Could a credit default swaps scam be Putin’s game?

What if Vladimir Putin’s protracted, blowing-hot-and-cold deployment of the Russian military to wartime footing against Ukraine has been motivated by other than geopolitical motive? What if Putin has been fiddling financial markets?

The question occurred to me when I read David P. Goldman’s fascinating Asia Times story about the effects on markets of Ukraine Prime Minister Volodymyr Zelensky’s Monday remark that Russia would attack in two days. A top aide to Zelensky quickly brushed off the prediction as a joke. (The prime minister is a former television comedian.) But that dismissal didn’t keep the news from punishing Russia’s sovereign debt. As Goldman wrote:

A key political risk gauge, the cost of US-dollar-denominated insurance against default on Russia’s sovereign bonds spiked to 2.75 percentage points above the interbank rate early February 14 before settling back to 2.5 percentage points. That’s close to the high point during the peak of the Covid-19 market panic in March 2020, with the difference that the credit default swap market reflected fear of sanctions against the Russian Federation rather than economic distress.

I couldn’t help thinking of a premise of my 2017 novel Nuclear Blues. Reporter Joe Hammond, while on a sightseeing tour in North Korea, is killed by northern guards after inexplicably bolting and running across the border into the southern half of the Demilitarized Zone. His photographer-musician pal Heck Davis focuses on a clue that suggests Joe may have been pursuing a big financial story.

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