Sweden, Turkey: Promise me.
Also: Ukraine, Russia, China, India, Taiwan and France.
SWEDEN. TURKEY. Promise me.
Erdogan says he agrees to Sweden joining NATO.
Turkish President Recep Tayyip Erdogan agreed on Monday to support Sweden joining NATO in a dramatic turnaround on the eve of the alliance's summit. Earlier in the day, Erdogan linked Sweden's bid with Turkey's desire to join the EU.
INTELLIGENCE. Turkey’s parliament still needs to confirm Erdogan’s pledge, and the ambit claim of EU membership – a decades-long pursuit – may give him room to renege. Erdogan has played hardball in negotiations and will unlikely acquiesce unless Turkey gets something in return. F-16 fighter jets could fit the bill, but Congressional approval is uncertain despite White House leaks to the contrary. Hungary also needs to grant approval, though this is expected.
FOR BUSINESS. With its proximity to Kaliningrad and fleet of Gripen fighter jets, NATO will welcome Sweden. Putin will be annoyed, particularly after Erdogan’s recent overtures to Ukraine, but this won’t be a dealbreaker for Moscow’s trade ties with Ankara, which have almost doubled since the invasion. Irrespective of the fate of the Erdogan-brokered Black Sea grain initiative, which in any case seems dead, expect the Russia-Turkey relationship to continue to thrive.
UKRAINE. RUSSIA. Version control.
Moscow and Kyiv are spinning the message.
The Kremlin on Monday said Vladimir Putin had held talks with Wagner’s leader, Yevgeny Prigozhin, who pledged his loyalty. Volodymyr Zelensky on Monday said Ukraine had “taken the initiative” after a slow start to its counter-offensive.
INTELLIGENCE. Propaganda is a feature of war and morale is essential. Beyond their domestic constituents, however, Russia and Ukraine must consider external audiences too. Putin needs to show China he is still in control. Zelensky needs to show NATO his cause is still worth fighting for. Ukraine cannot prosper without the West. Russia is a diminished player without China. It again underscores how the war’s direction rests with Washington and Beijing.
FOR BUSINESS. On the narrative front, Putin and Zelensky have both had small victories. Zelensky has confirmed his attendance at this week’s NATO summit – indicating he has been given sufficient assurances short of membership. Putin will have been buoyed by Xi Jinping’s message on Monday that Russia and China will together “lead the correct direction of global governance reform.” Xi met with Russia’s senate speaker, a courtesy he did not give Janet Yellen.
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CHINA. DIPLOMACY. Without a trace.
China’s foreign minister disappears.
Foreign Minister Qin Gang would not attend ASEAN-related talks in Jakarta, sources told Reuters on Tuesday, with his predecessor representing China instead. A spokesman on Friday said he was unaware of rumours about Qin’s health.
INTELLIGENCE. Much has been made of Moscow’s missing generals since the aborted Wagner mutiny (Chief of General Staff Valery Gerasimov only reappeared on Monday). More consequential has been the disappearance of China’s foreign minister since 25 June. Rumours began to circulate that Qin was unwell when a visit last week by Europe’s top diplomat was postponed. Qin was also missing from meetings with US Treasury Secretary Janet Yellen.
FOR BUSINESS. One problem with autocratic systems is that the disappearance of a public figure can spook outsiders. In September 2022, Xi Jinping went missing for several days, leading to speculation of a coup. It turned out he was in COVID-19 isolation after travel. With top-down controls on messaging, public officials cannot comment on even innocuous issues, leaving rumours to swirl. The danger of such silence is occasionally the topic will matter.
CHINA. ECONOMY. Undeserving credit.
Beijing faces a dilemma on debt.
Real estate shares rose on Tuesday after regulators extended liquidity relief. Consumer prices for June, released on Monday, were unchanged year-on-year in the latest sign of flatlining growth. Economists have called for further easing.
INTELLIGENCE. Amid slackening global demand and ageing demographics, China's economy needs support to avoid contraction. Signs of a thaw with the US will be welcome, but for many Chinese, another bout of infrastructure stimulus would be better. Xi Jinping doesn’t need votes to stay in power, but his legitimacy rests in part on the Communist Party’s ability to raise living standards. Historically, a dictatorship’s other source of legitimacy is war.
FOR BUSINESS. Xi won’t want war if he can avoid it, but pump-priming an already debt-laden property sector is also unappealing. Economist Richard Koo, who coined the term “balance sheet recession” to explain Japan's lost decades of debt-addled stagnation, has warned that a similar dynamic is building for China. Talk of a Chinese crash landing has been going on for years, but Beijing’s short-term solution may contribute to a longer-term ailment.
With the brevity of a media digest, but the depth of an intelligence assessment, Daily Assessment goes beyond the news to outline the implications.
INDIA. TAIWAN. When the chips are down.
Asia’s other giant isn’t a sure-fire bet.
Taiwanese chipmaker Foxconn announced on Monday it had withdrawn from a $19.5 billion semiconductor joint venture with India’s Vedanta group. Last week, Taipei announced a representative office in Mumbai – its third in India.
INTELLIGENCE. Many in the West see India as a strategic and economic alternative to China. The country is growing fast – Goldman Sachs on Monday forecast it would overtake the US by 2075 (a heroic attempt at long-range vision) – but its path won’t be straight. Taiwan has more reasons than most to diversify its risk, but even it has limits. Foxconn’s deal in Narendra Modi’s home state of Gujarat was allegedly cancelled following government interference.
FOR BUSINESS. India’s growing friendliness to the West doesn’t make it easy to deal with. India has risen rapidly in global competitiveness rankings, but it still trails China and other large emerging markets on most measures. Vedanta says it has lined up other investors for India's first chip plant. Foxconn, meanwhile, is on a hiring spree in China. Last month, it introduced bonuses for former workers to return to its factories in Zhengzhou and Shenzhen.
INDIA. FRANCE. Gunboat diplomacy.
Paris faces stiff competition in Delhi.
India’s defence ministry gave its approval on Monday to purchase 26 Dassault Rafale fighter jets and three Scorpène submarines from France, media said. Narendra Modi will be guest of honour at Friday's Bastille Day parade in Paris.
INTELLIGENCE. France is keen to remain a lead supplier to India’s military. Delhi has a budget few can match, and every plane or ship sold by Paris is one that’s not sold by Moscow. Yet efforts by the US to wean India off Russian arms won’t necessarily benefit France, which though a US ally, is a competitor in defence sales. And India’s main aim is to grow its domestic industry. For that, with its more open approach to technology transfer, Moscow is still ahead.
FOR BUSINESS. India has become a major defence customer for France, but previous contracts have not been straightforward. A previous deal to supply 126 Rafale fighter jets in 2012 was mired in controversy, including over alleged corruption and side deals for the then-girlfriend of former French President Francois Hollande. India later bought just 36.Another contract, involving Dassault Mirage 2000 aircraft, is under investigation for illicit payments.
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