Last week, going back to the latest developments in Saudi Arabia and the rising tension in the Arab Peninsula, we explained in detail that one of the dynamics behind the political-military tension of the last couple of months for the Saudi Arabia-Qatar-Iran triangle where the United Arab Emirates (UAE) and especially Abu Dhabi Emir played a vital role, was the Belt and Road project led by China. The Belt and Road project, in addition to creating a goods and services corridor between Asia and the Middle East & Africa, also means an alternative source to meet the energy needs of Pacific countries China, Taiwan, South Korea, and Japan via the sea corridor. The aforementioned countries' daily oil import reach 12 million barrels, and oil coming from the sea corridor and from the Persian Gulf alone meet 10.4 million barrel of this demand.
In this case, the transformation of military and political tension involving Saudi Arabia, Qatar, Kuwait, the UAE, Bahrain and Iran into hot conflict not only points to a disaster for the region's stability, but also means that Pacific countries will experience a lack of energy supply. At exactly this point, if we consider that U.S. shale gas-based immense energy resources are ready for export, it has started to build eight new liquid natural gas plant in various parts of the U.S. and exported its first LNG (to Poland) in the first week of the Qatar crisis, we could provide some clues to the energy aspect of Gulf tension. In addition, Russian Gazprom and Qatar continue negotiations to buy an LPG plant in Greece. We should highlight that it would be very logical for Israel to transport its natural gas to Europe via Turkey.
Let's note the opportunity for 16 billion cubic meters of natural gas that will reach Greece, Armenia, and Italy through Turkey starting from Azerbaijan. President Erdoğan's multi-aspect visits to Russia-Kuwait-Qatar and his call for union and togetherness to Gulf counties aside, we see who loses and who gains if the region's countries kneel to the forced tension and move to heated conflict. In this equation, Energy and Natural Resources Minister Berat Albayrak's step to find and extract gas resources in the Black Sea, the Marmara Sea, our Mediterranean coast and the Cyprus coast means Turkey's "playmaker" role will strengthen. If the Gulf loses the energy game, China and Europe will turn to the U.S.
Trump uncertainty can
strengthen the euro
Following Trump's Saudi Arabia visit, Gulf tension rapidly increased, starting with the Qatar blockade, Trump's latest Pacific communications and ongoing debates in internal U.S. politics; interestingly, despite Trump's "tax reform" move and the Federal Reserve's (Fed) determination to conduct monetary policy, does not create the expected effect on the euro-dollar exchange rate. To the contrary, experts from international finance institutions foresee higher than $1.20 for euro-dollar parity. Due to the internal and external uncertainties caused by Trump, the belief that the Eurozone led by Germany is trustworthier and that it's a "reliable port" shines out. ING Bank economist James Smith is one of the people expecting euro-dollar parity to rise to $1.30.
Smith said if tax reform passes in Congress, then markets will relax, indicating that Europe's growth narrative is going well. He pointed out that they could see that the bull market still continues despite some political uncertainty and that there is no sign it is going bad, and he is optimistic for markets for the next year. Smith, who mentioned that the growth path of developing nations, such as Turkey, are also going well, foresees the euro will strengthen against the dollar and a good future for 2018 in the global view. He indicated that they were expecting the European Central Bank (ECB) to start normalization of the monetary policy on top of the Fed and explained that we should not be surprised if the euro-dollar exchange rate rises to $1.25-1.30 in 2018.
At this point, the presidents of the ECB, Bank of England (BoE), the Fed and Bank of Japan (BoJ) indicate that uncertainty in monetary policies should be kept at a minimum for global markers to healthily run. The four presidents that came together in Frankfurt for an organization of CNBC, and, especially ECB's President Mario Draghi, discussed the necessity of guiding investors with verbal direction. Fed President Janet Yellen defended the necessity of verbal guidance and said the statement: "All guidance should be according to conditions and related to the economic outlook."
