Israel, Iran: Dumbstruck
Also: India, Maldives, China, and Germany.
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ISRAEL. IRAN. Dumbstruck
Netanyahu must know something we don't.
Iran activated air defences around the city of Isfahan early Friday, following reported strikes at a nuclear research facility and a major airbase. US officials briefed media that Israel was behind the attack, as well as strikes in Syria and Iraq.
INTELLIGENCE. After Benjamin Netanyahu allegedly told Joe Biden he would not retaliate to Iran’s earlier strikes against Israeli targets (itself a retaliation for an attack on Iran’s Syrian embassy) the strikes came as a shock. Israeli media says the Pentagon had forewarning but US policy would be upended if a regional conflict got out of control. Iran has downplayed the impact, suggesting it won’t escalate, but it may yet come under domestic pressure to do so.
FOR BUSINESS.Markets seem to expect escalation. Oil rose 3% and stock indices a similar amount. Ironically, this will only help Iran, which needs a fiscal breakeven price of $112/barrel (Brent crude has struggled to get beyond $90). Bank of America expects prices could get to $130 in the event of a conflict. Air raid sirens sounded in Northern Israel but were later reported as a false alarm. Israel’s defence minister said the work of interceptors would “only increase”.
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INDIA. Beast Modi
To be number one, campaign like you're number two.
Voting began Friday in polls that will run over seven weeks with almost 1 billion eligible voters. Prime Minister Narendra Modi called on the young and first timers to vote. Opposition leader Rahul Gandhi called on Indians to "defeat hatred".
INTELLIGENCE. Though almost 20 years Gandhi’s senior, Modi has campaigned with an energy few can match. Many Indians believe he governs with a similar vigour, and Delhi has made sure to project this image. Yet behind the infrastructure announcements, the GDP growth, and the foreign policy wins is a lopsided economy with deep structural challenges and a strategic vision that, beyond seeking a multipolar order, appears random and confused.
FOR BUSINESS. Modi will almost certainly win the election, though he won’t likely extend the Bharatiya Janata Party’s reach in the south, where much of the growth has happened but where the BJP’s brand of Hindu nationalism is toxic. As with most governments, a third term can be a poisoned chalice. Only Jawaharlal Nehru, India's first prime minister and Gandhi's ancestor, achieved this. Nehru died in office aged 74 but with diminished status after a war with China.
MALDIVES. Presidential parole
An ex-leader leaves jail as the current one faces calls for impeachment.
A high court overturned ex-president Abdulla Yameen's jail term Thursday due to procedural irregularities. Opposition members have called for President Mohamed Muizzu to be impeached after reports were leaked over alleged graft.
INTELLIGENCE. Yameen will be tried again for alleged corruption and bribery. Like Muizzu, a fellow pro-China, pro-development politician from the Islamic nationalist People's National Congress, Yameen has been accused of getting kickbacks from property developers. The moves come as Muizzu seeks to end India’s military presence in Maldives and its parliament, the Majilis, holds elections on Sunday. The Majilis is currently held by the pro-India opposition.
FOR BUSINESS. Maldives isn’t the first and won’t be the last tourism-dependent economy accused of hotel developer sleaze. The difference is, rather than simply being a beachside municipality, Maldives is a sovereign state straddling the world’s busiest shipping lane and under intense geopolitical competition from China, India, the Gulf, and, to a lesser extent, the US, which leases a naval base at the British-held island of Diego Garcia, immediately to the south.
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CHINA. Alternating currency
The renminbi slowly becomes a global medium of exchange.
Nearly 30% of cross-border goods settlements were made in renmenbi, or yuan, Beijing said Thursday. The RMB’s share of total global payments for March rose to 4.69% from 2.26% last year. It is now the fourth-most used currency globally.
INTELLIGENCE. World trade is still dominated in US dollars and China’s share is even smaller in financial markets and central banks, but the trend is clear, despite a closed capital account. Much of this is due to sanctions pressure on large Eurasian markets like Russia and Iran, which now use the yuan for a range of settlements, but stopping its further rise is the risk of secondary sanctions. Several Chinese banks are now refusing RMB from Russian customers.
FOR BUSINESS. Western sanctions, while pushing the yuan’s use offshore, are nonetheless curtailing its development. If carefully applied, US dollar hegemony can thus be maintained. Yet their excessive application across a range of countries could accelerate a globally bifurcated trading and currency system, particularly if China-dominated bodies like the BRICS get their act into gear. This would have a major impact on other levers of US power.
GERMANY. Ostpolitik, realpolitik
Berlin wakes up to Moscow and Beijing.
Analysts said it was a "disaster" Olaf Scholz failed to back EU messages on de-risking during a visit to Beijing. Moscow banned a German think tank Thursday as German police arrested two dual nationals suspected of spying for Russia.
INTELLIGENCE. Scholz’s Beijing visit was heavy on German interests, as to be expected, but his interventions on Russia and Ukraine at least signalled a united Western front. That signalling on Russia is becoming more vocal too, despite Scholz’s reluctance to send Taurus missile systems and initial hesitations when the war broke out in Ukraine. The arrest of the alleged spies, said to be scoping German locations and US bases for attacks, is another wakeup.
FOR BUSINESS. Germany’s ‘Ostpolitik’ and 'Wandel durch Handel' (change through trade) policies have been scorned by Western allies but the counterfactual is that without the 'Putinversteher' (Putin-understanders) of Berlin, tensions would be much worse. Likewise with China, where Germany is seen by some in the US as weak, a willingness to trade has kept Beijing slightly more invested in Western rules. It also provides a useful circuit-breaker amid the US election.
Would you be able to share a source to the China story? I can't find a trace of it anywhere else.