An endgame in Ukraine

Delivered on By Justin Pyvis

Good morning! The rains and flooding that swept over much of Queensland this week have now well and truly hit New South Wales, with Premier Dominic Perrottet saying that yesterday morning:

“…large parts of the state [are] underwater. There are now 76 current evacuation orders, 18 evacuation warnings and about half a million people affected by these floods.”

The Bureau of Meteorology reports that the flooding has already exceeded March 2021 levels, which back then led to the government declaring “many parts of the east coast a natural disaster zone”.

To those on the east coast, good luck and stay dry! πŸ€žβ˜‚οΈ

Reading the tea leaves

Daily % change







AU Bond



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Note: Brent oil, gold bullion and iron ore prices are the second futures contract. Bond yields are 10-year Treasuries. The S&P500 is a snapshot 30 minutes before close.

At the time of writing theΒ US S&P500Β was down -0.49%, having see-sawed between gains and losses for most of the day. Volatility is likely to remain heightened given the considerable uncertainty surrounding Russia, Ukraine and sanctions.

Locally, theΒ ASX200 gained for the fourth consecutive day this week, adding +0.49% led by, you guessed it, materials and energy, which both increased +2.6% due to higher commodity prices on supply (Russia/Ukraine) and inflation concerns.

While many commodity prices took a breather overnight, as a whole they remain on track for the biggest weekly rally in more than 50 years. Yesterday the Brent crude price briefly topped $US118 a barrel, the highest level since February 2013, while the price of a bushel of wheat climbed above $US11 for the first time since 2008.

Food for thought

Russia's elites lost any political power they may have wielded a long time ago, with one man quite literally calling the shots: Putin.
Russia's elites lost any political power they may have wielded a long time ago, with one man quite literally calling the shots: Putin. Source

How will the conflict in Ukraine come to an end? No one really knows, although Ross Douthat wrote a thought provoking article in the NYT theorising three possible endgames:

  1. Regime change in Moscow.

“Popular among Twitter wish-casters”, Douthat believes this outcome is the least likely. While Russia’s President Vladimir Putin “relies on some degree of popular support” at home, he has spent more than 20 years solidifying his spot at the top of Russia’s autocracy.

According to a recent article in the FT, when Putin came to power in 2000 he:

“…offered a deal to the wealthy businessmen: keep the gains they had made from privatising Russian state assets after the Soviet Union’s collapse in return for pledging fealty and staying out of politics.

Since then, Putin has imposed his will on the oligarchs by responding to any criticism with reprisals, leaving them with vastly diminished influence β€” and some of them in prison.

‘The smart oligarchs get how things work here and the dumb ones aren’t oligarchs any more,’ a senior Kremlin official said.”

What’s left of Russia’s elite are toothless tigers who are unlikely to challenge Putin, even if they suffer large losses to their ill-gotten wealth.

  1. A brutal Russian victory and grinding occupation.

Russia’s invasion of Ukraine has not gone to plan. In fact, it has probably run for at least a week longer than Putin anticipated. But the Russian army is significantly larger than Ukraine’s and they are slowly “winning the actual war at the moment, still taking territory and still pushing forward”.

This outcome has advantages for the West, as:

“It keeps Moscow tied down in its own near-abroad, it keeps Europe focused on the necessity of rearmament and energy independence, and it undermines Putin’s rule slowly without the risk of a coup.”

However, “it also leaves most of Ukraine under Russia’s boot and keeps people fighting and dying for years if not decades… [and] basically guarantee that the current Russia-China alignment becomes a true axis”.

  1. A swift cease-fire followed by peace on not-entirely-ideal terms.

The final scenario offered by Douthat “is the preferable endgame”, although he’s not sure “whether there are terms the warring parties might currently accept”.

A successful cease-fire endgame is difficult to envision because it’s not clear which side “has the upper hand”, meaning any such deal might end up creating “only stalemate, a new frozen conflict, Russia isolated and wounded and dangerous, and preparations for the next war in both Moscow and Kyiv”.

All up it’s not exactly optimistic. Douthat concludes that while the West has so far “met the test of this war’s outbreak quite impressively… those benefits are provisional, contingent on how the war ends and what kind of peace follows β€” and those tests are yet to come”.

Chewing the fat

Bits and bytes

πŸ™οΈ Local officials confirmed that Russian forces captured the southern Ukrainian port city of Kherson, “the first major urban centre to fall since Moscow invaded a week ago”.

πŸ˜” The second round of peace talks between Russia and Ukraine ended in “great regret”, with no progress made towards a resolution.

πŸ’° Australia’s trade surplus increased by $A4 billion to $A12.9 billion in January, just shy of the record $A13.3 billion surplus recorded in July last year as iron ore and coal prices rebounded.

πŸ—οΈ Australian building approvals plunged -27.9% in January and are now close to pre-pandemic levels, although the fall was likely temporary due to “higher absenteeism in January arising from the Omicron outbreak… slow[ing] the approval administration process”.

πŸ™ƒ Problem solved! The secretary of the Australian Council of Trade Unions, Sally McManus, asked “when Warragamba Dam is near capacity, why doesn’t Syd Water suspend billing & ask ppl to turn on all their taps to take it down a bit before more rain comes?”

πŸ’» Database management and cloud service giant Oracle “has already suspended all operations in the Russian Federation”.

πŸ’± The European Union will on 12 March exclude “seven Russian banks from the SWIFT messaging system, but stopped short of including those handling energy payments”.

🧐 Facebook owner Meta rejected calls “from United Australia party leader Craig Kelly to suspend its community standards enforcement and factchecking on politicians' posts on Facebook during the upcoming federal election campaign”.

🐯 “A group of researchers from the University of Melbourne plan to bring the Tasmanian tiger back from the dead.”

πŸ•΅οΈβ€β™‚οΈ The US government launched Task Force KleptoCapture, which as you might have gathered from the name will “help enforce sanctions against Russian government officials and oligarchs, targeting their yachts, jets, real estate and other assets”.

🚒 Germany’s government seized Russian oligarch Alisher Usmanov’s 156-metre, $A822 million luxury motor yacht in Hamburg. France’s government seized the 86-metre superyacht belonging to Igor Sechin, the boss of Russian oil group Rosneft.

πŸ‘Ž Australia and 140 other United Nations member states voted to condemn Russia’s premeditated and unprovoked invasion of Ukraine. Only Russia, Belarus, Syria, Eritrea and North Korea voted against the measure. China and 34 other countries, including India, abstained.

πŸ“œ According to an intelligence report seen by senior US and European officials, the Chinese government did in fact ask Putin to delay the invasion of Ukraine until after the Beijing Olympics.

🏒 Google will ask employees to return to the office for at least 3 days a week from 4 April, although they “can request to work from home permanently”.

😲 Uhhh. Wow. Sean Ambrose, a NSW United Australia Party Senate candidate, withdrew because: “I do not support the acts of aggression by NATO against the people of #Ukraine and it’s [sic] creation of a pariah state and I commend Putin for his fight against the New World Order.”

πŸƒβ€β™€οΈ According to the United Nations (tracker here), more than 1 million people have fled Ukraine in the past week, equivalent to over 2% of the country’s population.

✈️ Japanese airlines JAL and ANA cancelled all passenger flights to and from Europe citing safety concerns amid the Russia/Ukraine conflict.