With friends like these. On Monday, U.S. President Donald Trump took to Twitter to call for countries like Japan and China to protect their own oil tankers traveling through the Strait of Hormuz, claiming the U.S. shouldn’t be guarding international sea lanes for “zero compensation.” Later, Bloomberg reported multiple sources as saying that Trump has privately expressed a desire to pull out of the 59-year-old mutual defense treaty with Japan. Meanwhile, across the Sea of Japan, a U.S. State Department official said that Trump expects South Korea to pay up if it wants the U.S. deployment on the Korean Peninsula to continue when a bilateral cost-sharing agreement expires next year. Trump reportedly has no plans (or even the ability) to actually try to pull out of either the Japan or South Korea treaties if his demands aren’t met. But these sorts of reports inevitably deepen uncertainty about U.S. commitments abroad, particularly in the Western Pacific, and its longtime role of guarantor of global sea lanes, with unpredictable long-term consequences. Trump’s skepticism of alliances, moreover, may be moot: For their own strategic reasons, Japan and South Korea have been preparing for a future with considerably less U.S. military support since long before Trump took office. Both have a long way to go to be able to stand on their own, much less take on, say, policing duties in the Persian Gulf. But unless there’s a spike in isolationist political sentiment in the U.S. and/or a total collapse of strategic rationale underpinning U.S. partnerships, a rapid disintegration of the U.S. alliance structure will remain far-fetched.
French finance. The national audit office warned Tuesday that France’s public finances were continuing to deviate from those of key partners. The French budget minister said in an interview that the country was still on pace for a 2 percent public deficit in 2020, but an unnamed source told Reuters that a deficit as high as 2.3 percent was more likely. The audit office seemed to confirm the source, saying the 2020 target failed to account for the cost of President Emmanuel Macron’s concessions to yellow vest protesters late last year and this spring. It also said Paris was unlikely to enact plans to close tax loopholes by next year, potentially adding another 0.3 percent to the 2020 deficit. Finally, the audit office warned that the country’s high debt and deficit levels leave it with little room to cope with a financial crisis or cyclical slowdown.
Azerbaijani energy and Ukraine. Ukraine’s ambassador to Azerbaijan met with the president of Azerbaijan’s state oil company to enhance bilateral energy cooperation. It’s likely as not that nothing will come of a meeting with such a broad, vague mandate, but Ukraine’s efforts to diversify its energy sources always pique our interest. With Russia’s ongoing conflict in eastern Ukraine, and with the completion of Nord Stream 2 – which will allow Russia to more easily cut natural gas shipments to Ukraine without cutting supplies to Western Europe – nearing completion, the meeting could be a small sign that Azerbaijan could compensate for whatever energy Ukraine loses.
Iran in Africa. A report from The Telegraph claims that for the past three years – ever since the signing of the Iran nuclear deal – Iran has been organizing militias in Sudan, Chad, Ghana, Niger, Gambia and the Central African Republic. Overseeing the operation, according to the report, is the Quds Force, which is training militants in Iranian camps in Iraq and Syria. These are logical theaters in which Iran could carry out retaliatory measures against the U.S. as tensions rise in the Middle East, and indeed other world powers are already involved there. Russia, for example, has set roots down in Central Africa, providing military training and assistance to the CAR president’s personal security entourage, and has sent Wagner defense contractors to Sudan. Readers familiar with our annual forecasts will recall that we anticipated an opportunity for Iran to increase its presence in sub-Saharan Africa. The Telegraph report appears to corroborate that prediction.
Srpska cancels police bill. Bosnia’s Republika Srpska announced that it will withdraw a bill that would have established a reserve police force. According to Voice of America, Western diplomats had pressured the Serb Republic to do so for fear that it could create tensions like those that led to the Bosnian civil war in the early 1990s. Their concerns were not without merit. Bosnia’s other region, populated primarily by Bosniaks and Croats, had promised to respond to the bill, if passed, by establishing its own auxiliary police forces.
Russian military drills. Russia called for surprise military drills on Monday. Though Russian officials claimed that the exercises were a response to U.S.-Iran tensions and the deployment of U.S. troops to the Middle East, NATO drills with Finland, Estonia and Lithuania near the Russian border are the more likely culprit. (Not to mention exercises planned for July that will include the U.S., Ukraine and 19 other countries.)
- The U.S. intelligence community does not believe North Korean leader Kim Jong Un is ready to denuclearize, U.S. Defense Intelligence Agency Director Lt. Gen. Robert Ashley told Fox News.
- Russia has sent a naval task force, armed with Kalibr cruise missiles, from its Northern Fleet on an official visit to Havana, Cuba. Meanwhile, the Russian air force landed an Ilyushin 62 jet at Venezuela’s Maiquetia International Airport.
- European economics commissioner Pierre Moscovici suggested weeks ago that the European Commission should give the Italian government until January to rein in its fiscal policy, according to the published minutes of a meeting in early June. If the bloc decides to open a formal disciplinary procedure against Rome next month, it could give the government as few as three months to comply.
- European Union ministers approved a free trade agreement with Vietnam, described as “the most ambitious free trade deal ever concluded with a developing country.” The agreement, as well as an investment deal, will be signed June 30, though the trade agreement requires European Parliament approval before it takes effect.
- According to the Confederation of British Industry, 16 percent of British retailers saw improved sales in June relative to last year, compared to 58 percent who saw a decline, resulting in a weighted balance of -42. This is worse than the -27 reading in May and well below a Reuters poll of -10.
- Three Armenian airlines have offered to help provide transport to Georgian airlines that have been temporarily banned from flying to Russia because of anti-Russian protests in Tbilisi.
- China lowered its overnight repurchase rate to the lowest level in four years. The People’s Bank of China is trying to manage a seasonal demand for cash that increases toward the end of June.
- Iran’s Islamic Revolutionary Guard Corps and an Iranian-Kurdish insurgent group engaged in a small fight in northwestern Iran near the Turkish border. One Kurdish fighter was reportedly killed. Iran claims – not unreasonably – that Kurdish groups are receiving U.S. aid, a claim that has some merit to it.
- Japan, Australia and the U.S. have selected their first co-investment infrastructure project in the Pacific as a way to counter China’s Belt and Road Initiative. The three will finance a liquefied natural gas project in Papua New Guinea, to which they will lend approximately $1 billion.
- The Netherlands said it is reviewing Washington’s request to provide security support in areas held by the Syrian Democratic Forces in northeastern Syria.
- Japan’s Maritime Self-Defense Force will for the first time join the joint U.S.-Australia Sabre military exercises next month. Tokyo plans to send several ships, including a helicopter carrier.
- Oman denied reports that it conveyed a message from the U.S. to Iran regarding the drone that was shot down last week.
- Qatar plans to invest $3 billion in Pakistan, which received another loan last month from the International Monetary Fund to save it from a balance of payments crisis. Qatar’s investment comes in addition to two investment packages of $6 billion each from Saudi Arabia and the United Arab Emirates.
- The presidents of the U.S. and South Korea are scheduled to meet in Seoul on Sunday.
- Turkey reportedly sent more reinforcements to Hatay province, near the Syrian border.