Editor’s note: We will be off tomorrow for Christmas, but the Daily Memo will resume on Wednesday. We wish those celebrating a wonderful Christmas.

Pakistan’s balance of payment crisis continues. Pakistan’s talks with the International Monetary Fund are going poorly, according to Finance Ministry officials who spoke with Dawn, an English-language Pakistani newspaper. The crux of the disagreement is the IMF’s belief that Pakistan has not fulfilled its commitments in prior IMF agreements. The organization is asking for large cuts to current, rather than future, expenditures, including defense spending. Pakistan doesn’t believe this is feasible. The IMF is also requesting that Pakistan raise interest rates, which would make borrowing and servicing debts more expensive for both the government and private sector. The IMF is also pushing the government to float the Pakistani currency, but Pakistani officials claim that the currency market isn’t large enough to make that happen. In the meantime, Pakistan received a loan package from Saudi Arabia and is awaiting further Saudi investment in its Gwadar Port. Abu Dhabi committed to depositing $3 billion in Pakistan’s state bank (Pakistan hopes part of this will be a deferred payment for an oil program), and Pakistan is hoping to strike a similar deal with China, worth $2.2 billion. Islamabad is also discussing liquefied natural gas exports with Qatar.

More on the U.S., Turkey and Syria. U.S. President Donald Trump and Turkish President Recep Tayyip Erdogan spoke on Sunday. Erdogan described the call as “productive,” and Trump said afterward that the U.S. withdrawal from Syria would be both “slow” and “highly coordinated” with Ankara. This seems to contrast with initial claims that the withdrawal would take 60 to 100 days. Trump signed the executive order for the withdrawal on Sunday. Ankara has signaled that it is willing to delay its offensive on Manbij and areas east of the Euphrates River. But reports indicate Turkey has sent a 100-vehicle convoy of reinforcements, including tanks and other weapons, to positions north and northwest of Manbij. Additionally, Yeni Safek reported that 8,000 Free Syrian Army fighters were deployed to the Manbij area. (It’s unclear if this deployment is part of or in addition to the 15,000 FSA fighters that were already mobilized.)

Meanwhile, Kurdish forces are doing what they can to cope with the fallout from the U.S. withdrawal. Over the weekend, officials from the Syrian Democratic Forces traveled to Moscow, seeking some sort of settlement with Russia that would prevent or at least limit the anticipated Turkish offensive. Russia reportedly offered to deploy border guards east of the Euphrates, but the SDF insisted that they be Syrian army units rather than the Iran-backed Popular Defense Forces that were sent to Afrin in February. With the U.S. withdrawing, Kurds in northern Syria are essentially faced with two options: quickly reach an agreement with Assad – presumably brokered by Russia – or face a Turkish offensive and long-term occupation. Russia will need to walk a fine line to broker such a deal, as it would like to see President Bashar Assad retake as much territory as possible and use the Syrian Kurds as leverage against Ankara, all the while avoiding a direct confrontation with Turkey.

China is open for business. In yet another move to open China’s markets, a draft law was submitted to the National People’s Congress Standing Committee that would consolidate several laws on foreign investment. The law would replace existing ones on joint ventures and covers issues related to legal protection of foreign investment. Amid the ongoing trade war with the United States and a growing diplomatic spat regarding detention of foreign nationals, China is under pressure to attract more foreign investment by showing it is, in fact, a secure place to do business for firms and their foreign employees.

OPEC is losing power. In a statement provided to Turkey’s Anadolu Agency, the executive director of the International Energy Agency said that by 2025, U.S. oil production will equal Russia and Saudi Arabia’s combined output. The IEA anticipates that the production levels of OPEC+ countries will grow only modestly in the next five years, with U.S. production reaching an anticipated 17 million barrels per day by 2023. Meanwhile, the United Arab Emirates said that if the most recent OPEC+ cuts of 1.2 million barrels per day do not sufficiently boost oil prices, it would be willing to hold an extraordinary meeting to pursue more cuts.

Iran tries to speak softly but doesn’t have a big stick. Iran, which has repeatedly called for the destruction of Israel, is changing its tone. Mohammad Javad Zarif, Iran’s foreign minister, claimed that Iran has “never sought wiping out any country,” a clear reference to Israel. He instead laid the blame on Saudi Arabia for trying to destroy Iran. The about-face in this statement is notable. It could be Iran’s attempt to redirect attention from its presence throughout the Middle East, or a sign that the myriad pressures it is facing internally and externally are beginning to have an effect on the way it feels it must present itself to the world. At the same time, the Iranian navy conducted an exercise that involved firing several rockets near the Strait of Hormuz, where the USS John C. Stennis aircraft carrier is currently conducting patrols.

Honorable Mentions

  • U.S. President Donald Trump announced that the current deputy defense secretary, Patrick Shanahan, will replace Defense Secretary James Mattis on Jan. 1.
  • After reaching an agreement with Brussels last week to lower its proposed budget deficit from 2.4 percent to 2.04 percent, Italy passed its 2019 budget through the upper house of parliament on Sunday. The budget will now go to the lower house for approval by Dec. 31.
  • Teachers are protesting over unpaid wages and bonuses in several Mexican states. In Hidalgo, 14,400 retired teachers held a demonstration, blockading at least 20 highways.
  • Ethiopia is establishing a new force to protect government officials and their families from attacks. It is being referred to as the “Republican Guard.”