Ukraine, NATO: Not yet.
Also: Saudi Arabia, Pakistan, Paraguay, Taiwan, technology mergers, Australia, the EU, China and Zimbabwe.
UKRAINE. NATO. Not yet.
A hollow communiqué fools nobody.
NATO leaders declared on Tuesday that Ukraine’s “future is in NATO” but failed to offer a clear timeline for Kyiv’s ascension. Volodymyr Zelensky complained there was “no readiness” among allies to invite Ukraine to join.
INTELLIGENCE. The NATO communiqué agreed Ukraine could join “when Allies agree and when conditions are met”, waiving the need for Ukraine to complete a Membership Action Plan. While the statement appears to offer promise, Zelensky is right – NATO is not ready to admit Ukraine and the communiqué is little more than a chimera. If Ukraine joins, NATO would be at war with Russia; dragging in the US, Europe and, eventually, the entire world.
FOR BUSINESS. While offering little for Zelensky, NATO members did restate a commitment to invest 2% of their GDP on defence.For many members, that represents a significant increase – if it can be believed. Only seven of 31 members reached the target in 2022 and, excluding Washington, defence spending is just 1.74% of GDP across the alliance. Shifting strategic times might now see NATO members make a genuine effort. Or at least that’s the hope.
SAUDI ARABIA. PAKISTAN. Brotherly love.
Riyadh gives Islamabad some breathing room.
Saudi Arabia deposited $2 billion into Pakistan’s central bank, Riyadh said on Tuesday, a day before a key meeting of the IMF Board to finalise a $3 billion rescue plan for Pakistan’s economy.
INTELLIGENCE. Saudi Arabia has long been Pakistan’s ally. Both are leading members of the Organisation of Islamic Cooperation, and Riyadh was a big supporter of Pakistan during its wars with India in the 1960s and 1970s, not to mention its adventures in Afghanistan since the 1980s. Today, Riyadh is a bit more careful with its oil revenues, but Islamabad is perceived to provide a reliable nuclear-armed security safety net should the US ever exit the region.
FOR BUSINESS. Saudi money, pledged in April, had been conditional on an approved IMF program. Fitch, on Monday, upgraded Pakistan’s sovereign rating from CCC– to CCC. But Pakistan remains near default, inflation is running at 29% and fiscal discipline is necessary. A lack of foreign currency is meanwhile felt not just by investors, but everyday Pakistanis who cannot access food and medicine. With elections due in October, Islamabad still faces an uphill battle.
Written by former diplomats and industry specialists, Geopolitical Dispatch gives you the global intelligence for business and investing you won’t find anywhere else.
PARAGUAY. TAIWAN. Holding back the years.
Asunción is an outlier in a region drawn to Beijing.
Santiago Peña, Paraguay’s returning president, arrived in Taipei on Tuesday for a visit to reinforce diplomatic ties. As Taiwan’s list of diplomatic allies dwindles, Peña pledged to increase trade and investment ties.
INTELLIGENCE. Paraguay is one of just 13 countries that still diplomatically recognise Taiwan over China. It is also one of Taipei’s last remaining Latin American allies, after Honduras bailed in March. In company with Nauru, Palau, the Vatican and Eswatini, Paraguay is hardly in heavyweight company, but for now – insulated between its giant neighbours of Brazil and Argentina – it perceives it can afford to be a geopolitical anomaly.
FOR BUSINESS. Peña may face no security threats, but he is facing strong economic opposition from Paraguay’s agriculture sector, which wants to open to Chinese markets for soybeans and beef. And with exports to China worth just $21 million in 2022, versus imports worth a lop-sided $4 billion, the weight of opportunity is likely eventually to catch up. Paraguay’s September 2022 request for Taiwan to invest $1 billion, meanwhile, remains unanswered.
TECHNOLOGY MERGERS. Technical difficulties.
Regulators continue divergent approaches to big tech.
A California judge ruled on Tuesday that Microsoft’s proposed $69 billion acquisition of videogame maker Activision could go ahead. Europe has approved the deal, but Britain’s regulator remains a stumbling block.
INTELLIGENCE. Microsoft has seemingly cleared two of the three antitrust regulators needed to complete the acquisition. The EU stated previously it was satisfied Microsoft would keep Activision’s games available on rival consoles. But the UK regulator said in April it was concerned about competition in the growing cloud gaming market. As the gaming market surpasses $250 billion globally, one of the biggest deals in its history remains far from certain.
FOR BUSINESS. The divergent approach highlights the difficulty for large businesses to keep everyone happy. Amazon has filed a petition disputing its obligation to proactively mitigate certain content in the EU. Meta’s Threads platform is yet to receive EU approval due to privacy concerns. And UK chip designer Arm is again in talks with Nvidia for investment for its upcoming NY listing, following an abandoned $66 billion acquisition last year due to regulators.
With the brevity of a media digest, but the depth of an intelligence assessment, Daily Assessment goes beyond the news to outline the implications.
AUSTRALIA. EUROPE. Not for ewe.
A much-vaunted trade deal fails to materialise.
Australia’s trade minister left Brussels on Tuesday unable to secure a free trade deal with the EU. Australia’s prime minister, visiting Europe for the NATO summit, said he would push French President Macron to yield on agriculture.
INTELLIGENCE. The EU remains reluctant to (further) upset its farming sector by reducing tariffs and quotas on key products. It is also continuing to push for exclusive naming rights on products such as feta, which Australia believes is not a geographic indicator. The brinkmanship is unsurprising and part of any good trade deal, but if an agreement cannot be landed within the next month, it will likely get pushed back to after the EU’s 2024 parliamentary elections.
FOR BUSINESS. While the EU signed a deal with New Zealand on 9 July and one with Kenya in June, the interests at stake were far narrower. At best, an implemented Australia-EU deal is 12 months off. At worst, another few years. Neither scenario bodes well for South America’s Mercosur bloc. More immediately, from October, the EU phases in its carbon border adjustment mechanism on countries like Australia, to tax carbon-intensive imports such as steel.
CHINA. ZIMBABWE. I'm so happy 'cause today I found my friends.
China is on a global hunt for lithium.
Chinese battery maker Sinomine Resources announced on Monday it had completed a spodumene concentrate facility in Zimbabwe. Last week, Prospect Lithium, another Chinese firm, opened a $300 million processing plant near Harare.
INTELLIGENCE. Zimbabwe has Africa’s largest lithium reserves, but last year banned the export of lithium ore to encourage local processing. Across Africa, Chinese mining and battery firms have invested $4.5 billion in lithium projects over the past two years. China’s investments are part of a global strategy to secure resources and defend its dominance in electric vehicle metals processing, in addition to ambitions within its own neighbourhood.
FOR BUSINESS. China dominates the global critical minerals supply chain, enjoying 60% of worldwide production and 85% of processing capacity. And while from a low base, Chinese investment is expected to catalyse African lithium production 30-fold by 2027. Western policymakers are finally looking to counter. Morocco, which has a trade deal with the US and an abundance of phosphate, is emerging as a possible location for EV battery production.
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