The Global News Roundup collects news stories from entirely international (non-US) media sources on variety of pressing global political and economic issues and events.
The decision of OPEC+ to cut crude production on Wednesday, by a whopping 2 million barrels per day and in the lead up to the US midterm elections, is only the most recent illustration of waning US and European dominance. Major national suppliers of commodities on world markets, many of them members of the OPEC, OPEC+, and/or BRICS organizations, have for some time been successfully leveraging US and EU reliance on global trade for critical production inputs to weaken them and extract concessions (from crude and natgas to aluminum, nickel, lithium, fertilizer, and semiconductors). The success of these strategies to date were on full display in the EU this week, which has revived its proposed crude oil price cap and is also developing a mechanism to halt trading in energy derivatives markets when prices spike. In the wake of the OPEC decision, US President Biden was also rumored to be considering offering concessions on sanctions to Venezuela in exchange for oil exports, garnering backlash from the opposition party. In answer to the question I posed in last week’s post—will commodities traders get the memo?—crude oil prices were back to just over US$90/barrel as of this writing.
(Image: Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin hi-five at the 2018 G20 Summit in Argentina, from The Daily Mail, here.)
Along similar lines, the BRICS countries spoke this week in a unified voice against US foreign policy, with pointed criticisms appearing on the organization’s website, including accusations that the US and UK destroyed the Nordstream pipelines and praise for Arab nations resisting US pressure in the Ukraine war. “Relations with the US are still taken into account, but they are not following the orders given by Washington, and in fact they are instead deepening their ties with Moscow”, wrote Ahmed Adel, a Cairo-based BRICS researcher. BRICS news this week also included several new partnerships: India-Russia rupee trading, Russia-China navigation stations, and hopes that Argentina will soon join the organization.
North Korea fired a ballistic missile (thought to be intermediate range or longer) over Japan, prompting air raid sirens and shelter-in-place orders across parts of the country. This was North Korea’s fifth launch in 10 days, with some experts speculating that the DPRK’s leadership is waiting until after the CCP National Congress is held in China to “conduct an even more significant test”. South Korea, with US military partners, then held a counter-test in protest of the North’s launch during which a ballistic missile exploded during a live-fire drill, terrifying local residents and embarrassing South Korean officials.
Coming at an inopportune time for the US and Europe relative to the OPEC decision, the UN-mediated truce between the Government of Yemen (backed by Saudi Arabia) and Houthi rebels (backed by Iran) expired on Sunday (Oct. 2). Houthi representatives subsequently warned that they may attack oil facilities in Saudi Arabia and the United Arab Emirates. “The Saudi-led coalition countries, the Houthis said, have “transfer[red] the war to the economic field,” as oil companies continue “looting” the country’s natural resources during the blockade. The rebel group called on foreign oil firms, particularly from Saudi Arabia and the UAE to cease activities and stop extraction in Yemen as of Sunday”, reported Russia-based Oreanda News.
Meanwhile, the South China Morning Post reported this week that Taiwan is stockpiling supplies in preparation for a blockade or attack from China. “We want to ensure that we have a certain period’s worth stockpiled in Taiwan, including food, including critical supplies, minerals, chemicals and energy of course”, stated deputy economy minister Chen Chern-chyi. The odds of the US getting baited into waging proxy wars on three separate fronts at the same time—Ukraine, Yemen/Saudi Arabia, and Taiwan—seem to be rising rather quickly. “Statesmen who base their strategy on the myths of empire [i.e., that security can be won through expansion] are likely to undermine their power and security by provoking an overwhelming coalition of opposing states…” writes Jack Snyder in Myths of Empire.
Things I’m keeping an eye on:
1. The Everything Bubble is deflating quickly. I’m expecting more debt crises—sovereign debt, forex and balance of payments, CDS, margin debt, corporate debt, pension funds, mortgages…It’s hard to say where in the global economy the next cracks will show up. The next rate hike from the US Fed, which seems likely given the OPEC decision and jobs data this week, is poised to result in more debt fireworks. Credit Suisse is on the hot seat this week, with British and Japanese debt and currency problems still fresh, not to mention recent troubles for Nike, FedEx, Uniper, and Evergrande, among others.
2. Global food crisis. The IMF opened a new Food Shock Window this week to provide emergency financing for countries experiencing balance of payments problems owing to the global food crisis. The FAO’s October report on global food prices, released this morning, thankfully showed vegetable oil prices significantly down, but cereal prices are now rising again (cereals, such as maize, wheat, and rice, are the single most important source of calories for the world’s poor). The World Food Program reports that right now more than 800 million people go hungry each night and 50 million people in more than 45 countries are at risk of famine. WFP operating costs have risen 44% since 2019, largely due to rising food and transport costs.
3. Elections. Over the past months, the only solid election takeaway for me so far is that the backlash coming for politicians espousing liberal, free-market, pro-globalization agendas moving forward will likely be brutal. This free market agenda is sometimes called the “Washington Consensus” because the version of it pushed on the global South beginning in the 1980s was conceived in Washington DC at the IMF and World Bank; the gradually diminishing legitimacy of these ideas (and these institutions) is yet another facet of the shifting international balance of power. The right-leaning winners of recent elections in Sweden and Italy organized their campaigns largely around anti-globalization themes and policies (especially immigration, but also broader economic policies). In Brazil, former president Lula da Silva beat current president Bolsonaro in the first round of national presidential elections in a close contest; the two will compete in a run-off at the end of the month. Lula, the Workers’ Party candidate and expected winner (though perhaps by less than pollsters originally suggested), is well known for his socialist-inspired opposition to free market capitalism, especially in regard to workers’ rights and poverty. The US midterm elections are scheduled for early November.
Finding that I rely heavily on this post for information and perspectives that are not readily found elsewhere. I also appreciate the brevity: how concise this is written with the focus on most critical information to know. Thank you