Ukraine, Russia: Black Sea day.
Also: Argentina, Germany, Turkey, China and New Zealand.
UKRAINE. RUSSIA. Black Sea day.
Moscow threatens all cargo, not just grain.
The Kremlin on Wednesday said that any ships heading to Ukrainian ports would be viewed as potential military targets, a day after Moscow’s repudiation of the Black Sea grain deal. Attacks on export infrastructure continued into Thursday.
INTELLIGENCE. Ukrainian officials said Russia targeted port infrastructure in Odesa and Chornomorsk, two of the three ports included in the original grain export deal. Agriculture Minister Solskyi said a ‘considerable amount’ of export infrastructure was out of operation, and up to 60,000 tonnes of grain were lost. Kenya called Russia’s withdrawal from the grain deal a ‘stab in the back’ amid a food shortage crisis in East Africa.
FOR BUSINESS. Russia’s statement is deliberately imprecise, intending to intimidate commercial shipping and halt trade through key Ukrainian ports. Operators and insurers will view the declaration with distress – it means putting sailors’ lives at risk to continue ordinary trade – and it will place more pressure on Danube ports in Romania. The move comes as Turkish group Onur and Korea’s Samsung reportedly signed a deal to rebuild Ukrainian infrastructure.
ARGENTINA. Cry for me.
Exports fall for another big grain exporter.
Data released Wednesday showed Argentina recorded its worst monthly trade deficit in June. A delegation from Argentina is meanwhile in Washington to meet the International Monetary Fund to renegotiate a $44 billion loan.
INTELLIGENCE. South America’s second-largest economy is struggling from the impact of the drought, severely limiting the ability of farmers to export soy, corn, and wheat. While drought conditions may improve as La Niña exits, soil degradation and water management issues mean farmers’ yields are likely to remain sub-par. Meanwhile, Argentine inflation sits at around 100%, only behind Venezuela and Zimbabwe, themselves once major exporters.
FOR BUSINESS. Argentina is again seeking to revise benchmarks agreed with the IMF and bring forward planned disbursements from the loan. It is also attempting to push back some of the $2.6 billion in interest owed to the fund at the end of July, thus limiting the impact on its depleted foreign reserves. Domestic interest rates sit at a staggering 97%, further crimping business activity. Despite billions in assistance over decades, Argentina’s woes are structural.
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GERMANY. Dirty laundry.
Another big bank falls short on anti-money laundering requirements.
Deutsche Bank was fined $186 million by the Federal Reserve on Wednesday for failing to implement adequate money laundering controls. The charges relate to a 2017 case involving Estonia, Danske Bank and relatives of Vladimir Putin.
INTELLIGENCE. The fine is a considerable slap-down for Deutsche Bank, which has struggled to keep AML measures in compliance with regulatory requirements, despite increasing its global financial crime headcount to around 2,000. In 2015, it was fined for insufficient controls related to sanctions, and again in 2017 for failing to maintain an effective AML program. Globally, fines for AML breaches by banks by regulators topped $2 billion in 2022.
FOR BUSINESS. AML obligations for companies are rising, but the difficulties in complying are huge, often requiring extensive manual checks. As AML risks increase, a growing number of banks have reduced their exposure to correspondent banking, and even entire countries. The number of correspondent banking relationships has been on a downward trend globally over the past decade, with impacts on market concentration and access to finance.
TURKEY. Gulf course.
Erdogan’s tour pays dividends.
Turkey’s president finished a visit to the Gulf on Wednesday, lauding drone-acquisition contracts with Saudi Arabia and investment from the UAE worth more than $50 billion. Turkey also agreed to enhance relations with close ally Qatar.
INTELLIGENCE. Erdogan is on a mission to replenish Ankara’s depleted foreign reserves, a result of earlier attempts at exchange rate control. Fresh from re-election, his tour has also borne strategic fruit – the drone deal is reportedly the biggest aviation deal in Turkey’s history – and provides a distraction from the failed Black Sea grain initiative. It also mends testy relations with Saudi Arabia, which hit a nadir over the murder of journalist Jamal Khashoggi.
FOR BUSINESS. Turkey announced deals with the UAE on energy, space, and defence. Abu Dhabi’s sovereign wealth fund will also buy up to $8.5 billion in Turkish earthquake relief bonds and spend $3 billion to support Turkish exports. With Ankara’s growing economic confidence, the UK spies an opportunity, agreeing this week to update its trade deal. Turkey’s recovery, however, will also involve some pain. Fuel taxes have tripled. Spending cuts are on the cards.
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. Pot, kettle.
China acknowledges the impact of strategic competition.
China’s commerce ministry said on Wednesday that attempts to de-couple supply chains and onshore manufacturing were interfering with trade. Beijing also said it was open to altering rules on the allowable size of foreign investments.
INTELLIGENCE. There is irony in Beijing’s comments. Trade is (of course) a two-way process, and Chinese restrictions have hampered investor and exporter confidence since Xi Jinping took power in 2012. But with China the largest trading partner for more than 120 countries, a relationship based on cooperation, not exclusion, remains in the world’s interests. Beijing will continue repeating this message as it seeks to gain tech concessions from the US.
FOR BUSINESS. Firms have sought workarounds to continue their trade with China despite Beijing’s restrictions. For example, Australia’s Penfolds, impacted by Chinese tariffs on wine, has developed an in-country supply chain and will soon release its first China-sourced vintages to the global market. Chinese firms like TikTok, risking exclusion from the West, have meanwhile set up separate entities and infrastructure for their non-China operations.
NEW ZEALAND. Bad sport.
An attack and a political football.
A gunman killed three in central Auckland on Thursday ahead of the opening of the FIFA Women’s World Cup. Despite some of the strictest gun laws in the world, crime and gang violence has been on the rise in New Zealand.
INTELLIGENCE. New Zealand’s prime minister said the attack would not affect the competition, but it highlights the logistical, security and financial challenges associated with hosting major events. It also highlights the political challenge of funding costly tournaments amid competing priorities (such as crime and social cohesion). A state government in Australia on Tuesday canned its hosting of the 2026 Commonwealth Games over such concerns.
FOR BUSINESS. From the Saudi LIV golf franchise to Qatar’s FIFA World Cup, sport is a reliable way to win friends and influence people. Yet, for others, the diplomatic benefits are often outweighed by the political costs. Japan was put under severe pressure in 2021 to cancel the Olympics. Controversy has plagued Paris’s preparations for 2024. Like national airlines, monarchs and military parades, large sporting events may soon become rare for democracies.
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