We are all Europeans now

The broadening cracks in the European economic framework now appear to be undermining the whole European structure, as if a ‘contagion’ is spreading from the Southern European economies outwards.

The new EU External Energy Policy: an important move - if it is not too late

By Alexander Mirtchev

With the adoption of its new External Energy Policy, the EU has finally made a first step towards its integration as a single negotiating bloc in the world energy market. As such the External Energy Policy could become an important factor in the global energy security picture and a possible geopolitical game-changer. However, it remains to be seen whether the big EU member states will be willing to subordinate their interests to the wider EU interest. The External Energy Policy has probably come five years too late, argues Alexander Mirtchev, President of Krull Corp. and Vice-President of the Royal United Services Institute for Defence and Security Studies.

ALEXANDER MIRTCHEV DISCUSSES THE EVOLVEMENT OF THE ECONOMIC AND FINANCIAL CRISIS IN EMERGING MARKETS AND THE STRATEGIC OPTIONS FOR THE MULTI-NATIONALS WITH VOICE OF AMERICA

In an interview with Voice of America television, Dr. Alexander Mirtchev (Александр Мирчев), an economic policy expert and president of Krull Corporation, shed light on the strategic options that multi-national companies have in some rapidly emerging markets during the economic crisis and beyond.

Our Best New Foreign Policy Tool: Energy

By Alexanser Mirtchev

To date, the extensive policy debate over production of non-traditional fossil fuels, such as shale gas, and the resulting possibility for the use of those resources by the United States  has not adequately focused on an important consideration: the geo-economic and foreign policy implications and advantages to the United States, its allies, and global economic security overall, stemming from these new fossil fuel resources.

New gas resources and exports of liquefied natural gas (LNG) from the U.S. are an added economic resource, which can allow the U.S. to mitigate its own and the reliance of many of its allies in Europe on external sources of fossil fuels. Europe is extensively dependent on gas imports, especially from Russia, as well as  Algeria, Qatar and others. According to the International Energy Agency, Europe depended on oil and gas imports for over 60% of its demand in 2010, and this dependence is set to increase to over 80% by 2035. At the same time, the external energy suppliers to the EU have demonstrated their willingness to use the leverage of European energy dependence for foreign policy purposes. Several times in recent history, Russian disputes with countries through which those pipelines transit – most notably disputes with the Ukraine in 2006 and 2009 – have caused either actual supply shortages or fear of supply shortages to Europe, which was sufficient to roil the local markets. The simple knowledge that Europe depends on foreign gas has allowed exporters to use producer power as a foreign policy leverage.

The preferred manner of transporting gas to European markets has been pipelines, but currently only one meaningful alternative pipeline route is being developed – from Azerbaijan to Europe – to provide a check on Russian natural gas power. This raises the importance of LNG, the other alternative form of supplying distant markets. Because LNG is transported in vessels, supply is not limited by pipeline infrastructure but instead can be delivered to various markets so long as LNG regasification facilities exist. European countries such as Belgium, France, Italy, the Netherlands, Portugal, and Spain currently import LNG. Additional LNG regasification facilities and increased supplies of LNG on the world market will increase European energy security. This is where the U.S. is in position to become an adequate optional source of energy and energy security for its European allies.

With huge supplies of natural gas and the technical capability to produce large quantities of gas on a steady basis for years to come, the introduction of meaningful volumes of U.S. LNG into world markets will disrupt the current market, threaten the incumbents and ultimately lead to the creation of a liquid global spot market for LNG. It will not require duplicative infrastructure, only sufficient adjustments and adaptation to ensure that loss of other suppliers will not constrain consumers. Once European buyers are able to tap into liquid global markets rather than long-term contracts with one or two suppliers, they will be less intimidated by prospects of shutdown or other forms of manipulation of gas deliveries. The mere availability of adequate LNG regasification infrastructure and supply may be all that is necessary to prevent gas exporters from using natural gas supply as geopolitical leverage, nudge them to take diversification seriously and spur a wave of market reforms, contributing to the improvement of global economic security.

The geopolitical opportunities presented by the shale revolution and the prospect of LNG exports cannot be underestimated, and yet these considerations seem to rarely factor into the current debate in the US about LNG exports. The economic rationale for increased LNG exports from the US have been well documented. A recent IHS study puts the increase in US industrial production at $252 billion by 2020, thanks to lower energy prices in the US and other economic ‘spillovers’ from unconventional oil and gas. The objections fall into two categories: (i) those large US industrial consumers that benefit from low natural gas prices and thus for parochial reasons want to limit demand by closing off export markets in order to keep an imbalance between supply and demand that results in artificially low prices; and (ii) environmental interests opposed to hydraulic fracturing used to produce much US natural gas and who therefore want to close off export markets in order to try to limit natural gas production. While the economic case alone outweighs these objections, the case for US LNG exports becomes even stronger when one further takes into account how US LNG exports stand to advance US foreign policy, geo-economic and geopolitical interests.

Dr. Mirtchev is an economist who frequently writes on global economic security and energy issues

The Economist: “The Fed's have-it-both-ways policy”

R.A., regarding Bernanke’s Jackson Hole speech, your column notes that you “found the tone on monetary policy to be confusing and timid.” Expectations now turn to what President Obama will say next week and what the Fed will do (or not do) when they next meet. Uncertainty again prevails.

Alexander Mirtchev

The Global Inflation Wave: Waiting for Constantine?

Source: The Globalist

Alexander Mirtchev and Norman Bailey,

In the wake of the global economic crisis, the world is trying to chart an economic path to the future and find a "new normal." As Alexander Mirtchev and Norman A. Bailey explain in the first installment in their series "The Search for a New Global Equilibrium," inflation as a factor of global economic security has the innate capacity to upend carefully laid plans and further upset the equilibrium.

Will G-20 Counter Power of Uncertainty?

By Alexander Mirtchev 

In 2009, G-20 leaders met in Pittsburgh and emerged with a mandate ‘to be the premier forum for international economic cooperation,' endowing the G-20 with a leading economic role on the global stage. It appeared at the time that the leaders of the G-20 had successfully defeated pessimism. However, the rising tide of global economic turmoil and problems ranging from sovereign indebtedness to consumption and saving imbalances have created a ‘perfect storm' that is far from abating.

Alexander Mirtchev

Will Financial Regulation Trash Global Economic Securi

Alexander Mirtchev, Contributor

Under the auspices of the Financial Stability Board, more than 30 recommendations have been set out as part of a massive and far-reaching G-20 financial regulatory reform package to ostensibly minimize risk in the financial system and maximize consumer protection.

How the Alternative Energy Megatrend will impact global geopolitical relations

The Greening of Geopolitics

By Dr Alexander Mirtchev

 

The advent of renewable energies is generally regarded from a fairly narrow perspective: whether – and to what extent – they are able to replace fossil fuels and what this would mean for the energy system and the economy. Such a perspective profoundly underestimates the potential consequences of what is in fact a revolutionary global development: a socio-political and techno-economic megatrend that has the ability to become a global societal game-changer, writes Alexander Mirtchev, Vice-President of the Royal United Services Institute for Defence and Security Studies (RUSI). According to Mirtchev, the ‘Alternative Energy Megatrend’ will have far-reaching effects on global geopolitical relations and security concerns – effects that have yet to be fully grasped by most observers. This article is adapted from his upcoming book: “The Alternative Energy Megatrend: A Global Security Discourse in the Universally-Securitized World”.

Alternative Energy And Global Energy Security In Aftermath Of Rio+20

“Life always gets harder toward the summit–the cold increases, the responsibility increases.” These words by Friedrich Nietzsche aptly characterize the atmosphere among global leaders at June’s international summits.

Gold Prices Struggle to Stay Near $1, 700

Gold prices fell Wednesday on negative economic news from China and Europe plus concerns that the world's No. 1 economy is barely advancing.

Dr. Alexander Mirtchev Discusses the U.S. Government's Measures to Deal With the Global Economic Crisis and Stresses the Imperative for Viable Exit Strategy on the Riz Khan Show

Dr. Alexander Mirtchev, founder and president of Krull Corporation, discussed the U.S. government's actions in response to the crisis in the economy on Al-Jazeera's Riz Khan Show. The complexities created by the precarious economic and financial situation are exacerbated by what is perceived as a "failure of the reigning 'social contract'" between Main Street, Wall Street and the U.S. government. "To put it simply, Main Street was relying on Wall Street to go about its business, with the government perceived as the arbiter and even guarantor of sure returns. Presently, the collapse of this 'contract' is giving rise to calls from different quarters for overhauling the whole system," according to Dr. Mirtchev.

Securing global economic security

Inflation is a significant factor of global economic security and has the innate capacity to upend carefully laid plans

The Evolving Nature of Corporate Mergers and Acquisitions in the Wake of the Global Economic Crisis

WASHINGTON (Marketwire) - In an article in Global Finance Magazine Dr. Alexander Mirtchev, economics expert and president of Washington-based Krull Corp., a consultancy with a focus on new economic trends and emerging policy challenges expounds on the signs of revitalization in the international mergers and acquisitions market. He assesses the implications of the resurgence of investment activity and the potential repercussions of the growing trend of investors' "clubbing together" for major acquisition and investment deals.

After the international M&A activities "cratered" in the midst of a global recession, there are finally indications that corporate tie-ups and "teaming-ups" are once again becoming an attractive form of prioritizing investment activity. According to Alexander Mirtchev, "looking towards recovery, joining forces allows investors to achieve better terms and access 'tailor-made' financing tools. This has led to intensifying interest in mergers and acquisitions of a size that until recently appeared unviable due to the impact of the global economic crisis." Despite the fact that global economic recovery is "moderately-paced and uneven," he added, "M&A activity has picked up noticeably, perhaps even beyond the level that is perceived to correspond to the actual state of the global economy."

The rationale for the recent resurgence can be seen not only in efforts to tackle the effects of the crisis, but represent also the "long view" of recovery in the post-crisis period. From Mirtchev's perspective, mergers and acquisitions are not simply driven by the growing perception that asset prices have dropped to a level that makes them attractive. "Rather, a number of major corporate alliances and acquisitions reflect the drive to develop synergies beyond the immediate," he indicates. "Merger and acquisition activity is being driven not just by the growing perception of attractive asset values in the wake of the crisis. Stronger investment interest is also due to the momentum of private equity firms, investment companies and sovereign wealth funds "teaming up" in order to achieve shortcuts to improved market knowledge, better trading terms and increased opportunities for investment with a realistic medium to long-term significance."

According to Mirtchev, "there is, in addition, a view among major investors that combining forces brings new resources to bear to a particular project, as well as enhancing the level of expertise brought to the table. The primary advantage of forming clubs is to spread the risk while increasing potential profits. Meanwhile, the co-financing is welcome at a time when lack of financing is the biggest impediment to dealmaking." Skeptics would suggest that, given uncertain demand, M&A recovery reflects the desire by CEOs to use cash to eliminate their weakened competitors rather that invest in organic growth and innovation. From Mirtchev's vantage point, this is a sign of maturity by investment companies and funds, which are now interested not only in short-term gains or in "glamour investments", but are more focused on the results in the long-run.
Moreover, a number of investors are showing greater willingness to join forces, in order to pool their exposure to risk, generate additional opportunities and multiply the effect of their resources. "The increased willingness of investors to share the benefits from an acquisition in order to introduce elements of comparatively independent supplementary financing mechanisms in their transactions is another sign of their growing acumen," posits Dr. Mirtchev. "These signs of maturity reinforce the legitimacy of mergers and acquisitions, and provide an added level of liquidity to a system that is still struggling to cope with the effects of the global financial and economic crisis."

About Krull Corporation

Washington, D.C.-based Krull Corp. was founded in 1992 with a mission to address new economic trends, relevant business strategies, and economic and political risk mitigation.
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Economic Expert Says the Key to Creating Growth for Multinationals Post-Crisis Is to Focus on Core Business and Expand Their Global Footprint

In a recent Reuters interview that was featured in UK's The Guardian, the founder and president of the Krull Corporation, Dr. Alexander Mirtchev, discussed the impact of the global economic slowdown and the financial crisis on the growth potential of major multinationals, in particular in the emerging markets.

"Despite the fact that multinationals generate the majority of their total revenues from developed economies, emerging markets could provide the all-too-necessary upside that may be the difference between success and failure during the crisis, its fallout and, most importantly, in the positioning for recovery," he said.

"Granted that the pressure on all emerging markets is similar – dealing with the global slowdown in demand and the credit crunch, overexposure to major currencies and commodities price fluctuations, in a number of casesoverleveraging and budget deficits among other things -- they are by nomeans a 'single class of assets,' and are going to act and react differently, and reach distinctly separate outcomes. From China to Chile, emerging market economies are equipped with specific advantages that would affect multinationals' decision-making process -- large reserves, greater access to natural resources, or access to new avenues and options to deal with the crisis as part of the EU," he indicated. "In addition, in these interventionist times, some are more agile, easier to 'manage' from the top, and can adjust more quickly to the crisis, provided their governments have the necessary political will and wherewithal," stated Mirtchev.

According to Dr.Mirtchev, multinationals such as GE should not succumb to growing financial pressures, but should rather "stay the course, and approach local turbulences as part of any systemic business problem that will be around for a while." The upside is that "even though these markets are not decoupled from the world economy and will slow down further, significant segments of these markets are placed to do better in comparison with the rest of the world."

Secondly, "these markets can not only provide a certain offsetting counterweight to the impact of the downturn on multinationals' bottom line,but, significantly, are the markets via which multinationals should growtheir global footprint looking beyond the recession," he indicated.

That is to say that multinationals should utilize the relatively positive-looking segments of markets, such as China, India, Brazil, and even Russia, despite its own economic travails, etc., to partially offset the effect of the slowdown elsewhere, and, most importantly, to provide themselves with a springboard for further regional and global growth. An eventual recovery is inevitable and appropriate positioning today is critical to tomorrow's success.

The Reuters article with Dr.Mirtchev was published in the United Kingdom's Guardian newspaper and can be viewed in its entirety at: "Emerging markets lend some support to GE outlook."

Several interviews with Dr. Mirtchev on the global economy can be viewed at www.youtube.com/focuswashington.

Dr. Mirtchev is also a member of the board of directors of the Kazakhstan sovereign wealth fund "Samruk-Kazyna."

December 8, 2008