Moisés Naím / El País
"May you live in interesting times." This expression, which seems a blessing, is really laced with stinging irony: interesting times are often fraught with conflict, instability, and danger.
Who can deny that we are living in interesting times? And what could be more interesting than the Helsinki press conference in which President Donald Trump stated before the whole world that he trusted Vladimir Putin more than his own intelligence services? The spy agencies insist that they have definitive proof that the Russian government interfered in the 2016 presidential election. But Putin told Trump that he didn’t, and the American president believed him…at least for a few hours.
The backlash against Trump’s conduct was so intense and widespread that he had no choice but to retract his comments, in typical Trump fashion. According to the President, his error was grammatical, not geopolitical. He meant to say “wouldn’t” not “would”. The next day he invited Putin to Washington for a second meeting.
Meanwhile, two pieces of news were quietly published that will have enormous consequences for Russia, the United States, and the relationship between them.
The first was a prediction by the respected energy analysis company Wood Mackenzie that world oil demand will peak in just 18 years, much earlier than previously expected. The report cites "tectonic changes" in the transport sector—especially the use of more efficient electric and autonomous vehicles— to argue that peak crude oil demand may come as early as 2036. From that point on the world's appetite for oil will wane. Of course, hydrocarbons will not disappear as an energy source, but their importance will decline more rapidly than experts had anticipated previously.
What does all this have to do with the Helsinki meeting? Well, Russia is a petrostate, a country whose economy is critically dependent on oil and gas exports. Putin has failed to diversify the Russian economy and reduce its dependence on oil and gas. As a result, a drop in the world’s demand for its main export product will reduce the nation’s revenues and thus have a major negative impact on the lives of ordinary Russians. And history shows that dictatorships are not immune to the adverse and unpredictable political consequences of a deteriorating economy.
The second piece of news is an alert from the Institute of International Finance (IIF), a private organization based in Washington D.C. that collects and analyzes information on the health of the world economy. According to the IIF, the world suffers from a serious addiction to indebtedness. Global debt has grown at an alarming rate and has reached levels never before seen. Back in 2003, total global stock of debt amounted to 248 percent of the world economy. Today it is 318 percent.
Debt is not a problem for a person, a company, or a country if they have the income to service it. Or if they can find someone willing to lend them the funds. But if one’s income is not enough to cover the interest due, or if the lenders lose confidence in the borrower’s ability to pay, then they will stop lending. When this starts to happen, the lenders also try to recover what is still owed to them as quickly as possible. This is how financial crises are hatched.
Does this mean that we are on the verge of an economic crash like the one that shook the world in 2008? Not necessarily. The global financial system is stronger today and is relatively better regulated. High indebtedness can be sustained without giving way to a crisis as long as the world’s economy grows and generates the income necessary to service the debt. The concern is that global economic growth, which had been recovering, will be hamstrung by the trade wars unleashed by Donald Trump.
Laurence Fink, the CEO of BlackRock, the largest investment management company in the world, has just warned that the White House’s continued increase in import tariffs, as well as the tit-for-tat reprisals that the affected countries have taken, could hinder economic growth and cause the stock market to fall. Jerome Powell, Chairman of the Federal Reserve, issued the same warning.
The main lesson of the 2008 financial crisis is that the economic diseases of one country infect others very quickly. What happens to the American economy will shake the rest of the world and, of course, Russia, too. Naturally, this will affect the relations between the two countries. Another lesson is that economic crises distract us from our political problems, while political instability distracts us from our economic problems. This is precisely what is happening now.
Alas, it’s safe to say that our times will remain enormously interesting