Good morning. Here’s your Daily Situational Awareness for Monday, 24 July 2023.
TODAY’S BRIEFING:
- READ TIME: 5 Minutes, 15 Seconds
- Inside the Beltway
- (1) Trump Espionage Act Trial Set for May
- (2) NSA Used Section 702 to Screen Immigrants
- (3) Mexican Government Gun Lawsuit to Test PLCAA in Court
- Domestic INTSUM
- (4) China: The Foreign Winner of Bidenomics
- (5) Hunt: Another Inflation Wave is Coming
- (6) Big Regional Banks Holding Up
- (7) Fed Land Fee Increase Will Hobble New Oil Field Discovery
- Russia-NATO SITREP
- (8) Putin and Lukashenko Meet; Laugh at Counteroffensive
- China & Indo-Pacific SITREP
- (9) China Supplying Military Equipment to Russia
INSIDE THE BELTWAY
- (1) TRUMP ESPIONAGE ACT TRIAL SET FOR MAY: U.S. District Judge Aileen Cannon ordered former President Trump’s two-week jury trial on charges under the Espionage Act to begin on 20 May 2024.
- Cannon said the Justice Department prosecutors’ request for a 14 December 2023 trial date was “atypically accelerated and inconsistent with ensuring a fair trial.”
- Why It Matters: The new May 2024 trial date will force Trump into court right as the 2024 Republican primary is ending, and his campaign is shifting gears for the general. Just as important as eating up his time, multiple trials during the primary and general elections will tie up funds Trump could otherwise be using for his campaign. – R.C.
- (2) NSA USED SECTION 702 TO SCREEN IMMIGRANTS: The Office of the Director of National Intelligence (ODNI) released declassified documents on Friday, 21 July, that show the National Security Agency (NSA) used Foreign Intelligence Surveillance Act Section 702 powers to screen immigrants seeking entry into the U.S. for ties to terrorist groups.
- The Foreign Intelligence Surveillance Court released a decision the same day, finding that the FBI conducted improper searches of the Section 702 database as recently as June 2022.
- Why It Matters: Lawmakers on both sides of the aisle are pushing for reform of the FISA Section 702, and revelations that the NSA was using surveillance powers under Section 702 to screen immigrants could draw in more Democrats to support new limitations when the law is up for renewal later this year. – R.C.
- (3) MEXICAN GOVERNMENT GUN LAWSUIT TO TEST PLCAA IN COURT: The U.S. First Circuit Court of Appeals will hear oral arguments in a first-of-its-kind lawsuit by the Mexican government against U.S. gun makers today.
- The Protection of Lawful Commerce in Arms Act (PLCAA) normally protects gunmakers from liability for the criminal misuse of firearms, but no U.S. court has decided if the PLCAA protects companies from liability suits brought by foreign parties.
- Why It Matters: Democratic lawmakers and activists have targeted the Bush-era PLCAA since the Obama administration, and it was a plank for Hillary Clinton’s 2016 campaign. If the First Circuit decides the Mexican government has standing to sue American gun companies over the criminal use of firearms outside of the U.S., this could give the Biden administration an end-run around legislative and Constitutional limitations by encouraging “lawfare” from international actors. – R.C.
DOMESTIC INTSUM
- (4) CHINA: THE FOREIGN WINNER OF BIDENOMICS: Despite the Biden administration’s desire to shift supply chains to friendlier countries (“friendshoring”), China has profited from the Inflation Reduction Act (IRA).
- Asian companies – largely from South Korea, Japan, and China – have received 60% of the $110 billion spent so far on U.S. clean energy projects.
- China’s clean energy dominance makes it hard for the U.S. to shift away from China without affecting trade and investment flows.
- Why It Matters: Friendshoring would slow down the Biden administration’s green energy push. So, U.S. policymakers will talk tough on China but will send more American taxpayer dollars to Chinese green energy companies, which will become a hot political issue in the 2024 elections. – H.B.
- (5) HUNT: ANOTHER INFLATION WAVE IS COMING: Technical analyst and trader Francis Hunt projects further weakness in the U.S. dollar on foreign exchange markets, which will spark another round of imported inflation from our trade partners.
- Why It Matters: We’ve noted that higher oil prices and commodity shortages will cause another round of inflation, likely starting in the fall. The U.S. dollar’s loss of buying power, as Hunt argues, could add more inflationary fuel for American consumers. The dollar will be the last fiat currency to collapse or hyperinflate. But over the next weeks or months, the dollar may lose value against other currencies. – H.B.
- (6) BIG REGIONAL BANKS HOLDING UP: Last week, investors expected the worst for big regional banks’ second-quarter earnings, but that didn’t happen.
- Earnings for several big regional banks – Citizens Financial Group, KeyCorp, Western Alliance Bancorp, and Zions Bancorp – fell, but deposits were stable or higher than in the first quarter.
- M&T, another large regional bank, posted an increase in profit and customer deposits compared to Q1.
- Why It Matters: With more data available, we know that the biggest U.S. regional banks are in better shape than expected. However, some regional banks are closely tied to the commercial real estate market, which has started to turn down. If a financial crisis hits, the highest probability risk is that smaller regional banks will consolidate or close. – H.B.
- (7) FED LAND FEE INCREASE WILL HOBBLE NEW OIL FIELD DISCOVERY: The Department of Interior is proposing a rule that will make increased royalties and fees for companies developing gas and oil projects on public land permanent and increase the minimum costs for reinstated leases each year.
- Geologist Bill Ehni said the new rule and the proposed End Speculative Oil and Gas Leasing Act of 2023, which would codify it into law, will prevent the discovery of new oil deposits.
- Why It Matters: Alternative energy sources cannot entirely replace fossil fuel energy. This is another move by the administration that will increase energy costs for Americans; the new rule will ensure cost increases each time a lease is reissued and, more importantly, make it cost-prohibitive to search for new deposits putting pressure on supply. – R.C.
GEOSTRATEGIC INTSUM
Russia-NATO SITREP
- (8) PUTIN AND LUKASHENKO MEET; LAUGH AT COUNTEROFFENSIVE: Russian President Vladimir Putin hosted Belarusian President Aleksander Lukashenko for talks in St. Petersburg on Sunday. Putin and Lukashenko both publicly dismissed Ukraine’s ongoing counteroffensive.
- When asked about Ukraine’s counteroffensive by reporters at a post-meeting press event asked about Ukraine’s counteroffensive, Putin replied: “It exists, but it has failed.”
- Lukashenko was quoted on social media as saying that fighters of Russia’s Wagner mercenary group, who are now training Belarus’s special forces, were keen to push across the border into NATO member Poland.
- Why It Matters: Putin is probably not worried about the counteroffensive since reports from the Donbas this weekend indicated a collapse in the Ukrainian lines amid counterattacks by Russian forces. Wagner Group, hosted by Lukashenko in Belarus, is a significant threat to Kiev and possibly even Poland should NATO intervene in the conflict. The situation reported from Ukraine differs significantly from comments made by U.S. Secretary of State Antony Blinken and Chairman of the Joint Chiefs of Staff Mark Milley, who said Ukraine is doing well in its counteroffensive effort. – M.M.
China & Indo-Pacific SITREP
- (9) CHINA SUPPLYING MILITARY EQUIPMENT TO RUSSIA: France’s top diplomatic adviser said China was delivering items that could be used as military equipment to Russia in support of its war in Ukraine.
- A White House National Security Council spokesperson said U.S. officials are concerned over China’s supply of “dual-use equipment” to Russia. Adding that the material could be used to kill Ukrainians or have a significant battlefield impact.
- When pressed further, Emmanuel Bonne, the head of Macron’s diplomatic team, said: “Well, kind of military equipment … as far as we know, they are not delivering massively military capacities to Russia, but (we need that to be) no delivery.”
- Why It Matters: China uses private sector corporations and third countries to supply Russia with military technology and weapons in the Ukraine conflict. To date, plainly lethal aid has been routed through proxies like Iran and North Korea, whereas high-tech systems for fighter jets, missiles, and command and control systems have been delivered to Moscow under “dual use” labels. – 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