BRICS: Another in the wall.
Also: Russia, the US, Canada, Panama, Japan and the UAE.
BRICS. Another in the wall.
A summit that’s more brickwork than breakthrough.
The BRICS Summit opened in Johannesburg on Tuesday with 1,200 delegates attending. Brazil’s president said the five-country group was not a counterpoint to the US, adding: "we just want to organize ourselves."
INTELLIGENCE. Vladimir Putin, appearing by video, told the summit that the BRICS alliance should become the “global majority” and act as a geopolitical counterweight to the West. But divisions remain within the group over what it’s even for, let alone how far to expand. China and Russia have publicly supported new members, while India and Brazil, are less keen. South Africa is happy for a stronger role for Africa, but only if it can remain the senior partner.
FOR BUSINESS. Blaming Western sanctions on food and other commodity volatility, Putin also threatened to permanently cut Ukraine’s grain exports. Bluster aside, BRICS delegates are discussing a separate BRICS development bank and how to reduce reliance on the dollar for trade. But South Africa has already ruled out a new currency emerging from the summit. Even moderate changes to the global trading system are unlikely at this stage.
RUSSIA. UNITED STATES. Musk to Moscow.
A private company causes diplomatic headaches.
According to the New Yorker on Monday, Elon Musk spoke directly to Vladimir Putin outside of official channels, raising alarm in the Pentagon and potentially breaking the 1799 Logan Act, which bans freelance diplomacy by private citizens.
INTELLIGENCE. Starlink satellite terminals have become critical for Ukraine’s war effort and allegedly attracted Putin’s ire. The technology, owned by Musk’s SpaceX, allows high-speed communication to take place even in the face of heavy cyber-attacks. Musk has already been criticised for his handling of political issues in another company, X (formerly Twitter). Patience for his unconventional style is wearing thin, but his innovations are used by everyone.
FOR BUSINESS. While Musk delivered thousands of terminals in early 2022, the costs started to mount up, and Musk threatened to withdraw services if the Pentagon didn’t pay (estimated at $400 million annually). It appears a solution has been found, as Starlink has remained connected. But it’s not just the US that is concerned. China is reportedly working on its own network to rival Starlink – ‘Project GW’ – with 13,000 satellites expected to be deployed.
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CANADA. UNITED STATES. Softened up.
A long-standing lumber dispute shows no sign of resolution.
Canada has filed a notice of intent to pursue a judicial review in relation to exports of softwood lumber to the US. This challenges the US Commerce Department’s decision to maintain duties at 7.99% on imports from Canada.
INTELLIGENCE. The dispute with the US dates to the early 1980s, when the US first imposed duties on Canadian lumber, citing price setting under provincial ownership arrangements in Canada. The US has argued this amounts to a subsidy for Canadian producers. The US is still highly dependent on Canadian lumber, but heavily influenced by domestic producers. Wood is a major plank for Canadian industry – it is the second largest exporter after China.
FOR BUSINESS. This is not the first time that Canada has challenged US duties on its wood. A previous WTO claim largely ruled in favour of Canada, finding US duties were improperly high, while noting that Canadian practices could constitute a subsidy. The US is also currently threatening retaliatory action against Canada, for the allocation of dairy import quotas, and Mexico, for limiting the use of genetically modified corn imports from the US.
PANAMA. Money for logjams.
The Panama Canal remains hit by drought.
A backlog of vessels seeking to pass through the Panama Canal eased a little on Tuesday as the canal administration allowed two more ships without bookings to pass daily. Other ships are meanwhile choosing alternative routes.
INTELLIGENCE. As a lengthy drought bites the Panama Canal, impacting water levels in the locks, long queues are piling up. While 40 ships crossed daily in 2022, that number has fallen to 32 to save water (the canal locks rely on water from nearby lakes and rivers). A lack of rain has also increased salinity in the canal system, which provides water to the 2 million inhabitants of Panama City. Unlike the Suez, freshwater cannot be replaced with seawater.
FOR BUSINESS. For international commerce, the canal remains critical, moving around 6% of all global maritime commerce. As more shipping companies look for alternative routes, including the Strait of Magellan, freight rates are increasing. Significant restrictions are likely to remain until September next year. Earnings for Panama will likely drop $200 million in 2024. It is yet another hit for shippers already dealing with a post-pandemic capacity glut.
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JAPAN. Influence and effluence.
Radioactive water raises neighbourhood concerns.
Japan announced it would start releasing treated radioactive water into the Pacific Ocean as soon as Thursday. The water, from the Fukushima nuclear power plant hit by a tsunami in 2011, has been deemed safe by Tokyo and the UN.
INTELLIGENCE. While deemed safe by the International Atomic Energy Agency in July, the plan continues to cause controversy. Around 1.34 million tonnes of radioactive water has accumulated since the 2011 disaster and needs to be released eventually. China has opposed the plan, saying it was “extremely selfish,” and that it would take measures to protect marine and public health. Pacific nations dependent on fishing have also raised concerns with Japan.
FOR BUSINESS. The plan has caused widespread backlash since it was proposed two years ago. Despite experts declaring it low risk, protests have continued in Japan and abroad. Beijing has made concerns a central pillar of recent information campaigns (while expanding its own nuclear industry), but Tokyo has said that releasing the water is a necessary part of Fukushima’s decommissioning. As with all things nuclear, sentiment is as important as science.
UNITED ARAB EMIRATES. Come fly with me.
Flights and property values soar.
The Dubai International Airport said on Tuesday that it had hosted 41.6 million passengers in the first half of 2023, higher than in 2019. The Wall Street Journal on Monday said Dubai had become a hub for sanctioned Russian money.
INTELLIGENCE. Dubai is the world’s busiest international airport and the figures show that global travel has largely recovered from COVID-19. India (not Russia) was the top destination in terms of traffic. Irrespective of provenance, Dubai is enjoying a boom, with a rising population and real estate investment fuelling growth. But worries are mounting of another 2009-style crash, when the Emirate’s property developers created a glut of luxury real estate.
FOR BUSINESS. In a post-Zoom age, the need for face-to-face contact has not diminished. For the UAE, this is good news – its central location means it will remain a commercial travel hub. The property frenzy is partly explained by Russian expats channelling money into Dubai, but Chinese investors are also being lured given their property troubles at home. An oasis of stability and indulgence, the UAE will continue to profit as the wider region remains under stress.
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