China: This is fine.
Also: Russia, Ukraine, Saudi Arabia, West Africa, Chile and Argentina.
CHINA. This is fine.
Beijing urges patience on the economy.
Property developer China Evergrande filed for US bankruptcy protection on Thursday. Zhongzhi Enterprise Group, believed to manage $137 billion in assets, told investors on Wednesday it would need to restructure its debts.
INTELLIGENCE. Bad news out of China is coming in fast. Yet fresh from the Politburo’s leadership retreat in the resort town of Beidaihe, Xi Jinping is cutting a relaxed figure. He told Party members to focus on reconstruction from recent floods. Officials meanwhile released this week a speech of his urging patience and “ideological cohesion”, as well as videos of PLA troops preparing, presumably, for battle in Taiwan. Its challenges look big, but China is big too.
FOR BUSINESS. Chinese lenders on Thursday went on possibly the largest RMB buying spree since 2018 to shore up the yuan. Corporate and real estate data is showing new weakness. Yet officials are right not to panic. While China’s economy is undoubtedly slowing, and US restrictions are starting to bite, Beijing has plenty of fiscal firepower in reserve. It may also welcome a culling of weaker lenders, local governments, and developers. Never waste a crisis.
CHINA. RUSSIA. No limits, no worries.
Xi Jinping stands by his friend.
Russian and Chinese ships had travelled 6,400 nautical miles since joint patrols began last month, Moscow said on Friday. After a speech in Russia, China's defence minister visited Belarus on Thursday, where he pledged closer ties.
INTELLIGENCE. Beijing is at pains to demonstrate its closeness to Moscow, despite (and perhaps in response to) Western criticism. Amid reports of sanctioned and dual-use military trade with Russia, China is parading its friendship in symbolic ways too. This includes through the BRICS grouping, whose leaders meet next week in Johannesburg. While Vladimir Putin will only participate via video, Xi Jinping on Thursday confirmed his in-person attendance.
FOR BUSINESS. Russia has become increasingly reliant on China, but trade with Asia’s other giants continues. India is understood to be negotiating the purchase of discounted Russian wheat – a move that will upset Delhi's free trade partners like Australia. Indonesia is looking to do something similar on the back of lower corn production. Even Japan is engaging. Its exports to Russia rose 25% year-on-year in July, thanks to an 84% increase in vehicle exports.
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. Fear of flying.
Promises of F-16 fighter jets may prove hollow.
Washington on Thursday gave long-awaited approval for Denmark and the Netherlands to transfer F-16 fighter jets to Ukraine. Germany last week gave Belgium approval to transfer dozens of second-hand Leopard 1 tanks to Kyiv.
INTELLIGENCE. As Ukraine struggles on the front, any additional weapons are welcome. Yet the devil is in the detail. The F-16s will only be sent once Ukraine’s pilots are trained, unlikely until mid-2024. The Leopards, which Belgium bought in the 1980s, are of an inferior quality to newer models that Kyiv has already received (and lost). Ukraine is having better luck with its drones, which are harrying Moscow and the Black Sea fleet, but these won’t win the war.
FOR BUSINESS. Kyiv is putting on a brave face, but it's Moscow that's smiling. Despite a decline in the ruble, which forced Russia's central bank on Wednesday to raise rates by 3.5 percentage points, UBS estimates that Russia added $600 billion in private wealth last year, in contrast to the US, which lost $5.9 trillion. Much of that value will have been destroyed in the ruble’s subsequent decline, but with Russia effectively isolated from dollar markets, few may notice.
SAUDI ARABIA. Mecca for deal-makers.
The Kingdom is in hot demand.
British Prime Minister Rishi Sunak invited Saudi Crown Prince Mohammed bin Salman to visit, Downing Street said on Thursday. Iran's foreign minister visited Riyadh on Thursday, his first trip to the Kingdom since ties were restored.
INTELLIGENCE. Saudi Arabia has used its riches and rapprochement with Iran to assert itself more forcefully. And now, with the West and China vying for influence, Riyadh is reaping the benefits. Two prizes appear tantalisingly close. The first, pending Saudi recognition of Israel, is an enhanced security pact with Washington and assistance to start a civil nuclear industry. The second is a key role in the UK’s next-generation fighter project with Japan and Italy.
FOR BUSINESS. The White House is reportedly consulting with Senate Democrats on the Saudi-Israel deal. It’s unclear whether they, let alone the House, will agree, but Biden appears to be tying his legacy to it, despite once vowing to make Saudi Arabia a “pariah”. As for the UK, expect a big economic bounty should Whitehall agree to alliance-level military cooperation. Despite a history of Saudi arms deals (viz Prince Andrew), joint fighter production is a big step.
With the brevity of a media digest, but the depth of an intelligence assessment, Daily Assessment goes beyond the news to outline the implications.
WEST AFRICA. On the wrong war footing.
A Nigerian-led alliance seems unready to intervene.
Regional military chiefs met in Accra on Thursday and Friday to discuss plans for an intervention in Niger, should diplomatic efforts fail. Chad's president welcomed Niger's military-appointed prime minister on Tuesday.
INTELLIGENCE. Having survived its first two weeks in power, Niger’s military junta appears to be settling in for the long haul, having appointed a civilian-led cabinet and reached out to its neighbours (and, indirectly, Vladimir Putin). Threats of an intervention by the Economic Community of West African States, meanwhile appear precipitous. Though discussed as a live option, the African Union has expressed its disquiet and public opposition remains high.
FOR BUSINESS. Nigeria and Senegal, two of ECOWAS’s biggest economies, seem especially unready, despite their leaders being most bullish on an intervention. Abuja is struggling to contain an insurgency, with 36 soldiers killed this week in its own Niger State. Dakar’s detained opposition leader was in intensive care on Wednesday, setting the scene for more unrest. A conflict involving Nigeria and Senegal would create a disaster altogether bigger than Niger.
CHILE. ARGENTINA. Lost in the lithium triangle.
Resource riches are no substitute for political management.
Chilean copper miner Codelco is at risk of insolvency, a report seen by Reuters on Thursday suggested. Argentina said on Thursday the IMF wanted a “100% devaluation” of the peso, before agreeing to an 18% correction this week.
INTELLIGENCE. Even by regional standards, the news out of Santiago and Buenos Aires looks worrying. State-owned Codelco is the world’s biggest copper miner. Alongside Chile’s vast lithium reserves – and those of Bolivia and Argentina – it is a vital player in the global electrification challenge. Argentina is under new pressure in the wake of libertarian Javier Milei's primary win on Sunday. Unless voters step back from the brink, it will get worse.
FOR BUSINESS. If South America can’t get its house in order, other producers like Australia and Canada will continue to steal a march. With debts of at least $18 billion, Codelco is on its third CEOin a year. Chile's SQM, one of its two main lithium miners and at risk of re-nationalisation, reported a larger-than-expected fall in earnings on Wednesday. It is looking to buy Australia’s Azure for a valuation over 10 times its worth at the start of 2023. Anything to diversify.
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