Geopolitical Supply Chain Rundown - Series 14

Is the U.S. playing with fire? 

Washington claims that Russia was involved in interfering with the U.S. 2020 elections to undermine public trust in the election process and exacerbate socio political divisions in America.  According to the report, ''we have high confidence in our assessment; Russian state and proxy actors who all serve the Kremlin's interests worked to affect U.S. public perceptions consistently.'' 

As a result, the U.S. administration announced that it would sanction Russia. It is important to note that Washington had earlier sanctioned Russia over the poisoning of Navalny via its Commerce Department.

The department suspended the export of unrestricted software and technology, as well as servicing and replacement parts and equipment that had been exported to Russia. In his reply to these sanctions, Putin said that the U.S. was playing with fire. and the Russian foreign ministry spokeswoman, Maria Zakharova added that Russia will continue to systematically and resolutely defend its national interests and rebuff aggression.

As tensions rise we will see different policies, trade restrictions, and sanctions from both countries. Russian organizations in the U.S must pay attention to sanctions that can affect their productivity, profit, operations, and possibly existence. We may also see the U.S. boycott Russian oils, precious stones, and mineral fuels in a bid to reduce its economic power. 

In the same vein, American organizations in Russia must also pay close attention to this trend. The current US administration has vowed to strengthen supply chains to avoid a situation where any country holds America to ransom. 

If this conflict with Russia persists, we may also see the U.S increase production of materials it imports from Russia to ensure that the American economy is not stranded if Russia stops exporting to America. 

Russia has said that the U.S. is playing with fire, and one can only wonder what Putin will do next.

India's Oil dependence 

India is one of the world’s largest importers of energy. It imports about 80percent of its oil, and when the OPEC+ coalition decided to tighten the market, which led to the spike in oil price, India expressed its displeasure. 

India is displeased because the prices pose a threat to the recovery of consumption and can ruin the Central bank of India's strategy to support economic growth. As one of the world's largest importers of oil, an increase in oil prices will push up India's import bill and domestic inflation. 

In the past, Saudi Arabia was the largest exporter of oil to India bringing in nearly 15 million barrels of Saudi crude to India monthly. However, since OPEC began tightening production cuts, India has been looking to diversify its oil imports from the Middle East. 

As a result, it boosted its crude oil import from America and slashed its purchase from Saudi. Now America has overtaken Saudi as India’s second-largest oil supplier. Since the U.S. is not a member of OPEC, it has full rights over the production and exporting of its oil without OPEC's interference. As a result, the OPEC pricing and market tightening do not directly affect the price of America's oil. 

Can Saudi lose India's patronage to a larger extent if it doesn’t fix the cuts? Can other countries match Saudi's production? Again, this proves the danger of any country depending solely on another for essential goods and services. 

Africa needs to have a debt repayment plan. 

 In last week’s geopolitical rundown, I highlighted China’s increasing influence over African countries through loans, grants, and investments. This week the President of the African Developmental Bank, (AfDB) President Akinwumi Adesina called on African leaders to collectively establish an African financial stabilization mechanism that would give Africa the fiscal space it needs to deal with debt.

Why is this important? Currently, Africa’s collective debt now stands at 70 percent of the continent’s Gross Domestic Product (GDP). Many of these loans may have been granted with huge collateral, precious to African nations, and crucial to their national security, economic stability, and sovereignty as a nation. 

Let’s take the concerns on China's ability to seize the Port of Mombasa if Kenya cannot pay up. Although, authorities in Kenya have allayed fears that China will seize the Port of Mombasa if the country defaults on loans procured to finance the loss-making Standard Gauge Railway (SGR).

We are now left to wonder what kind of assets do countries offer to secure loans? Will Africa be able to establish this mechanism, only time will tell. 

The U.K. also recognizes China's growing influence.  

Britain has published a review of its post-Brexit defense and foreign policy. In the document titled global Britain in a competitive age. The Integrated Review of Security, Defence, Development and Foreign Policy. The U.K highlighted China's increasing power as a major challenge to the future. 

It also stated its willingness to "tilt" to the Indo-Pacific. According to the report, Britain will invest in enhanced China Facing capabilities. It will also develop a better understanding of China and its people, and remain open to Chinese trade and investment while protecting themselves against practices that hurt prosperity and security. 

We can confidently say that there will be a rise in trade relations between China and the U.K, although we're not sure of the extent. 

Source - Geopolitical Futures.