Day: June 15, 2024

By David Hutt

Let’s start with the good news – potentially great news, in fact – for Southeast Asia: Laos could be sitting on 10 billion tons of potash, one of the three main fertilizers used in global agriculture.;

In 2022, a subsidiary of the Chinese company Asia-Potash International announced a $4.3 billion;investment;in a potash mining venture in Khammouane province. This deal grants exploration rights to 48 square kilometers for potassium ore.;

The company reckons it can start with producing 1 million metric tons of potash annually, scale up to 5 million tons by 2025 and eventually reach 7 to 10 million tons. For a comparison, Canada, the world’s largest potash producer, exported around 23 million metric tons, valued at approximately $6.6 billion, in 2023.

In 2022, Laos’s potash exports were valued at approximately $580 million,;representing;about 1.7 percent of global supply. It isn’t inconceivable that Laos will become a global player.;

Location helps Laos

Geography is key. Next door is China, the world’s largest importer of food and food inputs, and the world’s third-biggest purchaser of potash. China;imports;around 8 million metric tons each year, about half of its demand, although that is increasing.;

China is the world’s biggest producer of potatoes, which are very reliant on potassium. China’s potato heartlands – Yunnan, Guizhou and Sichuan provinces – are on Laos’ doorstep. Guangdong province, China’s main banana producer, isn’t too far away.;

There’s ample room for Laos to expand potash exports in Southeast Asia, too. Indonesia, the world’s fourth-largest potash importer,;boughtaround $2.1 billion worth in 2022, with Laos holding a 6 percent market share.;

Malaysia, the sixth-largest importer,;spent;around $1 billion on potash, with Laos having a 2 percent share. Laos is already the largest supplier of potash to Vietnam, with exports worth about $82 million in 2022.

If, for instance, Laos was to replace suppliers like Jordan and Israel and capture a 20% share of China’s potash import market, its exports could rise to around US$750-800 million, making potash Laos’ second-largest export product, after energy.;

Right now, the spot price for potassium chloride is US$307 per metric ton. So, loosely, 10 million tons exported a year would bring in around US$3 billion.;

Expectations shouldn’t be that high, though. It’s one thing for a Chinese investor to promise to produce 10 million tons a year and it’s another thing for it to actually deliver it.;

And because it’s a Chinese firm selling the goods, most of the money won’t stay in Laos. And there are already the same;complaints;as with every Chinese investment: Asia-Potash International isn’t hiring local workers.;

Geopolitics

Nonetheless, estimates vary, but there still could be between $30 million and $300 million in annual revenue for the Lao state. Almost certainly it will be towards the lower end, but it’s not to be sniffed at by the badly-indebted government.;

However, consider the geostrategic implications.;

Up until now, China hasn’t really needed Laos. It lacks the strategic importance of Cambodia, with its naval base on the Gulf of Thailand, or the trade routes offered by Myanmar, where China is developing a $7 billion port to access the Indian Ocean for oil and LNG imports from the Gulf.;

In 2022, Laos;accounted;for a mere 0.1 percent of China’s total imports; food makes up less than a tenth of that, so Laos isn’t a solution to China’s future food insecurity.;

China’s primary import from Laos is pulped paper, not energy. Instead, China constructs hydropower dams and coal-fired stations in Laos, which generate electricity sold to Thailand and Vietnam.;

Geostrategically, Laos is a useful ally for Beijing to have because of its ASEAN membership, but Vientiane holds little weight in the regional bloc.;

Should something drastic occur in Laos – such as the fall of the ruling communist party or the emergence of an anti-China government – Beijing would be displeased and Chinese investments would be at risk, but China’s national security would be unaffected.;

That situation changes if Laos becomes a significant supplier of potash. If projections are correct and Laos can produce between 7-10 million tons of potash annually, it could theoretically more than meet China’s entire import demand. That makes Laos a national security interest for Beijing.

Food security

The Chinese government is preparing itself for military conflict. It knows that in the event it launches an invasion of Taiwan or attacks a rival state in the South China Sea, the West will hammer it with economic sanctions so damaging it would make the retribution reaped on Russia look like a slap on the wrist.;

Self-sufficiency and diversification are the buzzwords. But it’s doubtful that China – arguably the country most dependent on world trade and on U.S. protection of shipping routes – could survive such sanctions.;

Even short of war, food security has long been a major concern for China., for reasons too long to go into. According to;Xi Jinping, the supreme leader, food security is the “foundation for national security.”;

Beijing is also;concerned;that its reliance on imported fertilizer inputs “could pose a major threat to its food security”. There’s no way China can achieve the food self-sufficiency that Xi wants, as was spelled out in a detailed;study;by the Center for Strategic and International Studies, a U.S. thinktank.

China can domestically produce enough nitrogen and phosphate fertilizers, the latter essential for phosphate-hungry rice. But almost all of China’s phosphate is produced in Xinjiang and Tibet, far away from the rice-growing Han heartland and where the local population is largely hostile to rule by Beijing.

China will remain dependent on imports of potash, which accounts for more than four-fifths of all China’s fertilizer imports. That’s why it has been trying to diversify away from Canada towards countries like Russia, Belarus and Kazakhstan – and now Laos.;

In the event of a conflict and Western sanctions, China would immediately lose access to potash from Canada, the U.S., Israel and Jordan – countries that;accounted;for over half of China’s import supply in 2022 .;

Sourcing Belarussian and Russian supplies has become more unreliable since the Ukraine War, and both are in competition with one another on that front. That would leave Laos.

Possibly, this could give Vientiane leverage with Beijing. Knowing how important food inputs would be to China in the event of global sanctions, Vientiane might push for major write-offs off part of its; high national debt of 130 percent of GDP, most of which is owed to China.;

More likely, this would incentivize Beijing to exert a stronger hand over Laos; it means Beijing couldn’t tolerate anything that might affect the flow of potash. That makes the relationship much more imperial.;

David Hutt is a research fellow at the Central European Institute of Asian Studies (CEIAS) and the Southeast Asia Columnist at the Diplomat. He writes the Watching Europe In Southeast Asia newsletter. The views expressed here are his own and do not reflect the position of RFA.

Many citizens of the West believe that they live in free societies, or something close. But as time goes on, public authorities increasingly insist on having a say in everything.;

People cannot build things on their own land without permits. They cannot run businesses without approvals and inspections. They cannot give advice without professional designations. They cannot educate their children outside of state-mandated curricula. They cannot hire employees without triggering a myriad of workplace and tax requirements. They cannot produce and sell milk, cheese, or eggs without a license. They cannot earn money, spend money, or hold property without being taxed, and then taxed again.;

Jeffrey Tucker recently;described;three layers of omnipotent managerial technocracy.;

The deep state, he suggested, consists of powerful and secretive central government agencies in the security, intelligence, law enforcement, and financial sectors.;

The middle state is a myriad of ubiquitous administrative bodies – agencies, regulators, commissions, departments, municipalities, and many more – run by a permanent bureaucracy.;

The shallow state is a plethora of consumer-facing private or semi-private corporations, including banks, Big Media, and huge commercial retail companies, which governments support, protect, subsidize, and pervert. The three layers work together.;

For instance, in the financial sector, as Tucker illustrates, the deep state’s Federal Reserve pulls the powerful strings, the middle state’s financial and monetary regulators enforce myriad rules and policies, and the shallow state’s “private” titans like BlackRock and Goldman Sachs dominate commercial activity. It’s a system, Tucker writes, “designed to be impenetrable, permanent, and ever more invasive.”;

We are approaching state singularity: the moment when state and society become indistinguishable.;

In physics, a “singularity” is a single point in space-time. Inside black holes, gravity crushes volume to zero and mass density is infinite. In computer science, “technological singularity” is unitary artificial superintelligence. At the singularity, everything becomes one thing. Data points converge. Normal laws do not apply.;

At state singularity, the state becomes society and society is a product of the state. Legal norms and expectations become irrelevant. The state’s mandate is to do as it judges best – since everything and everyone are expressions of its vision. Powers are not separated between the state’s branches – the legislature, the executive, the bureaucracy, and the courts. Instead, they all do whatever they deem necessary. The bureaucracy legislates. Courts develop policy. Legislatures conduct hearings and prosecute cases. Government agencies change policies at will. The rule of law may be acknowledged as important in principle while it is rejected in practice.

State singularity is the ultimate collectivism. It resembles old-style fascism and communism, but it is neither. Fascist states enforce an idea, often nationalist in sentiment (“The motherland for the superior race”), and recruit private actors, especially corporations, to the cause. Communist regimes champion the working class and outlaw private property (“Workers of the world unite”). Singularity, in contrast, is not propelled by an idea other than singularity itself. To justify its own hegemony, the state champions a variety of other causes. In the modern era, social justice, climate change, transgender rights, feminism, economic reform, and many more have served to extend the state’s reach. Problems are rarely solved, but that is not the reason for taking them up.

State singularity develops gradually and insidiously. Whereas fascist, communist, and other centralized power regimes often result from deliberate political revolution, in the West omnipotent managerial technocracy has grown, spread, and infiltrated the nooks and crannies of social life without sudden political upheaval. Like a form of institutional Darwinism, public agencies, no matter their formal purpose, seek to persist, expand, and reproduce.;

At the singularity, all solutions to all problems lie with government in its various forms. More, never less, programs, rules, initiatives, and structures are the answer. Like black holes, state singularities absorb and crush every other thing. Corporations serve state interests and participate in managing the economy. Singularities destroy voluntary community organizations by occupying the space and placing obstacles in the way. Both the left and the right seek to harness state power to craft society in their image.;

In a singularity, one cannot propose to eliminate government. Doing so would be contrary to prevailing ideology and vested interests, but more fundamentally, the idea would be incomprehensible.

And not just to officials. Citizens dissatisfied with the services they receive want more service and better policy. When schools sexualize their children, they demand changes to the curriculum instead of the end of public schools. When monetary policy makes houses expensive, they demand government programs to make them cheap instead of the end of central banks. When government procurement is revealed to be corrupt, they demand accountability mechanisms instead of a smaller government. State singularity is found not just in the structures of government but in the minds of the people.;

Modern states have capacities they have never had before. Technological advances are providing them with the ability to monitor spaces, supervise activities, collect information, and require compliance everywhere all the time. In the collectivist regimes of old, governments knew only what human eyes and ears could tell them. Soviet authorities were tyrannical, but they could not instantaneously monitor your cell phone, bank account, fridge, car, medications, and speech.

We are not at the singularity yet. But have we crossed the event horizon? At a black hole, the event horizon is the point of no return. Gravity becomes irresistible. No matter or energy, including light, can escape the pull to the singularity at the core of the abyss.;

Our event horizon beckons. We cannot evade it by merely slowing down on the path that we are on. Liberation requires escape velocity in the other direction. 

• This article was published at Brownstone Institute

By accusing Gorbachev, Yeltsin, and Western governments of being behind the disintegration of the Soviet Union, Aleksandr Tsipko says, the Putin regime seeks to conceal what for it is a most unwelcome truth: at the end of Soviet times, it was Russians and no one else who wanted a sovereign Russia and were ready to give up the empire to get it.

According to the senior Russian commentator who was deeply involved in Russian political life in the late 1980s and early 1990s, the USSR’s disintegration, which Putin calls the greatest geopolitical tragedy of the 20^th century, was “the sovereign choice of the Russian people” (mk.ru/social/2024/06/10/raskryta-trudovaya-pravda-o-raspade-sssr-elcin-ne-byl-predatelem.html).

Tsipko points out that the idea of a sovereign Russia was formulated and promoted by Russian ruralist writers, a group especially close to the thinking and feeling of the Russian people and distant from many democrats and certainly the West, at the RSFSR Writers’ Congress in 1988.

Aleksandr Yakovlov, then a close advisor to Mikhail Gorbachev and someone often presented by the Putinists as “a CIA agent” who supposedly undermined the Soviet Union, advised Tsipko, then one of his aides, at the time that “you should read it and you will understand how the disintegration of the USSR began.” 

“I can give many other examples to show that today’s historians who are putting out conspiracy theories and linking all the events of post-Soviet history to a project of the CIA do not in fact have the slightest idea about what happened in the country after Stalin and what in fact led to the collapse of the USSR,” the Russian commentator says.

Indeed, Tsipko continues, “all this conspiracy theory is designed to conceal” that the Russians themselves having suffered the depredations of Soviet power wanted sovereignty for a Russian country and were not ready to go into the streets to fight for the preservation of the old empire.

The commentator notes that he personally was “at the time a categorical opponent of the disintegration of the USSR, spoke against sovereignty for the RSFSR, and, understood, even with Yakovlev’s comments, that the idea of sovereignty would lead to the demise of historical Russia.”

But despite that, Tsipko says, Boris Yeltsin was positively inclined toward him and in December 1992 even proposed that Tsipko become minister for nationality affairs. The current Russian commentator says he rejected that proposal because he “felt that sooner or later this would end in blood, and already in October 1993 my fears were proved true.”

Despite what today’s conspiracy theorists say, “today one must see the truth” and it is this: Yeltsin, “who really after his March 1991 meeting with striking Kememovo miners took the decision to actively support the idea of sovereignty for the RSFSR fulfilled he deep  demands of the Russian people.”

The Beloveshcha accords that put the final nail in the coffin of the USSR were “based on the deep-seated need of the Russians to get rid of the empire, where they had never been a metropolis and where they lived at least during Soviet times even worse than the other peoples” under Moscow’s rule, Tsipko argue.

“Today’s patriots,” he points out, “have forgotten what was heard everywhere especially in 1991 – ‘stop feeding the Caucasus,’ ‘stop feeding Ukraine,’ and ‘we must give all the natural reserves of Russia to its people” rather than to anyone else. Thus, “the idea of killing the empire belonged to the Russian people of the USSR” who were tired of living in poverty.

These reflections, Tsipko says, arise when he and others visit the Yeltsin Center that some in Moscow want to close. Not only what is one display there but even more what is not sends a cleare message. In the museum, there is no reference to the fact that the Russian people and above all the Muscovites didn’t support the coup” in August 1991.

That is an important truth. A second, which is not mentioned in the museum, is that “no one protested against the Beloveshcha agreements” or that Soviet officers who had sworn loyalty to the USSR and the CPSU almost to a man changed sides overnight and supported Yeltsin and Russian sovereignty.

Another truth that everyone should remember despite efforts to get them to forget by accusing Yeltsin of treason and betrayal is this: “After the defeat of the GKChP, after Yeltsin’s glorious victory, there was no political foce which could have opposed the disintegration of the USSR.”

Democratic Russia actively supported the idea of the disintegration of the USSR, and that political force in fact “actively cooperated with the Democratic Party of the US.” But the American government under President George H.W. Bush, did not favor the coming apart of the USSR and spoke against it in Kyiv on August 1.

Tsipko says that he knows that to be the case on the basis of a month-long visit he paid to Washington at the time. 

Within Gorbachev’s command, the commentator continues, there were “only three people – Georgy Shakhnazarov, Andrey Grachev, and himself who actively resisted the idea of the sovereignization of the RSFSR.” The others followed what they were confident were the views of the majority of the Russian people rather than someone else, whatever the Putinists say.

By Ryan McMaken

Earlier this week, those of us who follow news about the US dollar’s global status noticed numerous claims that the US-Saudi petrodollar agreement had “expired” and that the Saudis would now sell oil for many currencies other than dollars. Some versions of the story even claimed the Chinese yuan would replace the dollar.;

The reports appear to have originated either;in India;or in publications that cater to crypto investors. Fervor over the story was large enough that economist;Paul Donovan at UBS;felt the need to clarify that there have not actually been any big, new developments in Saudi-US currency relations.;

It now seems clear that these reports of an alleged formal petrodollar “contract” did indeed get several key facts wrong.;First of all, the Saudis’ turn toward embracing currencies other than dollars is not new. Moreover, there is no known;formal;treaty or contract between the US and Saudi Arabia—least of all one with an expiration date.;

One could reasonably argue, however, that these reports of the decline of the petrodollar are only wrong;in their particulars.;The reports;do;reflect a real-world trend, however, and that’s likely why the stories about the end of petrodollar may seem plausible to many. The Kingdom of Saudi Araba (KSA) has been increasingly moving further away from the US orbit in recent years, and this is reflected in an increased willingness to settle oil deals in non-dollar currencies. There are also other indications that the Saudis are more and more willing to embrace Washington’s adversaries—such as China and Iran and Russia—in spite of Washington’s objections. While short run changes may seem minor, the current trend in US-Saudi relations points to an overall and significant decline in US global influence.

What Is a Petrodollar?;

So, what is this petrodollar “deal” that is under threat? It’s an informal deal—dating from 1974—between the US and Saudi Arabia under which the Saudis agree to sell oil only for dollars. The deal also stipulates that the Saudis will invest their excess dollars in US Treasurys. Why does this deal exist? From the American perspective, the deal helps to prop up the US dollar. It is not a coincidence that the deal dates form the early 1970s in the wake of the 1971 Nixon Shock and the closing of the gold window. Moreover, the deal maintains a ready market for ever-growing amounts of US Treasurys as federal deficit spending continually grows.

When the Americans conceived of the petrodollar arrangement, the KSA was the largest oil-producing country and a dollars-only trade ensured continued prestige for the dollar. For the Saudis, this close relationship brings certain implied security guarantees from Washington. That is, the Saudi regime knows that so long as it remains an important component of dollar policy, the US will intervene militarily, if necessary, to ensure the continued existence of the Saudi state.;

New Threats to the Petrodollar System

Over time, however, geopolitical realities evolve and Saudi willingness to engage in non-dollar oil trades finally became a publicly-stated policy of the KSA regime in January 2023. As;we reported here at mises.org last year, the Saudi finance minister stated that;“There are no issues with discussing how we settle our trade arrangements, whether it is in the US dollar, whether it is the euro, whether it is the Saudi riyal.” At the time, this was indeed a new development, and it was the end of a multi-year period during which there were persistent rumors that the Saudis would move away from the dollar. In 2019, for example,;Arab News;reported;that Riyadh “has rejected the suggestion that it is considering selling oil in currencies other than the traditional US dollar.” By 2023, things had apparently changed.;

Further changes in Saudi policy continued throughout the year. In mid-2023 the;Saudis began to;import record levels of fuel oil from Russia, further solidifying trade relations between the two countries. Given how Washington has attempted to cut Russia out of the dollar economy, growing trade between the Russians and the Saudis further drives a need for trade in currencies other than dollars. Then, in November of 2023, The KSA and Beijing;signed a currency swap agreement;designed to “expand the use of local currencies”—i..e, non-dollar currencies.;

Breaking Free of the US Axis

Taken by themselves, these developments might seem like no big deal. After all, the Saudi riyal currency is still pegged to the dollar—for now. Taken in the larger context, however, these recent developments illustrate how the Saudis are moving away from the established monetary and geopolitical order that the US has imposed on nearly the entire world since the end of the Cold War.;

In March of 2023, the Saudis participated in;a China-brokered deal to re-establish diplomatic relations with Iran. The KSA had long been at odds with the Iranian regime as the two states vied for dominance in the Persian Gulf region. Naturally, Washington has encouraged the Saudis to help the US isolate Iran. Although the US publicly praised the China-brokered deal when it became public, the deal is clearly a blow to US influence in the region. Moreover, if there is any doubt that Washington privately disapproves, we need look no further than the fact the;Israeli regime opposed the deal.;

Six months later, a September 2023 report from the foreign policy think-tank Stimson;concluded;that Saudi movements away from the dollar were not mere bluffs from Riyadh. They were, rather, part of a larger diplomatic effort by the Saudis to gain more flexibility in dealing with major global powers like the Chinese and the Russians. Or, as the authors put it, the “Saudis are demonstrating that they have other options in the new multipolar world order.”

From the Saudi perspective, the US has provoked Riyadh’s disenchantment with its American “partner.” US criticism of the Saudi regime over the Jamal Khashoggi murder and the Saudi blockade of Qatar have not been forgotten in Riyadh. Moreover, some members of the US Congress continue to publicly;raise uncomfortable questions;about the Saudi regime’s connections to the 9/11 attacks. The fact that the Washington foreign-policy establishment mostly looks the other way on frequent human rights abuses in Saudi Arabia—while selling immense amounts of arms to the Saudi regime—is not enough to keep the Saudi regime complacent.

Other recent developments suggest this trend isn’t going away. For example, after receiving an invitation to the G-7 summit for;the first time ever, the Saudi regime declined the invitation with Crown Prince Mohammad bin Salman;claiming;that he had to personally oversee Hajj pilgrimage activities in Mecca. Days later, the Crown Prince was nonetheless sure to send his foreign minister to;Nizhny Novgorod;in Russia for this week’s;BRICS summit.;

High-level personnel in Riyadh can apparently make time for BRICS—which Saudi Arabia has been invited to join, and which has become a;de facto;anti-US bloc—but not for the G-7.

The cooling relationship between Riyadh and Washington does not prove there will be an immediate and major change to the dollar economy or to the US’s continued dominance in the Middle East. The trend is nonetheless continued evidence of an ongoing relative decline in US control over global currency markets and the geopolitical order. 

• About the author: Ryan McMaken (@ryanmcmaken) is executive editor at the Mises Institute, a former economist for the State of Colorado, and the author of two books: Breaking Away: The Case of Secession, Radical Decentralization, and Smaller Polities and Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre. Ryan has a bachelor’s degree in economics and a master’s degree in public policy, finance, and international relations from the University of Colorado. Send him your article submissions for the Mises Wire and Power and Market, but read article guidelines first. 
• Source: This article was published by the Mises Institute

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