by Philip Pilkington
Monday, 14
February 2022
Analysis
17:08

Joe Biden’s Ukraine strategy is confusing the markets

Publicising intel that later proves to be incorrect could undermine credibility
by Philip Pilkington
Credit: Getty

Oil futures are up today due to tensions on the Ukrainian border. This comes on the back of an increase in energy prices that have been taking place since October, with prices for crude oil more than doubling in the last five months.

No doubt if Putin invades Ukraine oil prices will rise. An invasion would clearly interrupt a key supply of oil and gas into Europe, driving prices higher. And the markets are worried that the invasion will take place — in part thanks to all the sensationalist headlines in the western media.

Yet we must also consider how the invasion is being communicated to the markets and the public at large. Politico has a long and fascinating report on how the intelligence on Russian troop movements is being shared in an unusual way. Former director of the CIA and the NSA Michael Haydon summarises the communications strategy as “very different” due to us living in the “Information Age”.

Intelligence communications in the West are geared toward getting Russia to back down. The idea is that if the NATO countries hammer the Russian troops build-up in the press, this will “pre-emptively [expose] — and thus [derail] — Russian lies that could lead to a war”.

But there are murmurs in DC about the potential downsides of this strategy. Putin could simply be provoking the NATO allies into showing their hand so that he can understand how they will respond and what intelligence they will act on. If Putin does not invade, the hit to the credibility of the intelligence agencies, not to mention the countries promoting the intelligence, could be quite severe.

No one has yet pointed out the dangers of this strategy from a markets point-of-view, however. First, it results in rising prices in the futures market. This can exacerbate price rises in the actual or ‘spot’ market for energy and so consumers may take a hit. In the context of rising inflation, price rises in one market can be passed into other markets and this can lead to further inflationary uptick. It is no secret that inflation is far higher on the list of voter priorities than Ukraine.

Then there is the issue of credibility. Futures markets are useful because they guide market prices for commodities. They take in information in the present situation and guide prices for commodities in the future. But futures markets will discount any information that they view as unreliable. If NATO adopts this new intelligence disclosure strategy in the future and the ‘calls’ made often miss, markets will lose interest in the statements of politicians on foreign policy. Some may argue that this is no bad thing, but nor is it a healthy symptom of a functioning state when markets are ignoring elected leaders.

There is no doubt that we live in an information age. Information is, as the philosophers say, ‘performative’. It can ‘do’ things. Markets know this too because they depend on valuable information. But those in markets also know how to filter signal from noise. The new strategy of disclosing intelligence pre-emptively risks diluting the credibility of our institutions — and if this happens, markets will treat their statements as more noise than signal.

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Matt Hindman
Matt Hindman
7 months ago

“Publicizing intel that later proves to be incorrect could undermine credibility.” What credibility is left at this point? Iraq, Afghanistan, Libya, illegal domestic spying, intelligence agencies hostile to their own citizens, cluelessness after unexpected overseas developments, and failure after failure have already destroyed it.
Biden: “IMMINENT INVASION!!!”
Zelensky: “Dude, calm down. You’re scaring people.”

Last edited 7 months ago by Matt Hindman
James Joyce
James Joyce
7 months ago

THIS JUST IN: America’s policy under the demented doddering dotard in chief has changed from “strategic ambiguity” to a new policy of “strategic stupidity.”
Joe Biden has no Ukranian policy, or any other policy for that matter. All policies come from the US PM Ron Klain, and the numerous woke COWs (Citizens of Wakanda) to whom Biden owes “his” presidency, really “their” presidency.
Two quick and easy examples: Taiwan, where Biden changed the policy with his stupid, senile talking (since walked back), and Nord Stream 2, where Biden swore that the pipeline would never go live while Olaf Sholz looked at his boots and muttered “Mein Gott….” Sanctions? Really? Let’s create an even larger criminal class in Russia and other dodgy places….
Putin has already won, whether he invades or not. The West looks simply pathetic–fragmented and disjointed. With Biden (I mean PM Klain) at the helm, what would you expect?

Galeti Tavas
Galeti Tavas
7 months ago
Reply to  James Joyce

Mr Klain did bring us the ‘All must be vaccinated, at All costs’, policy which has been so eagerly taken up by the entire planet.

This bit of crime against humanity has resulted in a thousand unintended consequences and hundreds of Millions of Collateral Damages, and Globally cost $ 50 Trillion in National Debts, but on the plus side; has made the Global Elites something in the $12 Trillion to $ 30 Trillion range in two years, depending on how you count it. So you could say it all was worth it.

This bit of goosing the Military Industrial Complex he now is working on is mere spare change after his ‘Pharma/Medical Industrial Complex successes, and the gaming the Global Debt/Finance scheme – but he feels… ‘why not’?….

Charles Hedges
Charles Hedges
7 months ago

Surely Putin will be aware of electronic eavesdropping and will make sure those who need to know are kept few in number. How many assets will the West have within the circle of people who need to know? One if we are lucky. Consequently Putin can keep the troops in place on the Ukraine border which in effect places pressure on the West and allow cracks to develop in alliances. If nothing happens, the West has cried wolf.
However, the next time may be different. This goes back to what does Putin want, what does he think he he can obtain and what has he achieved ? Five Eyes is perhaps the most valuable defence asset The West has and if Putin can damage it’s credibility, it lessens it’s power and increases his. By driving up oil and gas prices Putin increases his income: is this what he wants?

R Wright
R Wright
7 months ago

More likely the managerial-bureaucracy and the HR blob that now governs it have not the foggiest idea what they are doing.

Margaret Tudeau-Clayton
Margaret Tudeau-Clayton
7 months ago

I’m hoping Putin will make the most of the opportunity to mock the ridiculous behaviour of Biden, Johnson et al.

Ian Stewart
Ian Stewart
7 months ago

Jeez it’s really important to consider market futures in a potential war situation. If only Hitler had realised that and exploited people instead of killing them. Oh wait, wars are driven by ideology not markets, aren’t they?
Yet another tedious, myopic article fawning over Putin and his strategic genius. He’s screwed up here, no matter how it turns out.
Now could Unherd cover the far more important issue of what will happen to Russia after Putin please? That’s what could result in disaster in the next 10 years. My preferred option would be another strong man like Putin, since he’s managing the inexorable decline of Russia, with a few globally irrelevant disputes and wars on its periphery, to a position of weakness when it’ll eventually agree to give up its nukes in 20-30 years.

Last edited 7 months ago by Ian Stewart
Jürg Gassmann
Jürg Gassmann
7 months ago

The “Information Age” started when Aesop wrote his fable about the boy who cried “wolf”.

Martin Smith
Martin Smith
7 months ago

There’s a strategy?

George Knight
George Knight
7 months ago

Joe Biden seems totally confused about being President – no wonder markets are confused…they are not alone!