The US: Animal house.
Also: The Philippines, Malaysia, India, Armenia, Russia, Algeria and Niger.
UNITED STATES. Animal house.
Treasury yields spike as Congress goes feral.
Republican hardliners joined Democrats on Tuesday in the first ousting of a House of Representatives speaker in US history. US Treasury 10-year bond yields reached a 16-year high on Tuesday. German 10-year yields hit 12-year highs.
INTELLIGENCE. Speaker Kevin McCarthy was unpopular with many Republicans, and will not run again, but Congress is in genuinely unchartered territory. Events on Wall Street were not necessarily related but speak to an increasingly febrile market sentiment. Ten-year Treasury yields have returned to their 230-year average for the first time since 2007, which may also signal the end of ultra-cheap debt. Even Japanese bond coupon rates are at 10-year highs.
FOR BUSINESS. Government borrowing costs have an economy-wide influence – particularly when the government is in shambles – from mortgages to business credit. The challenge for firms is re-adjusting to an environment with permanently higher yields. As investors move more money into bonds and out of shares, equity markets are being negatively affected. Higher US yields also mean a stronger dollar, which will continue to pressure other currencies.
Written by former diplomats and industry specialists, Geopolitical Dispatch gives you the global intelligence for business and investing you won’t find anywhere else.
THE PHILIPPINES. MALAYSIA. Wild rice.
Price rises for rice pose political challenges.
The president of The Philippines lifted caps on rice prices on Wednesday, as inflation-limiting controls broke down. Malaysia’s prime minister threatened action on Monday against anyone hoarding rice amid nationwide shortages.
INTELLIGENCE. The Philippines is the world’s largest rice importer, while Malaysia imports around 40% of its supplies. Despite their reliance on other exporters, such as Thailand and Vietnam, both are reeling from the flow-on effects of India’s recent trade restrictions. The lack of availability has led to panic-buying and stockpiling across Malaysia. Kuala Lumpur has since announced subsidies of around $200 per ton of imported rice starting Thursday.
FOR BUSINESS. Poorer countries in Southeast Asia have also felt the impact of India’s rice export ban. Around 90% of the world’s rice is produced and consumed in Asia. Global prices climbed to 15-year highs following India's ban on exports last month. The world’s second and third largest exporters – Thailand and Vietnam – have been unable to step up yields due to limited fertiliser supplies (thanks to the war in Ukraine), and the predicted impacts of El Niño.
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. Click bait.
Liberal democracy takes another blow.
Police in Delhi raided the offices and homes of journalists at online news site NewsClick on Tuesday, a media outlet known for outspoken criticism of the Modi government. India asked Canada to send home 41 diplomats on Tuesday.
INTELLIGENCE. Delhi said NewsClick had received funds from China in return for pro-China propaganda. The raids were conducted under anti-terrorism and money laundering laws. Delhi has meanwhile accused Canada of harbouring terrorists, following Justin Trudeau’s accusations of India’s hand in the killing of a Canadian Sikh activist. From Western NGOs to the BBC, Modi has increasingly sought to internationalise domestic political opposition.
FOR BUSINESS. Ties between India and China continue to be strained. Border clashes in 2020 led to deaths on both sides and the banning in India of Chinese firms like TikTok. Ties with Canada are worsening by the day. India is trying to remain on good terms with the US, its top export partner, but its actions are highlighting human rights concerns to Washington. India, once known for its outspoken media, has fallen to 161st in the World Press Freedom Index.
ARMENIA. RUSSIA. No friends at court.
A further shift to the West won’t necessarily be rewarded.
Armenia voted to join the International Criminal Court on Tuesday, in response to the military action by Azerbaijan in the once Armenian-majority Nagorno-Karabakh region and its increasingly strained ties with erstwhile ally Russia.
INTELLIGENCE. The move further complicates ties with Moscow and brings Yerevan closer to the West. Russia was the primary peacekeeping force in Nagorno-Karabakh, but Armenia has been grossly disappointed by the Kremlin’s inaction since Azerbaijani forces moved in. Putin is subject to an outstanding ICC arrest warrant, which Yerevan would now be required to honour if Putin entered Armenian territory, despite it promising not to do so.
FOR BUSINESS. Armenia on Monday said 100,520 had left Karabakh out of a pre-takeover population of 120,000. The ICC move signals a further shift to the West. But Azerbaijan has plans to supply up to one-fifth of the EU’s gas by 2027 and just as Russia has seemingly sided with the larger and more prosperous Caucasus country, the strategic logic suggests the West, in time, will too, particularly if Azerbaijan remains a vital route for European airlines to Asia.
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ALGERIA. NIGER. Gaslighting.
Niger’s economy is in trouble following the coup.
Niger banned all exports of liquefied petroleum gas on Tuesday, noting in a statement that all production should supply domestic needs. Niger's military on Monday said 29 soldiers had been killed by jihadists near the border with Mali.
INTELLIGENCE. Most of Niger’s exports previously went to neighbouring Nigeria. The move is intended to alleviate price pressures domestically. Since the coup, the price of staples has exploded, due to regional sanctions and border closures. Meanwhile, Niger has accepted Algeria’s offer to negotiate a deal to institute a civilian-led government and restore order. Yet without the presence of French troops, Niger’s security vacuum will only worsen.
FOR BUSINESS. The export ban shows the deteriorating status of Niger. It also calls into question the viability of a proposed $13 billion, 4,128km gas pipeline, which aimed to supply Europe with gas from both southern Nigeria, Niger and Algeria. It has been touted for 20 years as a potential economic boon for the region, but politics keeps getting in the way. Other projects, such as a Chinese-backed oil pipeline and hydroelectric scheme, are also in doubt.