Geopolitical Crisis and the Global Economy

The recent and typically arrogant attack by the Zionist State on the Turkish aid ship for Gaza has produced a flurry of angry reactions against this unprovoked attack, even among Israel's biggest allies, the USA and European countries including France. The Israeli attack on the 'Mavi Mamara' aid ship, with 10 persons - mostly Turkish civilians - killed by Zionist troops, has been followed by serious questioning of the real role and position of Israel in the Middle East.

Speaking in a long panel discussion on French state-owned France2 television, May 31, the permanent representative of Palestine at UNESCO, Elias Sanbar, sitting next to Mr Shek, the Israeli ambassador in France, clearly underlined the basic unreasonable and arrogant position of the Zionist State. Sanbar said that long before World War 2 and the German Nazi outrages, Palestine's leaders had offered as much as 20% of their territory for peaceful settlement by Jewish groups wanting to leave Europe. But after 1948, the Zionist State with tanks, bombs and troops had taken, we can say stolen, 80% of Palestine's homeland and territory. Even inside Israel, today, there are persons and groups who admit this. Outside Israel most persons who are given the facts will come to the only possible conclusion and say this is injustice, and must stop.

Unfortunately the modern world is not like that. The Zionist State has been "immune and protected" from any sanctions, any punishment or any criticism. Almost no media attention in the USA or Europe is given to the illegal Israeli atomic weapons programme, for example. This hypocrisy can only lead to trouble, and it has now come - resulting in large geopolitical risks for the global economy.

These risks are in no way limited to the Middle East, but because of oil export supply from the Middle East the attention given to the 62-year-old Israel-Palestine crisis is always high: on June 1st, many stock markets had a big sell-off, linked to this increase in geopolitical tension. In the Far East, tension between North and South Korea is extreme, easily able to bring China, USA and Japan into this local conflict. Like the Israel-Palestine crisis, this centre of geopolitical tension also dates back more than 45 years into history, and has never been resolved. Attempts to divert public attention and media coverage away from these and other "hot spots" are almost certain - for example US media coverage of airline security threats and claims that terror attacks are being planned in big cities like New York.

In this context of rising geopolitical tension it is possible to predict continued speculation against the Euro and in favour of the US dollar and gold. Conversely and for the moment, oil will tend to fall due to fears that global economic stability will be compromised or destabilized, and that economic growth, and oil demand will decline. Certain strategic metals, for the weapons and aerospace industries may be favoured by an increase in trade price, but the base metals like copper or aluminium, zinc or lead, and industrial materials like bauxite and iron ore will tend to fall in price, along with oil.

This of course is a "panic driven" special situation, not related to real fundamentals of the global economy, in which both China and India, and several other Emerging Economies are enjoying record industrial growth, depending on oil, base metals, industrial materials and other commodity raw materials. In this special situation, economic fundamentals are forgotten.

These fundamental are however not forgotten and are real. Taking oil, the BP disaster in the Gulf of Mexico, which BP is not able to repair after spending about US$ 1000 million since April 20, has already led to the Obama administration stopping offshore oil drilling. About 1.8 million barrels a day or more than 25% of all US national oil production is now produced offshore. Any halt to US offshore oil will directly and rapidly lead to higher US oil imports, increasing world demand for oil exports and raising the price. In other countries, deep offshore oil production, sometimes at water depths below 3 kilometres (3000 metres), is now the fastest-growing source of non-OPEC oil supply, suggesting that oil prices should remain well-supported, and not suffer from geopolitical tensions in the Middle East or Korean peninsula.

To be sure we now have serious geopolitical problems, but this comes on top of the long-term and very serious sovereign debt crisis of many countries. These specially include many European countries, the USA, and Japan. Only economic growth can resolve the debt crisis, meaning that global economic growth is now as vital as quickly stopping the atomic armed Zionist State from further aggression and stopping the two Koreas - one of them atomic armed - from going to war.

What is already called "the debt bomb" and major weakness not only of the Euro but also the US dollar, are also serious risks and challenges for the world.

We can hope that global economic recovery will soon start. When it does, the energy commodities led by oil, and non-energy raw materials like the food grains, metals and minerals will all gain.

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