Ukraine, Russia: Other side of the bridge.
Also: the Sahel, Europe, Latin America, Israel, the US, South Korea and oil prices.
UKRAINE. RUSSIA. Other side of the bridge.
The market shrugs off events in Crimea.
Moscow launched drones and missiles across Ukraine's south and east, Kyiv said early Tuesday. The Kremlin said on Monday it would not cut diplomatic ties with the West following an attack on the Kerch Bridge linking Crimea to Russia.
INTELLIGENCE. Early reports that NATO-supplied missiles damaged the 18-kilometre Kerch Bridge, a symbol of Crimea’s annexation, appear unfounded, with naval drones the likely culprit. Fears of escalation appear unfounded too, with Moscow striking a conciliatory tone (or what counts for one), delinking the attack from its decision not to renew the Black Sea grain deal. Despite the UN’s warnings, the door seems to still be ajar for further negotiations.
FOR BUSINESS. The Black Sea deal’s collapse led to a 3% jump in wheat futures before selling off again. Alternative routes are keeping exports going, and despite uncertainty over China’s summer and autumn crops, grain prices are tracking lower in concert with other commodities. UN warnings of a calamity may thus be unfounded. Moscow has retaliated for Kerch through drone strikes at Ukrainian export infrastructure, but this appears for now to be the limit.
THE SAHEL. RUSSIA. Back to Africa.
The Wagner group returns to business.
Scores of Wagner troops arrived in the Central African Republic ahead of a referendum next week, the CAR’s presidential office said on Monday. A convoy of over 100 Wagner vehicles entered Belarus on Monday, according to local activists.
INTELLIGENCE. Whether as a staging post for Ukraine, or operations beyond, Wagner’s re-emergence in Belarus, presumably with Kremlin agreement, is more troubling for the West than for Russia. Speculation that Wagner would be fully absorbed into the Russian military seems to be contradicted by reports of its ongoing commercial operations in the CAR, Mali, Libya and elsewhere. For now, it appears to be business as usual, at least outside Russia.
FOR BUSINESS. Wagner chief Yevgeny Prigozhin’s days may be numbered, but his operation thrives. For the former chef turned mercenary, Monday’s report in the Financial Times would be poignant. Client state Mali will this week take over the .ml domain name, giving Wagner potential access to misdirected .mil emails, of which there have been 117,000 in recent years. Besides Wagner, Progozhin ran the troll factory that allegedly turned the 2016 US election.
Written by former diplomats and industry specialists, Geopolitical Dispatch gives you the global intelligence for business and investing you won’t find anywhere else.
EUROPE. MERCOSUR. Latin rites.
An EU-Latin American meeting is more ritual than revelation.
The EU-Community of Latin American and Caribbean States (CELAC) summit began in Brussels on Monday. EU Commissioner Ursula von der Leyen said Europe would invest €45 billion in Latin America under its ‘Global Gateway’.
INTELLIGENCE. Europe wants to retain influence in its former colonies. Modelled on China’s Belt and Road Initiative, the Global Gateway could help an infrastructure-hungry region, but a lack of projects doesn’t augur success. Nor does its launch in the Metaverse last December – which just six attended. More showed up this week, but zeal was similarly muted. Europe wanted to talk Ukraine. CELAC’s president wanted to instead discuss Atlantic slave trade reparations.
FOR BUSINESS. For Brazil, Argentina and the region’s other big economies, Europe is the past, while the emerging markets of China, India, and, to a lesser extent Russia, are the future. This doesn’t bode well for the EU’s proposed free trade agreement with Mercosur, which Brazil and Argentina dominate. Not only does Brazil seem unenthused – pushing back on a deforestation clause – but Europe’s politically influential farmers are likely to oppose the deal.
ISRAEL. UNITED STATES. Promised land.
Netanyahu finally gets an invitation to Washington.
Ahead of the arrival of Israel’s president, the White House issued an invitation to Prime Minister Benjamin Netanyahu on Monday. The same day, the Pentagon said it would send F-35 jets to the Gulf after a series of encounters with Iran.
INTELLIGENCE. Washington needs to signal support for Israel’s security while condemning its politics. Pushing back on Iran, which the US had been rumoured to be in tentative peace talks with, is one way of doing so. Another is to invite Netanyahu, but meet him at the UN, rather than the Oval Office. As Netanyahu’s far-right coalition pursues controversial changes to the judiciary, it has been embroiled in more skirmishes with Palestinian militants.
FOR BUSINESS. Netanyahu will be emboldened by the invitation, issued via a call with Biden. A day after being hospitalised, it’s a reminder of his political resilience, having stared down months of mass protests on the judicial changes and routed Iranian proxies in the West Bank. All is not well, though. Establishment figures have warned of a recession and investment flight. Start-up investment in Israel’s tech sector has fallen 68% over the first half of 2023.
With the brevity of a media digest, but the depth of an intelligence assessment, Daily Assessment goes beyond the news to outline the implications.
SOUTH KOREA. Weathering storms.
Yoon Suk Yeol’s presidency is at an inflection point.
South Korea’s president called for an overhaul of the country's emergency management system on Monday after floods killed 40 following a week of heavy rains. On Friday, Yoon Suk Yeol’s approval rating fell another 6 points to 32%.
INTELLIGENCE. Yoon is unlikely to be ousted, but still, nobody wants to be a South Korean ex-president. What follows can be imprisonment, assassination or exile. Yoon is hardly the least popular, but a combination of the floods, Korea’s culture wars, his controversial rapprochement with Japan, the late-2022 stampede in Seoul and pressure from Pyongyang have tested his leadership. Beijing might spot an opportunity to press for a return to friendlier policies.
FOR BUSINESS. While unpopular at home, Yoon is feted in the West. Biden gave him a state visit. Poland on Thursday awarded its highest medal. South Korea’s economy, however, may require a pivot back to neutrality. Growth forecasts have been downgraded. Electronics exports are weak. Yoon's finance minister met his Chinese counterpart on Monday for the first time in four years. Watch too for a return of the ‘Sunshine Policy’ of Yoon’s predecessors.
ENERGY. The dog that didn’t bark.
Oil demand is low, but so are inventories.
Crude rose on Tuesday amid reports of tightening inventories. Bloomberg reported a 40-year low in the US Strategic Petroleum Reserve on Monday. Libya's Sharara and al-Fil fields reopened on Sunday, having shut on political tensions.
INTELLIGENCE. Geopolitical tensions have failed to push oil prices higher in recent months, thanks to slowing Chinese demand and a very slow replenishment of the US strategic reserve. The White House doesn’t want to risk inflation or recession by putting pressure on oil prices – particularly as Americans crank their air conditioners and prepare for the summer driving season – yet the SPR’s levels put it at risk of supply shock, which can’t be ruled out.
FOR BUSINESS. Nobody likes high oil prices, except producers, but the slow diminishing of US inventories as a stimulus policy appears reckless. Ahead of data this week from the American Petroleum Institute and the US Energy Information Administration, traders are cautiously bullish. After a year of prices set on the demand side, tight supply could see markets set alight the next time geopolitics hits the headlines. And as readers know, that’s not uncommon.
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