One of the first indicators of an army’s performance is its logistical capacity. When high-intensity operations are deployed, there simply are few countries which have the operational capability to transfer immense quantities of equipment, safely and quickly, across the planet. ICS (International Chartering Systems), a small French airlift company, has made meeting this military challenge its specialty.

ICS, International Chartering Services, is a small French company which specialized, in the 1980s, in a very specific type of chartering: top-size. Using close contacts to the Russian and Ukrainian worlds of aviation, CEO Christian de Jonquières obtained access to Antonov 124s, the biggest cargo jets in the world, and started the commercial venture. The arrival on the market of ICS was a game-changer. With commercial airlifts available on the market, France was not only able to extract itself from NATO’s rigid airlift-sharing plan (known as SALIS), but also greatly expanded its transport capacity, well beyond those provided by the new Airbus A400. This outstanding transport capacity was an understandable part of France’s expeditionary culture, as described by the Rand corporation, and represented the way in for ICS. Reporter Dominic Reed explains: “ICS started doing business with the French army through both channels. Both the Army and ICS got lucky by doubling their agreement capacity, because transport capacities were overstretched between 2012 and 2015, with the simultaneous withdrawal of Afghanistan and the deployment in Mali, and things had already been tight before.”

ICS built its worth in reliability, by keeping a small and highly specialized workforce, able to work out all the details of such highly specific flights, and by simplifying operations to the maximum, on the client size. Flight hours were sold, including all overheads (such as maintenance, ground fees, personnel training and empty return flights), unlike SALIS flights, which sold flight hours at a far lower rate, but then added many extra costs, resulting in a fatter bottom line. Because military airlift missions are almost by nature unique, they are difficult to streamline and industrialize: every mission will come with a set of new parameters and complications. Each flight is crucial, as it conditions the military operations down the stream, and must be secured, loaded, calculated and processed through necessary authorizations, not to mention the fact that many will land in hostile environments. A task force of highly skilled, committed and specialized people was therefore necessary to provide services in line with operational requirements. With a peak workforce of 15 people in 2012, ICS was able to provide, for a fraction of the standard price, airlift capacities towards high-intensity operations, at a moment’s notice, with a successful-mission rate of a 100%.

France, as a NATO-member, already had access to strategic airlift capacities, through the SALIS contracts – run from Luxemburg and signed with Russia’s Volga-Dnepr company. However, the sizable limits were then placed on France’s sovereignty, as explained by specialist Katia Vlachos-Dengler, from the Rand corporation: “Significant barriers exist to adopting multinational, integrative solutions for the more efficient use of European lift capabilities. These barriers include, among others, divergent interests and threat perceptions among European countries; concerns about national sovereignty and dependence on other nations; institutional and organizational inertia; and problems with establishing burden sharing relationships.” The first is that NATO handles the distribution of flight hours purchased from Volga-Dnepr. Each country has credits which cannot be exceeded, within the total number which was pre-negotiated with the airlift company. Army Col. Patrik Steiger, spokesman for the French joint chiefs of staff, details the tricky situation: “It is not a total dependence, it is cooperation among allies. We are allies with the Americans, we are engaged in the Sahel region, Levant, and there is the principle of a ‘mutualization’ of available assets.” SALIS contracts being multi-year agreements, they cannot account for last-minute operational requirements. The second limit to sovereignty affects not only France, but all of NATO, and blew up in NATO’s face just months ago. Following US sanctions on Russia, Volga-Dnepr announced its unilateral decision to cease providing strategic air transport to NATO, leaving Western armies to rely on their much smaller cargo planes, such as the Airbus A400, and US C5s and C17s. This new setting excludes, as was probably Russia’s goal, many military items such as heavy armored vehicles, out of the air routes, and considerably slows military deployments. Through its specific business relationship with the Ukraine, ICS is able to save its access to Antonov 124s and preserve its clients’ access to large-scale strategic arilifts.

France, however, also placed itself in harm’s way, when members of parliament were lobbied into denouncing the side agreement with ICS, by large competitors which became fed up with the little challenger’s success. In a 2017 feud which left observers puzzled, Paris separated itself from ICS, and therefore placed itself entirely under the rule of NATO SALIS contracts, themselves at the mercy of Russia. As a resulting move, ICS has extracted itself from the French market, to sell its highly-demanded airlift capacities abroad, namely in Africa and for UN operations – also submitted to high-intensity operations and operational urgency. The scarcity of such offers is such that it explains why ICS was able to rebound immediately on the international market – France’s loss being everyone else’s gain. Namely, the UN’s mission in Sahel was quick to hire ICS for its major logistics needs, which foresee the delivery of large amounts of peace-keeping equipment. Jean-Pierre Lacroix, head of UN peacekeeping operations, recently announced that “Major equipment shortfalls, capability gaps, insufficient infrastructure and a lack of secured operational bases continue to delay its full operationalization”, before ICS was chosen to provide the necessary logistics for the operation.

Russia, the European Union, the UN, and the United States all have dedicated vectors for large-scale cargo, and the administrative structures to operate them. What NATO, and now France, lack, is a small and nimble structure able to address urgent and flexible deployment needs. That capacity did exist for France, but has now befallen the UN, to help with its African operations, leaving all NATO members within the gridlock of SALIS contracts.

There are numerous factors that can potentially have an effect on financial markets and which traders have to be aware of. They can range from extreme weather events, terror attacks, corporate announcements, all the way to the political climate of a country. In most of these scenarios, the ramifications for an economy and the subsequent reflection in the stock markets can be relatively predictable – we expect to see a drop in stock prices when a disaster hits , for example. When it comes to the political climate, however, things become a whole lot less predictable. This is due to various reasons, not least because of the inherently fickle nature of politics itself and the sometimes vast differences in the political cultures and traditions of different countries.

To get a sense of just how a country’s political climate can affect various aspects of a nation’s economy and its financial markets, we’ll take a practical recent example of the USA following President Donald Trump’s election in November 2016. It serves as an interesting case study due not only to its unexpected nature which highlighted the basic unpredictability of political climates, but because it brought about some very interesting reactions and results from businesses and the financial sector in general.

Growth Expectations

A general statement can be made to the effect that a country’s political climate and its economic environment are closely related. Investors, no matter how large their risk appetite, like to have a reasonable assurance of their money’s safety, which is why stock markets are usually the first industries to react to any political climate changes. In fact, research suggest that stock markets follow a predictable general pattern along a four-year cycle punctuated by the Presidential Elections in the USA and perhaps many other countries worldwide, with the market showing signs of increased caution as election season comes around.

Following President Trump’s unexpected victory, many organizations held the hope that the bold fiscal proposals he had talked about during the campaign – including increased spending and tax cuts – would serve to boost the country’s economy. The Federal Reserve actually went ahead and increased interest rates in anticipation of the changes, showing how even the promise of a policy change will directly be felt on the financial market.

Anticipated Regulatory Changes

When a country undergoes a significant political change of pace, it is expected that this will come with significant regulatory standards and practices. It is widely acknowledged that increased government regulation and bureaucratic interference in a country’s economy and industrial activity will usually result in a slowing down of the economy in question.

President Trump had poised to relax the regulatory framework in the country as well as consolidating the numerous bodies tasked with formulating the regulations to make it easier to do business in the country, and this came as good news to organizations and their stakeholders.

Political Stability Concerns

Political stability has a very real effect on the state of businesses within an economy, as we can all agree. While many business owners and stakeholders were encouraged by the promise of deregulation and fiscal policy reform, many were also given cause for concern when it came to the President’s apparent pattern of unexpected and inconsistent policy decisions.

His stance on immigration, promise to wall of the USA’s southern border with Mexico, and his abandonment of previous trade deals all went into fueling anxiety and a sense of uncertainty in the financial markets. This was especially felt in the case of organizations with a global business presence. These feelings decrease investor confidence and often lead to a depreciation in stock market values as the more risk-averse investors keep away.

In Conclusion

When looked at in totality, countries all over the world face the same types of political risks. We’re not talking about complete government collapses such as might occur in times of a coup, but relatively smaller yet high-impact moves and policies by governments on matters such as regulation, currency valuation, taxes, spending, minimum wage laws, labor laws, environmental regulations, and the like.The financial market of a country, being highly sensitive to such shocks, can register an impact when such actions are merely proposed, without their implementation having taken place yet. The impacts may be long or short-term, but they are definitely felt throughout the financial markets.

“Watch this man.” These were the three words used by the founding father of Singapore Lee Kuan Yew to describe a relatively unknown Xi Jinping while he was yet to become the President of the People’s Republic of China. Today, in addition to being China’s “paramount leader”, Xi is arguably the most powerful man in the world, and even if leaders across the world were doubtful about it till now, the developments in the previous week were sure to make them think again.

19th Party Congress: How it unfolded

Xi today, Xi forever?

The Communist Party of China assembled the previous week for its 19th Party Congress, a political summit that takes place every five years to decide upon the country’s future and the future is precisely what Xi has fixated his eyes upon. According to the current rules, Mr Xi must step down as the leader when his term ends in 2022 and as tradition dictates, a successor must be appointed. While only time will reveal whether Mr Xi steps down from the presidency at the end of his term, it increasingly looks that he is not keen to do so, having failed to hint towards any successor for the time being. His apparent intentions to stay put were further solidified with the appointment of the new members to the Politburo Standing Committee, the highest decision making authority in the country after the president. Each of the members appointed to the body is over 60 years of age, which means that they are highly likely to retire when their term comes to an end with the next meeting five years later. Interestingly, two-thirds of them are also known to be Mr Xi’s loyalists.

Xi Jinping Thought: A force to be reckoned with

“Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era” or the “Xi Jinping Thought” for short was written into the party’s constitution at the end of the Congress. The thought consists of 14 principles calling for deep reforms, conserving the environment, the party’s complete control over the army, and the importance of the unification of the country. The development was highly publicised and with good reason. With the “Xi Jinping Thought” embedded in the constitution while still being in power, Xi Jinping has drawn comparisons from all over the world to Mao Zedong himself. Moreover, he has ensured that anyone that opposes him will do so at the cost of their removal from the party. When Xi asked the delegates at the end of his address for any objections, shouts of “meiyou” which means “none” rang through the Great Hall of the People.

Mr Xi has declared the start of a “new era” for China, and undoubtedly for the entire world. It is therefore important to ask what significance these developments hold for the country and for the world at large.

What this means for China

The inclusion of Xi’s thought in the constitution means that the same will be taught in schools, colleges, and other institutions throughout the country, infusing his ideology among the Chinese on a cultural level. Abraham Denmark, director of the Asia program at the Wilson Center puts it aptly when he says that the move “greatly increases, … broadens, and deepens Xi Jinping’s personal power within the Chinese system”.

The president has already found a wide support of the Chinese population with his push for modernisation and his crackdown on corruption has been hugely popular among the masses. Since his election in 2012, Mr Xi’s anti-corruption drive, famously known within the country as the “tiger and flies campaign” has either disciplined or expelled nearly a million party members. As his stance on corruption remains as stern as ever, many have come to view it as a political tool used by him time and again to get rid of political rivals. However, the corruption drive has undoubtedly proved to be effective and fruitful for the country’s business climate.

While Mr Xi’s crackdown on corruption has garnered immense coverage, the crackdown on humans rights activists and NGOs has not received its fair share. China has struggled for decades in its battle for free speech. In 2015, many human rights lawyers were detained and many international NGOs faced stricter curbs to keep them from functioning. As the president has left little room for any opposition within the party, the authoritarianism and censorship are by no means expected to be relaxed, ensuring that there is no opposition from outside the party as well.

Powerplay: China’s standing on the global stage

Donald Trump was among the world leaders who wished the Chinese president when he congratulated him on his “extraordinary elevation”. The reverence he holds for Mr Xi was quite apparent when he said: “some people might call him the king of China.” The surprise, however, came when North Korea’s Kim Jong Un congratulated the president on his “great success” since the two leaders are not known to be fond of each other. The intent here is clear. Both sides need a China that is continuously growing in power on their side in their stand against each other, and that means a closer association with Mr Xi. Chinese influence in the world is unlikely to stop there.

While speaking to CNN, James McGregor, author of “No Ancient Wisdom, No Followers: The Challenges of Chinese Authoritarian Capitalism”, mentioned that “given the chaos in Washington and also the dysfunction in Europe, the world is looking for leadership.” Mr Xi enjoys a great level of stability and largely unquestioned authority in a time where the leaders of Western democracies face intense competition at home. As such, his message to his party and to the world is clear: in the coming decades, China will “stand proudly among the nations of the world” and “become a leading global power. ” However, it will do so on its own terms, emphatically rejecting the Western political models.

These intentions are perhaps best evidenced by The Belt and Road initiative, China’s attempt at connecting Europe, Asia, and Africa with each other through a modern take on the Silk Route, into which it has already pumped hundreds of billions as loans and aid to countries across all three continents. While the project has been met with opposition from Japan, India, and the USA, many of China’s neighbours have expressed their support for it, which speaks of its influence on the global stage.

With the people’s army under the control of the party, Mr Xi also looks to achieve the twin goals of increasing the military might and the protection of China’s sovereignty. “We will not tolerate anyone, using any means, at any time to separate one inch of land from China”, he said in his address which is seen as a warning to both Hong Kong and Taiwan. Enhancing combat capability is also linked to the Chinese interests in the South China Sea, where its activities of building and militarisation of islands have received backlash from the international community.

“If one is big”, Mr Xi said on the final day of the Congress, “one must act big.” There’s no doubt that Mr Xi intends to put these words into action at the global level. Lee Kuan Yew once rightly pointed out about China that the world would do well to remember:  “The size of China’s displacement of the world balance is such that the world must find a new balance. It is not possible to pretend that this is just another big player. This is the biggest player in the history of the world.”

References:

http://www.cbc.ca/news/world/china-congress-xi-jinping-petricic-1.4371251

https://www.theatlantic.com/china/archive/2013/03/interview-lee-kuan-yew-on-the-future-of-us-china-relations/273657/

https://www.theatlantic.com/international/archive/2017/10/china-xi/544035/

http://www.independent.co.uk/news/world/asia/xi-jinping-china-communist-party-constitutional-amendment-ideology-enshrined-superpowers-future-mao-a8017111.html