The US: Swamp things.
Also: the Pacific, China, the Philippines, Egypt and Mali.
Please note that Geopolitical Dispatch will take a break on Thursday and Friday this week. Our usual weekend Not in Dispatches will be published on Saturday.
UNITED STATES. Swamp things.
Washington is caught in the mire.
Donald Trump urged Congress on Monday to let federal funding lapse, with a shutdown due on Sunday if a deal isn’t reached. Senator Bob Menendez defended against bribery charges, attributing cash and bullion to “old-fashioned” habit.
INTELLIGENCE. Freedom Caucus Republicans have a minority of House seats but have been buoyed by recent polls showing a 10-point lead for Trump over Joe Biden. Economic suicide would presumably harm this advantage, but should the US go into recession, the blame will be shared. Also helping the hardliners are last week’s charges against Senate Foreign Relations Committee Chair Menendez over alleged bribes from the Egyptian government.
FOR BUSINESS. Shutdowns under Reagan, Clinton and Obama didn’t limit their terms, but furloughs and payment delays have an economic cost. They also harm Washington's credibility at home and abroad. While the US continues to attract migrants and capital, rising populism diminishes democracy and business certainty. High-risk politics continues this week, including with Biden today joining a United Auto Workers picket line – a presidential first.
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UNITED STATES. THE PACIFIC. Blue ocean strategy.
The battle for midway islands continues.
Joe Biden hosted Pacific leaders on Monday, opening diplomatic ties with two microstates, and pledging $40 million for infrastructure. Vanuatu's government faced a no-confidence vote on Tuesday, just weeks after taking power via one.
INTELLIGENCE. The White House has pursued an overdue regional charm offensive, with all members of the Pacific Islands Forum attending other than pro-China Solomon Islands and Vanuatu (albeit with a good excuse for the latter). Still, the occasion was marred by Biden mixing billions for millions in his speech (with notable disappointment) and China announcing on Saturday the upgrade of relations with East Timor to a “comprehensive strategic partnership”.
FOR BUSINESS. With the support of allies Australia, France, Japan and New Zealand, the US remains dominant in the Pacific, but China is catching up, viewing the region as part of its sphere of influence. Beijing has little economic sway in the tourism and aid-dependent economies of Polynesia and Micronesia, but it is now the top trade partner for the larger states of Melanesia, including Papua New Guinea, despite the latter’s recent defence pact with Washington.
With the brevity of a media digest, but the depth of an intelligence assessment, Daily Assessment goes beyond the news to outline the implications.
CHINA. THE PHILIPPINES. Cutting the nine-dash line.
Tension builds again in the South China Sea.
Filipino officials, posing as fishermen, on Monday cut through a floating Chinese barrier at the Scarborough Shoal, which both nations claim. Manila last week said it was exploring legal options over Beijing’s damage to nearby reefs.
INTELLIGENCE. Beijing reacted badly when Manila last pursued arbitration over their overlapping claims. The Philippines’ latest moves, likely taken in consultation with the US, will enrage China, but may not count for much unless other Southeast Asian claimants take similar action. Despite closer ties with the US and rumours of an arms deal, Vietnam has been reluctant to internationalise the dispute. Malaysia and Brunei have opted for quiet diplomacy.
FOR BUSINESS. A third of the world’s cargo transits the South China Sea. New developments not only imperil maritime trade, but the Philippines’ broader ties with China. China pledged $22.8 billion in investment when President Ferdinand Marcos visited Beijing in January. Earlier this month, Marcos told Chinese Premier Li Qiang the Philippines would “continue to push for cooperation.” Many of Manila’s biggest firms are controlled by ethnic Chinese families.
EGYPT. Pyramid schemes.
The curse of the Pharaoh.
Cairo on Monday announced elections would be held on 10-12 December, which President Abdel Fattah el-Sisi is widely expected to win. Egypt's central bank kept rates at 20.25% on Thursday, despite record inflation of 37.4% in August.
INTELLIGENCE. El-Sisi, nicknamed the Pharaoh, brought political stability when he overthrew a short-lived Islamist government in 2013, but his economic record is mixed. While he has implemented some IMF-backed reforms, he has also pursued wasteful mega-projects, including a capital in the desert. Further, he has lost Egypt’s sway in the upper Nile. Sudan is in civil war. Ethiopia is building a giant dam. Talks on the project failed to make headway on Sunday.
FOR BUSINESS. Egypt’s mega-projects are good business for El-Sisi’s army friends, but they are failing to grow the economy out of its high unemployment and debt. Food and fuel subsidies, which once insulated Egyptians from penury, have been cancelled to pay for the schemes, but rising commodity prices are forcing a rethink. The UAE, a traditional ally, is considering loans to purchase wheat. The Egyptian pound has lost half its value since March 2022.
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MALI. Pain in the ASS.
Jihadists versus a junta alliance.
Mali's junta said Monday it would postpone elections in February. Fighting between the military and Jihadist rebels intensified in the north last week. On Saturday, a Belarus-registered cargo aircraft crashed near a former UN base.
INTELLIGENCE. Since UN peacekeepers began withdrawing, insurgent attacks have doubled in Mali, whose military government has opted to rely on Russia’s Wagner Group and its fellow military-run neighbours. Last week, Mali joined Niger and Burkina Faso to announce the Alliance of Sahel States (ASS), but it is hard to see how a mutual defence pact will work among states that barely control their own territories; a point being made by France as it exits Niger.
FOR BUSINESS. A wave of anti-Western sentiment across Africa has led to new security vacuums as peacekeepers and military advisors depart. Some states, like Somalia, are reconsidering their requests for withdrawal. Others, like the Democratic Republic of Congo, are doubling down. It’s not helped by Russian rumours that France is supporting the rebels operating in Mali’s north. It’s a reflection of the operating environment that such rumours are believed.