The Coming Dependency Stranglehold

Gordon T Long

Global Macro Research | Macro-Technical Analysis

STRATEGIC INVESTMENT INSIGHTS

COMMODITIES

THE COMING DEPENDENCY STRANGLEHOLD

In this month’s UnderTheLens video I continued with last month’s Theme of “Putin’s Chessboard”. Since releasing this month’s video, I continue to see increasing proof.

In this newsletter I want bring to your attention further evidence that there is a major offensive strategy underway that the western nations seem unable to see or the strategy is possibly part of the even larger coordinated “Great Reset” which dominates the annual Davos conferences amongst the global elite and power brokers. I am decidedly in the camp of the former and that China and Russia are solely in full implementation mode! I suspect as 2022 unfolds it will become even more blatant for all to see!

TELL ME AGAIN WHO SANCTIONS ARE SUPPOSED TO HURT?

I have advocated strongly since their implementation that Russian sanctions would not work and like a boomerang would come back to hurt the west more than Russia. Well it didn’t take long to prove that!

The Russian Current Account is growing dramatically (chart: top right), while the US Current Account only continues to fall!
The Russian Ruble is now stronger than when Sanctions were implemented. (chart: right)
Russia and China were fully prepared for US Sanctions and had prepared by developing an alternative SWIFT system (CIPS/SPFS), sold US Treasuries (Russia), established bi-lateral agreements and stockpiled commodities amongst other actions outlined in prior newsletters.

The longer Western sanctions isolate Russia and reduce energy supplies to European refiners, the higher energy prices will go. Even though Russian energy exports are declining, higher prices have enabled the country’s state-owned oil and gas companies to double revenue, thus stabilizing the ruble and allowing financing for President Putin’s military machine.

According to The Guardian, citing a new report of shipping movements by the Center for Research on Energy and Clean Air (CREA), Russia has reaped a whopping €62 billion from oil, gas, and coal exports since the invasion of Ukraine began.

Russian exports to energy-stricken Europe totaled €44 billion in the last two months, compared with €140 billion for FY ’21.

The revenue surge comes as:

“Russia has continued to benefit from its stranglehold over Europe’s energy supply, even while governments have frantically sought to prevent Vladimir Putin from using oil and gas as an economic weapon,”

Center for Research on Energy and Clean Air (CREA)

HOW TO ACCELERATE THE STRANGLEHOLD ON THE GLOBAL OIL & GAS INDUSTRY

The following announcement by global insurer giant Allianz is as strategic (and as obviously coordinated) as Saudi Arabia’s decision three weeks ago to abandon the Petrodollar. Whether planned or a massive miscalculated blunder, together they potentially accelerate shifting global power to China & Russia by effectively crippling oil & gas supply in the non-aligned China-Russian alliances, as highlighted in this month’s UnderTheLens video.

No producer can possibly operate without full property and casualty insurance on a multi-million dollar project!

Here is the announcement as reported by ZeroHedge:

The Allianz Group, one of the world’s largest insurers and asset managers, published a statement Friday detailing how it will no longer insure and invest in new oil and gas fields starting in 2023. This comes at the worst possible time for extremely tight oil markets as Russian production drops due to hard-hitting Western sanctions, igniting fuel shortages in Europe, the US East Coast, and other parts of the world.

Allianz said it won’t offer new single-site and stand-alone property insurance and casualty insurance coverages (and renew existing contracts after July 1, 2023) and will halt new funding for exploration and development of new oil and new gas fields (upstream), construction of new midstream infrastructure related to oil, construction of new oil power plants, and projects in the Arctic.

The new guidelines come as the company is “accelerating the deployment of its climate strategy and has announced new ambitious commitments in both its core business and operations … limit the greenhouse gas emissions (GHG) deriving from Allianz’s sites and activities in over 70 markets to net-zero by 2030, instead of 2050 as originally planned.”

The timing of such an accelerated climate strategy will undoubtedly mean a reduction in capacity for new oil projects globally because it will be harder or perhaps more expensive for oil and gas companies to insure projects. This is a sure way to collapse supply even more, when the US is acting as a barrel of last resort to a tight global energy market hungry for supplies as Russia’s production sinks.

Allianz said it was “committed to actively driving the transition towards renewable energy sources, supported by significant underwriting and investment capacity and appetite for renewable risks.”

The world is about to experience a second energy shock, and Allianz’s move to abandon insuring and funding fossil fuel projects may lead to continued disorderly decarbonization of the economy. In other words, elevated energy prices are here to stay.

Here’s Allianz’s full press release. DOWNLOAD

THE STRUCTURAL SHIFT TO COMMODITY CONTROL

ALIGNMENT OF GLOBAL COMMODITY SUPPLIERS

BRICS (Brazil, Russia, India, China, South Africa) have now reached a group of 17 countries. The BRICS work in close alliance with initiatives led by China which include:

ROAD & BELT INITIATIVE: As of January 2020, 138 countries have signed on to the BRICS, ranging from Italy to Saudi Arabia to Cambodia.
SHANGHAI COOPERATION ORGANIZATION: The Shanghai Cooperation Organization (SCO), also known as the Shanghai Pact, is an 8 nation transcontinental political, economic, security, and military alliance. In terms of geographic scope and population, it is the world’s largest regional organization, covering approx. 60% of the area of Eurasia, 40% of the world population and more than 30% of global GDP. (Non BRICS members include: Kazakhstan, Krygyzstan, Pakistan, Tajikistan & Uzbekistan as well as additionally 4 Observer States, 6 Dialogue Partners and 4 Guest Attendee States. This totals 22 Central Asian nations.)
AFRICAN TRADE AGREEMENTS: China is now the largest trading partner of Africa. Bilateral trade agreements have been signed between China and 40 countries of the continent. In 2000, China Africa Trade amounted to $10 billion and by 2014, it had grown to $220 billion. Of these countries, China’s government financing is the principal creditor of three countries: Congo-Brazzaville, Djibouti and Zambia. Between 2001 and 2018, China loaned approximately $126 billion to African countries. Between 2001 and 2018, China invested $41 billion in FDI. Beijing plans to invest over $300 billion in Africa to increase African exports and help close the large trade gap with China.

The commonality is they are dominated by Commodity Export economies historically dependent on the US dollar for: i) pricing their export products and ii) (until the Financial Crisis) financing their economies.

We have approximately 138 countries, or ¾ of all countries on the planet economically dependent on the export of commodities. In many ways they are still the feudal mercantile slaves of old through Western pricing.

The vast majority of exports of many nations are derived from natural resources. Fuels, metals, minerals, and organics comprise over half of all top national exports. Meanwhile, food and produce, which includes commodities like sugar, coffee, fish and soybeans, also could be classified this way as well – and they make up a further 18.7% of top exports. Control now rests with the aligned nations shown above and led by China and Russia.

NEXT: A STRANGLEHOLD ON THE SOFT COMMODITIES OF FOOD & PRODUCE

The IMF, the BIS, World Bank, The UN, the Rockefeller Foundation, the World Economic Forum, Bank of America and even Biden himself are all predicting a major food crisis in the near term, and it is not a coincidence that the policies of these very institutions and the actions of puppet politicians that work with them are causing the crisis they are now predicting. That is to say, it’s easy to predict a disaster when you created the disaster.

It is the sanctions on Russia that are a problem well beyond Ukraine, however, as Russia also produces around 20% of global ammonia and 20% of global potash supplies. These are key ingredients to fertilizers used in large scale industrial farming. Farmers are estimating an overall price spike of around 10% in food markets, but I believe this is very conservative. I am already seeing overall price increases of at least 20% from six months ago, and I expect there to be another 30% in price hikes before this year is over. In other words, we are looking at 50% in average increases in 2022.

Brandon Smith via Alt-Market.us

- China has been stockpiling commodities since 2019 and according to estimates by the US Department of Agriculture currently holds:
- · 80% of global copper inventories,
- · 70% of corn,
- · 51% of wheat,
- · 46% of soybeans,
- · 70% of crude oil, and
- · over 20% of global aluminum inventories.

THE QUESTION IS WHY?

Meanwhile we see Russia retaliating against economic sanctions by restricting their commodity exports to “friendly” countries only. Dmitry Medvedev, a senior Russian security official who previously served as the nation’s president, has threatened that Russia may soon cut off the West from food exports and limit food exports to only nations it considers to be “friendly nations ”, According to Sanford Bernstein analysts, the implications of the Russian/Ukraine conflict on global food involves some of the following:

Ukraine represents ~10% of global wheat exports in 2021, with Russia at a further 17 -18%.
Ukraine and Russia combined supplied over 60% of global sunflower oil exports last year.
The conflict is causing disruption in this spring’s crop planting. Fuel, fertilizer and labor shortages could lead to a 30% reduction in cultivated areas for spring crops including wheat and soybeans.
To compound matters further, Russia is a leading global exporter of fertilizers. The sanctions imposed on Russia plus protectionist moves to limit exports by Russia is driving unprecedented levels of agriculture commodity inflation, which will likely persist for some time.
In terms of oils and grains, Mills and Kellogg are most exposed. Tyson has exposure to corn and soybean meal within its chicken business.

The effects of pandemic lock-downs, related supply chain strains, and conflict in Ukraine are wreaking havoc on the world’s agricultural system. Readers have heard the likes of the UN warning that Middle Eastern countries are at “breaking points” as food prices hit record highs, and as of last week, the Rockefeller Foundation began the countdown (about six months) to a “massive, immediate food crisis.”

Now, Goya Foods CEO Bob Unanue has issued a similar warning in an interview with Fox Business’s Maria Bartiromo:

“We are on the precipice of a global food crisis. Americans will have to tighten their belts and consume less.”
He warned about an imbalance in world food production, indicating “farmers are paying double for fertilizer, they’re planting less and yields will be less.”
“30% of the global wheat production in Ukraine goes unplanted. The global food supply chain is a very tight balance. If we interrupt the food production, we will have a food crisis that will send prices through the roof.”
“As a rich country, we can afford higher-priced food, but other countries won’t be able to bear it.”

What Unanue is saying is that the dominos are already beginning to fall as inflation riots have already sparked Socio-Economic turmoil in Sir Lanka and Peru. Countries across Africa and the Middle East, many of which are importers of food, are experiencing soaring prices and imminent shortages.

The interview is more proof the world’s agricultural system is fracturing and storm clouds are gathering.

CONCLUSION

SHORTAGES ACROSS THE BOARD ARE ABOUT TO GET WORSE … MUCH WORSE!

In recent days, the number of newly confirmed COVID cases in China has soared to record highs, and Chinese authorities have responded to this with unprecedented lock-downs. As a result, nearly 400 million people across 45 cities in China are under full or partial lock-down as part of China’s strict zero-Covid policy. Together they represent 40%, or $7.2 trillion, of annual gross domestic product for the world’s second-largest economy, according to data from Nomura Holdings.

Analysts are ringing warning bells, but investors feel the analysts aren’t properly assessing how serious the global economic fallout might be from these prolonged isolation orders. Chinese lock-downs are a lot more brutal than lock-downs in the western world. By now, you have probably seen video footage of Shanghai residents literally screaming from their apartment windows. To put this in perspective, the number of people that are currently locked down in China is greater than the total population of the United States.

Needless to say, these lock-downs are bringing the Chinese economy to a grinding halt, and that is going to affect the entire planet. The Port of Shanghai, which handled over 20% of Chinese freight traffic in 2021, is essentially at a standstill. Food supplies stuck in shipping containers without access to refrigeration are rotting.

This is an enormous problem for those of us in the western world, because our stores are normally filled with goods that have been made in China. This even extends to our food supply. For example, we send giant mountains of apples to China where they are processed and sent back to us as apple juice. We need to hope that the lock-downs in China end soon, because if that does not happen it will likely create tremendous shortages all over the planet.

WE CAN EXPECT A CRUSHING ASSAULT ON THE US STANDARD OF LIVING OVER THE NEXT DECADE

Americans Are Spending More, Getting Less,& Borrowing More To Pay For It

RUSSIA & CHINA ARE PLAYING THE OPENING GAMBIT — AND WE ARE NOW ON THE DEFENSIVE!

CREA data showed Russian crude oil exports tumbled 30% in the first three weeks of April, compared with rates in January and February, before the invasion. However, soaring prices because of tight global supplies have helped cushion the blow of Western sanctions and ultimately allowed Putin to continue his funding war efforts.

“Russia has effectively caught the EU in a trap where further restrictions will raise prices further, cushioning its revenues despite the best efforts of EU governments,” CREA explained.

“Fossil fuel exports are a key enabler of Putin’s regime and many other rogue states,” Lauri Myllyvirta, lead analyst for CREA, said.

“Continued energy imports are the major gaps in the sanctions imposed on Russia. Everyone who buys these fossil fuels is complicit in the horrendous violations of international law carried out by the Russian military,” Myllyvirta said,

The EU receives around 40% of its gas, 46% of its coal, and 30% of its oil from Russia — and there are no quick and easy substitutes if supplies are disrupted. Germany has been the biggest importer of Russian energy products in the last two months. German businesses and unions have warned a ban on energy products from Russia could severely impact industry and jobs.

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