Pence Backs NATO and Blasts Russia

Does Vice-President Pence’s NATO stand reflect Trump’s views on Russia? In a drastic shift from Trump’s comments after his election that NATO had outlived its usefulness, on Saturday the VP pledged to stand behind the NATO alliance. Pence also stated that Russia needed to abide by the terms of the 2015 deal designed to end the ongoing conflict on the Ukrainian border. The speech, given at the Munich Security Conference, aimed to calm America’s European allies. It also put Russia on notice regarding the U.S. opinion of Russian land grabs.

Pence supports NATO and warns Russia

Pence Talk Address European Worries About NATO and Russia

Pence’s talk comes as many European countries fear increased Russian aggression in the Baltic States. Recently, President Trump pointed out that few NATO member states were contributing two percent of their GDP to the NATO budget. This is the amount negotiated per the revised agreement in 2014. Trump said that unless more countries began pulling their weight, that they would not be able to count on the support of the American military forces if they were involved a conflict. Given Trump’s apparently friendly demeanor towards Vladimir Putin, and combined with the Russian invasions into Crimea, the bordering states of Estonia, Latvia, and Lithuania, were understandably worried about America’s commitment towards members of the NATO pact.

Trump Signals Change of Opinion on NATO

Although Trump referred to the obsolescence of NATO frequently before officially taking over as President, his message since assuming the role has been more moderate. Germany’s Angela Merkel and the U.K.’s Theresa May supported the need for NATO. Veteran politician Pence went on his first overseas trip primarily to defuse a potential conflict. Pence did confirm that Trump still expected each of the 28 countries who participated in the treaty to pay their fair share. At this point only five countries are living up to the agreed upon baseline.

Pence Puts Fears of Russian Interference in American Politics to Rest

Pence’s remarks on Russia come at a particularly sensitive time, as the President’s first choice for National Security Advisor, Michael Flynn, was forced to resign following charges of improper contact with Russia prior to Trump’s inauguration. Michael Flynn had originally discussed the contact with Vice-President Pence. The nature of the discussions between Flynn and the Russian diplomat were substantially different than what was disclosed. Having Pence be the administration representative responsible for putting Russia on notice served two purposes. First, it emphasized that Trump still had faith in his second in command despite his involvement in the administration’s first scandal. Second, the speech shows the world that Russia does not have undue influence when it comes to American foreign policy.

Russia Raises Concerns Regarding Pence’s Speech

Russia’s response to the comments was generally pessimistic. Sergei Lavrov, Russia’s Foreign Minister, also gave a speech to the Munich Security Conference attendees. Lavrov described NATO as a relic from the Cold War. He expressed the hope that the world would eventually embrace a “post-Western world”. Russia’s hopes for American diplomacy center on the new Secretary of State, Rex Tillerson, who spent decades negotiating in the region as an executive and eventual CEO of the oil company Exxon Mobil.

Pence Promotes Middle East Military Partnerships

Pence also focused on American interests in the Middle East during his trip. He held separate meetings with the leaders of Iraq and Afghanistan, where the U.S. is still fighting wars. Pence told Iraqi Prime Minister Haider al-Abadi of the appreciation the American government had for Iraq’s tough stand against Islamic State. However, the Vice-President also stressed the need for cooperation between the Iraqis and the Kurds living in the Kurdistan region. Additionally, Pence declared that the U.S. would send additional troops to shore up Afghani forces, although mostly as trainers.

How Pence’s Speech Affects Trading

Europe breathed a small sigh of relief upon hearing of the continued support from America. The euro should go up based upon this news. Given the current situation in the Baltics, this is also good sign for the defense industry. Contractors will likely receive more business if America participates actively in European regional conflicts. Look for stock prices for these companies to go up. Gold prices should fall due to lowered concerns regarding Trump’s intentions in the area.

The continued positive relationship between the U.S. and Iraq could lead to lower oil prices for the America. OPEC exempted Iraq from strict quotas to help  the country rebuild its economy. This could improve the bottom line this quarter for the manufacturing and transportation sectors. Hopefully this means a generally good outlook for the DOW index. Trump’s recent willingness to partner with the Middle East also bodes well for the Saudi Tadawul index.