Saturday, 30 August 2008

Whose right is it?

Amidst all the noise regarding the events in the Caucasus and the Balkans, the western media is doing a very good job in dumbing down the Georgia-Russia conflict as if it were a simple choice between the goodies (the West obviously) and the baddies (Russians of course).

Many others have written endlessly about the authoritarian nature of the Russian government, and its lack of democratic credentials. We could write about the Georgian president and his miscalculation. We could write about the Ossetian militias and how Georgians have been driven away from Abkhazia and South Ossetia in a tidy exercise of ethnic cleansing. We could write how the Russian government caricaturises the Georgian President as some sort of crazy despot, despite Georgian elections being overseen by the OECD, unlike Russia. We could write how it is Georgia’s turn now, then it will be Ukraine and Crimea, then Poland’s energy dependency on Russia, and after that it will probably be the Baltic Republics’ (Estonia, Latvia and Lithuania) turn.

But not many people is paying attention to the key socio-political issue: the selfish manipulation by states of the debate on the right of self-determination versus the principle of territorial integrity.

In the last few months, we have seen how the Russian government comes out to defend the territorial integrity of Serbia, against the right of self-determination of Kosovar people. A few months later, they send troops well inside Georgian territory to defend the right of self-determination of South Ossetia and Abkhazia, without a care in the world for Georgia’s territorial integrity.

It is the exact opposite with the western states: support for the right of self-determination in Kosovo but deny exactly the same right in South Ossetia.

And the fact of the matter is that neither the West or Russia can claim the moral high ground. Both sides have switched from defending one right to supporting the other. Their positions are not based on a consistent ideological framework, but driven by geo-political and economic considerations.

The outcome however, has been the same in both cases: the right of self-determination has succeeded in both Kosovo and South Ossetia.

The lesson of the last few decades in Europe is that if there is "on the ground consensus", and some degree of external help, in the end it is the people’s right (self-determination) the one that prevails above the right of territorial integrity of states. It is also a confirmation of the politics of fait accompli: whatever happens on the ground becomes the new status quo and the new accepted reality.

But the right of self-determination does not always reign. If in doubt, ask the Kurds, who have no external support whatsoever for their cause and must be the largest and most fucked up stateless nation in the world jointly with Tibet. 

The question is: will the Russian government do the same trick in Crimea? My answer: yes, without a doubt.

Wednesday, 20 August 2008

An imaginary Russian tale

It feels a bit miserable to write about this, but it was always going to be a winner. In a perverse way, I feel quite smug.

Free financial markets training by Rab:

For a place like Russia, there is no need to hedge corporate bond exposure with its correspondent CDS; it is much cheaper to hedge it using Russian Sov CDS.

I am torn between my fiduciary duty to investors (wait before insulting me: it could be your pension) and personal ethics. Is it morally acceptable to indirectly profit from political risk (war) to directly benefit future pensioners? I somehow think, or want to think, it is, but what do you think? Would you be happy if your pension fund had benefited from the above strategy?

My actions have not been and are of no consequence to events in Georgia but I somehow feel uneasy. Why? Am I just being a pussy with a conscience or I am just trying to justify my own misplaced post-leftie legacy guilt by writing about it...

This communication is not directed at professional investment advisors, retail investors or any other market participants or pesky journalists. It should not be distributed to, or relied on, by private customers or anybody else for that mattter. The information in this article is based on my own understanding of the historical, current and future positions of the markets, and not that of my employer or my colleagues. The views expressed should not be interpreted as recommendations or advice by anybody or as an accepted or rejected house view.
Past performance is not a guide to future performance, but we only brag about it when it is good. The value of investments and the income from them may go down as well as up and is not guaranteed, and if you invest in Russia or any other emerging market you do need to think about hedging your risk in anyway you can because these places are generally a mess.
If you want to take a punt, just buy Euromillions tickets and do not gamble your money in the financial markets thinking that you are going to beat the market consistently over the long term.