The Arctic, Russia and the West

The Arctic, the final frontier and one of the most unexplored regions for oil; it has stayed very unexplored for a reason. Shell this week announced their suspension of their drilling, this included France's Total. Combined spending of these two companies within the region is estimated at approximately $7-9Bn. This has occurred due to countless safety problems and the high guarantee of not being able to contain a spill if occurred. ENI and Exxon Mobil though still have their hands hooked into the exploration of the Russian Arctic, but progress has yet to be made, or is it really Russia's Arctic?

Countless disputes between Norway and Russia over the northern territory have continued, leading more secondary companies to conduct their northern drilling explorations from Greenland, yet progress is still yet to be made, one of the suffers of $1Bn yet to make a comeback is Cairn Energy. Russia may though, as well as BP be drawing a quick line under their exploration problems, if the long battle zone of TNK-BP joint venture can be settled.Therefore rebidding of Rosneft (Russia's state oil company) can start again, bringing BP back into the Strategic oil club, and more importantly growing in size since it's asset sale to cover it's remaining Gulf of Mexico disaster repayments.

If the deal with Rosneft is completed soon, BP could quickly become the largest licensed drilling holder within the Arctic. The company is known to be at the front of hard drilling conditions, but also for their failure to operate safely. If BP through the help of Rosneft throws $12Bn give or take, with their newest Arctic technology, they could become successful in domineering the one fifth of the worlds, untapped oil resources.
The company is now finalising the selling of two refineries in the US, leaving it desperate to grow more. Taking a more primary/tertiary model of growth, will be beneficial for the company, though refining oil is turning into a more profitable area of the oil sector. Many new companies are entering this market such as Marathon Petroleum and buying refineries of the likes of BP.

If success is seen in Russia, the strategic energy chart will be weighed more heavily towards the old bears, as the unrest within North Africa and the Middle East continues. Though the slowdown in economic growth has, allowed for the demand price of oil to drop to lows of $108.00 bbl, showing that as much as oil production risk may have increased, the demand has dropped. Though I think it is safe to assume that OPEC will drop supply if it decreases "too much".

Another attack from Europe is occurring. Just before this winter the EU began a probe into GazProm (Russia's state gas company) for it's price fixing to Europe, but more on that in the next entry.
Tata GE

How to dismantle an atomic Eurozone, Putin Punches & Barrels of Black

After some weekend back pressure, Spain eventually retracted from their denial, they needed money.However... the speed in which it took, was like a bullet leaving a gun, when comparing it to the other euro-bailouts, which leaves our dear Gothic analyser in pondering. How long till the others start renegotiating their bailouts after Spain's easy cash injection?

The weakness of Europe couldn't be better portrayed this week as the value of currency continues to fall, as the markets speculate the eventual truth...The euro-zone will never be the same.

On Tuesday it was announced that the banks of Europe will now be interlinked into a european banking system infrastructure that could be complete by January next year, though that is to say that we will still be looking at the same Europe by then. The banking entwining is just an extra stepping stone in the pond towards the european fiscal union. But like so many european policies an extra stepping stone might just be delaying, the eventual splash and dampness of the ever so deep Stygian pond.

Taking a leap to Syria and we see the real site of Strategic economics and Geo-political heavyweights Russia, not leaving any breathing space and taking full advantage of gaining more political might in the middle east by the revealing of arms and now helicopter gunships support to Syria. This is nothing new for Russia to supply Syria even before the Arab spring uprising first began.

In a way it is an inevitability that Russia would do this, as it is in a current position of just turning into a fuel supplier if it were not to challenge itself to keeping the fight in its corner of the ring, plus with a troubled financial world it's the best time for Russia to do it's dirty deeds.

At the same time OPEC meets in Vienna to see what to do about the collusion oil breakers Saudi Arabia, that has continued to break its quota on oil production, though as markets predict economic slowdown. Mr Gothic economist can only say, that it could be in your interest to fill up your tank before the week is out, as Saudi Arabia will either reduce its supply; or the others will.

I had a befuddled moment of clarity, where I remember how god had created economists to make weather forecasts look good. In economics we can an only assume; and as a Gothic economist I can only assume the worst, Good day to all

P.S. Do not prithee peace, it shall not be soon!

Germany vs Greece... The Epitaph of the Euro-Zone

Western Europe has experienced a rough spell of weather, the cold wind spitting up snow where the sand meets the seas in Portugal. The same cold bitter winds engulf Greece; and they have had enough of it.

As much as the snow for many has only been a cause for depressed thoughts and feelings. Most dark people will tell you, winter is our summer. Even as a Gothic-economist, the snow gets buried in the financial section of the newspapers still^^The words of default have loomed in the cracks of the euro-zone, though they stay there, freezing further and widening the cracks. The thaw then happens every time new bailout funds are given, only to expand the deepening debt more and more into Europe.

With €130bn up for Greek grabs again plus €200bn debt restructuring plan, default is still going to be there. The German Bund rate fell to one it's lowest levels following the yearn for safe-havens away from Greece, as investors struggle to see why they should still leave financial risk in Greek hands. With €14.5bn due in bond repayments next month, it is only inevitable that Greece is staying frozen. The forces of euro paper expressing their emotions have grown now to the AAA+ & A1 remaining european countries as they lose patience with the delayed default.

Looking towards my main opinion, it is hard to see why Greece has not defaulted yet? Yes there is the thoughts of it turning into a systemic plague with the other debt ridden countries. Though the longer they keep giving free money to Greece, the less money the other Eurostar countries have for their own safety.

With the occurrence now also turning into euro member hatred expressed in Greece, as protesters in Athens burn the German flag. How long will it be until Germany realises they have been saving their neighbour that won't repay the favour?

The other options that have to be considered are the strategic implications of a Greek default, with regards to political and civil backlash. The look of the Greek people can be seen to bestow civil unrest for the long term and how these unfavourable emotions could spill into the other member states. Avoidance of civil unrest after all the inorganic alterations in the economic foundations of Greece will only occur naturally, even if that means we have to leave Greece crumble so it can slowly rebuild itself back.

The worry for me does not lie with Greece, but the rest of Europe, more and more can it be seen that the european nations slowly copy the recovery phase similar to that of Japan's 1990 years? If so...The deed comes nearer and nearer.

This is monetarist and positive economic thought... Do not tamper with money in sovereign areas, it will only deepen the blade. 

Adiós 

What to do??

I had no idea what on earth to write about last week...There was too much to write about!! Instead I made a draft of my views last week which I did not finish.

So the world has turned into the rule of the bond market. If you want to know what happens, look at the rating agencies a few purpose done government leaks and the market speculation.

one day this week at 13.30 the rallying of stocks occurred on the DAX bringing it up by 3% percent within minutes. Though still peripheral pressure was implemented on Europe.

The worrying thing was that the Chinese Central Bank cut deposit rates for banks as the China markets closed negative, possibly showing a new landmine that could go off on the already fuel leaking world market.

Still I think one kind of cranky positive result that has come out this week so far is that the UK economy doesn't seem to be needing to fear the rating agencies for the time being only the Strike currently occurring which is seeing huge amounts of public Sector workers affect the growth of the UK economy.

Middle East, Democracy and Civil Unrest

If you had to think of a chess match of strategic economics, this would be it.

In chess you have to be as many steps ahead of the opponent as possible, so that the main outcome is to bait your challenger into thinking that he can see your next move. The same can be said in the real world and this could be the playing game with the middle east.

Democracy is one of the stages in the building-blocs to becoming a more advanced country, but the trick is to know when that should be done, otherwise your country could stall or even worse be at the mercy of strategic interplay whether it be economics or geo-politics.

What better way to give an excuse to allow for more foreign intervention than to allow the people in the country, to remove the autocratic government and then have the temporary elected government become corrupt. This is the case in Egypt, this week the military government took action against protesting on the main Cairo square. This resulted in deaths, showing the new Egypt as unstable, allowing for more international pressure to be put on the OPEC state.

Libya at the moment is in a good position, the current governing body seems to have a good strategy to the recovery of the country and implementing democracy in the short medium-term. Also there is an equal amount of cooperation happening in Libya between the government and public, as they give ease and criticism to the transition. Libya was also one of the most developed African countries, thus for the democracy transition, it was inevitably going to be easier. Nonetheless they still had a civil war occur and bombing with NATO (though I think this was in tern for economic aid transaction for the future).


Syria remains highly unstable and also could show a more dangerous side of strategic economics... Allow the country to internally remove itself, where the remaining controller still has a wielding power. This is cost effectiveness for any country which sees a strategic advantage whether be in implementing a new government  strategy or for fundamental resources such as geographic dominance or natural resources for the example. Also external countries have less a reason to enter Syria as it's resource return is low and the public are not that cooperative.

I will continue more tomorrow on this topic, though I just spotted an announcement on 'Moody's' rating agency, which has the French AAA credit rating under view. This is just primarily down to market speculation, as we all know whether it be fundamental behavioural theory or strategic economics, the market is always proactive, though never as rational as a monkey.
Tata

2025...The period for nuclear & renewable energy

I'm taking a mini break from the EU as the Financial Times this week has been reporting on the nuclear debate going on around the world currently, after the Japanese earthquake produced our second largest nuclear energy industrial incident. Not only that I was also invited to attend an ecological economics speech yesterday where nuclear was condemned (as well as positive economics & monetarism which is really two my economic areas). So I thought about giving my opinion, mixed in with scientific facts.

We cannot smell it, feel it; though we breath it in, it tans our skin, it's in the food we eat; it is there and that is what radiation is, the invisible particles of life. It has been there all our lives, from the sun, the earth, from atomic testing to the medical industry, but why are we scared of it?

My main three points about why people are against anything with the elements, are nuclear waste and nuclear destruction, be it weapons or meltdown. Though I feel a lot of the science is left unspoken, and facts can be larger than words, so here I go at trying to balance out the atomic debate with some economics as well.

The Science
Background radiation is everywhere and the biggest contributor is Radon, which comes from decaying elements in rocks within the earth's crust. Radon is approx 50% of background radiation and gamma and beta from the same decaying in the ground is 14%. 12 % is internal, what this means is we are technically radioactive as we have carbon -14 inside us, not only that, but what we eat has C-14, radioactive potassium as well as other radioactive elements inside. The next is the Cosmic, that's 10% contributed by space.
So...we have approximately 86% of radiation today being non-man made.

Man Made Radiation
The biggest man-made contributor of radiation is the medical industry...12%.

Air travel contributes 0.4%, fallout 0.4% occupational 0.2% and nuclear waste <0.1 %. This is all by the way up to present day factual numbers, from the UN, NAEA.

• NAEA 

The Dangers
I really hate going into this topic as it is very sensitive for me on both sides valuing any loss in life is worrying area for me, but sometimes it has to be shown.
There have been many more and troubling disasters outside nuclear energy, the nuclear medical industry and other areas are much more worrying, here are examples:
http://en.wikipedia.org/wiki/List_of_civilian_radiation_accidents
My point here is that medical contributes more to background radiation, though we don't scrutinise x-rays, cat scans or cancer treatment?
And the horrible summary is that I have seen what oil has done to some poorest areas of the planet pollution wise in real life. We don't want to see it, smell it, touch it though we are addicted, that is what oil is for modern society and how many people have died due to it?

The Economics
My main concern is Germany's promise to scrap nuclear reactors by 2020. The funny thing is, to make up for that loss in nuclear, you have to build more coal fire power stations, which actually give out more radiation than a nuclear power station as well as carbon dioxide which then in turn goes in global warming. They are creating more wind farms and other renewable sources, but the energy production of wind turbine is so small, compared to energy demanded, it is an unrealistic approach and is very expensive contributor to the rise also in energy companies increasing their bills, as well as the price of oil being more susceptible to shocks and increasing due to demand and supply.
People right now and in future years cannot afford this until technology in the renewable sector improves and governments can afford to run deficits.

Conclusion
My goal is not to say we should be Nuclear forever, but when you have depleting highly demanded natural resources. A society which is going through depleted income, that will eventually have to pay more continuously for energy. A time where new nations demand more energy, and geopolitics becomes more powerful... To look away from Nuclear is really a scary mistake I feel.

Renewable energy is the future beyond a doubt, within 5-10 years we most likely will have fusion near perfected for power generation testing, and wind energy being actually cheap in a competitive market. That is where the future lies, but to jump on the green band wagon completely does not make sense from an environmental and economic point of view.

Autonomy...Shift to Fiscal Union and then expansion of EFTA

Apologies on not responding on the weekend as promised, though I wanted to see what the situation regarding Italy was going to turn out by mid-week. So I hope you'll agree with me that it was indeed on good decision to make, whether that be regarding sheer laziness on my part or not knowing what interesting drama to compose on here.

Italy recieved it's first batch of Technocrats on Monday with little enthusiasm given for Mario Monti, though there was a lot of cheering & celebration for the departure of the late Mr B at what power there country has, as the IMF & ECB hammer a few more nails into the default coffin.

The use of this new technocratic power may see the newest change occurring the Europe; Fiscal control. This is maybe the one thing we can thank Greece and Italy speeding up for us. With trying to implement a whole rounded Monetary policy for the € member states, while different Fiscal control occurs really can eliminate the use of it all together. The evolution of the European Union since it's beginning has seen more conformity and policy decision making unity within most of it's key members, so to make it not happen would be a real slump.

I'm not a pro € person, though to bring confidence back to the European area and secure the long term future of the € this has to happen. The break up of the euro could still occur, though it would just be threats being eliminated that may cause future problems such as Greece and Italy(though would highly doubt Italy with the sovereign debt exposure other European banks have for it).

The problem that the euro-zone faced from the beginning was the unsynchronised fiscal policies. The main outcome for the eurozone is that fiscal harmony will occur and that the remaining EU countries will most likely merge into a separate trade agreement. There already exists this and it's name is EFTA (including Lichtenstein, Switzerland, Norway, Iceland). The merge may not be taken too kindly, though with proactive market actions being the the touch of death, you have to afford to lose some power.
I will be adding to this post this week, have to run to lectures!