Good morning. Here’s your Daily Situational Awareness for Monday, 31 July 2023.
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TODAY’S BRIEFING:
- READ TIME: 6 Minutes, 26 Seconds
- Inside the Beltway
- (1) Trump PAC to Report Funds Spent on Legal Fees
- (2) Bipartisan Effort to Expand AI Research
- (3) Hunter Business Associate to Testify on Biden Connection
- Domestic INTSUM
- (4) ExxonMobil: Record Oil Demand Ahead
- (5) CDC Finds Secret China-Linked Bio Lab in California
- (6) U.S. Hunting for Chinese Malware in Critical Infrastructure
- Mexico SITREP
- (7) Morena Plans Justice Overhaul After 2024 Elections
- Russia-NATO SITREP
- (8) Russia’s Nuclear Expansion in Africa
- (9) U.S. Officials Concerned Ukraine Running Out of Military-Aged Males
- China & Indo-Pacific SITREP
- (10) North Korea Says It Will Boost Cooperation With China
INSIDE THE BELTWAY
- (1) TRUMP PAC TO REPORT FUNDS SPENT ON LEGAL FEES: The Trump-aligned Save America PAC is expected to reveal in an FEC filing today that it spent $40.3 million in legal fees in the first half of 2023 to defend former President Trump in court.
- Save America PAC requested the refund of a $60 million contribution to another PAC.
- Why It Matters: The Trump reelection effort is hemorrhaging money. Donald Trump is still facing another possible indictment from the Justice Department and three other criminal and civil trials in the first half of 2024. The Democrats’ strategy is to keep Trump busy in the courtroom and away from the campaign trail, and they are successfully pushing Trump’s allies to drain their war chest to defend him. – R.C.
- (2) BIPARTISAN EFFORT TO EXPAND AI RESEARCH: House Artificial Intelligence (AI) Caucus party leaders Anna Eshoo (D-CA), Michael McCaul (R-TX), Don Beyer (D-VA), and Jay Obernolte (D-CA) introduced the Creating Resources for Every American To Experiment with Artificial Intelligence Act of 2023 (CREATE AI Act), which would create the National Artificial Intelligence Research Resource to keep the U.S. in the lead on AI research.
- Why It Matters: Lawmakers are recognizing the importance of AI research and the U.S. staying ahead of adversaries like China. This bill could be the domestic component of a two-pronged strategy that includes the Biden administration’s coming restrictions on direct investment in Chinese firms and blocking Chinese access to cloud computing services that can be used as an alternative to hardware computing for AI development. – R.C.
- (3) HUNTER BUSINESS ASSOCIATE TO TESTIFY ON BIDEN CONNECTION: Devon Archer, who served on the board of Ukrainian energy company Burisma with Hunter Biden, is scheduled to testify before the House Oversight Committee today.
- Archer is expected to testify that Hunter placed then-VP Joe Biden on the phone with business partners.
- Damian Williams, the U.S. Attorney for the Southern District of New York, sent a letter to District Judge Ronnie Abrams days before Archer’s scheduled testimony asking the judge to set a date for Archer to report to prison.
- Why It Matters: Archer’s testimony is the first piece of evidence in the House probe that could show a direct connection between Hunter Biden’s overseas, potentially illegal, business dealings with President Biden. The timing of Williams’ request that Archer report to prison is unlikely coincidental. Williams had more than two months since Archer lost an appeal on financial fraud charges to request the judge set a report date. – R.C.
DOMESTIC INTSUM
- (4) EXXONMOBIL: RECORD OIL DEMAND AHEAD: On Friday’s second-quarter earnings call, ExxonMobil CEO Darren Woods projected high oil demand in the second half of 2023.
- Goldman Sachs estimates that global oil demand rose to a record 102.8 million barrels per day in July.
- To meet demand, Exxon is on pace for 10% production growth in the Permian Basin this year – the only shale oil region without falling output.
- Why It Matters: While Exxon’s CEO may be cheering for his company’s share price to rise, we should not dismiss his projections. The U.S. is the world’s largest producer and consumer of oil, so record global oil demand wouldn’t be possible if the U.S. entered a recession. This is another sign pointing to a recession not in 2023 but likely sometime in 2024. – H.B.
- (5) CDC FINDS SECRET CHINA-LINKED BIO LAB IN CALIFORNIA: The Centers for Disease Control and Prevention (CDC) and Fresno County Public Health Department said they were investigating an illegal bio lab owned by Prestige BioTech that housed highly infectious agents including HIV, Coronaviruses, and Hepatitis.
- Officials said they were in contact with Prestige BioTech President Xiuquin Yao, and addresses provided to authorities were empty offices or located in China.
- Why It Matters: This is unlikely to be the only lab operated by individuals and groups connected to China on U.S. soil. Lab leaks are already prevalent with Biosafety Level 3 and 4 labs that have oversight in the U.S. and follow safety protocols, so illegal labs handling infectious agents represent a serious public health threat. – R.C.
- (6) U.S. HUNTING FOR CHINESE MALWARE IN CRITICAL INFRASTRUCTURE: Officials said the Biden administration is hunting for malicious Chinese code in the United States’ critical energy and water infrastructure.
- A Congressional official said the malware was “a ticking time bomb” that could give China the power to interrupt American military deployments or resupply operations by cutting off power, water, and communications to U.S. military bases.
- Why It Matters: China taking down the U.S. grid through a cyber attack is a low-likelihood but high-impact event that presents a significant risk to U.S. military operations in the event of a conflict with China. The threat of cyber attacks on the U.S. grid will greatly impact Americans, making it prudent to prepare for a “grid-down” scenario, possibly in this decade. – R.C.
GEOSTRATEGIC INTSUM
Mexico SITREP
- (7) MORENA PLANS JUSTICE OVERHAUL AFTER 2024 ELECTIONS: Officials from Mexico’s ruling leftist party said they plan to overhaul the nation’s Supreme Court of Justice of the Nation (SCJN) if they win the presidency in June 2024.
- Mexican President Andres Manuel Lopez Obrador (AMLO) has been embroiled with the SCJN after the court repeatedly blocked his election reform efforts. The court said that those laws, which Mexican Congress passed, would take away power from the National Electoral Institute (Instituto Nacional Electoral; INE) to oversee elections.
- Meanwhile, the American Bar Association, in a letter last week, criticized AMLO’s attacks against the judiciary, saying that hostility toward the court undermined Mexico’s rule of law.
- “Conservative” candidate Xóchitl Gálvez leveled additional criticism against AMLO, who continually weighs into the politics of the next presidential election, despite a law that outgoing presidents refrain from commenting on elections.
- Why It Matters: Mexico’s Supreme Court has stymied AMLO’s efforts to centralize political power and control the country’s elections. For their part, Morena says the country’s justice system works on behalf of “the highest bidder,” allowing the politically powerful to escape justice. If a Morena candidate wins next year, an overhaul of the country’s justice system is likely intended to knock down barriers to reforming the INE, which AMLO sees as having denied him a presidential victory in the 2006 elections. Either way, we can expect more centralization of power under Morena as they push the country closer to socialist authoritarianism. – M.S.
Russia-NATO SITREP
- (8) RUSSIA’S NUCLEAR EXPANSION IN AFRICA: Rosatom, Russia’s state-owned nuclear monopoly, is sharing its nuclear experience and technology with the developing world and strengthening the BRICS+ economic union.
- According to the World Nuclear Industry Status Report, of the 53 nuclear reactors under construction as of last year, Rosatom was building 20 reactors, with 17 of them outside Russia.
- The BRICS New Development Bank will finance Rosatom’s small-capacity nuclear power plants in BRICS countries.
- Why It Matters: Russia has pushed for wider nuclear cooperation with African countries for the past decade. Nuclear projects won’t develop overnight, but this is another sign that Russia and African economic cooperation will strengthen and the BRICS+ union will have more influence in the region. – H.B.
- (9) U.S. OFFICIALS CONCERNED UKRAINE RUNNING OUT OF MILITARY-AGED MALES: Senior U.S. defense officials are concerned that Ukraine may be unable to sustain current casualty rates and maintain sufficient military personnel strength.
- Ukraine’s economic minister recently noted that Ukraine is short 6 million working-age adults.
- Ukrainian casualty estimates are over 200,000, with 50,000 killed and 150,000 wounded as of July.
- Why It Matters: Ukraine started the war with 43 million people but is now down to 30 million due to migration away from the war zone and military and civilian casualties. Russia is preparing to mobilize another 100,000 men to throw into the fight in Ukraine, numbers that Ukraine cannot match. While Ukraine is making modest gains in its counteroffensive, those gains are coming at heavy costs and are often rolled back by Russian counterattacks. Continued attrition of Ukraine’s most capable military units may result in Kiev and the West re-evaluating Ukraine’s ability to continue the war. – M.M.
China & Indo-Pacific SITREP
- (10) NORTH KOREA SAYS IT WILL BOOST COOPERATION WITH CHINA: North Korean leader Kim Jong Un, in a meeting with the Chinese Politburo delegation visiting Pyongyang, vowed to develop the two countries’ relations to a “new high.” The delegation was in North Korea to celebrate the Korean War armistice.
- Kim hosted a reception for the Chinese delegation led by Communist Party Politburo member Li Hongzhong on Friday,
- Chinese and Russian officials joined Kim for a military parade in the capital Pyongyang that included his newest nuclear-capable missiles and attack drones.
- Why It Matters: North Korea is a major arms supplier to Russia in its war in Ukraine and has a long history of nuclear saber-rattling in Northeast Asia. Beijing has repeatedly claimed it has little control over Kim, although China is one of North Korea’s biggest trading partners. Kim’s comments suggest North Korea is more of a client state to China and a strong partner in the China-Russia eastern alliance than Beijing wants to admit. Expect China to leverage North Korea as a proxy in any future conflict with the U.S. – M.M.
— END REPORT
M.S. indicates analyst commentary from Mike Shelby
M.M. indicates analyst commentary from Max Morton
J.V. indicates analyst commentary from Jared Vaughn
R.C. indicates analyst commentary from Robert Cook
H.B. indicates analyst commentary from Harrison Burge