An unsettled world

What it looks like from Asia

The US President, Joe Biden, is visiting Europe and Asia continues to watch the implications, wondering about the contours of the new order that Putin may well have imposed upon the world. Saudi Arabia is using the war to threaten the old petro-dollar regime and unsettle the US dollar as the world’s premier currency.

The global poor, already reeling under inflation thanks to Covid19, are likely to face another round of price increases with worsening supply chain disruptions in essential food commodities.  

Japan is struggling with its own energy problems and Kazakhstan may well be left ruing its relationship with Russia, in the years to come, with its primary export, oil, threatened by the war and sanctions.

Thailand’s economy may be heading for a crisis, with rising energy bills. Pakistan is going through yet another round of internal turmoil with the army likely to withdraw support to Prime Minister Imran Khan, and India may be quietly preparing to restart the rupee-rouble trade, despite the uncertain geopolitical consequences.

For all this and more, read on…

Saudi Arabia

Saudi Arabia’s Production Capacity Boost Doesn’t Solve Today’s Problems

Over the long term, a boost in Saudi oil production capacity would certainly be good news for oil importers. The problem, however, is that these importers are energy-starved now - or rather, they want to avoid being energy-starved if they decide to increase their sanctions on Russia. In this, no help is coming from Saudi Arabia.

The Kingdom has made its stance clear on numerous occasions. The fact that it basically turned a deaf ear on calls from the White House to boost OPEC+ production should have been enough, but it wasn’t. Several more calls, escalating to demands, were made before the White House realized Saudi Arabia wouldn’t budge. And if Saudi Arabia doesn’t budge, neither will the rest of OPEC or OPEC+, which also involves Russia.

Aramco health adds spice to Saudi’s yuan dilemma

Saudi Arabia’s $2.3 trillion oil behemoth wants to increase its maximum output as crude prices soar. That adds spice to tensions between the Saudi Arabian crown prince and the U.S. president that are spilling over into how the kingdom prices its oil.

Right now, Saudi Arabia’s crude contracts are denominated in dollars. That makes sense, given that the Saudi riyal is pegged to the dollar and nearly 25% of Saudi’s $493 billion of central bank assets are U.S. Treasuries. Abruptly repricing Saudi’s main export (in yuan) could destabilise the economy, and undermine Saudi’s decades-long U.S. friendship.

Global Inflation

Inflation could wreak havoc on the world’s poor

Inflation has returned, and it is wreaking havoc. Surging economic activity, supply-chain disruptions, and soaring commodity prices combined in 2021 to push global inflation to its highest level since 2008 (Figure 1). Among emerging market and developing economies, inflation reached its highest level since 2011. It now exceeds inflation targets in more than half of these economies with an inflation-targeting framework.

Japan

Japan unsure on ‘unfriendly’ nations’ rouble payments to Russia

Russia has put Japan on its “unfriendly” nation list along with the United States, European Union member states, and others. Japan accounted for 4.1 percent of Russia’s crude oil exports and 7.2 percent of its natural gas exports in 2021. Suzuki said the government would closely monitor the “side effects” of the sanction measures on the Japanese economy and financial markets and continue to take appropriate steps in coordination with the Group of Seven (G7) and the international community.

Kazakhstan

Kazakhstan: CPC pipeline shutdown poses serious economic threat

A consortium operating the pipeline that Kazakhstan uses to export the bulk of its oil has said the route may be largely unusable for up to two months because of infrastructure damage caused by a recent storm.

The Caspian Pipeline Consortium, or CPC, said in a March 22 statement that two of three tanker loading facilities at the Russian Black Sea port of Novorossiysk, which allow ships to take on oil at a safe distance from the shore, have been rendered inoperable.

Thailand

Thailand faces current account blowout on oil, tourism risks

Thailand is heading for a rare back-to-back current-account deficit as the outlook for tourist arrivals becomes less rosy with a flare-up in Covid cases globally and energy import bills ballooning amid soaring oil prices. The net-oil importer may post a shortfall of $4.6 billion this year, according to Bank of Ayudhya Pcl, which previously estimated a surplus of $5.8 billion in the current account -- the broadest measure of trade and investment.

Pakistan

Pakistan PM Khan says he won’t resign ahead of no-confidence vote

The Pakistani leader rejects opposition calls to step down as he faces the toughest challenge since coming to power in 2018. Some political analysts and opposition members say Khan has fallen out with Pakistan’s powerful military, which has intervened in civilian politics for decades and was seen as instrumental in the success of Khan’s upstart party four years ago.

India

Rupee-ruble trade to be ready by next week

The rupee-ruble trade mechanism may be ready as soon as next week. With Russia out of the SWIFT communications system and the country losing access to several international currency markets, India has been looking for alternatives to carry out trade with the strategic partner.