What We're Watching Today, July 12, 2024

Overview

What We’re Watching Today is 1,320 words and an 8-minute read.

Global: First F-16 jet fighters to be operation in Ukraine this summer; goal to push back Russian forces on the front lines

Announced during the NATO summit in Washington, Danish and Dutch governments have begun to transfer F-16 jet following a promise made by US President Biden more than a year ago.

Our Take: Acquiring fighter jets has been high on Ukraine’s wish list since early in the war. US and NATO initial reluctance was linked to escalation risks with potential Russian reaction. Also, these highly sophisticated fighter jets require extensive pilot training, suitable facilities with strong defenses. The F-16s will strengthen Ukrainian air defenses, suppress Russian air defense systems and strike Russian positions with air-to-ground missiles. If provided with long-range missiles, they could also hit targets inside Russia. Russia can be expected to try to destroy the fighter jets in their bases, with the deployment leading to a return of sustained cruise missile attacks deep within Ukrainian territory. Russian military planners likely understand the strategic implications of providing NATO-standard aircraft, integrating Ukraine further into the US and European defense ecosystem.

Europe: US and Germany foiled Russian plot to assassinate CEO of arms manufacturer sending weapons to Ukraine; heightened risks of hybrid war to businesses

Western intelligence agencies have exposed and disrupted Russian plots to carry out assassinations, arson and other sabotage in Europe, seeking to harm the Ukrainian war effort and supply lines.

Our Take: One major plot was targeting of Armin Papperger, CEO of Rheinmatall, a defense company producing armaments procured by western countries for use by the Ukrainian military. Russian intelligence is also suspected of sabotage at industrial and commercial sites in Lithuania, Poland, the UK and Germany. Businesses operating in the defense supply chain supporting Ukraine face heightened risk of Russia’s hybrid war strategy, which combines military and non-military strategies to attack adversaries, including assassination, espionage. sabotage, cyber attacks and disinformation.

Read More: Associated Press, NATO Review, Chatham House

Middle East: US reverses embargo of 500-pound bombs to Israel

The Biden Administration announced the resumption of sales of 500-pound bombs to Israel. Their sale had been suspended two months ago in response to high civilian casualties in Gaza.

Our Take: The rare suspension came at a moment of escalating tensions between the US and Israel following the announcement of Israel’s plan to invade Rafah without what the US considered a credible plan to protect civilians; the US had said it would resume shipments once Israel supplied such a plan. While shipments of the heaviest bombs remain suspended, the US explained that the reversal of the ban on these lighter bombs was due to the fact that there were fewer civilian casualties in Rafah than expected. The resumption of shipments reflects the strong foundation of the US-Israel defense relationship, as well as the line President Biden is struggling to walk in addressing widespread humanitarian concerns.

Read More: Wall Street Journal [paywall], The Economist [paywall]

Americas: Cuba tightens control over private businesses, again

Cuba introduced new curbs on private businesses, most still in their infancy. This newest attempt to balance private enterprise with communist government will rein in profits and increase government oversight.

Our Take: The announcement comes two years after Cuban authorities lifted a ban on private companies, allowing Cubans to become entrepreneurs and run small to medium sized entrepreneurs. Now, the government says some of those businesses have gotten out of hand, contributing to snowballing inflation and economic crisis, and will be subject to price and profit caps. In fact, Cuba’s economy has been spiraling for years, both due to mismanagement and the pressure of sanctions, and the new restrictions will likely accelerate the decline in the economy and quality of life there.

Read More: Reuters, The Economist [paywall], The Heritage Foundation

Asia-Pacific: US and South Korea sign joint nuclear deterrence guidelines in response to North Korean threats

For the first time, the US and South Korea established collaborative nuclear deterrence guidelines, a fundamental move towards enhancing their capacity to counteract North Korea's developing nuclear threats.

Our Take: The US and South Korea's new joint nuclear deterrence guidelines present a landmark development in the countries’ bilateral relationship, with the potential to bolster their combined response to North Korea's nuclear threats. However, the move may also raise tensions with North Korea, which might respond with increased nuclear testing and provocative posturing toward South Korea and Japan. Additionally, the effectiveness of the agreement could be hindered by US political changes or North Korea's strengthened alliance with Russia and reset of ties with China following a period of deterioration in the mid to late 2010s.

Africa: Kenya’s president disbands cabinet in response to protests

Kenyan President William Ruto largely disbanded his cabinet following weeks of demonstrations against high taxes and poor governance, vowing to establish a more streamlined and effective government.

Our Take: Ruto's dismissal of most of his cabinet could potentially ease tensions and improve government efficiency. However, the move also carries risks such as political instability during the transition and potential policy implementation delays due to the loss of experienced ministers. The effectiveness of the new cabinet in tackling the country's major issues remains uncertain.

Read More: Associated Press, New York Times [paywall], BBC

Trade and Compliance: China sees record surplus, raising fears abroad

China’s exports surged in June, and despite shrinking imports as a result of Chinese companies and households becoming more hesitant to spend money, the country saw a record monthly trade surplus of slightly over $99 billion.

Our Take: This surplus supports China's strategy to expand industrial output, maintain factory operations, and meet foreign consumer demand for goods. Yet, the growing trade imbalance continues to cause global concern, with fears that Chinese exports could further displace domestic industrial production, leading to factory closures and economic slowdowns in other countries. Consequently, several nations including the US, EU, Brazil, India, and Turkey have been increasingly imposing higher or new tariffs on Chinese goods.

Read More: New York Times [paywall], South China Morning Post [paywall], Financial Times [paywall]

Disruptive Technology: Indonesia begins recovering data following major ransomware attack

Indonesia is starting to retrieve encrypted data from a significant ransomware attack last month that impacted over 160 government agencies, with the perpetrators, Brain Cipher, initially demanding $8 million ransom, though they eventually apologized and provided the decryption key at no cost.

Our Take: The ransomware attack on Indonesia's governmental agencies underscores the urgent need for governments and private entities alike to prioritize robust data backup protocols and advanced cybersecurity measures. The event serves as a reminder of the potential disruption and chaos that such attacks can cause, particularly if crucial data is not backed up, and the potential risks associated with relying on attackers to provide decryption keys, as this situation proved an exception to the rule.

Read More: Reuters, Jakarta Globe, Tech Radar

Energy Transition: China is the global leader of new wind and solar plants

According to a new report by Global Energy Monitor (GEM), China is building 339 gigawatts (GW) of utility-scale wind and solar. This represents 64% of the global total.

Our Take: China’s rapid adoption of wind and solar power is enabled by the declining cost of electricity generated from renewable sources (the levelized cost of electricity – LCOE). Through strategic investments over the past two decades, China now dominates solar and wind production technologies and the supply chain including strategic minerals. However, China still remains heavily dependent on coal-fired power plants to meet growing demand, and in 2023, accounted for 95% of the world’s new coal power construction. This demonstrates that lower costs alone cannot sustain energy transition, but must be backed by policymaking and modernized electricity grids to better manage changes in supply and demand to optimize renewable sources.