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Markets Create Some Peace Even Between Russia and Ukraine

by Index Investing News
May 26, 2023
in Economy
Reading Time: 2 mins read
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Montesquieu: “Peace is the natural effect of trade.”

KYIV, Ukraine — Despite a brutal Russian invasion that has killed tens of thousands of Ukrainian soldiers and civilians and laid waste to swaths of the country, Ukraine continues to allow Russian oil and gas to cross its territory to serve its European neighbors — generating revenue for Kyiv and Moscow and illustrating how hard it is for the bitter enemies to cut ties.

Senior Ukrainian officials have demanded that their Western partners impose tougher sanctions and cut virtually all economic ties to Russia, saying “more must be done” to cripple Moscow’s war machine. But as surreal as it might seem, Ukraine insists that it has virtually no choice but to maintain its own commercial deals and has lobbied to preserve them, arguing that they provide some leverage over the Kremlin and help constrain where the Russian military carries out airstrikes.

This is from David L. Stern, “Despite War, Ukraine and Russia are still connected to pipelines,” Washington Post, May 24, 2023.

There is little doubt that a huge percent of Ukrainians, not least among them President Volodymyr Zelenskyy, hate Russian President Vladimir Putin.

So love cannot account for the fact that Zelenskyy allows the Russian oil and gas to cross its territory. What can account for it? Economic incentives. Both sides gain. Obviously, this doesn’t create peace in an overall sense, but notice the last part of the quote above: “arguing that they provide some leverage over the Kremlin and help constrain where the Russian military carries out airstrikes.” So both sides gain and a little bit of territory is somewhat safer.

The whole Stern news story is well worth reading.

 



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