Europe, China: Kicking the EV down the road
Also: India, France, New Caledonia, Russia, Central Asia, Israel, and Lebanon.
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EUROPE. CHINA. Kicking the EV down the road
Brussels seeks conversation over confrontation.
China and the EU agreed to meet over electric vehicle subsidies, officials said Saturday. Germany's economy minister made conciliatory gestures but warned of ties to Moscow during talks in Beijing. Poland's president began a state visit.
INTELLIGENCE. Following Washington’s announcement of 100% tariffs on Chinese-made EVs, Brussels announced its own investigation into potential tariffs, which Beijing responded to with a probe on pork. Both sides are now having second thoughts. European carmakers depend on the Chinese market, while cross-ownership abounds. Higher pork prices would mostly harm Chinese consumers. The EU wants to give China reasons not to double-down on Russia.
FOR BUSINESS. Greed, not fear, remains Europe’s primary driver on China. Unlike the US, whose top industries are already semi-bifurcated and where geo-economic competition is more engrained, the EU is coping with lower growth, has more balanced trade with China, and wants to at least appear adherent to WTO rules. Further, a collection of 27 members, who increasingly agree on little, Europe’s policies will always be more cautious. Just as China wants it.
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INDIA. CHINA. Neighbourhood watch
The play for regional dominance continues.
Pakistan launched a new anti-terrorism campaign Saturday after pressure from China over threats to its investments. Bangladesh signed a security agreement with India during the first leader visit to Delhi in Narendra Modi's third term.
INTELLIGENCE. Islamabad’s "Resolve for Stability" operation may be old wine in new bottles, but its framing indicates how Beijing, not Washington, is increasingly pulling the strings. Delhi is meanwhile working to ensure the same doesn’t happen in Dhaka, which has flirted with closer military ties to Beijing, including through a submarine base. The jury is out on Sri Lanka, where a pro-China government was kicked out in 2022 but residual links remain.
FOR BUSINESS. China is proceeding with a $4.5 billion refinery in the Sri Lankan port of Hambantota, which India's military once feared could host the Chinese navy. The facility will lessen Colombo's dependence on Indian fuel but risks angering Delhi. The two sides continue to spar. Sri Lanka arrested 22 Indian fishermen Sunday, just days after India’s foreign minister visited, promising greater cooperations in energy, infrastructure, maritime security, and ports.
FRANCE. NEW CALEDONIA. More trouble in paradise
Problems simmer beyond the metropole.
A New Caledonian independence leader was transferred to pretrial detention in mainland France Saturday following two weeks of riots that left nine dead. Eight Vanuatu MPs called on Emmanuel Macron Friday to end "colonial" violence.
INTELLIGENCE. There is plenty to keep Macron up at night. Dirty water in the Seine. Fears of Olympic terrorism. EU deficit rules. A likely routing at Sunday's election. But problems in the restive territory of New Caledonia could be graver. Governments and budgetary cycles come and go, but if Paris loses its biggest Pacific territory to a revived independence movement it will lose a major claim to global power. The West will also lose a vital ally in Melanesia.
FOR BUSINESS. France would risk one of the world's biggest nickel industries if New Caledonia separated. This would not just be a risk to French producer Eramet – which faced a geopolitical shock last year when Gabon, where it mines manganese, underwent a coup – but hopes by Tesla and others to establish a sustainable nickel sector using French standards and subsidies. New Caledonia is seven times richer per capita than Indonesia, the biggest nickel producer.
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RUSSIA. CENTRAL ASIA. Central nervous
Another terrorist blow to Moscow’s underbelly.
Gunmen killed at lease 15 police officers and a priest Sunday in attacks on churches, synagogues and police stations in Russia's Dagestan. Tajikistan last week banned the Hijab in the latest crackdown on perceived Islamic extremism.
INTELLIGENCE. Moscow has not blamed Ukraine or the US for Sunday’s attack – unlike a separate strike on Crimea – but attribution can be expected. An attack on a Moscow theatre in April, which killed 145, was carried out by Tajik terrorists, but was subsequently linked to Western intelligence agencies (and even Hunter Biden’s Burisma Holdings). Ordinary Russians may see it differently: another hole in Putin’s police state and reason to fear Muslim migrants.
FOR BUSINESS. The attacks in Dagestan were along the trade corridor Russia is building with Azerbaijan and Iran. Isolated from the West, Moscow is increasingly dependent on its Muslim-majority neighbours for trade, connectivity, and workers, as the growing military-industrial complex absorbs a demographically stagnant labour pool. It also depends on its Muslim-majority regions for a large share of troops in Ukraine, and for soft power in the Middle East.
ISRAEL. LEBANON. Winding down or winding up?
Netanyahu flags a change in priority.
Benjamin Netanyahu said Sunday the "intense" phase was ending but fighting would continue until Hamas’s defeat. Israel's defence minister travelled to Washington. The US's top general said a war with Lebanon risked regional conflict.
INTELLIGENCE. Netanyahu said fewer troops in Gaza would mean more along the Lebanese border. Northern Israel, a stronghold for his coalition, is growing weary of endless strikes and many are calling for a full assault on Hezbollah. The US is right that this would risk dragging in Iran, even as it conducts a presidential election. It would also risk the US losing further control of its ally, as well as prestige in a region that is increasingly aligning with other major powers.
FOR BUSINESS. Neither Israel nor Hezbollah likely want war but options for de-escalation are decreasing, and the US has even less leverage on the Lebanese side of the border. Whereas the war in Gaza provoked global outrage and escalated risk in places like the Red Sea, a war with Hezbollah could provoke much more, including higher oil prices should Iran involve itself via a Persian Gulf blockade, or missiles that could materially puncture Israel’s iron dome.