Argentina: Two to tango.
Also: Switzerland, Israel, Palestine, China, the US, Ukraine and Russia.
ARGENTINA. Two to tango.
An incumbent rebound takes elections to a second stage.
The ruling Peronist coalition scored a surprise first place in general elections on Sunday, leading to a presidential run-off next month against far-right libertarian outsider Javier Milei, who had been predicted to win the first round.
INTELLIGENCE. The conservative opposition, which had the most conventional solutions to Argentina’s deepening woes, is out of the race. Its supporters stayed home as the incumbents brought out their electoral machine. The choice is now between a broken status quo and a radical alternative more suited to social media outrage than governance in a federated system. Argentina has long underperformed its potential. This looks set to continue.
FOR BUSINESS. Neither outcome is good for markets. Under the Peronists, inflation has reached 138%, foreign reserves have collapsed, and the economy this year could shrink by 3%. Milei promises a cure worse than the disease, by abolishing the central bank, replacing the peso with the US dollar, and slashing welfare payments on which half the population depends. Peronism is discredited as an ideology, but Milei’s anarcho-capitalism seems hardly better.
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SWITZERLAND. Cheesed off.
Migration and economics trump melting glaciers.
The Swiss People's Party (SVP) won 28.9% of Sunday's federal elections, in a turn to the right. The biggest losers were the Green Party, which fell to 9.2%, and the liberal FDP party, which fell to 14.5% but is still largest in the upper house.
INTELLIGENCE. The SVP campaigned on protecting Swiss neutrality, opposing immigration and fighting “woke madness”. As in 2015, when elections were held amidst another European migration crisis, the campaign has worked. Still, Switzerland’s Federal Council – which the lower house appoints – operates by consensus and the upper house Council of States is appointed by the cantons, where centrist parties like the FDP and Die Mitte continue to dominate.
FOR BUSINESS. The results won’t change much but they serve as another temperature gauge in a Europe turning to the right. While Switzerland is not part of the EU, it is a microcosm of the bloc’s largest countries: Germany, France and Italy. It is also a reminder of populism’s appeal in times of geopolitical uncertainty and high living costs. As the EU gropes toward a new energy policy – subject of recent talks between Paris and Berlin – politicians will take note.
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ISRAEL. PALESTINE. Waiting to happen.
Visiting dignitaries try to slow things down.
The US is pressuring Israel to further delay its ground assault on Gaza, media reported on Sunday, after two hostages were released on Friday. Israel said France's Emmanuel Macron and the Netherland's Mark Rutte would visit this week.
INTELLIGENCE. As Western leaders tie Israel up in meetings, shuttle diplomacy is keeping other actors busy. The Turkish and Russian foreign ministers visit Tehran today (ostensibly for talks on the Caucasus). South Korea's president is visiting Saudi Arabia and Qatar. Egypt hosted a summit. Skirmishes continue on the Lebanon border and violence is rising in the West Bank, but aid is reaching Gaza and a weekend of protests have acted as a release valve.
FOR BUSINESS. Commando raids are underway and a full ground assault could still happen, but Gaza’s wholesale destruction may be averted if Israel can continue to neutralise Hamas leaders at the current rate. This means a regional conflict may also be averted, but the risk remains real while feelings run hot. Slowing the pace of events and cooling the room will stay a US objective, particularly while Congressional chaos holds up aid.
CHINA. UNITED STATES. Bumps in the road.
Things could be worse between the superpowers.
Beijing introduced export permitting for a range of graphite products on Friday, an apparent reaction to Washington placing further restrictions last week on advanced chips and equipment. China refines over 90% of the world's graphite.
INTELLIGENCE. The announcements were followed by a boat “bumping” incident between the Philippine and Chinese coast guards in the South China Sea. Washington has deepened ties with Manila and other Asian capitals amid tension in the Taiwan Strait and China’s other maritime approaches. The US held its first trilateral air force drills with Japan and South Korea on Sunday. So far, Beijing is playing down the issues – a sign it still wants room for diplomacy.
FOR BUSINESS. The moves look significant, but the US restrictions have carve-outs for several firms, and China’s graphite restrictions will more likely hurt Japan and South Korea, which have otherwise been acting cautiously on trade with China, due to their intertwined supply chains. On balance, both sides can look tough to domestic audiences, while also having room to repair ties. Neither has confirmed, but Joe Biden is expected to meet Xi Jinping next month.
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UKRAINE. RUSSIA. Seizing the moment.
The Kremlin moves while Washington is distracted.
Moscow claimed to have thwarted Ukrainian attempts to cross the Dnipro River on Sunday. Six were killed at a logistics centre in Kharkiv on Saturday. Intensified shelling in Kherson, and Avdiivka near Donetsk, continued over the weekend.
INTELLIGENCE. Should Russia breach Ukraine’s defences at Avdiivka it would be a blow to Kyiv’s counteroffensive and change the course of the war. This appears to be the Kremlin’s calculation as it accepts heavy losses in a Bakhmut-style assault. Should Ukraine’s situation materially worsen before the US Congress elects a new speaker and decides on the White House’s latest spending proposal, Russia hopes the chances of replenishment will diminish.
FOR BUSINESS. Entrenched fortifications along the frontline have made progress difficult for either side. Moscow thus hopes a frontal assault, while costly, will make a difference as Kyiv’s supplies run down. Congress, meanwhile, is no closer to signing off on Joe Biden’s $100 billion funding request. While hardliner Jim Jordan has left the speakership race, Republicans are divided on whether to link spending on Ukraine to Israel and other priorities.