Israel, the US: Unbanked.
Also: the UK, Rwanda, France, the Sahel, Australia, the Pacific, and Sri Lanka.
ISRAEL. UNITED STATES. Unbanked.
Washington enacts a mild, if rare, rebuke over the West Bank.
The State Department said Tuesday it would place a travel ban on Jewish settlers in the West Bank it considers to be “extremist”. Benjamin Netanyahu said that Israel would need to maintain open-ended security over Gaza after the war.
INTELLIGENCE. The move is meant to demonstrate to Israel that the US alliance has limits. It is also a convenient way to show some balance in the US response to the war with Hamas. Even the most ardent supporters of Israel find it hard to support West Bank settlers who commit violence against Palestinians in designated Palestinian Authority zones. Calls will continue for a stronger US response to other Israeli actions, but this remains unlikely for the moment.
FOR BUSINESS. Israeli citizens were granted visa-free entry into the US just a month ago. The new ban will mean certain people in the West Bank will not be eligible, and those same people will have any existing visas revoked. There are likely to be further fractures in the US-Israeli relationship as interests diverge. This includes US opposition to open-ended Israeli security control of Gaza after the war, first proposed by Netanyahu in early November.
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BRITAIN. RWANDA. Airport, seaport, Supreme Court.
Number 10 seeks a new deal on asylum seekers.
The UK signed a new treaty on Tuesday to enable the deportation to Rwanda of refugees from any country who try to land on British territory without prior permission. On Monday, the UK promised to slash the number of legal migrants.
INTELLIGENCE. In November, the Supreme Court upheld a Court of Appeal decision striking down the government’s previous Rwanda deal. This was based on a risk that deported people would have their claims assessed incorrectly or be returned to their country of origin and face persecution. The new treaty aims to get around these concerns, by ensuring that Rwanda would not expel these people and providing an avenue for individuals to lodge complaints.
FOR BUSINESS. Downing Street is under sustained pressure on immigration, with migrants a convenient outlet for frustration as high living costs continue into winter. Migration policy is under intense scrutiny around Europe as more leaders are elected on restrictive immigration platforms. However, it’s unlikely that deportation flights will commence before next year’s election. The Labour Party opposition has also said it would abandon the Rwanda deal, if elected.
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FRANCE. THE SAHEL. Death and taxes.
The conflict-wracked former colonies of France go their own way.
Mali and Niger on Tuesday revoked double tax treaties with France, in place since 1972 and 1965 respectively, criticising ‘persistent’ French hostility. A Russian defence mission visited Niger on Monday as an accord with the EU was annulled.
INTELLIGENCE. The majority of two-way investment in Mali and Niger is French. France has around 200 firms in Mali and 30 in Niger. It is a further act of defiance after their recent coups. Burkina Faso rescinded its tax treaty with France earlier this year. Amid strengthening bonds with Moscow, Burkina, Mali and Niger last week proposed forming a confederation. Together, the hypothetical bloc would have 65 million very poor people in an area the size of India.
FOR BUSINESS. Double tax treaties are relatively common, having proliferated in the 1970s and 80s as governments sought to provide support for their investors abroad. Confederations are less common. Few states, particularly those run by juntas, are willing to cede sovereignty for economic or security cooperation. The EU shows the difficulty, as does the short-lived Union of African States (1961-63), which is likely to be the Sahel grouping’s chief example.
AUSTRALIA. THE PACIFIC. Blue line.
Closer security ties in the Pacific region.
Australia and Papua New Guinea will sign a bilateral security deal this week, PNG’s prime minister said Tuesday. Australia last week signed a deal to access French bases in the region amid a defence summit with the US and UK..
INTELLIGENCE. Recent outbreaks of violence around PNG underscore the challenging domestic security environment. But while Port Moresby is focused on internal security, Canberra has an eye on regional dynamics, as its dealmaking with Washington and Paris shows. The Australia-PNG agreement was delayed after a similar US treaty faced criticism within PNG for infringing on the country’s sovereignty by providing access to ports and airports.
FOR BUSINESS. The deal with PNG will involve policing, which Australia has resisted since leaving its former colony in 1975. But the recent signing of a deal between China and Solomon Islands on police cooperation likely shifted the calculus. Security is a high-priority concern for businesses in the Pacific. More active interest in security from wealthy and stable overseas partners is not a bad thing from the perspective of foreign and domestic investors.
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SRI LANKA. Disburse to the purse.
Further loans will promote recovery but provoke questions.
The Asian Development Bank committed on Tuesday to providing $600 million in further budget support to Sri Lanka. The money is dependent on Colombo meeting policy actions and reforms as part of its recent $2.9 billion IMF bailout.
INTELLIGENCE. Sri Lanka is still recovering after a political crisis and shortage of foreign currency led to it being unable to pay for essential imports. The ADB’s support includes $200 million for power sector reforms, $100 million for the water sector and $50-70 million for tourism. The funds are a welcome boost but, after years of overspending, external debt levels are still incredibly high at around $36 billion (GDP is expected to be around $71.5 billion this year).
FOR BUSINESS. Colombo announced it would provide loans at an incredible 2% to businesses using the ADB funds, in a bid to spark the economy which contracted 7.8% in 2022. Exports are still down around 15% from this time last year. Foreign bondholders are yet to strike a deal with Colombo, unconvinced of reform efforts and wary of opaque debt restructuring deals with Japan, France, India and China. Half of Sri Lanka’s external debt is owed to China.