The US, Iran: Signal to noise
Also: Europe, Ukraine, Russia, Turkey, Moldova, and Egypt.
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UNITED STATES. IRAN. Signal to noise
Washington sends a carefully mixed message to Tehran.
Pentagon officials on Thursday outlined plans to strike Iranian targets in Iraq and Syria following Sunday's deadly attack on a US outpost in Jordan. Iran's Revolutionary Guards pulled out senior personnel from Syria this week, sources said.
INTELLIGENCE. Iran withdrew its officers on account of earlier Israeli missile strikes. Yet they will minimise the costs of, and reduce the need to retaliate to, any US attacks, which Washington has now deliberately telegraphed. Analysts will debate whether US caution is advisable, but a judgment has seemingly been made that real deterrence in the Middle East isn’t worth the costs – particularly ahead of Iran’s elections, where hardliners will welcome escalation.
FOR BUSINESS. While still the region’s hegemon, the US is showing a weakening resolve. Strikes in Yemen have been tepid (partly, we suspect, out of deference to Riyadh). Wary outreach has been made to Hezbollah. Previously vocal support for Israel has been moderated (including through new sanctions on settlers). US allies in the Gulf will now need to determine how to cope with this emerging reality, as will the many Western businesses that are present there.
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EUROPE. UKRAINE. Orban planning
Hungary agrees to the EU’s €50 billion package, but has not revealed its price.
Hungary’s Viktor Orban agreed to support a four-year EU aid package to Ukraine on Thursday with few concessions, surprising many expecting long negotiations. Volodymyr Zelensky welcomed the aid as a sign of unity against Russia.
INTELLIGENCE. Orban’s assent has been cast as a surrender to the EU’s other members, but the wily five-term leader – the EU’s longest-serving – will have unlikely agreed without a plan. Budapest is seeking €20 billion in EU funds, withheld over democracy and civil rights concerns. He will hope his reluctant flexibility on Ukraine will be rewarded as he looks to take another decision on which Hungary remains the sole objector: Sweden’s membership of NATO.
FOR BUSINESS. The funds will be a morale boost to Kyiv. While they won’t compensate for a lack of arms, they will take the heat off Zelensky as speculation continues over the future of his military chief and the wider Ukrainian war effort. The funding will also put more pressure on Washington to send further aid of its own, though conversely, many opponents in Congress will see this as another excuse to put any additional money on the backburner.
TURKEY. RUSSIA. Sultan of swing
Erdogan shows that he, too, can bargain.
Officials said Wednesday that Vladimir Putin will visit Turkey on 12 February, his first to a NATO member since 2022. The US said Monday Turkey could re-join the F-35 program if it gave up Russia’s S-400 missile defense system.
INTELLIGENCE. After belatedly consenting to Sweden’s NATO membership, Turkey is characteristically swinging back to its non-Western partners, including Russia and Iran, whose foreign minister visited Ankara last week. With a neo-Ottoman foreign policy, President Recep Tayyip Erdogan has made geopolitical ambiguity an art. But more than just fence-sitting, he seeks to leverage Turkey’s central role in regional transportation, energy and migration corridors.
FOR BUSINESS. Turkish vacillation has gotten its firms in trouble. Washington on Wednesday sanctioned a Turkish entity for supporting Iran, just as Turkish banks are cracking down on Russian accounts. Portfolio investors have returned on improving fundamentals, but Turkey remains on the FATF 'grey list' for money laundering and terrorist financing compliance. Mega projects, like a Chinese nuclear power plant and a Tesla factory, remain unrealised.
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MOLDOVA. Now in Chisinau
Europe’s latest protests have a dangerous edge.
Thousands of pro-Moscow protesters demonstrated in Chisinau on Thursday, demanding Moldova’s pro-EU leaders resign. Moldova would be Russia's next target, should it win in Ukraine, Romania's defence chief warned Wednesday.
INTELLIGENCE. Most have been watching the farmer protests in Brussels, but the demonstrations in Moldova's capital concern a bigger disagreement than trade or environmental regulation. While only around 4% of Moldovans identify as Russian (down from 13% before the collapse of the USSR), they are concentrated in the south, as well as the breakaway strip of Transnistria, leaving the country vulnerable to Donbas-style war justifications from Moscow.
FOR BUSINESS. Moscow seems unready to open a new front, but with Vladimir Putin facing a new challenger for elections next month, planners from Chisinau to the Baltics – where a Latvian MEP has been accused of being a Russian spy – are taking no chances. The EU wants to incorporate Moldova as a deterrence (constitutional neutrality and Transnistria prevent it joining NATO). Russian control of Moldova would give it 680km of additional NATO border.
EGYPT. Shifting sands
Cairo’s challenges build up.
Cairo said Thursday that Israel's operations in southern Gaza could cause thousands to flee into the Sinai. The IMF agreed Thursday to key aspects of Egypt's reform program but stopped short of finalising a new $3 billion loan.
INTELLIGENCE. Beyond Gaza’s blow to tourism and the Houthis’ impact on Suez Canal fees, Egypt is struggling under an unbalanced, military-heavy economy, a lack of jobs for its youthful population, and wars along every border. And rather than Gaza, it’s the wars to the south that really worry Cairo. A Rapid Support Force win in Sudan could create a hostile neighbour. In Ethiopia, a conflict with Somalia could kill any chance of a negotiated settlement on Nile flows.
FOR BUSINESS. Egypt has one of the region’s top militaries, but with a history of local unrest, its leadership has been unwilling to intervene abroad (though it has made threats to Ethiopia). The approach may frustrate Egypt's hawks, but the economy can't take risks, particularly if a currency devaluation is on the cards. It is instead trying diplomacy. Erdogan will visit in March after a ten-year gap. It is reportedly hosting direct talks between Hamas and Israel.