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Daily Memo: Warm US-Russia Relations, Combustible Chinese Finance, Simmering Iranian Tensions

All the news worth knowing today.

|June 28, 2018

By GPF Staff

The past 24 hours have been relatively uneventful, geopolitically speaking, but the recent signs of improvement in U.S.-Russia relations would top our list on even the busiest of days. U.S. National Security Adviser John Bolton met with Russian President Vladimir Putin on Wednesday to lay the groundwork for a future Trump-Putin meeting. (Initial reports suggest it will take place July 16.) Then on Thursday, Russia announced its commitment to a cease-fire in the eastern Ukrainian region of Donbas, effective almost immediately. Coincidence? Perhaps. Some Russian media have said Bolton actually de-prioritized Ukraine during the meeting, though those reports are unconfirmed. (Not for nothing, Ukraine’s Defense Ministry said Thursday that Russia might invade from Belarus, hardly a conciliatory gesture.) Still, in the context of U.S.-Russia relations, this is exactly the kind of development we should pay attention to.

Meanwhile, a government-backed think tank in China has warned of a potential “financial panic.” The study reportedly said bond defaults, a liquidity shortage and volatility in financial markets, combined with tensions in U.S.-China trade, make for a highly combustible situation. We say “reportedly” because the study was immediately taken off the think tank’s website. Obviously, a Chinese financial crisis would be consequential for U.S.-China relations and for the global economy. But what’s more intriguing is that the report itself, and its quick removal, suggest that there is discontent in China about the direction of economic policy.

Protests in Iran have died down, but the pressure on the Iranian government has not. The rial is still close to record lows against the dollar. In an impassioned and defiant speech, President Hasan Rouhani said Wednesday that he was not afraid of the protesters and that his government would never resign. On the same day, a spokesman for the Islamic Revolutionary Guard Corps said his group had a “bond with the people” and could not remain “indifferent” to their struggles. Clearly the IRGC is continuing to portray itself as the country’s potential savior – just in case Rouhani is wrong about the future of the government.

With so much on Washington’s plate, the U.S. appears to have little time for India. So little time, in fact, that the U.S. has canceled a meeting between the U.S. secretaries of state and defense and their Indian counterparts, during which they had been expected to sign agreements meant to facilitate closer military cooperation. The State Department said the meeting was postponed for “unavoidable reasons,” though a new date has yet to be announced. Scheduling conflicts aren’t unheard of, but it’s hard to ignore how combative the two sides have been lately. India has reacted angrily to U.S. protectionist measures and has complained about U.S. demands to stop importing Iranian oil, even as it slows defense purchases from Russia because of U.S. sanctions. There’s probably more here than meets the eye.

Honorable Mentions

  • North Korea reportedly executed a lieutenant general for “abuse of authority” on June 22. Was this a one-off event, or is this evidence of disagreement in the North Korean military?
  • Azerbaijan will hold large-scale military exercises from July 2 to July 6. Considering the current level of tension between Armenia and Azerbaijan, could the exercise be a pretext for something more?
  • U.S. oil production and U.S. oil exports have reached record new highs (10.9 million barrels per day and 3 million bpd, respectively).
  • The heads of state of Ethiopia and Eritrea may meet in the near future. The reconciliation process, at least for now, appears to be real.
  • The U.S. was the top investor in Uzbekistan for the first quarter of 2018, and it wasn’t even close. The U.S. invested nearly three times as much as China, the next largest investor. Russia was a distant fourth.