China, the US: Blinken you'll miss it.
Also: Saudi Arabia, Britain, Ukraine, Russia, Serbia, Kosovo and Pakistan.
CHINA. UNITED STATES. Blinken you’ll miss it.
Beijing hoses rumours of a Secretary of State visit.
China's foreign ministry said on Wednesday it had nothing to add to speculation that Antony Blinken would visit Beijing this month, before adding that the US understood bullying and intimidation better than any other country.
INTELLIGENCE. US media has run hot on the rumoured talks, postponed since February’s spy balloon incident, but China will want to extract what it can before confirming a meeting. Amid an economic slowdown, Beijing is torn between a need to engage the West on trade and show Washington it won’t back down on “core interests” such as Taiwan. A refusal to meet the US Secretary of Defense thus coincides with chummy dialogues between trade envoys.
FOR BUSINESS. Whether or not Blinken visits, Beijing is incentivised to tread carefully on investment and trade, just as it is incentivised to ratchet tensions on security. Such a two-pronged approach won’t be sustainable in the long term, but for now, Beijing appears to have made its point on economic issues such as corporate espionage and semiconductors. Firms, particularly those not explicitly American, will find a customer needing to keep growth going.
SAUDI ARABIA. UNITED STATES. Mountain to Mohammed.
Secretary Blinken plays supplicant in Riyadh.
Antony Blinken held "open and candid" talks with Crown Prince Mohammed bin Salman, Saudi Arabia's de facto leader, a US official said on Wednesday. Tensions persist over Russia and Iran, oil prices, human rights and ties with Israel.
INTELLIGENCE. Breakthroughs do not appear imminent, but Riyadh is enjoying the moment, exercising its energy heft, dangling the carrot of normalisation with Israel, and merging its golf tournament with the PGA. And with the Biden Administration’s hands-off approach to the Middle East, Riyadh is increasingly calling the shots. Ultimately, the Kingdom still needs the US – particularly for security – but it can afford to remain cool until the elections in 2024.
FOR BUSINESS. Riyadh is not particularly sympathetic to Washington, but Saudi Arabia still welcomes US firms. Its desire for economic diversification, and bold plans such as Vision 2030 and nuclear power, require Western IP and investment which, for now, China and Russia cannot match. Later this week, Riyadh will host a major economic summit with China. Beijing will hope that it can continue to build an advantage, but it still has a long way to go.
BRITAIN. UNITED STATES. Count on me.
Washington can rely on at least one partner.
Prime Minister Rishi Sunak met congressional leaders on Wednesday ahead of talks with President Biden on Russia, China and artificial intelligence. Sunak admitted a comprehensive free trade agreement was not on the cards.
IINTELLIGENCE. Unlike for the visit of South Korea’s president in April or India’s prime minister later this month, Biden does not need to host Sunak at a state dinner. Britain needs close US ties to insure against waning competitiveness at home, as larger powers, like the EU, use their industrial weight to attract high-tech investment and set regulatory norms. Biden will want to see progress on Northern Ireland, an issue of significance for parts of his party’s base.
FOR BUSINESS.It is telling that Sunak has made a pitch on AI and critical minerals. These are areas where other close US partners like Australia are focusing the alliance while broader free trade deals remain unacceptable on the Hill. In the wake of Britain blocking the Microsoft-Activision merger, US tech firms will be wary of involving London too closely in regulatory policy, but Britain’s need for a deal could give Silicon Valley the upper hand.
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UKRAINE. RUSSIA. Fertiliser bomb.
Another piece of infrastructure is blown up.
Russia claimed on Wednesday that Ukraine blew up part of the Togliatti-Odesa ammonia pipeline on Monday. The pipeline is crucial to Russian fertiliser exports, the maintenance of which was a condition for the Black Sea grain deal.
INTELLIGENCE. The accusation appears a nail in the grain deal's coffin, which in the wake of the Kakhovka dam disaster could send wheat prices yet higher. While it is possible Kyiv was complicit, the continued operation of Russian infrastructure in Ukraine is in any case increasingly untenable. Last month, Uralchem, Russia's top potash and ammonium nitrate maker, said a new export terminal to open later this year would make the pipeline redundant.
FOR BUSINESS. Just as Europe seeks to wean itself from Russian exports, Russia wants to pivot its trade to emerging markets. The legacy of Soviet pipelines such as Togliatti-Odesa complicates the transition, but like the attack on Nord Stream, sabotage – whether Russian or Ukrainian – is hastening the process. In the meantime, disruptions will impact Africa and the Middle East the most. Russia, the world’s biggest fertiliser maker, remains their key supplier.
SERBIA. KOSOVO. Balkan Byzantium.
Belgrade promises early elections, again.
Serbian President Aleksandar Vucic vowed early parliamentary elections on Wednesday following more protests in the wake of mass shootings in May and deteriorating relations with neighbouring Kosovo, once part of Serbia.
INTELLIGENCE. Elections are an easy offer for Vucic, flanked on television by his prime minister offering to resign. A president in a presidential system, he holds the power and opposition parties have called the move – just like his resignation last week as head of the Serbian Progressives – a ruse. Vucic will want political space to deal with the more intractable issue of Kosovo. Violence has continued in Serb-majority regions, injuring NATO peacekeepers.
FOR BUSINESS. Serbia seems a shambles but it's par for the course. The World Bank on Wednesday affirmed a 2.3% growth forecast for 2023, not bad for a country in demographic decline. The bigger issue is whether the long-standing issue of Kosovar recognition can avoid being swept into great power competition. Vucic and his inner circle are close to Russia. Kosovo is closer to Turkey and the West. Both crave EU funds. China seeks investment, and influence.
PAKISTAN. Between innings.
The generals have the upper hand, but play is not over.
Imran Khan was formally named on Wednesday in connection with the killing of a pro-government lawyer on Tuesday. The army said on Wednesday it would punish the “planners” of last month's protests, held in the wake of Khan’s arrest.
INTELLIGENCE. Pakistan’s former prime minister has lost momentum in his fight against Pakistan’s military-dominated system, but the country’s deteriorating economy and restless urban youth could provide new impetus for his cause. Despite high inflation and collapsing foreign reserves, the IMF continues to dither. Prime Minister Shehbaz Sharif said this week he was hopeful for a bailout by the end of June. Pakistan's budget is due Friday.
FOR BUSINESS. Islamabad wants a $1.1 billion tranche of a 2019 package, due to expire this month. The IMF wants China and the Gulf to give guarantees, which Pakistan says it has. Yet its erstwhile friends may want to be left in a stronger position if the rescue fails and the generals can contain the fallout. It’s high stakes, but there are signs that terms are being set. Last week, tax exemptions were offered at a Chinese-built port. The wild card, as ever, is Khan.
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