Segurança alimentar, Direito Internacional, Direito do Mar e suas violações pela Russia de Putin - CDS

 O presidente Lula, sempre tão preocupado com a fome no mundo, em especial a segurança alimentar dos povos africanos, poderia pedir a seus assessores diplomáticos uma informação sobre as ações criminosas de Putin no Mar Negro e suas consequências sobre o mercado de alimentos no mundo inteiro. Aqui estão alguns dados:

Russia's Actions: Potential Impacts on Global Food Security, Ukraine, and Western Relations.

Center for Defense Studies, July 20, 2023

Russia is poised to starve millions of people in the developing world as it pursues the destruction of Ukraine and undermine the West. Russia pulled out from the Black Sea Grain Initiative (BSGI), threatened to target any cargo ships bonded to or from the Ukrainian ports, mined the sea routes, and stepped up targeting grain and other Ukraine's port and commodity-related infrastructure.

If Russia had succeeded in invading Ukraine, it would have the potential to emerge as a significant agricultural superpower, thereby gaining additional leverage to pursue its geopolitical goals. With 17% of world wheat exports in 2021 (33 million tons), Russia ranked first, surpassing the E.U. (16% or 31 million tons). Along with Ukraine (ranked 5th with 10% of exports or 19 million tons), it could have amassed a 27% share of global wheat exports — equivalent to the combined export share of the E.U. and the U.S. On top of that, before the all-out Russian invasion, Ukraine ranked first in exports of sunflower oil and millet; third in corn, barley and rapeseed; fifth in walnut and honey; and sixth in the export of soy.

Unable to achieve its initial neo-colonial objectives, Russia resorted to dismantling the Ukrainian economy and infrastructure. This strategy aimed to weaken the Ukraine’s ability to resist the invasion immediately and hinder its capacity to recover, rebuild, and allocate resources for defense and security in the long run.

Agriculture accounted for 10% of Ukraine's GDP in 2021 and was severely affected by Russia's illegal occupation and combat in Ukraine's Eastern and Southern oblasts, which are crucial agricultural regions. Russian forces intentionally targeted agricultural infrastructure, looting equipment and machinery, and "exporting" stolen grain and other products to foreign markets. 

Ukraine is now among the most heavily mined countries globally, with up to a third of its territory contaminated by mines and unexploded ordnance. The estimated time required for demining the territory, including crop fields, varies from thirty to sixty years. Russia's destruction of the Kakhovka dam also caused the irrigation system's collapse on which key regions depended (Kherson - 94%, Zaporizhzhia - 74%, and Dnipropetrovsk - 30%). 

After another instance of withdrawing from the grain deal, Russia has escalated its attacks on Ukrainian ports and agriculture-related infrastructure for several consecutive days. These actions constitute war crimes and will have lasting damaging implications for Ukraine's economy and worsen global food security for years to come.

The Black Sea Grain Initiative (BSGI) comprises two distinct agreements: one between Turkey, Ukraine, and the U.N. for exporting food from Ukraine and Turkey, and another between Russia, Turkey, and the U.N. for exporting food and fertilizers.

Russia has consistently disregarded the agreements it entered from the start of it. Just barely 12 hours after signing a deal on July 22, 2022, Moscow initiated a missile barrage against Odesa, targeting Ukraine's main port and infrastructure. It had frequently threatened to withdraw from the deal or decline its extension routinely. Moreover, it deliberately misused the monitoring mechanism to create shipment hurdles and disrupt their flow.

In October 2022, the Kremlin declared the suspension of its participation in the deal. However, it had to eventually rejoin the agreement due to the continued determination of Ukraine, Turkey, and the U.N. to proceed with the outflow of food under the terms of the deal.

The BSGI allowed Ukraine to export some 30 million tons of its food to foreign markets through the Black Sea, while enhancing alternative transportation routes. The railway is capable of exporting more than a million tons monthly, road transport could handle more than 600 thousand tons, and the Danube River ports might handle over two million tons, potentially reaching up to three million tons. However, alternative export routes can't substitute the sea trade for many reasons, including increased costs, logistical difficulties, the necessity for big-ticket and long-time infrastructure investments, etc. 

While its sea trade remains unimpeded, Russia has managed to claim control over the North-West part of the Black Sea, even though it did not succeed in occupying it, and faced no repercussions for doing so under the Law of the Sea. Instead of making Russia obey the Law of the Sea, ensuring freedom of navigation, the international community talks about prolonging the BSGI.

The U.N. State of Food Security and Nutrition in the World 2023 Report highlights that one in ten people worldwide faces hunger, and a staggering 3.1 billion individuals cannot afford a nutritious diet. Due to Russia's aggression against Ukraine, an alarming 23 million people have been pushed into hunger. The Russian authorities have been utilizing these vulnerable populations as leverage against the West. The Kremlin has been widely disseminating narratives in the Global South, attributing the surge in food prices and food scarcity to the Western sanctions imposed on Russia.

In June, a delegation of African leaders led by South African President Cyril Ramaphosa visited Kyiv and Moscow, advocating for their peace initiative, which involved facilitating food exports. Prior to that, in May, Senegalese President Macky Sall, acting as the African Union chief, visited Moscow and Paris (bypassing Kyiv), urging the West to lift sanctions against Russia. It's worth noting that there are currently no sanctions on Russian food and fertilizer exports, and these exports have been particularly lucrative, bringing Russia a 70% increase in revenue due to the surge in prices. Furthermore, U.N. Secretary-General Antonio Guterres recently emphasized that "Russian grain trade has reached high export volumes." 

Russia has strategically utilized the BSGI to undermine the Western sanctions directly or, in the event of failure, to shift the blame for the food crisis onto the West. The Kremlin's objective is to create a looming food crisis that could trigger waves of refugees, destabilizing social and political situations in European countries. The Russian hope is that this instability would pave the way for pro-Russian political forces to displace the current ones, consequently weakening support for Ukraine and disrupting Trans-Atlantic unity concerning Russia.

Ukraine has been proactively seeking a solution to restore its freedom of navigation and ensure a stable food supply to countries in need. Kyiv has urged its partners to create a naval demining coalition, either as a standalone initiative or as a first step towards enabling protected cargo convoys under the escort of a joint naval force. This coalition may involve assets from littoral states and, hopefully, from nations beyond the Black Sea region. In either scenario, the pivotal role of Turkey is crucial, as it possesses the largest Navy in the Black Sea.

Since the beginning of the all-out Russian invasion of Ukraine, Turkey has invoked the Montreux Convention of 1936 provisions, which restricts Russia and non-Black Sea nations from deploying naval assets to the Black Sea. Ankara is hesitant to proceed with shipments via cargo vessels under its flag, as it fears potential attacks as Turkey is a significant military power and a NATO member. 

The unique dynamics in the relationship between Vladimir Putin and Recep Tayyip Erdoğan could act as a buffer against further escalation. In 2015, Turkey downed a Russian jet that had violated its airspace, leading to a tense moment in bilateral relations. However, it did not escalate into a full-blown military response from Moscow.

An alternative approach that appears more feasible is chartering sea lines of communications from Ukrainian ports toward the Straits within the territorial waters of the littoral states (Romania, Bulgaria, and Turkey). However, this approach would require these nations to confront the risks of a direct attack, regardless of how insignificant it may be, and find solutions to the mine issue in the region.

In addition, legal actions under international law and Ukraine's domestic laws are crucial to hold Russia accountable for its actions. Ukraine's current military capabilities are insufficient to deter the Kremlin from transforming the Northern part of the Black Sea into a "Russian lake." The deployment of anti-ship missiles and modern Western fighter jets could play a significant role in restraining Moscow's actions in the region. 

As Russia continues to cause increasing damage to Ukraine, it has effectively deterred the West from taking more assertive actions against its exports. Notably, the Russian ports on the Sea of Azov and the Black Sea have remained sanctions-free. In fact, Russia has even escalated its exports of oil and oil products from the Black Sea ports, including instances that breach the prohibition of direct shipments to Europe.  

Before the E.U.'s 11th package of restrictive measures was announced, crude oil exports from Russia witnessed a significant surge, increasing by 14.55% in June alone. Among the 42 tankers transporting Russian oil from the Black Sea last month, 15 belonged to companies from E.U. countries, with 14 belonging to Greek shipowners and one to a Latvian company. Russia is gradually shifting its grain exports to Baltic Sea ports in response to capacity challenges.

To compel the Kremlin to reconsider its actions, it is imperative to enforce existing sanctions and target Russian ports in the Black Sea, the Sea of Azov, and the Baltic Sea. Additionally, Ukraine and its allies must intensify efforts to engage with developing countries to counter Russia's propaganda.

China: the debate over economic policy, from export led to consumer led growth

Roach v. Pettis (on China)

Blog The Humble Student of the Markets, July 4th, 2013

Stephen Roach recently penned an article entitled "Get Ready for the Next China" outlining the transformation that China is undergoing from an economy led by investment led growth to consumer growth:

The message from this new approach to Chinese macroeconomic stabilization policy is clear: Gone are the days of open-ended hyper growth. Significantly, this message has been reinforced by an important political overlay. Xi’s rather cryptic emphasis on a “mass line” education campaign aimed at addressing problems arising from the “four winds” of formalism, bureaucracy, hedonism and extravagance underscores a new sense of political discipline directed at the Chinese Communist Party. The CCP is being urged to realign itself with the core interests of citizens and their need for fair and stable economic underpinnings.

This new mindset works only if China changes its growth model. A services-led growth dynamic, one of the pillars for a consumer-led Chinese economy, is consistent with a marked downshift in trend GDP growth. That’s because services generate about 30 percent more jobs per unit of Chinese output than do manufacturing and construction – allowing China to hit its all-important labor absorption and social stability goals with economic growth in the 7 to 8 percent range rather than 10 percent as before. Similarly, a more disciplined and market-based allocation of credit tempers the excesses of uneconomic investments, necessary if China is to begin absorbing its surplus saving to spur consumer demand.

He went on to say that this transformation presents a great opportunity for American business:

China’s consumer-led growth presents the United States with an important opportunity. With the American consumer on ice for more than five years – underscored by average annualized growth of just 0.9 percent in inflation-adjusted consumption expenditures since the first quarter of 2008 – the US is in desperate need of a new source of economic growth. China is America’s third largest and most rapidly growing export market. Washington negotiators should push hard on market access, ensuring that US companies and their workers have the opportunity to capitalize on China’s transformation.

Second, and related to the first point, is a potential bonanza in Chinese services. At 43 percent of its GDP, China has the smallest services sector of any major economy in the world. Under reasonable assumptions, the scale of Chinese services could increase by around $12 trillion by 2025. Increasingly tradable in a connected world, the coming explosion in Chinese services could translate into a windfall, up to $6 trillion, for foreign services companies from retail trade and transportation to hotels and finance. For the United States, with the world’s largest and most dynamic services sector, this could be an extraordinary opportunity. US negotiators should push especially hard for access to Chinese services markets.

How do you get from A to B?

In recent years, Stephen Roach has changed from the global bear to the cheerleader for China. In his article, he glosses over the little detail of how China can effect this transformation without a significant slowdown. 

Michael Pettis has a different take. He wrote a Foreign Policy article about the credit crunch related convulsions within the context of the transformation from an investment-led to a consumer-led economy and also urged caution by the West in their approach to China:

Last week is a reminder that Beijing is playing a difficult game. The rest of the world should try to understand the stakes, and accommodate China's transition to a more sustainable growth model. As policymakers in China continue to try to restructure the economy away from reliance on massive, debt-fueling investment projects that create little value for the economy, the United States, Europe, and Japan must implement policies that reduce trade pressures. Any additional adverse trade conditions will further jeopardize the stability of China's economy, especially as lower trade surpluses and decreased foreign investment slow money creation by China's central bank. A trade war would clearly be devastating for Beijing's attempt to rebalance its economy and have potentially critical implications for global markets.

Here is his key conclusion [emphasis added]:

Regardless of what happens next, the consensus expectations that China's economy will grow at roughly 7 percent over the next few years can be safely ignored. Growth driven by consumption, instead of trade and investment, is alone sufficient to grow China's GDP by 3 to 4 percent annually. But it is not clear that consumption can be sustained if investment growth levels are sharply reduced. If Beijing can successfully manage the employment consequences of decreased investment growth, perhaps it can keep consumption growing at current levels. But that's a tricky proposition.

In other words, Pettis estimates that the consumer-led Chinese economy can only grow at 3-4%. If the Chinese economy changes the tone of its growth from investment and infrastructure to consumer led growth, the consensus of growth in the 7% range is unrealistic.

In addition, what happens to all the leverage in the system? Who eats the non-performing loan (NPL) losses from all of the infrastructure spending by the SOEs and local governments? In past eras, the Chinese government had taken the brunt of the NPL losses through classic financial repression - through artificially low interest rates that repressed the household sector and blew an property asset bubble.

Now that the Plan is to grow the consumer sector, the old trick of household sector financial repression won't work. In a separate interview with Ron Rimkus of the CFA Institute, Pettis stated:

You can only resolve a bad debt problem by assigning the cost to some sector of the economy. In the past it was the household sector that implicitly paid to clean up the debt, but if we expect rapid growth in household consumption to lead the economy going forward, and this is what rebalancing means in the Chinese context, we cannot also expect the household sector to clean up the bad debt in the same way it has done so over the past decade.

So who pays? In the worst case, it could lead to a disorderly unwinding of the excess leverage in China which, given how the global financial system is inter-connected, spark a global financial crisis.

In addition, Kyle Bass sounded a warning on China (via Zero Hedge) [emphasis added]:

The speed and depth of the Chinese policy response will help determine the severity and duration of this crisis. If the Chinese address the issue quickly and move decisively to rein in credit expansion and accept a period of much lower growth, they may be able to use the government and People’s Bank of China’s balance sheet to cushion the adjustment in the economy. If, however, they continue on the current path and allow this deterioration to reach its natural and logical limit, we will likely see a full scale recession as well as a collapse in asset and real estate prices sometime next year.

Even Stephen Roach sounded an implicit warning of potentially higher interest rates as China transforms itself:

But there is another twist. As China shifts to consumer-led growth, it will start to draw down its surplus saving and current-account surplus. That could lead to a reduction in its vast $3.4 trillion foreign exchange reserves, thereby dampening China’s demand for dollar-based assets. Who will fund a seemingly chronic US saving shortfall – and on what terms – if America’s largest foreign creditor ceases doing so?

China's transformation from investment led growth to consumer led growth is a story of short-term pain for long-term gain. The only questions are:

1. When? And
2. How much pain?

Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest. 

None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or Mr. Hui may hold or control long or short positions in the securities or instruments mentioned.

About the Blog: 

HUMBLE STUDENT OF THE MARKETS

Mr. Hui has been involved in the equity markets since 1980, both on the buy side and the sell side. He serves as the portfolio manager principally responsible for making investment decisions for the Qwest Global Tactical Balanced Class of QE Funds Corp. He is also a director of Qwest Investment Fund Management Ltd and a CFA charterholder. Mr. Hui has presented numerous papers to quantitative discussion groups. Sample topics include: How Global are Resource Sectors; Hidden Biases in Quantitative Models; and Hedge Fund Replication.