Best of the Week
Most Popular
1. Crude Oil and Water: How Climate Change is Threatening our Two Most Precious Commodities - Richard_Mills
2.The Potential $54 Trillion Cost Of The Fed's Planned Interest Rate Increases - Dan_Amerman
3.Best Cash ISA Savings for Rising UK Interest Rates and High Inflation - March 2018 - Nadeem_Walayat
4.Fed Interest Hikes, US Dollar, and Gold - Zeal_LLC
5.What Happens Next after February’s Stock Market Selloff - Troy_Bombardia
6.The 'Beast from the East' UK Extreme Snow Weather - Sheffield Day 2 - N_Walayat
7.Currencies Will Be ‘Flushed Down the Toilet’ Triggering a ‘Mad Rush into Gold’ - MoneyMetals
8.Significant Decline In Stocks On The Cards! -Enda_Glynn
9.Land Rover Discovery Sport Extreme Driving "Beast from the East" Snow Weather Test - N_Walayat
10.SILVER Large Specualtors Net Short Position 15 Year Anniversary - Clive_Maund
Last 7 days
SPX Wedge Breaks and Double Gaps: Capatulation but GOLD is Coiling for Breakout - 24th Mar 18
The Fed’s Interest Rate Hikes Aren’t Bearish for the Stock Market - 24th Mar 18
Will Gold Price Breakout? 3 Things to Watch… - 24th Mar 18
Gold Junior Mining Stocks GDXJ Fundamentals - 23rd Mar 18
Global Trade War Fears See Precious Metals Gain And Stocks Fall - 23rd Mar 18
Stocks Recovering from a "deep dive" Overnight - 23rd Mar 18
Blaming the Fed for Weaker Greenback US Dollar - 23rd Mar 18
Watch This Group Signal Stock Market Trend Changes - 22nd Mar 18
Stocks are Gapping Beneath the Trendline Support - 22nd Mar 18
Fed Action Casts Shadow on Bullish Case for Stocks - 22nd Mar 18
A Strong Economy and Weak Stock Market is Bullish for Stocks - 22nd Mar 18
Fed Raises US Interest Rates 25bp – Where Are We In The Stock Market Cycle? - 22nd Mar 18
Why Spotify Will Likely Surge During Its IPO - 22nd Mar 18
SY Police Arrest Woman for Blowing Trumpet at Sheffield Tree Felling Protest - 22nd Mar 18
Facebook: The Anti-Social Network Covert Data Gathering - 21st Mar 18
Additional Signs for Gold and Silver Amid Increasing FOMC Tension - 21st Mar 18
Credit Concerns In U.S. Growing As LIBOR OIS Surges to 2009 High - 21st Mar 18
Stock Markets Are Flat-to-lower Before the FOMC - 21st Mar 18
Will Powell’s Actions Pop Stock Market Perfection - 21st Mar 18
Economic Moral Hazards of the International Criminal Court - and Philippines Withdrawal - 21st Mar 18
Larry Kudlow vs. Vladimir Putin on Gold - 21st Mar 18
Trump Builds Economy and War Machine - 21st Mar 18
This Stock Market "Illusion" Can Destroy Once-Vibrant Portfolios - 21st Mar 18
Gold Short-term Pull Back in Progress - 20th Mar 18
Stocks Appear to be Under Pressure - 20th Mar 18
Time To Eliminate Your Wall Street Tax? - 20th Mar 18
The Beast from the East Snow, UK Roads Driving Car Accidents - 20th Mar 18
Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - 19th Mar 18
2018 Reversal Dates for Gold, Silver and Gold Stocks - 19th Mar 18
This Tech Breakthrough Could Save The Electric Car Market - 19th Mar 18
Stocks Set to Open Lower, Should You Buy? - 19th Mar 18
The Wealth Machine That Rising Interest Rates Create Conflict With The National Debt - 19th Mar 18
Affiliate Marketing Tips and Network Recommendations - 19th Mar 18
Do Stocks Bull Market Tops Need Breadth Divergences? - 19th Mar 18
Doritos Instant £500 Win! Why Super Market Shelves are Empty - 19th Mar 18
Bonds, Inflation & the Market Amigos - 19th Mar 18
US Housing Real Estate Market and Banking Pressures Are Building - 19th Mar 18
Stock Market Bulls Last Stand? - 18th Mar 18
Putin Flip-Flops Like A Drunken Whore On Bitcoin Cryptocurrency Legalization - 18th Mar 18
How to Legally Manipulate Interest Rates - 18th Mar 18
Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - 18th Mar 18

Market Oracle FREE Newsletter

Urgent Stock Market Message

Germany’s Delegation To Russia Signals That Merkel Is Looking For New Allies

Economics / Russia Oct 23, 2017 - 06:08 PM GMT

By: John_Mauldin


BY GEORGE FRIEDMAN : A delegation of executives from major German corporations recently met with Russian President Vladimir Putin.

Such delegations are not unusual. Sometimes it is routine, sometimes a courtesy. But occasionally, it has significance. In the case of Russia-Germany relations, such meetings are always potentially significant.

Germany’s Unsteady Relations

Two relationships are critical to Germany.

One is with the European Union, the other is with the United States. Neither relationship is stable right now. Brexit, the Spanish crisis, Germany feuding with Poland and the unsolved economic problems of southern Europe are tearing the European Union apart.

The Germans and the EU apparatus claim that none of these threaten the bloc. In fact, almost a decade after 2008, Europe appears to be achieving very modest economic growth. But the Germans know the dangers that lie ahead, even if Brussels does not.

Many of the EU’s problems are political, not economic. (I wrote about the inherent weakness of Europe in my free e-book, The World Explained in Maps, which you can find here)

Poland and Germany have butted heads over the tension between the right to national self-determination and EU rules. This is also what Brexit was about.

Spain is locked in a dispute over the nature of a nation and the right of a region to secede, while the EU considers what role it should play in the domestic matters of a member state. And although southern Europe’s problems are economic, the fact that Europe has eked out minimal growth means neither that such growth is sustainable nor that the growth rate comes close to solving the Continent’s deep structural problems.

As the de facto leader of the EU, Germany has to appear confident while considering the implications of failure.

The German relationship with the United States is unsettled—and not just because of President Donald Trump’s personality.

The strategic and economic situation in Europe has changed dramatically since the early 1990s—when the Soviet Union fell, Germany reunified and the all-important Maastricht treaty was signed—but Germany’s structural relationship with the US has not.

Both are members of NATO, but they have radically different views of its mission and its economics. Germany has the world’s fourth-largest economy, but its financial contribution to NATO doesn’t reflect that.

Then there is Russia. The American policy toward Russia has hardened since the Democratic Party adopted an intense anti-Russia stance following the presidential election—more intense even than that of the Republican Party, which has always been uneasy with Russia.

The Ukraine crisis continues to fester while US troops are deployed in the Baltics, Poland, and Romania. This has widened rifts within the EU. Germany isn’t interested in a second Cold War; Eastern Europe believes it’s already in one.

The Eastern Europeans are increasingly alienated from the Germans on the issue and more closely aligned with the Americans. At a time when German relations with key Eastern European countries are being tested, the added strain of US policy in the region is a threat to German interests.

Germany wants the Russia problem to subside. The US and its Eastern European allies think the way to accomplish that is through confrontation.

An Alternative That Germany Doesn’t Want

Germany’s foreign policy has remained roughly the same since 1991, even as the international reality has changed dramatically. This is forcing Germany toward a decision it doesn’t want to make.

It must consider what happens if the EU continues to disintegrate and if European countries’ foreign policies and politics continue to diverge.

It must consider what happens if the US continues to shape the dynamics of Europe in a way that Germany will have to confront American enemies, or refuse to do so. This isn’t just about Russia—we can see the same issue over Iran.

Germany can’t exist without stable economic partners. It has never been self-sufficient since it reunified. It must explore alternatives.

The most obvious alternative for Germany has always been Russia, either through alliance or conquest.

Germany needs Russian raw materials. It also needs the Russian market to be far more robust than it is so that it can buy more German goods.

But Russia is incapable of rapid economic development without outside help, and with the collapse of oil prices, it needs rapid development to stabilize its economy. Germany needs Russia’s economy to succeed, and what it has to offer Russia is capital, technology, and management.

In exchange, Russia can offer raw materials and a workforce.

An alignment with Russia could settle Eastern Europe in Germany’s orbit. With the way things are going, and given Germany’s alternatives, the Russian option is expensive but potentially very profitable.

But Germany has a problem with Russia. Every previous attempt at alignment or conquest has failed. Building up the Russian economy to create a robust market for German goods would certainly benefit both countries, but it would also shift the balance of power in Europe.

Right now, Germany is militarily weak and economically strong. Russia is moderately powerful militarily and economically weak. An alignment with Germany could dramatically strengthen Russia’s economy, and with it, its military power.

Having moved away from the United States and de-emphasized military power in the rest of the European peninsula, Germany could find itself in its old position: vulnerable to Russian power, but without allies against Russia.

On a Lookout for New Allies

The corporate chiefs’ trip to Russia is not a groundbreaking event, nor does it mark a serious shift in German policy. But it is part of an ongoing process. As the international reality shifts from what Germany needs, Germany must find another path.

In the short term, the United States is vulnerable to a cyclical recession, and hostility toward Germany is increasing in Europe—particularly in Eastern Europe. China is facing internal challenges of its own. There are few other options than Russia, and Russia is historically a most dangerous option for Germany.

Grab George Friedman's Exclusive eBook, The World Explained in Maps

The World Explained in Maps reveals the panorama of geopolitical landscapes influencing today's governments and global financial systems. Don't miss this chance to prepare for the year ahead with the straight facts about every major country’s and region's current geopolitical climate. You won't find political rhetoric or media hype here.

The World Explained in Maps is an essential guide for every investor as 2017 takes shape. Get your copy now—free!

John Mauldin Archive

© 2005-2018 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules