Incursion and World Trade, and What Ties Them Together The Benjamins, From a U.S. (individual’s) Perspective

If you wake up each day, grab a cup of coffee, and turn on the world news, or CNN, like I do here in the U.S., one could obviously become a little pessimistic about our future together on this planet. I say, fear not, and look at the bright side. According to Wikipedia, and the 15 signs of impending doomsday….meh…we have hit on maybe one if #9 was in fact Mick Jagger and Keith Richards coming to blows in the studio. https://en.wikipedia.org/wiki/Fifteen_Signs_before_Doomsday (Welsh Prose version please)

However, in the real world, according to CNN, and other credible world news reports, (sorry Fox news, although Russian state run media loves Tucker Carlson) and not Wikipedia, we are definitely sitting on the brink of potential world war again at the time of this writing 2/1/2022. With the pandemic still having a grip on the global economy and supply chain shortages becoming the norm, the last thing we needed was another world crisis…but here we are.

Obviously, I am talking about Russia amassing troops on the border of Ukraine. If that wasn’t the first thing that popped into your head, I ask, where have you been lately? Will they invade? Nobody really knows at this point except Putin, but if you look back at 2014 when Putin annexed Ukraine’s Crimean Peninsula and funded a separatist war in eastern Ukraine, yes, he provoked Western sanctions and global condemnation, but it also provided an infusion of capital into his domestic political fortunes. What the Russian population sees on state owned media, and what we see on a channel like CNN, are entirely different, which is very similar of course to China’s reporting of world events.

I’m not looking at just one hot spot on the planet daily…but two of course. If Xi Jinping wanted a distraction from what’s going on in the S. China Sea and Taiwan, Vladimir Putin certainly obliged with putting 127,000 troops on the border of Ukraine, and 30,000 in Belarus. Updates are coming in by the hour, so who knows where this situation will have led by the time you read this. I’m hoping it’s just a game of chess among the major players, and Putin would simply like to see if the U.S. does in fact have a checkmate for him. Afterall, we are now viewed as a waning world power thanks to the ongoing divisiveness within our own government. Poking the bear also reveals whether or not our allies really are on the same page with us.

Given that the world’s largest masses of land are not always tied directly to being among the world’s most influential economies does in fact beg the question, what is it that Putin really wants? To reverse the West’s expansion after the Cold War? Really? I don’t think so. As I have preached in many of my previous articles, just follow the Benjamins. (Translation: $100 bill in U.S. currency with a picture of Benjamin Franklin on the front for those not familiar with the colloquial). Isn’t this Russian move on the world chess board really just about the Nord Stream 2 gas pipeline that runs from Ust-Luga in Russia through the Baltic Sea to Greifswald Germany? One of three major pipelines leading from Russia to the E.U. The company behind it is Gazprom, a state and therefore President Putin owned, economic powerhouse. In a nutshell, it will carry a much needed 151 million cubic meters of gas per day. The $11.6 billion project was completed in September of 2021, but Germany’s energy regulator BNetzA has said the approval process for the pipeline is likely to drag into the second half of 2022 so it is still on hold with Germany yet to officially sign off on the arrangement, quite possibly also due to the rather loud objections of the U.S. and the E.U. citing just what a huge geopolitical mistake this would be to give Russia that much leverage. Therefore, case and point, and most notable among the NATO countries commitments to assist Ukraine, Germany needs to stay neutral in regard to Russia’s current posturing with Ukraine and have announced that they were going to send 5,000 helmets to the Ukraine military, along with matching scarfs, and gloves. It’s damn cold on the Ukraine-Russia border in winter, but remaining stylish pre-combat is essential. President Biden announced recently that new German Chancellor Olaf Scholz will visit him at the White House next month in a further sign of a possible meeting of the minds. He is bringing a custom helmet for President Biden with a Gazprom logo. All kidding aside, there is a great deal of pressure on Olaf Scholz to follow through, as of January 2022, Gazprom is the largest company in Russia by market capitalization generating revenue of about $130 billion in 2020. Gas prices in Europe are surging, and Gazprom is reaping the benefits.

We in the U.S., who are paying attention to world trade and the sometimes-critical exchange of resources get it, Germany needs reliable gas supplies from Russia who is one of the top world exporters of liquified natural gas, and the U.S. is not in a position, at this time, although we will try, to replace Russia in that role.* In fact, Germany, Italy, and Austria, who receive gas via pipelines that run from Russia through Ukraine, are attempting to wean themselves off of coal and nuclear power. Of note, Ukraine stands to lose several billion dollars per year in transit fees from Russia with Nord Stream 2 taking a reroute. Bypassing Ukraine sharply reduces the country’s leverage with Russia and of course would reduce a good portion of its potential annual income. Europe and Germany depend on Russia’s gas, and the conflict is exposing the subsequent vulnerabilities as Nord Stream 2 has become both a deterrent to war in Ukraine and an option for punishment if the one final line in the proverbial sand is crossed. Given the somewhat chaotic mix of rhetoric from the various governments involved, who knows just what that would be. Suffice it to say, we are past the point of defining what was once considered a “minor incursion.” I’m with Ukraine on that one, as it was truly a WTH moment from the U.S. President.

Back to more definitive language from the Whitehouse, who have stated, if Russia invades, Nord Stream 2 is “dead,” but that’s not really our decision, or is it? I urge you to once again, follow the Benjamins. In 2021, the total value of U.S. trade in goods with Germany amounted to a little over 183 billion U.S. dollars; composed of exports worth 59 billion U.S. dollars and imports of 123 billion U.S. dollars, making it into the top 5 trading partners list with the U.S. Worth noting though, Germany is in the top 3 of trading partners with Russia, but Russia doesn’t even make the top 10 in trading partners with Germany. Who has the leverage, and who needed some I ask? Keep in mind, Germany is the region’s biggest economy, and the scramble to secure energy supplies for Europe puts on display just how reliant the continent is on Russia to meet its needs. In 2021, Russia accounted for about 38% of the European Union’s natural gas imports, shipping almost 153 billion cubic meters, according to data agency Eurostat. To say the least, Putin will not be happy if the U.S. intervenes with Germany signing on the dotted line to get things flowing.

I have to hand it to Putin, to a certain extent, as his timing on causing an additional global crisis was well planned, and probably for quite some time. I would imagine, he also kept Xi Jinping in the loop and promised not to do anything considered totally invasive, until after the Olympics. I am pointing to the American struggle to save democracy in a post-Trump administration, and divisions between European powers. This is most definitely a very transitional period for the three major European powers. Germany has a new government that is divided regarding foreign policy, and fully admits that it is reliant on Russian gas in the winter and remains apprehensive in the face of any military operation due to its past abuses in military incursion. French President Emmanuel Macron faces reelection in April and is using the crisis to push for a more dominant E.U. role that could weaken U.S. authority. (He is however having discussions with Russia, but is talking with the Biden Administration first) ) As for the British Prime Minister, poor Boris, who is facing a relentless barrage of attacks on his character for partying during the strict London COVID lockdown that he implemented. It’s now coined in the U.K. media as “Partygate” and is looking at 20 months’ worth of the Prime Minister’s festivities concerning excessive alcohol intake during COVID lockdown restrictions. Ouch! Suffice it to say, the government in London is also facing continued backlash with its close allies over its exit from the EU, but that’s old news. In the meantime, January-October 2021, total trade between Russia and the countries of the European Union increased by 37.6% year-to-year up to 197.8 billion euro. According to Eurostat, imports from EU countries into Russia were up 11.9% during the 10 months 2021 marking a total of 73.1 billion euro. However, next up, with any amount of invasion are extreme sanctions and export controls that could put a real damper on things. Hopefully it won’t come to that.

With all that is going on with Russia and Ukraine, it does make one wonder, what is China doing at this exact time in world history, besides welcoming absolutely nobody from around the globe, much less locals, to the Olympics? Continued military activity in the S. China Sea could of course enjoy the current distraction of the Russian-Ukraine situation. The build-up of military might on the Spratly and Paracel Islands has been going on for quite a while, and military exercises are a weekly event. It makes one wonder, could the invasion of Taiwan be a post-Olympic event?

What resource is it that China wants that Taiwan has? Is it really what Xi stated, that complete national reunification is an inevitable requirement for realizing the great rejuvenation of the Chinese nation.”

Smoke and mirrors. I don’t think so. It’s greed, not creed, and China is already a superpower, but lacks the technological advances of Taiwan. It’s deep rooted in their dual circulation policy goals, which I covered in my previous article.

Much like the E.U. and Russia, U.S. and China, China and Taiwan, etc., invasion of another country aside, the economies are deeply intertwined. That being said, China is a major trading partner to over 120 different countries around the globe, and expansion in that regard, has always been first and foremost, on a daily basis. Testimony comes from the massive Belt and Road initiative. In this particular case, China is also Taiwan’s largest trading partner, accounting for 26.3 percent of total trade and 22.2 percent of Taiwan’s imports in 2020. Most notable, Taiwan’s exports have surged in 2021 to a record $446.5 billion, which is $100 billion more than in 2020, with China being the number one destination. On the other side of the globe, trade between Taiwan and the U.S. has also been more than robust in the last decade, and when you look for the largest producer of microchips on the planet, and how that shortage of supply is affecting us all, Taiwan is an absolute standout globally. Taiwan accounted for 30% of U.S. semiconductor exports, making it the largest semiconductor market in the world. Aside from semiconductors and substantial amounts of agricultural trade, Taiwan is the 3rd largest destination for U.S. energy exports. In a noteworthy trade agreement, beginning in 2021, Taiwan was slated to purchase over $35.8 billion worth of liquid natural gas (LNG) over the next 25 years from the U.S., and there is no pipeline involved. What is also attractive to China is the fact that Taiwan is the 4th largest U.S. Pacific trade market, after itself, Japan and South Korea. This land grab would be one heck of an acquisition for China, and a boost in the technology sector.

Given the ongoing territorial disputes in the South China Sea, it’s amazing to me that trillions of dollars in trade can actually still pass through these waters without a major incident on a daily basis, or could it be that it is widely recognized that the world economies are in fact more important than territorial disputes, many of which have been going on since the 2nd world war. Of course, countries like N. Korea could cause a major incident in the S. China Sea any day by striking something with an errant missile. An incident totally unrelated to trade? Not really, as they are completely shut off from the world. In the Sabre rattling, hey look over here, they just fired off their 7th ballistic missile in the last 30 days, but few, except the U.S., S. Korea, and Japan care, because N. Korea has no valued resources when it comes to clout in trade. Farfetched yes, but crazy things are happening on a global scale these days, and I think the reason N. Korea would be invaded, actually should be invaded, is due to a total lack of resources, where the United Nations, with a big push from the U.S., goes in on a mass scale humanitarian mission to save about 30% of the population that is severely malnourished having been bashed by 2020 crop killing storms and floods. Pre-pandemic, N. Korea was only trading with China, and when they officially shut all that down due to severe COVID restrictions, they were totally on their own, and that’s not a sustainable arrangement internally. China accounts for more than 90% of North Korea’s external trade, and last time I checked, early July in 2021, the value of such transactions was just $14.13 million, sliding 85% from the previous year. Follow the Benjamins, and there go the missiles. As of two weeks ago, minimal trade has started again with emergency supplies being loaded by train to go back to N. Korea.

World trade, or lack thereof, it’s chess board moves of the haves, and the have nots. It’s the root cause of much of the world’s military engagement. The haves: At a glance, below are the top 18 richest countries in the world according to the International Monetary Fund October 2021 report. Evidence as to why Beijing wanted Hong Kong back in my opinion.

Listing Taiwan as a Province of China? I wonder who sits on the IMF board of directors. Could it be #3, Jin Zhongxia of China, with a whopping 306,288 votes? Yes, would be the answer. Only the U.S. and Japan have more votes.

 RANK

 COUNTRY

 GDP-PPP ($)

1

Luxembourg

126,569

2

Ireland

111,360

3

Singapore

107,677

4

Qatar

100,037

5

Switzerland

78,112

6

United Arab Emerates

74,245

7

Norway

69,859

8

United States

69,375

9

Macao SAR

67,475

10

Brunei Darussalam

65,675

11

San Marino

65,446

12

Hong Kong SAR

65,403

13

Denmark

63,405

14

Netherlands

61,816

15

Taiwan Province of China

61,371

16

Austria

59,406

17

Iceland

59,268

18

Germany

58,150

The list continues to 192 with the poorest countries. Regarding the have nots, for example, Somalia (a lawless land with no stable government) comes in around 191, but Somalia also has untapped reserves of numerous natural resources such as iron ore, uranium, copper, tin, bauxite, gypsum, salt, and natural gas. An impending invasion there? I don’t think so, at least not from the U.S. and Russia, as both have had their fill of unsuccessful Somalian events (Black Hawk Down even made it to Hollywood). China is making some inroads, and roads as well, as the infrastructure is very poor. The Belt and Road Initiative should come into play gradually, without China being aggressive.

So, speaking of aggression, and/or non-aggression, if we can get through the Ukraine-Russia event diplomatically, and Putin gets his Nord Stream 2 up and running, next up as previously mentioned, is a post-Olympics Taiwan event, and back to the aggression. There is never a dull moment when you follow the Benjamins, and the highly coveted resources around the globe. One final note. As I wrote this, a song from Pink Floyd’s “Dark Side of the Moon” album was stuck in my head. “Us and Them.” Specifically, the lyrics within the song: Down (down, down, down, down) and out (out, out, out, out) It can’t be helped that there’s a lot of it about. With (with, with, with), without, and who’ll deny it’s what the fighting’s all about?

*In December 2021, the U.S. exported more liquefied natural gas (LNG) than any country in the world—an incredible achievement for a country whose exports were negligible just a few years ago. While Asia remains the top export destination, many of these cargoes were delivered to the E.U.

Through the first 10 months of 2021, total U.S. LNG exports surpassed $25 billion in value, and IHS Markit is now projecting that America will surpass Qatar and Australia in 2022 to claim global leadership on an annual basis.

Source: https://www.uschamber.com/energy/u-s-natural-gas-exports-deliver-more-than-just-energy

Read more articles by this author: https://www.braumillerlaw.com/author/bob/ 

Contributing Advisors