“No Russian mining without Western technologies”

Alastair Newton was invited by the Luxembourg Financial Markets Association (LFMA) to share his geostrategic analysis on the occasion of the association’s 65th anniversary celebration. A former diplomat for the British Foreign Services, he collaborated among other things in the coordination of intelligence – notably during the first Gulf War – and led the diplomatic team at 10 Downing Street for the G8 summits. Entering the world of finance through a secondment from the diplomatic service with Lehman Brothers in the early 2000s, he then left the public service to hold the position of senior political analyst at Nomura International from 2008 to 2015. Since then, Alastair Newton co-founded the company, Alavan Business Advisory, which specializes in geopolitical risk analysis and consulting.

In your speeches, you establish a causality between the end of hegemonies and the current global economic crisis. Can you explain it to us?

Alastair Newton. – “The definition of a geopolitical cycle revolves around a period of hegemony, that is, when one power controls a large part of the world’s economy, apart from its own. Imperialism is a classic example. The British Empire was a hegemony. Since its decline, we have lived in a world under American hegemony. And the corollary of that is that when hegemony comes to an end, exactly what happens is what we are experiencing today: increasing trade barriers, disruptions in supply chains, etc. We see economic growth slowing down, sometimes even reversing. We are also seeing a rise in nationalism.

Vladimir Putin’s decision to invade Ukraine illustrates very clearly that Russia is entering a period of decline.

Alastair Newton,&nbsp co-founder,&nbsp Alavan Business Advisory

The reality is that, in a significant number of cases of end of hegemony, the declining power has waged war in an attempt to secure its primacy, and very often it has come out badly. And, in my opinion, Vladimir Putin’s decision to invade Ukraine illustrates very clearly that Russia is entering a period of decline.

In this context, what reading do you have of the Western sanctions taken against Russia?

“Financial sanctions are not without importance. At least, if we got an effective embargo on the sale of Russian hydrocarbons, it would have a significant impact. Russia still makes a lot of money selling oil on international markets. If there was an effective capping mechanism, if insurance was cut off on ships carrying Russian oil, that would have an impact. But this will still not be enough to crush the whole Russian machine. What would really make the difference is the crippling of the country’s manufacturing and mining capacity. Russia simply will not be able to extract oil and gas from the ground without Western technologies. The extraction is done either by Western companies bringing this technology with them, or by buying the technology from Western countries.

Alastair Newton believes that China's ability to overcome potential Western sanctions would rest in foreign trade transactions denominated in renminbi and no longer in dollars.  (Photo: Guy Wolff/Modern House)

Alastair Newton believes that China’s ability to overcome potential Western sanctions would rest in foreign trade transactions denominated in renminbi and no longer in dollars.

(Photo: Guy Wolff/Modern House)

Alone, Russia simply cannot do it. It will not be able, for example, to drill in the deep waters of the Arctic without Western technology. In such a case, their means of production would gradually be completely suffocated. You add to that the fact that Western companies are pulling out and bringing their technology home. There are also around 150,000 of the best and brightest Russians who have left the country since the start of the war. This is going to have quite a significant and negative impact on Russia’s economy. But it will take time, let’s be clear on that. Russia is not North Korea.

If there was an effective capping mechanism, if insurance was cut off on ships carrying Russian oil, that would have an impact. But this will still not be enough to crush the whole Russian machine. What would really make the difference is the crippling of the country’s manufacturing and mining capacity.

Alastair Newton

Alastair Newton,&nbsp co-founder,&nbsp Alavan Business Advisory

Could the intensity of Western sanctions against Russia have a chilling effect on China’s desire to conquer Taiwan?

“I think that’s the case for now, but the Chinese are going to be prepared to try to ride out a wave of sanctions similar to the one that was inflicted on Russia. To do this, the most important thing for China is to get out of its dependence on dollar-denominated transactions for its foreign trade. It is indeed at this level that the Russians really took a hit. But I think the Chinese understand now that they will never get the renminbi (official name of the Chinese currency, of which the yuan is the unit, editor’s note) in paper form to be an alternative to the American dollar. China therefore needs to prepare even more before it is able to defend itself against a sanctions regime imposed on it.”

Leave a Comment