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Geopolitical Update: Likelihood of serious Trade Frictions & War rises as GOP faces loss of the House in November

By Christian Takushi MA UZH, Macro Economist and Geopolitical Strategist – Switzerland, 11 April 2018 (Public release 48 hours delayed)

Over the past two weeks of Easter and Passover celebrations several geopolitical trends we have been monitoring (and warning about) have begun to converge in a worrisome way. A new phase has begun in which the proxy wars (characterised by the use of middle men) may be now giving way to military action to kill one’s enemies directly: Israel is seen as having killed the first Iranian military personnel in a preemptive strike.

1) The Iranian military and intelligence build-up in Syria, Iraq, Lebanon and Yemen accelerates. The military build-up has reportedly prompted the IDF to attack a Syrian military base.

2) Pro-Iranian forces fired another Ballistic Missile from Yemen at the Saudi capital – It was intercepted. More missiles followed.

3) Tensions in the Gaza Strip are rising – we have warned of this.

4) Just as the USA is facing a more defiant Syria, Iran and Russia, Ankara openly embraces both Russia and Iran. Ankara has additionally constrained NATO’s military options in Syria forcing the USA, France and Britain to take higher risks in the event of an intervention. Given the strained relations between Washington and London, the May administration may support military action in order to avert that President Macron becomes President Trump’s closest ally in Europe.

Christian Takushi: “War is coming to the Middle East”
Source: Pexel

5) Israel’s military is preparing for simultaneous attacks at multiple fronts. Military history shows that when faced with imminent simultaneous attacks or war, Israel (aware of her vulnerability – it can be wiped out easily) has opted for a pre-emptive strike. Our independent intelligence gathering & analysis points to Israel developing theatre scenarios in which it cannot fully rely on the USA. This makes a devastating pre-emptive strike and even the use of non conventional devices (possibly nuclear) more likely in the future.

6) The recent tensions following the latest gas-attack on British soil and the increased isolation of Russia by the West, have – in our analysis – increased the pressure of Nationalist-Patriotic circles on President Putin to act more forcefully. Many in Russia believe Western entities set this latest gas-attack up. The West might be making a lethal miscalculation, thinking Mr. Putin is their worse possible enemy. In fact some potential successors of Mr. Putin are military hardliners that see Russia’s growing encirclement by NATO and are ready to go to war against the West.

Mr. Putin may be forced to risk war with the West to stay in power and to “defend” Russia against Western aggression. But a weaker enemy may – like Japan in World War 2 – try to strike first and hard. Russia may not have the strategic conventional resources the USA has, but it has smartly focused on developing First Strike Capabilities since the mid 2000’s. Military history shows how Western powers have repeatedly underestimated Russia’s resourcefulness.

7) A deadly chemical attack in Syria against civilians has reminded the world of Obama’s Red Line. Both Iran and Russia have warned they won’t tolerate a US military strike to punish the Assad regime. Syrian jets have been seen flying to Russian bases. The USA is unlikely to yield to a Russian threat. President Trump is under pressure from Republican and Democrat leaders to act swiftly.

8) The most promising and widely accepted Republican member of Congress and Speaker of the House, Paul Ryan, announces he will step down in January. It is a blow for the Republican Party as it faces a tough Mid Term Election in November. After Ryan’s announcement it is now more likely that the Democrats will take the House. The surprising development may nevertheless force the Republican Party and the White House into a more proactive and aggressive approach. Given the obstruction by Federal Judges at home, it is likely that the bolder stance will be focused on Foreign Affairs.

It is time to begin thinking the unthinkable

Miracles & Traumas live on: An Israeli tank about to advance against Arab forces in the Sinai in June 1967.  200 relict WW2 tanks would obliterate the formidable Egyptian Tank Divisions in 3 days.
Source: IDF archives

From a macroeconomic-geopolitical perspective a war between Russia and the West is becoming more likely: Russia has been isolated, cut off from the world economy and humiliated so much, it has little to lose in a global conflagration. Many experts would rightly say, the USA and Russia know the risk of Assured Mutual Extinction. Thus, the next major or global conflagration is likely to be a staged process. We ascertain from all the trends we monitor, that both the USA and Russia are preferring for that inevitable war to be unleashed in the Middle East first. The slow-motion multi-layered Middle East Conflict is not only unfolding – it is accelerating. Thus, while WW3 might still be far away, the next nuclear war could be much sooner and closer to Europe than consensus assumes. The US-Iran Deal shielded Iran’s Ballistic Program, allowing Iran to use the new hard currency to buy enriched material. Hence the reaction by Arab nations to try to seek missile and nuclear devices of their own.

The recent Trade Frictions may have emboldened Moscow. We expect that In case of a Global Trade War  China would be the biggest loser (or most affected economy), followed by Western Europe (led by Germany)… the USA would also lose, while Russia might be a net winner. Any war or conflict that blocks the Sea Lanes in the Middle East would have to some extent a similar effect of a Trade War. Should there be a war between the West and Russia, the West is likely to descend into chaos while Russians – used to daily hardship and deprivation – are likely to adapt much faster.

Democracy is showing its weak side: Not only have Western democracies become hostages of their huge oligopolies and elderly voters, Western leaders are pursuing their short term domestic goals to seek popularity ever more dynamically – thanks to social media, big data and instant polls. They lack the integrity and strategic foresight to do what is right for human kind.

It is hard to make predictions at the Meta Level where macro trends overlap, but a Currency Reform, a conventional war of large proportions or a war with nuclear weapons is becoming increasingly likely.  Today’s shocking news that the Speaker of the House is stepping down in some 7 months has decidedly weakened the Republican Party ahead of the US Congressional Elections. It could be one of those external triggers. The beleaguered US Administration – under unrelenting pressure by the media, the FBI and the Justice System (federal judges) may have to opt to radically fulfil the outstanding campaign promises of 2016 – to get tough on unfair trading partners and US foes (Iran etc.) – in order to contain the damage in November 2018.

What do I personally think could be a next move? I share here only the most likely scenario: The USA launches concerted attacks on Syrian military targets – although proportional to the committed crimes against humanity, the unleashed force and fire power will send a message to Russia and Iran. More importantly, I expect the US military to use back channels (giving Ankara’s current hostile stance towards the West, possibly via Israel) to inform Russian Central Command of the targets with 30 to 120 minutes fore-warning. Thus, giving Russia just sufficient time to bring Russian nationals to safety. As no Russian personnel is killed, that should allow President Putin to safe his face and opt for a rather measured response. The next most likely course of action is Ambiguous & Delayed Action (ADA), which can be also highly effective. Syria, Iran and Russia have to expect a possible US attack against their interests or assets at any time. Ambiguity is a geopolitical and military weapon. Thus, even if the USA prefers not to announce her military actions (standard doctrine in the Trump-Pence era), at times announcing one with ambiguity can be useful as this also increases the power of the doctrine. It makes the USA even more unpredictable for her foes.

The road to the Mid Term Elections is still long (half a year away), thus I doubt the US Administration will exhaust the National Security theme too early. This is rather one stop in a long journey of destabilisation.

By Christian Takushi MA UZH, Macro Economist and Geopolitical Strategist – Switzerland, 11 April 2018 (Public release 48 hours delayed).

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