China, Russia: High five.
Also: the US, the Pacific, Israel, OPEC+, Libya, Indonesia and Australia.
CHINA. RUSSIA. High five.
Beijing gives Moscow its renewed endorsement.
China and Russia should take their military cooperation to a “new level,” China's defence minister told Russia’s naval chief on Monday. Putin and Xi joined a virtual meeting of the Shanghai Cooperation Organization on Tuesday.
INTELLIGENCE. Monday’s meeting was China’s most visible sign of support for Russia since the Wagner mutiny. The endorsement will be valued by the Kremlin, which has counted on Beijing's friendship at critical moments, such as in 1957, when Nikita Khrushchev defeated a putsch. Such backing was not forthcoming to the KGB when it attempted to oust Mikhail Gorbachev in August 1991. Deng Xiaoping overruled plans to fund the hardliners, and their coup failed.
FOR BUSINESS. Beijing’s endorsement comes alongside recent reports by “Nikkei that China sent Russia dual-use drones despite Western sanctions and Beijing's denials. Russia does not need Chinese arms, but its diplomatic support is vital. Further signs of this would normally have emerged in the margins of the SCO. But with India hosting the meeting virtually, those wanting a Xi-Putin bearhug will need to wait for South Africa’s BRICS summit in August.
CHINA. UNITED STATES. Warning signs.
Beijing restricts critical exports; the US warns Americans not to travel.
Beijing on Monday announced export restrictions for gallium and germanium, while Hong Kong issued bounties for activists in the US and other Western countries. On Friday, the US warned of the risk of wrongful detention in China.
INTELLIGENCE. There are many challenges in the relationship, but a long list of problems can give negotiators issues to trade. Further, as much as the US and China are locked into a long period of competition, Washington remains keen not to push Beijing even closer to Moscow and will want to sow doubt on Putin’s longevity. And both sides, at the very least, will be keen to avoid a new trade war, let alone a hot war, if they can help it.
FOR BUSINESS. On the eve of Janet Yellen’s visit, the omens aren’t great, but China’s rare earths move is a classic negotiation tactic – assuming the US, in turn, will remove its own restrictions on semiconductor technologies. Gallium and germanium, of which China controls 80% and 60% of global production, are essential in chip manufacturing, as well as fibre optics, solar cells and LEDs. Alternative supply chains are nascent. The next biggest producer is Russia.
Written by former diplomats and industry specialists, Geopolitical Dispatch gives you the global intelligence for business and investing you won’t find anywhere else.
CHINA. THE PACIFIC. Red ocean strategy.
Beijing won’t let Washington just take back the region.
A Chinese navy hospital ship embarked on Monday for a multi-stop trip providing free medical services in East Timor, Kiribati, Solomon Islands, Tonga and Vanuatu. Solomons Prime Minister Manasseh Sogavare will visit Beijing this week.
INTELLIGENCE. The US and China are in a contest for the Pacific, a once-neglected region that now enjoys rising influence in multilateral negotiations, particularly on climate, and which could be a vital base for US operations in a conflict over Taiwan. The five countries that Beijing’s ‘Peace Ark’ is visiting are seen as open to Chinese influence. The Solomons, in particular, has leaned closer to Beijing since a fallout with its traditional partner Australia in 2021.
FOR BUSINESS. A flurry of US diplomacy in the Pacific, including a defence deal with Papua New Guinea, will not go unanswered by China. Beijing will be dusting off the chequebooks and its firms will be encouraged to invest. Yet the Pacific’s small population and dispersed geography make commercial returns hard. Pacific nations, meanwhile, are increasingly wary of China’s so-called ‘debt diplomacy’ in the wake of recent restructurings from Sri Lanka to Zambia.
ISRAEL. It’s complicated.
Conflict in Palestine is a subset of larger wars.
Nine Palestinians were killed and 100 injured on Monday after Israel launched its biggest operation in the West Bank in decades. Rising violence over the past year risks a new intifada and fresh distractions for Israel's fractious government.
INTELLIGENCE. Israel’s troubles in the West Bank complicate its rapprochement with Saudi Arabia, a relationship vital to Benjamin Netanyahu’s political and economic legacy. The role of Iran’s Palestinian proxies also complicates Tehran’s mooted rapprochement with Washington, which on Sunday sealed a third sale of F-35 stealth fighter jets to Israel, worth $3 billion. A series of missile salvos into Syria meanwhile risks bringing Russia further into the mix.
FOR BUSINESS. While Israel’s prominent tech industry has grown out of its defence force, the sector’s ongoing success and attractiveness to investors and employees is complicated by the country’s security woes. It is also complicated by the parallel fight between rival factions in Netanyahu’s coalition, including over judicial reforms, which on Monday brought the Ben Gurion Airport to a standstill as protesters occupied the main terminal.
With the brevity of a media digest, but the depth of an intelligence assessment, Daily Assessment goes beyond the news to outline the implications.
OPEC+. LIBYA. Doesn’t cut it.
Higher prices will need more than output cuts.
Saudi Arabia said on Monday it would extend a 1 million barrel per day cut through to August, following reductions agreed by OPEC+ last year. Russia and Algeria also said they would cut by 500,000 bpd and 20,000 bpd respectively.
INTELLIGENCE. The seemingly coordinated moves by increasingly coordinated partners made a small impact on markets, but lower Chinese demand is proving a larger drag on prices. The moves were welcomed by Libya, which did not join the curbs, but could unintentionally contribute to lower supply if a standoff over revenue sharing cannot be resolved. Authorities in Tripoli and opposition forces in Tobruk periodically clash on how to distribute the spoils.
FOR BUSINESS. Unless China recovers, it might take an event like conflict in Libya to spur oil prices. For Moscow, frustrated at lower revenues, Wagner may have once been a group it could call on to help spur such a thing. Last week, a Wagner paramilitary base in Libya's east was hit by a drone strike. Wagner is close to Khalifa Haftar, Tobruk's warlord, and a backer of Sudan’s Rapid Support Forces. Oil flows for now, but the ingredients for crisis are present.
INDONESIA. AUSTRALIA. Nickel and dimed.
A mooted battery partnership won’t be easy.
Indonesian President Joko Widodo visited Australia on Tuesday for bilateral talks. Widodo has said Indonesia, the world's biggest nickel producer, wants to cooperate with Australia, the world's biggest lithium miner, on EV batteries.
INTELLIGENCE. Books have been written about who will be the ‘Saudi Arabia’ of green energy. Often mentioned are Chile and Bolivia – the latter of which signed a deal with Russia and China last week – but also in contention are Indonesia and Australia. The island neighbours could make a good team, but Jakarta’s reliance on Chinese investment and Canberra’s hopes of gaining US clean tech subsidies may complicate a comprehensive deal.
FOR BUSINESS. Becoming a green power seems alluring, but Indonesia and Australia have seen many booms and busts, as have Chile and Bolivia. Near the Atacama lithium deposits lie the ruins of Huanilos. Now a ghost town, it was once a hub of global guano mining. Guano briefly ruled the world but was made redundant with the invention of the Haber process. Scientists globally are likewise hoping to usurp today’s super commodities and may well succeed.
Emailed each weekday at 5am Eastern (9am GMT), Daily Assessment gives you the strategic framing and situational awareness to stay ahead in a changing world.