Forecast for 2009: Prepare for the most dangerous military stand-off since the end of the Cold War!
Today's Financial News - Posted November 14, 2008
By February 20, 2009, the world will be rocked as Russian special forces, wearing Gazprom (OTC:OGZPY) security uniforms, will invade Ukraine to protect the natural gas pipeline into Europe. Russian stocks will plummet as skittish investors flee Moscow for good. But three companies stand to make a mint.
by Andrew Snyder and J. Christoph Amberger
Baltimore — (TFN): At the height of the presidential campaign, on Oct. 19, Vice-President elect Joe Biden predicted that the Obama Administration would be put to the test by an “engineered” crisis within 6 months. Just like Kennedy. In fact, he “guaranteed” it.
We believe we know where the flash point of this crisis will be. We think we know how it will play out. And we’ve determined that, as potentially explosive as this crisis will prove to be, there is an excellent opportunity for forward-thinking investors to use the resulting upheaval for their own financial gains.
Our research indicates that Russia is prepared to strike within four weeks after the new president is sworn in. When that happens, the global balance of power will be stretched to its breaking point. Global equity markets, just barely out of the woods, will once again plummet.
Crisis Investing
The coming crisis will have a sense of deja vu. That’s because we’ve seen the “dress rehearsal” played out last summer. Russia’s invasion of the Caucasian country of Georgia was part of a larger plan. One dictated by Russia’s desperate need to shore up its mot important sources of foreign-currency revenues: Oil and natural gas.
The U.S. Department of Energy estimated that oil and gas account for about 20% of Russia’s GDP. But that was at a time when oil was trading at $140… when Russian President Dmitry Medvedev predicted prices of $500 a barrel.
On November 13, Russia was forced to revise downwards its 2009 forecast for oil prices from US$95 per barrel to US$50. The forecast for average oil prices in 2010 had also been lowered to US$55 per barrel and to US$60 in 2011.
Unfortunately, the trajectory of crude oil prices over the past weeks indicates that estimates of $50 to $60 per barrel may be way too optimistic: On November 13, the price of Russian oil fell below $50 per barrel for the first time since early 2007. Some experts now peg the outlook for crude as low as $10-$30 per barrel. But even prices at current levels mean budget cuts and a sudden end to Russia’s economic boom.
To make things worse, Moscow has been spending huge parts of its limited financial reserves on banking bail-outs. Over $100 billion were spent between September and October alone, representing over 20% of Russia’s total reserves. Experts estimate that Russian banks and companies will have to pay out another $115.7 billion, in addition to the $47.5 billion which is to be covered by Vnesheconombank in the fourth quarter.
It’s not just Russia’s newfound prosperity that’s melting away. It’s the newfound nationalist pride of the humbled Evil Empire! It’s a matter of money, of pride — and of superpower leverage!
Gas and Power
With oil prices in the dumps, Russia increasingly depends on its natural gas business.
That market actually turns out to be more advantageous than the oil market. After all, oil is a fungible commodity with a global market price. Natural gas, due to its complex infrastructure requirements, is far more regional. Controlling supply in one particular region can be far more profitable than competing globally for oil or gold prices.
Over the past decade, Russia has turned its natural gas business into a cash cow. It buys natural gas from the formerly Soviet countries of Central Asia at half price… and resells it to Europe at full retail.
But Europe is sick of paying full price… and increasingly suspicious of Vladimir Putin and the Kremlin. In the Caucasus, the West is about to establish a natural gas pipeline that runs from Central Asia through Georgia. This “Nabucco Project” pipeline would bypass Russia—and cut deeply into its natural gas business. Nabucco is expected to be operational by 2013, pumping gas along 1,800 miles, from Turkey’s borders with Georgia or Iran to Austria.
This has the potential to single-handedly destroy Russia’s financial future.
Putin simply cannot allow this to happen. That’s why last summer the Russian army occupied the Georgian towns that would control the Nabucco pipeline. And regardless of what Putin tells the press, they aren’t leaving anytime soon.
One Down, One to Go
In Eastern Europe, the Cold-War era pipeline carrying gas into Europe runs through Belarus and Ukraine. Since Ukraine’s freedom-loving president Viktor Yushchenko is a friend of the West — even applying for NATO membership — that section of the pipeline has become Russia’s Achilles heel.
That’s because Russia’s main “peace-time” weapon to keep down uppity neighbors is natural gas. Consider this:
- Ukraine relies on Russia for 71% of its gas needs.
- Hungary obtains over 80% of its natural gas from Russia.
- The Baltic countries, Finland, and Slovakia are almost entirely dependent on Russian supplies.
- Even Turkey receives most of its gas from Russia.
Right now, the European Union has to import 57% of its natural gas. This will rise to 84% by 2030. Much will come from Russia. And most of this gas is still shipped through that Cold War-era pipeline that crosses Ukraine. The two countries have a history of pipeline-related hostilities!
Russia’s gas monopoly Gazprom (OTC:OGZPY) has choked off gas flows to Ukraine in the past: Russia doubled the gas price for Ukraine in 2006… raised it by 37% in 2007… and by 38% this year. When Ukraine couldn’t pay, they simply cut off gas deliveries. Russian Foreign Minister Sergey Lavrov said in June that his country may double the gas price again for 2009.
In view of its budget situation and the continuing efforts to push through the Nabucco Project, Russia needs to strike again.
The timing is crucial. It will have to happen when…
- Ukraine and Europe require gas most, in the dead of winter…
- The probability of U.S. interference is minimal, due to an inexperienced, “non-confrontational” new administration…
- The economic situation in Europe is critical thanks to the recent financial crisis!
Guaranteed Crisis
Our research indicates that Russia will make its move after Inauguration Day (Jan. 20). Most likely, it will happen during the week between Feb. 13 and Feb. 20. Here’s how it will go down:
* Russia will double gas prices for Ukraine, quoting supply and demand. Ukraine will be unable to pay.
* Gazprom immediately will cut off natural gas deliveries.
* Ukraine’s already damaged economy will grind to a standstill.
* Kiev will be forced to help itself to “transit gas” destined for Europe — and threaten to cut off the pipeline that connects Russia with the European Union.
The most powerful player in this brutal game of chess will be Gazprom. Gazprom is a company so powerful it’s sometimes called a “state within the state”. Its former Chairman of the Board is now the Russian president.
The company was even granted the right to form its own armed security force to safeguard its pipelines against “sabotage and terrorist acts” that could disrupt gas supplies to Europe. Gazprom’s “kontraktniki” are an army of mercenaries, recruited from veteran Russian special forces. They have tanks. They have helicopters. And they’re backed up by the conventional and nuclear firepower of the Russian military…
Who else to come out swinging from an armed confrontation?
But there’s a hidden agenda behind this whole scenario…
Russia is making the ultra long-term play. A few million in stock valuation lost today could be worth trillions in the long run: Russia wants to re-nationalize Gazprom at the lowest possible cost to the Russian government… and at the expense of Western shareholders! When they sell in a panic, Russia will buy at fire-sale prices.
Ticking Time Bomb
If Ukraine moves to block the pipeline, Gazprom’s shock troops will move to “protect” their business interests. Gas prices will go through the roof the moment the first Russian tank rumbles across the Ukrainian border. And Russian stocks will collapse as investors pull out in a panic.
Just as they did in August, when Russia invaded Georgia. Just as they did last October.
When that happens, Gazprom’s share price will get destroyed. Don’t be surprised if their U.S.-traded ADRs will lose 20%… or even 50%… in a single trading day.
That’s exactly the moment the Russian government is waiting for: As private investors bail out, the Kremlin will step in… graciously buying up shares for kopeks on the ruble. Hedge funds, institutions and private investors will lose billions. Investors will scramble to pull out their principal from battered commodities funds.
But this crisis also holds the promise of great opportunity. My team and I have compiled a special report for interested investors that concisely details how you need to position yourself for the coming energy showdown. We have identified three stocks that will soar the moment the first Gazprom helicopter breaches Ukraininan airspace. As Europe scrambles for energy resources to bridge the gap of natural gas deliveries, these three companies will become the focus of every crisis investor in the world.
If you can bear the risk now of buying shares in one, two, or all three of these independent, well-positioned companies before Dec. 13, you will be in an optimal position to survive this crisis with your net worth intact… and your portfolio solidly in the black! Please check out our Free Special Report right here!
Next Article: The long dying of vice stocks: Short Las Vegas Sands (LVS) for 20-30% gains!
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January 1st, 2009 at 2:29 pm
Nonsense in every statement… It’s even hard to pick biggest lie in this article due to broad choice…
January 27th, 2009 at 12:25 pm
This is not non-sense. The gas pipeline has already been shut down to raise the price of natural gas, Russia blaming Ukraine etc., etc., etc.. Putin has gone to war several times (used military force) and will do so again. It is only a matter of short time. Good luck with your investments.