Russia has invaded Georgia which is a vital area for oil pipelines from the Caspian Sea. The potential disruption if the pipelines are cut is significant, yet oil prices have fallen over the last few days. This seems odd after all of the big price moves associated with geopolitical risk in the Middle East. Of course, the size of the problem in the Middle East is much larger but we have had strong reaction in oil prices from Nigerian terrorists, hurricanes and refinery black-outs, so a war in the vicinity of major pipelines seems to be a no brainer in the geopolitical spectrum. The plan of EU peace talks will be too little too late given how fast the situation is changing.
More important than this specific event is the geopolitical risk of Russia using its power or sphere of influence to all of the lands that used to be controlled by the Soviet Union. Russia is flexing its muscles and that means greater control over key commodities needed by the world.
Through controlling oil and natural gas flow to Europe and grain trading with the rest of the world, Russia is asserting itself in ways we have not seen in the last fifteen years. Europe at this time is doing nothing and America is unable to take any action. Russia is able to do what it wants, when it wants without much reaction.
This geopolitical change goes beyond the impact on prices in commodities affects spending plans in the future because the peace dividend of the cold war will be over and many countries will have to arm themselves to be prepared for this type aggressive future. The world is becoming a more dangerous place just when we are facing greater economic risks.
More important than this specific event is the geopolitical risk of Russia using its power or sphere of influence to all of the lands that used to be controlled by the Soviet Union. Russia is flexing its muscles and that means greater control over key commodities needed by the world.
Through controlling oil and natural gas flow to Europe and grain trading with the rest of the world, Russia is asserting itself in ways we have not seen in the last fifteen years. Europe at this time is doing nothing and America is unable to take any action. Russia is able to do what it wants, when it wants without much reaction.
This geopolitical change goes beyond the impact on prices in commodities affects spending plans in the future because the peace dividend of the cold war will be over and many countries will have to arm themselves to be prepared for this type aggressive future. The world is becoming a more dangerous place just when we are facing greater economic risks.
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