Ukraine, Russia, energy: Flight risk.
Also: China, US, semiconductors, Australia, mining, renewables, Britain, Switzerland, India, United States, Pacific and Greece.
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UKRAINE. RUSSIA. ENERGY. Flight risk.
As Moscow claims victory in Bakhmut, Washington prevaricates on F-16s.
Vladimir Putin on Sunday congratulated Russian and paramilitary forces for capturing the Ukrainian city of Bakhmut. The White House said the US had not made a final decision on allowing the third-party transfer of F-16 jets to Ukraine.
INTELLIGENCE. The Kremlin’s victory in Bakhmut may prove pyrrhic, as Ukraine readies for a counteroffensive, but the real battle is in the skies, with drones and missile systems taking centre stage. The planned provision of US-built F-16 fourth-generation fighters from European stocks could thus prove decisive for Ukraine, but the Pentagon, which must approve any third-party transfers, will be wary of escalation considering Putin’s previous nuclear threats. Moscow said the step would be a “colossal risk”. Though in use since 1981, the F-16 Falcon remains a potent weapon.
FOR BUSINESS. The US has already agreed to start training Ukrainian pilots on the F-16, but providing the platforms would be a precipitous step. In addition to military escalation, Putin still retains economic levers. Fifteen months into the war, Russia piped to Europe an estimated 75 million cubic metres of gas per day in April, up 7.5% from March.
CHINA. UNITED STATES. SEMICONDUCTORS. Bargaining chips.
Beijing bans a US chipmaker in a shot across the bows.
The Cyberspace Administration of China on Sunday blacklisted memory card maker Micron Technology, citing information security risks. The Idaho-based firm said it would continue to engage with Beijing authorities on the move.
INTELLIGENCE. There may be a tactical reason for Beijing’s decision, with media reporting that Micron is due to receive $2 billion in incentives to produce next-generation chips in Japan, but the blacklisting was more likely in retaliation for Washington’s earlier ban of Yangtze Memory Technologies, not to mention moves against telco equipment giant Huawei. With a $75 billion market capitalisation just prior to the announcement, Micron is big but smaller than Taiwan’s TMSC ($448 billion), South Korea’s Samsung ($348 billion) and California’s Intel ($125 billion).
FOR BUSINESS. Despite the tit-for-tat measures, there are signs that US-China relations may in fact be stabilising. Joe Biden said on Sunday he expected relations to shift and the US wanted to “de-risk” not decouple. Through Micron, Beijing wants to wield sticks as well as carrots, but a full-blown trade war would need a bigger cause.
AUSTRALIA. UNITED STATES. MINING. RENEWABLES. Clean sweep.
Australia gains access to US subsidies. Could the UK be next?
Canberra and Washington agreed a Climate, Critical Minerals and Clean Energy Transformation Compact, the White House said on Saturday, expanding access to US Inflation Reduction Act subsidies for Australian projects.
INTELLIGENCE. The deal is a boon for Australia’s mining and renewables sectors, which have otherwise been unable to compete with the Biden administration’s $391 billion clean energy deal under the ironically named IRA. It is not, however, without precedent. Since 2017, Australia and the UK have been part of Washington's National Technology and Industrial Base – a defence free trade area – joining Canada, which was added in 1993. This may augur well for London and Ottawa, which have also been unable to compete with Washington’s renewables largesse.
FOR BUSINESS. Canberra’s deal with Washington could be for renewables what the NTIB, and later AUKUS, have been for defence production. It could pave the way for other allies to join and not only stay competitive with US firms but the EU and China. That, at least, is the hope in the beggar-thy-neighbour world of industrial policy.
Written by former diplomats and industry specialists, Geopolitical Dispatch gives you intelligence for business you won’t find anywhere else.
BRITAIN. SWITZERLAND. TRADE. Uncommon market.
Europe’s biggest non-EU economies eye a deal.
The UK's trade secretary met with her Swiss counterpart on Monday for talks on a free trade agreement between the two “services superpowers”. Current post-Brexit continuity arrangements only cover trade in goods.
INTELLIGENCE. After finalising deals with the EU, Australia and Japan, the UK is now pursuing ‘Global Britain’ with Switzerland, India, the Gulf and the members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Even with tiny Switzerland, however, it faces obstacles, with Bern needing to stay close to regulations in Brussels for access to the much-bigger EU bloc. Like all trading economies, the UK will need to eye measures other than tariff agreements to stay competitive. Low productivity growth remains, as for many years, the bigger concern.
FOR BUSINESS. FTAs are nice to have, but few will make or break an economy. Beyond deals with the largest actors – the US, EU and China – domestic reform and unilateral liberalisation will almost always provide a greater boost. Where preferential deals stand out is in their political function: a demonstration that governments can ‘do business’.
INDIA. UNITED STATES. PACIFIC. Islands in the stream.
Narendra Modi stands in for Joe Biden in Port Moresby.
India's prime minister met with 14 Pacific Island leaders in Papua New Guinea on Monday, ahead of US Secretary of State Antony Blinken meeting with the group later that day. President Biden had earlier cancelled a visit to PNG.
INTELLIGENCE. Rarely has PNG hosted so many VIPs, but Modi’s and Blinken’s trips would have been no match for Joe Biden’s planned visit, cancelled due to debt ceiling negotiations. The meetings do, however, indicate the Pacific’s growing importance in great power rivalry. Blinken’s signing of a defence pact with PNG rebuked a similar deal last year between China and Solomon Islands, to PNG’s east. Modi’s Forum for India-Pacific Islands Cooperation was a reminder that Delhi also seeks a greater Pacific role, though it admittedly has enough challenges within its own sea.
FOR BUSINESS. A string of defence agreements in the Pacific has implications for US and allied contractors in a region with poor infrastructure and few domestic capabilities. The deals also signal how Washington plans for the day after tomorrow, should China invade Taiwan. India, on the other hand, still has a literal ocean to cross.
GREECE. Bearing gifts.
The New Democracy party almost achieves majority government.
The centre-right government of Kyriakos Mitsotakis received 40% of Greece's vote in election counting late Sunday, 20 points ahead of the rival Syriza party. Mitsotakis is five seats short of a majority and will return to the polls in late June.
INTELLIGENCE. For a country used to unstable government, the result appears a victory. Mitsotakis, a former banker, has steered Greece to economic recovery, with growth close to 6% in 2022. A rail disaster in February failed to dent his popularity, and opinion polls were proven wrong, as they were in Turkey last week. Yet should Mitsotakis win outright government when Greece votes again next month or early July, he still faces a Herculean task, including across the Aegean should sparring partner Recep Tayyip Erdogan also win a second-round election this weekend.
FOR BUSINESS. Athens is out of its 2011 nadir but not out of the woods. Debt to GDP is forecast to top 160% in 2023, albeit down from a peak of 209%. Strategically, fissures remain with NATO frenemy Turkey. Socially, attitudes toward Russia divide a majority-Orthodox population. Despite the eudaimonic facade, Greece’s challenges are labyrinthine.
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