Armenia, Azerbaijan: End of the road?
Also: the US, Russia, Britain, North Macedonia, and Argentina.
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ARMENIA. AZERBAIJAN. End of the road?
A breakthrough in negotiations.
Azerbaijani President Ilham Aliyev said Tuesday a peace deal with Armenia was closer than ever before. Armenian and Azerbaijani officials announced they had installed the first new border markers, without announcing exact locations.
INTELLIGENCE. Armenian Prime Minister Nikol Pashinyan has been on the defensive since revealing that at least four villages in the northern Tavush region would be handed to Azerbaijan as part of talks. Further border shifts are likely to follow, reportedly based on Soviet-era maps. Residents in the affected towns have protested, blocking roads where the proposed border would run. But their concerns will likely be ignored in pursuit of a peace deal.
FOR BUSINESS. The deal is an increasingly rare bright spot as border disputes and conflicts rage. Some are hailing it as a template for other conflicts. But the dynamics here are different. Armenia is militarily outgunned by Azerbaijan, and without the backing of Russia, with few options. The next major task for Armenia will be resettling refugees from the Nagarno-Karabakh region, estimated to cost €1.5 billion over the next decade, though less than the cost of war.
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UNITED STATES. RUSSIA. Against the wall
An ongoing case of arbitrary detention drags on.
A Moscow court Tuesday rejected the appeal of Wall Street Journal reporter Evan Gershkovich to end his pre-trial detention. The decision means he will remain jailed in Russia on espionage charges until at least the end of June.
INTELLIGENCE. Hostage diplomacy is an unfortunate but increasing aspect of international relations, employing arbitrary detention for strategic leverage. Today, more than twice as many Americans are held by state-based actors than by non-state militants. While Putin previously commented in February that Gershkovich could be swapped for a Russian hitman currently held in a German prison, any talks are still clearly being worked through both systems.
FOR BUSINESS. Hostage diplomacy puts countries in a bind, often having to trade high-value prisoners for citizens caught up in geopolitical spats. In addition, it can be costly. Last year, Biden allowed the transfer of $6 billion of Iranian oil held in sanctioned accounts in exchange for prisoners. As hostage diplomacy increases, particularly in a more globalised media environment, the risks will only increase for businesses with staff in high-risk locations.
BRITAIN. Step by step
The prime minister doubles down on defence spending.
Rishi Sunak said Tuesday Britain’s defence industry was being put on a “war footing”, with defence spending increased to 2.5% of GDP by 2030. The UK needed an “iron dome”-style missile defence shield, the House of Commons said.
INTELLIGENCE. Sunak’s announcement also included around £500 million worth of arms to assist Ukraine. A further £75 billion will be spent on defence over the next six years to help the UK reach its goal. The announcement is partly political – former prime minister Boris Johnson already committed to the 2.5% target in 2022. Nonetheless, it remains significant in going well beyond NATO’s commitment for member states to spend 2% of GDP on defence.
FOR BUSINESS. Total defence spending in the UK last year was around £55 billion, around 2.07% of GDP. This is ahead of France and Germany, but behind Eastern European countries such as Poland in percentage terms. The policy is bipartisan, with Labour having also committed to the 2.5% target, “when economic conditions allow”. Any change of leadership after the January 2025 election is unlikely to have a significant impact on the pledge.
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NORTH MACEDONIA. Race for the mace
Presidential elections this week for a tiny Balkans country.
North Macedonia is holding presidential elections on Wednesday. Parliamentary elections will take place on 8 May, along with the second round of presidential voting if no candidate receives a majority of the vote this week.
INTELLIGENCE. This is the seventh round of elections since the landlocked Balkan country gained its independence in 1991. Though it was part of the former Yugoslavia, it largely avoided the wars as its independence from Belgrade was peacefully negotiated. North Macedonia has been pushing for EU membership since 2005, though accession talks only began in 2022. North Macedonia joined NATO in 2020, having changed its name to appease Greece.
FOR BUSINESS. North Macedonia’s bid for EU membership had also been stalled by another neighbour, Bulgaria, related to the unresolved status of the Bulgarian minority. Bulgaria’s veto was lifted in 2022, allowing membership talks to start. But integration into Europe is still some way off – Montenegro and Albania are likely higher in the pecking order, and closer to fulfilling EU requirements. Bosnia, Kosovo, and Serbia, on the other hand, rank lower.
ARGENTINA. Shock horror
Milei’s economic measures have an impact.
Protests flared across Argentina as hundreds of thousands of people voiced their dissatisfaction at budget cuts to public universities. The cuts are part of President Javier Milei’s austerity measures, aimed at reducing the fiscal deficit.
INTELLIGENCE. Inflation is chronic in Argentina, with the 12-month rate to February 2024 at a staggering 276%, one of the highest in the world. Buenos Aires has run a deficit for 113 of the last 123 years, and it is this that Milei is focused on, taking a ‘chainsaw’ approach to the budget. He has slashed public spending not just on education, but also on subsidies for utilities, transport, and welfare. Protests have been widespread, but many back his campaign.
FOR BUSINESS. As cuts start to have a real-world impact on Argentinians, Milei will need more than combative words to demonstrate his ‘shock therapy’ is working. This is a country used to big public spending, and it has powerful public sector lobbyists. As other countries have found out, fiscal surpluses mean little if the perception is general living standards are decreasing. Milei will need to balance economic reform with deft politics and cost-of-living pressures.