Ukraine, Russia: Ship over troubled waters.
Also: China, the US, Solomon Islands, Indonesia, Vietnam and Syria.
UKRAINE. RUSSIA. Ship over troubled waters.
A risky corridor in the Black Sea.
A Hong Kong-flagged cargo ship left the Ukrainian port of Odesa on Wednesday, having been stuck there since early 2022. NATO apologised on Wednesday for suggesting Ukraine could be given membership in exchange for territory.
INTELLIGENCE. Ukraine aims to resume traffic to its seaports despite Russian attacks on grain storage facilities and ports along the Danube, which Ukraine has increasingly relied on for safe exports since Moscow left the Black Sea Grain Initiative. Kyiv was left furious after a suggestion from NATO’s chief of staff on Tuesday that peace could be achieved if Ukraine gave up conquered land to Russia. What’s concerning is that it’s emerging as the likely outcome.
FOR BUSINESS. Black Sea shipping has remained relatively steady since the end of the grain deal (despite higher insurance rates) although shipments out of Ukrainian have dropped. Russian escalations at sea – including the boarding of a Turkish ship on Sunday – could force NATO to intervene by supporting a humanitarian corridor for shipping, but amid rising Ukrainian losses on land, it’s unlikely its backers will want to escalate tensions at sea.
CHINA. UNITED STATES. Misplaced antitrust.
China’s competition watchdog derails a US chip deal.
Intel was forced to call off a $5.4 billion deal on Wednesday with an Israeli target when China’s regulators failed to rule on the transaction. Media reported last week that Chinese firms had ordered $5 billion worth of Nvidia semiconductors.
INTELLIGENCE. Beijing is finding new ways to hit back at Washington’s tightening trade and investment rules, including by making (or in this case failing to make) the kinds of decisions for which Western regulators are better known. Chinese firms are also getting creative. In addition to stockpiling chips that US rules will soon effectively ban, new import routes are reportedly opening, using traders’ deep experience in getting around Russian sanctions.
FOR BUSINESS. It is hard to see how Intel’s deal with Tower Semiconductor impacted China, but Beijing’s reactions will only get more punitive as Washington continues to curtail China’s access to US technologies in advanced semiconductors, quantum computing and AI. Amid such uncertainty, a tougher Beijing will mean that sellers will have to seek stronger deal protections, while buyers might have to rethink their merger and acquisition strategies.
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SOLOMON ISLANDS. Snubbed.
Honiara declines a US delegation’s request to meet.
The Solomon Islands told a visiting US delegation, led by a representative from the select committee on the Chinese Communist Party, that Prime Minister Manasseh Sogavare was too busy to meet. Sogavare visited Beijing last month.
INTELLIGENCE. The visit by the high-profile congressional delegation comes as Washington steps up engagements with the Pacific in response to China’s growing influence. It also comes a week after Niger’s ruling junta refused a meeting with senior State Department official Victoria Nuland. As Honiara edges closer to Beijing, Washington announced this week new aid for the region, including an elevated USAID presence in Papua New Guinea and Fiji.
FOR BUSINESS. Showing up might be half the battle, as Pacific leaders who expected Joe Biden in May well know. But the delegation’s visit does nothing to convince the region that Washington is interested in more than just competition with Beijing. A summit between Biden and Pacific Island leaders next month might be a timely opportunity to dispel lingering scepticism among Pacific Island nations about the US’s staying power in the region.
INDONESIA. Indopendent variable.
Jakarta hopes to guard against global challenges.
Indonesian President Joko Widodo proposed a $216.24 billion budget for 2024 on Wednesday. The budget focuses on food and energy security amid global supply chain disruption and the risk of conflict in the South China Sea.
INTELLIGENCE. As Jokowi approaches the end of his second and last term, his focus is to cement his legacy, which his son Gibran, may one day wish to inherit. But his flagship project – a new national capital in Borneo – has thus far attracted few international investors. Meanwhile, the launch of a $20 billion climate financing deal on Indonesia’s transition to renewables has been delayed. Earlier this month, Jakarta was named the world’s most polluted city.
FOR BUSINESS. Bolstered by infrastructure development, high export commodity prices and strong consumer spending, Indonesia has seen strong economic performance under Jokowi, most recently registering 5.2% growth in the year to July 2023. Regardless of who takes power, expect much policy continuity post-2024, especially the ‘downstreaming’ of industries, as Indonesia aims to be a production base for electric vehicle components.
With the brevity of a media digest, but the depth of an intelligence assessment, Daily Assessment goes beyond the news to outline the implications.
VIETNAM. Vroom, vroom.
VinFast laps US and Chinese car giants.
Vietnamese carmaker VinFast debuted on the Nasdaq on Tuesday. Shares surged by 68%, then plummeted almost 19% on Wednesday, though it still holds a valuation higher than established automakers like Ford and General Motors.
INTELLIGENCE. Though little known in the West, VinFast has established itself as a household name in Vietnam and is setting its sights on the US market. The firm aims to begin production at its North Carolina facility in 2025, so vehicles produced there can qualify for at least some of the US’s tax credits. But the road ahead could be rough. VinFast’s electric SUV has been widely criticised. Its fundamentals more represent a ‘meme stock’ than a carmaker.
FOR BUSINESS. The EV industry is crowded. But as a global market that is set to grow at a compound annual growth rate of 15.9% to 2035, there is room for a company that can deliver affordable sedans like those of Chinese firm BYD. Nonetheless, manufacturing commercial EVs profitably remains a huge challenge for both legacy automakers and new companies – American electric bus maker Proterra went bankrupt earlier this month.
Economic decline continues despite regional accords.
Damascus on Wednesday announced a doubling of public sector pay and a reduction in fuel subsidies, as the value of the Syrian pound fell to a new low. A blast hit a suspected Hezbollah munitions dump outside Syria’s capital on Tuesday.
INTELLIGENCE. Syria’s civil war, now in its 13th year, has devastated the country’s economy. Some 90% of Syrians live in poverty and while the wage increase may offer temporary relief, it will likely fuel inflation and the pound’s further depreciation. Syria’s allies, Iran and Russia, are bogged down with their own financial troubles. There have been rumours about investment and aid from oil-rich Gulf monarchies. But the talk has not translated into action.
FOR BUSINESS. Syria’s readmission into the Arab League in May was perceived as a turning point for the return of investment. Syria’s neighbours – many of whom are hosting millions of Syrian refugees – would like to restore stability, lower Tehran’s influence in Damascus, and curtail its illicit multi-billion-dollar amphetamine trade. But Western-led sanctions remain a key obstacle, alongside rampant corruption and the impunity of Iran-backed militias.
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