China’s latest trade data is bad. According to China’s General Administration of Customs, exports fell 4.4 percent in December 2018 year-on-year, while imports fell 7.6 percent. Imports and exports both increased overall in 2018 by 7.1 and 12.9 percent respectively, but the fact that they tapered off suggests U.S. tariffs are taking a toll on the economy. Also notable are car sales, which declined for the first time since 1990. In response to the news, a top official from the People’s Bank of China tried to smooth things over, saying that China’s economy would stabilize in the first quarter of 2019 before it warmed back up in the second half of the year. And China’s State Administration of Foreign Exchange announced that foreign-exchange quotas for overseas investors in the stock market would be immediately doubled, no doubt to encourage foreign capital inflows to China’s struggling economy. Those won’t be the last statements or policy measures China issues as it attempts to weather the storm.
Beijing battens down the hatches. Sticking with China for a moment, the Central Commission for Discipline Inspection – President Xi Jinping’s purge machine – held its third plenary session this weekend, after which it issued a communique that itemized eight key priorities it would focus on in the year ahead. They include the safeguarding of Xi’s position at the center of the communist party, the targeting of areas where power, money and resources had been centralized, and the development of an “iron army” of disciplinary inspectors who are loyal and clean. The Central Military Commission’s Vice Chairman announced today that the military would swiftly implement the spirit of the communique. Xi’s crusade to root out corruption has made him popular with the people, but it has also given him near-dictatorial control over the political system. We always knew his grip would tighten in the wake of China’s economic woes. The communique just makes it official.
Russians are unhappy with their government. The Levada Center, a Russian research organization, conducted a poll that asked respondents if they would be for or against the resignation of the Russian government. The question is carefully worded to indicate dissatisfaction with the government, and not necessarily with President Vladimir Putin himself. The results: Some 53 percent of respondents said they wanted the Russian government to resign – a marked increase from the 33 percent who responded affirmatively the last time Levada conducted this poll in November 2016. No doubt contributing to the negativity are the concerns over increased food and gasoline prices, as well as increased mortgage loan rates. The last time Russians were so pessimistic about their government’s ability to cope was in 2008, at the onset of a global financial crisis.
Japan and Russia set the tone for the year. Before meeting with Russia’s foreign minister in Moscow earlier today, Japan’s foreign minister said his government hoped 2019 would be a “fruitful and historic year” for Russo-Japanese relations, adding that Putin would be welcomed to Tokyo in June. It’s likely that they were tacitly referring to the disputed Kuril Islands, but either way, that was where the pleasantries ended. Japan declined to participate in a press conference after the meeting, which a Russian Foreign Ministry spokesperson described as “odd.” That didn’t stop Russia’s foreign minister from holding his own press conference, during which he criticized Japan’s negotiating tactics, saying the two sides remained “diametrically opposed.” Even so, the FM said both Putin and Abe wanted to normalize relations – and therefore dialogue will intensify. An auspicious beginning to a year in which both sides are talking up the peace prospects of a territorial dispute going back to World War II.
Iran’s paltry budget. An Iranian parliamentary committee approved a draft of Iran’s 2019 budget. It must pass at least two more hurdles (votes in the full parliament and a top clerical body) before becoming official. The proposal would cut Iran’s budget by a staggering 50 percent compared to the previous year. The cuts are related to the decline in oil revenue following U.S.-led sanctions – Iran’s Planning and Budget Organization reported last month that government revenue had fallen by two-thirds because of sanctions. Iranian President Hassan Rouhani acknowledged in a statement today that Iran faced many “hardships and problems,” but he remained confident the country would overcome them. He has also said that Iran needs to use this opportunity to reduce its dependence on oil and build up the country’s private sector. To that end, notably, the draft budget would slash defense spending by 28 percent and the Islamic Revolutionary Guard Corps’ budget by 17 percent, creating much political tension in the country. The budget is based on crude prices remaining between $50 and $54 a barrel – anything less might send Iran over the edge.
Keeping an eye on Turkey. The world is once again transfixed by a tweet from U.S. President Donald Trump, one in which he said the U.S. would “devastate Turkey economically if they hit Kurds” (referring to the Syrian Kurds allied with the U.S. in its fight against the Islamic State). A Turkish presidential spokesperson fired back that the U.S. was making a “fatal mistake,” while Turkey’s foreign minister tried to downplay the social media firestorm, saying that the two sides were working together to coordinate a U.S. withdrawal from Syria. We confess we’re less concerned with the Twitter war and more concerned with a report from Turkish newspaper Yeni Safak that 80,000 Turkish soldiers were gearing up for “the biggest cross-border operation in the country’s modern history.” Previous Turkish incursions into Syria have been much smaller and more limited.
Qatar plays all sides. For such a small country, Qatar certainly makes a lot of headlines, and some of them today are a bit surprising. After meeting with U.S. Secretary of State Mike Pompeo on his regional tour, Qatar’s foreign minister predicted a “quantum leap” in relations with the U.S. and said Qatar would expand a base that hosts the forward headquarters of U.S. Central Command. Meanwhile, Turkish President Recep Tayyip Erdogan said yesterday that Turkish-Qatari relations would deepen significantly in the areas of defense, trade and energy. And finally, bucking the trend of other Arab states seeking to normalize relations with the Syrian government, Qatar’s foreign minister ruled out the reopening of the Qatari embassy in Syria. For a country that Saudi Arabia boycotted nearly two years ago for being too close to Iran, those are all decidedly anti-Iran moves.
Greek drama. Greece’s defense minister resigned yesterday over Athens’ endorsement of a deal with Skopje to change Macedonia’s name to North Macedonia. (With the Macedonian parliament’s approval of the name change last week, the Greek parliament’s support is the last remaining obstacle before the deal becomes official.) Greek Prime Minister Alexis Tsipras said he will call for a confidence vote in parliament this week, and while it looks like he has sufficient support, the margin is too narrow to consider it a done deal. The Macedonian foreign minister said the Greek government had assured him it remained “strongly committed” to the name change agreement – just how committed we will likely find out this week.
- Singapore’s foreign minister warned of “consequences” for Malaysia for its “daily intrusions” into Singapore’s waters. This follows an official protest note send last Friday to the Malaysian government. While at least one high-level ministerial meeting has been postponed as a result, Malaysia and Singapore’s economic affairs ministers met without event yesterday.
- Israel’s prime minister confirmed that Israel struck Iranian and Hezbollah targets in Syria over the weekend. Ordinarily, Israel neither confirms nor denies these kinds of operations.
- Uzbekistan’s National Guard and China’s People’s Police conducted joint exercises in Uzbekistan. Uzbekistan’s president praised recent military reforms.
- Saudi Arabia says it will build a $10 billion oil refinery at Pakistan’s Gwadar Port.
- Chinese President Xi Jinping may travel to North Korea in April, according to the South China Morning Post.
- Clashes continue in northwestern Ethiopia. Meanwhile, the Ethiopian National Defense Force launched airstrikes against “military training camps run by OLA [Oromo Liberation Army]” in western Ethiopia.
- Referring to himself as “the soldier of the people and the keeper of the temple,” the second runner-up in the recent Democratic Republic of Congo presidential elections called for a recount over the weekend. The DRC’s Catholic Church has also rejected the results.
- A U.S. desire for long-term military bases in Afghanistan is reportedly the key sticking point in negotiations with the Taliban over Afghanistan’s future.