It’s becoming an active weekend around the world with hotspots flaring and some geopolitical and economic situations requiring close attention. We’ll start off in Tehran, then move on to Myanmar and wrap up in the Suez Canal.
Iran and China officially signed the long-anticipated 25-year strategic cooperation agreement on Saturday. The Comprehensive Strategic Partnership, or CSP as it is referred to, has been discussed for years and speculation has been rampant. The agreement is centered on economic activity, according to a wide variety of third-party sources and analysts. However, there’s reason to suspect that military and intelligence cooperation also makes up a sizeable portion of the agreement. Neither country has revealed any concrete details on the agreement, leaving the terms a mystery to practically everyone outside of government circles in Tehran and Beijing. The confidentiality surrounding the CSP will no doubt only fuel further conjecture. Yet the one fact that cannot be disputed is that the CSP will bring a new era of increased Chinese influence in the Persian Gulf region. As well as perhaps emboldening Iran at a time when its relationship with the United States continues to decline.
Saturday has been a bloody day in Myanmar. Troops and police have reportedly killed 114 protesters around the country as government suppression of the protests has escalated to a new level. The heavy hand comes on Armed Forces Day, an annual holiday celebrated in Myanmar. Apparently, the military’s preoccupation with the protests in the cities has motivated the Karen National Union (No Joke, the Karens have organized 😊) to seize a military base in the Kayin state. The KNU has rejected the 1 February military coup. “Their bullying and killing of unarmed civilians across Myanmar is against our revolutionary force’s beliefs. We cannot accept inhumane acts, not only in Kayin state, but also in other areas,” Saw Htoo Ka Shaw, a KNU official said in a statement earlier today.
The MV Ever Given remains aground in the Suez Canal. Efforts continue to get the large container ship dislodged from its present position. On Friday evening, Egyptian officials expressed some hope after the ship’s rudder was freed. However, concern is growing over the economic fallout if the Ever Given remains unmoved for an extended period of time. Shipping analysts already estimate that the gridlock of container ships and oil tankers at either end of the canal has held up $10 billion in trade daily. It will simply be a matter of time before this situation has long term effects on economies and markets across the world. There is no firm timetable on when the Suez will be reopened to traffic. The one certainty hanging over the situation is that with the majority of global retail trade moving via sea, the effects will also soon be felt by shoppers in practically every country.
It has been around thirty hours since the ammonium nitrate explosion in Beirut devastated parts of the city. The initial of the investigation now underway strongly suggests that the explosion was the result of negligence, and a number of variables coming together at the most inopportune time. The investigation is nowhere near complete yet though and this should be kept in mind. A final verdict will not be rendered for some time. It is worth noting, however, that as Lebanese officials and authorities continue their investigation, at the same time the intelligence services of many Middle Eastern, and Western nation-states are conducting their own investigations of the incident.
Accident or otherwise, the explosion has come at a very delicate time for Lebanon. First there is the COVID-19 pandemic. Infections are on the rise, and the nation’s healthcare system and hospitals are struggling to cope. Economic conditions are another factor. Lebanese are dealing with an economic crisis worse than any since the 1975-1990 civil war. Brownouts are a part of daily live, and clean drinking water is not readily available on a consistent basis. Large scale street demonstrations against the government were a regular occurrence until the pandemic arrived, and the mood of many Lebanese has turned decidedly anti-government, and anti-Hezbollah.
The explosion occurred at Beirut’s port and caused an immense amount of damage. Significant quantities of stored grain have been destroyed, leading to worries about a possible food crisis in the near future. To exacerbate matters, the destruction caused to the port is leading to questions about its operational capacity. The Lebanese government is releasing 100 billion lira in emergency funds to help offset any economic consequences, but there is a growing consensus among economists, and geopolitical analysts that the impact of the blast on Lebanon’s economy will be long-lasting.
Fears of a global economic slowdown reached Wall Street today. The Dow Jones Industrial Average dropped 800 points during trading today. It was the fourth largest point loss on record, and by far the worst of 2019. It was a perfect storm of news and events that came together to wreak havoc on Wall Street today. Reports of the slowest Chinese industrial production rate in 17 years, and that Germany’s economy actually shrank last quarter fed into fears of a coming global recession. Yet what really sank Wall Street today was the inverted yield curve, which historically signals an approaching recession. Just when that recession may arrive is unclear. It could be within months, or up to two years off in the distance. Asian and European markets also suffered considerable losses.
The current geopolitical climate, and the impact of the US-China trade war also played a key role, and will continue to. Aside from the trade war currently underway, Hong Kong, and Iran are two areas investors are watching carefully. Events earlier this week in Argentina are also on investors minds. A loss by the incumbent president in the primary election touched off a near economic route and brought forward investor concerns that Argentina could default on its IMF loans at some point in the coming year.