In the Doghouse Over Ukrainian Sanctions: China, India, Israel, Germany

by Greg Valliere, AGF Management Ltd.

UKRAINE CONTINUES TO IMPRESS with its military deftness, striking the flagship Russian missile cruiser in its Black Sea fleet, which was evacuated, ablaze, yesterday. And Ukrainian forces are about to get a huge infusion of sophisticated weapons from the West, including the U.S.

THE U.S. AID PACKAGE includes 11 Mi-17 helicopters, 300 Switchblade drones, 200 M113 armored personnel carriers, 18 Howitzers, 40,000 artillery rounds, 10 counter-artillery radars, 500 Javelin missiles, unmanned coastal defense vessels and protective equipment in the event of a chemical or biological weapons attack.

BUT A LONG SLOG LOOMS, as Russian troops seek to control the Donbas region before a self-imposed deadline of May 9, the sacred holiday commemorating the end of World War II in Europe in 1945.

WHILE UKRAINE’S MILITARY HAS STUNNED THE WORLD, the grumbling is growing in Washington about countries that have not spoken up against the Russian barbarity and have maintained trade and diplomatic relations with Moscow.

AT THE TOP OF THE LIST is China, of course, but that’s not a huge surprise (there’s a belief in the U.S. intelligence community that Beijing, worried about damage to the Communist brand, has been urging Putin to seek a truce).

NEXT ON THE LIST ON INDIA, which has a long history of friendship with Moscow. India has not cut its reliance on Russian energy, and Prime Minister Narendra Modi gave little ground in talks with Joe Biden this week. India has abstained on several United Nations resolutions condemning the barbaric Russian targeting of civilians.

NEXT ON THE LIST IS ISRAEL, surprisingly, which has only mildly criticized Russia. The Israeli relationship with Russian oligarchs is complicated; some of them have dual citizenships and have been major financial supporters of Israel. It’s likely that Israel wants to keep diplomatic channels open with Moscow, but U.S. officials are disappointed with the lack of support throughout the Middle East, particularly from Israel.

THE COUNTRY THAT HAS GENERATED THE MOST ANIMOSITY in Washington is Germany. The New York Times reported yesterday that Chancellor Olaf Scholz has waffled on his promise to supply military aid to Ukraine while ending Germany’s dependence on Russian oil and natural gas. Germans apparently are re-thinking action that could hurt their economy, and most NATO members privately are furious.

THIS LIST OF COUNTRIES that haven’t been full-throated supporters of Ukraine could add another major member later this month if Marine Le Pen wins in France. We think Emmanuel Macron will win narrowly, but a Le Pen victory would send shock waves through NATO.

BOTTOM LINE: We still think Russian troops lack the supplies and morale to capture territory in Western Ukraine, including Kyiv. An ultimate truce could be bitter for Ukrainians: Russian control of a sliver of the East and an assurance by Volodymyr Zelensky not to seek membership in NATO.

AN UNAMBIGUOUS VICTORY BY UKRAINE would require global unity on sanctions, and that will be difficult as countries like Germany focus on their own needs, not the atrocities inflicted on civilians by Russia.


The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

This post was first published at the AGF Perspectives Blog.

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