Russia: Vladimir the merciless
Also: the Caucasus, the US, Argentina, Britain, Ethiopia, and Somalia.
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RUSSIA. Vladimir the merciless
The Kremlin shows no compunction in pursuing its interests.
G7 ministers held a minute's silence Saturday for Russian opposition figure Alexei Navalny, who died in a prison camp. Russia took control of Avdiivka. Volodymyr Zelensky blamed an "artificial deficit" of arms. Joe Biden blamed Congress.
INTELLIGENCE. There are many reasons Avdiivka fell, but most of all it was Moscow’s resolve. The prize removes Kyiv’s strongest defence, but with 20,000 men lost, the costs were greater than any Western state would likely accept. And this is Putin’s weapon: an ability to go harder and fight dirtier than his opponents. Domestically, he employs the same approach. Beyond Navalny, he has blocked his only true contender, Boris Nadezhdin, from next month's polls.
FOR BUSINESS. As Moscow bears down on Kyiv, the West dithers and debates. A series of inter-European pledges, including with Ukraine, have made headlines, but as yet these represent words, not deeds. As for weapons, it is convenient to blame the Republicans, but low reserves and a withered industrial base have been open secrets for decades. Deals like Rheinmetall's ammunition plant in Ukraine seem like closing the gate after the horse has bolted.
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THE CAUCASUS. Watch the climate, not the weather
Tensions simmer, but the hosts of COP29 are unlikely to risk war.
The foreign ministers of Armenia and Azerbaijan would "meet soon" after German Chancellor Olaf Scholz met with the countries' leaders on Sunday. Azerbaijan was planning "a full-scale war", Armenia's prime minister claimed Thursday.
INTELLIGENCE. Europe is having better luck negotiating a positive outcome in the Caucasus now that former Russian ally Armenia has swung firmly into the Western camp. A peace deal with Azerbaijan, however, should be relatively simple. Behind the rhetorical bluster and last week's border incident, where four Armenian troops were killed, both sides have more to gain through cooperation than enmity, and a settlement is also being tacitly supported by Russia.
FOR BUSINESS. Baku will host this year’s climate summit and sees the event as a coming-out party amid renewed interest in its position as a transit hub between Europe and Asia (which should also benefit Armenia). Another war with Armenia is the last thing it needs and while some in Armenia’s diaspora may want honour restored following last year’s loss of Karabakh, Yerevan has bigger equities to manage, such as a nascent cooperation deal with the EU.
UNITED STATES. Opportunity costs
Higher prices and massive fines help Donald Trump.
Trump told supporters on Saturday a $355 million fine for overstating his wealth was "election interference". Producer prices rose 0.9% year-on-year in January, confounding rate cut hopes. Consumer prices came in at 3.1% y-o-y Tuesday.
INTELLIGENCE. Markets had been betting on several rate cuts in 2024, which would have been a tailwind for Joe Biden. But stubborn inflation continues. Prices are, on average, 19% higher than when the president took office. Despite an otherwise strong economy, Trump can accurately tell many Americans they are worse off under Biden. Trump’s legal woes, meanwhile, continue to deliver political advantage through a narrative of official persecution.
FOR BUSINESS. A President's Day poll of experts today ranked Biden 14th best (higher than Reagan) and Trump last. This too will be manna for Trump's anti-elite message. But the morality play ultimately distracts from what truly matters: the economy. Biden’s industrial policy has delivered strong job creation, but the US is indebted, unbalanced and, outside of tech, uncompetitive. Its unpredictable politics also make accurate economic forecasting impossible.
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ARGENTINA. BRITAIN. Argy-bargy
London sends a message to Buenos Aires.
David Cameron said the sovereignty of the Falkland Islands was not for discussion, ahead of the first ministerial visit to the territory since 2016. David Cameron will also travel to Paraguay and the G20 foreign ministers' meeting in Brazil.
INTELLIGENCE. Like his predecessors, Javier Milei claims Argentine sovereignty over the Falklands, which have been British since 1833. Milei, with Western leanings, is unlikely to press hard, but Britain continues to send the occasional message. A message may also be inferred through Cameron’s visit to Paraguay – the first by a foreign secretary. Argentina impounded a Paraguayan barge last year over an unpaid toll, leading to a power embargo and arbitration.
FOR BUSINESS. Cameron is more likely to visit Paraguay in recognition of the country’s current presidency of South America’s Mercosur trade area. The UK is not pursuing a free trade deal with the bloc, but it has already struck (improbable) membership in the CPTPP, to which Chile, Peru and others are party, and the Caribbean Forum. A stealth deal with Mercosur would steal a march on the EU, whose own agreement has been jeopardised by farmer protests.
ETHIOPIA. SOMALIA. Slamming the door
A diplomatic snub and US investment heighten tension.
Somalia's president accused Ethiopia Saturday of trying to annex part of the territory of Somaliland. Attending an African Union summit, Hassan Sheikh Mohamud also accused Ethiopia of trying to block his access to the venue.
INTELLIGENCE. The friction between Mohamud and the AU’s Ethiopian hosts was bound to be apparent, though the spectacle of him being blocked by security guards was unexpected. The insult to injury follows weeks of intrigue over an MoU Addis signed with the breakaway Somaliland last month, which could give it diplomatic recognition. Somalia has corralled others to its corner, notably Turkey and Egypt. The US has also entered the fray with funding for bases.
FOR BUSINESS.The US agreed Thursday to build five bases for Somali counter-terrorist forces. The deal is driven by the persistence of Al Shabab and other actors, who not only harm security in the Gulf of Aden but have threatened the US mainland. Yet an indirect message to Ethiopia, which has stolen US aid and ignored human rights demands, cannot be ruled out. It’s also likely a message to the AU, whose own failed mission in Somalia is now winding down.