Moreover, Western admirers of Ukrainian president Zelenskyy have praised him as a modern Winston Churchill, defyingly resisting an evil aggressor.

But Zelenskyy is no Churchill.

He’s succeeded in presenting himself as a strong wartime leader, standing up to the big, bad Putin. But in reality, he’s a corrupt oligarch with millions of dollars hidden offshore. His acting skills have enhanced his propaganda efforts, but it doesn’t take much training to see how phony he is.

Innocent civilians, including women and children, are dying under his failed leadership and inability to come to terms with Putin before the invasion began.

The True U.S. Objective in Ukraine

But the same journalist who complained about the widespread corruption has figured out the real U.S. strategy in Ukraine:

It is obvious that the U.S. doesn’t want Ukraine to win the war. They only want to make Russia weak. No one will win this war, but the countries the U.S. is using like a playground will lose.

That’s exactly right. The U.S. has no vital interest in Ukraine worth going to war over. Its real aim is to weaken Russia through a protracted war in Ukraine. The longer it drags on, the better, no matter how many Ukrainians have to die in the process.

In other words, the U.S. is willing to fight Russia to the last Ukrainian.

That may sound overly cynical, but it really isn’t. It’s just an objective assessment based upon the facts on the ground. But don’t take my word for it.

As Defense Secretary Lloyd Austin has said, “We want to see Russia weakened to the degree that it can’t do the kinds of things that it has done in invading Ukraine.”

Sanctions Are a Complete Failure

Meanwhile, the sanctions regime against Russia has proven to be a complete failure. Sanctions have had zero impact on Russian advances on the battlefield and Russian goals in Ukraine. In fact, Putin has run rings around the sanctions.

Instead of the ruble collapsing, it has strengthened in the face of Western sanctions. And boycotting Russian exports of oil and natural gas was pointless because Russia just sold the same energy to China and India instead of Europe. It’s a world market, after all.

European countries like Germany are so dependent on Russian energy that they’re facing severe shortages and a bleak winter without it. Germany faces a catastrophic winter in which factories will have to be closed, homes will have to reduce heat to 50 F and hot showers may be a thing of the past.

It’s all because Germany made a political decision to side with the climate alarmists and Greens

despite the lack of scientific evidence supporting their claims. They became utterly dependent on Russia as a result.

When reality collides with ideology, reality wins every time. Now Germany will pay the price. Meanwhile, global food shortages and possibly famine are real possibilities this winter because Ukrainian and Russian grain won’t be delivered.

The tragedy is that all of this could have been prevented had the U.S. and NATO guaranteed Russia that Ukraine would never be invited into the alliance. That’s not a defense of Putin’s invasion, by the way, which I condemn. It’s just reality.

Now the world is living with the results.

Regards,

Jim Rickards
for The Daily Reckoning

James G. Rickards is the editor of Strategic Intelligence. He is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street. He was the principal negotiator of the rescue of Long-Term Capital Management L.P. (LTCM) by the U.S Federal Reserve in 1998. His clients include institutional investors and government directorates. His work is regularly featured in the Financial Times, Evening Standard, New York Times, The Telegraph, and Washington Post, and he is frequently a guest on BBC, RTE Irish National Radio, CNN, NPR, CSPAN, CNBC, Bloomberg, Fox, and The Wall Street Journal. He has contributed as an advisor on capital markets to the U.S. intelligence community, and at the Office of the Secretary of Defense in the Pentagon. Rickards is the author of The New Case for Gold (April 2016), and three New York Times best sellers, The Death of Money (2014), Currency Wars (2011), The Road to Ruin (2016) from Penguin Random House.

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