April 7, 2023: Global News Roundup
Three weeks that weakened the West—Banks, BRICS, Bakhmut, greenbacks, water bears, and Leonardo DiCaprio
This article was originally published on IPEwithSBB.org.
The Global News Roundup collects news stories from entirely international (non-US) media sources on variety of pressing global issues and events.
Good Morning, and welcome back to IPEwithSBB. It’s a regular theme in my posts here on Substack that the world is changing quickly, and documenting these changes in real time as they happen is part of the reason I started writing here to begin with. That said, these past three weeks since my last post stood out. And they stood out not just because of how far reaching and consequential recent world events have been, but also because some of the news was just so odd.
Let’s start with the strangest news first, an ethically-dubious development of substantial geopolitical significance. “A team of military medical scientists in China says it has inserted a gene from the microscopic water bear into human embryonic stem cells and significantly increased these cells’ resistance to radiation,” reported the South China Morning Post last week. The water bear—also called a tardigrade or moss piglet—is one of the toughest creatures known to humans partly owing to “a gene that can generate shield-like proteins to protect its cells against radiation and other environmental damage”. Tardigrades can survive in extreme temperatures (hot and cold), and even in the void of space. Scientists from the Academy of Military Sciences in Beijing explained that “success in this unprecedented experiment could lead to super-tough soldiers who could survive nuclear fallout.”
(Image: A 3D rendered illustration of a water bear, or tardigrade. Image: Shutterstock, courtesy of the SCMP, here).
Indeed, news from the past few weeks illustrates several strategies being deployed by especially by China, but also by Russia, India and other rising powers and their supporters that are now actively asserting their independence from and competing with the US and Europe (see also my prior post on deglobalization and how competing military-economic blocs are emerging). First, as the tardigrade experiments illustrate, China is investing extensively in new and very sophisticated military capabilities and heavily publicizing their successes. Other recent examples include successful Chinese and Russian hypersonic missile tests (the US’s tests have so far failed), Russian deployment of the hypersonic-missile capable frigate the Admiral Gorshkov, and North Korean progress on miniaturizing nuclear warheads.
Second, on the heels of last month’s success in brokering an agreement between Iran (a US enemy) and Saudi Arabia (a traditional US ally), China continues to push for a diplomatic settlement to the Ukraine war. The gambit has so far been successful, not because peace is now at hand, but because the diplomatic efforts are increasing China’s legitimacy on the global stage relative to the US, especially among non-Western countries that have been neutral or opposed to the war from the start (see, e.g., here and here). The possibility of a settlement was a key agenda item when Chinese President Xi met with his “dear friend”, Russian President Vladimir Putin, a couple of weeks ago in Moscow, and appears to enjoy substantial international support, including some support even among traditional US allies like France (see here, here, and here for examples). This week Ukraine also indicated its tentative willingness to negotiate moving forward, following a recent call between Presidents Zelensky and Xi and recent Russian successes in Bakhmut and elsewhere. Meanwhile, the US and NATO are still not agreeing to negotiations.
Third, as the US has pivoted to China in recent months, China and other current and aspiring BRICS members have been forging economic agreements that are weakening the US’s global position and further reducing potential future support for a potential US-led defense of Taiwan. For example, Saudi Arabia not only joined the Shanghai Cooperation Organization (SCO, a security alliance led by China) last week, it also recently spearheaded a massive “surprise” OPEC+ oil production cut in defiance of Western expectations and further agreed to sell oil to China for yuan instead of US dollars, following similar recent moves by Iraq and Iran. Brazil is also increasing yuan-based trade with China, while India is doing more trade with its partners in rupees and yuan. Other countries, including many that sit in the path of China’s Belt and Road Initiative, are following suit. Even in Europe the yuan is making inroads: France and China traded LNG last week in yuan, the first-ever non-dollar energy trade between China and Europe.
This week, French President Macron and EC President von der Leyen are visiting China to discuss Ukraine and future economic and business collaboration, travelling with a delegation of about 50 business leaders. The Financial Times yesterday noted the strategic and geopolitical significance of these European economic deals with China, quoting a former US foreign policy advisor:
Paul Haenle, a former China adviser to US presidents George W Bush and Barack Obama, said Macron’s decision to travel with a large business delegation and pursue economic deals undermined his efforts to pressure Xi on Ukraine…
While the US under President Joe Biden has taken a harder line against China and urged Europe privately to do the same, the EU and countries such as France and Germany have sought a middle path of “de-risking” their relationships with China while continuing trade and diplomacy.
The visit to Beijing by Macron and European Commission president Ursula von der Leyen… presented Xi with an opportunity to push France and Europe on their strategic autonomy and not “fall blindly into the American camp”.
Deals like the ones China is rushing to make with France and Brazil are really interesting from a strategic perspective because, bit by bit, they change the cost-benefit analysis involved in supporting the US and opposing China. Every deal that China concludes with another country for trade in its own currency reduces the US’s dollar-based leverage if a conflict erupts. US sanctions against China, for example, will not work as well if Saudi Arabia no longer relies so heavily on the SWIFT system to process dollar payments for oil exports to China. Every deal that China concludes with the US’s traditional allies in Europe makes it less likely that they will support a US-led defense of Taiwan. As economic ties deepen, France and Germany—which rely heavily on trade with China—will grow more reluctant to support sanctions or other more severe measures against China.
In fact, it is clear that many countries are already dumping the dollar precisely because they want to avoid being disciplined and coerced by the US in the future. This week, the Association of Southeast Asian Nations (ASEAN) announced a plan to reduce reliance on the US dollar, and Indonesian President Joko Widodo was quoted in the Malaysia Sun explaining that “Moving away from Western payment systems is necessary to protect transactions from "possible geopolitical repercussions””. China has already concluded agreements for yuan-based trading with some ASEAN members, including Indonesia, Vietnam, Cambodia, Malaysia, Singapore, and Thailand.
As the ASEAN example suggests, it’s not just that China is so quickly and effectively pulling other countries into its orbit. US behavior is, perhaps just as quickly, alienating and pushing other countries away, as has been the case with sanctions against Russia and the US’s covert sabotage of the Nord Stream pipeline that used to supply natural gas to Europe (see here and here). This week, a damning report on the pipeline explosion published originally in the Washington Post made international news: “At gatherings of European and NATO policymakers, officials have settled into a rhythm, said one senior European diplomat: "Don't talk about Nord Stream," according to the report… "It's like a corpse at a family gathering," the European diplomat said, reaching for a grim analogy. Everyone can see there's a body lying there, but pretends things are normal. "It's better not to know." Quite an analogy, huh? As that rotting corpse begins to really stink, the US-led NATO coalition is set to deteriorate further.
And the recent banking crisis and obvious fragility of US and European economies doesn’t exactly instill much confidence in Western currencies, assets, and markets. Following the collapse of Silicon Valley Bank and Signature Bank in the US, Swiss banking giant Credit Suisse also failed in late March and was subsequently forced by the Swiss National Bank to merge with rival bank UBS. An op-ed this week in the Jordan Times commented on the geopolitical significance of the unfolding financial crisis and deepening economic recession:
For the past 20 years, a group within the senior ranks of the Chinese leadership has argued that America is in a state of permanent decline, providing an opening for China’s global ascendancy. This view gained support in the aftermath of the US-made global financial crisis, and most assuredly will gain even more support as the SVB crisis hits a new segment of the US financial system.
A rising China could hardly ask for more. At a time when the Western financial system is once again suffering from self-inflicted impairment, the imagery of Russian President Vladimir Putin and Chinese President Xi Jinping embracing each other in the Kremlin as “dear friends” pretty much says it all.
In other, related news, American actor Leonardo DiCaprio made international headlines this week when he testified in US federal court regarding a “foreign influence campaign” involving CCP-backed Malaysian businessman Jho Low who illegally funneled foreign funds into former US President Obama’s 2012 reelection campaign with help from Prakazrel “Pras” Michel, a member of the US hip hop group The Fugees. (I swear I’m not making this up.) Salvadoran President Nayib Bukele, who I wrote about in a prior post, took to Twitter this week to comment on the arrest of former US President and current presidential hopeful Donald Trump: “[J]ust imagine if this happened in any other country, where a government arrested the main opposition candidate. The United States ability to use “democracy” as foreign policy is gone.” (The fact that the President of El Salvador feels comfortable making this statement publicly without concern for reprisal from the US is significant.) And, French protestors stormed the Paris offices of financial giant BlackRock on Thursday, part of larger, weeks-long protests against changes to national pension policy that President Macron pushed through without legislative approval.
(Image: Firecrackers were set off in the atrium of the BlackRock offices in Paris by striking railway workers, from The Telegraph, here.)
Things I’m keeping an eye on:
1. The Whole World Debt Crisis: As I noted in my recent cover article for Dollars & Sense, debt burdens around the world are absolutely massive and are already causing a lot of trouble, from the US, UK, and Japan to Pakistan, Lebanon, Argentina, Egypt and Sri Lanka, among many others. The Fed hiked rates again in late March, which only puts more pressure on local currencies and debt service burdens. I expect a cascade of sovereign defaults as the year proceeds, continuing on with what we’ve already seen since Zambia’s 2020 default. From what I’ve seen since last summer in the US, UK, and Japan, even the wealthiest and most advanced economies may not be spared.
2. The US dollar: The relative legitimacy and strength of a country’s currency wholly depends on its broader power and standing in the world. As you can probably tell already, I’m bearish on the dollar over the medium-term, largely owing to the shifting geopolitical context within which the dollar is currently situated. Having lived (and suffered) under the dominion of the US for almost 75 years, the rest of the world wants its power and resources back and is seizing on the opportunities available in the current context. The dollar will surely not be the only casualty of this broader shift in the international balance of power.
3. Popular unrest: The economic crisis we’re all in now is much more than just a financial/debt/banking/currency crisis. It’s a cost-of-living crisis for households all over the world that are struggling to find decent jobs and to afford food, energy, and other necessities. Recent unrest and protests organized by workers and pensioners in recent weeks in France (see above) and in Lebanon provide insight into how ordinary people are faring. These protests are only the most recent in a long series of them over the past year or so as food and energy prices soared and recession set in (see here and here).
4. The US’s position on Ukraine and Taiwan: Taiwan’s President is meeting with US officials this week, signaling that the US continues its China pivot. (China warned off the US in advance of Taiwanese President Tsai Ing-wen’s visit to the US, deploying naval vessels and fighter jets in Taiwan’s direction.) The US also continues to refuse peace talks over Ukraine. Given the strong geopolitical and economic headwinds, for how long will the US be able to sustain these hardline positions?
5. BRICS, OPEC, SCO, ASEAN, etc.: I expect non-Western multilateral organizations and regional groups to continue developing new modes of cooperation and deepening security and economic ties. The news on this front is coming in really fast these days, almost every day as best I can tell, and I imagine we’ll see many more non-dollar trade agreements, new technology collaborations, and military and security alliances as military-economic blocs solidify.