Blackouts… tangled supply chains… shortages of aluminum, titanium, platinum, palladium, lithium and nickel… famine?

Is it possible?

Jim Rickards certainly thinks so. In fact, he says, all of that and more is barreling down the pike as you read this.

Recently, Rickards wrote a full report on the Ukraine war — and how the global economy is faring — for his subscribers.

He also made some dire predictions about the near future, many of which are directly related to the war. (And, as we’ll see, Rickards has also offered some solutions).

Fair warning: Many of his predictions are things most people don’t want to hear, or even think are possible.

As we’ve said before, we’re not above preparing for the worst.

Out of respect to his subscribers, I won’t publish the full report…

But I will go over the highlights.

“Russia is Winning”

As you know, the War in Ukraine began on February 24, 2022.

The Russian Federation invaded Ukraine along four vectors; a northern front aimed at Kyiv from Belarus; a north-eastern front aimed at Kharkiv; a southern front from Crimea; and a south-eastern front from the Ukraine cities of Donetsk and Luhansk.

Just like all wars, the fog is thick.

But, added up, says Rickards:

“Russia is winning the war on the ground. It is moving toward achieving strategic control of the entire coastline, interior river system, and the pro-Russian Donbass region. Much of Ukraine’s critical infrastructure will either be destroyed or put under Russian control in the process. This level of control will achieve Russia’s political goals of a weakened Ukraine unable to join NATO or the EU, and leave Ukraine as an officially neutral buffer state between Russia itself and the NATO members.”

That said, the war won’t be over any time soon… unless Ukraine seeks a settlement that gives Russia what it wants.

Rickards believes that’s unlikely:

“Given the adamant positions of Joe Biden for the U.S., and Boris Johnson for the UK, and the fact that President Zelesnky is a weak figure beholden to extreme nationalist forces inside Ukraine (the Banderist faction), it seems likely the war will drag on with continuing cries by Ukraine for more weapons and more money, but very little progress on the ground.”

Financial War

The kinetic war isn’t the only one raging right now.

At the same time, the U.S. is leading a financial and economic war against Russia and its ally, Belarus.

“This,” says Jim, “involves a combination of account freezes, asset seizures, export/import bans, and efforts to redirect future energy purchases away from Russia toward alternative sources. As in the case of the kinetic war, Russia is winning the financial and economic war.”

Here’s a summary of recent developments:

• Biden’s effort to “crush the ruble” has failed. The Russian ruble was trading around 70-to-1 to the U.S. dollar before the war. After the war broke out, the ruble briefly crashed to 140-to-1. It then quickly rallied back and is today trading around 60-to-1, which is materially stronger than when the war began.

• Biden and U.S. allies have been able to seize assets of Russian oligarchs such as yachts, townhouses, bank accounts, and ownership interests in sports clubs etc. This has benefitted Russia. Putin’s base of support does not come from the oligarchs. It comes from the military, intelligence services, the Orthodox Church and everyday Russians. Putin regards the oligarchs as a rival power center. Biden is doing Putin’s dirty work by destroying Putin's rivals.

• The U.S./EU ban of Russian energy imports of coal, oil, and natural gas have also failed. Most of the so-called ban is not even in force yet; it is merely a case of theatrics and empty announcements. Russia is still making $21 billion per month in hard currency earnings for its energy exports. Russia has also found willing customers in India, China and elsewhere for its energy exports. There are no feasible substitutes for Russian energy in the next several years. Western Europe will either have to continue buying Russian energy (at much higher prices) or resort to rationing with industrial shutdowns and rolling blackouts.

• Biden’s export bans will result in global food shortages and an unprecedented humanitarian disaster in the form of a global famine by this fall. Russia and Ukraine account for about 25% or global grain exports. Cutting off those flows will result in starvation in places such as Egypt, Lebanon, Kenya and other populous countries that rely almost exclusively on Ukraine and Russia for food. Russia is also a major source of global fertilizer including key nitrogen-based inputs. Bans on Russian fertilizer exports will result in higher food prices around the world (at best) or food shortages in cases where farmers don’t plant because they cannot afford the higher-priced fertilizer.

• Most of the impact of sanctions has not even been felt yet because of delayed effective dates or lack of political consensus on implementation. This means that as bad as the situation is today (inflation and shortages) it can be expected to get worse as further sanctions are implemented.

• The longer-term impact of the U.S.-led sanctions will be highly detrimental to confidence in the U.S. dollar and U.S. Treasury securities as the bases for global payments and global reserves respectively. Already, Russia and neutral nations such as China, Turkey, Brazil, Saudi Arabia, Iran, and others are exploring alternative payment channels, alternative payment currencies, and the use of gold as a reserve asset in place of U.S. Treasuries. Ultimately, this could result in a collapse of confidence in the U.S. dollar and much higher interest rates and inflation in the U.S.

Conclusion

The big winner of all of this? Russia.

Though the war has been costly for Russia, and the financial sanctions have been far from harmless, Rickards believes that Russia will emerge the big winner.

Ultimately, he writes, “Russia is poised to gain through higher energy prices, control of agricultural and natural resources inside Ukraine, control of the manufacturing base of Ukraine, and a vastly expanded sea transportation network through its control of half the Black Sea (with Turkey controlling most of the other half). Russia will also achieve geopolitical goals of keeping Ukraine out of NATO and reducing Ukraine to a weak and neutral state.”

And the biggest loser? Ukraine.

“It will have forfeited much of its land, agricultural output, and industrial capacity,” Rickards writes. “Its army will be reduced to little more than a national guard or police force. It will have lost all access to the sea, except through Russian controlled ports. Ukraine has also suffered a population exodus of perhaps 10 percent of its population who left as refugees to Poland, Romania, and other neighboring states. These refugees include many of the richest and most talented Ukrainians, which will impede Ukraine’s rebuilding when the war is over.”

The other biggest losers? Western Europe and the United States, (the UK, Canada, Australia and Japan are less directly affected).

“These developed economies will suffer higher prices for food and energy, tangled supply chains, blackouts, and shortages of critical inputs including aluminum, titanium, platinum, palladium, lithium and nickel. In time, this will negatively impact manufacturing output, technological development, and international trade.”

Lastly, and certainly not least, “the world will suffer mass starvation in late 2022 due to shortages of fertilizer, seed, grain, transportation and other critical inputs to a functioning food supply chain.”

Yes, that’s a lot of doom, but here’s the thing…

There’s more to this story. It has to do with an event happening this Wednesday — only a couple of days from today.

Yesterday, our publisher, Doug Hill, hosted a live event with Jim to talk about this event.

If you’re worried about the market fallout, check out the interview at the link below.

Click here to watch it now.

Until tomorrow,

Chris Campbell
For Altucher Confidential