Applying reverse gear in geoeconomics

The rationale for applying reverse gear in geoeconomics affairs cannot be overemphasised. Tools & techniques such as sanctions need constantly be reviewed to ascertain whether to reverse these or continue as it is. Performance of recent sanctions against Russia present one such opportunity.

A plethora of sanctions in the areas of diplomacy, military and in geoeconomics field have presented a big dilemma to the American led west. Most of these are rendered useless or in some cases backfired in that the contrary to the expected result has happened. This is where reverse gear need to be applied first and followed up with either removal of these sanctions altogether or deliberately tone down their ambit. Here are few of the sanctions that failed to bring about the expected outcome:

1. Export of fertilizer by Russia to Western Europe was sanctioned but the contrary has taken place. Since Russia began SMO Germany alone has imported more than nine times the quantum of fertilizer that was imported before the start of Ukraine war. By the way, production of nitrogen requires hell of a lot of gas which is available in plenty in Russia.

2. In the military sphere sanctions were imposed on artillery pieces and associated shells exported to Russia by the globe. The startling fact is Russia now roll out three times many artillery pieces and shells than America plus west combo, that too at a fraction of their cost.

3. Putin quickly built a wartime economy with military industrial complex given pride of place that went on to improve existing arsenal and produce new weaponry. Not only the west failed to install war footing in their respective economies but were unable to marshal resources both financial and material to turn out necessary weaponry anew not to forget that uncontrolled spend of existing stockpile resulting in a position where if war is escalated there is not sufficient armaments  available to mount defence or counter attack.

4. There is no stopping whatsoever regarding the expansion of nuclear plant sale by Rosatom. Recently it signed a memorandum with the Government of Ghana for constructing a nuke plant for electricity generation.

5. Geoeconomics heavyweights Russia, China and Iran have become ‘brothers in arms forever’ to counterbalance the portfolio of existing sanctions and deny America led west to enlarge the scope of any future prohibitions that could derail geoeconomics wagon, that all three civilizational states have embarked upon.

6. All three as a group have made the purported sanctions regime by the west a dubious affair marked with a huge patch of self-interest that at the end of the day affected the third parties along with imposers as well.

7. Financial transmission is all about how money can be interchanged and exchanged via multiple platforms. All three countries are joined in their hips by promoting their respective national currency between and amongst them. For Example, nearly 90% of trade between Russia and China takes place via Ruble & Renminbi. Not to be left out Iran is making all efforts to promote Iranian Riyal as well as using Russian Mir card payment system & Chinese CIPS exchange platform.  FYI: Mir is now operative in more than 12 countries and also accepted by Eurasian Economic Union. That tantamount to be a coup de grace for western hegemony in geoeconomics!

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist

 

Kissinger business strategy: Dollar for Security

Strategists often acclaim Henry Kissinger as a dark horse in the field of business strategy. His style was entirely different from the ones that prevailed in the State Department: ‘no latent threat but suave arm twisting that keeps opponents at ease’. The best demo is “Dollar for Security” he negotiated with Saudis in 1974.

Let me give you the background of the Dollar crisis first. When President Richard Nixon removed Dollar convertibility to gold in 1971, holders of US Dollar as currency and in debt instruments were thrown into trauma. Dollar was sliding down in the exchange market. The rush to sell Dollar dominated US securities was further destabilising.

Then comes the Arab Israel War of 1973 consequent to which the OPEC imposed an oil embargo against the USA terming her as collaborator for Israel. American oil consumption is proverbial so is her imports of oil from the Middle – East. In the halls of power in USA there was an urgent deed to lessen or at best eliminate this double whammy.

Two suggestions were put forward. One is to invade Saudi Arabia and bring all the oil wells under US control. If that to succeed Soviet Union must countenance this approach and US establishment was doubtful of that happening. The second option is to talk to the Saudis and agree on a peaceful settlement of the oil & dollar crisis similar to the proverbial ‘one stone kills two birds’ theory.

The overriding issue at that time was US has just embarked upon a programme of economic development inshore where job creation, keeping inflation low and stabilizing exchange rate are the three most important pivots. To do that US Dollar must be backed by two interconnected tactics. Raising revenue by issuing Dollar dominated debt securities and more than that compelling the globe to transact its business in US Dollars, mainly.

So Henry Kissinger cunningly crafted a military economic agreement with Saudi Araba which was signed in June 8, 1974 in Washington where he along with Prince Fahd Ibn Abdul Aziz were signatories. This agreement commonly called as “oil for security” was a classic one in the annals of business strategy as it gave little away to Saudis while the Americans got everything they wanted to safeguard their interest. Here is the package of the goodies USA got:

a) OPEC dropped the oil embargo against USA

b) Saudis were incentivised to increase their oil output

c) Saudis will sell their oil exclusively in US Dollars bringing on a new animal known as ‘petrodollar’

d) Demand for US Dollar skyrocketed

e) Once again the US Dollar secured unshakable confidence as the world’s stable exchange & reserve currency

f) More than anything else, America as a geoeconomics giant was reinforced.  

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist

 

Putin visiting North Korea, master move

In the annals of strategy master moves are somewhat rare but not uncommon. Recent such incident was Putin visiting North Korea after decades or so. This master move rattled the West mostly because it did not expect this surprise. My strategic analysis follows from the angle of strategy towards geoeconomics:

Firstly it is strategy of ‘correlation of forces’ as coached by Lenin. This is an amended form of ‘correlation coefficient’ which is a numerical measure explaining linear relationship between two variables. In practise, the Soviet looked at choosing partners on the basis of correlation of forces where detailed analysis of capacity, production and manpower is done along with the idea of proximity to Russia proper. For example, Ukraine was absorbed for her coal & gas reserves.

Same thing is now being applied in the case of North Korea, which has advanced system in turning out artillery and associated shells. According to estimates 3 million rounds of 152 mm artillery shells and/or more than 500,000 rounds of 122 mm multiple rocket launchers had already been shipped into Russian armoury. The visit by Putin upgrades the relationship where the possibility of even North Korean soldiers manning rear position of the Russian forces in Ukraine is braced upon

On the fillip side Putin wants South Korea to be unmasked. Being the 9^th largest arms supplier South Korea was exporting armoury & weapons to third parties such as America and Poland to be used in Ukraine theatre. As consequence to this agreement signed between Russia & North Korea providing mutual help, South Korea has to come out publicly that she provides needed weapons by Ukraine directly, making her as co-belligerent against Russia.

Apart from military there is something to do with business strategy. Russia has huge grains production part of it rot within Russia itself due to the sanctions imposed upon her by the West. This portion, very large indeed, could be easily supplied to North Korea across the border to feed 26 million Koreans most them are starving due to lack of sufficient grains.

Ground under North Korea has started shaking in terms of geoeconomics. Pitted against her southern hostile partner North Korea under the weight of US & UN sanctions cannot import essentials in order to sustain & develop the country. Putin rubbished the sanctions regime and in fact called for the removal of it wholesale. Before long China world barge in. Iran which is still an outlier due to the sanctions biting her also would find North Korea as useful partner and would be able to legitimise her existing clandestine partnership in acquiring military hardware & know –how from North Korea.

More than anything, this master move by Putin is plus–plus one for Russia as well as the Global South. In addition to ‘food for weapon’, North Korea gets a god sent window of getting out of her isolation. That itself is a great shake-up for her geoeconomics!

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist