US, Japan, China, Russia: Sanction-monious.
Also: Taiwan, Vietnam, the Philippines, Pakistan and Israel.
UNITED STATES. JAPAN. CHINA. RUSSIA. G7. Sanction-monious.
Despite Beijing’s fears, third-country sanctions will likely be limited.
President Biden met with Japanese Prime Minister Kishida Fumio on Thursday, ahead of Friday's G7 plenary, where leaders are set to announce new secondary sanctions on Russian trade, impacting foreign firms including from China.
INTELLIGENCE. Since Russia’s invasion, the G7 has been united on moral support for Ukraine, but members have had varying enthusiasm regarding economic interests. Most reluctant have been Germany – which has slowed the pace of sanctions – and Japan, which continues to import oil from Russia’s Sakhalin Island. Japan, host of this year’s G7, will be similarly reluctant to jeopardise ties with China, its top trading partner. New sanctions on Russian trade, of which some details, such as diamond bans, are emerging, will unlikely target more than a handful of Chinese companies with few direct links to Western markets.
FOR BUSINESS. Despite attempts at stabilising relations with China, the US will have wanted to go further than Japan and Europe in punishing Chinese firms helping Russia. For now, at least, businesses can expect trade to continue.
UNITED STATES. TAIWAN. No big deal.
An initial agreement with Taipei will only irritate Beijing.
Taiwan and the US agreed the first part of their '21st Century' trade initiative, US Trade Representative Katherine Tai said on Thursday. The deal covers customs and trade facilitation, regulatory practices, and small business.
INTELLIGENCE. Not an interim deal, let alone a WTO-compliant free trade agreement, the announcement will merely annoy China. At a time when Washington and Beijing have been working to cool tensions amid the possible introduction of secondary sanctions on Russia, the timing is diplomatically awkward. Still, it has been welcomed by Republicans and Democrats, a rare point of bipartisanship. Negotiators will commence talks on other aspects of the proposed US-Taiwan Initiative on 21st Century Trade, including digital trade, agriculture, labour and environmental standards. These will prove more contentious, particularly as Taiwan also heads to elections in 2024.
FOR BUSINESS. The deal, if signed, will be of minor consequence for most firms, providing more a symbolic value. Since the 2016 election, US trade policy has been desultory. Big agreements are on ice, and the WTO is floundering.
UNITED STATES. INTERNET REGULATION. Social immunity.
The Supreme Court sides with Silicon Valley on a landmark case.
The US Supreme Court unanimously sided with Twitter on Thursday in a case alleging the platform aided and abetted terrorists during a 2017 attack. The Court adopted a similar opinion on a lawsuit against Alphabet's YouTube.
INTELLIGENCE. The cases, brought by the families of victims in the 2015 Paris and 2017 Istanbul terrorist attacks, won’t change so-called Section 230 immunity for social media firms under US law but won’t put an end either to the tech sector’s battles over how their products are being used and abused by political actors. Legislators globally are eyeing stricter restrictions and legal liability for firms that carry harmful content, or which threaten often vaguely worded security concerns. In an extreme example, the US state of Montana banned the Chinese-owned app TikTok this week, a move civil liberties groups have criticised, raising expectations of retaliation from Beijing.
FOR BUSINESS. US firms need to consider how Montana’s banning of TikTok could set a precedent for their operations, not just in China. Silicon Valley must focus on lawmakers, not just the courts, to protect their products.
VIETNAM. PHILIPPINES. CHINA. All at sea.
The South China Sea’s growing complexity is deterring firms.
Vietnam rebuked both China and the Philippines on Thursday. A Chinese research vessel was accused of entering Vietnamese waters. Manila was criticised for placing navigational buoys within Hanoi's exclusive economic zone.
INTELLIGENCE. While Southeast Asia prefers to seem united on the South China Sea, Hanoi is increasingly trying to balance its interventions, worried about inflaming tensions already exacerbated by the growing presence of external players. Earlier this month, Manila – which took a quietist approach under its previous government – signed a raft of new security deals with Washington, which extended its defence guarantee to the Philippines’ maritime claims. On Thursday, Australia said it would provide drones to the Philippine coast guard and consider joint patrols. Last week, a retired Chinese colonel said a superpower conflict was more likely to start over the South China Sea than Taiwan.
FOR BUSINESS. Undersea cable owners are bypassing disputed areas and oil explorers are looking elsewhere. Airlines and shippers will, however, have limited alternatives while the South China Sea remains a locus for trade.
PAKISTAN. Once more unto the brink.
Police look set to arrest Imran Khan again.
Police on Thursday surrounded the Lahore residence of Pakistan's former prime minister, who last weekend was released after riots broke out following an earlier arrest on corruption grounds. Khan said he expects to be re-arrested.
INTELLIGENCE. Pakistan’s beleaguered government risks collapse should there be a prolonged repeat of last week’s violence. Populist leader Imran Khan, however, has raised the stakes for the military command, which largely runs Pakistan behind the scenes. In a move designed to elicit a showdown, Khan last Friday accused army chief Asim Munir of "abducting" him and holding a personal grudge. Khan and his supporters have previously attempted to cleave the army’s top brass from the lower ranks, among whom Khan is widely seen as a hero. Pakistan is meanwhile nearing economic collapse as IMF talks stall. China and Pakistan’s Gulf allies may need to step in to forestall disaster.
FOR BUSINESS. A political or economic breakdown in Pakistan would not just spell trouble for local firms and lenders, but India, whose security effectively relies on Islamabad’s ongoing control of Islamist militants.
ISRAEL. PALESTINIAN TERRITORIES. March madness.
Israeli nationalists risk provoking an Arab Intifada.
Thousands of ultranationalists marched through Jerusalem's Muslim quarter on Thursday, marking the anniversary of the city's capture in 1967. Earlier in the week, Hamas warned of conflict should Jewish groups cross its red lines.
INTELLIGENCE. Having seen off rocket attacks from Palestinian Islamic Jihad last week, Israel now risks conflict with the much larger militant outfit Hamas. Coming after the 75th anniversary of Israel’s independence on 14 May, this year’s annual Jerusalem Day ‘flag march’ is particularly charged, an atmosphere seized on by several far-right members of Israel’s coalition government, who spoke at the event. Some in Israel’s extreme Zionist fringe may wish to ignite a face-off with Hamas, which Israel outguns. Still, a Palestinian Intifada, or uprising, would be the economy’s final straw. Further, an absent Washington has less sway over Palestine’s Arab backers than it once did.
FOR BUSINESS. Strong first-quarter growth has buoyed Tel Aviv, but the tech sector has warned that turmoil is deterring investment. This could also undo Israel’s warming ties with Arab states, jeopardising regional projects.