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International relations and impact on businesses in 2019

From US-China trade tensions to Brexit woes in Europe, 2019 is likely to be a roller coaster for geopolitics. As much as a government can help businesses reach their full potential with various reforms, its relations with other countries can significantly hamper operations.

Taking the example of US-China trade war, US President Donald Trump in March 2018 had said that, “Trade wars are good, easy to win,” but a year down the line, US businesses operating in China don’t seem to share the view. According to a survey, 60% of companies surveyed believe tariffs have harmed their operations.

And it is not just the trade war, we’ve seen big corporate giants move operations out of the United Kingdom, fearing the impact of Brexit as uncertainty rose after failed Parliamentary votes. Similarly, US sanctions on Iran impacted the global supply and prices of crude oil.

With more than 9 months remaining in 2019 and budding topics like Venezuelan political crisis, European Parliamentary elections, Canada-China tensions, we expect it to be an interesting year for geopolitics.

In this Live Discourse, we are tracking all the interesting happenings in geopolitical relations and its impact on businesses worldwide.


Parag Narang
Updated: 22-04-2019 23:53 IST
International relations and impact on businesses in 2019

With more than 9 months remaining in 2019 and range of budding topics we expect it to be an interesting year for geopolitics.

Key Updates


22-04-2019 11:53:39 PM

US ends waivers allowing countries to buy oil from Iran, spiking crude prices

US ends waivers allowing countries to buy oil from Iran, spiking crude prices

US President Donald Trump has decided to eliminate all waivers issued to eight economies allowing them to buy Iranian oil without facing US sanctions, the White House said on Monday while vowing to ensure global oil market was well supplied.

Secretary of State Mike Pompeo is expected to make an announcement on Monday detailing the decision. "The United States, Saudi Arabia and the United Arab Emirates... along with our friends and allies, are committed to ensuring that global oil markets remain adequately supplied," the White House said.

Oil prices spiked after Sunday reports that the waivers would end and remained higher on Monday. International benchmark Brent rose 2.6 per cent to $73.87 a barrel after earlier touching $74.31, highest since early November. The US crude futures gained 2.4 per cent, or $1.52 a barrel, to $65.52. It earlier touched a high of $65.87, a level not seen since late October.

The United States reimposed sanctions in November on exports of Iranian oil after Trump unilaterally pulled out of a 2015 nuclear accord between Iran and six world powers. Washington is pressuring Iran to curtail its nuclear program and stop backing militant proxies across the Middle East. Along with sanctions, Washington granted waivers to eight economies that had reduced their purchases of Iranian.oil, allowing them to continue buying it without incurring sanctions for six more months. They were China, India, Japan, South Korea, Taiwan, Turkey, Italy and Greece.

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17-04-2019 11:40:16 PM

Turkey exploring trade mechanisms to bypass US sanctions on Iran

Turkey's Foreign Minister Mevlut Cavusoglu said on Wednesday Turkey is looking into establishing new trade mechanisms with Iran, like the INSTEX system set up by European countries to avoid U.S. sanctions reimposed last year on exports of Iranian oil.

Cavusoglu reiterated Turkey's opposition to the sanctions and said Ankara and neighbouring Iran needed to keep working to raise their bilateral trade to a target of $30 billion, around triple current levels.

These sanctions were followed President Donald Trump's decision to withdraw unilaterally from a 2015 nuclear accord between Iran and six world powers to pressure Iran to curtail its nuclear programme and stop backing militant proxies in the Middle East.

France, Germany and Britain have opened a new channel for non-dollar trade with Iran to avert sanctions, dubbed The Instrument In Support Of Trade Exchanges (INSTEX). Washington's European allies opposed Trump's move to abandon the 2015 deal, under which sanctions on Iran were lifted in return for Tehran accepting curbs on its nuclear programme.

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11-04-2019 10:55:15 PM

EU moves towards trade negotiations with US after Trump's trade threat

EU moves towards trade negotiations with US after Trump's trade threat

European Union governments agreed to the start of formal trade negotiations with the United States on Thursday, a move designed but not guaranteed to smooth strained relations between the world's two largest economies.

The European Commission, which coordinates trade policy for the 28 member European Union, had sought clearance for two negotiating mandates - one to cut tariffs on industrial goods, the other to make it easier for companies to show their products meet EU or U.S. standards.

This comes after the US threatened to impose tariff counter-measures of up to USD 11.2 billion on a host of European products in response to subsidies received by aircraft maker Airbus.

In a tweet, US president Donald Trump said: "The EU has taken advantage of the US on trade for many years. It will soon stop!" 

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04-04-2019 11:16:16 AM

How Canada and Mexico can benefit from US-China trade war

How Canada and Mexico can benefit from US-China trade war

An all-out trade war would severely damage the US and Chinese economies but could also be a boon to countries like Canada and Mexico, the International Monetary Fund said on Wednesday.

The world's top two economies themselves would be the biggest losers in the event of a 25 per cent hike in duties on all trade in goods, the IMF said in a report released ahead of next week's spring meetings, to be held jointly with the World Bank.

Bilateral US-China trade could fall by up to 30 per cent in the short-term as a result and by as much as 70 per cent later on -- taking sizable chunks out of both countries' economies.

According to a range of models cited by the report, the hypothesis showed annual growth in China could be 1.5 per cent lower, while such a scenario could shave as much as 0.6 per cent off growth in the US.

"The effect on China is typically larger across all models, as exports to the United States represent a larger share of the Chinese economy (than vice versa)," the report said.

Under the scenario explored by the IMF, Canada and Mexico could ultimately benefit as they export more to the United States, making up for the shortfall in US imports from China.

And according to one model, these shifting export relations among countries would mean that, while the US trade deficit with China would fall somewhat, there would be "no economically significant change" in either country's overall trade balance.

A separate statistical model showed China would ultimately cease to be "the number one exporter of electronics and machinery to the United States", as Canada, Mexico and other Asian countries picked up the slack.

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01-04-2019 05:24:23 PM

Sri Lanka's 'largest FDI' oil refinery project will take at least a year to finalise

Sri Lanka's 'largest FDI' oil refinery project will take at least a year to finalise

An agreement to build a proposed $3.85 billion oil refinery in Sri Lanka will take at least a year to be finalized as its main investor, India’s Accord Group, says it is yet to recruit partners and conduct an assessment of the plan’s viability.

The comments add to the confusion about the project, which was announced last week by the Sri Lankan government as the nation’s largest single foreign direct investment ever, but has since been the subject of conflicting statements by various parties.

Accord’s Chairman S Jagathrakshakan, a former Indian government minister, said he has submitted a preliminary proposal to the Sri Lankan government to invest in the project but has not finalized any terms of the deal.

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27-03-2019 09:52:22 PM

Germany's SPD prepared to pull back from blanket ban on arms sales to Saudi Arabia

Germany's SPD prepared to pull back from blanket ban on arms sales to Saudi Arabia

Germany's junior coalition party is prepared to allow some arms exports to Saudi Arabia, a softening of its position which may defuse a row with its conservative partners in power, media reports said on Wednesday. Such a move by the Social Democrats (SPD) would also ease concerns in Britain and France that Germany's current ban on arms exports to the kingdom, imposed after the killing of Saudi journalist Jamal Khashoggi, may threaten joint tank, combat jet and drone development.

Citing government sources, the RND group of newspapers reported that Germany's security council would decide whether to extend the ban, due to expire at the end of March, on Wednesday. The discussion would include what to do about joint European arms projects that have been approved but can no longer be delivered due to the moratorium. 

RND said it had information showing the SPD was prepared to pull back from a blanket ban and allow such joint projects to go ahead, provided that no more than 20 per cent of the components involved came from Germany. Read more...

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25-03-2019 09:22:40 PM

Italy joins Belt and Road initiative even as Macron seeks united EU front against China

Italy joins Belt and Road initiative even as Macron seeks united EU front against China

Italy recently became the first G7 country to sign up for Beijing's Belt and Road initiative (also called "Silk Road" project) of the road, rail and sea transport and trade links stretching from Asia to Europe. The project has raised eyebrows in Washington and in some EU capitals where critics say it will give China too much sway.

China's President Xi Jinping has said it would be a two-way street of investment and trade.

This comes as Macron has called for united EU and lauded the EU's "awakening" to the challenges posed by China, which the bloc now labels a "rival" despite being Europe's biggest trading partner. "The reality is that the world has changed significantly -- China is not the country it once was, and we are dealing with a very major partner," a Macron aide had said ahead of Xi's visit.

Chinese President Xi Jinping and his French counterpart Emmanuel Macron met for dinner in the south of France on Sunday ahead of official talks.

On Tuesday, Macron and Xi will be joined by German Chancellor Angela Merkel and EU Commission chief Jean-Claude Juncker to explore "points of convergence" ahead of an EU-China summit in Brussels next month. 

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22-03-2019 07:32:18 PM

Businesses relieved by Brexit extension but uncertainty still haunts

Businesses relieved by Brexit extension but uncertainty still haunts

Britain's economy has struggled beneath the weight of Brexit uncertainty for nearly three years, but many business leaders would probably be relieved just to have more of the same for the next few months. 

The risk of a damaging no-deal exit by the world's fifth-biggest economy from the European Union on March 29 has been averted by the reprieve granted to Prime Minister Theresa May by other EU leaders on Thursday. But the possibility could return as soon as April 12. Or the delay could stretch into May or beyond, depending on the prime minister's ability to break the Brexit impasse in parliament.

Employers took some comfort from the postponement, even if it did little to settle the wide range of Brexit outcomes that has led to many of them putting their expansion plans on hold. "Businesses will accept a short extension because it’s a better alternative to no deal," Seamus Nevin, chief economist at Make UK, an engineering trade group, said.

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22-03-2019 09:45:32 AM

UK business unions demand 'Plan B' to avert no-deal Brexit risk

UK business unions demand 'Plan B' to avert no-deal Brexit risk

The heads of Britain's biggest employers' grouping, the Confederation of British Industry, and union umbrella organisation the Trades Union Congress urged PM Theresa May to change tack and find a "Plan B" to avert no-deal Brexit scenario.

"Our country is facing a national emergency. Decisions of recent days have caused the risk of no-deal to soar," read the letter from CBI director-general Carolyn Fairbairn and TUC general secretary Frances O'Grady. "Firms and communities across the UK are not ready for this outcome. The shock to our economy would be felt by generations to come," added the pair, who have demanded an "urgent meeting" with May.

"The current deal-or-no-deal must not be the only choice," added Fairbairn and O'Grady in their joint letter. "A 'Plan B' must be found -- one that protects workers, the economy and an open Irish border, command a parliamentary majority, and is negotiable with the EU.

"A new approach is needed to secure this -- whether through indicative votes or another mechanism for compromise," they added. "We cannot overstate the gravity of this crisis for firms and working people."

May's Brexit deal has twice been resoundingly rejected by British lawmakers, and a third vote the premier hoped to hold this week was cancelled by the House of Commons speaker on procedural grounds.

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21-03-2019 01:22:21 PM

EU plans to seek increased access to Chinese market amid trade woes

EU plans to seek increased access to Chinese market amid trade woes

The European Union will discuss a more defensive strategy on China, potentially signalling an end to the unfettered access that Chinese business has enjoyed in Europe but which Beijing has failed to reciprocate. Caught between a new US-Chinese rivalry for economic and military power, EU leaders will try to find a middle path during a summit dinner in Brussels, the first time they have discussed at the highest level how to deal with Beijing.

"We are fully open," European Commission Vice President Jyrki Katainen said of the EU's economy. "China is not, and it raises lots of questions," Katainen said, arguing that the world's second-largest economy could no longer claim special status as a developing country. 

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