Monday, July 11

Brexit: chance for Russia to force open the door?

It is not just the Russian economy that has been suffering post-sanctions: Russia also has been losing clout among the stans, as money means everything and that is in short supply currently in Russia. Kazakhstan and Georgia are building new port terminals, including a dry port on the Kazakh-Chinese border, seeking to strengthen an already-strong relationship with China and bypassing Russia: both traffic-wise and politico-economically. The trend has started to reverse in the past few months, though: parts of Europe, most notably Italy, have started to warm up to Russia. Russia used to be one of Italy's biggest trading partners pre-sanctions: in particular, Gazprom having a strong relationship with Eni. However, the colour of the relationship is changing. As Russia itself needs money now to keep floating, it is the Italians, with companies such as Saipem, investing in Russia: Italians are building and owning stakes in several projects in Russia, ranging from chemicals to hotels. Things are cheaper, and past bonhomie is being raked up, as Italy, probably very wisely, predicts a thawing of relations between the EU-US combine and Russia. The world, except for the US and India, is in a bit of economic doldrums, so to give a helping hand to each other would not go amiss; Ukraine and Crimea can be forgotten for convenience's sake. Russia is also building up some of its mining capacities, most notably in semi-precious and precious metals, even though commodity prices are not helping: the argument being that costs are also down and that a future cycle of growth, especially in Indian and Southeast Asian markets, might lead another world economic rally, though maybe in only a few years' time, not immediately. While pain relief thus might still look far ahead, Russia, through Britain's exit, should be seeing a silver lining in the economic cloud.

Right-wing parties are on the rise in Europe: the effect is a Europe breaking fast. Britain's exit might very well hasten it, unless a strong and charismatic European leader emerges to arrest the explosion. Already, effects of the right on relations with Russia can be seen: as reported here, more and more regional parliaments of Italy, like the right-dominated Ligurian one, are voting to recognize Crimea as part of Russian Federation. The outcast is gaining its way back into Europe slowly: Europe, with the impending exit of the UK, will now require Russia even more. Europe requires places for production, natural resources, and markets: it doesn't have a free trade agreement as yet with India, China or the US. In fact, that is why it might probably be a wise decision for the UK to leave the EU: after all, again due to Italian influence and "all stand for one", regardless of the merits of a case, EU hasn't had an FTA with India because of the Italian marines case. Many countries of the EU would have liked to get that deal, but when you run with another partner with one of your legs tied to theirs, it is difficult to drag yourself all the way to the finish line. And it is this that Russia would exploit, and, in fact, as a wily country, will.

It cannot be ruled out, especially at such a juncture, that Russia might discretely support, financially, if it is not already doing so, Europe's right-wing parties, most of which don't have an easy time raising funds as they occupy the intellectual low ground. That would, in turn, lead to more Ligurian-like resolutions, even at national levels; that may also fulfil Russia's long-held ambitions to see Europe broken up, which gives it again a very powerful, hulking presence, able to hold its own against its strong neighbour, China. More such resolutions would mean further weakening of the pan-European entity: and countries striking their individual trade deals. Some may prefer Russia (like those who like moneybags), some China (like all would want to), some India (like UK should), some US and some Latin America (like Spain, for historical and cultural reasons). In such a scenario, if Trump wins, then US itself would be off the list: and a lot of investment would flee to buy gold and commodities, and then to Russia, China, and Southeast Asia. It would be interesting in such a case to see what policies Trump has in place with regard to South Korea and Japan, in particular: two very strong US allies and trading partners as well as major investors and manufacturers. But, anyway, let's not discuss Trump right now: that's still a bit farther away. Irrespective of Trump, Russia has it good now if the UK leaves: an ageing Europe, crumbling under its leftist and Catholic-influenced burden, needs an anchor. The UK was one, to some degree, though Europe also was an anchor, complementarily, to the UK. Now, they need another: the US won't want to be one (though a Trump-led US might want that, but Europe might not be keen on that in a Trump scenario).

The world politics is in an interesting phase: a kind of final showdown between the inexorable progress of technology, bringing the world closer faster than what many would like, and humankind's abilities of adaptability, especially changeability of culture. A lot of ups and downs might be in the store in the next thirty years: what one must not lose the sight of is that not everything should be monetized, even if money should be recognized as important (and not pooh-poohed in grandiose corporate-hating leftist visions). I don't see a larger role for India or for Africa or for Southeast Asia in the immediate future: many of these countries, notably India, have adopted the old Western model of nationalism. That is always a suspect model, but even more so in the present context, when machines are talking to machines (IoT, and machines don't have a nationality) and people can be in different continents in the same day. Don't be fooled by the rise of right-wing nationalism in Europe: it is but foam that will die out, though it will take some time to die out. But countries like India are currently staking their everything on this ephemerality for some short-term advantage and some boasting: the Indian government advisers have not yet realized that by imitating the West's old methods, they will also come to the same, old results: violence, moral corruption and schizophrenia. What is very interesting is how the equation between Russia and China will play out: especially if Russia, as I predict, will become much stronger again in the next seven to ten years. India and Southeast Asia may continue to prosper economically, but it is China and Russia which might hold the key to the world in the future, along with the US. If there can be a rapprochement between China and Taiwan, which I see happening at some point of time not far into the future, that would be a major fillip to China. Meanwhile, Japan and South Korea, though economic powerhouses, cannot grow beyond that in the near future, limited by their size and population. Countries like Norway might come into their own after thirty years if the Arctic has melted sufficiently: the Scandinavian countries, Russia, Canada and the US would be immediate, strong beneficiaries of global warming. (Not the fishermen of Norway, though, a major industry for the moment.) The UK, if it plays its cards well, can benefit from Brexit: it needs to invest less in its mega energy projects and more in Asia and the US, and needs to look at new research partnerships (with China, the US and Japan) to replace some European ones. Though, hopefully, Europe won't be so foolish as to cut off a lot of ties with the UK: that would be a bad situation for everyone in the world, except for the European right-wingers (and for Russia).

Note added later: I did not mention Saudi Arabia and the UAE, two giants and who are both in the process of diversifying their economies. I think that they would keep a low profile for the foreseeable future, just silently expanding their reach. The sociological impact in these countries will be interesting to observe now that they are forced to diversify, and hence be more open.



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