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S&P Futures, MS CDS, And MS Bonds Tyler Durden's picture Submitted by Tyler Durden on 10/05/2011 08:44 -0400
Via Peter Tchir of TF Market Advisors-ZEROHEDGE

What do MS CDS and S&P Futures have in common? Everything AND Nothing.MS CDS and ES (E-mini S&P Futures) are clearly correlated. As MS CDS tightens, S&P futures rally, and vice versa. That is pretty clear. They are also the two most talked about things all day long lately. That is where the differences become blatantly obvious.
ES trades from 6 pm on Sunday until 4:15 Friday virtually continuously. It is global and the price is constantly known, and you can see the depth of the market at any given time. ES has been trading about 3.1 million contracts a day. Each contract represents an exposure of $56,112.50. That is a notional volume of about $175 billion. Yesterday, ES hit a low of 1068 and a high of 1119, about a 4.5% range. With volumes of $175 billion and huge swings, there must have been massive demand for counterparty protection? As far as I know, CDS on CME does not trade. I’m not sure anyone has ever asked for CME CDS and it isn’t in the DTCC list of top 1000 Reference Entities.Now look at MS CDS? No one even knows how much traded yesterday. No one knows what the volumes were on the way up or on the way down. I am guessing that about 50-100 trades occurred in the entire market yesterday. It is just a guess from a couple of volume numbers I did get. Given the volatility, a bunch of the trades were probably for $5 million instead of the standard $10 million. At the low end of the range, 50 trades at $5 million, volumes would have been $250 million. At the other end it could have been as high as $1 billion. Realistically the number was probably right around $500 million. Yesterday, in one of the busiest days ever, MS stock had volumes of 76 million shares. Assuming the average trade price was 12.50 that is a volume of $950 million. So for all the talk about how illiquid or thinly traded the CDS market is, the volumes are meaningful compared to stock volumes. It would be nice to know the exact numbers, and it would probably be helpful, but that is something the regulators have decided isn’t necessary for functioning markets. Until the regulators get their act together, we will have to just work on best guesses, and yesterday the volumes were probably about 3:1 stocks vs CDS, which I don’t think that is a particularly abnormal ratio.

For all the complaints about how such a low volume market like CDS can push the stocks, it is worth comparing to the bonds. It looks like MS has about $187 billion of debt outstanding. According to TRACE data, there were 201 trades totaling $687 million. Not bad until you examine how TRACE reporting works. The most active bond was the MS 5.5% of 2021, the benchmark 10 year. If a dealer buys from a client, sells to another dealer in the street through an intra-dealer broker, who finds a client to sell to, that counts as 4 trades. So one real trade, where the bond goes from one client to another generates 4 trades, each with a little bit of P&L if all is working correctly for the banks. Since every buy and sell is accounted no matter what, and the interdealer trades add even more, the right volume number is somewhere between 50% and 25% of the stated volume. That gets real volumes to around $300 million as a good estimate. At the lower end of the range of estimated CDS volumes. But at least with the bonds, you could download all the data and filter out the D trades, which are dealer to dealer, and adjust for double counting of B and S trades. Again, why isn’t that available for CDS? TRACE even lets you see what price bonds traded at. If anything, it only confirms that bonds were moving similarly to CDS and that they have similar volumes. Why have regulators been so insistent on making some transparency in the bond markets available but have done nothing to push CDS into the public domain in spite of the obvious impact on individual stocks and bonds, and even broader markets? I don’t know. It cannot be that they believe that CDS shouldn’t be available, and it shouldn’t be because it is too complicated – it isn’t much more complicated than stock or treasury futures, all of which are extremely liquid and transparent.

The other big talking point is that CDS is being driven by investors hedging counterparty risk. That I am willing to believe plays a role in this whole move. I have written repeatedly that the financials and counterparty risk are extremely correlated and can create negative feedback loops. As CDS widens, clients who have bought protection are in the money. If the spread widening that they are profiting from is name specific and non systematic, then they don’t really care much about the counterparty risk since the bank they are facing is fine. They do care when they are profiting from a move wider in financial spreads, and the counterparty that owes them more money by the day is seeing its spread widen as well. That creates the need to hedge the counterparty risk. Either that, or accept collateral from the bank. The collateral idea doesn’t work because most hedge funds aren’t set up to manage collateral, and banks are extremely reluctant to provide collateral to a hedge fund.So we are left with the status quo, that as bank spreads widen, systematic risk fears increase. Investors start talking about the possibility of a daisy chain of defaults. Clients rush to hedge counterparty risk. Traders short banks in expectation that someone will come in to hedge counterparty risk. The banks have fought clearing and exchanges, so it really does serve them right. So greedy to keep the market opaque and keep boutiques away from this revenue stream that they have once again set up the potential for bear runs. After Bear Stearns this should have been fixed, but wasn’t. After Lehman it should have been fixed, but wasn’t. If we make it through this crisis, it likely won’t be fixed. For the safety of the system, and to reduce systematic risk, and to eliminate inane talk of daisy chain counterparty defaults, these trades need to be cleared. It works for stock futures which are more volatile, it should work for CDS. The ironic thing is that the best dealers would figure out how to make money in the new system. It wouldn’t exactly be the same way they make money today, but they would adapt and be successful.I have to admit that I am sick of listening to talk about MS CDS when so much of the conversation addresses issues like volumes, liquidity, transparency, depth, counterparty risk, etc., when all of those issues could be, and should have been, addressed by regulators. The focus should be on whether or not there is value in MS credit at these prices/spreads not whether the prices/spreads are merely an illusion. I suspect that if we had all the same transparency that exists for stocks, MS CDS and bond spreads would be exactly the same as they are now, but at least we could be focused on the real problems and issues at MS.

DOCTOR DOCTORIAN FROM ANGEL OF GOD
then the angel said, Financial crisis will come to Asia. I will shake the world.

JAMES 5:1-3
1 Go to now, ye rich men, weep and howl for your miseries that shall come upon you.
2 Your riches are corrupted, and your garments are motheaten.
3 Your gold and silver is cankered; and the rust of them shall be a witness against you, and shall eat your flesh as it were fire. Ye have heaped treasure together for the last days.

REVELATION 18:10,17,19
10 Standing afar off for the fear of her torment, saying, Alas, alas that great city Babylon, that mighty city! for in one hour is thy judgment come.
17 For in one hour so great riches is come to nought. And every shipmaster, and all the company in ships, and sailors, and as many as trade by sea, stood afar off,
19 And they cast dust on their heads, and cried, weeping and wailing, saying, Alas, alas that great city, wherein were made rich all that had ships in the sea by reason of her costliness! for in one hour is she made desolate.

EZEKIEL 7:19
19 They shall cast their silver in the streets, and their gold shall be removed: their silver and their gold shall not be able to deliver them in the day of the wrath of the LORD: they shall not satisfy their souls, neither fill their bowels: because it is the stumblingblock of their iniquity.

REVELATION 13:16-18
16 And he(FALSE POPE) causeth all,(WORLD SOCIALISM) both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads:(CHIP IMPLANT)
17 And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name.
18 Here is wisdom. Let him that hath understanding count the number of the beast: for it is the number of a man; and his number is Six hundred threescore and six.(6-6-6) A NUMBER SYSTEM

WORLD MARKET RESULTS
http://money.cnn.com/data/world_markets/
CNBC VIDEOS
http://www.cnbc.com/id/15839263/?tabid=15839796&tabheader=false

HALF HOUR DOW RESULTS WED OCTOBER 05,2011

09:30 AM -3.43
10:00 AM -50.31
10:30 AM -12.00
11:00 AM +50.41
11:30 AM +63.65
12:00 PM +53.89
12:30 PM +1.10
01:00 PM +17.41
01:30 PM +40.27
02:00 PM +86.74
02:30 PM +95.25
03:00 PM +86.59
03:30 PM +68.34
04:00 PM +131.24 10,939.95

S&P 500 1144.04 +20.09

NASDAQ 2460.51 +55.83

GOLD 1,640.30 +34.20

OIL 79.64 +4.12

TSE 300 11,457.20 +279.34

CDNX 1413.65 +80.31

S&P/TSX/60 658.86 +16.52

MORNING,NEWS,STATS

YEAR TO DATE PERFORMANCE
Dow -31 points at 4 minutes of trading today.
Dow -52 points at low today.
Dow +7 points at high today so far.
GOLD opens at $1,623.00.OIL opens at $77.55 today.

AFTERNOON,NEWS,STATS
Dow -52 points at low today so far.
Dow +87 points at high today so far.

WRAPUP,NEWS,STATS
Dow -52 points at low today.
Dow +131 points at high today.

GOLD ALLTIME HIGH $1,902.60 (NOT AT CLOSE)

CRUDE OIL -4.68 MILLION BARRELS
GASOLINE -1.1 MILLION BARRELS
DISTILLATE INVENTORIES -744,000 BARRELS

Eurozone chiefs: Greece can wait till November
Today SEPT 5,11 @ 09:28 By Leigh Phillips

Eurozone finance ministers have kicked down a decision on the delivery of Greece’s latest tranche of bail-out cash, saying that the country can wait until November.At the end of a seven-hour meeting in Luxembourg that bled into early Tuesday (4 October), the economy chiefs stressed that they will not let Greece default, but that the country must work further on its structural adjustment and privatisations.
We had no one advocating a default for Greece. Everything will be done to avoid that and it will be avoided,Jean-Claude Juncker, the chair of the eurogroup of states, said after the meeting.The countries that employ the single currency will make a decision on handing over €8 billion in eurozone and IMF cash some time in October, he said, while the Belgian finance minister said that Athens has until mid-November before it runs out of cash.Greece told us that the funds will have to be made available during the second week of November. We reviewed the Greek plan and we will now wait for the final report from the troika since we have time to decide,Belgian finance minister Didier Reynders told reporters.Until now, Greece has maintained that it would begin to be unable to pay its bills around the middle of October.

Juncker also hinted that private sector investors may have to up their expected haircut on the Greek debt they hold, in line with the demands of Germany but opposed by France out of fears for its banks, which are highly exposed to debt from the Hellenic Republic.In July, eurozone leaders backed 21 percent write-downs on Greek bonds as part of a plan cobbled together by the International Institute for Finance, the global association of financial institutions. Berlin however has come round to the notion that Greece is simply unable to pay off the scale of its debts and that a more substantial haircut is necessary to prevent a disorderly default.The ministers for the first time also moved into discussions over a possible massive expansion of the firepower of the European Financial Stability Fund. It is understood that options on the table include leveraging the rescue fund via the European Central Bank in a way that would not require endorsement by the parliaments of all 17 eurozone member states, an arduous process not in keeping with the schedule demanded by markets for crisis response.We need a more flexible and powerful EFSF as a financial firewall to contain contagion,said Rehn, although none of the economy officials at the meeting would offer any further details than what is already the subject of speculation in the media.However, in one major breakthrough, the eurozone chiefs finally managed to resolve the issue of Finland’s demand for collateral from Greece in return for its participation in the bail-out.The ministers found a solution that still allows the country its collateral, but makes the terms so onerous that it is highly unlikely any other eurozone state will go down the same path.Finland must make a payment of €1.4 billion to the permanent eurozone rescue fund to be set up in 2013, the European Stability Mechanism, while other states only need to deliver their sums over the course of five years. Helsinki will also receive a lower interest rate on its loans compared to the other states.

Unrest spreads to military as retired Greek officers storm defence ministry 04.10.11 @ 16:55 By Leigh Phillips

The Greek armed forces now appear to be entering the political and street-level debate in the country over EU- and IMF-imposed austerity, with a group of retired Greek officers storming the defence ministry and the armed forces’ professional organisation issuing a stern warning to the government that the military’s confidence in the intentions of the state regarding their pensions has been shaken.
The Greek military professional association has warned the government its confidence has been shaken (Photo: EUobserver)Hundreds of retired Greek officers furious at EU-IMF-imposed cuts to their pensions invaded the Ministry of Defence on Friday (30 September), breaking doors and dismantling machinery.Amid a wider protest of some 2000 officers, around 300 stormed the building as the crowd shouted down with the Pasok junta - referring to the governing social democratic party.Defence minister Panos Beglitis denounced the officers’ actions as anti-democratic bullying by the state within the state and instructed the prosecutor of the Athens Military Court to conduct a preliminary investigation over whether the group had perpetrated any criminal offences against military institutions.Such bullying and anti-democratic behaviour that goes against the democratic government of the country are an insult that will be immediately repressed,said the minister.The retired military cannot act as a state within a state and they don't have the right to act anti-democratically, he declared.The officers removed doors and the dismantled security equipment that scans for the presence of weapons.After the chief of the general staff came down to speak to the crowd and asked them to leave, the officers abandoned their action at around four o’clock.On Sunday in a measured but pointed open letter to the government, the Association of Support and Cooperation of the State Armed Forces, the professional association of full-time staff, warned that the Greek Armed Forces are monitoring the government’s moves with increased concern and that their confidence in the intentions of the state have been shaken.

The executives of the Greek Armed Forces are monitoring with increased concern the latest developments regarding issues related to their needs after retirement, the letter reads.While condemning the behaviour of those who stormed the building, the association attacked the minister for his threat of repressive violence.After the rally of demobilised personnel of the armed forces - regardless of the conduct not consistent with status of retired men - and the known statements of the minister of national defence regarding the use of repressive violence against them, the confidence of the uniformed personnel of the armed forces has been shaken regarding the intentions of the state to assist them,the letter continues, after the rapid accumulation of subsistence problems, which hinder their undistracted devotion to the execution of their duties' Targeted escalating contempt and exclusion, denial of any dialogue and ultimately the threat of repressive violence is a serious blow to the morale of senior staff. This blow is extremely critical in the present geopolitical developments in our region,the letter continues.The military has every moral and legal basis to defend itself, and it will do so by any legal means, the letter, signed by the president and general secretary of the armed forces association, concludes.The defence ministry invasion comes atop angry protests last week by other elements of the Greek security forces, in this case, sections of the police, who demonstrated outside the European Commission offices and German and French embassies in the capital.The officers, upset at having their pay docked along with other civil servants as part of austerity imposed by international lenders, dropped a massive banner from Mount Lycabettus in Athens and denounced the EU and IMF.Last month, on a visit by Belgitis to Military Hospital 424 in Thessaloniki, employees blockaded the entrance and booed the minister. The cabinet member and his entourage were forced to exit their cars and enter the hospital on foot.

Road of internal conflict open

The incident also comes two weeks after Beglitis issued an ominous warning declaring: The road of internal conflict is open.On 19 September, in an interview with Ta Nea newspaper, the minister said: Recent days define the end of an epoch for Europe and for Greece. If we do not move immediately on orderly and conscious sacrifices, the road of internal conflict is open.Repeated efforts by EUobserver to extract a comment from the Ministry of Defence were unsuccessful.The minister has regularly insisted that the government will not go so far as to deploy the army to maintain order.However, on 4 February this year, according to the Athens News Agency, the Hellenic Army staged a mock battle with anti-austerity protesters. The Defence Ministry would not respond to requests for further detail on the military exercises.Code-named Callimachus after a commander of the Athenian army during the Battle of Marathon, the war games took place at the Koromila base in Argyroupolis, a village near Kilkis in northern Greece.The army’s 71st airborne brigade, which participates in EU peace-keeping operations in an EU battlegroup together with units from Cyprus, Bulgaria and Romania, practiced feuding parties control, conflict deterrence and crowd evacuation, according to the newswire, quoting military sources.
According to Diktio Spartakos, a network of trade-unionist conscripts in the army, a captain recently warned his troops to be on alert in case of the need to intervene against social disorder.Trade unionism by draftees is forbidden in the Greek military, so the group does not operate openly or use their real names or ranks.
State of alert order

On 17 September, in a military camp near Heraklion, the capital of the island of Crete and the country’s fourth biggest city, a Captain S informed his unit of a top secret state of alert order, according to soldiers from the trade-unionist network.
According to the group, Captain S., who was in charge of the unit, informed the guard about the existence of top secret state of alert order and said that all units should be on guard and apply increased security measures.The captain then allegedly went on to say that the order is linked to the announcement of new austerity measures, the laying off of tens of thousands of civil servants and new property taxes that may provoke social disorder for which the army should be ready.While a military junta known as the Regime of the Colonels ruled the country from 1967 to 1973, the Greek armed forces have for more than a generation been normalised under civilian command and few analysts expect the military to autonomously intervene against civil unrest.

Greek crisis close to claiming first victim in EU banking sector Today OCT 5,11 @ 09:37 By Andrew Rettman

Franco-Belgian bank Dexia has said it might restructure its operations in response to a run on shares caused by exposure to bad Greek debt.The Atomium monument in Brussels: The Franco-Belgian bank risks being split into tiny pieces in order to protect high-street savers (Photo: o palsson)The bank in a statement issued after an emergency meeting in the small hours of Tuesday (3 October) said the board has asked the CEO to prepare ... the necessay measures to solve structural problems which hamper its operational activities, citing the size of the portfolio of non-strategic assets [which] structurally weighs down on the group.Options for what would amount to a break-up of the company include getting rid of Dexia Credit Local, a unit which lends money to local authorities in Europe and the US, Dexia Banque Internationale a Luxembourg, its private fund-management branch, and Denizbank, its retail banking business in Turkey.Belgium and France, large shareholders in Dexia, might also create a 'bad bank' on the model of Ireland's Nama, which would take over Dexia's riskiest assets in a bid to protect its core activities.Rating's agency Moody's warned on Monday it is getting ready to downgrade Dexia, an announcement that wiped out 10 percent of the value of its shares in one day atop losses of 30 percent in the past three months. It said Dexia has experienced further tightening in its access to market funding - the day-to-day loans provided by markets which banks need to fund normal activity, like providing cash and loans to high-street savers.The loss of confidence comes due to Dexia's exposure to Greek and Italian debt. If the private sector is forced to write off 50 percent of Greek bonds, Dexia stands to lose around €2 billion, equivalent to 80 percent of its value as a company.

Belgian finance minister Didier Reynders tried to reassure Dexia's high-street customers on Monday. The French and Belgian governments are behind their banks, whether that is Dexia or another. To help banks and to help, for example French and Belgian savers, the first thing to do is to help Greece, he said at a meeting of EU finance ministers in Luxembourg.Dexia is a medium-sized bank by EU standards. But its larger cousins face similar problems. Major French banks BNP Paribas, Societe Generale and Credit Agricole also lost between four percent and five percent of their value this week due to exposure to Greece, on top of 40 percent to 56 percent losses in recent months.All four banks, including Dexia, were given a clean bill of health by EU stress tests in July.Fresh EU statistics on bank lending to small and medium-sized business show how the crisis in high finance is having a direct impact on the ground.Unsuccessful loan applications between 2007 and 2010 rose in 19 out of 20 EU countries for which data is available, the European Commission noted on Monday. Bulgaria is the worst hit, with the proportion of unsuccesful applications climbing from three percent to 36 percent. In Ireland, the numbers went from one percent to 27 percent.

MUSLIM NATIONS

EZEKIEL 38:1-12
1 And the word of the LORD came unto me, saying,
2 Son of man, set thy face against Gog,(RULER) the land of Magog,(RUSSIA) the chief prince of Meshech(MOSCOW)and Tubal,(TOBOLSK) and prophesy against him,
3 And say, Thus saith the Lord GOD; Behold, I am against thee, O Gog, the chief prince of Meshech(MOSCOW) and Tubal:
4 And I will turn thee back, and put hooks into thy jaws,(GOD FORCES THE RUSSIA-MUSLIMS TO MARCH) and I will bring thee forth, and all thine army, horses and horsemen, all of them clothed with all sorts of armour, even a great company with bucklers and shields, all of them handling swords:
5 Persia,(IRAN,IRAQ) Ethiopia, and Libya with them; all of them with shield and helmet:
6 Gomer,(GERMANY) and all his bands; the house of Togarmah (TURKEY)of the north quarters, and all his bands:(SUDAN,AFRICA) and many people with thee.
7 Be thou prepared, and prepare for thyself, thou, and all thy company that are assembled unto thee, and be thou a guard unto them.
8 After many days thou shalt be visited: in the latter years thou shalt come into the land that is brought back from the sword, and is gathered out of many people, against the mountains of Israel, which have been always waste: but it is brought forth out of the nations, and they shall dwell safely all of them.
9 Thou shalt ascend and come like a storm, thou shalt be like a cloud to cover the land, thou, and all thy bands, and many people with thee.(RUSSIA-EGYPT AND MUSLIMS)
10 Thus saith the Lord GOD; It shall also come to pass, that at the same time shall things come into thy mind, and thou shalt think an evil thought:
11 And thou shalt say, I will go up to the land of unwalled villages; I will go to them that are at rest, that dwell safely, all of them dwelling without walls, and having neither bars nor gates,
12 To take a spoil, and to take a prey; to turn thine hand upon the desolate places that are now inhabited, and upon the people that are gathered out of the nations, which have gotten cattle and goods, that dwell in the midst of the land.

ISAIAH 17:1
1 The burden of Damascus. Behold, Damascus is taken away from being a city, and it shall be a ruinous heap.

PSALMS 83:3-7
3 They (ARABS,MUSLIMS) have taken crafty counsel against thy people,(ISRAEL) and consulted against thy hidden ones.
4 They have said, Come, and let us cut them off from being a nation; that the name of Israel may be no more in remembrance.
5 For they (MUSLIMS) have consulted together with one consent: they are confederate against thee:(TREATIES)
6 The tabernacles of Edom,(JORDAN) and the Ishmaelites;(ARABS) of Moab, PALESTINIANS,JORDAN) and the Hagarenes;(EGYPT)
7 Gebal,(HEZZBALLOH,LEBANON) and Ammon,(JORDAN) and Amalek;(SYRIA,ARABS,SINAI) the Philistines (PALESTINIANS) with the inhabitants of Tyre;(LEBANON)

DANIEL 11:40-43
40 And at the time of the end shall the king of the south( EGYPT) push at him:(EU DICTATOR IN ISRAEL) and the king of the north (RUSSIA AND MUSLIM HORDES OF EZEK 38+39) shall come against him like a whirlwind, with chariots, and with horsemen, and with many ships; and he shall enter into the countries, and shall overflow and pass over.
41 He shall enter also into the glorious land, and many countries shall be overthrown: but these shall escape out of his hand, even Edom, and Moab, and the chief of the children of Ammon.(JORDAN)
42 He shall stretch forth his hand also upon the countries: and the land of Egypt shall not escape.
43 But he shall have power over the treasures of gold and of silver, and over all the precious things of Egypt: and the Libyans and the Ethiopians shall be at his steps.

EZEKIEL 39:1-8
1 Therefore, thou son of man, prophesy against Gog,(LEADER OF RUSSIA) and say, Thus saith the Lord GOD; Behold, I am against thee, O Gog, the chief prince of Meshech (MOSCOW) and Tubal: (TUBOLSK)
2 And I will turn thee back, and leave but the sixth part of thee, and will cause thee to come up from the north parts,(RUSSIA) and will bring thee upon the mountains of Israel:
3 And I will smite thy bow out of thy left hand, and will cause thine arrows to fall out of thy right hand.
4 Thou shalt fall upon the mountains of Israel, thou, and all thy bands,( ARABS) and the people that is with thee: I will give thee unto the ravenous birds of every sort, and to the beasts of the field to be devoured.
5 Thou shalt fall upon the open field: for I have spoken it, saith the Lord GOD.
6 And I will send a fire on Magog,(NUCLEAR BOMB) and among them that dwell carelessly in the isles: and they shall know that I am the LORD.
7 So will I make my holy name known in the midst of my people Israel; and I will not let them pollute my holy name any more: and the heathen shall know that I am the LORD, the Holy One in Israel.
8 Behold, it is come, and it is done, saith the Lord GOD; this is the day whereof I have spoken.

JOEL 2:3,20,30-31
3 A fire(NUCLEAR BOMB) devoureth before them;(RUSSIA-ARABS) and behind them a flame burneth: the land is as the garden of Eden before them, and behind them a desolate wilderness; yea, and nothing shall escape them.
20 But I will remove far off from you the northern army,(RUSSIA,MUSLIMS) and will drive him into a land barren and desolate, with his face toward the east sea, and his hinder part toward the utmost sea, and his stink shall come up, and his ill savour shall come up, because he hath done great things.(SIBERIAN DESERT)
30 And I will shew wonders in the heavens and in the earth, blood, and fire, and pillars of smoke.(NUCLEAR BOMB)
31 The sun shall be turned into darkness, and the moon into blood, before the great and the terrible day of the LORD come.

Putin unveils counter-EU option for post-Soviet states 04.10.11 @ 16:09 By Andrew Rettman

With EU-Ukraine association talks on the rocks, Russian leader Vladimir Putin has unveiled a new plan to pull former Soviet countries into a Eurasian Union instead.
Putin. Many post-Soviet leaders feel more comfortable on visits in Moscow than in Brussels, in terms of language and protocol (Photo: ec.europa.eu)Putin outlined his ideas in an op-ed in Russian daily Izvestia on Tuesday (4 October). Noting that Russia, Belarus, Kazakhstan, Kyrgyzstan and Tajikistan are already pressing ahead with plans to form a Customs Union and a Single Economic Space, he said the bloc will in future become a fully-fledged Eurasian Union with joint economic governance, common institutions and passport-free travel on the EU model.We propose a model of a powerful supranational union capable of becoming one of the poles of the modern world and of playing the role of effectively 'binding' Europe and the dynamic Asia-Pacific region,he said.In a signal to other post-Soviet nations in the region - Armenia, Azerbaijan, Georgia, Moldova, Turkmenistan, Ukraine and Uzbekistan - he added: The Eurasian Union is an open project. We welcome the accession of other partners, notably the [former Soviet] commonwealth countries. This does not mean pushing anyone or rushing them into something. It should be a sovereign decision of the state dictated by its own long-term national interests.Putin noted the plan sounds like an attempt to rebuild the Soviet Union.He said the group of 12 countries have spiritual threads that unite [their] peoples and that the 70-year-long period of Soviet domination in the last century left the inheritance of a joint infrastructure and manufacturing base.But he added:We are not talking about recreating the Soviet Union. It would be naive to try to restore or copy what is already past ... The Eurasian alliance will be based on universal principles of integration, as an integral part of greater Europe, united by common values of freedom, democracy and market laws.Moscow's gambit comes at a sensitive time in EU-Ukraine relations.

The EU is in December planning to finalise a trade and association pact with Ukraine, by far the largest and most populous of its eastern neighbours. The treaty aims to pull Ukraine out of Russia's sphere of influence and put it on a path to EU membership 10 to 20 years down the line.The pact is in jeopardy on two fronts, however. The EU is angry at what it calls Ukrainian President Viktor Yanukovych's persecution of his political rivals. And Ukraine is angry over the EU's refusal to promise future accession in the preamble to the treaty, while at the same time asking it to make pro-EU reforms set to cost tens of billions of euros.The Ukrainian foreign ministry is considering confronting the EU with a make-or-break decision by submitting a formal application for EU membership early next year.But with anti-enlargement countries such as France, Germany and the Netherlands highly unlikely to endorse the move, the confrontation could end in Ukraine turning towards Putin's union instead.It's a dangerous situation. It [an EU refusal] would give pro-Russian elements in Ukraine all the excuse they need to abandon the European project. At the same time, with Putin becoming president [of Russia] again next year, he will be in a powerful position to exert influence on Kiev and other capitals in the region,an EU diplomatic source told EUobserver.Georgia and Moldova are the most pro-EU in the group. But powerful pro-Russian opposition forces exist in both countries, with Georgian President Mikhail Saakashvili's popularity waning after the 2008 Russia-Georgia war and with Moldova facing zero prospect of EU membership so long as more than 1,000 Russian troops remain parked on its territory in the frozen conflict over Transniestria.