Investing in evil
When the USSR was dissolved in 1992 the nation of Ukraine found itself in possession of thousands of nuclear weapons. To prevent these weapons from falling into the hands of terrorists, an agreement was arranged that all former Soviet states would hand their nuclear material over to Russia for safekeeping. In 1994 Ukraine decided to give up those weapons in exchange for the United States, Britain and Russia guaranteeing the country’s security. The agreement was known as the Budapest Memorandum.
In the summer of 2003 Vladimir Putin flew to London on a special mission: cementing Russia’s business ties with the West. Now that Russia was free of Communism, many companies saw the opportunity to make huge amounts of money from an untapped market.
Putin donned a white tie and tails to dine with Queen Elizabeth II. He sipped iced vodka with 700 bankers and business executives, and during an energy conference with Prime Minister Tony Blair he watched British company BP sign a commitment to invest $6 billion in a Russian oil and gas venture. Putin told the conference that “Our priority is the step-by-step integration of Russia into the European and world economy,” stressing Russia’s desire to double its economy and attract investment in high-tech and aerospace sectors. Such cooperation would be “a great investment in strengthening Europe’s stability” he said. He was three years into his presidency at the time.
Nearly 20 years on, those deals and plans lie in ruins as Western governments and companies isolate Russia over its invasion of Ukraine. BP, Shell and Exxon-Mobil have said they will abandon their multi-billion dollar investments in energy. Banks and insurance companies worldwide are cutting transactions with their Russian counterparts.
Investors could be forgiven for giving their money to a nation that was free of Communism, but when it became clear that Vladimir Putin was a dictator they should have looked for the door. Instead, they foolishly thought they could work with a tyrant, and have suffered a great loss for their mistake. Any money invested in Russia is now trapped. Moscow is blocking foreign investors, who hold tens of billions of dollars worth of Russian stocks and bonds, from exiting. Russian companies have also been barred from paying dividends to overseas shareholders. The Russian stock market has now been closed for weeks, but people need to keep in mind that the Russian stock market closed in 1917 and didn’t reopen until 75 years later. At any point Putin can have a company nationalised, completely wiping out the stock value of shareholders. The value of Russian Exchange Transfer Funds (ETFs) that are still trading in the West has dropped considerably.
The Dow Jones Russia GDR Index is an index designed to track the top Russian Global Depositary Receipts: the index plunged a mind-boggling 97% in just a few days and wiped out $572 billion from the market value of 23 stocks, including Gazprom and the Sberbank of Russia. Stocks like Gazprom would seem to be a good investment, with its vast resources and a near-monopoly in the natural gas business, but the stock has performed poorly since it became a public company in 2006. One of the most widely traded ETFs is VanEck Vectors Semiconductor Russia fund that trades under the stock symbol RSX. It traded at $33 before the invasion and quickly dropped to $5 as Russian troops crossed the border into Ukraine, but many investors are buying up these Russian stocks: they are lured in by Price Earnings Ratios at one-tenth of US stocks. The people buying them are hoping that peace will soon return to the region and these stocks then sky-rocket in value.
Investing in Russia is investing in evil. The nation is run by a tyrant that has pocketed hundreds of billions from bribes and fraud. The oligarchs that run the companies use them as their personal debit cards. Dozens of Western companies have now closed their operations in Russia. The Russian government has proposed nationalising these shuttered foreign-owned companies, but Toyota, Nike and IKEA didn’t take their factories with them when they left. The abandoned property, inventory and investments worth billions of dollars are therefore a free gift to the Russian government. Since the collapse of the USSR Western nations have pumped about $400 billion into Russia. These so-called investments have benefited only President Putin and his oligarchs. When BP made its $6 billion investment into Russia in 2003 it added another $19 billion over the ensuing years and now has to write off the entire $25 billion. That is a lot of money to lose!
Putin had already taken over a portion of Ukraine territory in the 2014 Crimea invasion. The Republic of Crimea declared its independence from Ukraine following a disputed referendum, after which Russian troops moved in to occupy the area. The willingness of Putin to invade Ukraine in 2022 needs to be related to Joe Biden’s presidency. He has watched the weakness of the deteriorating President. He watched America’s disastrous withdrawal from Afghanistan last summer after 20 years of war. Biden has not been on top of the Ukraine situation, any more than he has been on top of anything. Putin’s strategy is reminiscent of Hitler taking over the Sudetenland in north-west Czechoslovakia. Hitler was very concerned about the Germans who lived there: they were being persecuted by the evil Czechs (or so he thought) and he demanded they become part of Germany. Within a matter of months, all of Czechoslovakia fell under Hitler’s control.
So, where will this all lead? It is too early to tell and there are many variables. What we do know for sure is that Ezekiel 38 and 39 describes a time, after the rapture of the church, when there will be a vast Russian/Muslim alliance that invades Israel to “take a spoil”. Although Israel is militarily powerful, it would have no chance against such a vast army were it not for the fact that God Himself intervenes, defeats the invaders and rescues His chosen people. Orthodox Jews are well aware of this prophecy and they are keenly watching the events currently playing out, because they know that they too will one day face the barrel of the Russian army.