Daily Memo: Making Sense of India, China and North Korea

Actual deaths on the Line of Actual Control. Violent clashes broke out Monday in the Galwan Valley, a disputed area in the Himalayas on the border of India and China. Three Indian soldiers were killed when, according to China’s Foreign Ministry, they crossed into Chinese territory. India, of course, denied the claim. Details about the incident are unclear. What we do know is that China and India have been engaged in a border standoff since the end of May. Since then, there have been multiple skirmishes followed by attempts to calm down. Remarkably, these are the first fatalities in the area (along what’s known as the Line of Actual Control) in more than 40 years — a period marked by repeated low-level clashes between the Indian and Chinese militaries. This speaks to the inherent difficulty of conducting major combat operations in one of the world’s most extreme geographic environments and the success Beijing and New Delhi have had in keeping small-scale incidents between them from escalating. (Troops stationed along the Line of Actual Control typically do not carry firearms, per protocols agreed upon by both sides.) But even before Monday’s incident, there were signs that things were starting to change. […]

Recession or Depression

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In March, we declared our 2020 forecast null and void. The COVID-19 pandemic had essentially rendered it irrelevant. The question we posed in March...

Daily Memo: Beijing’s New Coronavirus Outbreak

Beijing catches a big wave. The Chinese capital is scrambling to contain a substantial new COVID-19 outbreak involving at least 79 new cases, most of which could be traced to the city’s largest wholesale market. This is notable because Beijing had previously gone 56 consecutive days without a new domestically transmitted case, underscoring just how difficult it is to stamp out the virus completely. As we discussed regarding South Korea, though, think of it like putting out a forest fire: Periodic flare-ups will be inevitable for some time to come. What matters most is the ability of a government to respond quickly and effectively when they inevitably occur. In China, true to form, authorities are responding the best way they know how – with brute force – locking down a dozen neighborhoods, canceling schools and closing indoor tourism sites. They also appear to be implicitly trying to shift blame for the outbreak by linking it to imported salmon. There is scant evidence that the virus moves around the world on cargo, so this is dubious and speaks to the extreme political sensitivity in China about the Communist Party’s handling of the epidemic and the role of Chinese markets in its […]

The US Walks a Fine Line in Eastern Europe

In early June, White House National Security Adviser Robert O’Brien signed a memorandum authorizing yet another drawdown of American troops, this time directing the Pentagon to remove more than a quarter of its forces stationed in Germany and placing a cap of 25,000 personnel in the country. Following similar actions throughout the Middle East, the move affirms Washington’s commitment to restructuring its defense posture. This restructuring, or at least the timing of it, may not have been possible without the coronavirus pandemic and subsequent recession, which have been distracting enough to give the U.S. Defense Department the opportunity to act on its long-term plans to counter conventional threats. Chief among them is Russia. Moscow’s adventurism in Georgia, Ukraine and elsewhere over the past decade reminded Washington that it ought to strengthen its forces along Europe’s eastern flank. Hence why it is moving its soldiers in Germany farther east to places like Poland. But this is more of a balancing act than a true pivot; Washington isn’t vacating Germany entirely any more than it is setting up a new iron curtain in Poland. Instead, the U.S. is layering its forces, keeping a permanent presence in Germany while supporting its rotational presence […]

Measuring the Economic Damage in Europe

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(click to enlarge) The economic damage caused by the coronavirus pandemic is such that it’s nearly impossible to accurately measure. Still, some numbers are starting...

Daily Memo: Speeding Up Withdrawals and Vaccines

Countering Iranian influence in Iraq. After discussions on bilateral relations on a host of issues between the U.S. and Iraq, Washington officially committed to continue to withdraw troops from the country. After 17 years of war, there are plenty of reasons to believe Washington sincerely wants to reduce its footprint there, but Iran’s presence in Iraq complicates the issue. Iraq consumes a lot of Iranian energy exports, and Tehran maintains a lot of influence among Iraqi political leaders, cultivated in no small part through its many Shiite militias. The U.S. has allowed Iraq to continue electricity imports from Iran by extending a waiver on sanctions, but the two countries plan to explore alternative energy options. Baghdad has also committed to placing Iranian proxies, including those of the Popular Mobilization Forces, under further governmental control. Other issues are working in Washington’s favor too. Sanctions and the coronavirus pandemic have kept Tehran from doling out the support to proxy groups it normally extends, leading to fresh reports of discontent among the many militias. Expediting a vaccine. In conjunction with the U.S. National Institutes of Health, phase three clinical trials — the final major hurdle to regulatory approval — for three coronavirus vaccines […]

The Tug of War Over Libya

Cordiality has not been a characteristic of relations between nations in the modern Middle East and North Africa. Rather, relations have been more commonly defined by rivalry and competition for influence over the region’s most vulnerable states. In the 1950s, it was Syria that became the main battleground in which Middle Eastern powers competed for regional domination. In the 1960s, Yemen was the arena in which Egypt and Saudi Arabia battled for control following a republican coup in Sanaa in 1962. (Yemen again became a major battleground in 2015 as the Saudis allied with the United Arab Emirates, Egypt and Sudan to halt the advance of the Iran-backed Houthis.) During the 1970s and 1980s, Arabs settled their differences in religiously fragmented Lebanon and fueled its civil war, which ended in 1989 following Saudi-led Arab efforts to find a resolution to the conflict. The impending crisis posed by the growth of political Islam and Iraq’s rise as a regional power required refocusing Arab political and military resources to deal with new threats. In 2011, the Arab uprisings exacerbated turmoil across the MENA region and introduced new theaters of open competition, namely in Syria and Libya. Like in Syria, where Russian intervention […]

Daily Memo: Restoring the Russian Economy

Restoring the Russian economy. Alexei Kudrin, the former Treasury minister and current head of the Accounts Chamber of Russia, has revealed the details of a three-stage plan to improve Russia’s economy by increasing gross domestic product by at least 2.5 percent by 2021, lowering unemployment to 5 percent and jacking up real household income. It will cost some 5 trillion rubles, or about $73 billion, roughly $41 billion of which will be spent this year and the rest next year. The government will support the initiative with 1 trillion rubles from the acquisition of Sberbank. The plan has two objectives. The first is to restructure the state budget, including a review of ongoing projects and the redistribution of as much as 500 billion rubles. The second is to preserve the National Wealth Fund as much as possible in case of an unforeseen emergency, like a second wave of COVID-19 cases. Rail traffic. Demand for rail transportation between Asia and Europe is increasing. Rail freight volumes between China and Europe through Russia have grown despite a slowdown in global demand and production – an increase of 35 percent from January to May 2020 compared with the same period last year. Earlier, Russian Railways also reported an […]

The Redemption of Prediction

Foreseeing what will happen is not difficult. It requires only that we face the fact that life always repeats itself if not perfectly, then roughly. As Mark Twain famously put it, “History does not repeat itself, but it does rhyme.” We are born of a woman, are nurtured and grow, live our lives as best we can, and die, and within a generation or three, our names and lives will be forgotten, along with what little we have done. There are variations within the rhyming tune, but on the whole this is what we are. We cannot predict everything about life, but we can grasp the pattern that grips us and within which we struggle to live. It is conceited to claim that the pattern that grips the individual does not also grip humanity and all of its parts. It is more difficult to grasp the song that is being sung than to grasp its rhyme. An individual is born to his life. Where he was born and to whom tells an observer a great deal about what his life will be. The place you were born and the people to whom you were born is both a comforting cradle […]

Daily Memo: Brokering Peace in Libya

Brokering peace in Libya. France, Germany and Italy issued a joint statement calling on all parties involved in the Libyan war to engage in peace talks, an indirect reference to Egypt’s recent initiative to broker a cease-fire. As more powers – some of which are EU members and allies – have become involved in the Libyan conflict, the EU has shown growing interest in finding a resolution. German Chancellor Angela Merkel and Russian President Vladimir Putin spoke about the situation in Libya, as well as the ongoing conflicts in Ukraine and Syria. Both leaders voiced their support for further cooperation on all three conflicts. Turkey, however, has dismissed the Egypt-brokered cease-fire proposal. Foreign Minister Mevlut Cavusoglu said he suspected that Egypt and its partners were using the talks to boost the Libyan National Army, which opposes the Turkey-backed Government of National Accord, after the LNA’s offensive to capture Tripoli failed. Turkey is the GNA’s largest supporter, and its refusal to participate will make any negotiation process difficult. Posturing in the Arctic. As interest in the Arctic grows, countries have begun to stake their claims on the region. On Tuesday, U.S. President Donald Trump ordered a review of U.S. icebreaking requirements […]

China Threatens Australia Because That’s All It Can Do

As cases of COVID-19 resurge elsewhere in the world, it’s worth remembering that Australia whipped the coronavirus into submission with relative ease, reducing the number of new daily cases to single digits by mid-April. Yet, the pandemic has left Australia with an acute case of economic and diplomatic whiplash anyway, not because of its public health shortcomings but because of its uneasy codependence with China. The country’s astonishing 29-year run of economic growth is set to come to an abrupt end, thanks in part to flagging demand from China, whose soaring commodities purchases helped keep Australia out of a recession after 2008. And Beijing, upset with Canberra over (among other seemingly trivial matters) its pro forma support for an international investigation into the origins of the virus and Taiwanese membership in the World Health Organization, is going the extra mile to ensure Australia doesn’t take Chinese buyers for granted. Over the past month, China has halted shipments of Australian beef, imposed an 80 percent tariff on Australian barley, warned of consumer boycotts targeting Australian winemakers and dairy farmers, and urged the more than 200,000 Chinese university students in Australia to consider studying elsewhere. Beijing, in other words, is becoming less […]

Daily Memo: Troubling German Trade Figures

Troubling German trade figures. German exports declined in April by 24 percent month over month and 31.1 percent year over year – the largest monthly fall since the introduction of foreign trade statistics in 1950. Broken down by region, the results vary. Exports to eurozone countries – which total 26.4 billion euros, or a third of all German exports – were down 34.8 percent from the previous year. Exports to France and Italy were hit particularly hard, down 48.3 percent and 40.1 percent respectively. Exports to the U.S. and U.K. dropped 35.8 percent and 42.1 percent respectively. Trade with China was less affected; exports there declined just 12.6 percent from the previous year. Exports remain a critical part of the German economy given that they account for approximately 47 percent of the country’s gross domestic product. Some of Germany’s biggest customers have seen the largest declines in purchases – which is particularly concerning for the country’s future prospects. The drop is of course due to the shutdown of the global economy in April, suggesting exports may bounce back in May when lockdown measures began to ease. Third-quarter results will be a key indicator of the country’s economic outlook. Cutting ties. […]