Timothy Ash: Expectations for Trump’s presidency

One does hope so – I guess “making America great again” is a clear cut strap line, but delivering on that could be more difficult in practice. On the economy/business it might be easier given his experience therein but given the complexities of foreign affairs this could be a real Achilles heel, and he could end up being the proverbial bull in the China shop (“China” perhaps being the operative word therein). In some areas (NATO reform) this could be a breath of fresh air, and bring new and much needed reform. In others, e.g. the Middle East, the Balkans and China there are huge risks – and in the Middle East especially we have seen the results of ill-thought out Western intervention at all our costs over the past two decades almost.

That said, he clearly has an eye to business, and “the deal” which makes separating the bluff from the reality difficult.

And Trump’s lack of understanding in some areas is not necessarily an issue if he hires talent and delegates – always a sign of a good manager – understanding ones weaknesses, others’ strengths and then delegating.

But I guess therein the key is does Trump understand his own lack of understanding in certain areas – a bit like Donald Rumsfeld’s “known unknowns” – more like “unknown unknowns” in the case of Trump.

And this could be the heart of the problem, as the question is whether ego or realism win out with Trump.

Can he hire talent (yes), and really delegate? Many would have concerns therein due to ego and his seeming obsession with Twitter.

The danger is that while he might hire some talent (his cabinet picks so far have received mixed reviews) – his determination to meddle and set policy on the hoof, or Twitter, could serve to weaken the message, and risk confusion and cabinet splits and defections. The risk of distraction is high and major policy errors (particularly in foreign policy, e.g. Israel) could so easily result.

He clearly has to prove whether he is a Ronald Reagan or Margaret Thatcher, but it seems clear that he will shake up D.C. and break the logjam which I guess would have been inevitable under HRC.

Domestic economic policy – could bring market positives. Low taxes, deregulation, fiscal expansion, – priority sectors being defence, infrastructure and energy.

A strong dollar, higher Federal Reserve rates seem likely outcomes, but are dependent on smooth, coherent and consistent policy implementation.

But there are clearly huge risks of a domestic social backlash – a return to civil rights issue, mass protests from minorities, environmentalists, et al. And in the United Kingdom, Thatcher could so easily have been derailed early on by surprising events (e.g. the Falklands/Malvinas war could have gone either way if Argentinean gunners set the timers on their Skyhawks differently) – as a former British prime minister famously wrote, his biggest challenge in office was “events my dear boy, events” and importantly how these are handled and in this case by Trump.

Meanwhile, domestic economic positives have to be balanced against protectionist impulses impacting global trade, and emerging markets therein potentially, a lose – lose for everyone. Will a stronger U.S. economy be counterbalanced by a contraction in global trade resulting from the trade barriers being hiked in the U.S.?

I guess a strong/recovering U.S. economy is good for many emerging markets which export to the U.S. (if not accompanied by higher tariffs) but not if they are restricted from what they can sell by increased tariffs.

NATO – let’s face it is not working anyway. There are serious doubts as to whether NATO is capable of defending Europe from an eastern attack (highlighted by U.K defense experts recently), given the post -Cold War defense dividend was already spent, and several times over, some years back, while talk of NATO enlargement obviously just goads Russia so proving counterproductive.

So herein Trump’s intervention could be positive. It will put pressure on European Union partners to beef up contributions, to make NATO more effective and coherent, and perhaps more realistic in terms of enlargement plans.

But if not, the end game might be break up, and development of regional defence organisations.

This could see Ukraine, Poland and the Baltics allying, which could cause more tensions with Russia, and a regional arms race, and eventually conflict.

The break-up of NATO (a real prospect) would also be another nail in the coffin of Turkey’s Western anchor.

We could, meanwhile, see US and Russia cooperating elsewhere, e.g. in the Middle East, over Iran, ISIS, etc, and potentially against China in Asia.

And what about the relationship with Russia?

Important to think through the key geopolitical risks seen from Moscow for Russia, and in order these are:

First, coloured revolutions (Ukraine big risk), as key risk to the regime, as Russians might want the same as their counterparts in Ukraine, so real democracy, human rights, rule of law. And NATO expansion only as it brings with it the risks of coloured revolutions. In reality Russia knows also that NATO is no military threat anymore.

Second, China – Russia and China are long term rivals in the Far East, and Putin wants the US as an ally therein. Energy deals with China were never that serious, all about playing hard to get with the West. Russia would much rather get US oil companies back in – this could open the way for some huge deals with US companies, but at the price of sanctions being lifted.

Third, Islamic terrorism – much lower threat, as Putin has “dealt with” the threat from Chechnya and southern Russia, and on-going in Syria. Helps when you are willing to do whatever it takes.

Putin got what he wants, from the US election, which is great power status and prestige again which helps counter the risk from coloured revolutions – why would Russians want to row back from the Great Russia that Putin is recreating?

Ukraine is the challenge for Russia. Will Putin be content with the use of soft power or “influence” under Trump or want a more formal relationship, and Ukrainian membership in the Commonwealth of Independent States Customs Union? There is no way any Ukrainian government would accept this, so Russia would have to force the issue. Indeed, Ukraine could still be Russia’s Achilles heel. Will Russia want to assert itself, and “take” what it sees as its, and risk being then dragged into a bigger conflict? Arguably Putin’s chance to grab Ukraine, to make Russia Great(er) is now, while Europe is weak and divided and the US disengaged. Maybe, but big risks therein and Putin is cautious by nature. Maybe he prefers to wait, for Ukraine to unwind then hope that Ukrainians beg to come back into the Russian fold, or new elections in Ukraine bring in a government which wants closer ties again with Moscow. Possible I guess in a scenario where Europe is disintegrating but I think Ukrainians have already made their decision, and paid in blood and treasure to clearly show where their orientation is, and it is West.

The Trump administration is likely to signal no NATO/EU for Ukraine, albeit does it need to, given it seems to be working to undermine both institutions, in Russia’s favor. But at the same time I do think that the Trump administration could well hedge their bets by actually arming Ukraine – this could be a source of tension with Russia. Sanctions on Russia are likely to be eased, but in exchange for deals (energy deals, market access for US business).

Sanctions on Russia are likely to be eased, but in exchange for deals (energy deals, market access for US business). But this could see a wall of Russian new issuance, weakening credit spread compression, but supporting the rouble and playing to the rate easing story. I don’t see economic reform in Russia – too risky for Putin – and I think economic recovery will be weak still, which again plays to the receiving rates trade.

The future of the EU – in a sense is a binary outcome. Pressure from the US/Russia plus U.K. will either bring the EU together, force European populations to vote for more mainstream parties or go the other way. With such risks surely the French will spurn Le Pen and Merkel will get a second term. And Europe will be pushed to closer integration or a core. Or the whole project will collapse, and it will be the end of the EU as we know it, and the single currency, if Le Pen wins and Merkel is ousted. And we end up with every European nation for itself, the re birth of the nation state, bilateral deals cut, and Russian “sovereign democracy” dominant.

Well, the risks are that it brings greater risks of conflict on the periphery of Europe, particularly in the Balkans and with Turkey. Why would Serbia play ball over Kosovo, or RS in BiH, and there are stresses in Macedonia, Montenegro as well, plus across many borders in the region – too many to name herein. There are lots of potential stresses and conflict in the region, which could flair, and maybe we are already seeing all this in Turkey as the EU accession anchor has weakened since 2011. All these countries moderated positions on difficult ethnic or territorial issues because of the greater goal of EU membership.

But I guess with the EU disintegrating, and the risk of new conflict in the region, the question then is will Russia assume a stabilising/moderating force? Experience suggests not, they have always viewed conflict as providing leverage, e.g. over Nagorno Karabakh, Abkhazia, et al. But Russia ultimately surely has an interest in a stable, prosperous Europe, as a big market for Russian products, particularly oil.

Obviously the big question and risk factor given China has been the biggest beneficiary from globalisation and freer trade, and could be the big loser from US protectionism under Trump.

The US (and Russia) are military/strategic rivals in Asia. This could warm the US/Russia relationship as allies against China, but raises huge question marks about the future relationship with China, the durability of the Chinese economy, and the broader Asian region. The hope is that the domestic Chinese economy is now big enough to enable it to endure through a trade war with the US, but I have my doubts.

But all that said, Trump, and the big business he has brought in to the cabinet, have benefitted from the China trade as well over the past twenty years. Are they really that serious about rowing back from the China globalisation trade? Or is this all just window dressing in advance of the inevitable big deal with China. Maybe. Indeed, perhaps this is just about positioning prior to cutting deals with China, e.g. over greater market access for financials, et al.

And funny that we might see a re-alignment of allegiances with the US+Russia ranged against China and the EU, with the U.K. providing a bridge between all these.

Trump will be pushing business over Western values. Regimes which can offer business deals, and support in the fight against Islamic terrorism will be favored – good for Egypt, Pakistan, Tunisia, the Gulf, Saudi, maybe Philippines, obviously Russia, Central Asia, and perhaps even Recep Erdogan’s Turkey. On the latter note the Erdogan-Obama relationship was so bad – Turkey will be seen as an ally against ISIS, Iran, and perhaps counterbalance again to Russia/China.