China, the US: Tech trouble.
Also: Southeast Asia, North Korea, Israel, Saudi Arabia, Niger, Nigeria and Ecuador.
CHINA. UNITED STATES. Tech trouble.
Technological competition accentuates geopolitical tension.
Joe Biden issued an executive order on Wednesday to restrict US investments in high-tech areas of the Chinese economy. The same day, ten Chinese aircraft entered Taiwan's air defence zone, the second such incursion in a week.
INTELLIGENCE. The US and China are locked in a dance of improving and worsening ties. Their strategic posture is hostile, but their economies remain conjoined. Limits in tech investment will hasten decoupling at the margins, but the supply chain and financial substrate is commingled. As China’s viewers watch a new TV series about invading Taiwan, their leaders are at the annual Beidaihe retreat. They may soon need to decide whether to seek peace or war.
FOR BUSINESS. The restrictions, aimed at AI and semiconductors, were long expected and aren’t as broad as many feared, but they will still be used as a cudgel by hawks in Beijing, who see efforts to mend ties with Washington as futile. That said, China needs to stabilise ties with the US, at least while it navigates its way through deflation, which it entered this week. Trade, investment and industrial indicators are down. Rapprochement may be the best stimulus.
SOUTHEAST ASIA. UNITED STATES. The road less travelled.
Fears of US disengagement haunt ASEAN.
Joe Biden said he would visit Vietnam “shortly” in press pool remarks on Wednesday. The same day, sources told Reuters that Biden would skip next month's East Asia Summit, hosted by the Association of Southeast Asian Nations.
INTELLIGENCE. Biden attended last year’s EAS, hosted in Cambodia. Should he skip this year’s, it will unlikely be an intentional rebuke to ASEAN or host Indonesia but will be perceived as such. And that will be the message conveyed by Vladimir Putin and Xi Jinping, both expected to attend. It will be a message sent at other levels too. While the US is focused on Europe and Africa, China’s foreign minister will this week visit Singapore, Malaysia and Cambodia.
FOR BUSINESS. Southeast Asia is still smarting from Donald Trump’s three years of non-attendance at the EAS. While Washington has reinvested strategically in Asia, including via a revived alliance with Manila, summitry matters. Investment matters too. As ties with China worsen, there has been some US reshoring to ASEAN, but the main destinations have been the US and Mexico. As Biden plans a visit to Vietnam, China is planning a high-speed rail link.
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NORTH KOREA. So lonely.
Kim Jong Un fires one of his top lieutenants.
Chief of General Staff Pak Su Il had been replaced by General Ri Yong Gil, Pyongyang’s state news agency said on Thursday. Last week, North Korean leader Kim Jong Un called for increased arms production and preparations for war.
INTELLIGENCE. Threatening or preparing for war is par for the course in the DPRK, as are dramatic reshuffles to keep the apparatchiks on their toes. It is the second time this year that Ri has been beneficiary of a purge, having replaced Pak Jong Chon as Vice Chair of the Central Military Commission in January. And while unclear if this is a promotion – Ri has served as Chief of General Staff twice before – it’s a step up from his rumoured execution in 2016.
FOR BUSINESS. It is hard to see Kim’s threats as anything other than posturing, but the DPRK has been making real progress in the murky world of arms exports and sanctions busting. While the North's economy was last month estimated by Seoul to have contracted for a third straight year, 2022 was also estimated to have been a record year for ransomware and cybertheft. Arms sales may be the next growth industry, with speculation of a deal with Russia.
ISRAEL. SAUDI ARABIA. Redrawing the map.
With Riyadh, Netanyahu might pull a rabbit from a hat.
An outline of a deal for Saudi Arabia to recognise Israel had been agreed, the Wall Street Journal reported on Wednesday. The White House said “there's still a lot of discussing to happen” when asked to comment on the report.
INTELLIGENCE. Benjamin Netanyahu’s reputation as the great survivor of Israeli politics might be vindicated should a comprehensive deal be achieved. Having faced record protests and threats of a constitutional crisis after controversial legislation was passed in the Knesset, an accord with the Muslim world’s traditional leader might quell internal discord. What it won’t do is quell Palestinian anger, which is increasingly fuelled by Iran and its proxies.
FOR BUSINESS. We remain sceptical, even if a deal would be economically good for both sides. While Riyadh appears to be moving away from both Palestine and Lebanon, with which Israel has also been in rising disagreement, Saudi Arabia will not want to risk fragile Arab unity or rapprochement with Iran, which continues to be tested over islands in the Gulf. It will also want to step carefully with Syria, which is tentatively re-entering the Arab fold.
With the brevity of a media digest, but the depth of an intelligence assessment, Daily Assessment goes beyond the news to outline the implications.
NIGER. NIGERIA. Outfoxed on the coup.
Abuja backs down on threats of intervention.
West African leaders prepared to meet on Thursday to discuss a response to Niger's coup. On Tuesday, Nigeria's president said diplomacy was “the best way forward”, a walk back from earlier threats to launch a military intervention.
INTELLIGENCE. The only thing worse than a coup is a civil war, and the only thing worse than that is an inter-state one. Since Burkina Faso, Guinea, and Mali threatened to back Niger against any counter-coup intervention, the Nigeria-dominated Economic Community of West African States has taken a softer line. Nigeria must also consider its restive north, which has ethnic ties with Niger and has hosted a 14-year insurgency that has killed over 300,000.
FOR BUSINESS. Amid an ambitious reform campaign, Nigerian President Bola Tinubu, who took office in May, can ill afford distraction. Politically, any action against a largely ethnic Hausa country like Niger would also damage an ethnic Yoruba leader. Should Nigeria be able to tackle its chronic corruption and instability, it would be a success. Already Africa’s largest economy, it is resource-rich and home to the continent’s most dynamic start-up sector.
ECUADOR. Sorry state of emergency.
An opposition leader is assassinated two weeks from elections.
Ecuador's president declared a state of emergency on Thursday, blaming criminal gangs for Wednesday's assassination of Fernando Villavicencio, a presidential candidate and anti-corruption leader.
INTELLIGENCE. Villavicencio was not a front-runner, but his murder at an election rally has shocked a once relatively peaceful country. In crisis since the May impeachment of President Guillermo Lasso and his muerte cruzada (‘mutual death’) parliamentary dissolution, Ecuador's instability has been accentuated by criminal violence. In the wake of Colombia’s peace deal with the FARC militia, previous FARC drug routes have been fought over by rival gangs.
FOR BUSINESS. Ecuador's debt-laden economy was stressed under Lasso, but it's unclear who has a better solution. The former banker pursued novel fixes, including a $1.6 billion debt-for-nature swap and a free trade deal with China, but both are now in doubt. Growing instability in neighbouring Colombia and Peru makes matters worse. Colombia’s president is facing a corruption scandal. Peru’s president vies with Lasso as the region’s most unpopular.
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