What We're Watching Today, September 16, 2024

Overview

What We’re Watching Today is 1,307 words and an 8-minute read.

Global: Russia producing long-range attack drones with Chinese engines

Reuters reported that Russia is now producing long-range drones using Chinese engines and parts, citing European intelligence sources.

Our Take: Since the start of the Russian further invasion of Ukraine, the US government has warned China against equipping Russia’s military, threatening sanctions should Beijing cross this redline. US warnings have escalated, backed by an executive order in December 2023 authorizing secondary sanctions on financial institutions, with accompanying warnings to Chinese financial institutions. In May 2024, Deputy Treasury Secretary Wally Adeymo warned about shipping dual-use goods, saying that “Chinese firms can either do business in our economies or they can equip Russia's war machinery with dual-use goods. They can't continue to do both." Most recently, on September 11, Deputy Secretary of State Kurt Campbell expressed increasing concern on the “China’s exports of significant amounts of dual-use goods and items used by Russia on the battlefield against Ukraine.” These developments suggest that Washington is preparing to move beyond the warning stage to taking action, with risks of sanctions on Chinese companies providing dual-use materials increasing.

Read More: Reuters, Financial Times [paywall], Reuters, US Department of State

Europe: Russia expels British diplomats

Russia has declared six UK diplomats as persona non grata, accusing them of espionage and sabotage plotting.

Our Take: While London is framing the action as a tit-for-tat measure, retaliating against the UK for expelling the Russian defense attaché for being an undeclared military intelligence officer and removing diplomatic status from several Russian properties, including the Russian embassy’s trade and defence section in Highgate, last May. Beyond retaliation, the Russian move is likely a warning shot, meant to deter the effectiveness of UK advocacy in Washington in support of providing long-range missiles to Ukraine. British Prime Minister Starmer held his first meeting with US President Biden, with the topic of the UK providing Storm Shadow long-range missiles on the agenda. While the US will seek to balance risks, there is a precedence for European states to lead on providing a new capability, and the US allowing time to for Russia to absorb incremental escalation, before aligning with European partners.

Read More: Reuters, The Guardian, The Guardian

Middle East: Libya financially isolated following Central Bank chaos

On Thursday, Libya’s exiled Central Bank governor Sadiq al-Kabir said that the country was essentially cut off from the world financial system after the bank shut down amid an internal battle for control, including his own attempted kidnapping and flight to Turkey.

Our Take: The complete financial isolation is a devastating step in the months-long scuffle for control of the bank, and thus Libya’s oil-generated wealth, albeit a less-dramatic blow than Libya’s recent record of bloody civil war. Al-Kabir’s attempted kidnapping was reportedly organized by the western government of UN-backed Prime Minister Dbeibah, who failed in August to take control of the bank via a legally toothless order under suspicion that Kabir was an ally of warlord Khalifa Haftar, who controls the country’s east. Although physical conflict has been muted in Libya in recent years, the tussle over the Central Bank reflects the tenuous state of détente between Dbeibah and Haftar, and the impending inability of any party to make use of Libya’s oil revenues likely foreshadows more open conflict in the weeks and months to come.

Read More: Washington Post [paywall], al-Monitor [paywall], The Economist [paywall]

Americas: Mexico cements controversial judicial reform plan

Mexico will formally amend its constitution this weekend requiring all judges to be elected, cementing a controversial reform plan that has been months in the making.

Our Take: This weekend’s formal amendment process sets in stone the dismissal of all current judges and the requirement that all judges be elected by popular vote from this year on. The controversial policy has been strenuously defended by outgoing Mexican President Obrador against critics at home and abroad, who say that the policy will introduce politicization and instability into Mexico’s judiciary, damaging its checks and balances. Businesses are concerned about impacts on the business environment, and analysts are already warning that the reform could damage the USMCA.

Read More: Associated Press, New York Times [paywall], Yahoo! Finance, Atlantic Council

Asia-Pacific: Indonesian president-elect announces agreement to elevate ties with Vietnam

Indonesia’s President-elect Prabowo Subianto stated on Friday during a two-day visit to Vietnam that Indonesia and Vietnam had agreed to boost ties to the “comprehensive strategic partnership” level.

Our Take: The elevation of bilateral ties between Jakarta and Hanoi to a “comprehensive strategic partnership” marks a substantial strengthening of political and economic ties within Southeast Asia. For businesses, this enhanced partnership opens opportunities in key sectors such as digital economy, green energy, and manufacturing, positioning both nations as pivotal players in regional trade and investment. The commitment to increase bilateral trade to $18 billion by 2028 highlights the potential for growth, particularly in emerging fields such as electric vehicles and energy transition. Furthermore, cooperation on issues such as food and maritime security could offer a more predictable operating environment for investors.

Africa: Biden plans to make first Africa trip in coming weeks

Reuters reports that US President Joe Biden plans to visit Angola in the next few weeks, satisfying a previous promise that would make him the first American head of state to visit sub-Saharan Africa since Barack Obama in 2015, according to sources familiar with the plan.

Our Take: Biden’s planned visit to Angola, the first by a US president to the country, highlights the US effort to strengthen ties with African nations amid China’s growing influence in the region, particularly in resource-rich countries like Angola. The move signals potential shifts in economic partnerships, investment opportunities, and infrastructure development, especially with the US-backed Lobito rail corridor connecting Angola and the Democratic Republic of Congo. Should the trip go through, Washington could utilize the engagement to improve access to key minerals like cobalt and copper, critical for the global tech and green energy sectors.

Read More: Reuters, Atlantic Council, Brookings Institution

Trade & Compliance: US sanctions Venezuelan officials linked to Maduro over accusations of election obstruction

The US Treasury Department on Thursday announced it was imposing sanctions on 16 Venezuelan government officials appointed by President Nicolás Maduro, accusing them of obstructing the country’s disputed July 28 presidential election.

Our Take: The recent US sanctions on Venezuelan officials following the disputed presidential election have the potential to exacerbate Venezuela’s political and economic instability, with potential impacts on global oil markets and regional migration. However, many observers and analysts view these sanctions as unlikely to be effective in forcing political change, given the Maduro regime’s resilience and ability to bypass previous sanctions. The measures, which target key figures in Venezuela’s judiciary, electoral authorities, and security forces, may disrupt governance but are not expected to weaken Maduro’s hold on power.

Read More: New York Times [paywall], US Department of the Treasury, El País

Climate Change: Czech Republic warns of once in 100-year floods

Prague deployed flood barriers to protect the historic city center frim the rising Vltava river while the rest of country braced for flood levels seen on average once in 100 years.

Our Take: After the 2002 floods, the Czech government invested in flood barriers and other measures to control rising rivers, but they may not be sufficient given the size of the storm. Neighboring states, including Germany, Austria and Slovakia, expect flood waters on the River Danube and Elbe. The states have mobilized military personnel to support emergency services and issued warning to at risk communities. According to the European Environment Agency, one in eight Europeans lives in an area at risk of flooding and around 15% of European industrial facilities are located on flood plains, presenting widespread risks to Europeans’ health.