The Balkans: Serb your enthusiasm
Also: Bulgaria, Ukraine, Russia, Argentina, and Angola.
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THE BALKANS. Serb your enthusiasm
Bosnia’s EU membership talks won’t be straightforward.
Brussels recommended EU membership talks begin for Bosnia-Herzegovina Tuesday. Washington said it expects a greater risk of violence in the Balkans this year. The State Department said it would send a senior official to the region.
INTELLIGENCE. To solve the Balkans’ various ethnic conflicts, the West sees EU – and eventually NATO – membership as a solution. Yet for talks to proceed, the conflicts need to be resolved. Internal and external actors are being incentivised to raise the costs and stall progress. Bosnia’s Serb minority – led by an administration as much aligned with Moscow as with Belgrade – need to be assuaged. Kosovo’s Serbs won’t wish to be forgotten either.
FOR BUSINESS. Creative solutions have been offered to appease Bosnia’s ethnic communities since the 1996 Dayton Accords. But while EU membership offers a valuable incentive to all, many will oppose it. Many will also seek to exploit the EU’s newfound eagerness to incorporate Bosnia – part of a broader anti-Russian push involving accession for Ukraine and Moldova. It will likely be many years yet before the marka is replaced by the euro, to which it is pegged.
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BULGARIA. Sofia’s choice
A power-sharing deal becomes a power play.
Talks continued Tuesday on a new coalition, following last week's resignation of Prime Minister Nikolai Denkov. IMF Managing Director Kristalina Georgieva said she was optimistic Bulgaria would join the Eurozone next year as planned.
INTELLIGENCE. The transfer of power from Denkov, of the centrist Change Continues party, to Mariya Gabriel, of the conservative GERB, was supposed to be smooth. Yet their coalition has seemingly fallen apart amid a looming Euro accession and debates on Bulgaria's position between its European present and its Russian-aligned past. The pro-Kremlin Vazrazhdane party, which opposes the Euro’s adoption, has recently aligned itself with farmer protests.
FOR BUSINESS. Vazrazhdane has sought the intervention of President Rumen Radev, aligned with the pro-European Socialists but also not unfriendly to Russia. It’s not clear they’ll get their way (and elections aren’t due until 2027) but instability in the Denkov-Gabriel government could weaken Sofia’s reliability as an EU and NATO partner at a critical moment for the region. Like opposition parties from Moldova, Vazrazhdane deputies last month visited Moscow.
UKRAINE. RUSSIA. Feint accompli
Kyiv’s latest moves capture headlines but little else.
Ukrainian drones damaged a Russian refinery Tuesday as Moscow said it had killed 234 fighters attempting a border raid. The US announced $300 million in emergency aid as Congress was criticised over a stalled $60 billion package.
INTELLIGENCE. It’s unclear if Ukrainian regulars or anti-Kremlin Russian rebels led the cross-border attacks, but Kyiv seeks to highlight Putin’s vulnerability days out from his almost certain re-election. Strikes on Russian infrastructure and naval assets are designed to have a similar effect – and Ukraine’s Black Sea successes have at least forced a purge in Russia’s navy – but without substantial US funding, these actions will only make a marginal difference.
FOR BUSINESS. Kyiv’s strikes will boost morale but won’t stop Moscow’s grinding assault. Similarly, piecemeal aid and pledges from Europe will grab attention but won’t come close to a concerted US effort. Poland’s visiting prime minister said as much in Washington on Tuesday, but by browbeating House Republicans he will only alienate would-be supporters. Harsh language on “cowards” from France’s president has had a similar effect at home and abroad.
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ARGENTINA. 80/20 rule
Inflation cools as risk appetite grows.
Argentina's central bank cut its benchmark rate from 100% to 80% Monday, surprising markets. Monthly inflation fell to 13.2% Tuesday, a fall from 20.6% in January and 25.5% in December. Buenos Aires announced a $65 billion bond swap.
INTELLIGENCE. President Javier Milei has struggled to enact reforms through an opposition-dominated congress – made worse by awarding himself a 48% pay rise (which he claims not to have approved) – but his austerity measures are being felt in the economy and rewarded by the markets. He will have to hope investor enthusiasm maintains popular faith. Not yet 100 days in office, his approval rating has already fallen from 60% to the high 40s.
FOR BUSINESS. If Milei can maintain political momentum and avoid the more extreme urges of other Latin American libertarian populists – from Fujimori to Bolsonaro – he could fix Argentina. But he also needs more luck. Intense rain has damaged this year's drought-affected soybean crop, a key source of hard currency, though wheat plantings could benefit, and corn exports are at five-year highs. Low lithium prices have so far curtailed hopes for a mining boom.
ANGOLA. Increasing Lobito
Washington and Beijing compete for Luanda’s attention.
President Joao Lourenco will visit China on Thursday. Angola last week was given approval for the EU's first sustainable investment facilitation agreement. The deal follows a range of announcements made with the US in January.
INTELLIGENCE. The US and EU have focussed on upgrading a Portuguese-era rail line connecting the port of Lobito to the Copperbelt. The project was previously contracted to Chinese firms. In turn, it is hoped Angola can use its connectivity and ties with the Congo to bring peace to that country’s restive east. And it may have already delivered an early win, with the presidents of Rwanda and the DRC agreeing to meet following a summit in Luanda on Monday.
FOR BUSINESS.After a hard 2023, where a lifting of fuel subsidies led to deadly protests, Luanda hopes to turn geopolitical attention into growth. It is preparing a dollar bond and wants to ramp up oil production, having left OPEC last year. But Western investments tend to be market-led and don't always arrive in the form leaders want. China, Angola’s main oil buyer, and, until recently, Lobito’s main investor, will be motivated to offer an alternative.