Iran, Pakistan: Balochi standoff
Also: Israel, Palestine, China, the Philippines, the US, and the UK.
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IRAN. PAKISTAN. Balochi standoff
Anti-terror strikes are a convenient distraction with inconvenient risks.
At least nine were killed after Pakistan launched strikes against separatist militants in Iran’s Sistan and Baluchestan province on Thursday. Iran made similar attacks on Pakistan's side of the border earlier in the week, killing two children.
INTELLIGENCE. With low forex reserves, high unemployment, a string of terror attacks, and elections in the coming weeks (even if largely stage-managed), both Tehran and Islamabad have reasons to distract their restive populations with bombings in the desert. Yet the tit-for-tat strikes risk an escalating crisis, despite being aimed at non-state militias both sides would like destroyed. And beside Balochi separatists, both regions host key infrastructure nodes.
FOR BUSINESS.The port of Chabahar, in Iranian Baluchestan, has received major Indian investment as part of a bridge to Russia. The port of Gwadar, in Pakistani Balochistan 170km to the east, has received major Chinese investment and connects to Xinjiang. The regions also contain world-class copper deposits, plus access to the Gulf of Oman. Iran uses a portion of this to justify its claim to a slice of Antarctica under the speculative 'frontage' principle.
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ISRAEL. PALESTINE. State in play
Splits deepen over Palestinian statehood and Netanyahu’s future.
The US said Thursday there was "no way" to secure Israel without a Palestinian state. Benjamin Netanyahu said he opposed this in any scenario. Ex-military chief Gadi Eisenkot said Netanyahu's pledge to defeat Hamas was unrealistic.
INTELLIGENCE. Eisenkot is a key opposition figure and no ally of the prime minister, but as a member of the war cabinet his comments– including the need for elections to rebuild trust – come as a further blow to Netanyahu’s coalition. Rhetoric is hardening in the US as others try moral suasion. Chile and Mexico on Thursday referred Israel to the International Criminal Court (not the International Court of Justice, where South Africa's case is being heard).
FOR BUSINESS. Israel’s budget this week provisioned an extra $15 billion for the military, leading to an expected deficit worth 6.6% of GDP. And while most Israelis still back the war, support for Netanyahu continues to fall. Polls predict Netanyahu's Likud party would fall from 32 to 16 seats if a vote were held. Eisenkot's National Unity, which he formed with Benny Gantz in 2022, would go from 12 to 39. Eisenkot supports a two-state solution. Gantz is neutral.
CHINA. PHILIPPINES. Agreeing to disagree
Beijing and Manila try to keep their disputes contained.
The Philippines and China said they agreed Thursday to resolve disputes through diplomacy, following talks in Shanghai. Manila denied rumours Wednesday that soldiers loyal to ex-President Rodrigo Duterte were plotting a coup.
INTELLIGENCE. Coup rumours first surfaced in November. While outlandish, there have been attempts before, such as in 1989, when troops loyal to Ferdinand Marcos – the current president's father – sought to overthrow Corazon Aquino, and 1972, when Marcos appointed himself dictator via a 'self-coup'. Other tries were made in 2003 and 2007. Marcos Jr’s sabre rattling on the South China Sea has alarmed many Filipinos, though overall approval remains high.
FOR BUSINESS. Manila’s more conciliatory tone comes days after Beijing warned it was “playing with fire”, following Marcos’s call to congratulate Taiwan’s president-elect, and after the Philippines’ military chief said the army would undertake development works on several disputed atolls. Manila (and Beijing) will continue to appeal to nationalism, but neither wants war. Oil exploration – hinted at by the defence secretary this week – may, however, upend that.
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UNITED STATES. Stopgap year
The best hope is for Congress to keep the lights on.
Congress agreed to a stopgap bill on Thursday, extending funding to early March. The House Freedom Caucus sought to inject a border amendment, buoyed by presumptive nominee Donald Trump, who has demanded no compromises.
INTELLIGENCE. Trump’s re-election campaign gained momentum in the Iowa caucuses, and, with it, momentum is behind hard-line Republicans. Funding for Ukraine and other additional measures thus looks unlikely with Democrats unwilling to budge on immigration. Political dysfunction continues to impact consumer confidence, which remains historically low, despite a recent rebound. The University of Michigan releases the results of its January survey today.
FOR BUSINESS. Despite (or maybe because of) the impasse in Washington, economic indicators remain strong. This would usually benefit an incumbent, but Joe Biden’s poll numbers are poor. While Ipsos and YouGov give him an edge on Trump, in swing states and among independents, Trump is ahead. Trump's legal woes have only strengthened his brand, but for Biden, the storm around his son continues to weigh. Hunter will attend a House hearing on 28 February.
BRITAIN. Carry on
Sunak sets a low bar for success.
Rishi Sunak declared victory after defeating a Tory rebellion on his Rwanda asylum bill, saying Thursday he would not let international law change his approach. Polls on Tuesday showed the government losing support to the left and right.
INTELLIGENCE. The Rwanda bill may yet fail in the House of Lords and will likely do little to stem illegal migration without European cooperation. Sunak’s re-election chances look doomed. The Conservatives are 17 points behind Labour. Nigel Farage's Reform UK party is polling at around 7-8% – enough to split the right and deliver otherwise safe seats to the opposition. An election date has not been called but is expected in the second half of the year.
FOR BUSINESS. As more Tory MPs stake out positions for survival, Sunak’s remaining agenda will take a back seat. The economy splutters on. Inflation remains at 4% despite slowing wage growth. Risks remain for a technical recession despite growth in November. Sunak will find more breathing space in foreign policy and defence, but here too, plans seem hollow. A deal with Ukraine is toothless. A pledge for defence spending of 2.5% of GDP looks empty.