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Mar 13, 2022·edited Mar 13, 2022

Unfortunately, I think it has never been more important to take the geopolitical situation into account when looking at one's portfolio composition, but I hope I'm wrong.

If you keep it simple, and "just" look at oil, then Russia produces approx. 10 mbpd, of which they export approx. 4 mbpd - mainly to Western Europe. Even if they are allowed and want to, there is an overwhelming probability that a large part - maybe all 4 mbpd will disappear from the world market, and it is not possible to change the recipient country to China as the exports to it run at full capacity through pipelines.

This is because all Western oil companies have thrown away their activities in the country, and thus the expertise with which they contributed; as soon as oil service companies like Baker Hughes, Schlumnberger and Halliburton stop operating in Russia, the entire production apparatus decays rapidly; oil tankers cannot insure their ships if they go to Russian ports, and therefore do not want their oil on board;

Russia does not have a very large capacity in oil tanks on land, which means that they will very soon be in a situation where they can not get rid of their oil, and must therefore close production, with no prospect of soon production again.

This will cause the oil price to rise significantly, as there is no spare capacity in the vicinity of the decommissioned production.

Some oil producing countries will limit / stop their oil exports, which will cause the oil price to rise even more, and soon it will approach $ 200 per barrel.

I dare not even think about what happens to the oil price if the oil stands still in the pipeline in the Siberian winter - the oil will freeze, the pipes will burst, and then it is much more than 4 mbpd the world will lack ...

I think the above scenario has a high probability and it will have huge consequences for investing in the short, medium and long term.

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The arguments on long-end of the curve being driven by demographics are a bit overblown. Look at Russia, terrible demographics, yet long rates are elevated. Look at Chine.

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