What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing over the past few months, russia has been building up an invasion force of over 100 000 troops on the ukrainian border. In what many feared was a preparation for war in recent weeks, many observers hoped that russia was just bluffing and the situation would be resolved diplomatically, but on february 21st these hopes were dashed. Putin ordered his troops into the contested dawn bass region of eastern ukraine. In what could be the beginning of a full-scale invasion of the whole country since the beginning of the year, the s p 500 has fallen 10 percent.

However, it's hard to tell how much of this can be attributed to ukraine and how much is due to fears around the fed hiking interest rates. You can see a much bigger impact on the russian market with their broad equity index losing almost a quarter of its value. The russian ruble has also depreciated by more than five percent in the same period in this video we'll look at why putin is invading ukraine. How far he's likely to go and what impact, if any, this will have on both the russian and u.s stock markets, while the mainstream media has only been talking about ukraine for the past few weeks, it's important to know that the country has been experiencing a civil War since 2014., at the time, the ukrainian president viktor yanukovych, abandoned the country's efforts to join the european union and increase their political and economic ties with russia.

Many ukrainians viewed viktor as a russian puppet and forced him out of office in what came to be known as a 2014 ukrainian revolution. These developments had putin shaking in his boots. His biggest fear was that the new pro-western government in ukraine would join nato. This could potentially bring western military forces right up to the russian border, but there is still an opening for putin to turn things around.

Many regions in eastern ukraine have large populations of ethnic russians and viewed the revolution as an unlawful insurrection. This map shows the primary language spoken by people in various districts across ukraine, with ukrainian represented by blue and russian represented by red. The eastern danvas region, as well as the island of crimea, have many russian speakers in these regions. Pro-Russian separatists started protesting.

The new ukrainian government putin saw crimea as the lowest hanging fruit, given that the majority of the population were ethnic, russians and a significant proportion of them would be in favor of russian annexation. He sent in his special forces and they annexed the island within a matter of weeks. Around the same time, pro-russian separatists in the donbass region started taking over government buildings likely with covert support from the russian military. They declared themselves to be two independent states called the people's republic of donetsk and the people's republic of luhansk.

The ukrainian government still maintains that the separatists lack the legal authority to succeed and maintain that their regions are still part of ukraine's sovereignty. For the past eight years, the government has been in a bloody stalemate, with the separatists in a conflict which has already claimed the lives of 14 000 ukrainians. On monday february 21st putin met with the leader of the donetsk and luhansk people's republics. He signed documents officially recognizing both of them as independent states and entered into treaties for mutual cooperation and protection with this putin is no longer beating around the bush.

He's set up the foundation to annex the two territories from ukraine. He also ordered russian troops to start marching into these regions and subdue the potential efforts from ukrainian forces to take back those regions. Before the signing ceremony, he gave a 45-minute speech explaining the rationale for his decision. Obviously his talking points will be biased in a way to make the invasion sound justified, but it's important to hear what he has to say, as it could give some insights about what he will do next, he spent most of the speech bashing, the ukrainian regime.

As being anti-russian and a puppet of the western powers back in the day, both russia and ukraine were part of the soviet union. After the union's collapse in 1991, putin says that russia took responsibility for all the ussr's foreign debts. The smaller countries like ukraine essentially got a free ride, as some of the soviet debt should have been allocated to them. While ukraine said that they would give some compensation to russia for this, they never did, but instead of distributing this windfall to the people, most of it was misappropriated by corrupt oligarchs for personal gain.

Back in the soviet days, ukraine was an industrial powerhouse and was a leader in technology, shipbuilding and other heavy industries. But after decades of corruption and mismanagement, the country's economy has degraded significantly and they're. Now, little more than a shell of their former selves in an attempt to turn things around. Ukraine has increased its ties with the european union as well as the us, but according to putin, the western countries don't care about the economic conditions of ordinary ukrainians.

They just want to turn ukraine into a pond that they can use in their geopolitical efforts against russia. Today, ukraine is the poorest country in europe, with an average annual income of just five hundred dollars, while the two countries were roughly on par when they are both part of the soviet union. Russia is now almost three times richer than ukraine on a per capita basis. The situation is so bad that millions of ukrainians leave their homeland to become migrant workers in different countries.

Over the past couple decades, a full 15 of the population has left, which is one of the greatest mass exoduses in modern history. Putin says that right-wing politicians in ukraine have tried to blame the country's troubles on russia as a scapegoat. They discriminate against russian-speaking minorities by forcing them to have ukrainian as their official language and persecute the russian orthodox church. Despite their weak economy, ukraine has a large and capable military thanks in large parts of hardware given to them by the us.

Also, they still have access to a lot of legacy soviet technology which they could use to develop nuclear weapons. Such a development would be a major threat to russia. Over the past couple decades, nato has been gradually expanding eastwards towards russia's borders. They already admitted poland, estonia and romania.

Russia considers nato to be its arch enemy and a potential addition of ukraine into that alliance would be the greatest act of aggression. Yet in putin's eye, while nato says they won't admit ukraine, as a member in the near term, putin thinks that this is their ultimate goal and it will happen eventually. He says that, since the revolution in 2014, the ukrainian military has been indiscriminately shelling the donbass region. In their fight against the separatists resulting in thousands of civilian casualties and displacing millions, he is now recognizing the sovereignty of the separatist ukrainian regions and sending in troops to protect them from ukrainian aggression.

Importantly, he says that the west is trying to blackmail russia with the threat of economic sanctions. This is a deterrent to prevent him from invading ukraine, but putin says that they will find some excuse to levy the sanctions anyway. So it's unlikely to change his decisions. It's important to put the current escalation into perspective.

Russia has already been covertly sending military operatives into the contested ukrainian regions for many years now, they're just admitting to it. Officially there are two possible scenarios. Putin may be satisfied by annexing the two eastern regions and declare victory. This is the more optimistic scenario as it would prevent a larger war engulfing all of ukraine, but, based on his speech, it's pretty clear that putin still views the current ukrainian regime as a long-term threat to russia.

So he may not be satisfied until he topples the current government and replaces it with a pro-russian puppet in response to putin's recognition of the separatist states. Biden announced new economic sanctions. They target a russian bank called veb which has links to the russian military. They will no longer be allowed to interact with american financial institutions and thus will not be able to execute u.s dollar denominated transactions they're also banning u.s entities from investing in russian sovereign debt, but the bigger threat may come from germany over the past few years.

Russia and germany have jointly spent billions of euros to build the nordstream 2 pipeline, which will allow russia to export its vast natural gas reserves to germany. Construction was completed in september of 2021, but german regulators have yet to approve its operation. Germany recently said that they would halt approval of the pipeline as retaliation for their invasion of ukraine. Russia would have made billions of dollars if it could use this pipeline, so it's certainly a real economic cost.

Over the past few years, germany has shut down almost all of its nuclear power plants under pressure from protesters who think that it is bad for the environment to fill in the gap. They've turned to burning fossil fuels such as natural gas and more recently coal. This has been a huge windfall for russia as they supply almost 40 percent of germany's natural gas. German natural gas prices have increased more than four-fold as economic activity rebounded after the pandemic.

Far faster than people expected, german households have been struggling to keep the lights on. During the winter, with their energy bills skyrocketing, many people hoped the completion of the nordstrom 2 pipeline would finally reduce the cost of energy to more reasonable levels, as it would become far cheaper to transport it. Unfortunately, these hopes have been dashed now that chancellor olaf schultz decided to halt the project. The german households and industry will have to suffer under the weight of exorbitantly high energy prices for the foreseeable future.

In the end, this decision will probably hurt germany a lot more than it hurts russia, even without the nord stream too. They have tons of their pipelines to other countries. Demand for natural gas is also very high in neighboring china, so russia can just sell it to them. Those two countries already have a plan to double russian natural gas exports by the end of the decade.

Russia's economy is dominated by oil and natural gas, as both of these commodity prices have appreciated significantly over the past year. Russia's economy is booming, and the government is posting large budget surpluses. Given how well the economy is doing, they should be able to absorb the effect of western sanctions without too much negative impact. Economic sanctions are pretty much the only recourse the west has to deter putin.

The us is not going to send troops into ukraine, as this would risk starting world war. Three putin is probably weighing the costs and benefits of invading ukraine as we speak, given how hawkish his speech was, it looks like there is a significant probability that he will continue past the people's republics of danes and luhansk and march towards the capital of kiev. If this does happen, the us and its western allies will increase the sanctions further they'll, most likely target the russian financial sector, making it more difficult for russian companies to execute us dollar or euro-denominated transactions. It will also make it more difficult for western investors to buy russian financial assets.

This will decrease demand for the ruble and cause it to depreciate. It is already depreciated by 14 percent against the us dollar since fears around the invasion began. Russian stocks will also probably not do well, especially financial companies, like banks, who are likely to have their foreign transactions restricted, to the extent that the recent sell-off we've seen in u.s stocks is driven by ukraine fears. This is probably an overreaction.

At the end of the day, whatever russia is doing in ukraine isn't going to impact your decision to buy a new iphone or a new pair of jeans, it should have no significant impact on earnings of us-based companies. It could have a negative impact on european manufacturing companies, which will likely see even higher energy costs for their factories. On the flip side, some u.s natural gas producers may benefit from the high european prices if they can ship liquefied natural gas over the atlantic. However, this benefit will be limited, as shipping by sea is very expensive and there is very limited capacity at the ports.

Russia has officially invaded ukraine, and this is a tragedy for the people who live in the region. Given the threat of mutually assured destruction, it's unlikely to result in direct conflict between the us and russia, and as long as this remains the case, there should be almost no impact on u.s companies, alright, guys that wraps it up for this video. What do you think about russia invading ukraine? What do you think is putin's ultimate goal? Let us know in the comments section below, as always. Thank you so much for watching and we'll see in the next one wall, street millennial signing out.