Iran, Russia: The right to arm bears.
Also: Ukraine, South Korea, China, Taiwan, Europe, the US and Britain.
IRAN. RUSSIA. The right to arm bears.
Tehran stays the course on weapons and Moscow.
On Sunday, Ayatollah Ali Khamenei said the West could not stop Iran from obtaining nuclear weapons if it chose to (but adding it didn’t want to). On Friday, Washington alleged Tehran was giving Moscow materials to build a drone factory.
INTELLIGENCE. With talks to resuscitate the failed 2015 Iran nuclear deal stalled since September, Tehran is rattling sabres in the hope it can coax the West back to the table. With a sanction-racked economy and restless population, Iran would appear to be in a weaker position, but recent rapprochement with its Arab neighbours, closer ties with Russia and progress in its hypersonic and ballistic missile programs give it plenty of negotiating coin.
FOR BUSINESS. Until the UK, France and Germany agree to further sanctions, Tehran will continue to advance its arms industry and profit from closer ties to Moscow. Over the last year, imports are up 27%, exports up 10%, and Russia has pledged to invest $40 billion in Iranian oil and gas. Regional traders may benefit too, with plans to complete by 2027 a railway linking ports of the Persian Gulf and the Black Sea recently renewed.
UKRAINE. RUSSIA. Tanks for nothing.
Kyiv’s counter-offensive faces its first hurdles.
Ukraine’s counter-offensive suffered a setback and symbolic blow over the weekend, with Russia destroying several NATO-supplied assets, including at least one German Leopard 2 main battle tank and four US Bradley Fighting Vehicles.
INTELLIGENCE. Volodymyr Zelensky warned that Ukraine would suffer casualties and planners will have anticipated the loss of heavy armour, even if it was among the world’s best. That said, Kyiv is under pressure to deliver a decisive blow to Moscow not just to regain lost territory but to keep the West engaged amid a slowing global economy and ahead of key elections, including in the US. If Kyiv’s campaign looks too forlorn, too early, its backers may reassess.
FOR BUSINESS. Don’t read too much into the daily commentary on who is succeeding at the front. Both Russia and Ukraine have plenty of infantry and equipment in reserve, plus a hardened approach. Unless either side can win a decisive advantage, this will remain a protracted war of attrition, albeit one where Ukraine’s Western allies will need to remain enthused. As such, a negotiated settlement may need to be seriously explored in the coming months.
SOUTH KOREA. CHINA. Chipping away.
A semiconductor spy scandal further damages ties.
South Korean police on Sunday arrested 77 people in 35 cases of industrial espionage, eight involving the leak of technology secrets to China. Beijing on Saturday lodged a complaint with Seoul’s envoy in a diplomatic tit-for-tat.
INTELLIGENCE. Relations between China and South Korea are already under pressure. Beijing is still piqued over Seoul’s comments in April that China was trying to change the status quo on Taiwan and that the dispute had become a “global issue”. South Korean President Yoon Suk Yeol’s pivot to Washington – where that month he received the rare honour of a State Visit – is also testing Beijing’s patience. Spying allegations will only further raise tensions.
FOR BUSINESS. China typically handles South Korea with kid gloves compared to US allies like Japan, Australia and the Philippines. Similarly, Seoul usually takes care not to upset Beijing, which is seen to have leverage over Pyongyang. But despite Yoon’s refusal to join a tech embargo against China, the gloves are coming off. South Korea’s flagship industries – cars, chips and electronics – are all vulnerable to IP theft and Seoul cannot afford to not act.
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TAIWAN. CHINA. Crossing the line.
Beijing tests Taiwan’s defences.
Taiwan scrambled fighter jets and deployed ships and missile systems on Sunday after ten Chinese warplanes flew over the Taiwan Strait’s median line. At least 37 Chinese military planes skirted Taiwan last week.
INTELLIGENCE. Over the past three years, China has regularly sortied near Taiwan. But until recently the Chinese Air Force had not entered Taipei’s territorial airspace (which Beijing does not recognise but had previously served as an unofficial barrier). Recent months have seen Chinese drills and efforts to pester Taiwan grow bolder as both it and the US near their national elections. Beijing will be looking to see how they calibrate their response.
FOR BUSINESS. Beijing uses military exercises around Taiwan to deter US action. China wants to demonstrate its capabilities, cause the US to doubt its intentions, and use the psychological pressure of imminent war to create a deterrent. But more frequent, aggressive and bold Chinese exercises increase the risk of unintended escalation. An accident in the tinder box of the Taiwan Strait could easily become a conflagration.
EUROPE. CLIMATE CHANGE. Nuclear friction.
The EU aims to agree on new renewable energy targets.
Media reported on Saturday that EU diplomats will attempt to approve a new law creating more ambitious renewable energy targets on Wednesday. Negotiations stalled last week after France insisted on a carve-out for nuclear energy.
INTELLIGENCE. Europe’s 42% renewable target is ambitious. For some, like Bulgaria, Romania and Poland, it is too ambitious. The main hold-out though is France, which wants a carve-out for “low-carbon hydrogen” produced from nuclear energy. Paris and Berlin, at loggerheads over nuclear since Germany abandoned it in 2011, are in a bind. If a target cannot be adopted this week, it will need leader-level intervention when Emmanuel Macron visits Berlin in July.
FOR BUSINESS. The renewables law, if adopted, will send a powerful market signal. But it is also a litmus test for European cooperation. Tensions between Paris and Berlin have not only contaminated this bill; the fallout has extended to other legislative projects on gas, air and maritime fuels, and the hydrogen bank. Europe will have to get its climate act together if its industry can compete with American firms subsidised under the Inflation Reduction Act.
UNITED STATES. BRITAIN. The harder they fall.
Trouble for the Anglosphere’s most polarising politicians.
Donald Trump railed against “corruption” on Saturday after being indicted over classified materials. The former chief minister of Scotland was briefly arrested on Sunday. An inquiry into Boris Johnson finished its report on Monday.
INTELLIGENCE. Trump’s legal woes may help his campaign, deflecting his policy and electoral failings in favour of a “witch hunt” narrative. No such luck for Nicola Sturgeon, where dour Scots are cooling on the Scottish National Party’s alleged impropriety. Boris Johnson may hope the English are a little more American in their forgiveness and that his claims of a parliamentary “kangaroo court” ignite a new campaign for his return to the prime ministership.
FOR BUSINESS. Sturgeon and Johnson appear done for, alongside any majority enthusiasm for Scottish divorce from Britain, or indeed British divorce from Europe. Trump, on the other hand, still polls ahead of his challengers for the Republican presidential primary, leading Ron DeSantis 61% to 23%. Against Joe Biden, Trump's fortunes look worse, with betting markets giving him only a 30% chance of winning, but that race won’t start until 2024: an aeon in politics.
CORRECTION: In our email and PDF editions on Friday, we said that Donald Trump was indicted by a Manhattan court. It was a court in Miami.
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