Russia vs. America: Nuclear Threats

I have increasingly drawn your attention to Russia over the past months.

Just as China’s overall growth has played a significant role in our market, Russia’s ambitions will have a dramatic effect on global economies.

Specifically, Russia will continue to grow as an energy powerhouse. This is important because the nation – under Vladimir Putin’s reign – will challenge anyone standing in its way for global energy dominance.

Including the all-powerful United States.

That is why we should be focusing on Russia’s actions as it relates to our investment decisions and forecasts.

Russia vs. United States

From a military standpoint, Russia is lacking when compared to the United States. However, the distance between the two is not as far off as every one believes.

Sure, the United States has more than double the amount of trained soldiers, more than triple the amount of tanks, three times the amount of air crafts and helicopters, superior and more technically advanced naval capabilities, and more than 10 times the defense budget.

But Russia has nukes – lots of them.

According to the Federation of American Scientists, Russia currently has a total of 8500 nukes – the most nuclear warheads in the world.

Of the 8500, 1800 of them are active – that’s only second to the United States’ 1900 active nukes.

And Russia has boldly told the world that it’s not afraid to use them.

Not Afraid to Nuke

A few years back, Russia amended its military doctrine to allow for the possibility of using nuclear weapons first in retaliation to a non-nuclear attack.

This Wednesday, a senior government minister warned that Russia could retaliate with a nuclear strike if a new US military strategy threatened its security – more specifically, the United States’ Prompt Global Strike system.

According to the Moscow Times:

“Putin said Russia was closely following the development of so-called “disarming instantaneous global strike” programs, which he said could harm the international balance of power. Without naming the U.S. specifically, he seemed to be referring in part to the U.S.’ planned Prompt Global Strike system (PGS), which is designed to be capable of hitting a target anywhere in the world with a precision conventional weapon that could disarm a country’s nuclear capability.

“The ramping up of high-precision strategic non-nuclear systems by foreign countries, in combination with the buildup of missile defense capabilities, could negate all previously reached agreements in the area of limiting and reducing strategic nuclear weapons, and could lead to the destruction of the so-called strategic balance of powers,” Putin said.

On Wednesday, Deputy Prime Minister Dmitry Rogozin said Russia reserved the right to use nuclear weapons in response to a conventional strike and sees them as a “great equalizer” reducing the likelihood of aggression. And in an interview published in Kommersant on Thursday, Deputy Foreign Minister Sergei Ryabkov said the U.S. Prompt Global Strike system could have “apocalyptic consequences.”

In other words, Russia may launch a nuclear warhead – even if its not being attacked.

There’s no doubt there should be a system in place to disable the use of ANY nuclear warheads. Moreover, all active nuclear warheads should be disabled.

However, that is simply not how the world’s political system works.

Nuclear weapons remain the major component in Russia’s arsenal that maintains what Putin calls the “strategic balance of powers.”

What do you think of Russia’s “right” to use nukes? What do you think of Russia’s threats?  Do the threats have substance?

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Putin: Don’t Bully Us

Putin has boldly and publicly stated that it won’t be bullied when it comes to military power:

“Let no one have illusions that he can achieve military superiority over Russia. We will never allow it…Russia will respond to all the challenges, both political and technological. We have all the necessary potential.”
– Vladimir Putin to the Russian Federal Assembly

Deputy-PM Dmitry Rogozin, who oversees the Russian military and defense industry, also warned that Russia has the means to defend itself from advanced and future weapons:

“Any aggressor has to realize that whatever he does in terms anti-ballistic missile defense or the attempts to reach hypersonic speeds to deliver precision weapons, to neutralize Russia’ nuclear potential, it would be nothing more than an illusion, and will stay that way. We are not going to sit idle.”

Rogozin is right, Russia has not been sitting idle.

While President Barrack Obama is busy finding ways to cut America’s defense budget, Russia has already allocated nearly $700 billion on its military modernization program and is openly announcing its growing military efforts.

Russian Military Expansion

Putin is now leading the nation’s greatest military growth since the cold war by increasing its military technology and capacity, and advancements of robotic weaponry. Some of these advancements include the development of a new missile defense radar in southern and western Russia designed to counter missiles launched from Europe.

He has already announced the addition of 40 new Yars (SS-29) Intercontinental Ballistic Missiles (ICBMs) to Russia’s nuclear arsenal next year, which are capable of penetrating U.S. missile defenses.

They look like this:

Earlier this year, Russia Today reported that Moscow is establishing a permanent and powerful naval presence in the Eastern Mediterranean for the first time since the days of the Soviet Union.

In January, Russia held its largest naval exercises in the region with drills spanning both the Black and Mediterranean Seas.

Earlier this summer, Russia staged its biggest military exercise since the cold war in order to ascertain the readiness of putting intercontinental ballistic missiles on “high-alert” within a short time frame. It involved some 160,000 servicemen, about 1,000 tanks and armored vehicles, 130 aircraft and 70 warships from the Far Easter and Central military districts.

In the air, the Russian military said its on pace to keep up with its U.S. military counterparts in the field of hypersonic aircraft – that is, an aircraft capable of going Mach 5.1, or five times faster than the speed of sound.

According to UPI:

Russian Deputy Prime Minister Dmitry Rogozin, who’s in charge of the defense industry, said the Kremlin was working to keep up with the United States in terms of military technology, Russia’s state-run news agency RIA Novosti reports.

“Both we and the Americans conduct researches about hypersonic technologies, or speed that is more than six times above the speed of sound. This is not a secret, but everything else is,” he was quoted as telling Rossiya TV. “I can tell you that we are running neck and neck with the Americans as far as these technologies are concerned.”

Russia will also soon develop a prototype of an advanced lightweight fighter jet to supplement fifth-generation T-50 aircraft.

While Russia expands its military efforts at home, its also busy expanding its military presence in other countries in order to capture energy producing allies – just as the United States has done in the Middle East and the Persian Gulf.

Growing Arms Race

In 2012, the United States was the number one global exporter of weaponry, with sales of USD$69.1 billion – mostly to its client states in the Persian Gulf and the Middle East.

Russia, meanwhile, ranked a distant second with reported sales of only USD$15.2 billion. However, Russia is determined to topple the United States as the leading global arms exporter by quadrupling its annual weapons sales to over 50 billion dollars by 2020.

In the world of weaponry, there is no such thing as a free lunch. Nations who provide weapons to other countries always want something in return – and it almost always involves natural resources.

Control Energy, Control Power

Russia wants to control energy, but it must have a strong military presence to do that – not just at home, but strategic energy hot spots around the world.

I mentioned this in one of my last Letters, “How Russia Uses Energy to Gain Global Power.”

In that Letter, I also mentioned that the next major target for global military powers – United States, China, UK, and Russia – is Africa.

That’s why Russia’s quadrupling of arms sales involves adding weapons to Afghanistan and Oman, and African countries such as Ghana and Tanzania.

As Russia quietly invades Africa with its military presence and arms delivery, it will gain influence over more energy assets – in particular, uranium assets.

Just How Much Influence?

Over the past five years, Russia has quietly secured numerous uranium/nuclear deals in Africa:

• Between 2007 and 2008, Somalia invited Russian firms to develop their uranium deposits and proposed export terms.
• In 2008, Rosatom entered into a joint venture with SWA Uranium Mines in Namibia.
• In March 2009 Russia signed a cooperation agreement with Nigeria, including provision for uranium exploration and mining in the country. A further broad agreement in June 2009 envisaged the construction of a Russian power reactor and a new research reactor.
• In 2009, Russia signed a cooperation agreement with Egypt in the exploration and mining of uranium. Earlier this year, Egypt invited Russia to join a project to build a nuclear power plant in the country and to develop more Egyptian uranium deposits, just as the nation announced that it discovered huge amounts of uranium ore.
• In 2011, Russia announced that it is cooperating with the Ethiopian Geological Survey in the study of fields and the assessment of potential uranium reserves in Ethiopia.
• In 2012, Russia’s ARMZ acquired Mantra Resources, and this year received Tanzania’s first uranium mining license.

Russia has been growing its energy assets all over the world. The nation is a world leader in nuclear technology and is fast becoming one of the biggest controllers of uranium assets globally.

Anyone with common sense knows Russia won’t be selling uranium to anyone for cheap – especially not America. That alone should be more than enough to expect higher uranium prices.

And a growing military presence for Russia is something you can bet on.

The Growing Need for Energy Fuels

While many have an ingrained belief that nuclear power is a thing of the past, that statement is far from reality.

All over the world, plans are being made to increase nuclear capacity.

More than 20% of American energy comes in the form of nuclear power.

More than 50% of the uranium used to generate that energy is imported from Russia, or countries under the influence of Russia.

Russia will continue to acquire and control uranium assets because it believes nuclear energy will continue to be a dominant energy source in the future; China believes the same and both countries have joint global efforts for the pursuit of uranium assets and nuclear energy.

Countries all over the world are increasing their nuclear energy strategies.

Despite the on-going debate of nuclear power, the reality is that it’s not going away, its only growing.

The American government knows this. Just as it is doing with oil, it will encourage further production of uranium assets on its home turf.

A few weeks ago, I talked about a uranium company that I believe will do very well if uranium prices rise next year, as I expect it to.

Uranerz Energy Corp  

(TSX: URZ)(NYSE MKT: URZ)

Last week, Uranerz announced that it has secured a $20 million loan from the Wyoming State government to move its uranium mine in Wyoming’s Powder River Basin into production.

That means much of the financial risk has been removed and the Company should now be on its way to production within a few months – just as uranium prices are expected to climb.

The $20 million gives the Company ample room to not only pay off its current loan of $6 million, but more than enough cash to initiate production at their Nichols Ranch ISR Uranium Project.

Not only that, Uranzerz also announced a very strong addition to their team: Mr. Paul Goranson

Paul will become the President, Chief Operating Officer and a Director for Uranerz Energy.

Paul was the President of Cameco Resources, a wholly-owned U.S. subsidiary of Cameco Corporation, which is one of the world’s largest uranium mining companies.

This man has over twenty-five years of mining, processing and regulatory experience in the uranium extraction industry.

Not only did he expand production at Cameco, he led the construction, start-up and operation of the Alta Mesa project that achieved over one million pounds of uranium production per year under his leadership.

The addition of Paul to the team, in conjunction with the closing of their $20 million state loan from Wyoming, puts Uranerz in a very strong position. Unlike many uranium companies mired in debt and low margins, Uranerz should come out of the production gates very strong with little debt and higher margins.

They’ve got the money, they’ve got the team, they’ve got a mining license – they’ve got everything that they need to finally move toward production.

I expect 2014 to be a stellar year for Uranerz Energy Corporation.

Food for Thought

Nukes and the Virus

There’s been a big wave of newsletters and media outlets talking about a virus that could potentially threaten every single nuclear reactor in the world. Just so you are made aware, this virus is called Stuxnet.

Stuxnet is a malware worm that the US and Israel designed to cripple Iran’s nuclear program. However, in a 2012 report from The New York Times and recent leaks by Edward Snowden confirm that the US was not only behind the virus, but has lost control of it.

The malware is now evidently attacking nuke plants as far away as Russia.

For now, it’s not as dire as some are making it out to be. However, Stuxnet is an extremely complicated virus and repercussions on home turf have yet to surface.

What should be noted is that Stuxnet could lead to other more advanced viruses that could easily be infiltrated in America. These viruses could be carried on a USB, or on a cell phone, and could attack nuclear reactors in ways never thought possible.

Try having a customs officer intercept code on a cell phone…

Bitcoin Update

It seems everyone is looking for an alternative to currency and is riding the wave of digital currency.

JP Morgan is now said to have interest in the space by filing a “digitial currency” patent.

Here’s the article: JPMorgan Chase Building Bitcoin-Killer

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