by Louis Navellier

January 3, 2024

In 1982, Argentina thought they could take over Britain’s Falkland Islands (which Argentina called The Malvinas), but the Iron Lady, Prime Minister Margaret Thatcher, had different plans, sending the once mighty (but still proud) British Navy to reclaim the high seas in the South Atlantic. Now, it appears that another South American nation wants to grab another former British colony, Guyana (“British Guiana”).

As the New Year opens, Great Britain diverted a patrol vessel, the HMS Trent, from Barbados to Guyana to conduct “engagements” there. Venezuela is claiming two-thirds of Guyana, because it does not respect the established British borders and instead is relying on a Spanish map from the 18th century. Venezuela’s President Nicolas Maduro warned Britain not to “mess” with his country and so he deployed thousands of troops in response to the HMS Trent being sent to defend Guyana. Furthermore, Maduro called Britain a “decadent, rotten, ex-empire” as he ordered troops into defensive maneuvers ahead of the Trent’s arrival.

Naturally, Venezuela is mostly seeking a claim to Guyana’s crude oil production, which is expected to rise to 1.2 million barrels per day by 2027, so Venezuela has ordered its state-owned oil company to issue licenses for extracting crude oil on Guyana’s Essequibo region that consists of two-thirds of all Guyana.

It now seems inevitable that both Britain and the U.S. will come to the defense of tiny Guyana, since several major oil companies have an interest in this biggest oil discovery in decades, and this might mark the third war to erupt since 2022 in oil-rich regions, the other two being Russia and the Middle East.

Iran is Expanding the Scope of its Proxy Wars Against the West

In the Middle East, Iran has threatened to close the Mediterranean Sea if fighting persists in Gaza. Iranian proxies have already been attacking Israeli and U.S. facilities in the Middle East. Houtthi rebels based in Yemen have fired on British and U.S. warships, as well as cargo ships in the Red Sea. This has effectively forced the insurance industry to redirect ships away from the Red Sea, which is raising the price of LNG and container goods. Flexport reported that 299 cargo container ships are changing their course and will not be traveling through the Red Sea, which normally channels approximately 50% of container traffic.

Complicating matters further, a chemical tanker was hit off India by a rocket launched from Iran, so the geographical range of Iran-sponsored conflicts is expanding, targeting commercial ships, not just military targets. India has since dispatched guided missile destroyers to protect commercial vessels in the area.

Three U.S. service members were injured in a drone attack by Kataib Hezbollah militants at Erbil Air Base in Northern Iraq. One U.S. service member is in critical condition. The U.S. responded on Tuesday with three military strikes against the Kataib Hezbollah militants in Iraq. These Iran proxy groups have launched well over 100 attacks against U.S. forces in the Middle East, so U.S. soldiers are seemingly perpetual targets. An eventual confrontation with Iran is rising in probability and maybe a New Year surprise coming soon. The Biden Administration’s popularity continues to suffer from U.S. soldiers being essentially “pinatas” in the Middle East, so a more decisive response would boost military morale.

Early in 2023, Iran hijacked crude oil tankers and held them for ransom. Although subsequent U.S. Navy patrols in the Strait of Hormuz curtailed Iranian hijacking of crude oil tankers. Iran’s bad behavior has resurfaced via proxies – such as the Houthi rebels, Hamas and Hezbollah. It will be interesting to see if Iran launches more drones to attack commercial ships, now that guided missile destroyers have been dispatched. Naturally, Iran’s bad behavior, mostly through proxies, should keep oil prices artificially high.

The Russia/Ukraine Conflict Enters Stalemate Mode

In the meantime, the war between Ukraine and Russia persists. Although it’s still violent and deadly, this war is best described as a stalemate, where both sides are losing. Ukraine apparently inflicted severe damage on the Russian warship, Novocherkassk, with cruise missiles docked in Crimea. Tass, the Russian news agency, said that 74 sailors were killed and 27 sailors were injured in the Novocherkassk attack.

Then, on Friday, Russia retaliated with 36 drones and 122 missiles which rained on several Ukrainian cities, in the largest air assault ever attempted in this war, in an effort clearly designed to overwhelm Ukraine’s air defenses. Then on Saturday, Ukraine launched over 70 drones on Russian military facilities.

Severe winter weather might soon curtail some of this fighting, but abnormally warmer weather has so far allowed the fighting to continue. January is expected to be characterized by several days of snow in Ukraine, so hopefully the fighting will diminish, and cease-fire talks may ensue. Both the U.S. and the EU are reluctant to provide Ukraine with more aid. Recent news that a senior Ukrainian Defense Ministry official was arrested after embezzling nearly $40 million does not inspire confidence to send more aid.

I should add that my serviceman for my home Internet system in Florida is a young healthy gentleman from Ukraine, who confirmed that most of his friends have fled Ukraine for Poland or other neighboring countries. Clearly, like most wars, many people do not want to die in the war there, so the shortage of fighting age men in both Ukraine and Russia remains an acute problem for both nations.

When it comes to pouring more billions into the Ukraine war effort, the House of Representatives remains divided, with Republicans insisting that any additional aid to Ukraine will not be provided unless U.S. border security is restored. This is an interesting showdown, where neither side wants to budge, so it will be interesting to see if this persists all the way into the Presidential elections. Amazingly, aid to Ukraine from the U.S. has exceeded all federal spending on infrastructure, so some priorities are being questioned.

The Biden Administration apparently has no intention of cooperating with the slim Republican majority in Congress, so it is now looking at seizing approximately $300 billion of frozen Russian assets to fund Ukraine’s government and war efforts. I should add that the Biden Administration also met with officials in Mexico City to see if Mexico can help with the Southern border crisis. However, it appears that there is no immediate solution to the border crisis, so Democrat Party strongholds, like Chicago and New York City, continue to ask the Biden Administration for aid to house the migrants being dumped in their cities.

These three wars in energy-rich regions are helping to support our long-term energy bet. The American Petroleum Institute (API) reported on Wednesday that U.S. crude oil inventories rose by 1.837 million barrels in the latest week. API also reported that gasoline inventories declined by 480,000 barrels in the latest week, while the inventory of distillates (e.g., diesel, heating oil, jet fuel, etc.) rose by 270,000 barrels. Petroleum prices are steady. The demand for crude oil remains seasonally weak, but it is anticipated to firm up in February as the Northern Hemisphere warms up and economic activity picks up.

All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.

Please see important disclosures below.

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Louis Navellier

Louis Navellier is Founder, Chairman of the Board, Chief Investment Officer and Chief Compliance Officer of Navellier & Associates, Inc., located in Reno, Nevada. With decades of experience translating what had been purely academic techniques into real market applications, he believes that disciplined, quantitative analysis can select stocks that will significantly outperform the overall market. All content in this “A Look Ahead” section of Market Mail represents the opinion of Louis Navellier of Navellier & Associates, Inc.

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