“It’s the economy, stupid”. This sentence, coined during Bill Clinton’s successful presidential campaign, defines perfectly the scenarios that Donald Trump, as well as Vladimir Putin, will have to face on their own and as “preferred partners” for international affairs. Last events, like Michael Flynn’s resignation as security adviser for the White House, might appear, though it is quite blurry, as favoring the Kremlin. This political decision, Flynn’s ouster, comes after what it has been considered, for some informed sources, as a plot trying to undermine Obama’s policy by promising, through secret negotiations between Trump’s team and Moscow, removing sanctions on Russia. But what the whole situation really implies is that economy and money move the world, always. On this post, I give some tips about the Empire that Trump, as well as Putin, are trying to build.
From here, a wide range of possibilities might open up. Russia, financially and economically limited due to international sanctions and low oil prices, is trying to sharpen its strategy by supporting autocratic and populist governments like Trump’s. Thus, Russia pretends to accomplish two goals. On one hand, it is making big efforts to recover its financial health in order to go back to growth paths re-activating its trade relationships within energy and weapons fields. At the same time, its aim is to increase its specific weight as a global influencer. The most probable oil price rise, as well as ruble’s stabilization, would reactivate internal demand, therefore the Russian growth cycle would become a reality.
But another factor must be taken into account. Practicing a protectionist policy in the USA, against countries like Mexico, South Korea, Malaysia, India and Thailand, can accelerate recession, giving China a major role to become a global leader. This would come along with Eurozone’s stagnation.
But what has happened to get here? Why is there such a political tension? Again, the answer lies in economic growth upheavals, commodities exploitation and on the strategies to increase international market quotas
Russia is the first world gas and oil exporter and the third one for iron and aluminum. Its weapon and aeronautic industries are extremely important.
Currently, Russian economy has gone through a recession for the last two years. This year economy is expected to rise if oil prices maintain their 50 USD position and internal demand grows with a stabilized ruble, after readjustments.
Moscow is aiming to end with liberal democratic Governments and back up autocratic regimes.
Russia has helped president Donald Trump’s election spreading fake news throughout 2016.
Putin’s Administration is doing exactly that on the French election campaign. Through its RT television channel in French and fake news websites it is trying to create a positive state of opinion to boost Marine Le Pen’s populist list.
Putin must cope with economic and financial limitations due to American and UE sanctions since 2014 as the aftermath for the Ukrainian crisis, adding to that the fall of oil prices.
Besides, the Kremlin, right in the beginning of 2017, started to establish in the Arctic by setting military strongholds in the area due to its geostrategic position and to its natural resources, backed up financially by China.
During President Barack Obama Administration (January 20, 2009 – January 20, 2017) different movements took place and must be taken into account.
Washington and Moscow relations have been in a dead end since 2008 when Russia got started a war against Georgia, becoming even aggravated as the Kremlin rose the tension due to the Ukrainian crisis. Russian intervention ended up with strong international financial and banking sanctions in 2014, that affected Russian Defense companies. The outcome implied the cancellation of financing programs as well as freezing energy equipment exports from the States. Weapons and military industry production was also cut off between Russia and the EU.
The US expelled 35 Russian diplomats in the wake of cyber attacks related to the US election.
Internal and external tensions have already had an effect on the brand new President Donald Trump Administration, January 20, 2017 due to economic ties and interests.
The main United States commercial partners are China, Canada and Mexico.
The White House wants to establish an approach policy towards Russia. To make it possible Rex Tillerson has been sworn in as the United States Secretary of State, very close to Putin by oil business between Exxon Mobil, where he served as CEO, and Rosneft.
The President of the United States has attacked globalization and China in Davos has already taken a step offering itself as the new world leader assuming the USA does not want to play that role.
On January 23, 2017 Trump cancelled the TPP and announced new tariffs on a wide range of goods coming from different countries. On the other hand, he also announced the NAFTA (North America Free Trade Agreement) renegotiation with Mexico and Canada, decreasing taxes and cancelling regulations.
Washington creates global tensions with the following countries: Mexico (on January 25 the decision of building a wall over the Mexican border was taken), Australia (on January 28 a phone conversation over migration policies), Iraq, Syria, Iran, Libya, Somalia, Sudan and Yemen (on January 28 an order was set to block visas from being issued to citizens of these countries), China (China Sea crisis), Palestine (recognition of Jerusalem as Israel’s capital city and settlement of the embassy in the city), Germany (criticism spelt over refugees and European security policies), Estonia, Latvia and Lithuania (hypothetical Russian attack and NATO support).
International conflicts and the TPP being cancelled frame the countries with whom the USA maintains a commercial deficit (China, Germany, Mexico, South Korea, Malaysia, India, Thailand). Like this, Trump is able to turn them into his goals for his American protectionist policy. All this action is taken after being advised by Steve Bannon, Trump’s current chief of strategy.
Being China the main USA external debt creditor, that might leave the Asian giant aside from protectionist policy; thus, on February 9, Trump announced his Administration wanted to have a constructive and smooth relation with China.
Trump voters are new, weak and not united. This makes it easier for him to create an state of opinion about the existence of the external enemy that must be fought down, as quotes and tensions he is creating show. Within this strategy, Spanish readers probably remember the outcome of the conversation between Mariano Rajoy and Trump. A White House statement outlined that the American President asked for a rise on UN’s military budget. On the other hand, Breitbar, an online newspaper, owned by Steve Bannon, his current strategy chief, pointed out that Rajoy attacked President Trump for the Mexico wall. The problem with this was that Rajoy told Trump to rely on him as an ally to soften relations in South America.
Trump wants to establish changes, but he is swearing in new staff, day after day.
The current economic and financial cycle is coming to an end and a possible world deceleration is expected in 2018-2019. The situation could become worse, aggravated, by USA’s tariff levying on imported goods unleashing a commercial and a currency war that could set a recession in 2018.
Oil prices will rise up to 50-60 USD and interest rates will become less advantageous. ECB will probably be tapering its bond buying program pressing on interest rates and risk premiums.