Armed migration and its implications for investors

Savvy investors know that geopolitical tensions and uncertainty can significantly impact financial markets. This includes human migration – or, to be more specific, armed migration.

Undoubtedly, many of you have watched Elon Musk’s livestream Historic US-Mexico border crisis Last month on X, the platform formerly known as Twitter. You may also be aware of the situation that is unfolding in the Mediterranean, with thousands of refugees from North Africa flooding Italy, giving rise to much-needed immigration reform.

Both cases have raised questions about who is behind this global migration surge.

The strategy of using migrants as pawns is not new. According to Kelly Greenhill, author of the 2016 book, at least since the 1950s, bad actors have employed this tactic against liberal democracies such as the US and Europe, which have historically tended to accept large numbers of refugees. . Weapons of mass migration: forced displacement, coercion and foreign policy,

Return to the US-Mexico border. In August, U.S. Customs and Border Protection (CBP) reported a 36% increase in migrant encounters compared to July, totaling more than 180,000 apprehensions. And last month, 50,000 migrants crossed the border illegally from crisis-hit Venezuela, an all-time monthly record.

driving force? Beyond the immediate socio-economic and political crises, deeper geopolitical manipulations may play a role.

For example, the Mexican government has started a program to move immigrants from the southern part of Mexico to the US. Mexican President Andrés Manuel López Obrador recently said that about 10,000 people were reaching the border every day.

Rising tide of migrants in Europe

Across the Atlantic, Europe—and Southern Europe in particular—is facing parallel challenges. Between January and July 2023, the continent saw a significant increase in arrivals of refugees and migrants, totaling more than 120,000 persons, mainly through the Mediterranean and Northwest African sea routes. This increased by 77% compared to the same period last year.

The Italian island of Lampedusa has seen a huge increase in migrant boats. On September 15 alone, approximately 7,000 people descended on the island, doubling its population, and forcing local authorities to declare a state of emergency. This brings the total number of arrivals to Italy in 2023 to around 126,000, making it an important political issue.

As for the boats that migrants used to travel from North Africa to Italy, many of them appear to have been expensive, high-end speedboats and other such vessels, leading some observers to consider this a possibility. That this type of activity is being done to destabilize western countries. Governments.

Strategic manipulation of migrant flows

Some immigration experts suspect that Russia may be behind the current crisis. According to Daniel Cochise of the Heritage Foundation, Moscow has employed the weaponization of migrants to manipulate the situation in places such as Syria, North Africa, and the Sahel, effectively pushing refugees toward European shores.

Russia is not the only country using this strategy. According to Judge Aaron Petty, an appellate immigration judge on the Board of Immigration Appeals, Belarusian leader Alexander Lukashenko oversaw a massive crackdown in 2021 by luring thousands of migrants and asylum seekers – primarily from Iraq, Syria and Afghanistan – to Belarus and then deporting them. Pushed aside and created a crisis. The European Union (EU) border is exploiting EU law and UN treaties for asylum seekers.

Judge Petty believes that the weaponization of migrants will increase, especially by countries like China and Russia. Such “grey zone” activities, including manipulation of population flows, are intended to shape the strategic environment, destabilize adversaries, and achieve objectives through means less than direct warfare.

Creating an influx of migrants, or even threatening to do so, has proven effective in the past in leveling the playing field with more powerful opponents. This has created a bargaining chip and forced the targeted countries to get involved.

Judge Petty says that unless policymakers address the underlying dynamics enabling armed migration, the use of this tactic is likely to continue and expand.

The EU’s collective response to asylum challenges

That’s exactly what European policymakers are trying to do. EU diplomats reached a consensus on immigration policy reforms on Wednesday, following the resolution of a dispute between Italy and Germany over non-governmental organizations (NGOs) operating in the Mediterranean.

These reforms aim to enable EU states to respond in a unified manner to the significant increase in asylum seekers. A key element of the agreement proposes to redistribute migrants from high-flow countries such as Italy and Greece to other EU countries. Countries that refuse to host asylum seekers will be obliged to financially compensate those who do so.

For investors, it is a sign that Europe is keenly aware of the risks and seeking to mitigate them. A stable Europe means a more predictable investment climate, especially in industries such as tourism, real estate and manufacturing.

Government policy is a harbinger of change

The big question is whether America will also follow this? Ongoing challenges at the US-Mexico border, coupled with the increasing prominence of weaponized migration as a tool, mean that US policy decisions will be critical in the coming months.

For investors, this means staying informed, agile and ready to adapt. After all, government policy is a harbinger of change, and it is important to be prepared for sudden policy changes. It is also wise to diversify investments across sectors and regions to guard against potential disruptions such as armed migration.

As always, I recommend a 10% weighting in gold, with 5% in physical bullion and jewellery, with the other 5% in high quality gold mining mutual funds and ETFs.