More on the currency crisis. Iran’s currency has reached a new low, trading at about 120,000 rials to the dollars. The government in Tehran has begun to ration meat, citing a supply shortage. Inflation in Turkey has reached 18 percent in August. Argentina is formulating a new economic plan that would increase investor confidence by cutting the deficit and thus obviating the need to raise export taxes. How it plans to do this, however, is unclear. Cashing in on grains, one of its most valuable sources of U.S. dollars, is politically charged. And in Europe, meanwhile, the pound sterling also fell against the dollar and the euro over ongoing opposition to Prime Minister Theresa May’s Chequer’s plan.
China has released contradictory manufacturing data. Or so it seems. According to the private Caixin/Markit Purchasing Manager’s Index, manufacturing growth in the country slowed to a 14-month low in August, while export orders shrank for a fifth consecutive month. China’s official PMI, meanwhile, painted a much rosier picture, showing factory activity picking up the pace slightly over recent months. This isn’t just a matter of juking the stats. The official index focuses primarily on large, state-owned firms, while the Caixin/Markit survey focuses more on smaller private firms, which Beijing has publicly expressed concern over, all but begging the banks to lend them more money. The discrepancy shows that Beijing has the tools to stabilize the state sector but not the parts of the economy that are less directly under its control. This is where a potential crisis looms, and it’s here we should be watching as the trade war with the U.S. escalates.
Japan and China are getting along. The two countries have periodically been saying nice things about cooperating on certain Belt and Road Initiative projects, and it appears as though they may actually mean it. According to the Nikkei Asian Review, Tokyo and Beijing are planning to jointly undertake some 20-30 projects, starting with a high-speed rail network in Thailand. Japanese Prime Minister Shinzo Abe may even visit Beijing in the coming months to push the budding partnership forward. This comes as the Japanese and Chinese finance ministers met for the first time in more than a year last Friday. Tokyo has reportedly invited Wang Qishan, Chinese President Xi Jinping’s top lieutenant, to visit and lay the groundwork for the potential summit. China and Japan are still long-term competitors. Security concerns, not instances of economic cooperation, will increasingly define regional affairs. Just yesterday, Japan’s defense minister said China has been unilaterally escalating military tensions in the East China Sea. But for now, the two countries still have plenty of overlapping interests, from which the region stands to benefit.
Libya’s civil war may be taking a turn for the worse. Clashes in Tripoli left 41 people dead, and now there are reports that Italy may be preparing to send special forces to Libya to support Prime Minister Fayez al-Sarraj. Italy’s deputy prime minister, Matteo Salvini, ruled out the deployment (according to a translation by BBC News), but Italian media are talking about a potential French intervention. Violence in Libya had been relatively contained prior to the recent clashes. That could change if we are on the brink of European military intervention.
China recently held the Forum on China-Africa Cooperation in Beijing, during which Beijing said it would forgive the debt of several countries. (In almost the same breath, Chinese officials promised to extend an additional $60 billion in investment around the continent. Beijing has a habit of failing to follow through with such pledges.) Given the recent grumblings from countries that have fallen into China’s debt trap, Beijing’s decision to walk away from money it’s owed is important, especially if it continues to do so beyond small, select groups of countries.
We end with an update on the quagmire that is the Syrian civil war. Turkey and Russia are negotiating the fate of Idlib. Turkey has begun to deploy more forces, including tanks and howitzers, to the border. There are reports that Russia has begun to conduct air raids there. This may be an effort to control the refugees that will surely try to leave the province. Over the weekend, Turkey also designated Hayat Tahrir al-Sham as a terrorist organization, despite having cooperated with the group since last July. This could be an indication that Turkey has agreed to a coordinated attack on the group. U.S. President Donald Trump has weighed in on the status of Idlib, too, warning the Syrian government to “not recklessly attack” the province.
- Turkey’s foreign minister said Turkey and Greece should seek better relations. This makes sense – Turkey will want to keep its western border as secure as possible while it deals with the possibility of an offensive in Idlib.
- Colombia’s foreign minister has asked for financial assistance as Bogota tries to manage the influx of Venezuelan immigrants.
- Oil exports from Iraq’s southern ports reached a record high in August of 3.6 million barrels per day.
- Tens of thousands of Russians took part in protests against pension reform. It seems as though there is momentum for these to continue, according to a poll conducted by the Levada research center.
- The deadline that Italy gave the EU to come up with a solution to its migration problem – or face Italy’s refusal to pay its membership funds – has passed. Will Italy follow through on its threat?
- Kosovo’s president and prime minister disagree on the land swap deal with Serbia. This complicates an already complicated situation.
- Japan will probably not receive a waiver from the U.S. to continue importing oil from Iran. India continues to purchase Iranian oil, at least for now.
- It looks like Israel is resuming activity in Syria. Over the weekend, there were social media reports of Israeli warplanes near Damascus, followed by news coverage of a missile strike at an air base near the Syrian capital. On Monday, there were reports that another convoy of Iranian and Hezbollah forces was attacked. Also, after a Reuters report broke late last week that Iran was supplying ballistic missiles to its Shiite militias in Iraq, Israel claimed that it was willing to attack Iranian forces and military installations in Iraq.