As Recession Bites, Global Politics Turn Dirty

95129cIt is easy to look at Kuwait’s abandonment of a deal with Dow Chemical (DOW) as a simple economic decision on the part of the small Arab country. But, the country’s Parliament was involved. It said the risks of a deal during a recession were too high. It did not say that the US and Dow are benefiting from low oil prices and Kuwait is suffering. Some things are better left in the shadows.

In nations such as Russia and China, the governments are having to look inward. Labor strife caused by slowing economies is caused by dropping fuel income and slowing exports. Both of those can be put at the feet of the US, EU, and Japan, at least based on the perverse logic that every problem creates the opportunity to blame someone.

According to Bloomberg, “The global recession is re-exposing fissures in U.S.-China relations that Treasury Secretary Henry Paulson spent more than two years smoothing over.” The US buys Chinese imports and China buys US government paper. The export part of that equation is falling apart.

Russia’s desperate situation has caused it to threaten to put together a cartel to raise the price of natural gas. Venezuela, hurt by falling oil prices, is planning to seize local gold concessions, the largest of which is controlled by Canada, itself a major oil exporter which is not a part of OPEC. Put another way, it is not a friend of the Venezuelan government.

All of these national actions in the face of a dying global economy and competition for global capital could be viewed as random, unrelated events brought on by a full moon, global warming, or the earth spinning slightly off its axis. Or, a new generation of politics driven almost exclusively by economic concerns is emerging. If so, that would tend to break down fragile alliances and exacerbate bad blood.

When there is money to burn, everyone is a friend.

Douglas A. McIntyre