DIVERSIFY TRADE

“I learned recently that nylon and polyester come from petroleum products. So the price of thread has doubled in Bangladesh. We know that universities have been shut down in many countries in South and Southeast Asia. The Philippines declared a national energy emergency. Many airlines around the world, but many of them specifically in Asia, are cutting flights because jet fuel prices have doubled.”

“I don't know if you saw the headlines today, that the UAE have decided to pull out of OPEC. That's just another contributor to volatility. I mean, on the plus side, you could see that it may prevent having a high price floor on oil. But one of the things that OPEC did was prevent a large amount of volatility in these prices. And if the UAE pulls out, you could have a lot more volatility.”

“So the risk is that the current incumbents have invested a large amount in their AI infrastructure, in data centers, in trillions of dollars, in the hope that they will be able to raise revenues that can explain, justify these level of investments that they're making. That is completely unclear because you could very easily have another competitor come in and produce the same product or pretty close to the same product, a fraction of the cost, given how the technology is evolving. Then the current incumbents can't really make the money they're expected to make to justify their investments.”

“Take the example of Sri Lanka. Sri Lanka was a country that went through a very bad crisis, was on the path of recovery. This kind of a shock is like a nightmare situation for a country like that, which is just trying to get out of the crisis that it had with fuel prices the way it is, with fertilizer prices going up. More generally, with jet fuel prices going up, which means travel is going to become much more expensive, which means tourism is affected in the region. Countries like that, Pakistan is another country that is in a fragile situation with everything that's going on.”

“And if it gets even worse, and we are looking at oil averaging $110 a barrel this year, and this is a much more disrupted situation with bigger hits to energy infrastructure, which means next year too, oil is going to stay very high and financial conditions get a whole lot worse. Then we're looking at the world economy growing at 2%, which again, those are extremely rare occurrences. So the risk seems squarely to the downside at this current point.”

“I think energy independence is going to be critical. And thankfully, for many countries in the world, there are alternatives. I mean, there are renewables that one can invest and develop even more. I mean, Sri Lanka with, you know, solar can do great. So energy independence, I think, is very doable for countries. The cost of doing it in terms of just the inputs that are required is cheaper, much cheaper than it used to be.”

“And if you look at 2025 and growth in 2025, basically, AI offset the drag that came from tariffs, right? Almost one to one. So that was the positive effect that came from AI. And what's interesting is you see that despite everything that's happened over the last 24 months or so, the US remains the part of the world where people want to hold equities. So if you look at the net capital inflows into the US in 2025, that was at a record high.”

“But as the longer story goes, Russia made some bad choices. Its decision to invade Ukraine has been tremendously costly. It has led to an allocation of resources to this war economy, and that's affected their productivity, that's affected the more critical investments that they need to make, and it's also affected the number of people who are staying in Russia and willing to work and contribute to the country. There's been this exodus of people out of Russia. So for all those reasons, you know, this is not going to end well.”