Australia: Unlucky strike.
Also: China, the US, Ukraine, Russia, Turkey, Egypt, Ethiopia, Sudan and El Niño.
AUSTRALIA. Unlucky strike.
Industrial action worries markets.
Workers at Chevron's Wheatstone and Gorgon liquified natural gas facilities would go on strike from 7 September, the company said on Tuesday. The plants together employ around 500 and produce approximately 7% of the world's LNG.
INTELLIGENCE. LNG markets, particularly in Europe, have been spooked by the threat of strike and rose 10% after the announcement, though this may say more about traders than the situation at hand. Markets have been weighing the impact of Ukraine’s slow counter-offensive, prospects for a planned pipeline across the Sahara, and bad weather in the Gulf of Mexico. Australian unions are probably happy that the reaction has given them even more leverage.
FOR BUSINESS. Parallel bargaining at Woodside Energy facilities recently reached an enterprise agreement. There is nothing to stop Chevron from reaching a similar deal, though it may baulk at the wages being sought. Ultimately, Chevron and the unions know that Wheatstone and Gorgon, offshore Australia's resource-rich Pilbara region, are too big to fail. And Australia’s unions are commercially minded, operating some of the world’s biggest pension funds.
CHINA. UNITED STATES. Offramp on offer.
Not a deal, but a prelude to one.
US Commerce Secretary Gina Raimondo said on Monday the US and China had agreed to exchange information on export controls and other issues. She said it was profoundly important for the two powers to have a stable relationship.
INTELLIGENCE. No breakthroughs were announced, but positive messages from both Washington and Beijing on the visit indicate that there’s appetite for a climbdown. After months of mounting economic tensions, Raimondo’s visit follows technology industry lobbying and reports late last week that the US would soon extend a one-year exemption allowing South Korean and Taiwanese chipmakers to continue selling advanced semiconductors to China.
FOR BUSINESS. Judging by the price of Nvidia and other semiconductor firms, there is no trade conflict with Beijing. Enthusiasm for AI is of course the bigger driver, but the market is looking past the geopolitical tensions. If only it were so simple. Neither side wants a trade or hot war. But while sabre rattling and arms build-ups are no guaranteed predictors of war, they are preconditions. And while trade negotiators are talking, the generals aren’t.
Written by former diplomats and industry specialists, Geopolitical Dispatch gives you the global intelligence for business and investing you won’t find anywhere else.
UKRAINE. RUSSIA. Laying claims.
Kyiv advances southwards.
Ukraine's defence minister claimed on Monday that the village of Robotyne had been liberated after Ukrainian forces had broken through Russian defensive lines. Ukraine aims to split Russia's land bridge from the mainland to Crimea.
INTELLIGENCE. There is yet little evidence Ukraine has broken through Russia’s trench defences, which appear to be mostly south of Robotyne, a village of between 70 and 500 people, depending on who you believe. Russian forces are meanwhile making headway in the north and Ukrainian arms supplies are running low. The Ukraine Armed Forces are said to be using 7,000 artillery shells per day and repurposing US-made cluster munitions as drone-dropped grenades.
FOR BUSINESS. Verifiable proofmay be lacking for Kyiv’s frontline success, but it appears to have won an economic victory, with a second ship leaving Odesa on Sunday via the Black Sea “humanitarian corridor”, which hugs the coast close to NATO members Romania and Bulgaria. Moscow is also exploring new routes. Russia’s first goods train to Saudi Arabia entered Iran on Saturday. The goods will then cross the Persian Gulf from the port of Bandar Abbas.
TURKEY. Eggs in different baskets.
Ankara edges towards the West but from a distance.
Recent military drills between Turkey and the US, the largest in seven years, signalled improving ties, Turkish officials told Bloomberg on Monday. Turkey's President would soon visit Vladimir Putin in Russia, a spokesman said on Monday.
INTELLIGENCE. That Turkey, a NATO member, held exercises with the US should not be noteworthy, but the strategic hedging under President Recep Tayyip Erdogan has created doubts about where its loyalties truly lie. Ankara’s loyalties, of course, lie with itself. As with its recent overtures to the EU, Ankara is not moving toward any one camp but is seeking to get what it can. The same is true for relations with Russia, whether on the Black Sea deal or trade.
FOR BUSINESS. Erdogan began as a teenage street vendor and knows how to haggle. He also understands the principle of diversification, even if some of his other economic theories, notably around inflation, seem unorthodox. In any respect, Turkey's economic tide is turning. Interest rates were raised to a surprise 25% on Thursday. The lira has strengthened. Now that Erdogan has dealt with domestic and geopolitical concerns, he can tackle the economy.
With the brevity of a media digest, but the depth of an intelligence assessment, Daily Assessment goes beyond the news to outline the implications.
EGYPT. ETHOPIA. SUDAN. Horn of Africa dilemmas.
The Nile ain’t just a river in Egypt.
Officials from Egypt, Ethiopia and Sudan resumed talks on Sunday over a dam Addis Ababa is building on the Blue Nile. Sudan's army chief headed to Egypt on Tuesday, his first trip abroad since fighting with a rival militia began in April.
INTELLIGENCE. The flurry of activity began after Egypt and Ethiopia – traditional adversaries – were last week made new members of the China-led BRICS group of countries. This suggests Beijing may be seeking to negotiate a deal like that it brokered in March between long-term rivals Iran and Saudi Arabia. It’s unclear what this means for Sudan, stuck in the middle. Military leader Abdel Fattah al-Burhan barely controls Khartoum, let alone the rest of his country.
FOR BUSINESS. While Sudan is in civil war, Ethiopia is on the brink of another, and Egypt is suffering record inflation of 38%. It’s a tricky context for talks on the Grand Ethiopian Renaissance Dam after a two-year hiatus. The GERD, under construction since 2011 with Chinese money, has a planned capacity of 5.15 gigawatts and would be Africa's largest. The Blue Nile tributary accounts for 85% of the Nile’s flow. Egypt has described it as an existential threat.
EL NIÑO. Rain check.
More precipitate weather.
Chinese forecasters warned on Monday of heavy rain and floods as 3,000 were evacuated in Hunan over the weekend. Indian officials told Reuters on Monday the country was set for its lowest monsoon rains in eight years.
INTELLIGENCE. Fires and heatwaves in Europe and North America have gained the most attention, but Asia’s shifting weather patterns may have the most impact from El Niño’s arrival this northern summer. August is on track to be India's driest in a century. For parts of China, it's on track to be one of the wettest. Records can always be found if you look hard, but amid restricted rice markets and concerns on wheat and corn elsewhere, those statistics matter.
FOR BUSINESS. While China will likely recover quickly from floods, around two-thirds of India's rain comes from the monsoon and almost half of India's farmland is unirrigated. July rainfall was higher than usual, but August was dry. Good September rains are needed for winter-sown crops and a good yield are needed for managing food price inflation, which is running at a 3.5-year high of 11.5%, and is having an impact on trade, monetary policy, and politics.
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