India: Bubble and Sikh
Also: Australia, China, Central Asia, Turkey, Syria, Sudan, and Ethiopia.
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INDIA. Bubble and Sikh
Financial and nationalist conceit could risk Modi’s seeming invincibility.
Hyundai is mulling a $3 billion IPO of its Indian unit, media said Monday. India attracted $20 billion in foreign portfolio investment last year. Delhi would not aid Ottawa's probe into the killing of a Sikh activist, India's high commission said.
INTELLIGENCE. India’s stock market and Narendra Modi’s political fortunes are on a tear. Mumbai’s National Stock Exchange has overtaken Hong Kong by market capitalisation. An opposition alliance is falling apart, leaving Modi all but certain to win a third term. Last week’s restrained pre-election budget and recent Hindu nationalist policies indicate supreme confidence. Yet hubris carries risk, and much of India’s good luck relies on Western goodwill.
FOR BUSINESS. With an average forward PE of 23 – higher than the S&P 500 – unless firms in India’s NSE 50 index can deliver on their promise, the investment that flowed through in 2023 could flow out. For India’s foreign policy, with its ties to Russia and attacks on religious diasporas in Canada and the US, patience is wearing thin. A $3.9 billion drone deal almost died in the Senate. Extra visas could be lost in the compromise on border and Ukraine spending.
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AUSTRALIA. CHINA. Kangaroo court
Canberra is stuck between a capricious judiciary and public opinion.
Australian writer Yang Hengjun was handed a suspended death sentence by a Beijing court on Monday. Prime Minister Anthony Albanese said he was "outraged". Albanese will host his Papua New Guinean counterpart on Thursday.
INTELLIGENCE. Albanese has stabilised ties with China, with his government’s low-key approach rewarded by the removal of trade barriers and the return of a detained Chinese-Australian reporter. Yet Yang's sentence threatens to upend the detente and refocus attention on areas of sustained discord, from the Pacific, where Beijing has made recent overtures to PNG, to waters near Taiwan, where Australian troops are currently exercising with US and Japan.
FOR BUSINESS. Yang, a former Chinese official and spy novelist, is an Australian citizen. China, which does not recognise dual nationality, detained him in 2019 on espionage charges. The arrest was linked to deteriorating political ties, but the sentence could simply be the workings of China’s judiciary. A vocal response will make it difficult for Beijing to pardon Yang, but quiet diplomacy won’t satisfy a public frustrated with Albanese’s reputation for timidity.
CENTRAL ASIA. Middle east and west
The Silk Road enjoys a resurgence in trade, and sanctions busting.
Investors would commit €10 billion to new projects linking Europe and Central Asia, the EU said last week. Delegates from Shandong Port Group visited Baku to discuss intermodal transit. Kazakhstan's government resigned on Monday..
INTELLIGENCE. Amid Russian sanctions and Red Sea insecurity, interest has revived in the Caucasus and Central Asia as an alternative route from Europe to China. Recent attempts at peace between Armenia and Azerbaijan have aided this dynamic, as has rising interest from Turkey in places like Kazakhstan. Transport along the so-called 'Middle Corridor' has risen 65%. Regional rail operators are eyeing connectivity. Yet much of this increase is not as it seems.
FOR BUSINESS. Since Russia invaded Ukraine, parallel imports via the former Soviet Union have surged. Last year, German auto exports to Kyrgyzstan rose 50-fold. Kazakh electronics exports to Russia rose 18-fold in 2022. Much of the new Silk Road is merely a back door to Moscow (and Tehran). Land connectivity can never outcompete the sea. Central Asia is struggling for genuine investment. Astana’s cabinet resigned over an inability to attract foreign capital.
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TURKEY. SYRIA. Kurds and woe
Another victim in the US-Iran proxy war.
Six US-backed Kurdish commandos were killed Monday in an attack by an Iran-backed group in Syria. Ankara said Sunday it wanted direct security talks with Damascus and would look to Moscow for support against Kurdish militants.
INTELLIGENCE. Kurdish militias in Syria and Iraq have benefited from the presence of US counter-terrorist forces, both in terms of combating Islamic State and in helping maintain a de facto Kurdish state – much to the chagrin of NATO ally Turkey. Yet with US forces eyeing a potential exit from Iraq, and preoccupied with Iran, the Kurds’ many adversaries are eyeing a shift. Turkey has escalated its attacks. Last month, it hit 29 Kurdish sites in Syria and Iraq.
FOR BUSINESS. Trouble for the Kurds comes amid broader shifts that could see the Assad regime rehabilitated in Sunni capitals as part of an attempt to wean Damascus off Tehran, whose proxy network has destabilised the entire region. It also comes as Ankara looks to deepen ties with Baghdad (which has a complex relationship with Iraq's Kurds), including through a $17 billion road and rail link to Basra’s Grand Far port, reviving old Ottoman-era ambitions.
SUDAN. ETHIOPIA. Rather to die than to famish
Hunger escalates tensions in East Africa.
Millions in Ethiopia faced famine, Britain said Monday. Almost 18 million faced hunger in Sudan, the World Food Program said Friday. Around 2,000 were sheltering in US bases in South Sudan following a spate of land-linked killings.
INTELLIGENCE. Hunger is not the sole cause of conflict from Sudan to Somalia, but it provides leverage for militants and cause for internal migration, which has exacerbated ethnic tensions. Ethiopian soldiers are alleged to have killed 50 civilians in Amhara last week. Eritrean troops are accused of abducting farmers and stealing livestock in Ethiopia’s Tigray region. Terrorists killed six Ethiopians on the Somali border on Sunday – an attempt to foment ethnic conflict.
FOR BUSINESS. Neither hunger nor war is new for the region, but they could exacerbate instability at the international level, whether through Sudan’s civil war or Ethiopia’s dispute with Somalia over the territory of Somaliland. And as the Houthis attack ships from the Red Sea’s other shore, Western politicians are complicating matters. Congress’s Ilhan Omar has made contentious pro-Mogadishu remarks. Several Tory MPs have hinted at support for Somaliland.