Best news leader ever...

Thank goodness the world over has this important and timely report.

(CNBC) The latest news: Russian energy giant Gazprom either has or has not offered to bail out the country in exchange for exploration rights. 

As usual...

...the popular and reactionary press is looking at the Cyprus problem as some sort of catalyst for the End of Time.

We are talking about a 10 Billion Euro bailout.  AIG alone was an order of magnitude higher than that.  Reports are stating total deposits in Cyprus of around 100 Billion...anybody look at the Fed's balance sheet and the assets it soaked up?

On an absolute basis, Cyprus is a small player.  And it is precisely because of this that rules will be bent/broken.  It is also clear that the ECB will fully bail out its "own" citizens (see Ireland, etc.) but is sending a message that tax havens for non-citizens will receive harsher treatment.

But we are speaking about a small player.  It is also unclear as to whether this "bailout" will actually happen given domestic push back in Cyprus as well as Magnanimous and Benevolent Mother Russia acting as White Knight (half of that 100 Billion in deposits are Russian).

So I don't see the End of Time for the Euro just yet.

On cue...

...the Russians respond.  This may all be rumor, but there is no question as to the strategic opportunities this presents for Russia...especially given the veneer of respectability Cypriot banks has provided Russian depositors over the years.  It also serves to weaken the status of the EU if it cannot properly take care of its own.

Russian energy giant Gazprom has offered the Republic of Cyprus a plan in which the company will undertake the restructuring of the country’s banks in exchange for exploration rights for natural gas in Cyprus’ exclusive economic zone, local media reported.

Representatives of the Russian company submitted the proposal to the office of Cypriot President Nicos Anastasiades on Sunday evening, Sigma TV reported.

The proposal states that Gazprom will fund the restructuring of the country’s crippled financial institutions in exchange for substantial control over the country’s gas resources while Cyprus won’t need to take the harsh bailout package offered by the EU.

EU offered a 10 billion euros rescue package to Cyprus with the condition of raising 5.8 billion euros ($7.5 billion) by taking a piece of every bank account in Cyprus. The originally proposed levies on deposits are 9.9 percent for acounts exceeding 100,000 euros and 6.7 percent on anything below that.

Ruh-Roh...

All educated and sophisticated people are aware of the onomatopoeia "ruh-roh", coined by that famous canine crimefighter Scooby Doo.

I cannot think of a better way to describe what is occurring in Cyprus.  In terms of Gross Assets, this is small news, but as a precedent for the willful disregard for the political and legal process (favoring expedience in the face of "crisis") it speaks volumes.  Simply decreeing that a 10% levy on bank deposits constitutes a "tax" stretches the already feeble credibility bands of the ECB and EU political structure to the snapping point.

Expect pressure from Russia.

Everything...

...under one roof.  Putin has it all.  What could go wrong?  Full link here.  As I intimated in the previous post, this will get interesting.  Now that Putin has fait accompli in terms of absolute power, and has secured his eastern borders with commodity contracts, etc., he can focus on central Asia, either overtly or by playing The Man With No Name game with China and the U.S.  A favorable position at the moment.

Worryingly for investors, Mr. Putin nominated a confidante despite a consensus among global economic policy planners that countries with independent central bankers tend to do better economically over the long term. Yet Mr. Putin already controls other ostensibly independent institutions in Russia, like Parliament.

Mr. Putin’s government has also advocated for more seats on the bank’s board and plans to combine the functions of the stock market regulator, the equivalent of the Securities and Exchange Commission, with the central bank, further centralizing financial regulatory control.

“The central bank isn’t simply a commercial bank, it is above all the regulator of our financial system and the most powerful institution responsible for state economic policy,” Mr. Putin said in making the announcement, in comments carried by news agencies.

Very important...

Even more important than gross levels of spending is its composition.  We are not talking about protracted land wars in Asia.  We are talking about clandestine state-driven resource security or outright smash and grabs of same.

with Putin in Russia (see more recent post) consolidating absolute power and securing his borders to the East with solid economic ties, Asia and the subcontinent (as well as myriad proxy wars in Africa) will be very "interesting" places to be.  Lest we not forget that Russia has "historically" (read: always) regarded central Asia as its property...

LONDON (Reuters) - Asia's defense spending overtook Europe's for the first time last year, the International Institute for Strategic Studies (IISS) said on Thursday, reflecting China's military rise and shrinking European economies.

In its annual report on the world's militaries, it said China's defense spending in real terms rose 8.3 percent between 2011 and 2012, while in Asia as a whole, spending rose 4.94 percent last year.

At the same time, nominal defense spending among European NATO members had shrunk to around 2006 levels due to budget cuts, the IISS said in "The Military Balance 2013".

"Indeed, the increase in Asian spending has been so rapid, and the defense austerity pursued by European states so severe, that in 2012 nominal Asian spending ($287.4 billion) exceeded total official defense spending not just in NATO Europe, but across all of Europe, including spending by non-NATO European states," it said.

Broken

to laugh or cry...

An admission such as this is greeted with both cheers and more quiet reflection for its ramifications.  Mostly cheers though from the money center banks.  A get out of jail free pass is more subtle.

(Holder)

“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy,” he said. “And I think that is a function of the fact that some of these institutions have become too large.”