Geopolitical Thoughts: A World on the Brink

Includes: DIA, EEM, EFA, IEV, QQQ, SPY
by: Haerdt

This past weekend, world finance ministers and politicians from the recently-declared deceased G7 group of world powers met in the remote Canadian town of Iqaluit, capital and largest community of the northeastern Canadian territory Nunavut. Remote doesn't come close to describing how out of the way this meeting is; this distance from civilization would best be described by a pair of photos:

Not only is it completely off of the beaten path, but there’s no way that the meeting was planned well enough in advance for anybody other than the finance ministers to be present. If it had there almost certainly would have been significant public protests present, not to mention more secret organizations with more militant capability and intention, perhaps other G20 members, who would have acted in unison to stop it or be present. Geographically, this meeting also took place in the heart of the Western world, outside the publicity prone-United States, and in barren tundra. Conclusively, these are the makings of a secret gathering.

Let’s remember that the G7 consists of the United States, Canada, Germany, France, Italy, Japan and the United Kingdom. Of these countries included, major global powers like Brazil, Russia, India and China were apparently not involved. Neither were significant regional players like Australia, Iran, Venezuela and South Africa. In fact, the only countries with any real geopolitical clout in this group were Germany, France and the United States. Finally, the key players in today’s most critical global issues are also absent: Saudi Arabia, Israel, North Korea, Greece, Spain, Portugal and Pakistan.

A slew of recent events, well-publicized, make this meeting particularly important. First, the Hatian earthquake and the subsequent events surrounding the island demonstrated an international inability to cooperate towards common goals. Most important is the incident’s result: American military occupation of a region rich in natural resources. This power play by the US has resulted in the establishment of military and political ties, some forced, on energy reserves that can provide lifeblood to keep the American empire alive a little longer.

Second, the situation in Yemen, largely overlooked by global news sources, is of serious geopolitical consequence. Yemen sits on a strategically critical energy checkpoint in the Bab el Mandeb straits. Presence in this region has the potential to act as a faucet – with a well placed military strike, the flow of oil to Europe could be seriously compromised or impeded, and made considerably more expensive, as tankers would be forced to reroute around the Cape of Good Hope. The American response to a convenient failed Christmas Day terrorist attack will result in an American military presence in southern Yemen, providing control over the adjacent sea lanes.

Third, Greece’s impending default and restructuring require urgent multilateral action but there is not an international body in place to provide such supervision. Financially, the country is in default, which brings to light the pressing notion that most Western nations are essentially bankrupt existing only at the mercy of creditors. As much discussed in financial media, this problem potentially could collapse the Western world, but effectively the result would be far from disaster. After defaulting on mutual debts, North America and the European Union could realistically merely decouple from the trade interdependence created in the past thirty years with Brazil, Russia, India and China.

Unfortunately, these three events are representative of a drastic heightening of tension between global power centers: the West composed of North America and Europe, and the Rest composed of South America and Asia. To add to their importance are a slew of other developments, including, but not limited to, unresolved tension with Iran stemming from an inability of Western leaders to recognize responsibility, the Ukrainian political situation and its effects on the Russian sphere of influence, continued conflict in Afghanistan and its destabilizing effect on Central and Southern Asia, and American arms deals with Taiwan in the face of Chinese fury.

There are too many situations that are political powder kegs. As their number increases, the sparks that prevailing attitudes in the East and West often create have terrible potential. Although I sincerely hope that peace breaks out, the outlook is negative.

Disclosure: None