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The HC Commodities Podcast
The Donroe Doctrine and Commodities (emergency podcast) with Nick Kumleben
00:39:41
Emergency Pod: Nick Kumleben of Greenmantle, the geopolitical risk consultancy headed by Niall Ferguson, joins us to discuss the events in Venezuela, the 'Donroe' Doctrine and what it means for commodities. Is Venezuela an oil story or something else? Is the Donroe Doctrine a structured, intelligible set of principles or just a catchy phrase coined by a New York tabloid ? Intelligible or not, what does it mean for adversaries, allies (Denmark and Greenland?) and the rest of Latin America. Commodities once again sit at the heart of global power politics and it's through that lens we investigate. And what in turn does it mean for commodity markets themselves... can they withstand such unpredictability and government interventions.
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Foreign.
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Welcome to the HC Commodities Podcast, a podcast dedicated to the commodities sector and the people within it. I'm your host, Paul Chapman. This podcast is produced by HC Group, a global search firm dedicated to the commodities sector. Bonus episode to discuss Venezuela, the Donro Doctrine and what it means or what we can divine at this stage, what it might mean for the commodities sector. And joining us is a friend of the pod, Nick Kumleven, director at Greenmantle, the geopolitical risk consultancy. And yeah, thanks for coming back on, Nick.
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Always a pleasure, Paul. Thanks for having me.
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I think this is going to be, it's going to be a little difficult one to unpack, but obviously it's a very consequential story for the commodities world, one that's unfurling. You know, I think everyone is very aware of the spectacular military operation. And, you know, one can imagine that the, the makers of Call of Duty are rubbing their hands in terms of their next scenario. But, you know, the big question is, of course, what, what now? And what does that mean? As of Today, Friday the 9th, we're seeing our Friday 9th of January, we're seeing sort of the fifth oil tanker be taken over by the US so not only is what does it mean as a microcosm for the oil industry, which is probably not too much, but what does it mean more broadly for the world? Let's just start from the beginning, you know, with your geopolitical hat on and obviously all your connections at Greenmantle, Sir Neil Ferguson's reach as well. What, what, what? Can you just give us a quick synopsis and kind of perhaps divine for us, what difference the delta between what delta pun, what might be being said publicly and what the real reasoning for the intervention might be behind the scenes.
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Happy to, Paul and I think that one of the big misunderstandings here is about what the US Wants in Venezuela. Since the Trump administration came in, there's been a fairly clear US policy towards Venezuela expressed in a couple different ways. The US Wants Venezuela first and foremost to stabilize such that fewer migrants end up at the US Southern border. Before Trump came into office, a plurality of arrivals at the southern border or Venezuelan, and that was really the key driver of a lot of the administration's focus in the early stages. The second relevance is, of course, Venezuela as a forward operating base in the Western Hemisphere for Russia and China and as the key partner for the Cuban regime. Secretary of State Marco Rubio has long been a hawk on Cuba and more broadly on communism and socialism in the Western Hemisphere, not just because he's a Cuban American from South Florida, but because he understands perhaps more clearly than some past secretaries of state the importance of having what is functionally America's backyard in geopolitical terms under, under American control. And that's what we're seeing in terms of this reassertion of the Monroe Doctrine or the donroe doctrine in 2026 parlance.
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Yeah. Which by the way, the Don Roe Doctrine itself comes from a New York Post article I think, last year and was snapped up by the administration. But just as just to clarify that a bit because, yes, there's the immigration piece, although I don't think anyone can be under illusions that a, you know, a less stable Venezuela will cause more migration and more impacts in the region. It seems that the underlying concerns, well founded concerns from the administration was the penetration of, of geopolitical rivals China, Cuba, Iran, Russia and their overt and COVID support for that regime, as well as the, you know, it being a foothold in the region where, you know, blank passports were getting handed out and all the rest of it. There's plenty of stuff online you can read about it. And in some ways, and maybe this is wrong. I'd like to get your perspective on it. The, the cell to President Trump and then his cell to the nation has been about the oil, you know, and we were a long way away from denials in the Iraq war if it wasn't about the oil. This is now the stated reason. Can you help us sort of pass a little bit further and understand whether does that sound right to you? And that seems a pretty troublesome premise to use on the basis what we'll come on to. You know, people in the oil industry quite rightly know that no new oil is going to flow from Venezuela anytime soon, given the degradation of the infrastructure there.
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Yeah, that's right, Paul. And I think the relevance of the oil here is twofold. One, it's tactical in political terms. Affordability is a major issue as we look ahead to this year's midterm elections. And even if you look at what the United States is doing in lifting 30 to 50 million barrels of Venezuelan oil out of storage and capturing another 10 million barrels worth of oil on tankers, that's 10, 12% of US commercial storage right there. So the US can affect the WTI price and thus the gasoline price in the near term through taking control of Venezuelan oil exports, directing them to the Gulf coast when they previously had largely flown flowed to Asia and to China specifically. So that's one part of it. The second Part of it is that you have a slight delta between the public angle, which is we're going to bring prices down. This is about energy dominance and affordability. And then what the bureaucracy and perhaps some of the principles want making the kind of points that will have been made in house in the US Government around Iran, Russia, Hezbollah and Venezuela matter deeply at a geopolitical level, but are much, much more difficult to explain to the average American voter. And so there's a rationale that sells and there's a rationale that sells in the bureaucracy and both of those can be true at the same time.
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Staying on part one. And obviously it's been covered last year, you know, the, the issue of US refineries largely being geared towards heavy oil and you know that energy dominance at the moment is in the form of light oil in terms of production in the US That's a well known story to our listenership. The that idea, okay, you sold it on one thing and this is about affordability. The reality is that it's not going to move the needle that much because oil is already cheap. Gas is still the same price as it was 15 years ago in the US right. The affordability crisis is to do with other factors, I would argue not, not energy prices. There is some challenge around rising power prices as a result of lack of generation dispatch being put on and AI and all that. Good story. But there's a sort of temporary, temporary boost nature here. There's nothing structural going on and I'm just staying on the oil here for a minute. What is happening at the moment? Because obviously we've seen very publicly privately owned oil traders put their hand up and saying we're here to help. One wonders how members of the military who risk their lives feel about that. But what is going on there right now? Are our friends at the International Traders taking control of those tanks? Do we have any sense of what's actually happening or is this all building the plane as it flies?
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I think building the plane as it flies is quite a good analogy. And the oil traders are heavily involved in that sector as well. So it flows well. But what you've got is the US beginning a selective rollback of sanctions allowing trading firms to help them both liquidate Venezuela's oil inventories market, the ex Chevron flows from Venezuela into the United States and then hold that money functionally in escrow to an as yet undertone, to an as yet indeterminate fund marshalled by treasury that will be released for the benefit of the Venezuelan and the American people. What that looks like in practice is, is a little bit like the Iran escrow account that we saw in the first Trump administration. Right. Whereby Iran could still sell oil. That oil would flow into global refineries, especially those in US Allies, but the money wouldn't come back to a hostile regime unless it met a number of conditions that were aligned with the national interests of the United States. Iran obviously did not meet those conditions. There's a good shot that the Rodriguez regime does and that any future Venezuelan regime does. But we're going to see the US Control the oil flows with the help of the private trading companies and hold the revenues at arms length from the current Venezuelan regime. Which is, which is a very important point.
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Yeah. And I guess starts to signal what we can divine about the Donro doctrine, because it's here and it's serious and the commodities worlds needs to deal with it. And again, commodities, you know, sits at its heart. This idea ultimately around energy security, I think, and resources and real estate. Just staying on Venezuela for a moment. The, the, you know, we, and this is, this is sort of, I guess, is the, the herald of what the Donro doctrine means. But there's the scenarios at the moment. We've, it's obviously all up in the air. We're talking a week after it's, it's happened. You've got the, the Trump administration has essentially said the regime stays in place. We're going to deal with Rodriguez, you know, the former vice president as the, the head. All of those various power structures are going to remain in place. We've got them. You know, we've got, we've grasping something that is very important and therefore we've got control. But there doesn't seem to be, there's no, you know, it seems like this could go in multiple directions. One is obviously ultimately a certain tragedy would be state collapse. Right. The other is, you know, things go fine and that regime listens and changes and all the rest of it. I mean, do you have any sense at this stage how much thought has been put into this one? And secondly, what can we divine from past experiences? You know, is this regime change or is it not? And if it's not, what happens? And it is what happens? Big question.
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Let me take the easy part of that first. A lot of thought has gone into this. You know, know, we know from public documents that the US has been preparing for the, for the extraction Maduro for a very long time. Everything down from, from building replicas of his safe house for.
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Well, that's militarily right. D Day plus one is the sort of the question there.
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Yeah. And that's where the State Department comes in. And really where, where, where, where. Rubio and his team will have done a lot of the work here. We think there is a plan if you want to avoid societal collapse, a migrant outflow and the kind of collapse in oil production we saw say in Iraq in 2003. You do need to work with the existing power structure. And that's probably a lesson the US has learned from the 2000s era of interventionism and potentially even from the Arab Spring. Will the US work with this Venezuelan regime in the long term? I doubt it. Not just because of the history of Delsey and of Chavismo, both in its relations with the United States and with United States companies. But you've got a lot of people in that regime that it's really hard to see the US working with. I mean, take Diostal Cabello for instance. One of the key figures within Chabismo. Cabello had a serious must plot to murder Rubio back in, in 2017. That Rubio got, got himself and his family some extra security. So the idea of the US are.
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Going to suddenly these aren't sort of the, the 1980s hunters where as distasteful and terrible as it was with the Disappearedos and so forth, they kind of were thought that they were doing something in the name of something else. Right. This is very clearly kind of basically a criminal organization running a country when you boil it down.
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Right. And that's why its former leader is facing drug trafficking and terrorism charges in the Southern District of New York. That's I think, where what it, what it comes down to. Moreover, the day off, the plan the United States has is predicated upon to some degree fixing Venezuela's economy through new investment, which is primarily going to be in oil. That is simply impossible if the current government stay in place. It's just not going to happen. Not only because of their history of expropriations and nationalizations, but because anyone looking at oil investment in Venezuela can't underwrite this degree of political instability. It's very difficult to make the numbers work given the Chavista tax regime, which is one of the most punitive in the world for oil investment. So for this plan to work, you need not only a much more pro market government, but you need one that is in Venezuela on a legitimate basis and one that has a shelf life that extends beyond the Trump administration.
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What it needs is not, it's not the government, but a structure, a policy that is Democratic, but also sustainable. Right. Because to your point, you know, there is no oil company that's going to go there unless they can see a 10, 20, 30 year horizon to the billions of dollars it's going to take to get that infrastructure back up to speed. Right. And the world as we know, there's nothing indicative about the oil price today that suggests that's a good investment, even if all those structures were in place.
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Exactly. I thought the most illuminating comments on that topic came from the Secretary of the treasury yesterday who said, look, the big oil companies who move slowly, who have boards, are not interested. That's not just because oil's in the mid to high 50s, but that's also because if you play it out over that 10, 20, 30 year timeline, you really don't know what kind of host country, government you're going to be dealing with and when. Your upstream budgets could go next door to Guyana, in the region, could go to Argentina or elsewhere, or could stay in the United States. It's just, it's not going to make sense to look at Venezuela unless you have precious few other options.
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Yeah, I find it fascinating because so, and you may not have an answer to this or any indication of an answer to this, but clearly to pull off this kind of military operation, you know, knowing patterns of movement, everything down to kind of, you know, how thick the steel doors were on, you know, what kind of blowtorch you needed to get through it, there were a lot of people supporting this military intervention in country and a lot of very powerful people that were willing to put all at risk to do that. Obviously the regime stays in place, which is, I just, you know, do we have any sense of the popular feelings about this? You know, is the, I just find it fascinating that what we haven't seen is kind of, you know, flags, you know, in this, in the square and the popular uprising we saw in the wake of Saddam Hussein being toppled. Right. I mean, it seems very stark. Do we have any sense of, you know, what the local population feel? Is the current regime holding on with its fingertips or is it still firmly in place?
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Paul I think the reason we haven't seen huge popular protests against the regime is they're still in charge and they've got a brutal and bloody history of suppressing dissent. We've seen an immense flow of people leave Venezuela because of their dissatisfaction with the regime. We saw the opposition comfortably win the last round of Venezuelan elections, which the Maduro regime stole. And we've seen significant popular protests led by Maria Corinna Machado and others. But today you still have that regime in power, and you still have that regime security apparatus in power. So you would need to be a very brave Venezuelan indeed to be out in the streets, press protesting, especially at a time of such unrest. Yeah, I don't think that reflects any lack of desire for democracy or a transition among the Venezuelan people.
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Yeah, it's Stephen Cotkins. The, the regime just has to be stronger than any organized domestic opposition. Right. Is the, the tragedy scenarios. Okay, so let's talk about this nascent Donroe doctrine. You know, there's question marks whether it is actually a coherent doctrine, but it's certainly a set of behaviors and goals that is very consequential to the commodities markets. Both opportunity. Right. You know, I think once again, the trading houses have absolutely demonstrated their capacity and ability to overnight solve problems in time, location, price and form of these commodities and take the risks that the corporates aren't willing to take. Obviously, and it's fascinating to me, you know, the, the, you know, 10 years ago, people in the U.S. administration might not know who these companies were. Today, they obviously clearly absolutely do. So what, you know, what does it mean for commodities? Let's try and put some framework, some, I guess, some criteria around what the Don Road Doctrine is. Firstly, it would seem it's not about. To me, it doesn't seem. It's about, it's not the, the sort of 1970s extending freedom and democracy around the world. That doesn't seem to be the point.
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I think that's very fair to say. Paul, let's let the US government at face value here in the 2025 National Security Strategy, the key line is really that the US Will assert and enforce a Trump corollary to the Monroe Doctrine. And what that is really is an allusion to the Roosevelt corollary stating that the US has the right to intervene in Latin American countries in cases of chronic wrongdoing. Mitch Roosevelt, chronic wrongdoing.
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Theodore Teddy. We're talking 1905 here. Good. Teddy.
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Teddy. Right.
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FDR probably Franklin was a little bit more. No, no, this doesn't sound like Franklin.
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No, it certainly doesn't. But chronic wrongdoing sits in the eye of the beholder. And there's a lot of chronic wrongdoing in Latin America, if you care to look for it. It one might look, say, at El Salvador as an example, on the other side of the political aisle. And it's hard to see a U.S. intervention there. So really what you probably need here is three conditions for intervention. Chronic wrongdoing which Venezuela quite clearly satisfies geopolitical relevance in this case in the form of Venezuela status as a, as a forward operating base for nefarious actors and then a country that's big enough to matter, which plays into the geopolitical significance angle. There are a lot of small countries in which a lot of bad things are happening and it's very hard to see the US getting too exercised over them on a national interest basis. In terms of what that means for the commodity markets. It aligns quite neatly into the fragmentation of commodity markets we've seen in which there becomes a larger US aligned bloc and a largely China aligned block. But it also raises the risk of sharp, sharp transitions from one to the other. This won't be a matter of risk to the Western trading houses, but I'm sure there are traders sitting in China and elsewhere who had deals in Venezuela that have blown up quite spectacularly in the last week. There's no chance of China and Russia making that kind of deal for a Western trader block in the West.
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Yeah, this is, this I've just written now, Q1 market review, which is also our annual review and I think I've called it the Coming Storm. And I wrote in there as well. All this volatility is great. Obviously the last couple of years have been less volatile than years previously when we had land invasion in Europe and a global pandemic. But there's a certain sense at which, you know, be careful what you wish for this government, government driven, political driven volatility at some point, you know, what doesn't make us, you know, what doesn't kill us makes us stronger. I'd argue in the case of market structure is the other is the opposite. Whatever doesn't kill you still weakens you. And there's a point at which all of the constructs around risk management and investment, you know, you become just, you know, unable to move, utter stasis because the risks are just so unknowable. Right. I mean that, that is the world we're starting to enter in. As if that fragmentation gets greater, which is a deep concern. I don't have any comments on that.
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Yeah, look, the free market is starting to look like the Black Knight and Monty Python pleading that it's just a flesh wound while it loses various limbs and other appendages.
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Yeah.
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And that's not an unreasonable way to behave in an era of great power competition, let me be clear about that. And that's a way in which China's been behaving for a long time. So The US does feel that it needs to fight fire with fire. But the problem is what happens in a geopolitical context when the other side plays, plays by the same rules. I think if we look at, if we look at a Monroe Doctrine, a Chinese Monroe Doctrine makes it very, very clear that Taiwan, for instance, is in China's sphere of influence. And that's certainly the way, the way the world is interpreted from Beijing.
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Well, let's take that. Right, so this is this move from a rules based order of the last 70 years to potentially at least the Trump administration is viewing the world like this as a powers based order. Now one of the, I've got to be honest, this is, my immediate reaction was like, oh my God. Well, doesn't this give a green light to Russia and China to do whatever they want? And the argument to that would be, well, they, you know, they didn't need an argument from the US it's nice to have cover at the UN for this kind of thing. They didn't need an argument from the US to do that, you know, to do these actions because they already think and believe like that. Is that what, you know, what do you think That's, I mean, I think China is probably more interesting than Russia. You know what, what is China thinking about this? Is this actually. Holy, holy, you know, bleep. Yeah, that seems. This is a capability way beyond what we have in terms of militarily. And this is a very assertive. The US we can't predict them. Yeah, just talk to me about China, particularly in the context of Taiwan, which will be the big great power competition test, God forbid, if it ever happens.
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Well, the US has only chosen to exercise that power in what are frankly second tier or second second rate regimes. Look at Venezuela, look at Iran. If you look at U.S. special Forces and similar responses to the Russia, Ukraine war, there hasn't really been one that we know of because of the scale of what Russia can do in Europe and further afield. So the arg, it clearly holds that the US Special Forces are the world's premier fighting force. And every year we learn more about what they can do and it's greater than, it's greater than we previously thought. And I'm sure that's also the case in Beijing and in Moscow. But whether the US would, would choose to utilize its military options in a Taiwan contingency is really hard to know. The US didn't do, didn't become militarily involved in a direct form in Ukraine. China has a lot of options in Taiwan beyond, beyond A formal invasion. My colleague Ike Freeman and others have.
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B
Consistently argued, just do a blockade. Right.
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That a blockade is more likely. Last time I checked, the US Was running a blockade in the Caribbean as we speak. So from a Chinese perspective, I think there's also an argument that hemispheric spheres of control suit you quite nicely. And unless you think the US Is going to cool your bluff, you have more rather than less ground to stand on. Now, the difference, of course, is that Venezuela was a very minor supply source for the Chinese oil industry. There is no Venezuelan equivalent of tsmc and the US and the West Hand may be forced in the scenario of a Taiwan crisis. So. So. So Taiwan may well not be Venezuela in terms of the US Response. But we'll have to wait to see that and hope we don't have to find out.
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B
There must be some. You know, what's fascinating is also the fragility of these regimes. Right. Fragility of U.S. institutions. Right. I get that we're seeing sort of that, you know, a very dramatic change in U. S. Posturing, positioning and action compared to 20 years ago, a decade ago. Some would argue, others would say it's par for the course. Right. It's just. It's a little bit more overt and a little bit more sort of, you know, brazen than. But, you know, we have been used to invading countries when they don't meet our. Our, you know, those three criteria, as you said. Yeah, but there is a. There's, you know, and one wonders about China, but not for this podcast. Just going back to those three criteria. So series of wrongdoing, geopolitical relevance, and then big enough to matter. Right. So let's take Greenland. Okay, so. And this is where the, you know, that geopolitical relevance and is it big enough to matter in many ways always comes back to, well, what commodities and resources does it have in this world and where does it sit in sort of supply lines and all the rest of it. And so you can take the Greenland story. You can say, well, you know, it's geopolitical relevance. You know, big competition for the Arctic at the moment in the wake of global climate change. I find it fascinating that we're some parts of the administration pretending that's not happening, but very keen to be, you know, for those waterways to be controlled by the US Matters there. It also does have significant natural resources under it. There have been Chinese firms, Australian firms, you know, competing for those. Where does that, you know, it's certainly not a history of the 50,000 inhabitants of Greenland. Don't have a long history of wrongdoing and neither does Denmark. Right. So stacking that up against that sort of criteria of the Don Row doctrine, you know, I mean, would you be very surprised if we saw anything but some overtures to. To acquire it via buying it a real estate deal?
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Look, Paul, the US Already has what it wants in. In Greenland in geopolitical terms. We've got US Military bases there and we don't have to subsidize the 50 or thousand or so Greenlanders who are living there. That's the job of the Danes in terms of being big enough to matter. I think Greenland's a victim of its own cartography. It looks very big on the Mercator projection. It's not actually that big. Anyone who's looked at a globe will tell you, I mean, like a.
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B
And you just got to wonder on that, don't you? I mean, you know, not to be irreverent, but has anyone actually sort of, you know, gotten a different projected map and just pointed that out?
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I'd love to know that, Paul. I'd love to know it. And then as we get onto the chronic wrongdoing criterium, I think parents who've just done another large bill for Legos at Christmas might accuse the danger of chronic wrongdoing, but we don't have too many geopolitical reasons to think they're out of order. So in that framing, Greenland really only passes one of the tests, geopolitical relevance. And I think the US In a pretty good place there as it stands.
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B
And this is going to be the question of this year in many cases. Right. And this is not a political show, but there is a. The challenge, I think, for many prognosticators and analysts is are we dealing, you know, who and what are the rational actors in this play? Right. And on both sides. And, you know, are we applying criteria to events where. Actually, you know, like my earlier comment, Right. You know, actually oil isn't the justification for this action. It's perfectly justifiable in other, other ways. But, you know, are we. Are we. What's the. The gap there and how much can we predict actions? I guess that's a, you know, that, that comes back to that challenge of the markets. Yes, volatility and opportunity are great in a destabilizing world, but at what point, you know, are the surprises too surprising and, you know, in no way forecast or indeed more importantly, manageable? How, you know, how do you guys at Greenmantle. This is a tough question, or to let me put it in sort of the passive to analysts out there, you know, how many was, you know, were people surprised? And indeed if they weren't, what, what capabilities set up the organizations need? What do you yourself and Greenmantle need to be able to actually kind of be able to actually provide clients with the insight and analysis they need to navigate this tougher world?
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A
Look, Paul, first, I think you need context both from analysis and from human intelligence in order to understand the signals. And actually the market did a pretty good job in Venezuela. If you look at the last year of Venezuelan sovereign bond pricing.
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B
Someone made a killing on a polymarket, about 24 hours.
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A
Exactly. But you need to look at, for instance, that line I quoted from the National Security Strategy that the US Is willing to enforce a Trump corollary and intervene in cases of chronic wrongdoing. If you read that with the night of Latin America, Venezuela is first on your Christmas shopping list and if not a Christmas present done by early January in pretty good time. The question then becomes what else? Right. We've got major protests in Iran. Those for a number of reasons seem less likely to transpire into regime change, although it's not impossible.
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B
Well, that is. And that by the way, you know, as we record today, last night there was notable potential that some of the police security forces were on the side of the protesters. Right. Those things can snowball quite quickly.
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A
These are very hard to predict, very much so. But predicting them with the way to predict them is, is firstly to be aware of the historical grounding of both how policymakers and elites are thinking about events, but also how fast things can change. And the second way is simply to have the right conversations. And this is something the trading industry has excelled at and explains why they've been so nimble and able to come in and out of geographies. If you don't have ground truth both from the corridors of power and on the ground in the parts of the world that are in focus, you've got absolutely no hope. You're an outsider in what is fundamentally a knowledge driven market.
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B
And importantly, the key, this is kind of the narrative of last year and I think is going to be in stock relief this year. You know, the growing gap between supply and demand and what markets should be doing and the unpredictability or the, or the volatility of government intervention that can impact all of these well laid plans. Right. And thus frankly the need for all of these organizations, the need for those oil majors that the Trump administration approach to build, and they are building trading capabilities even if you're not outright taking spec risk and all the rest of it actually to be able to manage these events as they happen because come what may, they are happening and capture if you're in the case of the more nimble ones, those opportunities as they arise, as indeed you know, indicated by, you know, public statements from the trading houses the second day, day after saying ready and ready and standing by, sir, let's end up on this, you know, taking those three criteria, you know, chronic wrongdoing, geopolitical relevance, scale to matter. Clearly Iran sits in that, you know, who else I mean that, that doesn't. Well, let's talk about, you know, what, what does that mean for countries like Mexico? Right. What does that mean for, I mean frankly, Russia? What is it, you know, where, where does this Donroe doctrine go? I guess you know, those two, the first two I mentioned. Well, Iran and Russia are outside of the Western sphere of influence, but certainly this must be making some running some concerns for Colombia and for Mexico. And you know, that is going to be a real, you know, that could have some real consequences.
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A
Yeah, that's right. And look, Latin American voters have largely done the State Department's job for them here, most recently in Chile, before that in Argentina by, by moving to center right or conservative US Friendly governments. Colombia looks likely to do the same. And I think what we've seen as interesting is that there's a deterrence factor here. Shane Baum and Petro certainly don't want to end up in a situation analogous to that of Venezuela. So we've seen Petro have a very conciliatory phone call with the President in the last few days, tweets some very nice pictures of himself as a jaguar and the President as an eagle, which I'm sure was appreciated in the White House. And we've seen Shane ma work with the United States on everything from from giving the US military greater breadth to, to work with, to, to act against the cartels on Mexican soil to, to Mexican oil exports to Cuba, which is where this gets really interesting because Cuba is the obvious next play here for the United States. It may not be big enough to matter in some quantitative terms, but it's certainly big enough to matter in the eyes of Marco Rubio. Certainly big enough to matter in the US popular imagination. It's got deep geopolitical relevance given how close sits the United States and students of history will know well what having Cuba closely allied with, with American adversaries can mean. So that's where we're looking next. And it'll It'll be extremely interesting to see what plays out there across the coming days and weeks.
- [35:17]
B
Yeah, we just had the. Well, it hasn't come out yet, but we've got the CEO of a large, the largest privately owned midstream company in the U.S. you know, who has significant operations in, in Mexico. And, you know, these. I mean, it'd be a very good thing to get rid of the cartel, right? 30% of fuel supply in, in Mexico is now supplied by the cartel. You know, and, and the tragedy of the energy poverty caused by, you know, what the cartel have done there is, is, is just profound. But, yeah, it's a, you know, it's. And, yeah, well, all of this is complex. I also find it quite fascinating that one, one other point of history that we can use to look at the, what looks like going forwards is if domestic politics is really hard, it's a very difficult thing attacking affordability. We see this around, you know, Kirstar in the UK and so forth. It's very easy for politicians to go to the foreign affairs for the wins. And, you know, and that's definitely what we're seeing, right? We're seeing a far more interventionist Trump administration than advertised prior to the election. That doesn't necessarily bode very well for the upcoming midterms when Trump voters, you know, GOP voters are going to be, hey, we were sold on, you know, lowering prices. Tariffs will do that. And also that we were to get ourselves out of foreign wars. This might also be an accelerant to political change as well.
- [36:47]
A
I think that's very fair, Paul. And if you contrast this, the first Trump administration, when you had excellent economic performance by historical standards, you saw much less of a focus on foreign policy. There were some diplomatic wins, the Abraham Accords arguably principal among them, but that was primarily a domestically focused presidency. And today, to the extent where possible, the President is focusing on a foreign policy message, given some of the challenges around affordability, makes good sense.
- [37:14]
B
So it's interesting, isn't it, because in some part, Venezuela wasn't about the oil. It was, perhaps it sold around the oil. But the Donroe doctrine is very much about commodities and very much alive and real with fantastic opportunities available to those traders that can capture them, but probably on the long term, creates a degradating environment for the free flow of commodities around the world. And increasingly an episode we did three years ago now on sort of the Balkanization, blockatization of markets. And, you know, your capacity to operate spanning those blocks is going to be even more reduced and the risks involved are heightened.
- [37:54]
A
I think that's right, Paul. And the scary analogy here is I think the car makers in Europe who were too slow to react to that exact threat because so much of their business was in China. And for many of the trading houses, China is probably the second most important country in the world behind the United States. For some of them, China is probably number one. And so making, making that choice between those two superpowers is going to be an immensely difficult decision.
- [38:23]
B
Yeah. And it's a bet on the, it's all fine going after Venezuela, but actually decoupling the world truly between the US And China is going to be a, would be a, you know, it would be very deleterious in terms of markets and opportunity. But. Yeah. Well, Nick, you know, who should they call if they want this? Kind of. And obviously this is just scratching the surface of the kind of insight and advice that you guys offer. Who should they call and when?
- [38:52]
A
I'm happy to take the call pretty much 24, 7. Paul, we're not sleeping much at the moment.
- [39:01]
B
Well, I know you're in, you're in Cape Town at the moment and you're staying there to Lindabur. So, you know, people can, can reach out to you on LinkedIn. And I always really appreciate the, the, the insight and the conversation and yeah, the, the emergency podcast that this warranted.
- [39:16]
A
Always good fun. Thanks, Paul.
- [39:18]
B
Good man. Thank you for listening. To find out more about HC Group, our global offices and our expertise in search within the commodities sector, please visit www.hcgroup.
- [39:41]
A
Com.