Ukraine Update 24 January, 2022: Pieces of the Puzzle

The fact Russia is serious about Ukraine appears to finally be kicking in for NATO, the EU and Western governments. Whether this will end up being a matter of ‘too little, too late’ remains to be seen. But for the moment, there are at least some decisions being made in Western capitals which will lead to prudent action in the near future. The Western media is also coming around to the idea that all of this might very well be real. The media is almost always at least 48 hours behind events though, and we’re seeing that in their reporting today.

-Wall Street is responding negatively to the worsening situation in Europe. The Dow Jones Industrial Average cratered this morning, dropping more than 1,000 points.  The immediate reason for the drop was news that President Biden will be holding a video call with European leaders this afternoon to discuss Ukraine and Russia’s growing military buildup. There are other factors contributing to the Dow’s slide into correction territory, however, the realization that the Ukraine crisis is worsening appears to be the catalyst.  

-The US is moving ahead with plans to withdraw dependents of embassy staff from Ukraine starting this week. The plan was announced on Friday but did not garner much media coverage until the official authorization was given. Apparently, the US State Department has also decided to remove non-essential staff from the Kiev embassy as well.  Great Britain has also announced the planned withdrawal of family members of diplomats and other embassy staff. London has also indicated it will be reducing its embassy staff in Kiev along lines similar to what the US is doing with its people. The European Union, on the other hand, will not evacuate its diplomats from Ukraine for the moment.

-NATO is starting to reinforce its Eastern Flank, albeit in limited fashion. A number of alliance members have pledged to deploy additional fighter aircraft and warships to the region in the near future. Denmark is sending four F-16s to bolster the Baltic Air Policing mission in Lithuania as well as a frigate to the eastern Baltic Sea. The Netherlands has pledged two F-35s for Bulgarian air policing duties, yet they will not arrive until April. Spain, we discussed last week, has committed two warships and possibly fighter aircraft to Bulgaria. France has revealed it is open to deploying ground troops to Romania and Bulgaria under NATO command.  The United States is considering reinforcing its own forces in Europe but no further details have yet been made available.

Global Recession Fears Hit Wall Street Hard

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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.

6 August, 2019 World Brief: Kashmir, Turkey, US-China Trade War

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The beginning of the week has been a volatile one across the world from the Middle East to Asia. I am coming off of a long weekend and feel the best way to begin the week on here is with a brief on some of the world’s brightest flashpoints at the moment.

 

Kashmir

The Indian government has decided to fully incorporate the Muslim-majority state of Jammu and Kashmir (J&K) into the nation. It will become a union territory and the central government in New Delhi will assume considerably more control over the state’s affairs. The Kashmir region has enjoyed almost full autonomous authority since 1949. Article 370 of the Indian Constitution, the section of the document allowing J&K to conduct its own affairs, will be scrapped. Last week, a buildup of army troops, and paramilitary police in Kashmir, coupled with government warnings for visitors to leave the region immediately, foreshadowed Monday’s announcement. Unrest is expected and will likely occur. The growing concern in the region and around the world is what Pakistan’s reaction will be to India’s move. It will likely intensify tension between the rivals, who have fought multiple wars over the Kashmir region in the past. The Pakistani government has called for a joint session of the nation’s parliament today, and the military leadership has begun discussions on ‘regional security.’

 

Turkey Prepares for Syrian Offensive

Turkey has started moving forces onto its border with northwestern Syria as a major offensive against the US-backed Syrian Kurdish forces in that area becomes likely. A military move against the Kurds by Turkey will significantly ramp up already high tensions between Ankara and Washington. A delegation of US military officials is presently in Turkey and conducting talks aimed at heading off the Turkish offensive. Whether or not the Turks heed the US warning remains to be seen.

 

US-China Trade War

Following a sudden, and sharp drop of the yuan against the dollar, the US Treasury has designated China as a currency manipulator. The exchange is the latest as the US-China Trade War shows no signs of letting up anytime soon. The US viewed the drop in the yuan’s value as a deliberate move by Beijing to make China’s products cheaper on the international market and circumvent US tariffs. Stock indexes around the world reacted negatively to the Chinese action, and the US label, especially Wall Street which saw its worst trading day of the year. Today, China’s central bank set the yuan’s official position above the 7 yuan-to-the-dollar mark, bringing it out of currency manipulation territory and calming world markets. It is becoming clear, however, that the US-China Trade War will likely escalate further before it calms.

 

Friday, 21 August 2015 Update: Political Drama In Greece, Tension In Korea, Global Markets Plunge

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August had been a relatively quiet month up until a couple of days ago. As we move towards the end of the month, things are happening across the globe. In the space of the last thirty six hours or so, North Korea and the ROK have traded artillery fire and tensions are on the rise, Greek Prime Minister Alexis Tsipras has resigned and called for new elections, and China’s economic slowdown is beginning to have a negative effect on world markets. Judging by what we have seen this week, we could be in for a dangerous September.

Tsipras Resigns

For the third time since January, Greek voters are returning to the ballot box. Do not be fooled, Alexis Tsipras’s resignation and call for new elections were not made out of a sense of obligation or an admittance of defeat. They are components of a very shrewd political maneuver. When the third bailout was passed by the Greek parliament in mid-July, one-third the Syriza party’s representatives voted against the bill or abstained. Now, the Syriza party is in the midst of a rebellion and Tsipras needs to gain a new mandate. He is turning to the people to extract him from a very tenuous position and provide him with political cover. Tsipras is banking on the new elections neutralizing the radical left wing of his party. That wing has made his life complicated since July, opposing him almost constantly. Tsipras appears determined to move himself from the radical left to the center and he is using popular will as a political tool to help him get there.

Tension & Threats In Korea

The world has become desensitized to North Korean threats and claims. The regular stream of bold talk coming out of Pyongyang is bolder today, however. Following an exchange of artillery fire with South Korea and the resumption of US/South Korean military exercises, Pyongyang has announced that its forces along the DMZ are in a “quasi-state of war” and will prepare for battle. The North has, in fact, started preparations to test fire short and mid-range ballistic missiles but there have been no concrete signs of preparation for military action against the South.

The situation appears to be following the same line that others before it have. The North Koreans ramp up their rhetoric in an attempt to stoke military tensions on the Korean peninsula in a bid to show its populace that it is confronting the enemy to the south. Kim Jong Un has done this before and predictably will do it again in the future. The real danger here is the possibility that an accident or incident might lead to a military confrontation that neither side wants.

China’s Economic Woes Go Global

It was bound to happen sooner or later. Economists, market analysts, and financial experts around the world have been talking about the economic problems facing China. Last month’s successive devaluations of the yuan signaled that the problems were going to worsen before long. Data was released confirming that China’s manufacturing activity has slowed to its lowest levels since 2009. Global markets were thrown into panic mode almost immediately. Stock markets in Asia were the first to feel the hurt, followed by Europe and then Wall Street. The Dow plunged 531 points today, falling into correction territory. The two day sell off in New York has erased practically all of the 2015 gains for all three US indexes.

The ramifications of a weakened Chinese economy are continuing to play out. Investors are spooked for the moment, though, and it is fair to say that further bad economic news from China will continue to have negative consequences on Wall Street, in London, Tokyo and elsewhere. How these economic problems will translate into the geo-political arena also remains to be seen.

*Note- The third part of the Desert Shield series has been lost. I deleted it from my hard drive my mistake. I will rewrite and post it sometime before Labor Day. In the meantime, Sunday night I’ll post a look at the coming arms race in the Persian Gulf.*