The export trouble in Germany and weakness in the rest of the Eurozone has created a short-term advantage for Russia.

A few weeks ago, US Vice President Joe Biden made a statement that unless Ukraine fixed its internal corruption by the end of the year, current sanctions on Russia would be lifted. This basically gives the Ukrainian government a few short months to completely rehaul a deeply corrupt and entrenched political system — not gonna happen.

So what’s the real reason the US is close to dropping sanctions?

For one, the sanctions have been effective at impacting Russia’s economy, but have done little to thwart Putin’s aggressive foreign policy. If anything the exact opposite has been the result. This is what happens when the “enforcer” fails to back up its verbal threats, as the US has done on multiple occasions. This has only worked to embolden Putin even more.  

Secondly, and more importantly, Eurozone members (EZU) are suffering from these same sanctions as Russia is a major trade partner with many of them. It’s rumoured that a number of European countries are planning to veto the sanctions’ renewal at the end year anyway, which would reopen trade between the EU and Russia.

Easing sanctions on Russia would bolster various European economies. As the EU’s 3rd largest trading partner, Russia imports a number of items including agricultural products and machinery from the EU. When the union is this fragile, every bit of relief matters.

The US understands the dire situation in the EU and does not want to cause any more trouble for them. A financial crisis overseas would be detrimental to US markets (SPY). This is why they’re willing to lift sanctions, but to save face they’ve used Ukraine’s corruption as a reason for their decision.

Our long-term view on Russia is very bearish. The country is a mess and is on a steep path to becoming a disaster. Putin and his thugs are doing their best to destroy the capitalist system and install a soviet era command and control economy.