Saturday, March 13, 2021

Fentanyl Flowing Into United States At Record Volume

 Authored by Charlotte Cuthbertson via The Epoch Times,

The amount of fentanyl seized while coming through the southern border during the first 5 months of fiscal year 2021 is already higher than all of fiscal year 2020, according to the latest statistics from Customs and Border Protection (CBP).

CBP has seized more than 5,000 pounds of fentanyl since Oct. 1, 2020, said acting CBP Commissioner Troy Miller during a March 10 media call.

“We are seeing a dramatic increase in fentanyl seizures this fiscal year, more than 360 percent higher than this time last year,” Miller said.

“Nationwide drug seizures increased 50 percent in February from January. Cocaine interceptions increased 13 percent, seizures of methamphetamine increased 40 percent, seizures of heroin went up 48 percent.”

Fentanyl is the synthetic opioid attributed to the escalating overdose death rate in the United States. It is most often manufactured in Mexico using chemicals supplied by China. It’s mixed with other narcotics to increase potency as well as pressed into counterfeit pain pills commonly known as “Mexican oxys.”

“The cartels are dominating the distribution of this poison and it’s really, really alarming,” Derek Maltz, former head of the DEA’s special operations division, told The Epoch Times.

“I do anticipate the crisis continuing on this escalating path. And to be honest with you, it’s really sad, because I’ve been communicating with a lot of parents who have lost their young kids, especially to the counterfeit pills. And it’s all coming from Mexico.”

Overdose deaths involving synthetic opioids (other than methadone) between 2005 and 2018. (DEA 2021 report)

The Rio Grande City Border Patrol station takes care of a 68-mile strip of international border in south Texas. It sits within the Rio Grande Valley Sector and in 2019 was the busiest of the nation’s 135 stations for drug seizures and the second busiest for illegal alien apprehensions.

Then-deputy chief Border Patrol agent for the Rio Grande Valley sector Raul Ortiz, said in March 2019 “we’re not even probably catching about 10 percent of it [drugs].”

Border experts have said it’s likely Border Patrol drug seizures will decrease as illegal immigration surges—agents will be tied up with large groups of people rather than interdicting drugs. Border Patrol highway checkpoints are also closing in many areas as agents are sent to the border to help with processing the increased numbers.

The Biden administration has said there’s no crisis on the border and urges potential migrants not to come in illegally. But the latest illegal crossing numbers show that February hit a 14-month high with more than 100,000 Border Patrol apprehensions.

Mexico’s president has expressed concern that President Joe Biden’s policies are encouraging illegal immigration and human trafficking along the border with the United States.

“They see him as the migrant president, and so many feel they’re going to reach the United States,” Mexican President Andres Manuel Lopez Obrador said of Biden the morning after a virtual meeting with his U.S. counterpart on March 1, according to Reuters.

Maltz said, “perception is reality. People around the world look at Biden as a softie on immigration.”

“The open border is a disaster. It just increases the [cartels’] ability to move drugs freely into America,” he said.

“Also, most importantly, it allows them to get their command and control operatives in the [United States] to establish the stash houses, the distribution outlets, the money collection points, so they have lots of people in America who are able to operate freely around the country.”

Areas of influence of major Mexican cartel within the United States. (DEA report 2021)

The cartels control the south side of the U.S.–Mexico border and anyone who crosses illegally has to pay them. Many can’t afford the smuggling fees and become indentured to the cartels once they reach the United States. Others realize it’s more lucrative to become involved in transnational crime rather than get a job at a fast food restaurant, for example, Maltz said.

“This didn’t start under Donald Trump. It didn’t start under Barack Obama. It didn’t start under George Bush. This drug crisis has been escalating for years,” he said.

“But they’re doing it at levels that we’ve never seen in the history of the country.”

San Francisco's Poop-Patrol Boss Made $380K, Didn't Do Crap, And Has Been Charged With Corruption

 Authored by Adam Andrzejewski via RealClearPolicy (emphasis ours)

In 2019, we highlighted a tripling in reported human waste in the public way. Citizens filed 10,644 complaints in 2014 and the number of complaints escalated to 30,996 cases by 2019.

Our auditors mapped 118,352 case reports of human waste on city streets – from 2011 to 2019.

Certainly, the poop was deep in San Francisco, but then things really hit the fan.

And the FBI stepped in.

Mohammed Nuru, the public works director and self-titled @MrCleanSF, was in charge of keeping city streets clean and oversaw a $500 million budget. He was indicted by the Department of Justice (DOJ) in 2020

Nuru was charged with one count of alleged public corruption and is innocent until proven guilty. “The complaint describes a web of corruption involving bribery, kickbacks, and side deals by one of San Francisco’s highest-ranking city employees,” said U.S. Attorney David L. Anderson. “The public is entitled to honest work from public officials, free from manipulation for the official’s own personal benefit and profit.”

Nuru was well paid in his futile attempt to keep San Francisco streets clean. His total taxpayer-funded cash compensation in 2019 was $380,120, and his base salary had jumped by $65,000 over eight years. Our auditors at OpenTheBooks.com compiled Nuru’s pay based on Freedom of Information Act requests filed with the City of San Francisco.

Currently, the federal investigation that snared Nuru has charged nine people with one already sentenced.

It seems the streets might not be the only thing dirty in the Bay Area.

The #WasteOfTheDay is presented by the forensic auditors at OpenTheBooks.com.

Friday, March 12, 2021

COVID-19 Origins To Be Found 'Within A Few Years' According To Wuhan Lab Affiliate Peter Daszak

 From Zero Hedge

In 2014, Peter Daszak, president of New York-based nonprofit EcoHealth Alliance, received a grant from Dr. Anthony Fauci's National Institutes of Health (NIH) to work with the Wuhan Institute of Virology (WIV) and others to research how bat coronaviruses can 'evolve and jump into the human population.'

Peter Daszak, president of EcoHealth Alliance

The grant's initial funding of $666,442 began in June 2014 with an end date of May 2019, and had paid annually to the tune of $3.7 million under the "Understanding The Risk Of Bat Coronavirus Emergence" project. Notably, the Obama administration cut funding for "gain-of-function" research in October, 2014, four months after Daszak's contract began, while the Wuhan Institute of Virology "had openly participated in gain-of-function research in partnership with U.S. universities and institutions" for years under the leadership of Dr. Shi 'Batwoman' Zhengli, according to the Washington Post's Josh Rogin.

After Rogin exposed diplomatic cables last April expressing grave concerns over safety at WIV, he says (in a new book): "many of the scientists who spoke out to defend the lab were Shi’s research partners and funders, like the head of the global public health nonprofit EcoHealth Alliance, Peter Daszak; their research was tied to hers, and if the Wuhan lab were implicated in the pandemic, they would have to answer a lot of tough questions."

Shi Zhengli (center) and Peter Daszak (far right). (Emerging Viruses Group photo)

In short, Daszak - who has insisted the 'lab escape' theory is impossible, and that random natural origin via intermediary animal species is the only answer - has a massive conflict of interest.

Last August, the NIH reportedly cut funding to Daszak amid the COVID-19 pandemic, only to reverse its termination of the grant while suspending funding until EcoHealth met several requirements - including an in-person inspection of the Wuhan Institute of Virology by an outside team.

(August 19): According to a Wall Street Journal report and a statement by EcoHealth Alliance, NIH reversed its termination of the grant but suspended funding until EcoHealth meets new requirements, including arranging an inspection of the Wuhan Institute of Virology by an outside team. “NIH’s letter does not represent a good faith effort to understand the nature of our ongoing research,” EcoHealth says in its statement, but “imposes on us a series of demands that the NIH is fully aware many governments and the World Health Organization alike have been unable to successfully satisfy.” -TheScientist

As it turns out, Daszak (who, again, insists SARS-CoV-2 couldn't have come from the lab he worked with) was the most prominent member of the World Health Organization (WHO)'s media blitz super legitimate 'inspection' of Wuhan and said now-infamous virology institute he'd been collaborating with for years. A trip which coincidentally checked Daszak's box to continue receiving his NIH funding.

Unsurprisingly, Daszak says the WHO team learned during their Wuhan trip that "meat from animals known to carry coronaviruses belonging to the same family as the pandemic virus were sold in the Hunan market," adding that the leading hypothesis is that "a bat or other wildlife species carrying a progenitor, or closely related virus, infected a farm animal or a person, who then carried it to the Huanan market," according to the Wall Street Journal.

Dutch virologist Marion Koopmans echoed Daszak's position, reiterating that the team considered it "extremely unlikely" that the virus may have escaped from a lab - because they don't have evidence of it doing so (which is somehow different from the lack of natural origin evidence).

"There was a conduit from Wuhan to the provinces in South China, where the closest relative viruses to SARS-CoV-2 are found in bats," Daszak claimed, adding "And that's a really important clue."

So now - with that bit of context - you'll forgive the audible laughter after Daszak on Wednesday said that 'it might be a few years' before we find out exactly where COVID-19 came from.

"I’m convinced we’re going to find out fairly soon," he said during a webinar organized by London think tank Chatham House - defining 'soon' as: "Within the next few years," when "we’ll have real significant data on where this came from and how it emerged" [ZH: and which, in a stroke of unimaginable coincidence, began on the doorstep of WIV - where they were experimenting on how to make bat coronaviruses more easily infect humans].

Daszak also noted that he didn't ask WIV researchers about a mysteriously missing bat virus database.

And before anyone goes having their own thoughts on the matter, bear in mind that you may be censored, throttled or canceled for expressing deviant opinions which run counter to Silicon Valley's uber-establishment doctrine. Of course, as top commenters frequently ask - why are you on social media in the first place?

Saturday, March 6, 2021

One Bank Turn Apocalyptic: "The Fed Will Inevitably Move To YCC" As "Rates Are No Longer Anchored"

 From Zero Hedge:

Another week, another massive inflow into equity funds... just as the Nasdaq was about to get hammered with a painful 10% correction.

According to BofA Chief Investment Strategist Michael Hartnett's latest Flow Show note, $22.2Bn in new money flowed into equities last week, following the previous week's massive $46.2Bn inflow which was the 3rd biggest on record, bringing the total 16 week inflow to $436BN, a stunning outlier as shown in the chart below.

Addressing this massive tide of money, Wayne Wicker, chief investment officer at Vantagepoint Investment Advisers said that "Investors are looking at the market today and saying, ‘Wow, this is going to come back faster than I thought. I need to position myself accordingly. There’s a fear of missing out, of being under-invested."

“We’ve seen for many reasons that people have been trained to buy the dips,” Kim Forrest, chief investment officer of Bokeh Capital Partners, told Bloomberg. “Just about every economist out there thinks the U.S. GDP is going to be 6% or above and that says growth. And yes, there’s some specter of inflation that may bubble up,” but, she said, “people are not afraid of inflation because we haven’t had that horrible really life-changing inflation.”

“We would admit to still seeing some pockets of speculative excess out there,” said Leo Grohowski, chief investment officer at BNY Mellon Wealth Management. “When we reach levels of maximum bullishness, that is usually a better time to pare back,” he added. “Market pullbacks like we’ve had this week serve as wake-up calls for investors that buy first and ask questions later.”

And yet, it's very likely that next week this massive inflow won't be repeated. In fact, it's far more likely that next week we will see a massive outflow because as Hartnett notes, "the price is now right":  he points to the >100bps rise in 10Y TSY yields since Aug 4th low - as a reminder the plunge in 10Y prices since last March has been the 2nd worst bear market for bond in recent history... 

... with credit (LQD, EMB) and tech (NDX -11%, SOX -15% from highs) having been hammered. The result is a sharp drop in froth (TAN -32%, TSLA -33%) while at the same time inflation assets are increasing sharply (oil 37%, banks 33%). And pointing to the chart below, Hartnett says that his "investment clock" says once inflation visible = yield curve bear flattens = +ve volatility, dividend-yielders, defensives.

As an aside demonstrating the tremendous inflationary pressures which the Fed simply refuses to acknowledge as St Louis Fed Chair James Bullard idiotically commented on earlier when he said that " Commodity price inflation does not equal sustained inflation", Hartnett points out a price increase notification to CA real estate developer which said that

“Our worldwide supply chain, and ability to provide products and services to you, is being significantly impacted by increased prices resulting from labor and raw material shortages, escalating raw material prices, manufacturing delays and transit interruptions. Stated directly, our costs are increasing and are much more volatile than in the past.”

Someone please forward this to Bullard.

But going back to Hartnett, it's what he said next that was stunning. In the weekly note aptly titled "Throwing in the Powell"...

... Hartnett calmly lays it out that "debt deflation + 982 rate cuts and $21tn QE since Lehman = financial repression = low and stable interest rates = bull market in credit & stocks 2009-2021." But the epochal policy panic of past 12 months ($29tn global fiscal/monetary stimulus)

... has created an addictive Wall St-Fed dependency culture (everyone bullish) and beginning of Main St-Treasury dependency culture, which will spiral higher with $8tn US govt spending for stimulus checks, welfare, financed by $8tn Fed balance sheet.

This pernicious combination means that asset price inflation is mutating into Main Street inflation...

... and more importantly according to the rates strategist, means that rates are no longer “anchored”; Indeed, the best measure of interest rate uncertainty is 10-year Treasury term premium and it has surged by 120bps in the past 12 months...

... staring "a new era of volatility."

Which brings us to the punchline of the Hartnett report: what will the Fed do? As Hartnett notes, the 10-year Treasury yield low was just 0.51% on Aug 4th with bonds looking "big, fat & trendy." However this has changed and "the immediate outlook is excess fiscal stimulus + “boom” data (10% GDP, 30% EPS, 4% CPI in Q2) + subservient Fed + social/political desire for more inflation & less inequality."

As a result, BofA predicts that the bond bear is likely not over and that markets will now likely push the Fed via higher yields (i.e. 10Y rising above 2%) into Yield Curve Control policy announcement, something we have been pounding the table on for months...

... but first bond yields have to go even higher and stocks lower. Conveniently, Hartnett also lays out the key trigger to watch to determine if the current 10% tech correction will turn into a bear market:

XHB<$55, HYG<$80 could turn tech correction into deeper 10-20% correction of equities (SPX<3600, CCMP <12,000) which this time would likely include cyclicals (e.g. small cap, banks, energy, EM).

It's at this point that the Fed, facing the stark reality of being unable to let market drop as financial assets represents 600%+ of global GDP...

... will - in Hartnett's words - inevitably move to YCC. Some math:

  • a 1% rise in US Treasury yields (as occurred past 6 months) increases deficit in 12 months (interest payments) by amount equivalent 2X budget for NASA;
  • a 1% rise in yields above CBO baseline adds a remarkable $9.7tn to deficit between 2021-30 (10X the annual US defense budget of $0.9tn).

That's why the Fed's next step is clear.

So one Powell does launch YCC, BofA believes that it will trigger:

  1. Asset Volatility - all historic government policies to fix asset prices end with hubris, leverage, abnormal valuations; YCC (as Australia is learning) is new ERM (Europe’s failed Exchange Rate Mechanism of 80s/90s); era of speculative assaults on central bank policy has begun. BofA's reco: "own volatility"
  2. Dollar Debasement - while the US dollar may rally in advance of YCC (EM vulnerable short-term – see BRL), the YCC announcement "will likely trigger start of great bear market in US dollar."

Which all brings us to the conclusion, namely BofA's look at the regime shift between 2020 and the rest of the decade... and what to do ahead of the Fed's historic nationalization fo the entire bond market.

First, a look back at 2020:

Bigger picture secular low point for both inflation & interest rates; coming years will be marked by bigger government (public sector monopolistic), smaller world (globalization to localization), dollar debasement (inflation solves debt), a populist electorate (voting for UBI & MMT); all in an attempt to fight the War on Inequality (taxes, regulation, redistribution); "buy humiliation, sell hubris" = inflation assets to beat deflation in coming years.

And finally, Hartnett's views on the rest of the 2020s:

  1. We expect low, volatile, clustered, 3-5% long-run returns, like 1970s;
  2. We say optimal AA is 25/25/25/25in bond/stock/cash/commodities and/or in growth/yield/quality/inflation in 2020s;
  3. While we worry in very short-term inflation overpriced, we still think AA need to raise inflation hedges as US dollar weakens medium-term (commodities, gold, real assets, TIPS, small cap value, volatility);
  4. Tech leadership is over, but YCC should provide good entry point into small cap tech.

Monday, March 1, 2021

'Build Me An Ark': The Tsunami Of Risk Of Tesla-Bitcoin-Cathie Wood Is Coming

 Authored by Peter Garnry, head of Equity Strategy for Saxo Bank,

Summary:  

In today's equity update we are following up on our analysis of the Tesla-Bitcoin-Ark risk cluster showing an updated positions analysis, cross-correlations in the flagship Ark Innovation ETF, and an drawdown analysis. Yesterday, was another bad session for this risk cluster and Ark Invest had a day with outflows across all their ETFs highlighting that risk sentiment has changed. With the founder's bold move to increase the position in Tesla during the week the risk has gone up that this risk cluster could turn into an ugly forced selling dynamic causing pain in not only Tesla, Bitcoin, and Ark funds, but also US biotechnology stocks where Ark Invest is a major holder with high ownership in selected names.

A little over a month ago we first flagged the Tesla-Bitcoin-Ark risk cluster as something to take note off as short-term correlation between Tesla and Bitcoin was shooting up. A survey from Charles Schwab also confirmed our suspicion that there is a big overlap as these two instruments are among the top five holdings by millennials. Our analysis quickly led us to Ark Invest with its famous Ark Innovation ETF which had a big position in Tesla and its charismatic founder Cathie Wood is a big believer in the so-called disruptive innovation culture of Silicon Valley. This class of people believe firmly in technology as mainly good for society in all its aspects and that Bitcoin is a protection against future wealth confiscation which is most likely inevitable due to historically high wealth inequality.

This disruptive innovation culture is powerful. It is presented by some of the wealthiest people of this planet. Endless presentation about innovation and institutions like the Singularity University promote these views. Behind Bitcoin you find a huge online marketing machine sucking ordinary people into the game. Recently wealthy people such as Elon Musk has openly supported Bitcoin, first in writing and later in action adding $1.5bn to Tesla’s balance sheet and thereby significantly increasing its earnings volatility. The triangle of Tesla-Bitcoin-Ark and their respective momentum has reinforced each other creating a positive feedback loop luring more investors into these instruments. As we have seen this week the ‘tower of risk’ is beginning to show cracks.

Ark position update and Cathie Wood’s bold move and the risk to biotechnology

This week Tesla-Bitcoin-Ark all came under pressure from negative voices in governments over Bitcoin and beginning noise over real competition for Tesla in the coming years. The risk cluster was clearly moving together, and correlations started rising. On Tuesday, volatility picked up across the board and at one point Cathie Wood felt it was necessary to go public supporting her funds and said that she had increased their position in Tesla using big numbers in the future to justify increasing the risk. This is a bold move, but it increases the risk considerably. When you are at risk of seeing sizeable outflows, you should start reducing the most illiquid positions first while you can control the situation. Because if you are forced to do it by redemptions the game changes dramatically.

The tables below show updated Ark Invest positions as of yesterday’s close. There are still 26 stocks where Ark Invest holds more than 10% of the outstanding shares. This could become a serious problem if Ark Invest is suddenly caught in a negative feedback loop together with Tesla and Bitcoin. But also note how US biotechnology stocks are overrepresented in this list of stocks with high ownership in percentage of outstanding shares. If Ark Invest suddenly experience across the board outflows, like it did yesterday, then they can suddenly be the forced seller in US biotechnology stocks where they are the whale. This could cascade into the overall US biotechnology segment although the group is diverse.

Stocks held by Ark Invest funds with combined ownership above 10% of outstanding shares

Source: Ark Invest, Bloomberg, and Saxo Group

The table below shows the largest positions across all funds. Here Tesla has now jumped to 7% of AUM and the first five positions now account for 21.6% of AUM. The five biggest stocks are Tesla, Teladoc Health, Square, Roku, and Baidu. Square just recently reported disappointing Q4 earnings and announced the purchase of $170mn of Bitcoin increasing the risk and feedback loop further in this risk cluster. In the Ark Innovation ETF itself, Tesla is now 10.2% of assets and together with Roku (6%) and Square (5.4%) these three stocks represent 21.6% of assets. If you look at the 10 largest positions in the Ark Innovation ETF then the red thread is that they all come with very high equity valuations and thus low implied equity risk premiums. They are all also mostly equity financed, except for Tesla, which means that the WACC, cost of capital, predominantly come from the cost of equity. With low implied equity risk premiums, the risk-free rate dominates much more than for a company such as say Microsoft or Apple. This means that the rising interest rates could suddenly cause a huge shift in equity valuations. Not because the future is different but because the cost of capital has changed.

Top positions in terms of Ark Invest AUM across all funds

Source: Ark Invest, Bloomberg, and Saxo Group

Correlations on the rise and drawdown outlier

The best sign of risk going haywire is always fast rising cross-correlations whether it is on asset classes or single stocks. The chart below shows the 10-day moving cross-correlation in the Ark Innovation ETF since early 2020. It has recently moved to around 0.6 and while it is not a new record the direction is up and has been fast coming from only 0.2 from a few weeks ago. The next week will be critical for the Tesla-Bitcoin-Ark risk cluster as negative feedback loops can be violent and very unpredictable in their outcome.

Source: Bloomberg and Saxo Group

Another way of looking at risk is by plotting Ark Innovation ETF drawdowns against that of Nasdaq 100 since December 2015. The ETF has typically experienced a drawdown that is 1.22 times larger than that of Nasdaq 100. As of yesterday, the ratio stands at 2.44 and thus illustrates that something idiosyncratic is taking place at Ark Innovation ETF.

If outflows continue today and Tesla comes under pressure again then this indicator could very well hit a new record in terms of being an outlier signaling a negative feedback loop on risk has started.

*  *  *

See below for links to our research notes on the Tesla-Bitcoin-Ark risk cluster:

It is time to get cautious on the Tesla-Bitcoin-Ark connection – 22 January 2021

The Tesla-Bitcoin-Ark syndrome revisited – 9 February 2021

Tesla-Bitcoin-Ark positions have entered a dangerous tailspin scenario – 23 February 2021

Sunday, February 28, 2021

Escobar: Putin, Crusaders, & Barbarians

 Authored by Pepe Escobar via The Asia Times,

Moscow is painfully aware that the US/NATO “strategy” of containment of Russia is already reaching fever pitch. Again.

This past Wednesday, at a very important meeting with the Federal Security Service board, President Putin laid it all out in stark terms:

We are up against the so-called policy of containing Russia. This is not about competition, which is a natural thing for international relations. This is about a consistent and quite aggressive policy aimed at disrupting our development, slowing it down, creating problems along the outer perimeter, triggering domestic instability, undermining the values that unite Russian society, and ultimately to weaken Russia and put it under external control, just the way we are witnessing it transpire in some countries in the post-Soviet space.

Russian President Vladimir Putin during a meeting of the Federal Security Service Board in Moscow on February 24. Photo: AFP / Alexei Druzhinin / Sputnik

Not without a touch of wickedness, Putin added this was no exaggeration: “In fact, you don’t need to be convinced of this as you yourselves know it perfectly well, perhaps even better than anybody else.”

The Kremlin is very much aware “containment” of Russia focuses on its perimeter: Ukraine, Georgia and Central Asia. And the ultimate target remains regime change.

Putin’s remarks may also be interpreted as an indirect answer to a section of President Biden’s speech at the Munich Security Conference.

According to Biden’s scriptwriters, 

Putin seeks to weaken the European project and the NATO alliance because it is much easier for the Kremlin to intimidate individual countries than to negotiate with the united transatlantic community … The Russian authorities want others to think that our system is just as corrupt or even more corrupt.

US President Joe Biden speaks virtually from the East Room of the White House in Washington, DC, to the Munich Security Conference in Germany on February 19. Photo: AFP / Mandel Ngan

A clumsy, direct personal attack against the head of state of a major nuclear power does not exactly qualify as sophisticated diplomacy. At least it glaringly shows how trust between Washington and Moscow is now reduced to less than zero. As much as Biden’s Deep State handlers refuse to see Putin as a worthy negotiating partner, the Kremlin and the Ministry of Foreign Affairs have already dismissed Washington as “non-agreement capable.”

Once again, this is all about sovereignty. The “unfriendly attitude towards Russia,” as Putin defined it, extends to “other independent, sovereign centers of global development.” Read it as mainly China and Iran. All these three sovereign states happen to be categorized as top “threats” by the US National Security Strategy.

Yet Russia is the real nightmare for the Exceptionalists: Orthodox Christian, thus appealing to swaths of the West; consolidated as major Eurasian power; a military, hypersonic superpower; and boasting unrivaled diplomatic skills, appreciated all across the Global South.

In contrast, there’s not much left for the deep state except endlessly demonizing both Russia and China to justify a Western military build-up, the “logic” inbuilt in a new strategic concept named  NATO 2030: United for a New Era.

The experts behind the concept hailed it as an “implicit” response to French President Emmanuel Macron’s declaring NATO “brain dead.”

Well, at least the concept proves Macron was right.

Those barbarians from the East

Crucial questions about sovereignty and Russian identity have been a recurrent theme in Moscow these past few weeks. And that brings us to February 17, when Putin met with Duma political leaders, from the Communist Party’s Vladimir Zhirinovsky – enjoying a new popularity surge – to United Russia’s Sergei Mironov, as well as State Duma speaker Vyacheslav Volodin.

Putin stressed the “multi-ethnic and multi-religious” character of Russia, now in “a different environment that is free of ideology”:

It is important for all ethnic groups, even the smallest ones, to know that this is their Motherland with no other for them, that they are protected here and are prepared to lay down their lives in order to protect this country. This is in the interests of us all, regardless of ethnicity, including the Russian people.

Yet Putin’s most extraordinary remark had to do with ancient Russian history:

Barbarians came from the East and destroyed the Christian Orthodox empire. But before the barbarians from the East, as you well know, the crusaders came from the West and weakened this Orthodox Christian empire, and only then were the last blows dealt, and it was conquered. This is what happened … We must remember these historical events and never forget them.

Well, this could be enough material to generate a 1,000-page treatise. Instead, let’s try, at least, to – concisely – unpack it.

The Great Eurasian Steppe – one of the largest geographical formations on the planet – stretches from the lower Danube all the way to the Yellow River. The running joke across Eurasia is that “Keep Walking” can be performed back to back. For most of recorded history this has been Nomad Central: tribe upon tribe raiding at the margins, or sometimes at the hubs of the heartland: China, Iran, the  Mediterranean.

The Scythians (see, for instance, the magisterial The Scythians: Nomad Warriors of the Steppe, by Barry Cunliffe) arrived at the Pontic steppe from beyond the Volga. After the Scythians, it was the turn of the Sarmatians to show up in South Russia.

From the 4th century onward, nomad Eurasia was a vortex of marauding tribes, featuring, among others, the Huns in the 4th and 5th centuries, the Khazars in the 7th century, the Kumans in the 11th century, all the way to the Mongol avalanche in the 13th century.

The plot line always pitted nomads against peasants. Nomads ruled – and exacted tribute. G Vernadsky, in his invaluable Ancient Russia, shows how “the Scythian Empire may be described sociologically as a domination of the nomadic horde over neighboring tribes of agriculturists.”

As part of my multi-pronged research on nomad empires for a future volume, I call them Badass Barbarians on Horseback. The stars of the show include, in Europe, in chronological order, Cimmerians, Scythians, Sarmatians, Huns, Khazars, Hungarians, Peshenegs, Seljuks, Mongols and their Tatar descendants; and, in Asia, Hu, Xiongnu, Hephtalites, Turks, Uighurs, Tibetans, Kirghiz, Khitan, Mongols, Turks (again), Uzbeks and Manchu.   

Arguably, since the hegemonic Scythian era (the first protagonists of the Silk Road), most of the peasants in southern and central Russia were Slav. But there were major differences. The Slavs west of Kiev were under the influence of Germania and Rome. East of Kiev, they were influenced by Persian civilization.

It’s always important to remember that the Vikings were still nomads when they became rulers in Slav lands. Their civilization in fact prevailed over sedentary peasants – even as they absorbed many of their customs.  

Interestingly enough, the gap between steppe nomads and agriculture in proto-Russia was not as steep as between intensive agriculture in China and the interlocked steppe economy in Mongolia.

(For an engaging Marxist interpretation of nomadism, see A N Khazanov’s Nomads and the Outside World).

The sheltering sky

What about power? For Turk and Mongol nomads, who came centuries after the Scythians, power emanated from the sky. The Khan ruled by authority of the “Eternal Sky” – as we all see when we delve into the adventures of Genghis and Kublai. By implication, as there is only one sky, the Khan would have to exert universal power. Welcome to the idea of universal empire.

Kublai Khan as the first Yuan emperor, Shizu. Yuan dynasty (1271–1368). Album leaf, ink and color on silk. National Palace Museum, Taipei. Photo: Wikimedia Commons/National Palace Museum, Taipei

In Persia, things were slightly more complex. The Persian Empire   was all about Sun worship: that became the conceptual basis for the divine right of the King of Kings. The implications were immense, as the King now became sacred. This model influenced Byzantium – which, after all, was always interacting with Persia.

Christianity made the Kingdom of Heaven more important than ruling over the temporal domain. Still, the idea of Universal Empire persisted, incarnated in the concept of Pantocrator: it was the Christ who ultimately ruled, and his deputy on earth was the Emperor. But Byzantium remained a very special case: the Emperor could never be an equal to God. After all, he was human.

Putin is certainly very much aware that the Russian case is extremely complex. Russia essentially is on the margins of three civilizations. It’s part of Europe – reasons including everything from the ethnic origin of Slavs to achievements in history, music and literature.

Russia is also part of Byzantium from a religious and artistic angle (but not part of the subsequent Ottoman empire, with which it was in military competition). And Russia was influenced by Islam coming from Persia.

Then there’s the crucial influence of nomads. A serious case can be made that they have been neglected by scholars. The Mongol rule for a century and a half, of course, is part of the official historiography – but perhaps not given its due importance. And the nomads in southern and central Russia two millennia ago were never properly acknowledged.

So Putin may have hit a nerve. What he said points to the idealization of a later period of Russian history from the late 9th to early 13th century: Kievan Rus. In Russia, 19th century Romanticism and 20th century nationalism actively built an idealized national identity.

The interpretation of Kievan Rus poses tremendous problems – that’s something I eagerly discussed in St. Petersburg a few years ago. There are rare literary sources – and they concentrate mostly on the 12th century afterwards. The earlier sources are foreigners, mostly Persians and Arabs.

Russian conversion to Christianity and its concomitant superb architecture have been interpreted as evidence of a high cultural standard. In a nutshell, scholars ended up using Western Europe as the model for the reconstruction of Kievan Rus civilization.

It was never so simple. A good example is the discrepancy between Novgorod and Kiev. Novgorod was closer to the Baltic than the Black Sea, and had closer interaction with Scandinavia and the Hanseatic towns. Compare it with Kiev, which was closer to steppe nomads and  Byzantium – not to mention Islam.

Kievan Rus was a fascinating crossover. Nomadic tribal traditions – on administration, taxes, the justice system – were prevalent. But on religion, they imitated Byzantium. It’s also relevant that until the end of the 12th century, assorted steppe nomads were a constant “threat” to southeast Kievan Rus.

So as much as Byzantium – and, later on, even the Ottoman Empire – supplied models for Russian institutions, the fact is the nomads, starting with the Scythians, influenced the economy, the social system and most of all, the military approach.   

Watch the Khan

Sima Qian, the master Chinese historian, has shown how the Khan had two “kings,” who each had two generals, and thus in succession, all the way to commanders of a hundred, a thousand and ten thousand men. This is essentially the same system used for a millennia and a half by nomads, from the Scythians to the Mongols, all the way to Tamerlane’s army at the end of the 14th century.   

The Mongol invasions – 1221 and then 1239-1243 – were indeed the major game-changer. As master analyst Sergei Karaganov told me in his office in late 2018, they influenced Russian society for centuries afterwards.

For over 200 years Russian princes had to visit the Mongol headquarters in the Volga to pay tribute. One scholarly strand has qualified it as “barbarization”; that seems to be Putin’s view. According to that strand, the incorporation of Mongol values may have “reversed” Russian society to what it was before the first drive to adopt Christianity.   

The inescapable conclusion is that when Muscovy emerged in the late 15th century as the dominant power in Russia, it was essentially the successor of the Mongols.

And because of that the peasantry – the sedentary population – were not touched by “civilization” (time to re-read Tolstoy?). Nomad Power and values, as strong as they were, survived Mongol rule for centuries.

Well, if a moral can be derived from our short parable, it’s not exactly a good idea for “civilized” NATO to pick a fight with the – lateral – heirs of the Great Khan.