Migration will split the EU, quotas can split the Visegrad Group

European Union ministers agreed on Tuesday for relocation of 120 000 refugees in the next year. Against were Czech Republic, Hungary, Slovakia and Romania. Three of them are members of Visegrad Group. The fourth member of V4 – Poland – agreed for seven thousands of refugees, but it will only complicate the geopolitical situation of the Middle-East Europe.

As we said before, these quotas are not relevant, because it is for now a not permament or obligatory system and many of „Polish” (also Hungarian or Czech – they announced that they conform) migrants will escape in the end to Germany or Sweden. Moreover, the problem is much bigger and deeper and this EU-decision is not a solution.

The only thing which we have to make complete according to our last publication is a division not only within the EU (culture of unanimity  has been additionaly broken), but also within the V4. Poland acted collectively to the EU, but not to the V4 and it weakens the solidarity of the Middle-East Europe for the future and also the position of Poland in the region. As the tension between Poland and Germany are inevitable in the future anyway (elections come soon), the position of the Middle-East Europe will be weaker due to lack of consensus within V4. Unless Poland with new government rejoins to its southern allies. Continue reading

Migration quota system deemed to fail, causing EU to split

The Migration Crisis has divided EU members. The inflow of newcomers will last longer and the dissonance between Germany and the Visegrad Group will increase. There are no benefits to gain from it, except for Vladimir Putin.

The issue of immigrants and refugees is kindling European nations. Politicians have lost their senses,  they are governed by their emotions. Mistakes of the past cannot be fixed and the results will be harmful for the European unity for the years ahead.

Hungary, Czech Republic, Poland and Slovakia, known as informal Visegrad Group (V4), reject refugee quotas system1 forced by Germany and France. This will complicate the relation within the European Union in the future, signs can already be seen.

Western media, particularly the German one, are leading the campaign against their eastern neighbors. Hungary is criticized and compared to Nazis2, while they are struggling to respect the Dublin Regulations3, the European law on asylum seekers. As we have learned from last financial crisis in the USA and the debt crisis in Greece; disregarding of previous determined principles are always leading to political tragedy. Continue reading

Oil-asset fire sale: political well-connected global players will cherry-pick valuable assets for a bargain

Geopolitics and finance are driven by energy strategies and the other way around. To win a war you have to destroy the energy resources of your enemy and secure your own resources. We already noticed in 2013 that oil was in a bubble, we are now entering a phase where oil prices are so low it will destroy a big chunk of the oil industry. Without government intervention the destruction in the upstream oil industry will be devastating.  Production capacity of the oil industry could end up below the level of future demand. As production capacity is below demand we expects prices rebound into a bubble again. We are definitely not in the era of cheap energy. Oil prices will rebound but investing in oil, oil futures and oil related companies, could be a very risky strategy. Holding oil futures comes with a cost, as rolling them over is not free of charge and many oil related companies will not survive the downturn.
Global operating oil companies, except for BP, seem well prepared for the ongoing oil price decline according to our estimation.

The oil market will be one of the main factors in global financial turmoil the coming months. Oil companies are under pressure of falling oil prices, they have to seek for lower costs in every area of operations. Continue reading

Syrian-Iraq war spilled across the boarder into Turkey

Since the US coerces Turkey to participate in the Syrian war in July, the Syrian-Iraqi war has spilled across the boarder into Turkey. Our team tracks daily acts of war in Turkey. According to our first estimate, around one thousand people perished last month in eastern Turkey and Northern Iraq, as a consequence of the armed conflict between the Turkish army and Kurdish insurgents. Given the number of incidents, the daily attacks by Kurdish fighters in Turkey and the arming of Kurdish fighters in Iraq by the US, Germany and other Western countries, we expect the situation to deteriorate even further.  We will come with more exact numbers in the coming weeks. It is no coincidence that the refugee crisis moved into Europe at the same time that Turkey became the next victim of a mix of reckless US-Europe foreign policies, ethnic conflicts, religious fanatics and scruples political ambitions.

Street fights in Turkey Friday. A Kurdistan Workers’ Party (PKK) fighter was killed and another was wounded in Turkey’s eastern Tunceli province after an exchange of fire with security forces Friday, local authorities said. Continue reading

Forget China: Oil price main driver for market turmoil.

Commentators are linking the current market turmoil to problems in China. Our team sees the oil price as the main driver behind the market route. Low oil prices are positive for consumers and it will lower production costs for numerous industries. However it will also lower the investments in energy such as sustainable energy and oil producers will see their high profits turn into losses. Low oil prices have devastating effects on the financial sector that is involved in lending to the oil industry and in the trade of oil related derivatives. World oil production is about 90 million barrels a day, representing a cash flow of about nine billion dollars a day which comes down to three trillion dollars a year. With the oil price 40 to 50% lower, this flow is also cut by 40 to 50%. This amounts to 10% US GDP. Compare it with the 0.5% growth we are now missing in China, we prefer to keep our eyes on the oil price. These extreme moves can not be without consequence.

Many oil producers receive a fixed price for their oil as they covered their production with price insurance in the form of derivatives. With the current oil price, we just guess insurance providers paid out about 35 dollars a barrel to compensate the losses of the producers. Only for the US shale production this amounts roughly to 120 Million dollars a day. Somehow the financial sector has to cover these loses.

The US Energy Information Administration (EIA) stated in 2014 that most shale producers revenue has covered 75% of the production costs including initial investments, back then the oil price was about $95 a barrel. Even in 2014 this cast doubt on the profitability of US shale producers. Producers now claim they have lowered the production costs and are more efficient to reassure investors. But it is hard to believe they are now able to produce 50% cheaper. As investors are not buying this and start to flee the market, shale producers borrowing cost are starting to sky rocket, adding more pressure on the industry. Investors fear have already resulted in a spike in US junk bond rates. The energy sector accounts for about 15 percent of junk bond issuance. KKR has amortized 5 billion on two energy related bankruptcies. Restructuring of production companies will be inevitable.
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NATO: mismanagement without accountability

In the heyday of NATO between 1949 and 1995, the NATO’s credo was clear: an armed attack against anyone in Europe or North America would be considered an attack against all. For NATO members this was not a superficial contract between politicians, but a contract between the populations of the member nations. NATO countries had a standing army with conscripts prepared for war. There was opposition to the organization but everyone knew the purpose and scope of the organization.

In 1999 the NATO was enlarged with Hungary, the Czech Republic, and Poland under the same mandate: an armed attack against any one in Europe or North America would be considered an attack against all. The 1999 enlargement annoyed Russia but did not change the spirit of the organization nor the population it relies on and has to protect.

During the 2002 Prague summit, NATO invited former Soviet republics as Estonia, Latvia and Lithuania without consulting the population of its member states. While the NATO management assured these countries that they apply under the same security credo as all countries, the political reality is completely different. The willingness in Europe to fight in an ethnic border conflict in one of the former Soviet republics is very low. NATO Management has steered the organization on a slippery road, creating an organization that is not able to fulfill its promises. With the Baltic states as new member countries the NATO organization could still pretend that the emperor is not naked, but with the expansion including Georgia and Ukraine, things can unravel very rapidly.

With this expansion, Europe and the US could be sucked into a Caucasus conflict most Europeans never heard of and in countries they probably are not able to find on the map. There are no politicians in Europe who would send out their army on behalf of NATO into the Panski Gorge in case of a Russian invasion into this part of Georgia as they are chasing Chechen Jihadist. Continue reading

The world should prepare for Mr. Trump as the next president of the USA

It is very hard to predict who in the end will be the next president of the USA. But the world should realize Donald Trump is a very serious established GOP candidate who has a very high chance of winning the 2016 elections. Especially outside the US this prospect is not taken seriously yet. Our conclusion is the opposite: one better be prepared for Donald Trump as the next president of the USA.

Many European and Asian analysts see Donald Trump as part of the USA media-show frenzy but hardly regard him as a serious contester for the US presidency. Mr. Trump is framed as an outsider who threatens the status quo, but this couldn’t be further from the truth.

According to our analysis, Mr. Trump is the most established GOP candidate with support from all over the US political elite and media establishment.  He has full support from the GOP and media establishment. The McCain remark by Mr. Trump: “McCain is not a Hero” is supported by many veterans. Some GOP leaders will be sacrificed for the show, and some will despise Mr. Trump for his aggressive remarks, but cross the board he is admired and a well- respected GOP member and acknowledged by the US political elite across the political spectrum. He is not an outsider as he likes to frame himself.

The US media scrutinize Trump on some nonissues. The so-called critical media interviews were unconvincing; they were executed by journalists who were no match for him. It had nothing to do with serious politics. In fact, the US corporate media is launching Trump as the new GOP Brand. Trump is not Mrs. Palin who stunned Europe and Asia as the running mate for McCain during the 2008 elections. Mrs. Palin was despised by the media elite while Trump is being admired. Mrs. Palin is as simple minded as her supporters while Trump is far more clever than his audience, he knows that he is lying to them. He is a calculated businessman that plays with his victims, the ideal candidate for the US corporate establishment the ideal candidate for Wall Street.

Compare the media hype around Donald Trump with the 2012 maverick: Ron Paul. Ron Paul received zero media attention.  Continue reading