US + EU and EU vs US: a geoeconomics analysis

An interesting comparison of United States working with European Union as well as European Union working against United States reveals how geoeconomics could play out in the global scene. Let me peruse this tangle more:

US & EU working together

Primarily this combo can derail the progress of the BRICS as an upcoming geoeconomics giant. For example, for the year 2024 US accounts for 26.2 % of global gdp and EU got 14.33%. BRICS scored a median figure of 28.00%. Purely in money terms this works out as USD 29.18 Trillion for America USD 21.0 Trillion for EU while BRICS once again scoring a median figure of USD 26.7 Trillion.

Therefore US together with EU accounts for USD 50.8 Trillion and marking the global share at 40.53% of the global gdp surpassing BRICS handsomely in terms of absolute volume as well as global share of gdp factor.

Even though US-EU trade gives surplus balance of USD 240 Billion in latter’s favour US leverage over EU in service sector remains unbeatable. Dependence on US service sector is indeed a heavy burden cast upon EU but considered as necessary evil.

EU working against US

When it comes to the market outside the US & EU combo there is an issue. Only one party can make a sweep at the expense of the other. Either USA wins or EU does.  On another perspective, Elon Musk, a super intelligent man alive today has proposed zero to zero tariff on industrial exports both ways between USA & the Union, whereas agricultural trade might be allowed to suffer some form of mitigated tariff both ways.

Christine Laggard the President of European Bank hit the nail on the head by stating that EU must move away from financial transfer & payment using Visa/MasterCard centred in the New York City to Brussels to complement the SWIFT. According to her a consolidated financial techno infra-structure must be built in Brussels incorporating payment gateway, secure financial transaction outside the purview of US authorities and possibly outside the SWIFT system in case US objects to the new infra-structure citing it just duplicates the SWIFT architecture.

Moreover, EU by on its own volition could sign up with third parties including BRICS countries as regards to tariff on trade between EU & them outside the “rules based international order” commandeered by America.

I am leaving the readers to draw their own concussions as regards to the geoeconomics bombshell that is on the way when EU breaks out from the bind of USA altogether!

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist

 

Strange strategy of seizing shadow fleet

Shadow fleet is in the news these days. The Balkan Chihuahuas trailing and threatening these vessels was at the crosshairs of the Russian navy as well the air force. Why flag carriers departing from or sailing towards St. Petersburg and Kaliningrad are being harassed?

The answer is these vessels are deemed as part of shadow fleet. What is shadow fleet? The simple answer is the ships that are not registered in the Lloyd Registry in London. Lloyds is the well-known registry of sailing ships certifying compliance of standards relating to operations, insurance, and finance of vessels. Logical next question is whether a ship can sail without being registered at Lloyds.

The answer is it is not mandatory to register any ship at the Lloyds. The only requirement is every sailing ship must be registered with any national maritime registry alternatively known as flag state. Seven of the most popular flag states are in alphabetical order, Bahamas, Cyprus, Greece, Hangdog, Liberia, Malta and Marshall Islands.

Under the maritime law no country can harass any flag carrying vessels except for reasons including but not limited to crew safety, suspected to carry contraband, engaged in narcotics trade and wanton failure on the part of the crew in conforming to maritime standards.

Recently German navy seized the Panama flagged Eventin Oil Tanker carrying Russian oil citing that the ship was not registered in the Lloyds registry and any country in the G7 group can interdict an unregistered vessel. Ostensibly, this was done in furtherance of the decision made by the G7. The vessel along with her cargo of approximately 100,000 tons of crude oil, valued at €40 million, were officially confiscated and transferred to German ownership. The fact that due to an engine failure, Eventin drifted into German coastal waters was ignored.

Russia citing that Germany has no right to interdict a sailing ship under the “ Freedom of Navigation Law” of the United Nations acted quickly by announcing that there is no such thing as shadow fleet and that the arrested ship must be freed.

In the meantime, Germany took a bad strategic decision. She  not only seized the vessel and emptied the content of oil the vessel carried but later renamed the vessel as German owned one plying under the German flag carrying description as “EVENTIN Crude Oil Tanker, IMO 9308065”  last seen in the Baltic Sea.

As far as business strategy is concerned the seizure of vessel and re-registering under new name was too bad to foot. What Germany could have done is to warn the vessel and after effecting necessary repairs pilot it to international water in Baltic Sea.

This strange strategy of seizing the so called shadow fleet vessel would linger for a long time in Russia-German relationship! 

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist

 

Hidden reason for Trump leaving Iran deal

Citing “Iran Deal”, signed on 14/7/2015 in Vienna by the Permanent Five Members of UN Security Council plus Germany with Iran was not comprehensive, Trump left the deal on 8/5/2018. He alluded couple of reasons for his action but kept the real reason close to his chest:

It was not surprising that Trump found fault with the deal. He has been too scornful of the Iran Deal from the beginning. He bemoaned the fact that it did not address the concerns of Israel as regards to Iran’s missiles capacity and the perceived notion of Iran destabilising the Middle–Eastern theatre. For all purposes this is just smoke screen.

During the pendency of Iran Deal, Boeing negotiated with Iran Air for the sale of 80 Boeing 787 planes with a booking value of USD 16 Billion to be supplied over ten years that would provide jobs for more than 100,000 people. When the deal was ditched Boeing reported that the value was around USD 20 Billion. That could have been a real tangible benefit for USA.

Yet, Trump has a different calculation. His business strategy was two pronged: One, get the best out of the Iran Deal for USA. Two, deny the plums to European business sector. That is geoeconomics proper!

He was indeed right. Immediately after the deal was initialled Airbus signed USD 25 Billion deal to supply 118 planes including 73 wide body jets and 45 narrow body jets. Highlight of this is the proposed sale of 12 A380 superjumbos. By the way, A380 was hitherto below the break-even point. Undoubtedly, Iran was giving a boost not only to Airbus but also to A380.

Yet another remarkable European performance was in the cross hair of Trump. Trade between Iran and Europe shot up by 50% as regards to oil exports to countries such as Italy, Greece and Spain. Moreover, business openings for many European industries started to see the sunlight, mostly due to increased sale of oil by Iran exceeding 2.5 million bpd.

Trump wanted the cake and eat it alone. What transpired was Europe surging ahead in ordering more petroleum whereas US exports of crude oil to Europe starting to plummet.

Realizing, he must navigate business strategy amid geoeconomics the Deal Maker Donald Trump pushed the President Donald Trump to scupper the JCPOA alias Iran Nuclear Deal alias simply “Iran Deal“ on May 8^th of 20i8 laying waste the Obama legacy of long term peace making.

The bottom line is still President Trump dreams of a new Iran Deal during his watch in the second and last presidency. But in strategy you need two to tango. Admittedly Iran is not playing ball with Deal Maker Trump!

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist