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 days. The ongoing russian invasion of ukraine has gotten even worse. In the beginning, many in the international community hoped that putin would stop. After taking over the eastern donbass region, which has long been contested by pro-russian separatists, unfortunately, putin was not happy with just that and has expanded westward in an attempt to take over the entire country.

Roughly 100 000 russian troops have started to attack cities all over the country and have even reached the outskirts of the capital city. Kiev. The ukrainian resistance has been far stiffer than many had anticipated and putin has not yet been able to take over any major cities, but most military analysts believe that the fall of kiev is only a matter of time. Satellite imagery recently uncovered a massive convoy of russian military vehicles heading towards the capital.

The convoy stretches more than three miles long and likely carries tens of thousands of troops. Russia has three times as many troops six times as many tanks and fifteen times as many military aircraft. Unfortunately, for the ukrainian people, no matter how hard they try, there's almost no chance they can win when the cards are so stacked against them. In the eyes of the west, russia has become a pariah state.

The u.s and european union have repaired, perhaps the most comprehensive list of sanctions which could the russian economy. On saturday, the us and eu announce that a select number of russian banks will be banned from using the society for worldwide air bank financial telecommunication or swift. This will effectively cut them off from international financial transactions. This could be a disaster for the russian economy and possibly even plunge them into a financial crisis.

Spare bank, which is the country's largest bank, already has lost 65 percent of its market cap in an almost straight line down, and the implications will not just be felt by russia alone. The european union imports 40 of its natural gas from russia and germany imports more than 50 percent. Germany has already canceled the nordstream 2 pipeline, and the exclusion of the russian bank from swift could drastically reduce russia's ability to export oil and gas. European natural gas prices are already 5 times higher than normal levels, which is putting unprecedented strain on both households and businesses.

A reduction in russian supply could see prices skyrocket even further in this video we'll look at what is putin's end game. How disruptive the sanctions will be for the global economy and how? In the midst of all this chaos, there is one under the radar country which stands to benefit tremendously before we go any further. A quick word from our sponsors over at masterworks dot io in 2020. Jeff bezos spent over 50 million dollars to buy hurting the world radio by ed russia, there's a growing trend of billionaires, investing heavily in contemporary art, thanks to its low correlation with traditional assets and high historical returns, especially during times of high inflation.

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The swift system gives each participating bank its own, unique identifier code kind of like a social security number. They use this to verify the authenticity of transactions almost immediately at very little cost. Without swift, russian banks would still be able to make transactions. It would just be much more difficult.

Russia has long been wary of the west weaponizing, the swift system, and in 2014 they create an alternative system, called the system for transfer of financial messages or spsf. It's basically the same thing as swift and currently 20 of domestic russian transactions use this system, but swift has a powerful network effect which russia cannot recreate. Since swift is a global system, almost every bank in the world is a member and they can seamlessly transact with each other. Almost no banks outside of russia use the spsf system for banks that only have a small percentage of their transactions with russia.

It wouldn't be worthwhile to invest in the necessary infrastructure to accept russian payments. Banning russia from swift will add significant friction to any country that wants to import russian goods that will cause russia's trade balance to deteriorate and inflict real pay on their economy. German chancellor, olaf schultz was initially opposed to cutting off russia from the swift system, but eventually gave in as a situation in ukraine deteriorated germany. Currently imports 50 of its natural gas from russia.

Cutting this off overnight would likely hurt germany more than it hurts russia. The swift sanctions have an exemption for energy-related transactions until june of this year and they could even be extended beyond this. The transition away from russian gas imports will be a gradual process. Germany recently announced plans to build two new liquefied natural gas ports, so they can import natural gas from the us and qatar, but that'll take years to complete, given how dependent europe is on russian natural gas.

Does that mean putin will get free pass, not exactly. They also export large quantities of metals, fertilizer chemicals and grain. The export of these goods will be greatly diminished. Also, the sanctions will make it almost impossible for russian companies to raise money from western capital markets.

This will decrease demand for rubles and cause depreciation. The russian stock market has already fallen more than 40 percent. This past friday, the moscow stock exchange suspended trading in an effort to stem the declines. When they resumed trading, it could easily fall by another 20 or even 30 percent.

The rapid decline in currency has forced the russian central bank to double its policy interest rate to 20 in an attempt to avoid hyperinflation. This will make it more expensive for russian companies to borrow money which will reduce investment in fixed assets. That'll be especially painful for russia. Their economy is dominated by oil and natural gas, which are two of the most capital intensive industries oil wells deplete over time.

So you have to constantly invest in new ones, just to maintain your level of production. This is very expensive, and oil companies usually finance this with debt. This debt has just become twice as expensive overnight, which will put tremendous pressure on them. Even if europe doesn't directly sanction energy imports, russia's capacity to supply oil and natural gas could decrease substantially over the coming years.

This could put upwards pressure on global oil prices and especially european natural gas prices. Oil is easy to ship around the world on ships. The effects of any decrease in russian oil production will be spread evenly around the world and probably not have too much of an impact on the price. Natural gas is much more difficult to transport overseas.

It has to be cooled to insanely low temperature such that it turns into a liquid. The liquefied natural gas can then be shipped overseas and turned back into gas at a specialized port. This is an expensive process and there's a limited infrastructure at the ports. Because of this, natural gas markets are primarily local and prices in different parts of the world can diverge significantly.

Over the past year, european natural gas prices have already been exploding to five times greater than normal levels to add even more upside risk. Many of russia's pipelines flow through ukraine with ukraine. Now being an all-out war zone, these pipelines could be destroyed as collateral damage. This will be a disaster for many european countries who will see exorbitant natural gas prices for the foreseeable future.

However, there is one country that stands to benefit massively from all this chaos. Norway is a small scandinavian country with a population of just 5 million people, making it about half the size of new york city. Despite their small size. It is one of the richest countries in the world with a per capita income of almost 70 thousand dollars.

The reason for their prosperity is the vast oil and natural gas reserves in the norwegian continental shelf. Norway is the second largest exporter of natural gas to the eu after russia, accounting for 20 of total imports. Over the past year, norway has experienced a massive windfall from high prices. If russian supply is disrupted, things could get even better for them.

Equinor is the largest oil and gas producer in norway. It is majority owned by the norwegian government. In 2021 they generated 29 billion dollars in cash flow from operations, which is more than double the average. Over the past five years, the increase was largely driven by sky-high.

Natural gas prices, just by looking at the chart, the insanely high european gas prices today are obviously not sustainable in the long run. But if you believe that putin will continue his rampage across ukraine, the potential for upside could be tremendous. Alright, guys that wraps it up. For this video, what do you think about putin's invasion of ukraine? Do you think the eu will cut off gas supply from russia? Let us know in the comments section below, as always.

Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.