Iran: Clerical errors
Also: Haiti, China, the Pacific, and the Vatican.
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IRAN. Clerical errors
Any US missteps would be a gift to the Islamic Republic’s hardliners.
Iran denied any link to Sunday’s drone strike in Jordan. Republicans demanded an aggressive response. The Pentagon said "we don't seek a war." New sanctions were announced over an Iranian plot to assassinate dissidents abroad.
INTELLIGENCE. Washington is in a bind. Politically, the deaths of three soldiers demand a response (particularly after 170 other strikes since October). Strategically, any response must weaken, not strengthen, the hardliners preparing to take full control after March’s elections for the Majles and the Assembly of Experts, which will select the next Supreme Leader when Ali Khamenei, 84, dies. Ex-president Hassan Rouhani was last week barred as a candidate.
FOR BUSINESS. Rouhani and fellow moderates are being sidelined as factions linked to the Islamic Revolutionary Guard Corps take greater hold of Tehran. Besides pursuing a more aggressive foreign policy via their Middle East proxies, they have bolstered Iran’s technological capacity (three satellites were launched Sunday) and reaccelerated uranium enrichment (according to the IAEA). Escalated conflict with the US would only strengthen their internal grip.
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HAITI. Into the void
A power vacuum threatens to swallow a failed state.
Violence in Haiti was at “a critical point" the UN said Thursday. A stabilisation mission looked jeopardised Friday after a Kenyan court cancelled its participation. A crackdown was declared on forestry wardens after clashes with police.
INTELLIGENCE. With no UN-backed deployment, which Kenya was due to lead, Haitian authorities are battling alone a myriad of gangs, vigilante groups and, now, rogue park rangers. The spiralling chaos has attracted much discussion in the Security Council and regional bodies – the Dominican Republic faces a particular risk – but previous failed missions make few states willing to deploy forces, least of all the US, which has a long history of murky intervention.
FOR BUSINESS. Haiti’s collapse will only exacerbate flows of narcotics and refugees to the US border. Washington thus has reason to intervene, despite past experience, but China could also have cause. Beijing is making rapid inroads in Central America, with Haiti among a handful of remaining allies of Taiwan yet to switch recognition. A successful Chinese peacekeeping mission could be a soft power coup, and one difficult for Washington to oppose.
A capitalist crisis doesn’t seem to bother the Communist Party.
China's debt-to-GDP ratio rose to 287.8% in 2023, a state-backed think tank reported Friday. A Hong Kong court ordered property developer Evergrande’s liquidation Monday. Chinese ten-year bond yields fell to a 22-year low on easing hopes.
INTELLIGENCE. Traders continue to hold out for stimulus – especially of the fixed asset investment variety – but more signs are emerging that China’s economic woes are part of the plan, not a problem to be solved. Xi Jinping has made clear his desire for cheaper housing, lower debt, and less speculation. While he has no desire to crash China’s industrial base, the excesses symbolised by Evergrande and other real estate firms have no place in his political plan.
FOR BUSINESS. Xi’s goals of national rejuvenation and common prosperity rely on healthy trade and technological development but it’s unlikely he cares much for investor returns, so long as they don’t impact stability. Analysts have made valid comparisons between China’s economy and that of Japan in the 1980s, with fears of a balance-sheet recession to follow. Yet the Party has social controls and strategic intentions that transcend mere market economics.
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CHINA. THE PACIFIC. South Sea trouble
Beijing moves fast amid regional instability.
Port Moresby said Monday it was in security cooperation talks with Beijing. The same day, Australia provided $23 million to East Timor's police force. Tuvalu's pro-Taiwan prime minister lost his seat, election results showed Saturday.
INTELLIGENCE. With Australia having recently signed cornerstone defence agreements with Tuvalu and PNG, any repivot to China will come as a frustration (and one it will be reluctant to call out, lest its recently regained trade access be jeopardised). Beijing’s forays will also concern Washington, which has stepped up its diplomatic presence in the Pacific. For now, its ties with the US Compact States in Micronesia look solid, but these too can’t be guaranteed.
FOR BUSINESS. There’s little the West can do to stop small Pacific states from gravitating to China other than trying to match Beijing’s no-strings largess. The Compact States are slightly different, with association agreements tying them to Washington until 2043, yet they too could be swayed. Indeed, even in the Northern Mariana Islands – a US territory, rather than a sovereign state – the influence of Chinese casinos until recently dominated local politics.
CHINA. THE VATICAN. Church and state
A new diocese could mark a turn in relations.
Pope Francis consecrated a new bishop for the Chinese Diocese of Weifang, the Vatican said Monday. On Thursday, the Holy See consecrated a new bishop for Zhengzhou, which had been without a chief shepherd for 70 years.
INTELLIGENCE. The Weifang appointment had been decided in April last year but was held over until a diocesan boundary was agreed with the Chinese government. Notionally, the Vatican does not have relations with China, but a provisional agreement on bishops has been in place since 2018. Up for renewal, it appears as if Beijing is moving away from its unilateral approach and is seeking a stabler relationship with Rome. This will make Taiwan nervous.
FOR BUSINESS. Taiwan’s new president may be a Presbyterian, but he will struggle to ignore signals of the papacy’s reconciliation with China. Less a sign of Beijing’s compromise with civil society than the Catholic Church’s recognition of China as primus inter pares, it could, in time, herald diplomatic recognition. The Vatican may be the world’s smallest state, but it has outsized soft power and moral suasion. Even on matters as temporal as state sovereignty.