Treasury Secretary, Yellen finds her match…

US Treasury secretary Yellen is competent woman at the helms of US Financial power house. With matchless experience in financial affairs of America she ultimately found her match. Guess who? Surprise and surprise, in Russia to boot. That is her opposite figure of Central Bank chief Elvira Nabiullina. Read for more:

Steering Russia’s economy for nearly five years, earlier she got another five year term in May 2022 immediately after the Russian special military operations in Ukraine. As top notch banker she quelled the market panic over the invasion and brought a sense of sanity. As you are aware, Central Bank of Russia (CBR) is the highest monetary authority in the Russian Federation. It sets and carries out Russian monetary policy, supervises the commercial banking system, and maintains the payments system.

Yellen’s sanctions definitely bit lot of flesh off from the Russian body corporate initially. That is what geoeconomics tools expected to do anyway. Yet, Elvira is made of steel & blood as Bismarck used to say about his Prussian troops. Yellen as recently as on Feb 23, 2023 boasted that sanctions imposed on Russia are having a "very significant effect".

To dial up pressure on Russia, USA has also frozen former’s financial assets which figure has not yet been revealed officially. But Elvira remained unruffled. “Any country can freeze financial assets in the form of reserves held in central banks or in commercial banks. At the end of hostilities, negotiations would begin in earnest to repatriate these assets with accrued returns”. As simple as it is!

True enough, there was flight of capital from Russia to the West. But as the West started to seize or block physical assets such as yachts and financial assets in banks belonging to oligarchs, they abandoned their short stay and reverted to Russia with their hoarded wealth.

That added to the surplus being piled up after heavy trading of oil & gas, got Russia in the money, so to speak. Evidently, excess liquidity need to be channelled productively, and Elvira pounced upon on this chance and facilitated investment in consumer and industrial sectors. Unsurprisingly, apt text book example of geoeconomics counter measure.

Instantaneously, Russian Central Bank has elevated her position as the most reserve rich bank in Europe. What is truly amazing, China started using this God-given opportunity to increase her stake in foreign investment in Russia within double quick time?

Elvira’s best performance to date is in her business strategy of right conversion rate of Ruble. By June last year she recommended that Ruble be tied to gold where 5,000 Ruble was equated to one gram of gold. Technically, Ruble was trading at 135 for one US dollar. At this time gold was trading one gram for 52 US$. Plainly speaking, this means Ruble is worth about one dollar equal to 96 Ruble.

At the time of writing currency traders quote one dollar equal to 80 Ruble. From technical point of view, performance of Ruble over the year is staggering. Beginning at 135 being fixed at 96 and finally now 80 in the global trading means Ruble has strengthened.

To cap it all, Elvira implemented a scheme where purchase of Russian oil & gas be paid in Ruble or in gold in the western hemisphere. This strengthened the Ruble more than the gold itself. A business strategy, like of which I have not seen in the recent past.

 

Cheers!

 

Muthu Ashraff

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist

 

 

 

 

Who wins the commodity war?

Commodity war is defined as denial of resources to an enemy in conflict whereby the supply side of economics is targeted. It is akin to Anti-Access/Area Denial (A2/AD) in military strategy controlling access by opponent to an area of vital importance. China fears mostly about this scenario breaking out in South China Sea.

Let’s begin with what is commodity. In simple terms it is a basic good that is used as input for converting into finished item. In sum, it is simply raw material as accountants call it. China imports the largest quantum of commodity in the world today. Most of China's imports consist of machinery, equipment, semiconductors, chemicals, gas and fuels sourced from countries far and wide

Commodity in whatever form has to be physical. You can print money but you can’t print commodity so goes the maxim in geoeconomics. Therefore, commodity has to be made and exported by a country to China in physical form. That is where the geoeconomics risk glaring at China. Being the largest populous country of 1,437 million people, she has to create employment opportunities to at-least 500 million or so to survive as a nation. Hence, China understands that the one who has sufficient commodity to last for several months win any commodity war. Here are the preparations:

1. China possesses 44% of rare earth at globally. This stock is meticulously used and judiciously exported. As geoeconomics tool China uses this limited export quantum to influence economic policy of importing country. Japan has been put in place in few occasions when she tried to be funny.

2.  To protect China’s global manufacturing output that stand currently at 30% she has contracted for gas & fuel lasting for decades. For example China recently inked a deal with Qatar for 27 year supplying of natural gas. Saudi Arabia was corralled in for signing first of her oil storage agreement in China, where Aramco is provided with 3 million cubic meters (about 18.6 million barrels) of storage space in east China port Zhoushan. Moreover, Saudi exports of crude oil to China is in the region of 1.77 million barrels per day. Under the Russo-China “no limit partnership”, Russia alone accounts for about 25% of oil imports by China that too in discounted price.

In countering any geoeconomics battle, China cannot rely solely on her currency Yuan or her reserves of foreign currency held in unfriendly counties. The only solution is to stack up the gold reserves in safe houses within China and in friendly countries like Russia. Today China is the largest buyer of gold traded in international exchange at 244 t for a period of 2 months in 2023 alone. Approximately declared reserve gold is 2,068 t up-to-date. But unofficial figure must be more than this. Ostensibly, China gets more gold from Russia now than ever.

Let me go back to the captioned title of who wins the commodity war. Heavily stocked China has the highest probability to survive geoeconomics war and turn out to be a winner!

 

Cheers!

 

Muthu Ashraff

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist

 

 

 

France tweaks her business strategy

Emmanuel Macron is making all kind of noises these days. He said Europe must have strategic autonomy lest would become vassal of America. Now he is frantically trying to get an invite to the BRICS meeting in Johannesburg, August this year. Looks like he is trying to tweak French business strategy.

Cyril Ramphosa, President of South Africa is placed in an awkward position. He has the discretion to send an invite but he knows he would face censure by couple of members of BRICS, Russia being super most. For Macron he just cannot gate-crash. Whatever the outcome may be, this request demonstrates that France is in the process of re-visiting her business strategy to keep abreast of events happening in geoeconomics globally.

France is not doing that bad compared to the other trio members who drives European Union, namely Germany & Italy. But recently she was stung grievously by the American extra territorial law that states simply that US has the right to examine third party transactions entered into by French firms that use any process, patents, or techno of US origin. So Macron is working on how to protect French business from the over awning US extra territorial law.

There is no intent by Macron to leave G7 and join BRICS. What he actually wants is to sanitize Euro Zone business firms doing business elsewhere specially in countries in BRICS and the global south from America’s reach. Contingent to this parameter Macron also feels that as and when BRICS currency is unveiled the Euro must also be given status as trading and/or reserve currency, not to be left out in geoeconomics power-play.

Recent visits by Macron to Beijing in April 2023 and by Premier Li Qiang of China to Paris on 23 July 2023 have strengthened Macron’s hand where two-way opening of trade & financial relationship has been acknowledged by both countries and certain to be implemented. Macron wants this to be added onto BRICS wall as well. So with China secured, France waited for Saudi Arabia to show up. As an applicant in waiting KSA has better chance to get BRICS badge amongst the 19 prospective candidates. Currently, Mohammed bin Salman in Paris echoes implicit support to French breaking out from US embrace as he wants one for himself.

As my analysis goes, the vital reason for Macron’s attempt to gate crash has lot do with Russia. Realizing that Putin no longer cares for him, Macron wish to use French charm to get a one to one meeting on the side-lines of BRICS meet or at-least saying hello to him to de-freeze the cold that has set between them after revelation of the Minsk Agreement being fake document where France and Germany cheated upon Russia. Besides reading the current situation objectively France knows that Russia is winning hands down. She must ensure a seat in the post-war negotiating table to ensure French interest and taking forward French business strategy smoothly without any hiccups.

 

Cheers!

 

Muthu Ashraff

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist