North Korea launches more missiles. North Korea conducted its second missile test in a week yesterday, launching two more short-range missiles into the Sea of Japan. The missiles are again believed to be North Korea’s version of the Russian Iskander missile, which can fly on a low trajectory with a greater degree of maneuverability than most ballistic missiles, posing major challenges for missile defense systems such as the United States’ THAAD system that’s currently deployed in South Korea. The missiles, launched about 20 minutes apart, traveled just 250 kilometers (155 miles) at an estimated altitude of 30 kilometers – not as far or high as the missiles tested on July 25 and in May. As we noted following the last tests, the U.S. has drawn a red line around intercontinental ballistic missiles capable of reaching the U.S. mainland, effectively giving North Korea a green light to test increasingly sophisticated shorter-range missiles. But since these can be used to target invaluable U.S. bases in the region, and since they risk deepening the wedge between the U.S., South Korea and Japan, Washington won’t be able to ignore them forever.
Europe’s troubling economic signs continue. Mixed (but mostly bad) signals on the health of Europe’s economy continue to emerge. Retail sales in Germany rose by 3.5 percent month on month in June, the highest increase since December 2006, and eurozone unemployment fell to its lowest level (7.5 percent) since July 2008. Economic growth in the eurozone, however, declined to 0.2 percent in the second quarter compared to the previous quarter. Inflation fell from 1.3 percent to 1.1 percent, a sign that demand in the eurozone may be lagging. This increases the already high likelihood that the European Central Bank will again loosen monetary policy as the U.S. Federal Reserve considers similar moves. In the United Kingdom, investment in the car industry continues to fall, due in part to Brexit concerns. The Society of Motor Manufacturers and Traders estimated that in the first half of 2019, investment fell to 90 million pounds ($110 million), compared to 350 million pounds in the same period in 2018 and 650 million pounds the year before. This is another indicator that Brexit may have a serious impact on the U.K. economy, including its manufacturing sector.
China puts a check on residential sales. Dalian, a northern Chinese city, is introducing sales restrictions on new homes. A regulatory authority will have to approve all sales of new construction, and prices will have to be up to 5 percent lower than the lowest price observed for similar homes in previous months. With an overheated real estate market in a number of first-tier cities in China, this type of price regulation may be a sign of things to come nationally.
Israel appears to target Iran in Iraq. Israel may have carried out two airstrikes in Iraq in July. Israel, per its standard policy, has neither confirmed nor denied its involvement in the airstrikes, but several news outlets have stitched pieces together that point to Israel’s role. The first strike, which took place on July 19, targeted a base in Amirli, north of Baghdad, where Iran is believed to have moved a number of missiles shortly before the attack. The second, on July 28, targeted a base northeast of Baghdad in Ashraf and is believed to have killed several Iranian advisers and destroyed another shipment of missiles sent from Iran. Both airstrikes are believed to have been carried out with F-35s and, if true, would represent the first time that Israel has conducted airstrikes in Iraq since it took out Saddam Hussein’s fledgling nuclear program in 1981. It would also be a sign that Israel is willing to expand its campaign against Iran beyond Syria and Lebanon.
Ankara deliberates on northern Syria. In a six-hour meeting on Tuesday, Turkey’s National Security Council met to discuss a potential operation in northern Syria. While Turkish President Recep Tayyip Erdogan has repeatedly threatened to invade northern Syria over the past year and a half, the length of the session may indicate that Turkey’s national security apparatus is seriously examining the details of such an incursion. Reports indicate that up to 80,000 Turkish soldiers have massed on the Syrian border, which, if true, would represent a significant portion of Turkey’s total military and would be an order of magnitude larger than its two prior incursions into Syria.
- Samsung’s operating profit from April to June – before Japan’s ban on exports of critical materials to South Korea kicked in – plunged 55.6 percent. Moody’s downgraded South Korean chipmaking giant SK Hynix’s outlook to negative.
- The Public Opinion Foundation, a Moscow-based polling company, has released a survey indicating that one out of every four Russians has faced more financial difficulties in the past two to three months. Two-thirds of respondents said they saw almost no changes, and only 8 percent indicated that their situation has improved.
- Germany, unsurprisingly, rejected a U.S. request to increase its involvement in the Persian Gulf. The U.S. is seeking a commitment from European countries to support patrols in and around the Gulf as tensions with Iran remain high.
- Two Iranian missile boats have arrived at Baku, Azerbaijan, to take part in a contest. We have our eye out for any signs of an Iranian presence in the Caucasus, as Russia and Iran’s diverging interests in the Middle East may incentivize Iran to seek influence closer to Russia’s borders.
- Beijing is limiting travel between mainland China and Taiwan. The move, which may be retaliation for the $2.2 billion U.S.-Taiwan arms deal reached earlier this month, restricts Chinese citizens from 47 cities from traveling to Taiwan unless they are signed up to visit in a tour group.
- Trade talks between the U.S. and China concluded on Tuesday without any substantial progress aside from agreeing to another round of talks in September.
- China’s Politburo announced that it would continue to employ fiscal stimulus to manage “new risks and increasing downward pressure” on the economy.
- Iran’s crude oil exports continue to fall, declining to 100,000 barrels per day in July. Iran looks like it’s open to negotiations. On Tuesday, Tehran announced that it would be reviving maritime talks with the United Arab Emirates, a historical adversary in the Middle East. On Wednesday, Foreign Minister Mohammad Javad Zarif said Iran would still be willing to sit down for talks with Saudi Arabia.
- Japan and the U.S. appear to have reached a new digital trade agreement that would allow businesses to store data on host servers located wherever they choose without paying tariffs.