Russia has massed troops on its border with Ukraine. In 2014 it annexed the Crimean Peninsula which was part of Ukraine. And, over the last seven years Russia has supported separatists in the Southwest of Ukraine under the pretense that Russian speakers in the part of Ukraine are being mistreated. Why is this happening? Where will this lead? And, how can an options trader profit from the uncertainty of whether Russian president Putin is bluffing or will send troops into a neighboring country and take it over? How will Russia, Ukraine, and options trading work out in 2022?
History of the USSR and Vladimir Putin
For centuries up until the 1917 Russian Revolution and subsequent Communist Party takeover of Russia the large country stretching from Europe to the Pacific Ocean was ruled by a succession of Czars. At the end of a civil war in 1922 Russia and neighboring areas were organized as “soviets” and joined together as the Union of Soviet Socialist Republics which were all run from Moscow largely Russians. The USSR included Ukraine, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Estonia, Moldovia, Turkmenistan, Uzbekistan, and Tajikistan.
The USSR had an area of 8,649,500 square miles and Russia today is 6,601,669 square miles. Add to that the Eastern European countries occupied by the USSR until its dissolution and you can see how much land and power the Russians lost.
Vladimir Putin was a KGB colonel during the end years of the USSR and views the demise of the USSR and its hold on Eastern Europe as an existential disaster for Russia.
The USSR and World War II
If not for Hitler’s decision to attack Stalingrad (Volgograd), instead of bypassing it on his way to Southern oil fields, or if Rommel had not lost at El Alamein and had reached Middle Eastern oil field, Britain, the USA, and the USSR could have be faced with an unbeatable Germany. As it turned out the Germans lost those two battles and tide of the war turned. Meanwhile, the USSR suffered anywhere from 25 to 40 million deaths and the decision was made in Moscow to hold on to captured Eastern European countries as a buffet so that the next war would not be fought on Russian soil. Vladimir Putin knows this, remembers this, and has spent his life trying to build Russia back to something like the USSR in terms of power.
Afghanistan and the Demise of the USSR
A major factor in the demise of the USSR was its decision to invade Afghanistan and install a puppet government. Number of Russian soldiers returning home in body bags became too much for the ever-suffering Russian people. It is important to keep this in mind when we look at how far Putin would be willing to go to reestablish what he believes would be the necessary security along and dominance of his Western border. Another issue that Putin would like to go away is Poland being in NATO and having rockets that could be used against Russia. Poland was invaded by Germany and the USSR, cut into pieces, and spent more than forty years as a vassal state of the USSR. It is highly unlikely that they will stand down no matter what the Russians do.
Russia, Ukraine, and Options Trading
So, is Putin bluffing with tens of thousands of troops on Ukraine’s border? Is he willing to put up with more economic sanctions knowing that Europe needs his oil and natural gas? For that matter, if he invades Ukraine on a major scale and is faced with continuing resistance will the Russian soldiers coming home in body bags lead to his ouster? Putin is 69 years old and the clock is running on his ambitions to rebuild the Russian dream of empire. He is a smart guy and would just as not see himself go down in history as being ousted from office as a failure. And, he is ambitious to the point that he could misstep causing an armed conflict putting his forces against those of NATO.
Trading this situation like any of the DRINC issues could be profitable. As Americans we would hate to see our soldiers and those our NATO allies be put in harm’s way but should that happen option trading will be the best way to profit as this plays out.