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Markets are in denial about nuclear risk

Markets are in denial about nuclear risk, The Jordan Times, Mar 13,2022 –  NEW YORK  —  Financial markets do not seem to be pricing in the full risks of Russia’s invasion of Ukraine. The absence of any meaningful negative response in equity, corporate debt and sovereign debt markets in Europe, the United States, Canada and Japan would barely make sense even if there was no chance of the situation escalating into an open conflict between NATO and Russia. But that is not the only real risk; so, too, is the threat of the conflict going nuclear……….

Global asset markets have not even priced in this least-bad scenario. But if the Russia-Ukraine war escalated to become a Russia-NATO war, there would be a serious risk of nuclear conflict. One sure way to achieve such an escalation would be for NATO to establish a no-fly zone over Ukraine, as the Ukrainian government has urged.

While NATO and Western governments have imposed economic and financial sanctions on Russia and furnished Ukraine with anti-tank weapons, drones, portable surface-to-air missiles and ammunition, these forms of support do not amount to an act of war. Enforcing a no-fly zone, however, would mean shooting down Russian targets. Were NATO to take this step, a wider war would become inevitable.

So far, NATO has forthrightly rejected calls for a no-fly zone. It has also shown restraint in response to Putin’s nuclear saber-rattling. On February 27, 2022, Putin put Russia’s nuclear forces on high alert in response to Western sanctions and what he referred to as “aggressive statements” from NATO powers.

On the same day, Belarus abandoned its non-nuclear status  —  thereby permitting Russia’s nuclear weapons on its territory. This escalation came on the heels of Russia’s extensive strategic nuclear exercises on February 19, and Putin’s televised speech announcing the invasion on February 24, when he emphasised that Russia is still one of the world’s most powerful nuclear-weapons states…………..

Today, there is scant evidence that markets have even noticed the rising risk of a nuclear conflict. Denial is the name of the game.

Willem H. Buiter is an adjunct professor of international and public affairs at Columbia University.  2022.


March 14, 2022 - Posted by | 2 WORLD, business and costs

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