North Korea Update: Possible Nuclear Test and Economic Trouble On The Horizon

There are growing indications that North Korea is moving forward with plans for its first nuclear weapons test in over four years. Tensions on the Korean Peninsula have been on the rise lately, though this has been underreported in light of the war in Ukraine. Last week, Kim Jong Un promised to continue development of its nuclear weapons “at the fastest possible speed.” This has prompted concerns that a test will be scheduled to disrupt the late May visit of US President Joe Biden to South Korea. Chinese and South Korea diplomats met in Seoul on Tuesday with China pledging to play a ‘constructive role’ in attempting to get North Korea to resume negotiations.

South Korea, with a new administration taking power on 10 May, is quite interested in deterring North Korea from escalating the situation. One element that appears to be coaxing the North along the slippery path it’s on at present is Russia. Kim Jong Un and Vladimir Putin have forged close ties over the years and the North is one of the few nations supporting Russia in its war without misgivings. In exchange for this loyalty, Russia could return the favor by blocking a UN effort to impose severe sanctions on North Korea if it does move forward with a nuclear test.

Having said this, it must be mentioned that the global economic fallout from Russia’s adventure in Ukraine and the recent COVID-19 outbreaks in China could hit the North Korean economy especially hard. Supply chain issues now coming into play will exacerbate food shortages. Inflation will also play a greater role. Food prices in North Korea often mirror global prices. With food prices rising around the world, the North’s prices are expected to do the same in the coming weeks, taking the country’s economic issues from bad to worse in the process.

Shanghai’s COVID Lockdown

Frustration in Shanghai mounts as a two-stage lockdown  takes effect following a surge in COVID cases. Authorities had adopted a targeted approach to dealing with the outbreak, however, as case numbers continued to rise, it became clear a new strategy was necessary. Residents in Shanghai, China’s most populous city as well as its financial capital, have taken to social media to vent their frustrations with the lockdown. Citizens who have self-tested positive complain about waiting days to be transported to a central facility. More complaints were voiced about medical care access, purchasing food and other daily tasks that are difficult at best under lockdown conditions.

Although the number of new cases in Shanghai is small by global standards, reaching upwards of 15,000 in three days, China persists with an aggressive strategy. Its ‘dynamic clearance’ approach calls for all residents testing positive for COVID-19 to be sent to hospitals or a central quarantine facility. Close contacts and neighbors are ordered to quarantine at home and self-test.   The city has essentially been divided into two, with the Huangpu River acting as the boundary line. Neighborhoods east of the river were placed in lockdown on Monday, with the western areas expected to enter restrictions by Friday.

Rumors that authorities would begin the lockdown in the western neighborhoods earlier than Friday sparked panic buying and chaos. Officials have attempted to quash the rumors yet persistent reports from neighborhoods in the west paint a different picture. Many residents there received notice on Tuesday from their housing committees that they would be stopped from leaving their compounds for the next seven days, according to a report from Reuters.

Shanghai’s lockdown will carry a global effect as well. Manufacturing will plateau at least temporarily as factories close for a period. This will only add to the litany of problems facing global supply chains. Oil prices fell earlier this week too as the COVID lockdown created fears about declining demand for oil from China. The retreat will only be temporary though as the global oil market struggles to replace Russian supply.

The Rest of the World 15 March, 2022

With oil prices continuing to surge, the Biden administration has been trying to gain the support of oil-rich nations to roll back oil prices and apply more pressure on Russia in response to its invasion of Ukraine. The US is meeting significant resistance on both fronts from some of its allies in the Middle East. There’s mistrust in places like Riyadh and Abu Dhabi right now regarding the Biden administration’s priorities and intent. To put it in simple terms, there are many people of influence in the Saudi and UAE governments who consider the Biden Administration a fair-weather friend. It goes back to the war in Yemen, which was supported by the Obama and Trump administrations. But as the war became a humanitarian cataclysm, US opinion turned and one of the first acts of the Biden administration was a vow to end the war in Yemen and stop supplying Saudi Arabia with weapons.

Now in March, 2022, the United States wants something from its Middle Eastern allies and some are not very enthusiastic to help out. When President Biden attempted to arrange telephone calls with Saudi Crown Prince Mohammed bin Salman and the UAE’s Sheikh Mohammed bin Zayed Al Nahyan, he was reportedly rebuffed. Naturally, US officials deny this and have tried to put a different spin on the matter. But the fact remains that Washington’s relationship with some of America’s Gulf allies is in need of repair at a critical time. Iran’s missile attack against a US embassy and airbase in Iraq over the weekend certainly showcases the Islamic Republic’s intent to be play the role of agitator in the region. Especially in light of the pause that JCPOA talks have taken due to the war in Ukraine.

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China has reinstituted lockdowns in parts of the country amid a widespread surge in COVID-19 cases. Shenzen, China’s own silicon valley, is one city now under lockdown. Businesses have been ordered to suspend production operations and have non-essential employees work from home for a week. Shanghai and Hong Kong are two other major cities in China now dealing with major outbreaks. Case numbers are rising, but remain small compared to outbreaks in other nations back in late 2021 and early 2022 when the Omicron variant swept across the globe. A growing number of the cases in China appear to be of this variant.

The big concern now is additional instability for the global economy on top of what’s transpired from Ukraine. China’s COVID situation now adds more fuel to a fire which threatens to become dangerously bigger in coming weeks. The global economy will not stabilize by summer as some people had hoped.

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With international attention focused on Ukraine and Russia, North Korea has taken advantage of the lack of scrutiny to conduct a series of ballistic missile tests so far this year. On 27 February and 5 March, a pair of intercontinental ballistic missile tests were conducted, raising concerns these tests represent a crash effort by the North to resume its nuclear program. Adding to the concern are recent satellite images that show a resumption of activity at North Korea’s nuclear testing site at Punggye-ri. A North Korean nuclear test could be in the cards sometime soon.

In response to the increased missile tests and activity, the US is conducting naval and air exercises in the area. The USS Abraham Lincoln and her battlegroup are in the Yellow Sea running very visible air exercises with land-based USAF aircraft from South Korea. Patriot missile batteries in South Korea are also running increased exercises and preparations in light of the activity up North.

COVID 19 Update: Omicron Variant Arrives

The newest variant of the Coronavirus is taking much of the world by surprise. From its initial appearance to where it originated, world health experts and national governments appear to have been blindsided. Now, nations are scrambling to reestablish travel restrictions and set other measures in place to prevent the omicron variant from arriving inside their borders. With omicron having first appeared in South Africa, several nations are banning or restricting travel to and from southern Africa. Israel is going a step farther and closing its border completely to foreigners. Despite the surge in precautions and restrictions, the omicron variant is already cropping up in Europe. Most experts seem to feel it will only be a matter of time before the new variant reaches other parts of the globe.

On Friday, financial markets finished the day in negative territory, largely in response to omicron. Whether or not the slide continues this week will depend on how effective the travel restrictions are, as well as the number of cases worldwide and over time, how well the current crop of vaccines handles the new variant. The impact that omicron has on supply chain issues and other international concerns will also play a part in how global economies respond to the new variant.

As a side note, I hope everyone had an enjoyable Thanksgiving holiday. We’re officially in the Holiday Season now and Christmas is less than a month away. Where does the time go? 😊

China Advises Its Citizens To Stockpile Daily Necessities

The Chinese government is advising its citizens to maintain adequate stocks of basic necessities on hand as the winter season approaches. The Ministry of Commerce released the advisory on Monday, 1 November and it was not long before many Chinese social media users were playing the speculation game. The latest COVID-19 outbreaks and unusually heavy rainfall amounts have sparked concerns about a looming supply shortage. Some social media users believe the rising tensions with Taiwan are the reason for the advisory. There have been reports of panic buying as well, with rice, cooking oil and salt being the main products sought, and wisely so. Chinese media outlets have also published a list of recommended goods to store including instant noodles, vitamins, flashlights and a battery-powered radio. The alarm brought on by the advisory prompted state media to step in and attempt to calm the growing concerns. Economic Daily, a Communist Party-backed newspaper, told citizens on its website that the advisory’s purpose was to make certain people were prepared in the event of another COVID lockdown. Local authorities are being encouraged to make certain supply and prices remain stable through the coming winter months.

Speculation aside, there’s no doubt that China’s domestic supply problems run deeper than Beijing is willing to let on. Earlier bouts of extreme weather have driven concerns about food supplies. Shandong, the nation’s largest vegetable producing region, has suffered heavy flooding in September and October. Prices for some vegetables grown in this area have doubled in recent weeks. Then there are China’s continuing energy issues, which are far from being alleviated. A combination of high energy and rising food prices runs a risk of creating a storm of domestic unrest. Beijing is eager to avoid this scenario from becoming a reality for obvious reason.