"Question is with Mueller circling, and Trump desperate to fire him, has recent OFAC sanctions actions given him enough political capital to now moderate with Putin. Again, it seems unlikely."
LONDON, Apr 11, 2018 – With possible major action by the United States, France and the UK related to alleged airborne chemical attacks in Syria, Tim Ash of Bluebay Asset Management offered the following comments at 15:54 today: Just thinking aloud of places/areas for de-escalation/escalation around this Russia/US spat on Syria: What can Putin offer Trump to ratchet down tensions: - Ukraine - offer of Russian troops out of Donbas, albeit that would mean first accepting that they are there. Unlikely - if Putin accepts troops are in Donbas, he will have to own up to the Russian population that they have experienced significant casualties. Maybe he could offer to re-engage more rigorously in the Surkov-Volker peace process? More stuff around peacekeepers, but therein the two sides are at logger heads, with Ukraine only willing to accept peacekeepers up to the existing border with Russia, which would again mean Russian troops have to leave.
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- Accepting fault for Skripal, MH17, Cyberattacks, election meddling, etc, and offering to work to "collude" with investigations - very, very unlikely. Again this would involve accepting guilt on the part of Putin;
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- Bringing the US into the Syria peace process - not sure that the US wants to be involved therein given the complexity of the situation on the ground, and the assumption that by being "involved" it means the US bank-rolling the recovery and working with the Assad administration. Again very hard to see in practice.
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- North Korea - probably, the most useful, and Lavrov was supposed to have jetted off to Pyongyang. That said, Trump seems to be getting on quite well without the Russians already, with his offer of a WH meeting for Kim. Likely Russia can only stir this up.
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- Talks to tone down/moderate the arms race. Possible.
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- Pulling back from selling advanced military kit to US allies, think S400s there to Turkey, Egypt and Saudi. Seems very unlikely as creating fissures between the US and Turkey seems to be a policy priority for Putin which is playing out well.
I guess on the other side of the ledger, places where Russia could further stir things up/escalate with the US: -
- Syria, given the close proximity of US and Russian forces;
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- Lebanon, just recovering from the Hariri incident in Riyadh and in the glow of the Cedre conference;
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- Ukraine - as noted above, a return to more offensive actions by Russian forces? But comes with risks, given the much more capable state of the Ukrainian armed forces now armed with US anti-tank kits and sniper technology. Russia would need to double up significantly, with the risk of major casualties. And if he doubles up he has to be sure of winning, which I don't think he can be now.
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- The Balkans - Kosovo, Macedonia, and RS in Bih, plus even Montenegro.
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- The Caucasus, think the conflict in Nagorno-Karabakh between Armenia and Azerbaijan.
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- Northern Kazakhstan, as with Azerbaijan, making it clear that Russia is lynch-pin for Western energy security.
Actually probably the scope for de-escalation now rests with Trump - not hitting Assad militarily, or offering to do less, not more, and in coordination with Russia (at least telling the Russians where the missiles are heading). The fact that Trump "holds fire" might be a precursor to that Trump - Putin summit in the WH. Question is with Mueller circling, and Trump desperate to fire him, has recent OFAC sanctions actions given him enough political capital to now moderate with Putin. Again, it seems unlikely. ### ** Please note that any views expressed herein are those of the author as of the date of publication and are subject to change at any time due to market or economic conditions. The views expressed do not reflect the opinions of all portfolio managers at BlueBay, or the views of the firm as a whole. In addition, these conclusions are speculative in nature, may not come to pass and are not intended to predict the future of any specific investment. No representation or warranty can be given with respect to the accuracy or completeness of the information. Charts and graphs provided herein are for illustrative purposes only.”
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