Academy Securities: Geopolitical & Macro Strategy Podcast

The Geopolitical Impact of Low Oil Prices

The Geopolitical Impact of Low Oil Prices 

 

Table of Contents:  

• 0:00 - 2:20: Introduction 
• 2:21 - 7:56: Dealing with China in a COVID Environment 
• 7:57 - 20:00: Impact on the Middle East and North Africa 
• 20:01 - 25:06: European Union and Russia 
• 25:07 - 28:25: Venezuela 
• 28:26 - End: Final Thoughts and Hong Kong Update 

Key Points: 

• With oil prices likely to remain low for an extended period of time, our Geopolitical Intelligence Group weighs in on the global implications. 
• We view the effects through the lens of U.S. national security policy and how China (in the COVID environment) will react domestically and internationally. 
• The consensus view is that the U.S. will not pull back on its commitment to its allies, including Israel and Saudi Arabia, but the relationships will evolve.  
• However, the consequences of low oil prices for other nations could be significant and we go around the world to discuss the potential ramifications. 
• In the Middle East, low oil prices will have an impact on nations using oil revenue to help subsidize their local economies. 
• Saudi Arabia, with a very low break even point for production, can sustain lower prices, but its Vision 2030 plan could be at risk. 
• Iran and Iraq will have significant economic issues to contend with as the impact of COVID is taking its toll, particularity on Iran.  
• In North Africa, lower oil prices will impact nations that are budgeting for much higher prices and will have ripple effects. We do not see Turkey backing away from its support of the GNA in Libya. 
• In Russia, we believe that low oil prices, the impact of COVID, and struggling overseas campaigns in Libya, Syria, and Venezuela will not deter Putin or erode his grip on power. 
• In Venezuela, while the U.S. does not intend to interdict Iranian shipping carrying fuel to the country, the stakes are high as the goal is an eventual transfer of power.  

 

Major General (Ret.) James A. "Spider" Marks is Head of Geopolitical Strategy and Academy Securities' Senior Advisory Board Member. General Marks is the Founder and President of The Marks Collaborative, an advisory for corporate leader development, education and training and has led entrepreneurial efforts in global primary research and national security. He served over 30 years in the Army holding every command position from infantry platoon leader to commanding general and was the senior intelligence officer in the LA Riots, the Balkans, Korea, and Operation Iraqi Freedom. He culminated his career as the Commanding General of the U.S. Army Intelligence Center and School at Fort Huachuca, Arizona. He has been awarded the Distinguished Service Medal, the Defense Superior Service Medal, Legion of Merit with Oak Leaf cluster, Bronze Star, and multiple combat, expeditionary and service ribbons. General Marks is a Master parachutist, authorized to wear Korean and Canadian Airborne wings, Air Assault qualified, and Honor Graduate of the U.S. Army Ranger School. General Marks is a national security contributor to CNN and member of the Military Intelligence Hall of Fame.  

Lieutenant General (Ret.) Robert S. Walsh is an Academy Securities' Advisory Board Member. Lieutenant General Walsh served in the Marine Corps for over 35 years, completing his career as the Commanding General of the Marine Corps Combat Development Command and the Deputy Commandant for Combat Development & Integration. In his last assignment, he was responsible for strategic planning and executing the reorganization of the Marine Corps to meet the new National Defense Strategy roles and missions. His responsibilities included integrating multiple warfighting functions and domains across all military services and the Department of Defense. 

 

Major General (Ret.) Mastin M. Robeson is an Academy Securities' Advisory Board Member. A native of the Carolinas, Mastin Robeson was commissioned in 1975 and served over 34 years on active duty in the United States Marine Corps, during which time he served in more than 60 countries. He retired from the Marine Corps in February 2010. Major General Robeson served in combat zones in Liberia, Desert Storm, Somalia, Bosnia, Horn of Africa, Southern Philippines, Iraq and Afghanistan. He commanded at every operational level in the Marine Corps, including its Anti-Terrorism unit, an infantry battalion, an infantry regiment, a combined joint task force in combat, two Marine Expeditionary Brigades, two Marine Divisions, and the Marine Corps Forces Special Operations Command. He served as Military Assistant to Secretary of Defense William S. Cohen and as General Dave Petraeus’ Director of Strategy, Plans, and Assessments in Iraq, where he was responsible for writing and assessing the 2007 Crocker/Petraeus surge campaign plan. 

 

 

The following information has been provided for informational purposes only and should not be used or construed as a solicitation, an offer to sell, or an offer to buy any security. Academy Securities Inc. accepts no liability for any errors or omissions arising as a result of transmission. Use of this communication by other than the intended recipients is prohibited. 

 

Academy Securities is a preeminent disabled veteran owned investment bank with strength in public finance, fixed income and equity trading and underwriting. Leadership and staff have had intensive military training prior to entering and gaining in-depth financial services experience in global capital markets. We are mission driven with a high ethical code, a solid sense of accountability and strive for excellence in the pursuit of our clients' success. Intellectual assets, strong visionary leaders and a proud team commitment bring out the best in each other for the benefit of our clients. Academy is our nation's first and only post-9/11 disabled veteran owned investment bank and is certified as DVBE, SDVOSB and MBE. The firm has a strong top and middle tier client base served by a national platform with offices in New York, Chicago, Boston, San Diego, Kansas City, Los Angeles, Sacramento and Chapel Hill.  

Please visit our website at www.academysecurities.com. 

 

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COVID-19

Key Points:

Peter Tchir Discusses the Need for Federal Assistance to Mitigate the Economic Impact of the Crisis

• We have now declared war on the coronavirus pandemic here in the United States.
• The goal is to slow the spread so our healthcare system can catch up (i.e. not be overwhelmed).
• The recommendation to stay home/limit activity will have an immediate impact on the economy.
• The Federal government needs to be more aggressive and take action to protect its citizens and make them financially “whole”.
• Unlike the 2008 financial crisis, this is a “bottoms up” problem and the effect will “trickle up”.

General Spider Marks Comments on the National Mobilization

• National mobilization – much like in WWII and during national disasters like hurricanes.
• Invoking the Stafford Act – will grant the president additional powers.
• National Guard will continue to be engaged to help communities get through the crisis.
• Country cannot move into complete isolation; we will need to work together.
• Nation has made sacrifices before, and will make them again and overcome this.

Actions in Iran

Key Points: 

• Iran has been severely weakened by sanctions and the death of Soleimani further destabilizes Iran  
• The death of Soleimani is part of a three-part strategy:  

• Constrain Iran’s malign activity  

• Roll back Iran’s influence in the region - especially in Iraq 
• Deter further Iranian aggression 

• Iran hopes that the death of Soleimani would galvanize its population  
• Iran’s strategic information capabilities are significant  
• The IRGC are more ideologically entrenched than the conventional Iranian military forces  

• Iran is unlikely to want to confront the U.S. again in a direct fashion  

• Future attacks will allow Iran deniability  
• Attacks are likely to occur against U.S. allies in the region  

• Expect a back channel movement to establish a diplomatic resolution – ease sanctions  
• A significant portion of the Iraqi population wants Iranian influence out of Iraq  

• Kim Jung Un is watching this closely  

• China remains a critical aspect to resolution with North Korea  
• China could provide military and nuclear top cover for North Korea 

• For the first time, Iran, China, and Russia held joint naval exercises  

• Remains to be seen if this partnership will embolden Iran  

• Remains to be seen if Russia and China will stand behind the actions of Iran  

• If Iran attempted to close the Strait of Hormuz, China would be greatly impacted  

A Strategic Partnership with Turkey

Rachel Washburn and Lieutenant General Robert Walsh discuss the partnership between the United States and Turkey.  Recent escalations between Turkey and the Kurds in northern Syria has many Americans questioning the motives and thoughts behind the US reaction to the conflict.

Table of Contents:
U.S.-Turkey partnership history: 00:00 – 5:19
Turkey’s cultural shift and relationships: 5:20 – 22:39
Next steps: 22:40 – End

Lieutenant General (Ret.) Robert S. Walsh is an Academy Securities' Advisory Board Member. Lieutenant General Walsh served in the Marine Corps for over 35 years, completing his career as the Commanding General of the Marine Corps Combat Development Command and the Deputy Commandant for Combat Development & Integration. In his last assignment, he was responsible for strategic planning and executing the reorganization of the Marine Corps to meet the new National Defense Strategy roles and missions.  His responsibilities included integrating multiple warfighting functions and domains across all military services and the Department of Defense.

 

Previously, he served as the Assistant Deputy Commandant for Aviation, the Assistant Deputy Commandant for Combat Development & Integration, and the Director of Expeditionary Warfare, Office of the Chief of Naval Operations.  In these assignments he was responsible for managing numerous vital warfare systems.  Lieutenant General Walsh’s operational and joint assignments included serving as the Commanding General, 2d Marine Aircraft Wing (Forward) Iraq and the Director of Operations, United States Northern Command. Lieutenant General Walsh has served as the Co-Chairman of both the Navy-Marine Corps and Army-Marine Corps Boards along with being Co-Chairman of the Defense Advanced Research Projects Agency (DARPA) – Marine Corps Investment Board and the Office of Naval Research – Marine Corps Investment Board. A native of Chicago, Illinois, Lieutenant General Walsh is a graduate of the United States Naval Academy and holds a Master of Science in National Security Studies from the National War College.  He served as an F/A-18 pilot at all levels to include commanding Marine Fighter Attack Squadron 115, Marine Aircraft Group 31, and 2d Marine Aircraft Wing (Forward) during Operation IRAQI FREEDOM.  He was an instructor at the Navy Fighter Weapons School, also known as TOPGUN.  He has received several writing awards. Additionally, Lieutenant General Walsh has testified before Congress on subjects such as modernization, acquisition, readiness and training of the Navy and Marine Corps.

Unrest in Hong Kong

Academy Securities Geopolitical SITREP  

Geopolitical Flashpoints: The Macroeconomic Impact of the Geostrategic Landscape 

 

 

Table of Contents: 

Hong Kong Protest Background: 00:00 - 4:33 

Mainland China’s Response: 4:34 - 11:28 

The View from Taiwan: 11:29 - 15:43 

North Korea and China: 15:44 - 19:09 

 

Listen on iTunes Here 

Listen on Google Play 

 

Key Points: 

• For the last several years, the market has failed to fully recognize that Hong Kong is a part of China - it isn’t completely independent.  
• If the U.S. were to respond to the crisis, it would be with more difficult terms around trade.  
• Much of the anti-government sentiment and protests began in April in response to an extradition bill. 

• China and Hong Kong are part of “one country two systems”: 

• The Hong Kong system and “basic law” protects civil freedoms of Hong Kong citizens. 
• The protesters wish to highlight the deterioration of these freedoms and protections.  

• The protests are not hierarchical or organized. 

• The protesters and their recent actions risk alienating the population to their cause.  

• China’s growing global influence could impact its response.  
• China’s deft social media and AI capabilities are important considerations when evaluating these protests. 
• Two U.S. Navy port visits have been canceled amid protests and accusations of U.S. involvement.  
• The Chinese People’s Armed Police - not Army - has massed on the Hong Kong boarder. 
• China is walking a fine line trying to diminish the impact of the protests while using limited force.  

• An escalation by mainland China would result in more disruptions to trade negotiations with the U.S.  
• Taiwan is watching what happens in Hong Kong very closely: 

• The events in Hong Kong could lead to more anti-Chinese/anti-communist sentiment in Taiwan.   

• The U.S. has approved new military sales to Taiwan and China has responded by increasing military operations around Taiwan. 
• North Korea remains economically dependent on China and China remains a consideration as we evaluate the ongoing negotiations with North Korea and its behavior. 

UK Royal Navy intervenes in protection of UK merchant vessels from the Iranian IRGC Navy

As events continue to develop in the Straights of Hormuz and Gulf of Oman, tensions rise between Iran, the US, and other super powers active in these very valuable and necessary shipping lanes.  This week the UK Royal Navy had to place ships between a UK flagged merchant ship from BP and Iranian IRGC vessels.

We immediately got on the phone to discuss this further with our Geopolitical & macro Strategy team members.  We had Lieutenant General Frank Kearney and Lieutenant General David Deptula were featured in this conversation.  

I've also included sections from previous podcasts on the topic of Iran.  Those conversations feature Major General James "Spider" Marks and Brigadier General Tony Tata.

There are also several written pieces we've published regarding this global concern.  They can be viewed by clicking here.

Trump & Kim DMZ Walk, G20, Iran, & Turkey

Academy Securities discusses the recent meeting between President Trump's & Kim Jong Un's meeting and walk through the demilitarized zone.  We also talk about the results (or lack there of) after the G20 summit in Japan.  The second half of the conversation focuses on the effect sanctions are having on Iran and recent election results in Turkey.

Trade War - The Long War

We continue the conversation regarding the Trade War with China.  We cover Academy's previous coverage of this subject as well as long term forecasting.  Academy Securities has stayed ahead of some of the recent geopolitical, macro, and credit market trends that are driving price action lately. For example, here are some instances where Peter has been on the leading edge of market dynamics, and has been called on frequently by the financial press, including Bloomberg TV, to share his developing thoughts:

 

• In late March we started focusing more on China as a “strategic competitor” tying our geopolitical perspectives with Peter’s thought process.  Peter wasn’t yet bearish but that set the stage. See here for his thoughts then: China Trade War

 

• By mid-April he was more concerned and became more bullish. You all may have seen some of those notes.

 

• Turned full-scale bearish on May 12^th, with this piece:Crossing the Rubicon with China

POTUS Denies Waivers for Iranian Oil Sanctions

Brigadier General Tata, Peter Tchir, Rachel Washburn, and Chance Mims all discuss the Trump Administration's decision to deny waivers to countries that want to buy Iranian Oil against standing sanctions.  What threats are associated with this decision?

2019 Second Quarter Outlook

We discuss Geopolitical & Macro Strategy concerns with brigadier General Tony Tata, Major General James Spider Marks, Peter Tchir, and Rachel Washburn.

 

Topics 

• China & Trade
• Taiwan, US, and China Relations
• India's Position Among Other Leading Nations
• Elections in Indonesia
• Russian Interference in Ukraine's Elections
• Volatility in Turkey
• Unrest in Venezuela