Saudi Arabia Aramco Attack

The World This Week: September 16, 2019

East Asia

Japan and the US reached a trade agreement this week, expecting to officially sign off on it this month during the upcoming UN General Assembly meeting. Under the new agreement, Japan will lower in stages its tariffs on US wine imports, with the intention of removing them entirely within the next 5-7 years; Japan will also decrease US beef tariffs by 30% between now and 2033. Removing the wine tariff in particular will benefit US wine distributers, cutting the cost of wine by 13%.

Despite initial refusals, Hong Kong’s exchange presses onward with its takeover bid of the London Stock Exchange in an effort to become more competitive in a market dominated by US exchanges ICE and CME. The exchange hopes to hold talks with London Stock Exchange investors in its effort to keep this opportunity open, but London may be less than agreeable to continue negotiations.

Protests in Hong Kong continue into their fifteenth week. On Sunday, hundreds of protesters marched outside the British Consulate, calling for the UK to pressure China into maintaining the freedoms granted in 1997 under the “one country two systems” principle. China continues to warn against outside interference, but Britain maintains it has a legal responsibility to ensure China follows that principle. Additionally, thousands of protesters defy an ongoing police ban, and more violent Sunday protests led to confrontations between protesters throwing petrol bombs and police firing water cannon and tear gas.

South East Asia

Thursday, Cambodian Prime Minister Hun Sen and Laotian PM Thongloun Sisoulith agreed to improve border demarcation. Disputed boundaries have resulted in repeated troop deployments and minor skirmishes, but have thus far avoided serious escalations. Six additional political activists for the banned Cambodia National Rescue Party (CNRP) were arrested in Phnom Penh over allegedly planning a rally in support of an opposition politician. The state argues that opposition groups plan “to cause incitement against the royal government.” The EU and U.S. threatened targeted sanctions and revoking the preferential trade treatment since 2017 against senior Cambodian officials due to their roles in political crackdowns. It is unclear if resolve will return to push the issue, but critics argue that sanctions would fail or will merely drive Cambodia further towards China.

President Duterte claims that Chairman Xi Jinping for the People’s Republic of China offered an oil and gas exploration venture in exchange for ignoring the 2016 UNCLOS arbitration ruling in the Philippines’ favor. The Armed Forces of the Philippines (AFP) announced shortly thereafter a joint-service exercise (DAGIT-PA-03-19) starting Monday and continuing until September 27th. Despite external challenges and the longest-running insurgency in Asia, this will be the first time all three services coordinate in a strategic exercise. Health and agriculture officials across the country are managing an outbreak of African swine fever. Reports of dozens of dead animals spurred investigations in Quezon City, Manila, and Marikina City. Though technically banned per zoning laws, the Philippines $5 Billion USD swine industry relies heavily on smaller, backyard farms. Confirmed cases will result in mass culling’s which could affect both local operators and the industry at large.

The Middle East and North Africa

A drone strike on a Saudi processing plant has the U.S. “locked and loaded.” The damaged plant is the largest crude oil process plant in the world, resulting in the largest spike in oil prices since 1991. Houthi rebels in Yemen quickly claimed responsibility for the attack. U.S. officials blame Iran, but President Trump tweeted that he would wait until confirmation from Saudi authorities before taking any action. Trump also announced that he would release some supply from U.S. oil reserves to cover the setback. Traders are still concerned about long-term price increases, however, after learning how quickly and sharply the oil industry could be hit. Iran denies responsibility for the attack, but the Houthi rebels supported by the Iranian regime say that there is more to come. 

In Tunisia, opposition candidates Kais Saied and Nabil Karoui have a significant lead on the incumbent party. Karoui has been in jail for the past month on charges of tax evasion and money laundering – charges he rebukes as an “undemocratic plot” – which prevented him from participating in election day. He portrays himself as a populist, an anti-establishment representative of the poor. Saied is a conservative law professor who has run a shockingly thrifty campaign and supports decentralization of the government. The support for both of these candidates, as different as they are, represents a turn away from the post-Arab Spring democratic government which – in the eyes of many – has struggled to improve living conditions and end corruption. The ruling Islamist Ennahda party fell several percentage points short of these two challengers, signaling a possible change in government style and structure in Tunisia to come.

South Asia

After talks between the Red Cross and the Taliban in Qatar, the Taliban is lifting a 5-month ban on workers from the relief organization. Along with a lifting of the ban, the Taliban says it will also reinstate security guarantees for the workers.  There has been no update whether talks between the United States and the Taliban will resume after President Trump cancelled a summit last week that was to be held at Camp David.

On Monday, India arrested a senior Kashmiri politician, Farooq Abdullah. Abdullah was arrested under the Public Safety Act (PSA), which allows authorities to hold people for up to two years without a charge or a trial. Some see this arrest, as well as arrests of protestors and other Kashmiri leaders as a way for India to contain reactions against Indian decisions concerning Kashmir.

Sub-Saharan Africa

As the xenophobic violence continues in South Africa, Nigerian President Muhammadu Buhari has announced plans to evacuate 640 citizens from the country and work with relevant South African authorities to find a way to end the xenophobic attacks. Fearing retaliation against its citizens, South Africa has temporarily halted its diplomatic efforts in Nigeria. Nigerian citizens have already begun targeting South African-owned brands and stores.

More than 1,700 people have died from an Ebola outbreak in the Democratic Republic of Congo alone since July 29th, make it the second-deadliest Ebola outbreak on record. Oly Ilunga, the former Democratic Republic of Congo health minister, has been arrested due to allegations that he mismanaging over $4.3 million of public funds that were allocated to fight the Ebola outbreak in the country. Ilunga resigned in July after being removed from his position leading the Ebola response. Police believe that he was attempting to flee the country when he was apprehended  The WHO declared the outbreak a “Public Health Emergency of International Concern” as it has started to spread to neighboring countries and responders continue to combat the disease.

North America

The debate over immigration and asylum reached new levels as the Trump administration enacted a new sweeping asylum bar; the Supreme Court said that Trump can ban asylum seekers while the legal battle continues. Immigration policy is central to the current administration and the government said that the new ban will decrease fraudulent asylum claims and illegal immigration. The rule eliminates any possibility of U.S. asylum for most migrants arriving at the southern border if they have not previously sought refuge in a different country. It will be applied by both asylum officers and immigration judges. Critics are concerned that such actions will push asylum seekers towards danger and even death, and will suspend their legal right to asylum. Additionally, the United States’ rejection of migrants has placed overwhelming pressure on Mexico’s tiny asylum agency as applicants increasingly abandon the American Dream.

Use of vapes has recently been labeled a “youth epidemic” by California governor Gavin Newsom, in response to a surge of vaping-related illnesses and death across the United States. The U.S. Centers for Disease Control and Prevention (CDC) has also formally activated the agency’s emergency operations center to aid in the investigation into the causes of lung illnesses linked to e-cigarette use. The CDC has identified 380 cases of lung illness reported from 36 states and one U.S. territory, and six deaths reported from six states. The recognition of the danger of e-cigarettes has brought increased attention to the prevalence of vaping amongst youth in the United States and is accompanied by social-media campaigns to discourage the practice. JUUL Labs Inc. and other producers of e-cigarettes being blamed for targeting young people and inaccurately advertising vaping a safer alternative to smoking, when they had no concrete evidence.

One positive outcome has emerged from the attacks on Saudi oil fields; the struggling U.S. energy shares have soared in value. The attacked knocked out 6% of the global oil output, boosting the value of American stocks that had been pushed down by investors wary of a glutted commodity market. However, the political implications of the attack are less optimistic; the U.S. has explicitly blamed Iran for the attacks and escalated tensions between the two countries. Iran rejected the allegations entirely and a spokesperson said that there was no ‘absolutely no chance’ of a meeting between President Trump and President Rouhani of Iran.

South America

Conflict escalation is the main development out of South America this week, as Venezuelan President Nicolas Maduro launched Military exercises along the Venezuelan-Colombian border. The drums of war seem to be beating as some 150,000 Venezuelan troops are undergoing extensive military exercises and some 3000 troops have been moved to the region surrounding the border of the two nations. This escalation in the conflict was preceded by President Maduro alleging Colombia of harboring FARQ rebels earlier this month, with Colombia responding by making the same allegations. Maduro continues to blame his neighbors and the United States for the economic calamity that has befallen Venezuela. The U.S. and its partners in the region have denounced Maduro’s aggression through their continual support of U.S.-backed and self-proclaimed Interim-President Juan Guaido. They have also invoked Inter-American Treaty of Reciprocal Assistance (TIAR), a Cold-War era agreement that calls for multilateral sanctioning in the economic and political spheres. Maduro’s government has decried this another iteration of American Interventionism to the detriment of the peoples of South America. It will be interesting to see how this situation develops in the following weeks.

Argentina’s Treasury Minister Hernán Lacunza is set to visit the IMF at the end of the month to discuss the continuation of the payments and the overall development of the dicey economic situation in the country. Evaluations will be made on issues pertinent to the $57 billion-dollar loan the country received from the International Organization in 2018. This is the fourth iteration of the standard IMF review of the loan and Argentina is poised to get $5.4 Billion if the next scheduled payment goes through. Even with the help of the IMF loan, the Argentinian economy has struggled to bounce back. The results of the meeting and economic affects of recent restrictions on foreign currency access in the country will hopefully make the country a more attractive place to financiers.

In Chile, two major political entities have again put the issue of Same-Sex marriage to legislators. The Equals Foundation coupled with the Movement of Homosexual Integration and Liberation have petitioned President Sebastián Piñera’s government to promote a measure in congress to legalize same-sex marriage. Homosexual Civil Unions are recognized in Chile but does not recognize same-sex weddings.

Western Europe

Boris Johnson will still need a bloc of Labour MPs to vote for any Brexit agreement struck with the European Union. The prime minister insisted again on Monday that he wants a deal with Brussels that removes the Northern Ireland backstop. But even if he secures some concessions that he can sell as a new deal, his chances of getting that agreement through the House of Commons remain extremely finely balanced. On the current numbers, he has 287 MPs who voted for a deal last time, while there are 289 MPs from opposition parties and independents who are against a deal. Johnson would need to reach a total of 319 MPs to win a vote, discounting Sinn Féin MPs, the speaker and his deputies, who all do not vote, and three Labour MPs who abstained last time round.

Spain’s national court on Monday ordered the release of Hugo Carvajal, the former intelligence chief of Venezuela, after it rejected an American request to extradite him to the United States to stand trial on drug trafficking charges. Mr. Carvajal, known by the nickname “El Pollo,” or “The Chicken,” in Venezuela, was detained in Madrid in April on an arrest warrant issued by the United States that accused him of facilitating drug trafficking, as well as providing illegal support to Colombia’s FARC rebels. The court will publish its reasoning for rejecting the extradition request on Tuesday, but Mr. Carvajal’s release comes into force immediately, according to an official from the national court who asked not to be named ahead of the formal ruling. The United States Justice Department alleges that in April 2006 Mr. Carvajal coordinated the transportation of 5,600 kilograms, or about 6.2 tons, of cocaine from Venezuela to Mexico that was bound for America, according to charges filed in federal court in New York. If convicted, he would face a mandatory minimum sentence of 10 years in prison and a maximum sentence of life.

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