As peace talks founder, and the Russian army continues to advance, western investors in Ukrainian assets, whether debt, equity, or real property, must be growing increasingly anxious.
I think the numbers are going to prove far too great for the EU to underwrite, and a lot of unhappy investors will be left holding claims on a country that no longer exists.
One more thing to consider: Poroshenko and other politicians negotiate with other people’s money, taxpayers’. In the other hand, lenders’ representatives do get a real cut from the profits. They have skin in the game.
An awesome article. Queue the Wolf of Wall Street Meme, “John, Im calling about a new opportunity called ‘Conflict Derivatives’ which payout at a 50:1 ratio...”
Very informative and an enjoyable read. Thanks for the content, Brawl.
I known I was born in France and have been living in France for all my life except for 6 years in Asia (Myanmar). Myanmar administration is also quite degenerate but in another way.
Wow. What an interesting article. I am very familiar with derivatives, but this transaction was news to me. Really interesting. To me, it shows, unfortunately, that the EU leadership is truly as unwise as I feared it would be. As the old expression goes, it is always dangerous if you drink your own Kool-Aid, but the EU leadership seems to be gobbling it up. And the people in wider Europe have to pay the price for it. Having lived in Europe for a number of years and liking it there, it pains me to see that.
I wonder just how many people in Europe are even aware of these contracts and the potential cost they may be footing. I have the over/under as 1000 in all of Europe
Great question. I don't think that many people in Europe (or the US) know about this. I have been following the Ukraine/Russia topic in legacy media and independent media, including the less well-covered investment side (which is always interesting). But I had never heard about Ukrainian GDP/conflict derivatives investments. Kudos to The Brawl Street Journal for shining a spotlight on it. To me, it just shows that journalism is still very much alive, although nowadays mostly in independent media, including Substack.
Great piece. What a quagmire, thanks for sharing the details. Trump growing increasingly frustrated with Putin. These details help me understand the depth this whole damn mess truly is.
Very good piece. Imho the issue is far bigger than just the warrants. The EU encouraged a war on its door step with the full knowledge that if things went badly they would at minimum be paying in the form of refugees, rising crime, weapons being smuggled in etc. There seemed to have been no willingness to accept that Russia could win and Ukraine could be smashed to pieces. Maybe they were so blinkered by national security arguments that they couldn’t not back a chance to weaken Russia.
At this point it also seems bizarre that they aren’t pushing to freeze the conflict to contain additional downside for Europe.
Gaza is father away but its hard to see a situation in which waves of Palestinians don’t end up in Europe as refugees.
This is a fascinating analysis of how financial instruments like GDP warrants expose the real tensions between political ideals and economic realities. The situation with Ukraine really highlights the moral hazard dilemma and how market signals can force uncomfortable reckonings on policymakers.
This is exactly the same scenario as Western aid to Russia in the 1990s. Russian suffering was used to take $200B from Western, mostly Americans taxpayers, then laundering it through the gangsters paradise that was Yeltsin’s Russia back into Western Banks. The citizens of Russia and the taxpayers of the West got robbed going both ways.
As peace talks founder, and the Russian army continues to advance, western investors in Ukrainian assets, whether debt, equity, or real property, must be growing increasingly anxious.
I think the numbers are going to prove far too great for the EU to underwrite, and a lot of unhappy investors will be left holding claims on a country that no longer exists.
Not easy to feel sorry for them.
That’s a way this can go for sure. Which makes it even more reasonable to collect cash as long as there is something to collect.
Yes, definitely.
Get your money out while you still can.
Lending to Ukraine at this point is like investing in Austro-Hungarian war bonds in 1918.
What a great article .. no surprise that the investors are a whole lot smarter than the Euro bureaucrats
thank you!
One question - who is lending to or investing in 🇺🇦 today? I thought ukraines public expenditure was paid for by EU donations.
One more thing to consider: Poroshenko and other politicians negotiate with other people’s money, taxpayers’. In the other hand, lenders’ representatives do get a real cut from the profits. They have skin in the game.
Yes, the motivational asymmetry is real.
An awesome article. Queue the Wolf of Wall Street Meme, “John, Im calling about a new opportunity called ‘Conflict Derivatives’ which payout at a 50:1 ratio...”
Very informative and an enjoyable read. Thanks for the content, Brawl.
My pleasure! Now I can’t unsee Belfort yelling “sell me this war!”
haha!
I wasn't aware of these instruments. The moral hazard outcome is typical EU sadly. The road to hell is paved by good intentions.
Shooting itself in the foot is one of the EU’s core competencies.
I known I was born in France and have been living in France for all my life except for 6 years in Asia (Myanmar). Myanmar administration is also quite degenerate but in another way.
Wow. What an interesting article. I am very familiar with derivatives, but this transaction was news to me. Really interesting. To me, it shows, unfortunately, that the EU leadership is truly as unwise as I feared it would be. As the old expression goes, it is always dangerous if you drink your own Kool-Aid, but the EU leadership seems to be gobbling it up. And the people in wider Europe have to pay the price for it. Having lived in Europe for a number of years and liking it there, it pains me to see that.
Thank you! Kool-Aid is the only thing EU leaders never seem to run out of.
I wonder just how many people in Europe are even aware of these contracts and the potential cost they may be footing. I have the over/under as 1000 in all of Europe
Great question. I don't think that many people in Europe (or the US) know about this. I have been following the Ukraine/Russia topic in legacy media and independent media, including the less well-covered investment side (which is always interesting). But I had never heard about Ukrainian GDP/conflict derivatives investments. Kudos to The Brawl Street Journal for shining a spotlight on it. To me, it just shows that journalism is still very much alive, although nowadays mostly in independent media, including Substack.
Great piece. What a quagmire, thanks for sharing the details. Trump growing increasingly frustrated with Putin. These details help me understand the depth this whole damn mess truly is.
Thank you! And yes, this mess is miles deep.
Very good piece. Imho the issue is far bigger than just the warrants. The EU encouraged a war on its door step with the full knowledge that if things went badly they would at minimum be paying in the form of refugees, rising crime, weapons being smuggled in etc. There seemed to have been no willingness to accept that Russia could win and Ukraine could be smashed to pieces. Maybe they were so blinkered by national security arguments that they couldn’t not back a chance to weaken Russia.
At this point it also seems bizarre that they aren’t pushing to freeze the conflict to contain additional downside for Europe.
Gaza is father away but its hard to see a situation in which waves of Palestinians don’t end up in Europe as refugees.
Thank you! The EU consistently overestimates its strength, influence, and eventually the patience of its citizens.
This is a fascinating analysis of how financial instruments like GDP warrants expose the real tensions between political ideals and economic realities. The situation with Ukraine really highlights the moral hazard dilemma and how market signals can force uncomfortable reckonings on policymakers.
This is exactly the same scenario as Western aid to Russia in the 1990s. Russian suffering was used to take $200B from Western, mostly Americans taxpayers, then laundering it through the gangsters paradise that was Yeltsin’s Russia back into Western Banks. The citizens of Russia and the taxpayers of the West got robbed going both ways.