At the Intersection of Geopolitics and Geoeconomics

June 13, 2023| Volume 6, Issue 5 | The BlackSummit Team

Here is a summary of important events that unfolded over the last month, and which may affect economic, financial, and geopolitical issues in the months ahead.

North America

• Following weeks of touch-and-go negotiations between Republicans and Democrats, Congress passed a bipartisan debt ceiling package to increase the debt ceiling and avert a potential US government default. While the turmoil in equity and bond markets created by the fear of default has largely subsided, economists and policymakers warn that the US still finds itself in a very precarious debt situation that has created instability in the US financial system. Fitch Ratings has warned that it is considering another credit downgrade for the US government following the debt ceiling brinksmanship.
• Smoke from the worst fire season on record for Quebec, Canada drastically reduced air quality in the eastern US, especially on the East Coast. Cities such as Washington DC, Philadelphia, and New York were hit with severe air pollution, with pictures of New York being compared to “living on Mars” at the height of the smog. The smoke caused multiple flight cancellations, concurrent with a flurry of health advisories warning individuals with health risks to stay indoors. Some experts have expressed concern that even worse fires are on the horizon, with global warming increasing the likelihood of ever-more destructive wildfires and pollution in the future.
• Daniel Kritenbrink, assistant US Secretary of State for East Asian and Pacific Affairs, met with and senior Chinese officials in Beijing. Mr. Kritenbrink’s visit makes him the most senior US official to meet with the Chinese since the “Chinese spy balloon” was shot down in February. Leading up to the Beijing trip, top Chinese and US business officials met in Washington on the heels of a Chinese delegation trip to Detroit, where officials met with representatives of US firms with presence in Shanghai such as Johnson & Johnson, Honeywell, and Merck. During her meeting with Chinese Commerce Minister Wang Wentao, US Trade Representative Katherine Tai raised complaints about China’s state-led economic policies while Wang reiterated Beijing’s objections to US tariffs on Chinese goods and trade issues related to Taiwan. However, both sides reaffirmed their commitment to continue communication regarding trade.
• US Secretary of State Antony Blinken has finished his three-day visit to the Kingdom of Saudi Arabia. On the agenda were an array of regional issues of concern to the US, including Iran, Sudan, the Islamic State, regional infrastructure, clean energy, and Saudi-Iranian rapprochement. While the relationship between the US and Saudi Arabia under President Biden has been a contentious one, recent actions by Saudi Arabia to work more deeply with Russia and especially China have reinvigorated US interest in maintaining strong ties with the Saudis, even as the House of Saud balances its relationship with the US against its other interests.

Europe

• Ukraine’s “spring counteroffensive” has officially begun, with the intensity of fighting increasing significantly across the line of contact and especially along the southern front in the Zaporozhe region. Early reports indicate that Ukrainian losses of men and material are higher than expected due to stiff resistance from Russian defensive units. In tandem with the uptick in fighting, the Nova Kakhovka dam was destroyed, with accusations flying from both sides of the other’s culpability. It is unclear whose advantage the dam’s destruction serves, as both sides receive benefits and drawbacks from the event. The counteroffensive comes after a month of consistent Russian aerial bombardment on targets across Ukraine, with Ukraine sending a small number of drones in retaliation, including against the city of Moscow.
• Hundreds of thousands of people took to the streets in protest against the ruling Law and Justice Party of Poland in Krakow, Szczecin, and other large cities controlled by the opposition. The protests were in support of former Polish Prime Minister and President of the European Council Donald Tusk and his political party Civic Platform. Joining the protestors was former president and leader of the Solidarity movement in the 1980s Lech Walesa. The protests donned the mantle of Solidarity against the ruling party, arguing that recent legislative action is weakening democracy in the country. While Civic Platform is strong in certain cities, the party performs poorly in the countryside and as Poland gears up for elections in October, expectations are for another Law and Justice victory, though with a slimmer number of elected officials than the party has at present.
• Last month, violent protests broke out in the Serb-majority border town of Zvecan. A violent group of protesters stormed the city’s municipal offices, resulting in injuries to 30 NATO soldiers and 50 rioters. The unrest was sparked by the installment of an Albanian mayor and other Albanian officials in an election that was overwhelmingly boycotted by the Serb majority. In response to the unrest, NATO has increased its troop deployment to the region, and international leaders in Europe and the US have called for urgent de-escalation. The protests have since turned peaceful, with demonstrators calling for the withdrawal of ethnic Albanian officials and also of the special police force in northern Kosovo. The situation has stirred fears of a repeat of the 1998-1999 Kosovo War that left 10,000 dead and more than a million displaced.

Asia, Eurasia, & the Pacific

• The IISS Shangri-La Dialogue, an annual summit for high-ranking defense officials across the globe, was held in Singapore from June 2^nd-4^th. Attendees included Secretaries of Defense from the US, China, Australia, Britain, South Korea, and Japan, among others. Simmering tensions between the US and China constituted the backdrop of the summit. On the plus side, both sides seemed to indicate that dialogue is preferable to conflict; yet the Chinese nonetheless rejected a request for a US-China meeting. In the end, no headway was made in reducing tensions, especially over Taiwan. At the same time, defense officials for the US, Japan, Australia, and the Philippines met, strengthening defense ties ostensibly for the purpose of countering Chinese influence in the Asia-Pacific. Ultimately, the summit comes at a time of heightening tension and conflict across the globe and the event was marked by great power tension and conflict with little in the way of resolution to the security issues at hand.
• Indian Prime Minister Narendra Modi and Australian Prime Minister Anthony Albanese signed new agreements between the two countries on migration and green hydrogen. The Indian diaspora makes up 3% of Australia’s population but is the country’s fastest-growing ethnic minority. The migration agreement will promote mobility of students, graduates, academic researchers, and businesspeople between the two countries. The two leaders also agreed on a bilateral Green Hydrogen Task Force that will promote cooperation on producing clean energy. They also said that negotiations on a free trade deal between the two countries would likely be completed before the end of the year.
• US and South Korean forces participated in their largest-ever joint live fire drills in a simulation held near the border with North Korea. The exercise simulated a “full-scale attack” from North Korea, and it also served as a demonstration of the “overwhelming” military force of the US and South Korea. This comes after Kim Jong Un had approved final launch preparations for his country’s first military spy satellite, which would enhance the North’s military intelligence. North Korea denounced the drills, which it claims are preparations for a US-South Korea invasion.
• Tens of thousands of Rohingya refugees in Bangladesh joined in protest last week, demanding to be repatriated to Myanmar so that they could leave the crowded refugee camps they have been living in since a military crackdown in 2017. The protests come after the World Food Programme cut the monthly food allocation from $10 per person to $8 on June 1^st. More than a million Rohingya have been living in the world’s largest refugee settlement in southeastern Bangladesh. The largely Muslim ethnic minority has seen persecution from Myanmar’s military junta for the last 6 years and beyond. The military junta is unlikely to welcome the Rohingya back, nor offer them the citizenship rights Rohingya leaders are demanding.

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