US, India, Australia: Second fiddle.
Also: Europe, Russia, Ukraine, South Africa, Ecuador, United Arab Emirates and Syria.
UNITED STATES. INDIA. AUSTRALIA. Second fiddle.
As the debt ceiling looms, Biden cancels his trip to the Pacific.
Joe Biden on Tuesday cancelled visits to Australia and Papua New Guinea as debt ceiling negotiations continued. House leader Kevin McCarthy said Congress and the White House remained far apart, but a deal was still possible.
INTELLIGENCE. There have been 78 debt ceiling increases since 1960, and for as long as the US Dollar remains the world's reserve currency, there is no sound reason a 79th cannot be agreed. While Biden will attend the G7 Summit in Japan, his abandoning of a historic visit to the Pacific will be seized on by China, which is contesting US influence in the region. Biden’s cancelled trip is less an indication that negotiations are broken – legislative chicken is a Washington pastime – than a sign of political dysfunction. It is also a sign that the Quad – which Australia was due to host – is losing salience as India is increasingly at odds with its Western partners over Russia and human rights.
FOR BUSINESS. Irrespective of the outcome, Washington loses global credibility every time the US hits its self-imposed debt ceiling. US firms in Asia will have to work even harder as Washington squibs on economic diplomacy.
EUROPEAN UNION. INDIA. RUSSIA. Delhi-dally.
Europe is losing patience with a fair-weather friend.
The EU's top diplomat said the bloc should restrict India from reselling Russian oil to Europe. India's foreign minister said Europe should instead examine its own regulations. Third-country shipments have been a boon for Indian refiners..
INTELLIGENCE. As its markets opened and mutual tensions with China increased, the West hoped for a renaissance in ties with India, the world’s most populist country and fifth-largest economy. However, things haven’t gone to plan since Russia’s invasion of Ukraine, as Delhi returned to a policy of non-alignment. Delhi is worried that isolating Moscow could harm its reliance on Russian weapons, essential for defending India’s disputed border with China, and hasten the emergence of a Moscow-Beijing axis. Tensions are rising elsewhere, including with the EU's planned carbon border tax, which Delhi sees as an unfair tariff, and on technology standards, including artificial intelligence.
FOR BUSINESS. For firms, India is no panacea for China, either as an alternative manufacturing base or export market. Similarly, India is a problematic partner for states. Trade agreements with the US and EU seem farther away.
UKRAINE. RUSSIA. CHINA. Patriot claims.
Looking for Schrödinger's missile.
Ukraine said on Tuesday it had shot down six Kinzhal hypersonic missiles launched at Kyiv. Russia said the same day it had destroyed a Patriot missile defence system with the Kinzhals. US officials said there had been "some" damage.
INTELLIGENCE. Claims over the efficacy of advanced weaponry will be debated for years, but military planners will glean what lessons they can. Earlier this week, a senior Chinese general urged greater integration of "hybrid" and technological capabilities in a front-page article. Beijing is achieving parity with the US on personnel and equipment, but its combat-readiness and technical sophistication is unproven. Amid the uncertainty, the iron laws of economics provide guidance. High-tech systems cost money. Russia’s military spending rose 282%, year-on-year, across January and February. US aid to Ukraine is estimated to run out by July. Cutting-edge firepower won’t win the war alone.
FOR BUSINESS. Fiscal constraints amid stubborn inflation and recessionary fears could see defence spending soon peak, with bearish consequences for military suppliers. Western voters are wearying of ‘guns or butter’ trade-offs.
UKRAINE. RUSSIA. SOUTH AFRICA. Saving face.
Pretoria offers a peace mission to deflect criticism.
On Tuesday, South Africa's president said Russia and Ukraine had agreed to meet with a delegation of six African leaders. President Cyril Ramaphosa, who would lead the group, has denied South Africa was arming Russia.
INTELLIGENCE. A delegation from South Africa, Zambia, Senegal, Congo, Uganda and Egypt does not seem credible amid Africa’s own conflicts, but Moscow and Kyiv have reasons to entertain the group. Reliant on Russian and Ukrainian grain and with 54 UN votes, African countries form a vital constituency in how the world responds to the war. The continent is also scene to a more kinetic rivalry, with Russia and the West supporting rival forces in Sudan. African leaders have their reasons too. Beyond Ramaphosa’s reputation repair, Egypt is rebuilding Arab influence, Senegal wants to distract from political turmoil, and Uganda is trying to dismiss criticism of LGBT laws.
FOR BUSINESS. Injecting itself into Ukraine, Africa may get more attention for itself. This could raise pressure for commercial announcements at Africa’s summit with Russia in July, the BRICS in August, and the G20 in September.
Unstable politics risk an economic recovery.
Ecuador's president appeared at an impeachment trial on Tuesday amid threats that the legislature could be dissolved, repeating events last year in neighbouring Peru. Guillermo Lasso is Ecuador's first right-wing president in two decades.
INTELLIGENCE. Like many of its neighbours, Ecuador is politically and economically polarised. Last week, Lasso, a former banker, signed a free trade agreement with China, which agreed to a $4.4 billion debt restructuring in September. Lasso has pursued other ways to reduce Ecuador's $60 billion debt load, including a $1.6 billion debt-for-nature swap, also announced last week. The deals are now potentially in doubt, though Beijing found ways to work with Lasso’s left-wing predecessor. Unlike many South American countries, Ecuador’s largest trading partner is still the US, but Washington has failed to press its advantage. Biden rebuffed a trade deal request in December.
FOR BUSINESS. Political and economic volatility in South America, and a relatively absent US, is harming the interests of Western firms. Washington’s involvement may only get more complex as it manages changes to migration laws.
UNITED ARAB EMIRATES. SYRIA. COP that.
The host of the UN’s climate conference invites a pariah.
The UAE announced it had invited Syria's president to the COP28 climate change summit, being held in Dubai at the end of November. Bashar al-Assad will attend an Arab League summit on Friday after a 12-year absence.
INTELLIGENCE. The Assad regime has been largely rehabilitated in the Middle East but remains a pariah in the West, which puts the most stock in UN climate change summitry by far. In addition to the controversy of the UAE appointing its oil minister as COP28 chair, Western advocates will be put in a bind. Earlier this week, the UN's former climate chief Christiana Figueres said the UAE's approach to the summit, favouring technologies like carbon capture and storage, was a "direct threat to the survival of vulnerable nations". Most nations, however, will care less, with leaders focused on reducing persistent inflation and securing reliable energy supplies in the wake of Ukraine’s invasion.
FOR BUSINESS. Carbon-heavy industries will welcome the UAE’s approach and oil firms will unlikely see a loosening of demand, which the IEA on Tuesday forecast to increase to a record 102 million barrels per day on Chinese growth.