13 months ago we wrote a article in which we told you about the enormous value that existed in the Russian stock market.. In it we cited some companies that were trading at extraordinarily low earnings multiples, whose businesses were very stable and therefore had a dizzying potential for revaluation. Well, the geopolitical circumstances, i.e. the botched EU/US attempt to foment a pro-European revolution in a Ukraine at least half of which is pro-Russian, have caused the semi-war conflict to affect Moscow's stock market with sharp falls, adding even more value to some of its companies.
We should not lose sight of the fact that the conflict does not directly affect Russian territory or its economy. Or at least not as much as it does the EU itself, which is as recklessly dependent on Russian oil and gas supplies as a diver is on his oxygen tank. You will get a clearer idea of what I mean by looking at the graph at the end of this article. this Gurusblog article.
It is clear, then, that it is not Russia that has the most to lose in this conflict, but the EU. And yet the Western (US-EU) strategy, in its eagerness to incorporate Ukraine into NATO and thus advance the allied military border to the very line between Ukraine and Russia, has upset the fragile balance of the government in Kiev. A once pro-Russian government, but governing a single state, and now non-existent, unrecognised by the east and southeast (Russian-speaking) and financially bankrupt. Thus the secession of Ukraine into two antagonistic camps, pro-Russian and pro-Western, seems unstoppable. In other words, because the West wants to overthrow a government in order to set up another that is willing to hold the referendum necessary for NATO membership, the result is the break-up of a state where, paradoxically, it will be Russia that will extend its borders, at least de facto. A European-American botch-up if ever there was one.
Moreover, no matter how much corralito Kiev applies, Ukraine is bankrupt and the EU is not in a position to inject money into a state external to the Union (or internal...), much less to assume the economic and human cost of any military action against an arms power like Russia. It does not even have the right to defend Ukraine's borders from Russian invasion, since it has never even considered a referendum on NATO membership. Moreover, shutting off the tap - the pipeline - from Russia would temporarily hurt the accounts of companies like Gazprom, no doubt, but it would be lethal, unsustainable and unimaginable for the EU. Thus, with Putin's support, the chances of Russian-speaking Ukraine (or at least part of it) recognising a government that emerged from the popular revolt incited by the Western media - and secret services - are nil. And thus the chances of Russia gaining a more dominant position in the region after these events are very high. Putin has the upper hand, i.e. the EU's energy key, and the support of the Russophile national sentiment of a large part of the Ukrainian population (not for nothing was it a whimsical gift from Khrushchev).
Obama spent an hour and a half on the phone with Putin yesterday (I would pay to know the content of that conversation), which denotes difficulty or irresolution. And both the US and the EU know that all they have left to do is kick their feet up, make verbal threats and implement some low-intensity pressure measures. All in order to make Putin take pity on the West and not eat the whole Ukrainian cake, since if they really piss him off, Putin is «very mad» and could leave Europe, which is only standing on its own two feet because the markets live in Mátrix, without energy.
With all this scenario and its foreseeable end, it turns out that we have Russian companies that are trading at war drummers' lows -offshore-, But from prices that were already laughable. And if the Russian stock market falls by an additional 10% or 20% in the next few days, we will be looking at one of those once in a lifetime investment opportunities. Remember that the Russian stock market as a whole was trading at multiples of around P/E 5.5, with oil companies at P/E 4 or even Gazprom itself at 2.7... and that the stock market today is falling by an additional -14% at the time of writing. That said, once in a lifetime.