Ukraine, Russia: Shredded wheat.
Also: China, critical minerals, critical technologies, West Africa and Ethiopia.
UKRAINE. RUSSIA. Shredded wheat.
Grain prices spike on further Black Sea attacks.
Russian drones attacked the port of Izmail on Wednesday, preventing ships that had defied Moscow's blockade from loading Ukrainian wheat. Moscow said it would return “immediately” to the Black Sea grain deal should its asks be met.
INTELLIGENCE. The Kremlin is playing high stakes in the commodity markets as its war of attrition grinds on at the Ukrainian front. Turkey is in talks with Russia about a return to the Black Sea Grain Initiative, with Erdogan and Putin speaking on Wednesday, but it is unlikely Ukraine or the West will accept Moscow’s ambit claims. Gaining negotiating leverage in eventual peace talks is the main objective. A global food crisis would be as good an advantage as any.
FOR BUSINESS. After initially shrugging off Moscow’s exit from the Black Sea deal, futures markets are moving higher as export infrastructure is destroyed and foreign firms reconsider the risks of shipping Ukrainian exports. Coupled with India’s ban on non-basmati rice exports and other market pressures, food price inflation is easing in the West but returning to the countries that need it least, exacerbating risks like further conflict and civil unrest.
CHINA. Deep water.
Beijing is caught between a drive for security and a need for growth.
Floods receded on Wednesday after days of heavy rains battered Beijing and northern China. The US State Department on Wednesday said it was concerned by China's calls for all citizens to join counter-espionage efforts against the West.
INTELLIGENCE. Flooded streets dominated footage, but waterlogged farms will be Beijing’s bigger worry. China is amidst a food security push, with lessening reliance on the West a focus. Another focus is self-reliance in high-tech inputs for China’s economy, without harming the trade ties that have helped it grow rich since the late 1970s. A policy war between Beijing’s securocrats and more globally-minded economic agencies is spreading to all parts of society.
FOR BUSINESS. Beyond the flood clean-up, Beijing faces a greater challenge in reviving its economy. Small business tax relief is the latest tool to be deployed, but markets remain uncertain of whether trend growth will return without stronger measures, like infrastructure-based stimulus. China’s security services are meanwhile spooking foreign investors, as are opaque changes in the Politburo, from the foreign minister to the People’s Liberation Army.
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CRITICAL MINERALS. Rare to share.
Replacing China requires more than trade deals.
Ulaanbaatar will cooperate with Washington on rare earths production, Mongolia's prime minister said on Wednesday. The same day, Canberra said the EU’s access to rare earths would be assured if Brussels signed up to a free trade deal.
INTELLIGENCE. Mongolia won’t be able to help the US get the minerals that Beijing is withholding if they need to be shipped via Chinese (or Russian) trains. And Canberra won’t be able to help the EU achieve supply chain security if neither side is willing to undertake the dirty work of turning rare earths ores into something useful. Unless industrial processes or environmental rules change, China will likely enjoy its rare earths chokehold for years to come.
FOR BUSINESS. Resource exporters like Australia are rebranding themselves as rare earths superpowers, but many of the deposits they’re spruiking are existing projects for other metals like bauxite, with so-called ‘critical minerals’ a side-effect. Most rare earths are rare due to high refining costs and low volumes, rather than scarce natural reserves. Regulation has made Western production difficult, which is why China, with laxer rules, dominates the sector.
CRITICAL TECHNOLOGIES. LK-99 problems.
Superconductor hype seems premature.
State media reported on Wednesday that Chinese researchers had successfully replicated a room-temperature superconductor experiment using a lead-based compound, ‘LK-99’, with better results than a Korean team days earlier.
INTELLIGENCE. A room-temperature superconductor would allow for perfect efficiency in power transmission, viable fusion energy, warp-speed computation and so on. Experiments in China, South Korea and the US have released a flurry of speculated breakthroughs in recent days, but these may say more about superpower rivalry and internet virality than advances in physics. The news appears exciting, but scientists do occasionally make spurious claims.
FOR BUSINESS. Physicists like to joke about USOs – “unidentified superconducting objects” – and several LK-99 claims have already been retracted. But in the wake of advances in renewable energy, artificial intelligence, vaccines, blockchain and other fields, investors are hungry for the next big thing, and the hype cycle is getting shorter. States are also hungry for the next big thing. Even if LK-99 news disappoints, expect more funds for similar research.
With the brevity of a media digest, but the depth of an intelligence assessment, Daily Assessment goes beyond the news to outline the implications.
WEST AFRICA. Destined for war?
Niger’s neighbours debate the risks of intervention.
A delegation from the Economic Community of West African States arrived in Niamey on Wednesday as regional defence ministers met in Abuja to discuss Niger's coup. The US ordered the partial evacuation of its embassy in Niger.
INTELLIGENCE. ECOWAS has a tradition of intervening when a member experiences unrest. But since 2021, when coups succeeded in Mali and Guinea, the bloc has been reluctant to send in troops, partially due to the presence of foreign actors like Russia’s Wagner. Those dynamics are again at play in Niger, where the putsch has quickly gained backing from fellow autocrats. As in the Congo Wars of the 1990s, a civil war in Niger could drag in multiple parties.
FOR BUSINESS. Algeria and Italy have been the latest powers to warn against intervention, a possible volley at Paris, with whom both have long differed on African policy. France denies it will intervene, but speculation has risen of a US move, following an unnamed official telling media that Washington was working “to turn this around” and reports that US troops have no plans to leave. That said, a costly war in West Africa would be the last thing Biden needs.
ETHIOPIA. Early warnings.
Risks emerge for another country south of the Sahara.
Militia fighters and government troops clashed in Ethiopia's Amhara region on Wednesday, with the country's deputy prime minister making a rare admission of concern. The militia had been previously allied to the government.
INTELLIGENCE. At the eastern end of the African Sahel’s ‘coup belt’, violence in Ethiopia is a worry not just for Addis Ababa, but the entire region. Ethiopia hosts the African Union and the continent’s second-largest population. The split with a once-allied militia has shades of what is happening in neighbouring Sudan, but Fano – the part-time Amhara army – does not have the same wealth, weapons or foreign backing of Khartoum’s rival Rapid Support Forces.
FOR BUSINESS. Ethiopia is less a unitary state than a confederation of warlords. A dynamic not unique in Africa, it illustrates the risks of sudden conflict should the ingredients of inclement weather, high food prices or foreign meddling be thrown into the mix. Ethiopia ended a civil war in its Tigray region in November, but low-level insurgencies remain across the country, which continue to drive migrants to Europe and attract adventurers from elsewhere.
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