Timor-Leste: Xanana republic.
Also: Russia, China, Saudi Arabia, Israel, Hungary, the EU, Russia, Turkey, Thailand, Japan and Warren Buffett.
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TIMOR-LESTE. Xanana republic.
A septuagenarian ex-rebel regains control of a fragile state.
East Timor's election commission on Tuesday declared 31 out of 65 seats to the party of resistance leader Xanana Gusmao, just short of a majority. Gusmao’s ally Jose Ramos-Horta won the largely ceremonial job of president in 2022.
INTELLIGENCE. Since regaining independence in 2002, after Indonesia invaded the former Portuguese colony in 1976, Timor-Leste has been led by a small group of independence fighters, receiving popular acclaim abroad but governing with an economic style more Latin America than East Asia. Gusmao’s return to power after eight years heralds a return to type, with implications for his pet South Coast pipeline project, which has stalled the development of the 5.3 trillion cubic foot Greater Sunrise gas field astride the country’s renegotiated maritime border with Australia.
FOR BUSINESS. Though uneconomic, Gusmao sees a South Coast energy hub as the solution for his country’s depleted sovereign wealth fund. Chinese firms are the only ones likely to realise Gusmao’s dream, which worries Timor’s neighbours. The West supported Indonesia’s Cold War annexation on the premise of stopping another ‘Cuba’.
RUSSIA. CHINA. SAUDI ARABIA. Free movement.
Sanctioned Kremlin officials get the red carpet.
Russia's prime minister met Xi Jinping in Beijing on Wednesday after leading a major delegation to Shanghai on Tuesday. The same day, Russia's interior minister met his Saudi counterpart in Riyadh to discuss security cooperation.
INTELLIGENCE. US and European travel bans are not dissuading others from receiving Russian visits, which are gathering pace as Moscow seeks to maintain diplomatic and economic alternatives to the West. This week, former president Dmitry Medvedev travelled to Vietnam and Laos, where he warned the West was stoking a “nuclear apocalypse”. Last week, businesses from across the Muslim world attended the 14th Kazan Forum in Tatarstan. Next week, Belarus’s president will visit Moscow after last week being presumed dead by many in the Western media.
FOR BUSINESS. Cut-price Russian oil continues to lubricate non-Western ties, particularly after the G7 took kid gloves to third-country sanctions on the weekend. Dealing with a pariah also lets populists thumb their noses at Washington. Brazil’s president seemed to relish being stood up by Zelensky at the G7, giving him cause to grandstand on the West.
ISRAEL. SAUDI ARABIA. Grand bargain.
Israel won’t get the red carpet but the Saudis might offer something better.
Saudi Arabia's crown prince rejected a meeting request from Israel's prime minister, according to regional media on Tuesday. Israeli sources on Monday said the two leaders spoke on the weekend about direct flights for the Hajj.
INTELLIGENCE. The reports may amount to nothing, but there have been persistent rumours in recent months about an Israel-Saudi accord being negotiated by the US. The precedent exists – Saudi Arabia recently agreed to restore ties with Iran in a deal brokered by China – but Mohamad bin Salman, who secretly met Benjamin Netanyahu in 2020, won’t want to give Israel a victory while tensions simmer in Gaza and the West Bank, which saw three killed on Tuesday. The Crown Prince told the Arab League last week that Palestinian statehood remained a “top priority”.
FOR BUSINESS. A deal would tempt both sides, mainly if it meant the US would unfreeze Saudi arms sales. Still, domestic politics is in the way. Firebrand Israeli minister Itamar Ben-Gvir, who provocatively visited the Temple Mount on Sunday, waved through Netanyahu's 2023 budget early Wednesday. His price: more funds for Jewish settlements.
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HUNGARY. EUROPEAN UNION. RUSSIA. Hungary games.
Viktor Orban is, for many, Europe’s most annoying man.
Hungary's prime minister told a forum in Qatar on Tuesday the war in Ukraine could only be settled by a Russia-US deal. He added that Hungary wasn’t ready to approve Sweden's NATO bid and he hoped Trump would win the US election.
INTELLIGENCE. Despite new assistance agreed to by other partners, Hungary continues to buck the European trend on Ukraine and maintains a studied ambivalence toward Russia. Orban is not, however, just parlaying with fellow strongmen but wishes to strengthen his negotiating hand with the European Commission, which is in talks with Budapest about unblocking €36 billion in EU funds. The tactics are popular. Orban’s Fidesz party continues to lead its nearest rival by about 30 points, notwithstanding the bloc’s inflation levels and a long-term cash rate of 8.35%
FOR BUSINESS. Amid a deteriorating economy, Budapest’s stance seems illogical, but as long as Orban remains popular, he will pursue unconventional policies. Being kicked out of the EU or NATO are genuine tail risks for Hungary, but Germany will not want to lose a cheap manufacturing hub on its doorstep nor buoy the cause of other populists.
TURKEY. THAILAND. No cigar.
As this month’s election winners get closer to power the markets waver.
Turkey’s third-place candidate endorsed President Recep Tayyip Erdogan on Monday ahead of Sunday’s run-off vote. Thailand's Move Forward Party agreed an eight-party coalition on Monday, though it needs more to avoid an army veto.
INTELLIGENCE. Erdogan’s leadership appears unassailable and foreign investors are worried as the lira plumbs new depths. But local firms may benefit from his neo-Ottoman policies if they can secure hard currency. Last week, Uganda said it would award a $2.2 billion former Belt and Road rail project to Turkish company Yapi Merkezi after terminating talks with China. The Thai baht has also cooled on fears that democrat and Harvard alum Pita Limjaroenrat may fall short of the 376 seats needed to avoid compromise with the military-controlled Senate.
FOR BUSINESS. While crony capitalists breathe relief in Turkey – and look set to benefit from Erdogan’s frenetic diplomacy in the Middle East and Africa – the picture is murky in Thailand. Incumbent firms don’t want Limjaroenrat’s disruptive platform, but reform can’t be guaranteed for new entrants while power remains diffuse.
CHINA. JAPAN. BERKSHIRE HATHAWAY. Oma-harbinger.
The Oracle of Omaha cycles away from Beijing.
An interview with Warren Buffett on Tuesday further outlined the investor’s thoughts on the risks shaping his pivot from China to Japan. The Nikkei dropped 1% on Wednesday, the second daily fall, as investors took profit from a recent rally.
INTELLIGENCE. Since Buffett outlined his Japan-China views at Berkshire Hathaway's shareholder meeting on 6 May, Tokyo’s benchmark Nikkei index has rallied to 33-year highs. After Buffett described Taiwan Semiconductor Manufacturing as a great business with a terrible location, China raised the stakes for other chipmakers seeking to steal a march. While geopolitics, let alone the views of one investor, cannot explain everything in markets, the risk of a war over Taiwan is a genuine business disincentive and is playing out beyond the daily financial data.
FOR BUSINESS.US-based Micron Technology remains in limbo after China banned its goods on Sunday over security risks. Japanese manufacturers were in Beijing’s sights on Tuesday, saying Tokyo's restrictions on 23 types of chipmaking technology, announced Monday, were “abuse”. China and Japan sparred earlier this week over the G7.
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