Fuel for the Future

 

The current prices of petroleum have sparked a debate across the world about switching to alternative fuels. Goldman Sachs has predicted that Brent Crude will touch $110 per barrel early in the new year.

Thus, it looks as though high oil prices are here to stay for a while. Whenever oil prices shoot up the world clamours for alternative fuels. As the prices subside, the noise dies down and everyone goes back to their routine, which includes filling up one’s vehicle with fossil fuel.

However, this time with the havoc caused by the pandemic, the world economy has already taken a hit. Incomes have crashed and recovery will take some time to gather steam. High cost of fuel was the last thing the world wanted. It is proving to be an impediment for recovery and has put an unnecessary burden on the exchequer.

How this situation could have been avoided can become a separate topic for discussion. However, the pandemic has caused a serious loss of productivity in all sectors of the economy, and oil cannot be an exception. However, oil prices were high even in early 2019 before the pandemic struck the world. So, this time the debate around alternative fuels seems to be rather more serious than any time in the past. Coal prices have also shot up on the back of higher demand and supply bottlenecks.

There are many alternative fuel technologies vying for mainstream use. None of them has reached a stage where the world can immediately switch. However, all have shown promise and potential. Hydrogen fuel cell, electricity (mainly battery technology), bioethanol/biogas (with flex engines), solar power, etc. are some of the technologies currently being researched the world over.

The lowest hanging fruit here looks like bioethanol/biogas used with flex engines. Brazil has already adopted this technology and uses flex engine technology with a 20% mixture of ethanol in petrol. Bioethanol can be derived from agricultural produce and waste. Some experts have red flagged this alternative as it might affect supply of agricultural produce. Producers or farmers will prefer selling their crop to fuel companies which will offer better prices than grain wholesalers.

Electricity has also shown a lot of promise and electric cars are becoming fairly common. In India there are many companies now investing in various electric mobility technologies. But this technology will take a few years to mature as new materials like lithium, sodium, aluminum, are tested. Current electric vehicles have very limited range as electricity storage technology is still in its infancy.

Solar energy has proved difficult to adopt for use in transportation. Solar energy is probably the least promising of all the alternative technologies currently available for use.

One of the most promising technologies is however Hydrogen fuel Cell. Fuel cells use hydrogen to produce electricity without combustion. The engine emits only water vapour as waste. This is a very promising technology but also needs time to become more practical.

There are no easy solutions here. Which technology will the world use?  It looks as though it will be a combination of all the alternatives mentioned above. Of course, a completely new technology might present itself in the near future. This cannot be ruled out. However, nothing seems to be on the horizon yet. But millions of dollars are being poured into research and development of alternative fuels. The next decade might reveal the technology which will wean the world away from fossil fuels.

blog continuation - Page Two

 

Continuation...

AUKUS - A shift of Focus

Afghanistan – A fluid Geopolitical Chessboard

Dictatorships are Bad - Sri Lanka and China

The Chip - Geopolitical Implications

Afghanistan - Back to Square One

Cyber Security - Issue on Anvil

Trump's Triumph

Climate Change - Action Now

The Perpetual Pandemic

The Big Tech Question

China's window of opportunity

Biden - No Big Reset

India China Clash – Testing Times

India China clash - Collateral Damage

Mars and Venus

The Israel UAE Accord

The Lancet Study

The Pendulum is Swinging 

Opportunity in a Crisis

Deciphering the Dragon

A Pandemic induced hiccup

COVID-19 Status Quo Change

The Corona Shift

The Afghan Peace Deal

Coronavirus II - Fallout

Coronavirus I - The Show Stopper

South China Sea – heading for a confrontation? 

Blog continued ...

Previous List

AUKUS - A Shift of focus

At the eve of the pullout of US troops from Afghanistan some US leaders had said that this was done partly to stem the war fatigue of twenty years, and get the boys back home. Also, one of the reasons was that America will be better able to allocate resources to the Indo-Pacific in view of the threat posed by the Chinese aggression in the South China Sea and elsewhere.

 It was getting quite obvious that the US was not making any headway in Afghanistan. Pakistan’s complicity was neutralizing the effectiveness of America’s war on terror. Meanwhile the first decade of the new century saw the rise of an aggressive China. America now felt it could get mired in Afghanistan when it needs to focus its attention in South Asia. 

The AUKUS is ample proof for the US Afghanistan is to be a side show, to be closely monitored. The focus has now shifted to South Asia and particularly China.

The Obama administration was more accommodating of Chinese demands and gave ground especially in the South China Sea. The Chinese took advantage and built their bases in the Spratly and Paracel islands. However, when Trump came to power things changed and the Chinese began to face headwinds to their geopolitical ambitions.

They were denied technology due to their intellectual property theft and companies like Huawei were banned by many countries from participating their tenders.

AUKUS oddly as it is named, (Australia, United Kingdom, US) is completely focused on China and the Indo-Pacific. America wants to stay as the preeminent power in the world for the foreseeable future. The only way it can do this is by countering China. And AUKUS will do just that.

The older alliances like Five Eyes, ANZAC, ANZUS, NATO would not have helped. The EU has been reluctant to act against China for obvious reasons. Trade and commerce not being the least of them. Europe has vested interests in China which cannot be wished away. Canada and New Zealand are also not willing to take on China with full commitment as that would be contrary to their national interests.

Australia is a signatory to the NPT and has eschewed nuclear power. The US will however give nuclear powered submarines to Australia, not nuclear armed. This is the difference. This means the NPT is not so sacrosanct anymore. US national interest has thrown the treaty out of the door. Countries like India can now acquire nuclear technology denied to them earlier. 

Moreover, post Brexit, the UK has no obligations towards the European Union. It can now formulate its own foreign policy. That is why it has signed on as a partner.  

China wants to punish Australia for demanding an investigation into the possible Corona virus origin in Wuhan city and for cancelling some proposed Chinese projects in Australia which were unviable.  Australia has an ongoing trade dispute with China which started after the Australia made its demand for the investigations. The nuclear submarine deal means that Australia has now burnt its ropes vis a vis China. China has also declared that it will now target Australia with nuclear weapons.   

Australia has been a very reliable partner for the US for a long time since the cold war times. So much so that Australia did not hesitate to cancel a submarine contract with France worth thirty billion dollars as the US offered it nuclear submarines. Tactically, as well as strategically, the Australian nuclear submarines, when deployed, are going to be an additional headache for China. They will bolster Australian power in the Indo Pacific and as a consequence, US power indirectly.  

What about the Quad? The Quad will exist side by side with the AUKUS. The Quad it seems, has a wider objective. Besides the military aspect, it also has a economic side. Low-cost vaccine doses have already been distributed to some of the countries in South East Asian countries under the Covax agreement. Also, India will be manufacturing the Johnson and Johnson vaccine which will be given to these countries by 2022. Supply chain diversification will be pursued to reduce over-dependence on China with other allies in the Indo-Pacific. 

China as a matter of policy provokes countries to see how far they can be pushed. The clash in Galwan was a result of the provocation going too far, which was a miscalculation by the local Chinese commanders. China follows the same line against Taiwan. Will the AUKUS come to the aid of Taiwan if push comes to shove? 

The Chinese belligerence could be stemming from failures at home. The slowing economy, the isolation, the calls for investigating the role of China in starting the pandemic. The AUKUS, as the Quad, will have to prepare themselves for a full spectrum conflict even if it is limited on the ground. By this I mean the space and cyber dimensions. 

 

The AUKUS is more focused on the military aspect of the problem stemming from Chinese aggression in the Indo-Pacific. Its effectiveness will depend on how committed the members are. 

Afghanistan – A fluid Geopolitical Chessboard

 The withdrawal of the US from Afghanistan has opened a Pandora’s box in this part of the world and soon the creepy crawlies may spread in other parts of the world. The process may have already started.

It would not have made any difference if America had remained in Afghanistan for a few more years. As long as the US was there, the Taliban and other terrorist factions would have kept a low profile for fear of US reprisals. Albeit, under Pakistan’s protection. But now that the US is gone, the Taliban consider themselves free to rule Afghanistan.

The Taliban for all its ideology is not a homogenous organization. It has the ISIS, the Haqqanis, the TTP, etc. Moreover, it has some links with the LeT and the JeM which are predominantly Pakistani networks instituted and backed by the ISI. It is said by experts that the Taliban’s ideology is all about power and not about religion. But it is expected that dilution of the ideology will create factions like the ISIS Khorasan which will pursue a more fundamental version of Islam.

We have to see what the Chinese are after in this scenario. The CCP in China as a matter of policy has the objective of uprooting Islam from China. This Sinification of Islam is being carried out systematically since Xi Jinping took over as the supreme leader. The CCP is concerned that the Taliban could harbor the ETIM (East Turkmenistan Islamic Movement) which has started fomenting trouble in the Xinjiang province against Chinese persecution of Muslims.

Also, with the CPEC not making any progress in Pakistan, the Chinese are now viewing Afghanistan as the new ground for development of their Belt and Road Project. All this will need stability which as yet has proved elusive. Whether or not the Taliban are able to reign in their various factions, remains to be seen. The ISIS Khorasan has already shown they will not follow the Taliban dictates. Whether ETIM does the same, only time will tell.

A big contradiction here is that Taliban has said that China – despite the cultural genocide of Muslims - is their best friend. This can only mean that China will provide monetary aid to the Taliban and particularly its leadership. China will also invest in Afghanistan. It has already signed a MoU with the Taliban to exploit a copper mine.   

Pakistan is also playing its own game in this imbroglio. The political establishment in Pakistan revels in the fact that the US has left. Pakistan wants to control the Taliban as much as they can. and get them to do Pakistan’s bidding.  

Already, there is a rumour of ’Panjshir for Kashmir’. Pakistan will help the Taliban capture Panjshir from Amrullah Saleh, and in return Talban will deliver Kashmir to Pakistan.

Meanwhile, the US has finally woken up to the fact that Pakistan was playing a double game with them all through their occupation of Afghanistan. How the US will punish the Pakistanis remains to be seen. But Pakistan may now face US ire.

One small piece of news is intriguing in all this clutter. There is talk of Afghanistan being divided on the ground of religious factions. Some of the Northern provinces dominated by the Tajiks could separate themselves from the Pashtuns who are in the South.

Another opinion which has hardly been voiced by any of the analysts is that the US left Afghanistan to concentrate on a rising China, but also have now cut its losses. After spending two trillion dollars, the US left the Afghanistan mess for its neighbours. Iran, China, Russia, the CIS countries, all had benefitted from US occupation of Afghanistan. The region was secure for the last twenty years and America was spending for it. But now this mess will be inherited by the all the countries who share a border with Afghanistan. Suddently the spectre of terrorism has raised its head for Afghanistan's immediate neighbours.  

This is how the geopolitical chessboard looks like in the aftermath of the US departure from Afghanistan. It will be a hazardous task to predict an outcome of this game. However, there could be a spillover of the unrest in Afghanistan to areas like Kashmir, Xinjiang, and even Russia. Of course, Europe, the US and the rest of the world are no less vulnerable. The terror graph could see a spike in the days to come.  

Dictatorships are Bad - Sri Lanka and China

 

While the world, and especially India is pre-occupied with the onset of the third wave of the corona pandemic, a piece of news from the neighborhood has not got the attention it deserves.

It is about the crisis in Sri Lanka. It is a classic example of how political concentration of power really throws a well-run economic system into chaos. This has happened in the twenty first century. Dictatorships were popular in the nineteenth and especially early twentieth century. Dictators really do not learn from their mistakes.

By and large dictatorships are a thing of the past, though some are still going strong. The CCP in China, Kim Jong Un in North Korea, and recently Gotabaya Rajapaksa Sri Lanka. The Singaporean dictatorship will have to be excused from this list as it is not your run of the mill system. Lee took decisions which benefitted Singapore. One more benevolent dictator is the Sheikh of Dubai. There could be more such examples. However, as a rule dictatorships have been disastrous for their country.

From the nineties after the end of the civil war, Sri Lanka was one of the fastest growing economies in Asia. It has a small population, about 2 crore, and had a booming tourism industry. It was the largest producer and exporter of Cinnamon in the world. It had robust exports of tea and cardamom as well.

When Gotabaya Rajapaksa came to power in November 2019 Sri Lanka was doing fine on the economic front. It had one of the best health care systems in Asia. Tourism was the main source of foreign exchange with agriculture exports to back it up.

But President Rajapaksa is almost like a dictator in Sri Lanka today; (He was a Lieutenant Colonel in the Sri Lankan army). Though he is an elected member of the parliament, his election is suspect. In the best of times elections in Sri Lanka. especially the presidential ones are dicey to say the least.

This President made a disastrous decision some time back of only allowing organic farming. All pesticides and chemical fertilizers were banned. As a result crops began to fail. Lack of chemical fertilizers reduced crop resistance to disease and were ruined by insects and pests. As pesticides were banned, crops were destroyed by pests. Being a small economy this quickly affected the entire country.

Typical of a dictatorship, instead of mitigating the crisis, fuel was added to the fire. A disastrous solution was proposed by the agricultural ministry, that of supplying organic compost. If there is no animal feed, where is the compost going to come from?

The Rajapaksa family is heavily backed up by the CCP. The Sri Lankan leadership was so biased against India, that Sri Lanka did not even appoint an ambassador to India. Sri Lanka imported fertilizer from China for use in its agriculture. Certain harmful bacteria were found in the consignment. Sri Lanka then asked India to supply the fertilizer which India promptly did. Thus, now Sri Lanka's relations with China have come under a strain as Sri Lanka stopped payment for the fertilizer and in retaliation China blacklisted one of Sri Lanka's banks.

So Sri Lanka stands on the threshold of a massive food crisis. A smoothly running economy was punctured and taken to the brink by the whims of a dictator. Rajapaksa is propped up by the Chinese. He comes from the Hambantota area.  The port by the same name had to be leased to the Chinese for 99 years to offset massive development loans.

China has also shown how dictatorships can ruin a country. For decades Chinese economy grew at almost 10% per year. After the pandemic, some fault lines are becoming clear. It seems, there is only one avenue for the common man to invest in China. Real Estate. Almost 30% of the Chinese savings are in real estate. The common man in China does not trust the money market as it is considered too erratic and subject to sudden changes in government regulations. Real Estate companies took huge loans when the economy was booming during the last twenty years to expand business. Now that the economy has slowed down, these companies are saddled with huge debt.  

Also the Chinese government promoted high-speed railways to showcase Chinese technological prowess. The railway projects were implemented with total disregard for economic viability. Bonds were floated to raise the  money to fund the projects. Today China may have one of the best high-speed railway networks after Japan, but is again saddled with a huge debt. Most of the railway routes have become unviable. The single party dictatorship is responsible for the above fiascos. 

Mao had ruined Chinese agriculture by nationalizing all private farming. The communal farm system was a disaster. When private incentive was taken away, output plummeted.  The farmers stopped working when they were made to work on their own farms for a pittance paid by the government.

Dictatorships are bad as their political structure favours concentration of power.  Concentration of power means there is little or no opposition to the leadership. No one questions the decisions of the ruling elite for fear of reprisals. The result is, more often than not, wrong decisions are taken and implemented. If the economy is doing well, the dictator will be a powerful leader. However, if the people face economic hardships, the dictator quickly looses power as there is no alternative of electing another leader, as in a democracy. In bad times, the fall of a dictator is almost assured with the resulting political instability. 

China's covid vaccine efficacy is also under question as according to recent news reports China is witnessing a spike in covid cases in spite of most of its population being vaccinated. The CCP wanted China to be the first country to produce the covid vaccine and hence relaxed quality control and comprehensive testing. Not buying Australian coal to punish Australia was another short sighted decision of the CCP. China is facing a big power crunch as a result. 

History is replete with examples where dictators have forced disastrous decisions on their people and ruined the economies and social systems in their country. Sri Lanka and China are prime examples of how dictatorships are inherently bad political systems. 

The Chip - Geo-Political Implications

 The semiconductor chip shortage faced by the world industry today can be traced back to the peculiar circumstances in which this industry developed.  Of course the immediate reason for the shortage is the pandemic still blowing in the world.

The technology required to manufacture silicon chips is extremely complex. As a result, not many companies can boast of harnessing this technology. The USA of course has the lead. The company which started chip manufacturing was Intel and it is one of the few companies which makes them even today.

Among the few companies which are making semiconductor chips today, are Intel, Samsung, TSM, Qualcomm, Broadcom, Micron, Texas Instruments and Nvidia. These companies among themselves share the semiconductor market of the world. There are other small players as well. A few years after the semiconductor chip was invented, Intel had a virtual monopoly in manufacturing and supply of chips worldwide. But later Texas Instruments, Qualcomm, Nvidia developed their own technology and became major players themselves.  

In the late eighties and nineties the manufacturing of chips was outsourced to the Taiwanese company TSM. TSM recognizing the importance of the chip to the world industry had, over the decade between eighties and nineties, developed its own technology to manufacture semiconductors.

Today it is one of the largest manufacturers of semiconductors in the world. The chip may be designed by any of the above mentioned companies. However, chances are, it will be outsourced for manufacture to TSM. This company now supplies custom made chips to most of the industries of the world. Since electronics are used in almost all the devices one uses today, the chip has become an indispensable part of any gadget, from a wrist watch to an airliner.

The pandemic created the shortage of chips as factories closed down and production suffered. Enter China. China claims Taiwan as its integral part. However, Taiwan’s prowess in manufacturing semiconductor chips has been eyed by China for many years. With the integration of Taiwan, Beijing will get the knowhow to make advanced chips. Its own efforts in this field have not been so successful. Chips manufactured in China are several generations old compared to the ones designed by the big chip companies today and outsourced to TSM for manufacturing.

Massive investments by China in this field have not yielded them much in terms of success. This is an incredibly complex technology and most of it is controlled by the US. The recent ban on Huawei by the US has caused a big problem for Huawei and China, as it could not get the latest chips for its products.

The advanced machines to design and manufacture the chips are not easily available on the market. The US owns most of the patents on that technology as well. Moreover, no manufacturer will share such a lucrative knowhow, so the only way China or any country can hope to make their own chips is by research. This not easy, and is very expensive.

The chip war has only started, The US will zealously guard its technology and China more than any other country, will try its best to acquire it by hook or by crook. Also, it is worth noting that China has not been able to hack or reverse engineer this technology due to its sheer complexity.

As to where this chip war is headed, one can only make a guess. However, for the foreseeable future the chip shortage will pass us by and the US will continue to hold all the cards in this game.

The Post Pandemic Economic Order - A View

 

If one thinks of the disruptions wrought by the pandemic which is still blowing across the world, the question of post pandemic recovery will raise itself in the minds of some people.

The world economic order as we know it will certainly undergo profound changes. The pandemic is still amongst us, and the disruptions are continuing. However, it has already become necessary to cast an eye on the post pandemic scenario as now, after a two years of forced hiatus, the world will be in a hurry to get back to normal.

The new normal, however, is going to be different. The US led world order will not last very long after this pandemic, at least not as the world has known it. America, since Trump has been talking about withdrawing from most multilateral treaties like Climate Change, the TPP (Trans Pacific Partnership). On the other hand China, which is now economically second to the US, has been trying to increase its outreach in world trade by starting the Belt and Road project.

The US as a world leader in trade and peace keeping, was beginning to falter. And China is very much trying to take its place.

However there is a fundamental difference between how the US was looked at and how China is perceived today. The US guaranteed that the world trade mechanisms worked smoothly. The IMF was almost wholly financed by the US. And most of the countries in the world benefitted from the free flow of goods and services.

Japan became a manufacturing hub after the end WWII because the US bankrolled its development. Europe also benefitted from American largesse provided for post-war reconstruction. Thus, world trade saw its best growth phase in the post war world. Freedom was an underlying ‘mantra’ of this smooth growth. America stood for freedom and democracy and promoted those ideas across the world, mostly through its soft power, and occasionally, hard power.

Some of its actions of interfering in some country’s internal affairs to restore democracy can be overlooked as over-enthusiasm to promote its ideas. But by and large, the world supply chains worked reliably for many decades after the end of Second World War. It was stable because it was backed up by the US dollar which became the currency for world trade.

This picture will change in the coming few years. China may not replace the US as the numero uno in world trade, also, it cannot replace the US in terms of the trust that the countries of the world have in the US led system. China’s answer to the existing system was the Belt and Road project which has benefitted no country till date, and is being increasingly viewed as a debt trap for poor countries. China’s claim over the waters of South China Sea has eroded whatever trust China enjoyed globally and especially among the countries in this region.  

The new world order which will emerge after the pandemic will still be led by the US, the current situation in Afghanistan notwithstanding, and which has led many to predict the demise of the America as a world leader.  America may have lost the political will to fight other people’s battles, but its industry is in no mood to relinquish its technological and financial leadership.

Even in Afghanistan contrary to popular perception, American industry is the real winner. The politicians and their governments made a mess of the war, but the American defense industry has profited immensely from this twenty year war. 

America has always been an isolationist country. It did not pursue any territorial ambitions like other world powers before it. America became a super power without occupying any new lands. It was a reluctant participant in both the world wars. It carried the mantle of world leadership due to its military power and economic heft.

So, it is the industry of America which will keep it going when perhaps its politicians have few cards left to play. However, new players will emerge which will keep the supply chains of the world going. At the moment China does not look like it will be one of those players. Its current behavior has not won it any trust around the world.

Countries on which the mantle will fall could be India, Vietnam Mexico, Brazil, Bangladesh, etc. More could join the club. These countries could, along with the US, jointly ensure the smooth operation of the global supply chains.

During the pandemic the world realized that it was too dependent on one country for all its needs. From hairpins to medicines. When Chinese industries closed due to the pandemic, the world suffered as supply chains were disrupted.

As a result, the manufacturers of the world have begun to disperse their supply chains across the world to avoid bottlenecks and disruptions. Many production hubs will emerge as a result. The above mentioned countries are only the starting point.

The way forward would be a multipolar world order still dominated by America. No one country will be able to dominate the supply chains as it has happened in the recent past. The world has learnt it lessons. China will not be the workshop of the world. Many countries will be linked in the new supply chains.

Products will be assembled at different places and then shipped to their final destination. Technology will become redundant at a rapid pace and hence, innovation will be the key. The countries which are able to innovate the most will be the economic powerhouses.

In the post pandemic world there will be many economic mini superpowers. They will control a substantial part of the world trade and manufacturing. But competition will be fierce. For the last three decades China had a monopoly in manufacturing. No country could compete with China for scale. That is now past. In the future there will be many players which will take China’s place. Dispersed and distributed supply chains will be the norm, and world trade will that much smoother as a result.