Venezuela, United States: Oil spill.
Also: Israel, China, Nigeria and Colombia.
VENEZUELA. UNITED STATES. Oil spill.
Expectations of a significant change seem premature.
Washington would on Tuesday announce a deal to ease sanctions on the Venezuelan oil industry, the Washington Post said on Monday. News of the deal sent oil futures tumbling to under $90 per barrel on expectations of new supply.
INTELLIGENCE. The deal reportedly involves the removal of sanctions in return for monitored elections in 2024. Civil society has expressed surprise. Rivals to President Nicolas Maduro have been banned from recent polls. The 2018 vote was seen as a sham. Maduro took over from Hugo Chavez in 2013, but human rights abuses and poor economic decisions have resulted in a deep slump, causing millions to flee and a migration crisis in the US and Mexico.
FOR BUSINESS. Venezuela’s oil output has shrunk rapidly in recent years, falling from a peak of 3.5 million barrels per day in 2005, to just 400,000 after the US hit the country with more sanctions in 2019. Consequently, the skills and capital base of the oil sector has been eroded. Huge investment is needed to return it to previous levels. In the short term, even if the deal is honoured, it is unlikely new Venezuelan oil will make a significant difference to global markets.
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ISRAEL. UNITED STATES. Peace mission.
Amid incendiary comments from Iran, Biden announces a visit.
Iran threatened ‘pre-emptive action’ against Israel on Monday, as Israel prepared for a ground assault in Gaza and exchanged fire with Hezbollah in the north. The State Department said Joe Biden would visit Israel on Wednesday.
INTELLIGENCE. Secretary of State Blinken said the President would emphasise Washington’s support during his trip. He will also likely urge Israel to be discriminate in its attack and adhere to international law. EU leaders announced their own emergency summit on Tuesday over concerns of escalation and a possible wave of refugees. Meanwhile, aid from Turkey, the UAE, Jordan and Tunisia has landed in Sinai, but has been unable to cross into Gaza.
FOR BUSINESS. As provocative threats increase and the prospects of de-escalation diminish, budding economic deals have started closing. Saudi Arabia-Israel normalisation is on hold. The US and Qatar have agreed not to release $6 billion in Iranian funds as part of a prisoner swap. Israel-Egypt ties have deteriorated over the Gaza aid impasse. Gold futures remained elevated on Monday as investors moved into safe havens amid fears of a regional spill-over.
With the brevity of a media digest, but the depth of an intelligence assessment, Daily Assessment goes beyond the news to outline the implications.
CHINA. One belt, multiple roads.
An infrastructure meeting demonstrates China’s multipolar aims.
Xi Jinping welcomed Vladimir Putin and other leaders to China’s Belt and Road Forum on Tuesday. It is the third time Beijing has hosted such a gathering since the global connectivity initiative was launched a decade ago.
INTELLIGENCE. Over 100 countries are attending the event, which is notable for the lack of EU, US, or Indian, participants. Putin is attending, despite Moscow never having signed up to the BRI, though Chinese trade and investment has increased through other means since international sanctions were applied in 2022. For Xi, bringing Russia closer promotes a ‘multipolar’ vision in which Beijing aims to be an alternative global leader to Washington.
FOR BUSINESS. A reported $1 trillion has been mobilised by the BRI since its inception in 2013. But successive hits to the Chinese economy have seen investment pulled back significantly – 2023 has so far been the lowest since the BRI began. Criticism has also mounted around infrastructure fuelling high debt from Laos to Sri Lanka. Italy, the only G7 country to have signed up so far, has hinted it will withdraw, but the West is yet to provide a credible alternative.
NIGERIA. Money for something.
International institutions are keen to support reforms, despite missteps.
Nigeria will borrow an additional $1.5 billion from the World Bank, its finance minister said on Monday. The IMF said it was open to additional funding based on the West African country’s recent macroeconomic reforms.
INTELLIGENCE. President Bola Ahmed Tinubu has driven huge reforms in Nigeria, which the Bretton Woods institutions are keen to be seen to support. Yet the average Nigerian is not impressed. The removal of a petrol subsidy has led to mass protests, while lifting currency restrictions has seen a massive devaluation of the naira (and higher prices for essential imports). As staples increase in price, there is fear that Tinubu’s reforms will lose momentum.
FOR BUSINESS. For years, Nigeria’s economy has been unattractive to foreign investors given the difficulty in accessing foreign currency to repatriate profits. While the decision to let the naira weaken saw dollar rates briefly converge with black market rates, the black market has again surged, and there is a reported $7 billion backlog in forex orders on the central bank. Import restrictions, aimed at reducing forex demand, have also stifled activity.
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COLOMBIA. Fuel to the ceasefire.
A new armistice eases tension, for some.
Colombia announced a three-month ceasefire with Estado Mayor Central on Monday, the largest group of the former FARC rebels. Israel and Colombia entered a fiery row over pro-Hamas comments made by President Gustavo Petro.
INTELLIGENCE. The EMC deal reportedly means cessation of hostilities until at least 15 January 2024. While a deal to end the internal conflict between FARC guerrillas in 2016 put an end to the decades-long civil war, EMC split from FARC and refused the peace deal. EMC has reportedly around 3,500 members, mostly concentrated in Colombia’s notoriously ungovernable areas where coca harvesting and illegal mining run rampant.
FOR BUSINESS. While tensions ease domestically, Colombia’s foreign policy is in disarray, with Petro denouncing Israel as Nazis on social media and former FARC militants now free to drive the drugs trade into neighbouring Ecuador and Peru. Israel immediately announced a halt on security exports to Colombia, and Colombia threatened to suspend foreign relations. Petro is also dealing with the recent indictment of his son for alleged money laundering.