How will Putin and Trump affect the Singapore economy

January 24, 2017

Q: There has been much emphasize on the China factor. As to how it will affect the economies and geo politics of the Asia Pacific theatre. The same level of emphasize seems to be lacking concerning seemingly warming ties between Trump and Putin – how do you see the dynamics of the relationship between these two leaders and how will their combined designs have an impact on Asia?

A: I think that’s a very perceptive question – it’s certainly very true, while there has been top heavy emphasize on Sino American ties, very little seems to be directed to speculating on how Russian and American ties in the context of Trump and Putin might affect power and politics in this part of the world.

The way I see it – it all boils down to one question, cui bono? That’s to say what does Putin really want from a new Trump administration – to say better relationships is to really say absolutely nothing. So we need to be very specific about Putin’s shopping list.

If I had to boil it all down to a few points – Putin’s wish list would have to include higher oil prices in the short term and on the long term perhaps the lifting of sanctions that has been imposed by the EU on the instigation of the Obama administration.

On oil – let’s be realistic, while Putin has very little say on the global price of oil – as it’s really free market at work. Putin is very determined to maintain Russia’s primacy as the sole supplier of oil and gas to power Europe. That is the main reason why Russia has been propping up the Assad regime.

Now the media showcases this as Putin’s war against ISIS, but nothing can be further from the truth – as if one examines all the key targets that has been bombed right back into the Stone Age. Some of it is certainly ISIL held territory, but most the strategic targets have been to regain territory once held by proxies funded directly by the Saudi’s, Turks and NATO to build a new oil pipe line that stretches all the way from the Foroozan-Marjan Field in Saudi Arabia via Syria, Turkey to greater Europe. Currently no such oil or gas line exist and everything has to go thru the Straits of Hormuz that just makes Saudi oil and gas uncompetitive when compared to what Russia has to offer. To put it bluntly the Saudi’s want to muscle into the lucrative oil business that is currently held by the Russians thru their Caucasus pipeline that stretches thru the Balkans and is currently operational.

Trump’s entry into the White House could be Putin’s moment to reinstate Russia’s primacy as the sole gas and oil supplier to Europe.

The second pressing consideration on Putin’s wish list is to revitalize his country’s economy through new partnerships with US and European businesses, which have been prevented from trading with Russia due to a pheltora of sanctions since a Russia annexed the Crimea.

That’s especially important to Putin as the effect of sanctions have been crippling on Russian industries especially the oil and gas component manufacturers who now cannot even secure funding or for that matter high tech capital goods to fabricate many of the components to keep the Russo Euro pipeline in tip top working condition – if you go to many of these tech forums in Russia, you will find many enterprises grumbling that they can’t get this or that or even if they can get their hand on exotic materials, they can’t machine it to the closed tolerances that ensures quality – now from what we have been able from all this chatter, businesses are not happy in Russia – the sanctions are affecting not only their capacity to innovate but it’s conceivable it’s already degrading many of their high tech industries that still rely on Western technology.

Of course if we look at Putin – he’s cool like a cucumber, but trust me after this weekly briefing from his trade and industry minister I am sure even he is sweating bullets fast and furious. As the effects of these sanctions are not only far reaching, but since they have so sophisticated they’re literally designed to constrict Russia’s ability to manufacture anything of comparative value that the West may have to offer.

In the public front Putin is of course putting on a very brave face, but the sanctions are definitely bitting not only the technological dimension. But it’s even having a debilitating effect on ordinary Russians who once took out housing loans pegged against the US – so all this will have a negative impact on the balance of payment.

As we speak right now – it’s not far off to say Russia is already a failed state. Not maybe as bad as Greece or Zimbabwe, but they’re not too far off.

In the background of all this developments – I think Putin’s priority would be to work towards lifting western sanctions. That I imagine would be his first priority. The second would be to reinstate Russia’s primacy as the sole gas and oil supplier to greater Europe.

Q: How would Trump respond to these overtures and how will all this affect Asia?

A: How will Trump respond is matter of intense speculation. On the surface, the relationship looks cordial to friendly – but you have to understand there are very committed stakeholders who seem very determined to ween themselves off dependence from Russian gas and oil – most of the reasons are economic and geo political. NATO sees this strategy of beggaring Russia as a reliable means to blunt it’s military projection into many of the previous satellite states that broke away when the USSR Balkanized. The Turks on the hand see the new Saudi pipeline as a means of reinstating much needed balance of power and respect with Europe and NATO. As currently they need the EU more than the EU needs them. As for the Saudi’s – they’re not stupid either. They know both the US and Canadians are slowly moving away from ground based drilling to fracking as their primary oil source. The prospects of being able to supply the EU with gas and oil opens up new markets which will allow them to out flank the Iranians who will have to still transport their oil thru the Arabia Gulf which will be less competitive.

To your second question – how will this all affect Asia? The ramifications are far reaching as when there is such intense pressure to sell surplus petroleum in that part of the world – it can only mean the price of oil will continue to languish around the 40 buck a barrel level.

In the long term this will definitely have an impact finding ever more inventive methods to lower the friction cost in the supply chain of petroleum from source to user – that I see is the part of the equation that has changed very little since Rockefeller first figured out that transporting oil with pipe was far cheaper and efficient than rail – I think when you factor all these pressures, it’s very hard to say Singapore can retain it’s primacy as a die die must visit trading outpost – ships may certainly have to circumnavigate the straits and hairpin thru Singapore to make their way to the Pacific – but increasingly there are more options up and down stream along the traditional trade routes. Not to mention new ones that are in development or have simply come about because of polar ice caps melting at a such an alarming rate that may circumvent traditional trade routes.

Of course the politicians will continue to say training is what will enable us to carve competitive advantages. But tell me who in their right mind believes them?

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