Wednesday, March 16, 2016

Blood & Oil - The New Emerging Petro-Landscape



Collectively the major oil producing countries that are highly dependent on oil export revenue are experiencing an unprecedented level of tumultuous upheaval. A seismic shift is taking place in world oil production with the addition of US shale-oil production and recent exports during a period of flat demand not to mention a strong US dollar - so much oil and nowhere to go. And because of the strong US dollar, even countries that are not under economic strain have shrewdly decided to limit their purchases of oil.

Each oil dependent country has unique economic handicaps and each with their own particular budgetary breakeven oil price requirement that makes it imperative for them to produce at an unsustainable, flat-out pace.

However the oil market share is directly linked to another type of market share: defending sovereign territory with the creation of buffer zones by arming proxy groups. Additionally they have a dearth of military experience in supporting or battling militants beyond their borders, made more challenging because these militants are battle-hardened, highly experienced and possess firepower that rivals those of sovereign states.

A factor rarely mentioned is that many of these oil producing countries’ economic difficulties are exacerbated by the high cost of these direct and/or indirect military entanglements. The security and armed forces of autocratic governments are established to defend against internal threats, rarely external ones. These counties are now battling a two-front war, internal and external, and as a result are stretched painfully thin.

In the past their purchases of advanced fighter jets and other ‘trophy’ weapons designed for external battles, were rarely used in combat and their costs were limited to the initial purchase price, crew training and general maintenance. Nowadays these trophy weapons are significantly more expensive to maintain when utilized on a daily basis which accelerates the ‘burn rate’ of their precious foreign reserves. Consequently these war-time military expenditures increase considerably the actual breakeven budgetary oil price point than the officially accepted published figures.

Even a rise in oil prices above their adjusted economic break-even point will only enable them to more comfortably finance their armed forces to defend territorial market share. Depressingly because of the continued existent of powerful non-states operating almost at will within failed states, military expenditures will remain unchanged. And at some future point when the region establishes a modicum of stability, these countries will maintain their elevated military expenditures because they reside in a region whose stability is always short-lived and tenuous at best.

In this region, market share in the oil is meaningless without military dominance because “checkbook diplomacy”, practiced to perfection by the Saudis, has been rendered outdated and ineffective. Economically countries can adjust accordingly to harsher circumstances but cannot recover easily militarily from the loss of sovereign or buffer territory, especially the loss of influence within their own territory to anti-government indigenous citizens.

Outside of the Middle East cauldron is Nigeria and Venezuela, major oil producing countries that have exclusively internal yet still potent challenges. Nigeria still struggles to pacify the militant group Boko Haram while Venezuela, at the cusp of economic default, a humanitarian crisis and civil unrest, has a political gridlock between President Maduro and the opposition’s legislative majority, an acidic confrontation that can spillover onto the streets and ignite this tinderbox.

The OPEC community continues to have divergent and competing interests which have created unusual and sometimes contradictory geopolitical cross-relationships. In one of a multitude of examples, Iran and Russia collaborate militarily in Syria because of decades-long mutual interests yet compete on energy matters including gas exports with sanctions lifted on Iran yet still in place for Russia.

Because of these conflicting interests it’s almost impossible for OPEC to agree upon a strong coordinated effort to reduce production to raise oil prices. Those countries best positioned to not only survive but thrive after the denouement of economic and military battles, are the ones who best utilize their resources. Based solely on economics the ones with the deepest pockets and access to credit are Iran and Saudi Arabia; those most vulnerable are Iraq, Russia, Venezuela, Nigeria, and Iraq.

Not surprisingly the recent non-binding production “freeze” agreement among OPEC and non-OPEC producers has no real impact on raising oil prices. The real objective of the agreement was that it provides an important political precedent: that OPEC and non-OPEC countries can agree collectively in establishing some kind of an agreement. The perception created is that OPEC and non-OPEC countries indeed continue to disagree, but now the lines of communication are established so that differences can be narrowed, perhaps even overcome, in future meetings. Weak agreements are better than no agreements.

The eventual denouement of these economic and military battles will shape the region for decades to come. These governments are well aware that these are extraordinary historic times which, whenever the sand settles, will determine a newly formed power dynamic in the Middle East whose future landscape may be unrecognizable from today. Their frenzied efforts economically and militarily for not only survival but dominance is justified because second best is not an option in this unforgiving region.

Copyright Indo-Brazilian Associates LLC 2016.  All rights reserved.

Indo-Brazilian Associates LLC is a NYC-based global advisory service and think tank with connections at the highest levels specializing in international investment, political and security risk assessments. International business is increasingly complex featuring a highly mobile professional class in all corners of the globe. We provide you the tools to successfully negotiate cross-culturally in your global business endeavors. Tell us about your challenges.  We'll get you on the "Short List".

We provide executive coaching, speaking engagements, speechwriting and workshops. Contact us at www.indobrazilian.com

Is Berlin Burning?





There seems to be a reluctant admission, even subconsciously, that the world is just a slight push away from tumbling into an abyss that defined the 1930s when chaos and economic collapse reigned. It was a horrific era when genocide was government policy. Specifically it was when the Nazis successfully convinced its citizenry that Jews and other so-called undesirables were responsible for their misery and deemed “foreigners” and that their forced expulsion – or liquidation - was the key not only to their survival but their future prosperity. In the 21st century the so-called new invaders are primarily Muslims from the Middle East, North and sub-Sahara Africa, over one million, who are unofficially deemed as the new security threat.

The frightening aspect is that despite the post-WW II establishment of a plethora of economic, political and social reforms and institutions created to prevent conditions of the 1930s from re-emerging, these same conditions are festering at an alarming rate. The arrival of over a million migrants last year coupled with the anticipated arrival of hundreds of thousands more as spring arrives, the political landscape and operational logistics to house these migrants will start fraying at the seams. The present encampments are de facto ghettos creating a humanitarian crisis in the making as eerily depicted in the French movie District 13 (2004). The specter of last year’s terrorist attacks in Paris heightens the real possibility of chaos on the streets of many European cities this spring and summer should there be a repeat of such an act.

The massive surge of humanity gives the impression of an invasion, alarmingly to even the most leftwing, liberal Europeans. Many of the migrants have given up hope of ever returning to their respective countries whose dysfunctional, violent and repressive governments are unlikely to change in their lifetimes. Their voyage is a one-way ticket mimicking the strategy of the Spanish explorer Cortez who deliberately sunk his ships after landing in the New World to “inspire” his men to fight or die because there was no turning back. Similarly the migrant boats and dinghies barely made it in one piece to European shores, their New World. These migrants are now committed.

The simultaneous weakening governments and challenging rightwing parties in a stagnant economic environment inspires radical and violent elements that can provoke situations that can swiftly evolve and spin out of control. The volatile combination of far-right European and mostly Muslim migrant groups can spark the type of civil unrest that would be Europe’s, particularly Germany’s worst nightmare.

For decades the younger generation have wondered how a cultivated, sophisticated, liberal and democratic country like Germany could have fallen under the spell of Hitler and the Nazis could have occurred. Now it’s déjà vu, as they now find themselves transported back in time and facing the reality of an additional influx of people unlike themselves. It’s a real-life a war game to see how differently they would react versus how their grandparents did during the 1930s. And I’m sure there are those elderly Europeans who may have supported those despicable regimes back in the day who are privately snickering at how their grandkids are shifting their opinions in favor of expelling the migrants.

The European citizenry caught in a lose-lose predicaments are those Muslims who were born and raised in Europe with European citizenship but are still considered “foreigners” because their racial, ethnic and religious backgrounds differ greatly from the general population. Under the psychological strain of fear of being surrounded, or even being held hostage in their own land, Europeans may willfully psychologically blind themselves and refuse to distinguish between the European-born Middle Eastern & North African citizens and the recently arrived migrants.

The possibility of Europe devolving into utter chaos and ruin particularly after the bloodbath of WW I seemed impossible. Then WW II occurred destroying that myth. And it seems impossible that violence and chaos would return today particularly with the establishment of so many world organizations based in Europe. Nonetheless, like a suddenly awaken virus, dark sentiments can return and spread in more nefarious ways in the 21st century because of a new more powerful method of propaganda called social media. Of course this is not historically unique to Germany. It’s occurred elsewhere in Europe and worldwide.

And finally there’s the eerie timing, almost Cassandra like déjà vu, of the now best selling publication Mein Kampf, just as anti-migrant sentiment in Europe is growing. Despite the publisher’s best efforts by prominently including explanations to indicate its falsehoods, lies and racist views, just like computer ads that appear at the margins, the readership can consciously decide to ignore them and focus on what they want to be believe.

Copyright Indo-Brazilian Associates LLC 2016.  All rights reserved.

Indo-Brazilian Associates LLC is a NYC-based global advisory service and think tank with connections at the highest levels specializing in international investment, political and security risk assessments. International business is increasingly complex featuring a highly mobile professional class in all corners of the globe. We provide you the tools to successfully negotiate cross-culturally in your global business endeavors. Tell us about your challenges.  We'll get you on the "Short List".

We provide executive coaching, speaking engagements, speechwriting and workshops. Contact us at www.indobrazilian.com



Tuesday, March 15, 2016

Trump’s Political Self-Checkmate



Often there’s a violent reaction, whether individually or entire countries, from one political spectrum to the other after actual or perceived suffering. Witness the pacifist nature of Germany and Japan for decades after WW II. A similar situation is occurring in the US in which millions of Americans who loathe President Obama are attracted to the Donald Trump, the anti-Obama candidate, not to a pragmatic, reasonably well-articulated, policy specific agendas by other GOP candidates. For this reason we are now witnessing the resurgence of the darker side of America that has kept itself hidden in plain sight for many years, yet now emboldened by a “savior” whose political campaign pulls no punches– figuratively and literally – headlong into possible mob rule.

What Donald Trump, who is basking in his success and perhaps at the January 2017 inaugural address, is putting himself in an impossible position – a political self-checkmate - with his devoted followership. Just as Republicans have aggressively blocked or compromised many of President Obama’s initiatives throughout his presidency, so can many Democrats as well as moderate Republicans block President Trump’s initiatives. It’s still a democracy which means he will be hard-pressed to deliver promises to give “their America back” which could possibly provoke a searing backlash. Meanwhile his followership won’t care what obstacles he must overcome, they want their American back – now!  In other words his followers who may feel cheated and betrayed could become his worst enemies.

In turn President Trump could certainly blame liberal politicians and other actors why he’s not achieving his initiatives, a tactic that can work short-term. Because his perceived reputation as a savvy businessman precedes him in “getting things done” he’ll soon realize that the limits of politics are considerably more constraining than those of big business. Utilizing a political containment strategy just as the GOP applied to President Obama, Trump’s ambitions will fall far short of his promises. As the old adage goes, “Be careful for what you wish for.”

The ominous counter-strategy is in foreign affairs, an arena where the US president has far more discretion than domestically. A politically compromised leader, as undertaken by leaders in democracies and autocracies throughout history, is to create a crisis overseas thus persuading those who oppose him to join him otherwise they would be marked an un-American at best, traitors at worst. It looks and sounds ridiculously obvious but unfortunately it works, and works quite well. Just as we were sold a bill of goods about the existence of WMDs in Iraq, so could some artificially created future crisis hijack our emotions and persuasively convince many Americans to believe yet another fairytale.

Either way, this ends badly for your salt-of-the-earth American who entrusts their savior to return them to a long gone Americana will end up as nothing more than a hellish nightmare.

 Copyright Indo-Brazilian Associates LLC 2016.  All rights reserved.

Indo-Brazilian Associates LLC is a NYC-based global advisory service and think tank with connections at the highest levels specializing in international investment, political and security risk assessments. International business is increasingly complex featuring a highly mobile professional class in all corners of the globe. We provide you the tools to successfully negotiate cross-culturally in your global business endeavors. Tell us about your challenges.  We'll get you on the "Short List".

We provide executive coaching, speaking engagements, speechwriting and workshops. Contact us at www.indobrazilian.com

1930s Déjà vu - The Global Political Rightwing Surge



Politically the world is already leaning towards the right, following even worshipping demagogues, building walls and fences, and becoming ever increasingly isolationist. In fact, all Donald Trump has to do is secure the GOP nomination to inspire conservative and rightwing elements elsewhere in democratic countries and strengthen and legitimize autocratic leaderships worldwide.

Fueling this trend and popular rage against liberalism is simple: poor economics fuel strong negative emotions and emotions are never logical. Lurking in the shadows and intensely following the nightmarish American presidential race are rightwing European parties particularly France’s  National Front (FN)  led by Marie Le Pen and Germany’s relatively new Alternative for Germany (AfD) led by Frauke Petry.

Ironically because these parties are maternally led, they are not considered as extreme or dangerous if they were led by men whose comparisons to 1930s fascist dictators would have been inevitable to shame them to dial back their rhetoric far more than their female counterparts. It’s a savvy public relations move. Even Marie Le Pen performed coup d’etat when she removed her outspoken father from the spotlight in order to become more politically palatable and attractive to a wider audience. Europe’s economic social safety net is fraying badly while they host over a million migrants – a cultural invasion - that is competing for ever scarcer resources. These political parties will gain considerable political influence in the government and more importantly, on the streets, their de facto lobbying group, in order to influence and even dictate policies in their favor.

Globalization performs exceptionally well when the world economies do well but suffer severe blowback when it doesn’t. Strong economies remove walls and fences while weak economies encourage building walls and fences whether in Europe or the US.

The irony is that the racial, ethnic, religious and other minorities within the US and Europe will be targeted just as the migrants from the Middle East and Africans in their own countries – worst case “open season” in releasing the racist horrors of Pandora’s Box. The adage “it can’t happen here’ is crumbling” is weakening. When particular conservative groups gain power, current laws protecting the minorities and disadvantaged can be initially re-interpreted, then ignored, and finally dismantled. And with fewer and fewer living Holocaust survivors to personally retell their horrific tales of such trends, living witnesses will be hard to come by to serve as a warning of this nefarious déjà vu.

So the glamorous 1930s timepiece public relations atmosphere of glorious Art Deco architecture & design, the wonders of luxury train trips, the revolution of the airplane, and art & music cleverly paper over the severe misery shared by the majority of people worldwide during the Depression. This time around our façade will be the newly constructed luxury glass skyscrapers, huge commercial developments such as the Hudson Yards to rival Rockefeller Center, and the high-tech capability with a mobile in the palm of your hand vs. the telephone. But the reality for most of the lower and middle class in Europe and the US will be more like Blade Runner cyberpunk than ballroom dancing at the Rainbow Room.


Copyright Indo-Brazilian Associates LLC 2016.  All rights reserved.

Indo-Brazilian Associates LLC is a NYC-based global advisory service and think tank with connections at the highest levels specializing in international investment, political and security risk assessments. International business is increasingly complex featuring a highly mobile professional class in all corners of the globe. We provide you the tools to successfully negotiate cross-culturally in your global business endeavors. Tell us about your challenges.  We'll get you on the "Short List".

We provide executive coaching, speaking engagements, speechwriting and workshops. Contact us at www.indobrazilian.com