Monitoring Israel and Hezbollah. Since Hezbollah and Israel exchanged fire on Sunday, the situation seems to have reached a tense lull, as security restrictions have been lifted in northern Israel. Israeli Foreign Minister Israel Katz said Israel would not tolerate Hezbollah’s precision-guided missile program, while Hezbollah leader Hassan Nasrallah pledged retaliatory attacks deep inside Israeli territory in the event of another strike from Israel. Iran and Iranian-aligned forces, including Iraq’s Shiite-dominated Popular Mobilization Forces, have pledged their support for Hezbollah. We remain on close watch for any additional attacks in the coming days, Israeli calls on reservists, and any other signs of military preparations that could indicate future conflict.
Maritime security in the Asia-Pacific. This week will see several significant developments in Asia-Pacific security. The U.S. kicked off its first-ever military exercises with the 10 countries of the Association of Southeast Asian Nations. The location of the exercises, jointly led by the U.S. and Thai navies, will range from the Gulf of Thailand to the South China Sea. Japan and India’s defense ministers met yesterday in Tokyo to advance their talks on security cooperation, in particular on establishing a bilateral acquisition and cross-servicing agreement. South Korean President Moon Jae-in and Thai Prime Minister Prayuth Chan-ocha signed a memorandum of understanding on military intelligence cooperation. While such memorandums themselves do not carry much weight, it is notable that South Korea is pursuing intelligence sharing with its neighbors after scaling back such cooperation with Japan. Last but certainly not least, there are signs that the government of the Solomon Islands may be rethinking its relationship with China. A Solomon delegation of eight ministers recently paid visits to both Taiwan and Beijing. The Solomon Islands have recognized Taiwan for the past 36 years, and a shift toward Beijing would raise concerns for both the U.S. and Australia, for whom the islands play a strategic role in maritime security objectives.
Iran’s domestic strife. Internal pressures continue to mount against the Iranian government. Tasnim news agency reported today that a woman set herself on fire after her court case against government-imposed compulsory hijab practices was canceled. This follows an increase in protests against headscarf requirements. Meanwhile, Iran’s central bank reported that foreign reserves dropped 1.5 percent in June to $40 billion. The bank’s head said it would be necessary for the bank to take measures to control the value of Iran’s currency and warned that the bank would struggle to manage the supply of money as control over its balance sheet slips. Inflation continues to plague the economy, most recently clocking in at 42 percent. The political consequences include increased parliamentary scrutiny, falling confidence in the economy minister, and prosecutions of corruption cases that highlight the involvement of security and intelligence personnel. As observers remain focused on the future of the Iran nuclear deal, it’s important to also consider the internal battles the government is waging.
New currency controls in Argentina. Over the weekend, Argentina’s government ordered currency controls be put in place, effective between Sept. 2 and Dec. 31 of this year. Among the restrictions imposed are requirements that exporters receive central bank approval to buy U.S. dollars, that the government approve transfers of money abroad, and that there be a $10,000 monthly cap on individuals’ purchase of dollars. Although the measures do not put restrictions on individuals seeking to withdraw dollars from their bank accounts, there are already reports of long lines at banks. This is the Macri government’s latest move to deal with a financial crisis, but the move put further strain on Argentina’s compliance with the terms of its International Monetary Fund agreement. Central bank President Guido Sandleris acknowledged that the bank failed to meet the IMF monetary base goals for July and August, but stressed that compliance is measured on a quarterly basis. For its part, the IMF said it was monitoring Argentina’s capital flow management measures and reiterated its support for the country.
- Cyprus has fully repaid a Russian loan ahead of schedule.
- Australia announced 15 projects to develop and process rare earth minerals. The projects complement joint U.S.-Australian efforts to reduce China’s influence in rare earths.
- The Turkish economy contracted by 1.5 percent during the second quarter compared to the previous year. This follows a 2.5 percent year-on-year contraction in the first quarter, according to the Turkish Statistical Institute.
- Russia and Mongolia signed the Treaty on Friendly Relations and a comprehensive strategic partnership.
- India’s eight core industrial sectors grew only 3 percent from April to July, compared to 5.9 percent in the same period the previous year, with output of coal, crude oil, natural gas and refinery products recording contractions in July.
- Lebanese lawmakers and Prime Minister Saad Hariri agreed to declare an economic emergency and to expedite public finance reforms.
- On Monday, Ethiopia’s Wolaita People’s Democratic Front requested separation from the Southern Nations, Nationalities and People’s state to form its own state.
- Workers in Zhanaozen, Kazakhstan, protested against plans for Chinese businesses to start operations in the area, which is currently struggling with joblessness.
- Georgian Prime Minister Mamuka Bakhtadze announced on Monday that he will step down from his position, saying he has completed his mission of establishing a strategic development framework for the country.