MARKET PERSPECTIVE

By J Mulraj

Mar 7- 13, 2024

How Biden’s myopic geopolitical strategy has strengthened China

Before the Ukraine war, Europe (especially Germany) was the main consumer of Russian oil and gas. European industry benefitted from cheap Russian energy delivered via two Nord Stream pipelines. Russia, too, benefitted by long term agreements with solvent customers, creating a mutual economic dependency. A dependency that vastly reduced geopolitical risks for Europe.

Along came Polly folly! The folly of a myopic geopolitical strategy of Joe Biden trying to contain Russia by getting its neighbor, Ukraine, to join NATO. That would allow NATO to place missiles on Russia’s doorstep, posing, therefore, an existential threat to Russia. Putin said so, several times, imploring Biden and the collective West, to not admit Ukraine into NATO, warning them of his intention to invade Ukraine if they didn’t heed his plea.

Biden didn’t heed, so

Putin did invade.

The Ukraine war was, therefore, a completely avoidable one, instigated only by the desire of Biden, and the collective West to weaken Russia. So strong was this desire that Biden asked then British PM, Boris Johnson, to scupper a negotiated settlement Russia and Ukraine had agreed upon, just two months after the invasion. Thousands of lives would have been saved and billions of dollars in damage would have been avoided but for such geostrategic myopia.

In order to financially cripple Russia, the US imposed several sanctions, froze Russian assets, and forbade countries from buying Russian oil/gas. Moreover, Biden, according to Pulitzer Prize winner Seymour Hersh, blew up the Nord Stream pipeline to financially weaken Russia by depriving it of a European market for its oil and gas. Russia supplies around 12% of the world’s crude oil. It is the world’s largest exporter of gas.

Look at the geostrategic consequences of Biden’s folly.

The two Nord Stream pipelines destroyed by, presumably, Biden (he had publicly bragged, before the explosion, that he could, in typical mindless braggadocio) were replaced by two Power of Siberia pipelines to transport Russian energy to China!

In short, Biden’s myopia managed to achieve multiple negative results:

> It made two of America’s largest enemies, nuclear armed Russia, and financially armed China with huge natural resources, economically dependent on each other. Russian interdependency with Europe, which had made Europe safer, ended.

> It significantly weakened Europe, bereft of cheap Russian oil and clean Russian gas, necessitating it to import frightfully expensive American LNG instead.

> It weakened the threat to China of a blockade of the Strait of Malacca, through which most of the crude oil imported by China passes. The Power of Siberian pipelines between neighboring countries cannot be threatened with a blockade and is far cheaper to transport.

> It destroyed Ukraine, whose birth rate has dropped far below the level needed to sustain a population, as thousands of men have died in the war and millions have emigrated. Ukraine has not become a NATO member and unlikely to. So what did the collective west achieve?

> It has driven America to its highest indebtedness level ever, with an annual interest bill becoming $1 trillion, more than it spends on Social Security, Defense or Healthcare!

> It has, by cutting Russia out of the Western, $ denominated financial system, compelled it to use the Chinese renminbi instead. This gave China the ability to buy its energy needs in its own currency. See the excellent analysis of Louis Gave in this video .

Put that in your pipe, and smoke it, Joe!

Source: https://openart.ai/discovery/sd-1006318773696987176

Besides this, the overuse of sanctions by the US, thanks to its currency, the USD, being the only internationally accepted currency, has led to two undesirable consequences.

One, the relay of sanctions and retaliatory counter sanctions leads to an unwelcome de-globalization. In response to the high import tariffs imposed on Chinese EVs, China imposed retaliatory tariffs on European dairy products, limited exports of antimony, a mineral, of which China is the largest producer, used in a wide range of products from batteries to weapons, and is dumping steel, where its capacity of 1 billion tpa is 54% of world capacity. That gives its EV manufacturers, eg, a competitive advantage.

Two, a move towards de-dollarization, as other countries are fearful of their $ reserves getting frozen should they displease USA. Though the replacement of the US$ is not imminent, the trend is concerning. If the US$ gets an alternative, it would sap the US’s ability to print its way out of trouble. China’s exports, once largely dependent on USA, are no longer so. It exports more to developing countries than to USA.

In short, Biden has messed up just about everything he touched.

Last week the BSE Sensex rose 770 points over the week to end at  82890.

Next week the US Fed meets on Sep 17/18 where it’s widely expected that Chairman Jerome Powell will cut interest rates by 25 bips. A larger rate cut would be cheered by the market but is unlikely.

The world today is full of unnecessary conflicts, whether military or trade. A change in polity is needed. The hallucinatory pipe being smoked by Biden should be replaced by a peace pipe, by the next leader. American voters should be sensible enough to elect one.

Picture Source: https://www.intellinews.com/china-dragging-its-heels-on-power-of-siberia-2-gas-pipeline-investment-price-deal-303428/

Comments may be sent to jmulraj@asiaconverge.com