Just when there are signs that emerging market demand (and institutional investor frenzy) have eased in the oil markets, up pops an old friend: geopolitical risk.

Moreover, this time the old friend, 'Middle East Tensions,' brought along his long/lost cousin, 'Enboldened Russia.'

Russia's re-appearance on the international stage takes the form of a major power, not a geopolitical power capable of projecting force globally as during the Soviet era, but the gradation is minor as it relates to the oil market, so says economist Richard Felson.

"Russia has the capacity to create a remarkable amount of distress in the oil markets. It can use oil exports and natural gas as a lever against Europe and the world, and its territorial threats to Central Asia and Eastern Europe are also cause for legitimate concern," Felson said.

Oil fell $3.03 to $118.15 per barrel Friday at mid-day after Turkey restored oil flows through the Caspian Sea pipeline, Bloomberg News reported Friday. The Baku-Tbilisi-Ceyhan pipeline moves oil from Azerbaijan through George to Turkey's Mediterranean coast. Oil flows were stopped earlier this month after Russia invaded Georgia.

The other, major energy commodities also fell sharply Friday at mid-day on the Baku pipeline news. Unleaded gasoline plunged 11 cents to $2.93 per gallon, heating oil declined about 10 cents to $3.19 per gallon, and natural gas declined 14 cents to $8.11 per million BTUs.

Russia: a threat to the west's oil?

Further, Felson said Russia's action "have caused the west to re-evaluate the global oil and energy equation" to account for the new - - and unexpected - - Russia wild card.

"Whereas before the prevailing view was incorporation of Russia into the oil and energy markets and as a net-plus for production and supplies, long-term, the new view is guarded," Felson said. "Not only are supplies from Russia now viewed as liabilities, but the west now has to ask, 'what other oil-rich areas might Russia might try to threaten?' And what about it's natural gas relationship with Germany?" [Russia supplies about 20% of Germany's natural gas.]

As the saying goes, what if you invited everyone to a party and no one showed up?

That's a little like how the U.S. Federal Reserve feels right now. The Fed has lowered benchmark, short-term interest rates substantially - - including 125 basis points of reduction in January 2008 alone - - but so far, banks, stung by subprime losses, have been reluctant to ramp-up lending, CNBC.com reported Monday.

Patience advised

Still, economist David H. Wang took issue with those arguing that the Fed's rate cuts and ongoing term auction facility that haven't worked or weren't needed.

Concerning rate cuts, Wang told BloggingStocks Monday that the banking sector had to work through "a period of loan fright" - - an irrational fear of risk - - that is, in his view, the additive inverse of "the total neglect of risk" that characterized the earlier housing boom.

"Banks need some time to improve their balance sheets. Some may accomplish this through job cuts and by operational cut-back. Many will accomplish this through curtailed lending and tighter lending standards, at least for a short period of time," Wang said. "But in time, lending to businesses and individuals will resume its normal pace."

'Gradualism' vs. shock therapy

Second, the Fed's term auction facility - - which U.S. Federal Reserve Chairman Ben Bernanke has said will remain in operation "for as long as necessary" - - is working. "The term auction facility is doing exactly what it's supposed to do... it's providing short-term loans to banks who need it, who don't want to borrow from the discount window and who can't get the money from other banks who are afraid to lend," Wang said. "And in the process, bank operations are maintained, even as they slowly and gradually digest subprime defaults and related asset write-offs."

And that last point may be the key to understanding the outlook for a resumption of normal lending conditions, he said. Given the size of likely, problematic subprime loans - - some have put the figure at $500 billion - - and the preference for gradualism, it may be two quarters or more before normal lending conditions resume. Further, the correct place to look for the start of increased lending is not the stock market's level, but commercial activity: orders for new equipment, business expansion plans, and job growth / new hiring announcements.

And while some economists argue that it would be better if the financial services sector wrote-off problem loans quicker - - i.e. 'the sooner the better for economy,' Wang does not agree.

"Shock therapy may have worked in Poland's transition from a communist centrally-planned economy to a free-market economy but we're dealing with a magnitude difference in money here," Wang said with chuckle. "The Fed's goal here is to enable banks to gradually work the bad loans out the system, while maintaining the conditions for sustainable economic growth and not causing runaway inflation. And so far, that strategy is working, in my interpretation."

"Analogous actions by the Soviet Union, when it deployed missiles in Cuba, prompted the 'Caribbean crisis,'" Russian President Vladimir Putin said Friday, using the Russian term for the Cuban Missile Crisis, in reference to the United States' Europe-based missile defense plan.

Putin's statement that U.S. plans to put a Europe missile defense system in Poland and the Czech Republic can perhaps be best interpreted as a rhetorical overstatement before Putin negotiates new economic and political agreements with the West, particularly with Europe.

Russia's oil and natural gas resources, foreign currency reserves, commercial development and +5% annual GDP growth rate have enhanced the nation's negotiating stance, on both economic and geostrategic issues. Sensing his stronger hand, Putin has used the increased leverage to propose, among other measures, European economic/commercial agreements that would be more favorable to Russia, while also making clear that international political agreements among the U.S., Europe and Russia on such issues as the Iraq War, Iran nuclear technology -- and a potential European missile shield -- would also reflect Russia's concerns.

I was just invited to a conference at the University of California at Los Angeles by Natalia Johnson of the economics division of the Consulate General of Poland and I thought I would share this tidbit with those that might be interested and live in the vicinity.

Poland has been a member of the European Union since 2004 and its economy has been expanding rapidly even long before they became a member. Natalia informs me that last year Dell (NASDAQ: DELL) opened a large factory in Lodz, Google (NASDAQ: GOOG) opened shop in Krakov, General Motors (NYSE: GM) has been operating at several locations and the list is growing.

In addition to the presentations from representatives from Poland there will be presentations and a panel discussion by members of the Czech, Hungarian, and Slovakian missions. The UCLA Kane Anderson School of Management has scheduled the lecture for April 18, 2007 - next Wednesday, in the Korn Convocation Hall.

I have written about opportunities in China and India and others have included Russia and Brazil as offering large opportunities for significant growth as well. Central and Eastern Europe receives less press than the other regions but should be included in discussions about economic prosperity and integration into the global community.

I chase opportunity wherever I find it and if I can get out of some meetings will be there at this conference. If you are interested in long-term value investing you should read Chasing Value and put it on your toolbar.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm. Check out my other posts for BloggingStocks here.

Starbucks Corp. (NASDAQ: SBUX) announced that it signed a preliminary agreement with AmRest, the Polish restaurant group. AmRest operates restaurants in Poland, the Czech Republic and Hungary. They have 200 units within their operations. Adding the Starbucks brand is certainly a coup for AmRest.

As Starbucks aims to have 40,000 total units in its system worldwide, strategic alliances and partnerships will be critical to achieve. The management team must be nimble and prepared to seize these kinds of opportunities. I am sure the senior management group at Starbucks did not wake up one day and say "we need to dominate Poland or the Czech Republic," but as an AmRest shows up at the door, the opportunity may be too good to pass up.

One of the criticisms of McDonald's (NYSE: MCD) in its early expansion days abroad was its attempted "total Americanization" of the units placed in foreign countries. For example, when they were struggling in France (go figure!), the story has it that an elderly French woman told the local manger that traffic was mediocre because they did not offer wine with the food. Bingo! Honoring local traditions and customs became the norm for McDonald's in foreign countries. One would assume that Starbucks will adhere to local customs and tastes in these three new markets. Customers want the panache of a Starbucks, but old habits and traditions die hard.

Georges Yared is the author of Stop Losing Money Today and Baby Boomer Investing. Please visit www.georgesyared.com