Little prospect of East-West accommodation

Following are 10 reasons why the epic match between East and West over world domination will strategically intensify rather than move toward any meaningful accommodation:
Reason 1

Russia won’t be so foolish as to agree any deal with the West for a restoration of vital investment capital inflows. Why not? Because Western governments and financial institutions don’t directly control the flow of global investment capital, though their voice can have a significant effect on investor psychology in various ways.

But this indirect effect is dubious at best when we’re talking about targeting specific investment opportunities, such as Russia and/or China, because investors have clearly shown they will base their decisions much more on profit potential and risk assessment than they will on purely political and ideological considerations.

They have little compunction against investing in a country that makes a mockery of liberal democracy, as long as the profit potential is obvious and there exists sufficient confidence in the stability and creditworthiness of the regime. If Russia, for example, proves significantly better able to withstand the effects of the global crisis than the current risk assessment by the West indicates, perhaps because oil prices return to a desirable level some time later this year, then investors, who fled Russia with the collapse of the price of oil, will return in force when and if they see investment value there.

Two main factors will potentially determine whether capital flows into Russia resume. One is the price of oil, and the other is the potential bursting of the US Treasuries bubble. In such a bubble burst, investors would tend to flee Treasuries and the dollar and buy into hard assets as a safer store of value, and that would benefit Russia. Hence, Western governments and financial institutions cannot themselves decide Russia’s financial and economic future. Factors outside their direct control will do so. Therefore, Russia won’t bargain with the West for a return of those capital flows because it knows Western governments and financial institutions can’t actually deliver on any promise they might make in that regard.

Asia Times