Overview
What We’re Watching Today is 1,323 words and an 8-minute read.
Global: Hungarian President Orban visits China and backs Xi's Ukrainian peace plan; conditions for a diplomatic breakthrough not present
Hungarian Prime Minister Orban met Chinese President Xi Jinping and discussed a potential Ukraine peace deal, in an uncoordinated visit angering other EU leaders.
Our Take: Orban’s uncoordinated visits to Russia and China will not result in any diplomatic breakthrough, and risk creating confusion over the EU’s position on the terms of a ceasefire and ending the Ukraine war. The diplomatic initiative also will not cast Orban as an EU leader, but lead to his further marginalization, even as Hungary holds the rotation of the EU Presidency. Prospects for a ceasefire remain remote, as Ukraine and its backers seek to turn the tide of the Russian occupation to improve negotiating leverage. Russia President Putin has expressed wiliness to start peace talks, if Ukraine withdraws troops from four regions “annexed” by Moscow in 2022 and renounces plans to join NATO.
Read More: Reuters, Carnegie Endowment for International Peace, Institute for the Study of War
Europe: Newly elected UK Prime Minister pledges to work to improve 'botched' Brexit deal
Prime Minister Keir Starmer promised the nation to renegotiate some of the trade barriers with the EU imposed after the UK’s exit from the EU in 2020.
Our Take: Four years after leaving the EU, the bloc is still the UK’s largest trading partner. For the EU, the deal is done. There is little interest in addressing the UK’s concerns that include reduced market access and increased costs to UK businesses if the UK is not interested in a customs union or single market membership. The UK decision to leave the EU has had and will continue to have deep impacts on economic growth, but the political environment is such that leaders are not willing to concede that the downside risks of Brexit outweigh the benefits, and therefore there is no pathway to building constituencies to support a new type of customs agreement that would interest the EU.
Read More: Reuters, Centre for European Reform, Chatham House, Financial Times [paywall]
Middle East: Reformist Pezeshkian elected in Iran
Moderate candidate Masoud Pezeshkian was elected as Iran's new president, securing victory over Saeed Jalili, a hardline conservative, in a runoff election last week.
Our Take: The victory of a moderate candidate was a surprise result amid historic voter apathy and past attempts by hardline officials to block his party from elections. While decidedly more moderate than his regime-approved opponent, the fact that Pezeshkian was permitted to run at all suggests he is seen as a safe bet by the regime. The president oversees economic policy and appoints decision-makers, but has little influence on foreign policy or military matters.
Read More: BBC, Wall Street Journal [paywall]
Latin America: Fractious Mercosur holds meeting without Argentina’s Milei
South America’s largest trade bloc, Mercosur, held a presidential summit in Paraguay, with the notable absence of Argentine President Javier Milei.
Our Take: The absence of Argentinian President Milei from the Mercosur summit (who has advocated pulling Argentina from the bloc) signals deeper uncertainty about the group, which is increasingly politically divided and notoriously slow-moving. The rotating chair of the bloc, Paraguayan President Peña, set expectations low in his opening speech, saying that “Mercosur is clearly not going through its best moment.”
Read More: Associated Press, Council on Foreign Relations
Asia-Pacific: Philippines and Japan sign unprecedented defense pact
The Philippines and Japan signed a landmark military pact, the Reciprocal Access Agreement (RAA), allowing mutual deployment of forces and easing military cooperation in response to China's growing assertiveness.
Our Take: The RAA presents an opportunity to strengthen bilateral defense ties and coordination with the US Indo-Pacific strategy, while countering China’s regional ambitions, especially considering recent maritime disputes. However, it also poses a risk of escalating tensions, as this move could be seen as provocative by China, which has historical disputes with both nations and has warned against militarization and attempts to change the status quo by force. Moreover, the agreement needs to be ratified by both countries' parliaments, adding a layer of uncertainty to its implementation, particularly given Japan’s constitutional adherence to pacifism post-World War II.
Read More: Reuters, Nikkei Asia, South China Morning Post [paywall]
Africa: West Africa bloc asks Senegal to convince breakaway states to return
The Economic Community of West African States (ECOWAS) urged Senegal's President Basirou Diomaye Faye on Sunday to initiate talks with the military junta-led nations of Mali, Niger, and Burkina Faso in an effort to restore unity in the region, which has been destabilized since their departure from the group in January.
Our Take: The departure of Mali, Niger, and Burkina Faso from the bloc injected considerable uncertainty into the stability and development of the region, including potential economic volatility due to the suspension of ECOWAS projects in these countries, restriction of free trade and movement, and the spread of security crises. There is an opportunity for Senegal to build its own influence as a force for democracy in the region, although the success of such a dialogue is uncertain. Global geopolitical competition also plays a role, as the departing nations have firmly distanced themselves from ECOWAS and sought closer ties with Russia at the expense of the United States.
Read More: Associated Press, France 24, United States Institute of Peace
Disruptive Technology: Healthcare groups protest new cybersecurity rule
The healthcare industry is expressing concern over a proposed regulation by the Cybersecurity and Infrastructure Security Agency (CISA) that mandates rapid reporting of cyberattacks by critical industries, arguing that such directives could impede their response during a crisis.
Our Take: The proposed Cyber Incident Reporting for Critical Infrastructure Act of 2022 mandates critical industries to report cyberattacks within 72 hours. The implication presents risks for organizations over potentially over or underreporting incidents due to ambiguous definitions, misalignment with existing regulations like HIPAA, and concerns over penalties for non-compliance. Nonetheless, room exists for CISA to refine its final rule, taking into consideration the feedback from healthcare and other impacted sectors to enhance the overall cybersecurity ecosystem.
Read More: Axios, Healthcare Dive
Energy Transition: China and the in race to commercialize nuclear fusion as clean energy source; China surpassing US with massive funding of research programs
The Wall Street Journal reports that China is outspending the US, nearing completion of a massive fusion technology campus and launching a national fusion consortium with participation of national industrial companies, as Beijing seeks a breakthrough to commercialize this promising technology”
Our Take: Fusion power has no carbon emissions, has abundant fuel sources, is energy efficient and safe…if scientists can overcome the challenges to commercialize the technology. A scientific race can create the urgency and necessity for devoting resources. Winning a scientific race is not a zero-sum game, but the winner could have advantages in building out the fusion ecosystem. Experts warn that the race is a marathon, as it could take two to three decades before fusion provides energy at scale.
Read More: Wall Street Journal [paywall], World Economic Forum
ESG: Socially conscious investing for employee retirement plans to face new challenges
A federal court will hear a challenge to a Biden administration rule that allows socially conscious investing by employee retirement plans. The hearing will be an early test of how courts will look at federal regulations after the Supreme Court ruled that they no longer have to defer to the expertise of the agencies that issued them.
Our Take: The DOL rule allows 401(k) and other plans to consider environmental, social and corporate governance (ESG) factors as a "tiebreaker" in making investment decisions. Pension and retirement plans are significant players in the ESG investing world, both because they typically manage large funds and because they offer insight into individual investor perceptions. If the court finds against the Biden administration rule, it could present significant challenges to individuals and money managers seeking to invest along ESG principles.
Read More: Reuters, Bloomberg Law [paywall]
