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Confounding and confusing events 3/21/22

As the war grinds on in the Ukraine, China makes periodic headlines as it interacts with Mr. Putin regarding positions that they will take. There have been indications that they would support Mr. Putin from a supply perspective, but of course, no indication that they would take any military action. The real truth is that China’s leaders want to shield themselves from economic and diplomatic fallout which could easily occur if they support Putin too openly. Russia is a relatively small trade partner with China, and they desperately need to continue large scale exporting to the United States and Europe, which gives us some leverage in this process. The Chinese also believe that both parties – Russia and the US - will come out of this somewhat tarnished, and allow them to rise further as a world power. This is likely a reasonable analysis and bet. There have been, interestingly enough, over the last few days some inkling that a deal may be struck, particularly when the President of the Ukraine announced that it would not join NATO, which all believe is a goal of Putin if one assumes he does not intend to continue expansion of Russia into its old satellite states. The recent call between Mr. Biden and Mr. Xi Jinping has not caused any further disclosure of China’s position.

Although the Chinese have not, to date, to the best of our knowledge, given military equipment, it has been asked for, beginning in late February, as the Russian invasion has stalled. It is most amazing to me that the invasion continues to be bogged down, and the Russians are unable to, if you will, close the deal. Mr. Putin must be very frustrated, and how he responds will have to be watched carefully.

A recent public radio story led with the caption, “Cross Border Trade Poised for Growth Between the US and Canada, but Travel Remains Down”. During Covid, there has been very little disruption to trade, but there has been enormous disruption to individual travel. The latter obviously negatively impacts retail in the US as well as tourism destinations, but trade remains basically at its pre-Covid levels of about $2 billion a day. Any indication that commercial activity lessened substantially during Covid reflects a certain lack of sophistication on the part of the reporters, because that simply has not been the case, as evidenced by watching trucks go by on the US border, and from a more personal perspective, my clients in Canada do not report significant disruptions in their exports to the US.

Democrats are bracing for a potentially brutal election in November of this year, and have been hoping for a reset from President Biden. There is tremendous turmoil within the Democratic Party. The onset of the Ukrainian/Russian War have given centrists some additional negotiating ability that they lacked before. The progressive wing of the party created an appearance that the focus was on social give away programs, defunding the police and a general support of those who were protesting irrespective of whether or not that protesting turned violent. Unfortunately for the country, the Republicans stood with the January 6th and Big Lie folks which appears to have appealed to a broader spectrum of the Republican base than the progressive Democrats appeal to the broad spectrum of the Democratic base. Independents clearly are unhappy with both sides, and how they vote in the election will be most important. The many issues that Mr. Biden has faced like the supply chain disruptions, which have been the primary source of inflation, was not created by Mr. Biden, and, in fact, were largely created by Mr. Trump and/or were out of the control of either of these individuals, and for that matter, out of control of virtually everyone. This has put Mr. Biden in a position where he appears ineffective, which is clearly politically problematic, but if one looks at the reality, including high gas prices, it becomes clear that there is a much more complicated question than either side politically is allowing to be debated.

The imposition of sanctions on Russia begun to squeeze the world economy as well. Most encouraging is the fact that even though countries like Germany, France, Poland, Norway and Finland are effectively on the front lines, they are stepping up to their responsibilities and supporting the Ukrainians. There appears to be some substantial havoc being imposed on the Russian economy, and we will have to see how China responds and whether or not they take any action to assist the Russians, or simply allow them to wallow in the mess that they have created. Mr. Putin’s threat with regard to nuclear weapons seems to indicate he is becoming desperate as he continues to receive surprises in terms of the responses that his actions have engendered.

CNN in response to Congresswoman Stefanik’s statement on the Ukraine was sharply critical of both her loyalty to Mr. Trump, which in these circumstances is completely unfathomable, and when I watch Republicans talk about the bravery of the Ukrainians and their patriotism, while they fail to criticize Mr. Trump for his lack of his support of the US, and for his support of Mr. Putin, it is beyond my ability to comprehend. The almost exclusive focus of Ms. Stefanik’s comments has been to criticize President Biden, and as I pointed out last week, she called for strength through sanctions and that is what has been delivered, so she has nothing to add in terms of solutions, but rather she challenges the capacity of our sitting President, something which has never happened in wartime before. If anything is unpatriotic, her comments clearly indicate she is not a patriot, and she has demonstrated no substantive patriotism during her term in office, nor does it appear her family possess that character trait.

A couple of short notes – the Fed raised rates which is the first step in this process. Canadian and US shippers brace for more supply chain disruption as the CP rail gets ready for a strike. Truckers, if we had enough, could benefit. I read a great cartoon in my local paper; it shows Putin responding to one of his General’s comments on being called a war criminal. And he said, flattery will get you nowhere. Did you know that St. Patrick was declared a Saint before the church had a formal process? 8 of the farthest out Republicans were the only members of Congress voting against ending trade with Russia. This group will next, be praising Nazi’s.

Happy St. Pat’s – a little late. May the best day of your past be the worst day of your future.

Bill Owens is a former member of Congress representing the New York 21st, a partner in Stafford, Owens, Piller, Murnane, Kelleher and Trombley in Plattsburgh, NY and a Strategic Advisor at Dentons to Washington, DC.

The views expressed by commentators are solely those of the authors. They do not necessarily reflect the views of this station or its management.

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