I have been off the air for a
while and enjoying our holiday. However, there have been significant linked movements
in the mid-section of Eurasia and evolution of events in India.
Mathematically, discrete items maintain
their character when separated - i.e. quarter of a tree or an atom is no longer
a tree or an atom - but in political events they have a life in both forms discrete
and linked.
Iron Dome
And again hostilities have broken
out between Israel and Hamas and again each side is looking for ways to break
the stalemate. While Hamas has managed to smuggle despite oversight significant
rocket stock into their territory which are hidden in the deep underground
tunnels, Israel has been relying on its Iron Dome system to negate the rockets
launched thus far. The stalemate stemmed from the fact that Israel will need to
launch a significant ground offensive (means more casualties) to eliminate this
threat for a time period as Hamas can always smuggle in more (beat the Israeli
and Egyptian intelligence again). However, Israel has now taken the call to
launch the ground offensive. If the current situation endures Hamas may be
tempted or forced to launch enough rockets which may overwhelm the Iron Dome
system. The Iron Dome system gives Israel a sense of security and which is more
near-term until new attack mode emerges and anyways the tunnels which hide these rockets get re-built faster than Israel hopes.
MH17
Ukraine continues to fester as
the Russians are and will not be willing to let Ukraine at any cost slip into
the western orbit. It is too strategic politically, geographically and from a
food security perspective. The Malaysian crash piles significant pressure on
the Russians but will it change the way the view the situation – unlikely. Can
anyone make them change the way the deal with the situation – again unlikely at
least in the next 2-3 years. Russia has and will be a difficult country to deal
with.
Mesopotamia
The lands of Mesopotamia which
the British divided arbitrarily are coming apart with the Syrian and Iraqi
crisis. With the unsettling of the status quo when Saddam Hussein was dislodged,
it has come to today’s situation as the Americans were unable to re-build state
capacity while Iran manoeuvred to get the upper hand in the situation
It is an extremely difficult
situation given that it comes in the aftermath of the Arab spring and American
withdrawal in Iraq and now in Afghanistan. It is important that a new status
quo is built in the middle-east and that is where the two regional powers Turks
and Iranians and the global superpower America will need to carefully play
their hands. The Iranian-American rapprochement will play an extremely
important role and carving out regional influence will be on the table. Saudis
will be in for an extremely difficult time as American no longer need to rely
on their oil but the Saudi’s have no other benefactor to turn towards.
With regard to Ukraine the world
has no alternative good choices as European energy requirement from Russia
makes any significant action extremely difficult. It will be important to
restrict Russian ‘illusion for retrospective determinism’ as they will try to
bring ex-Soviet countries into the customs union or modify political landscape.
Poland with its significant but under-developed shale reserves (as an alternate
to Russian energy supplies partly) and location will be a critical country for
the Americans and the Europeans. It has been the land route for all significant
military interaction that has taken place with the Russians.
While all this and more (China in
South China Sea) happens it is critical that India remains neutral or does not
get involved while it puts its economy and military back on the rails. It may,
anyway, have its share of issues as American withdrawal is completed by
December 2014 from Afghanistan
Meanwhile, economic sentiment in
India continues to improve as does the stock market. The budget unfortunately
was a whimper possibly because of upcoming assembly elections and likely need
to understand the full depth of the issues. Besides that there has been no
significant bummer from the new government. Stock market continues to expect
significant action from the government to drive economic growth and corporate
earnings. It is likely in the near term as the Fed stops asset purchases we
continue to see strength in the dollar helping exporters (IT, Pharma). It is clear
that optimistic budget assumptions will not work out restraining government
push on infrastructure. The government needs to figure out a mechanism to
attract capital to fund core infrastructure. With banks being undercapitalized
and low domestic savings, channelling international savings (if possible on a
rupee basis given where global interest rates are likely to head) is the only
option. Companies supplying into infrastructure asset creators (like equipment lessors)
or as factories ramp up capacity their consumable suppliers (like refractories
or gas suppliers) will be initial beneficiaries.
The events in the Middle-east and
Ukraine connect to India in 2 important ways – Middle-east is the largest
supplier of energy and Russia is the largest supplier of weapons – and India
needs both in an uninterrupted manner.
Politics….Linked….Discrete….Linked….Mathematics
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