What We're Watching Today, July 15, 2024

Overview

What We’re Watching Today is 1,195 words and a 7-minute read.

Global: International Seabed Authority meets to negotiate deep sea mining code; disagreements risk unilateral national actions to exploit resources

The United Nations' International Seabed Authority is meeting to try to form a consensus on new rules allowing commercial extraction minerals from the ocean floor.

Our Take: The debate over deep sea mining takes place amid growing demand for metals used in electric car batteries and other green technologies. The oceans are believed to contain vast reserves of cobalt, nickel and copper, but the risks of destroying sensitive marine habitats are pitting environmentalists against business interests. The release of the deep sea mining code has repeatedly been delayed due to a lack of consensus within the ISA. Without an international agreement, ISA will not issue licenses for exploitation in international waters and more countries will adopt national policies to mine resources within their Exclusive Economic Zone (EEZ), absent any guiding code for risk mitigation.

Europe: Estonia's Kallas named new EU foreign policy chief

Kaja Kallas stepped down as Estonia's prime minister to become the EU’s foreign policy chief. She has staked out a tough stance on Russia as prime minister, and is expected to guide the EU in a similar direction, but will face challenges building consensus across the bloc.

Our Take: While the European Parliament elections delivered a clear shift to the right, the center parties won enough seats to continue to set the trajectory of EU policy, albeit with a smaller majority. Kallas will face challenges in marshalling foreign policy consensus amid an increasingly complex and aggressive external environment. There are strong differences in views on policies towards China, the Middle East, Ukraine and even the US. Lack of consensus risks policy paralysis during a period of heightened political, economic and security instability.

Middle East: “Miles to go” on ceasefire talks following strikes targeting Deif, misalignments on Philadelphi Corridor

Parties to Israeli and Hamas negotiations said that they were nearer than they had previously been on ceasefire negotiations in Egypt, although significant gaps remained and US representatives said there were “miles to go.”

Our Take: Hamas said they had not withdrawn from talks following weekend strikes targeting military leader Mohammed Deif, a hopeful sign. While parties to the talks have expressed optimism, there remain significant gaps, especially over whether Israel may or may not continue its military presence in the Philadelphia Corridor, an eight mile corridor dividing Gaza and Egypt.

Read More: Washington Post [paywall], New York Times [paywall]

Americas: Former Peruvian President Fujimori announces intent to run, sparking concerns around human rights and political stability

The daughter of former Peruvian President Alberto Fujimori announced on X that he will seek reelection in 2026.

Our Take: Fujimori is 85 and until last year was serving a 25-year prison sentence for human rights abuses related to his counterterrorism methods against the Shining Path and the MRTA, including death squads. His pardon was seen as corrupt by many observers, and his potential run for reelection has raised serious concerns for human rights experts, who worry that he could return to autocratic tactics, and that his run could further destabilize Peru. Confidence in government is already at a low following the impeachment of far-left President Castillo and installation of current President Boularte, whose use of police against anti-government protesters has been widely criticized.

Read More: Reuters, The Economist [paywall], CNN

Asia-Pacific: Nepal inaugurates fifth prime minister in five years

Veteran communist politician K.P. Sharma Oli was inaugurated as Nepal's prime minister on Monday, marking the fifth such appointment in five years, with the aim of achieving political stability to attract investors and create jobs in the struggling Himalayan country.

Our Take: The frequent changes in Nepal's leadership, including K.P. Sharma Oli's recent appointment, reflect deep-rooted political instability that threatens to undermine efforts to attract investment and foster economic growth. This ongoing turbulence, compounded by the risk of failure in the newly formed coalition, could further erode public trust in the political system and hinder Nepal's development prospects. This prospect echoes political turmoil in South Asia, with Pakistan and Sri Lanka having recently dealt with political crises that continues to impede the stabilization of these countries’ economies.

Read More: Reuters, The Hindu [paywall], New York Times [paywall]

Trade and Compliance: Chinese tech firms face increased compliance costs over EU’s new AI rules

Chinese tech companies anticipate that the EU's forthcoming Artificial Intelligence Act will increase their assessment and compliance costs by 20 percent to 40 percent, due to its stringent regulations on high-risk AI applications.

Our Take: The EU's Artificial Intelligence Act is likely to add financial and operational challenges for Chinese tech firms as they navigate the stringent regulations on high-risk AI applications. This heightened regulatory burden threatens to further strain China-EU relations by exacerbating trade and compliance friction, complicating efforts for Chinese companies to operate smoothly within the EU market. While ostensibly justified by the EU’s intent to safeguard AI development and usage across the board, the effect on Chinese tech firms in particular echoes calls in Europe to follow the US’s measures to restrict China’s access to advanced technologies.

Read More: South China Morning Post [paywall], Politico [paywall], Center for European Policy Analysis

Energy Transition: At COP29, EU to push other countries to meet pledges to curb fossil fuels

In a draft negotiating paper seen by Reuters, the EU plans to pressure other countries at the next climate summit to meet their earlier commitments to transition away from fossile fuels.

Our Take: COP29 is expected to be the finance COP, focused on providing a global finance compact to fund the COP28 agreement (the UAE Consensus) to transition away from fossil fuels. Participants will seek agreement on a new commitment for annual climate financing to developing countries. COP29 will also encourage countries to commit to more ambitious climate change targets. The geopolitical context of great power tensions, lackluster global economic growth, the rise on nationalism and potential weakening of climate leadership will make reaching consensus challenging, while the increase in negative climate impacts will make action all the more pressing.

ESG: Climate disclosures likely to come into effect at state and federal levels even if SEC fails to defend new rules

New laws and regulations at the state and federal levels in the U.S. are anticipated to create mandatory requirements for thousands of companies to provide climate-related reporting, in areas including value chain emissions and climate-related risks, even in the potential absence of climate reporting rules from the Securities and Exchange Commission (SEC), according to new analysis by Sustainable Fitch.

Our Take: The analysis by Fitch points to ever-shifting climate reporting requirements and attitudes in the US. Stricter sustainability reporting requirements are indeed likely on the way as state-level leadership adopts a patchwork of regulations to respond to local sentiment and catch up with European requirements that have already begun to impact some major American companies. Nonetheless, the results of the November election could once again throw nascent requirements into disarray.

Read More: Sustainable Fitch, Deloitte