Venezuela’s crisis isn’t dying down. On Wednesday, Venezuelan President Nicolas Maduro said he was open to talks with the Venezuelan opposition and potentially to foreign mediation. But the opposition isn’t interested. The country’s supreme court, which is loyal to Maduro, froze the assets of and slapped a travel ban on opposition leader and self-declared president Juan Guaido, who will presumably be at protests that begin today and will continue into the weekend.
As always, watch what key players do, not what they say. This includes the military, which remains the kingmaker in Venezuela, and outside powers, which are behaving as though a showdown is approaching. Following an unconfirmed Reuters report last week that Russian mercenaries had arrived to bolster Maduro’s security forces, a mysterious Russian 777 was spotted in Caracas on Tuesday, fueling all sorts of lurid speculation (and Moscow denials) about Russian efforts to prop up Maduro. A senior U.S. National Security Council official, meanwhile, said the U.S. was considering opening a “humanitarian corridor” to channel emergency aid into the country – something that would inevitably require outside military forces. For now, Washington is likely content to see if its new sanctions on Venezuelan oil firm PDVSA tilt the balance of power toward the opposition and is taking steps to find ways to fund it. Already, Caracas is scrambling to rework contracts to prevent oil revenue from ending up in the opposition’s hands. Curiously, Russia called on the government to “live up to its commitments” to Moscow, and Russian energy firm Lukoil has reportedly frozen its contract with Caracas out of fear of getting frozen out of the U.S. financial system.
The U.S.-China trade war and the U.S.-China tech war. A high-level Chinese delegation headed by Vice Premier Liu He, President Xi Jinping’s top economic adviser, has arrived in Washington. The negotiations are playing out roughly as we predicted they would: China is floating modest structural and market access concessions in exchange for a reduction in U.S. tariffs. On Wednesday, for example, Chinese news agency Xinhua reported that China’s parliament will fast-track a new foreign investment law that addresses some of Washington’s concerns. And the Nikkei Asian Review reported that Liu’s team is planning to present a roadmap on structural reforms, featuring specific benchmarks that will allow the U.S. to gauge Beijing’s progress on implementation.
But the U.S. will continue to pressure China to curb its tech ambitions, regardless of what is agreed to by March 1. On Tuesday, FBI Director Christopher Wray told Congress that the bureau has investigations into Chinese economic espionage at nearly all of its 56 field offices. In an interview with Fox News, meanwhile, U.S. Treasury Secretary Steven Mnuchin effectively confirmed that the White House views the trade and tech wars as largely discrete, saying the Justice Department’s new round of charges against Chinese telecom giant Huawei won’t be discussed in the upcoming trade talks. Put simply, U.S. measures aimed at the Chinese tech sector are inflicting less harm on the U.S. economy than tariffs are, and the U.S. knows it’s in its interests to fight China where it matters most.
Chinese tech firms are already hurting. On Wednesday, China’s tech-heavy Guangdong province announced a growth target of just 6-6.5 percent this year (compared to 7 percent last year). As we noted yesterday, Chinese chipmaker Fujian Jinhua is reportedly set to cease its operations. Huawei, meanwhile, is pushing overseas suppliers to move operations to the mainland in anticipation of new U.S. moves restricting the company’s access to U.S.-made semiconductors and other critical intellectual property. Share prices for several such suppliers, including Foxconn, plummeted following the U.S. Justice Department’s announcement of 23 new charges, which run the gamut from corporate espionage and obstruction of justice to wire fraud. The Chinese tech sector isn’t alone in its misery; on Tuesday, dozens of major Chinese firms from different industries warned investors of falling profits, while the FTCR China Export Index, which gauges export activity and sentiment, fell 2.4 points from December to 52.2, or more than four points lower than last January. But it’s China’s tech sector that matters most, both to Beijing’s plans to avoid the middle-income trap and to the intensifying competition between China and the U.S.
- The British Parliament voted to force Prime Minister Theresa May to renegotiate a Brexit deal with the EU and to remove the option of a no-deal Brexit.
- A European Commission gauge of eurozone economic sentiment slipped to its lowest level since November 2016.
- Less than half of Germany’s Eurofighter and Tornado fighter jets and none of its six submarines were ready for combat in 2018, according to an annual assessment published by Germany’s parliamentary ombudsman.
- U.S. Director of National Intelligence Dan Coats told Congress that the intelligence community believes Pyongyang will not completely give up its nuclear weapons.
- CIA Director Gina Haspel told the Senate Intelligence Committee that Iran remains technically in compliance with the 2015 nuclear agreement.
- Iranian President Hassan Rouhani said the country is facing its toughest economic situation in 40 years, and the United States, not the government in Tehran, was to blame.
- U.S. consumer confidence slumped in January to the weakest level since July 2017. Growth in U.S. home prices in November was the slowest in nearly four years, according to S&P CoreLogic Case-Shiller data.
- The U.S. State Department approved the sale of two Aegis Ashore missile-defense systems to Japan.
- Canadian law enforcement officials said they received an official request from the U.S. to extradite Huawei Chief Financial Officer Meng Wanzhou.