You see, Vladimir Putin’s latest power play has just given Barack Obama the biggest set-back to his foreign policy so far. And more importantly, I’ll show you how you could benefit from this as an investor.
First though, let me explain the background to this latest opportunity…
The New Great Game
In the 19th century, Britain and the Russian Empire contested for strategic influence in Central Asia. Historians dubbed it the Great Game. Today, there is a much more diverse bunch of players in the region. The Russians are still in there, but so are the Americans, the Chinese and even the Indians.
In the past few years, these countries have been setting-up military bases across Central Asia. The Americans have several bases in the region, including Afghanistan. The Chinese and Russians have a military presence there. And it’s all about protecting their growing energy interests in the region
The big difference between today’s Great Game and the 19th century is that America has replaced Britain as the Russians’ main rival in the region. Let me explain.
Russia sees Central Asia as its “near abroad”, its traditional and legitimate sphere of political influence. The Americans would probably be perfectly happy to let them have it apart for one little thing – this is one of the most energy-rich region’s on the planet. And for the US it is a chance to break its dependence on oil from the volatile Middle East.
America has big plans for Central Asia
Right after the US invasion of Afghanistan in 2001, America announced plans to build a major gas pipe line from Turkmenistan, across Afghanistan and down to Pakistan, from where it could be shipped to world markets. Political instability in Afghanistan has made that impossible so far.
But the US plans to siphon-off the region’s energy Westwards are already well under way… and it hinges on the little Caucasian country of Georgia.
You see, Georgia is America’s closest ally in the Caucasus. Vital oil and gas pipelines run through the south of the country. They carry energy from oil-rich Azerbaijan and Kazakhstan across into Turkey. From there it is carried further west to Europe and shipped on the US. There are also plans to extend the energy transport network further into Central Asia and Europe.
The critical thing about these pipelines is that they let the Western powers by-pass Russia energy transport pipelines when accessing Central Asia’s oil and gas. That makes it much harder for Russia to use energy as a political bargaining chip.
Why Russia can’t afford to let this happen
Right now, Russia is the biggest player in Central Asia’s energy industry. Its gas monopoly, Gazprom, is the biggest buyer of Central Asian gas. And about four-fifths of the oil from Kazakhstan, the region’s biggest oil producer is exported through Russian oil pipelines.
Control of Central Asia’s vast energy resources is a vital part the “energy diplomacy” that Vladimir Putin has used to restore Russia’s position as a great power. We got a stark reminder of how Russia uses energy as a way of securing its strategic interests when it cut of gas supplies to Ukraine in January. Putin’s move has undermined Ukraine’s pro-Western president, Viktor Yushchenko. His approval rating has fallen to just 3.4% since that debacle.
Russia’s influence on the global stage could take a massive hit if they don’t find a way to counter the US plan. And now Russia has made its move…
America’s ambitions have just suffered a massive blow
On Tuesday, the president of Kyrgyzstan announced that they will shut down a critical US military base in his country. This is the last thing that the Obama government needs after declaring Afghanistan his biggest foreign policy challenge. Because the Manas base is a crucial staging point for delivering vital supplies to the US forces in Afghanistan.
But here is where it gets really interesting. Kyrgyzstan’s president made the announcement right after talks with Russia’s president, Dmitry Medvedev, while on a visit to Moscow. And that was right after the Russians promised a $2 billion loan and a $150 million grant to Kyrgyzstan to help it deal with the impact of the global economic crisis.
The Russians don’t want the Allied mission in Afghanistan to fail. The last thing they want is a radical Islamic regime on their doorstep. But they are also worried that America is using the military infrastructure they built up for the operation in Afghanistan to extend their strategic influence in Central Asia.
Closing Manas won’t destroy America’s ability to function in Afghanistan. But it is a massive setback for America’s ambitions in Central Asia. The chances of the US securing access to Central Asia’s energy through Afghanistan now look even more remote. That makes the western pipelines that run through Georgia more critical than ever…
But it is also forcing America to look for new sources of energy in some other very unusual places. It is driving Americans to look at using alternative bio-fuels like ethanol and to try and develop clean coal technology. Critically, it is also pushing the US to explore for oil in some of the more remote parts of the world.
America’s thirst for new sources of energy is opening up huge new opportunities for investors (For a free report on our top opportunity, click here)And this is a theme that we are going to following very closely here in The Right Side.
Best regards,
Manraaj Singh
For The Right Side
P.S. For a free report on how you could profit from America’s global hunt for new energy sources click here.
Investment advice from beyond the grave – BUY NOW
BY THEO CASEY
It’s time to buy.
Unless you think that capitalism is dead, you probably believe that stocks are looking very attractive. And you’d be right. Of course stocks could get cheaper from this point and the usual caveats – don’t buy banks and other such “value traps” – still apply. Don’t be reckless, but maybe you should now be making one or two defensive stock purchases.
The chart below maps what is known as the Graham Dodd P/E ratio over the past 72 years. This is a more rigorous P/E as it is based on the previous ten years of earnings. It was created by the late Benjamin Graham and David Dodd. Dodd was an esteemed US economist while Benjamin Graham is the father of value investing and the mentor of the world’s richest man, Warren Buffett. The red line shows the UK FTSE 100 is trading just under 11x and that is a major buying signal.
In fact, any level below 16x is a time to buy stocks. That’s not just my view, it is the prescription of Benjamin Graham in his 1934 investment classic “Security Analysis”.
Time to buy? – Stocks are cheap according to the Graham Dodd P/E
Source: Société Générale
I don’t doubt that it’s tough to make bold decisions in such volatile times. The dramatic falls in October and November affected us all, but we must remember to think like investors. Stocks are fantastically cheap and, for long-term investors, now is the time to act.
The Daily Reckoning – Here come the zeros
BY BILL BONNER
We live in a world run by simpletons.
In this morning’s paper is a front-page article describing how Japan “wasted trillions” on its various stimulus programs.
The International Herald Tribune:
“Japan’s rural areas have been paved over and filled in with roads, dams, and other big infrastructure projects, the legacy of trillions of dollars spent to lift the economy from a severe downturn caused by the bursting of a real estate bubble in the late 1980s.”
Public spending was so aggressive, it boosted Japan’s government debt to 180% of GDP – more than two times the current US level. But did all that cement buy Japan out of its slump?
You be the judge. Housing prices in Japan are now back down to where they were in 1975 – nearly 90% below the late-‘80s peak. And stocks? The Nikkei index is back down to where it was a quarter century ago. Stocks sell for half their book value – and they’re still considered too expensive for beaten-down, hyper-fearful Japanese investors. The downturn began in 1990. Over the following 19 years, it did more property damage than the Great Tokyo Fire of ’23 and the Enola Gay combined, wiping out wealth equal to three times the country’s GDP. This was despite interest rates at zero... and a heroic effort at Keynesian stimulation.
If America were to follow Japan’s example, it would have to leave its interest rates near zero for the next decade... and add about $10 TRILLION to its public debt. And if it got the same results, you’ll be able to sell your house in 2026 for the same price you paid in 1992.
But the simpletons have no other idea…
CONTINUED...
To read the Daily Reckoning in full, click here.
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