Ask Dr Martin Shwitz, CEO of RWE AG, one of Europe’s largest power generators. His plan to expand an open-pit coal mine in the 12,000-year-old Hambach forest, which involves cutting up more trees, has run afoul of environmentalists whose protests have successfully blocked it. Not only would it cut trees in a 12,000-year-old forest, along with damaging the ecosystem, but the coal sought to be mined is lignite, which produces 33 per cent more carbon dioxide than normal coal.
On the other side of the decision equation, Habach provides electricity to power eight million households, and directly provides 4,600 jobs. Plus a further 10,000 jobs dependent on lignite mining.
No easy answer.
Such tough decisions will get tougher, both for corporate leaders and for political leaders, and an incorrect assessment can have a long lasting impact. As in the case of the Khashoggi murder case. After a briefing by the CIA, which had purportedly intercepted telephonic conversations between Mohammed Bin Salman, the Crown Prince, and the head of the operative team that murdered, even whilst it was in progress, US Senators seem convinced of his complicity in the matter and want Trump to take sterner action.
Crude game
Trump is looking at the flip side of a decision to take sterner action, viz, the volume of weapon purchases promised by Saudi Arabia, and its influence on the price of crude oil. Should he take sterner action, the risk is that Saudi my veer closer towards Russia; the body language of MBS and Putin at the recent G-20 meeting suggests cosiness derived from their common interest to raise prices of crude oil.
It is not widely known that up until 1938, when Stalin made a gigantic miscalculation, Saudi Arabia and Russia had strong ties. These ties were built largely by Karim Khakhimov, a Russian Muslim who was appointed head of mission by the Soviet Union. After Abdulaziz Saud, the founder of the house, won a victory over a rival house, Khakhimov drove (amid bullets) and met Abdulaziz, handing him a note in which Kremlin officially recognised the House of Saud, which meant a lot to the latter. In 1938, Stalin decided that Saudi (where large oil reserves had not been discovered) was unimportant. With a belligerent Nazi Germany, Stalin wanted closer ties with Britain. He recalled, and, in January 1938, had Khakhimov killed, as a spy, just two months before large oil reserves were discovered in Dhaharan in Saudi, which the Americans took advantage of.
Such are the fascinating vignettes of history and the course national ties take after ill-timed decisions. We are at a crucial time in history again where the correctness of decisions will shape the future of the world economy and hence, the stock markets.
Trump has launched a trade war against China, and has hiked import tariffs on a range of Chinese imports. At the recent G-20 summit the two leaders met and decided to cool things down.
Sensible decisions by world leaders which focus on co-operation, protect the environment and create an ecosystem of job growth, will ensure desired growth. A misstep will cause disaster.
Stockmarkets are awaiting the election results of five States and the reckoning is that if BJP would win three of the five, the market would rally, else drop.
(The writer is India Head — Finance Asia/Haymarket. The views are personal.)