The Times They Are A-Changin’: Love Thy Neighbour 

 

 

“I recall a box of rags that someone gave us, and how my momma put the rags to use,”  

 

In the Age of Instability, traditional alliances and relationships have been replaced by an alliance of so-called “strong leaders”, who, in attempting to make their countries “great”, are achieving the opposite. 

 

This Axis of Evil include Russia, North Korea, Israel, China and America, with leadership being disputed by China and America. 

Whilst America, under Trump, have been doing their upmost to undo their global leadership, China has had the luxury of being prepared, sitting back and watching their rival implode. 

To date, any form of conflict between them has been avoided, but with America’s economic blockade of Iran that might be about to change.  

According to the Trump administration, Iran has been defeated and is desperate for a deal. Despite being “desperate”, Iran remains remarkably intransigent, forcing America to undertake economic sanctions to topple the regime. 

Whilst the US can undertake a blockade, there are questions as to its effectiveness with the US navy already under severe strain.   

This, like the military assault, appears likely to fail, primarily because the war has gone on too long, as a result re-opening the Strait of Hormuz matters a lot less now than it would have done previously. 

Whilst this might sound counterintuitive, the duration of the conflict has depleted U.S. stocks of interceptors and other munitions, leaving them struggling to defend their Gulf allies, as Iran’s attacks have forced them to abandon many of their bases in the region. This means that any escalation of Iranian attacks on oil facilities all around the region, would be met with little American resistance. 

There is also the crack-spread which I wrote about in “Life Just Gets More Expensive”, which describes the divergence of the price of crude oil from the refined products  we actually consume.  

China, patiently waiting in the wings, has been the real winer of Trump’s Iran blunders. 

 

‘China, patiently waiting in the wings, has been the real winer of Trump’s Iran blunders’

 

China buys C.80% of Iran’s oil exports and has defied previous US efforts to limit the flow of revenue to the Tehran regime. 

Given this linkage, it was no surprise when China denounced this threat, saying any such measures would be illegal, and warned it would take “all necessary measures” to protect its national interests.  

A spokesperson for China’s foreign ministry, told reporters: “Cooperation between China and Iran has always been conducted within the framework of international law and should not be interfered with or disrupted.” 

A secondary proposal withing Trumps’ is: “Any entity that facilitates money laundering on behalf of Iran will be removed from the US dollar system.”  

Whilst it is unlikely the yuan could replace the dollar as the global currency, it could escalate a transition to a multipolar system. China has been expanding the use of the yuan for regional trade, oil purchases, and through initiatives like “Belt and Road”, especially in emerging market transactions. 

Continuing with sanctions, Trump has totally fallen-out with Canada after failed trade negotiations resulted in tit-for-tat 50% tariffs. 

 

‘Trump has totally fallen-out with Canada after failed trade negotiations resulted in tit-for-tat 50% tariffs’

 

As a result, Trump said “The United States is giving serious consideration to changing the name of Lake Ontario to Lake America in that we don’t expect to doing much business with Ontario any longer.” 

The Canadian PM, Mark Carney, used a speech to highlight how intertwined the two economies are; Canada buys more American cars than the UK, Japan and China combined, and supplies 99% of our natural gas imports. 

Carney, argued that the US can no longer be trusted, changing its arguing position so frequently that it can only write its signature “in pencil”. While Canada was proposing “long-term partnerships”, US negotiators were offering “short-term transactions”. 

Trade aside, Canada has another interesting play; US debt. They are the fifth-largest foreign holder of Treasuries, C. $459bln as of June. 

Interestingly, in January 2025, when Trump started his second term, their holdings were only $350bln.  

Clearly, they see this position as strategic, which, given recent US moves to control the bond market is interesting.  

 

Welcome to the Age of Instability! 

 

Whilst, there is nothing new about Washington managing yields via the Fed intervening to buy treasuries, the actions of Treasury Secretary Bessent do so in unusual. Rising yields have been the result of his bosses failed policies; inflation, which Trump appears to disregard are the result of his tariffs, and his excursion into Iran. 

Whilst the Treasuries actions are helping to protect markets from the consequences of Trump’s actions, households continues to pay the price. 

Russia, another member of the Axis is also struggling after starting a war it’s unable to finish. 

Ukrainian drone attacks have left Russia, once the world’s second-largest producer of crude oil, scrambling to find sources of gasoline to support its drone ravaged refineries which has led to rationing at petrol stations 

The Kremlin has tapped into a widening number of sources in recent weeks to alleviate the crisis. Most recently they bought a  shipment of 200,000 barrels of gasoline from Turkey, which are being shipped from Mersin to the Baltic port of Primorsk via a sanctioned tanker, the fifth confirmed seaborne delivery of vehicle fuel this summer. 

There is also a deal with the Kondensat oil refinery in western Kazakhstan this week to process Russian crude outside the country, with 70% of the refined fuel shipped back to Russia.  

Our new PM is having his first taste of Kremlin diplomacy, accusing them of “outrageous threats”, after Russia warned of an escalation in tensions following athe UK’s decision to present Ukraine with newly declassified blueprints to allow Kyiv to improve its production of long-range missiles. 

Putin’s spokesperson Dmitry Peskov said the exchange would add “fuel to the fire” and scupper any moves towards a peace deal. 

Burnham responded in his speech, saying: “Who started the fire? That’s the question, isn’t it?” 

Welcome to the Age of Instability! 

 

 

“Do unto neighbours
What you do to yourself, yourself, yourself, yourself, yourself”  

 

Of the five nations I have named, two appear to still be coming to terms with democracy. Russia, post-Gorbachev, has flirted with the idea, as, to a lesser extent has China, whereas North Korea can’t even spell the word.

The outliers are Israel and the US, both of whom have been hijacked by hardline far-right nationalists, seemingly hellbent on destroying the countries’ reputations.

Russia and the US are experiencing similar issues, fighting debilitating wars that are ravaging their economies and undermining the reputation of their military power. In both instances their leaders are in denial, assuming a golden age of empire and prosperity is there for all.

Unfortunately, it is the “all” that pay the price for their follies, whilst their chosen oligarchs hark back to the era of Louis XIV’s Versailles.

North Korea—who knows? Perhaps, who cares?

Israel, for years the good guys have now, under Netanyahu, started treating the residents of Gaza and Lebanon in the way the Nazis treated them. Of course, a statement such as this would in the eyes of our right-wing politicians and media be antisemitic…. Grow up; you can be anti-Israel without being antisemitic.

Which leaves China; sitting quietly, inscrutably playing the long-game and enjoying watching the US implode.

The new order was summed up by Canada’s PM, Mark Carney earlier this year when he said the “old order is not coming back” and urged fellow middle powers to come together.

“Middle powers must act together because if we’re not at the table, we’re on the menu.”    

Lyrically, we start with our tribute to Dolly Parton. Country music isn’t my thing; too many check shirts, dodgy boots and hats, as for line-dancing…..We open with “Coat of Many Colours” by Dolly Parton, to close, normal service is resumed with “Neighbours by The Rolling Stones.

Yehaaaaa

Philip.

 

 @coldwarsteve

 

 

 

 

 

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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