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The rise of geopolitical tensions – Rabobank

FXStreet (Delhi) – Piotr Matys, EM FX Strategist at Rabobank, notes that the downing of a Russian fighter jet by Turkey near its border with Syria sent European stocks lower across the board and the rise in geopolitical risk fuelled demand for safe haven, the yield on the US 10Y Treasuries fell to the lowest level since early November.

Key Quotes

“While Turkey claimed that the Russian military jet violated its airspace and that the pilots ignored repeated warnings before Turkish planes opened fire, Russia argued that its aircraft was flying entire time over the Syrian territory.

Russian President Vladimir Putin used a fairly harsh rhetoric as he described the incident as “a stab in the back from the accomplices of terrorism.” The Russian president also added ominously that his country “won’t tolerate such crimes” and that there will be “serious consequences.”

Later on Tuesday the Kremlin clarified that President Putin didn’t mean “military consequences.” Still, this is the most serious incident involving Turkey, which is a NATO member, since Russia has launched its air strikes against Islamic State in Syria (although the West questioned Putin’s real motives).

Following their emergency meeting in Brussels, NATO officials called for “calm and de-escalation.” In a telephone call US President Barack Obama and Turkish President Recep Tayyip Erdogan “agreed on the importance of de-escalating the situation and pursuing arrangements to ensure that such incidents do not happen again.”

In other words, comments from Western leaders have been fairly constructive and aimed to ease tension. In the meantime, Russia’s defence ministry suspended military cooperation with Turkey and also deployed a guided missile cruiser off to Syria’s coast with the mission to destroy any target that may pose danger to Russian jets operating in Syria.”

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