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No Time to Go Wobbly in Ukraine; Major Military Expansion by China

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No Time to Go Wobbly in Ukraine; Major Military Expansion by China

Author: Greg Valliere

June 7, 2022

THE HAND-WRINGING OVER RUSSIAN PROGRESS in the Donbas region strikes us as unwarranted for several reasons:

* The Russians always seemed likely to capture this area, with its flat terrain, but Moscow’s losses — its troops, generals, tanks, helicopters, etc. — have been staggering.

* Ukraine is about to receive sophisticated new rockets and other supplies from the U.S. and the West, a potential game changer.

* Guerrilla warfare is increasing in areas Russia has captured, with car-bombings and assassinations. Sounds like Afghanistan, where Russia couldn’t contain the insurgency.

* Dissent is increasing in Moscow, as the standard of living plummets and the public is now fully aware that this is a vicious war, ineptly run.

YET, INEXPLICABLY, there’s talk of negotiations by Western leaders, including Emmanuel Macron and Joe Biden, both of whom have raised the prospects of a deal. Is it any wonder why Vladimir Putin reportedly believes he can win a war of attrition?

THIS HAS BEEN A WAR OF MOMENTUM, with Ukrainian setbacks in recent weeks as its troops suffer from a lack of the basics — not enough bullets and extra magazines for their rifles, according to an article this weekend in the Toronto Star that describes Ukrainian soldiers charging into battle in running shoes and mismatched uniforms.

THE SUPPLY DEFICIENCIES WILL BE ADDRESSED, and we expect the tepid Russian offensive will stall before its troops reach central Ukraine. Russian troop morale will sink further in a stalemate, as Ukrainian guerrillas extract a terrible toll.

THIS IS NO TIME FOR WESTERN LEADERS TO GO WOBBLY, to paraphrase Margaret Thatcher. Russia cannot win this war — even if it turns its artillery fire on Kyiv, which would simply stiffen Ukrainian resolve.
* * * * *
CHINA IS SECRETLY BUILDING a naval facility in Cambodia for the exclusive use of its military, with both countries denying it “and taking extraordinary measures to conceal the operation,” the Washington Post reports this morning.

A GROUNDBREAKING CEREMONY is scheduled for Thursday for the facility, which would be adjacent to Cambodia’s Ream Naval Base on the Gulf of Thailand.

THE ESTABLISHMENT OF A CHINESE naval base in Cambodia — its first in the strategically significant Indo-Pacific region — is part of Beijing’s strategy to build a network of military facilities around the world in support of its aspirations to become a true global power, analysts told the Post. China already is establishing a foothold in the Solomon Islands.

TWO IMPORTANT IMPLICATIONS: First, chances of an easing of tensions between Beijing and Washington are still unlikely; we don’t expect tariffs to be eased any time soon. Second, the clear signs of Chinese military expansion will boost U.S. defense spending close to an astonishing $800 billion in the coming year, with an emphasis on ship-building.


The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

©2022 AGF Management Limited. All rights reserved.

Written by

Greg Valliere

Greg Valliere

Chief U.S. Policy Strategist

AGF Investments

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