Good morning. Here’s your Daily SITREP for Wednesday, 11 October 2023.
- READ TIME: 6 Minutes, 9 Seconds
- Inside the Beltway
- (1) Biden Surging Military Aid to Israel
- (2) House GOP in Disarray Heading into New Speaker Vote
- (3) Biden Admin and Venezuela Close to Sanctions Deal
- Domestic INTSUM
- (4) G&R: Higher U.S. Natural Gas Prices Coming
- (5) DOJ: Trump Trial Jurors Need Extra Protection
- Global SITREP
- (6) Global Fears of Rare Earth Shortages and Higher Prices
- (7) UniCredit: Global Protectionism on the Rise
- (8) Israeli Military Prepares for Ground Offensive into Gaza
- (9) Russian Forces Launch Offensive in Donetsk
INSIDE THE BELTWAY
- (1) BIDEN SURGING MILITARY AID TO ISRAEL: President Biden said the U.S. is speeding military assistance to Israel including ammunition and interceptors for Israel’s Iron Dome anti-missile system, adding that he would ask Congress to fund national security requirements for critical U.S. allies including Ukraine.
- National Security Advisor Jake Sullivan said Biden and Israeli Prime Minister Benjamin Netanyahu discussed “additional capabilities Israel will need,” and Biden pledged that U.S. planes would arrive with those supplies “in the coming days.”
- Why It Matters: The U.S. is currently deploying a carrier group to support Israel with the possibility of a second, special operations forces specializing in hostage rescue are preparing to enter Gaza, and now fires have been exchanged over Israel’s border with both Lebanon and Syria. The war between Israel and Hamas has the potential to drag the U.S. into a larger conflict in the region, and a surge in aid to Israel will spread an overstretched U.S. defense industry thinner than it already is. Especially if Biden is able to convince Congress to tie Israel’s aid to Ukraine’s aid. If senior U.S. intelligence officials are correct that Iran and Hamas desire to draw the U.S. into the war to galvanize Arab support, then we can expect attacks against U.S. interests and personnel in the region. – R.C.
- (2) HOUSE GOP IN DISARRAY HEADING INTO NEW SPEAKER VOTE: House Republicans are expected to hold closed-door meetings and an intra-conference vote to select their candidate for House Speaker vote as early as tomorrow.
- House Majority Leader Steve Scalise (R-LA) and Judiciary Chair Jim Jordan (R-OH) have officially announced they are running for Speaker.
- Rep. Thomas Massie (R-KY) said there is a “2% chance” House Republicans successfully elect a new Speaker because Republican conference members are becoming entrenched behind their preferred candidates.
- Why It Matters: Neither Scalise nor Jordan have a majority of Republicans supporting their bid, and the GOP has said they will not bring a Speaker vote to the floor without all 218 members of their conference behind a candidate. This is a move to avoid another contentious Speaker vote that would signal division within the party. U.S. support for Israel after attacks by Hamas will put pressure on Republicans, but unless the party gets behind Scalise or Jordan, expect the vote to be pushed to next week. – R.C.
- (3) BIDEN ADMIN AND VENEZUELA CLOSE TO SANCTIONS DEAL: According to people familiar with the negotiations, the Biden administration and the Venezuelan government are close to a deal that will ease oil and banking sanctions in exchange for guarantees of open elections.
- Venezuelan President Nicolás Maduro agreed not to interfere with opposition primary elections later this month and allow international observers to oversee the general election in 2024.
- Why It Matters: Allowing Venezuela to export oil again could increase market supply in the short term, possibly lowering energy prices for Americans, without increasing drilling in the U.S. and giving money to energy companies that primarily donate to Republican candidates. Depending on the timing, this could be a boon for Biden or a replacement candidate in the 2024 election. – R.C.
- (4) G&R: HIGHER U.S. NATURAL GAS PRICES COMING: Natural resource investors Leigh Goehring and Adam Rozencwajg said that U.S. natural gas prices are “reaching a turning point” and could head much higher.
- U.S. natural gas production has peaked in all shale oil regions except the giant Permian Basin – the same trend as U.S. shale oil.
- Goehring and Rozencwajg project that there will only be a single international natural gas price once global demand exceeds U.S. supply.
- Why It Matters: U.S. natural gas is the cheapest unit of energy globally, allowing Americans to heat their homes and businesses cleanly and affordably. In 2022, Europe’s average price for natural gas was over six times higher than the price paid by Americans. If Goehring and Rozencwajg are correct, Americans will no longer enjoy this energy discount, which means higher home heating prices for already struggling Americans. – H.B.
- (5) DOJ: TRUMP TRIAL JURORS NEED EXTRA PROTECTION: Department of Justice (DOJ) prosecutors in the Washington D.C. trial of former President Donald Trump asked Judge Tanya Chutkan to take extra steps to protect the identities of jurors, arguing that Trump uses social media as a “weapon of intimidation.”
- DOJ prosecutors requested that Judge Chutkan order Trump’s legal team to disclose by 18 December if they were planning an “advice of counsel” legal defense.
- Why It Matters: The DOJ argues that an “advice of counsel” defense would negate attorney-client privilege between Trump and his past attorneys and allow the DOJ to expand its search for evidence against the former President. Additionally, the difference in approach to the security of the jury between this case against Trump and past cases that included jury intimidation by left-wing groups and figures is glaring. – R.C.
- (6) GLOBAL FEARS OF RARE EARTH SHORTAGES AND HIGHER PRICES: Closures of Myanmar’s rare earth mines due to environmental concerns sent rare earth element prices to a 20-month high in September, and this continued lack of global supply could further increase costs this quarter.
- China’s Jiangxi province is China’s major mining hub for rare earth elements, but China still imports about 40% of its rare earths from Myanmar.
- Myanmar’s mine closures have led to anxiety about supply interruptions and hoarding of rare earths worldwide.
- Why It Matters: The green energy transition, laser-guided missiles and other defense systems, and high-tech applications depend on rare earth elements. China not only produces large quantities of rare earths, but it also refines 85-90% of the world’s rare earths and has already limited exports to the United States. As U.S.-Chinese relations worsen, the U.S. will diversify its rare earth production and refining supply chain, including Vietnam, which has the world’s second-largest supply of rare earths behind China. – H.B.
- (7) UNICREDIT: GLOBAL PROTECTIONISM ON THE RISE: This year will likely mark another record high in new protectionist measures – government subsidies, tariffs, procurement restrictions, and licensing and quotas – for global trade in goods and services, according to UniCredit economists.
- Governments issued more than 2,000 interventions through September – beating 2021’s record high of about 1,900 interventions and eight times more than in 2009, right after the Global Financial Crisis.
- Why It Matters: Increasing geopolitical tensions are JPMorgan CEO Jamie Dimon’s number one economic concern. New trade barriers have nearly tripled since 2019, and these restrictions are reversing decades of tighter global economic integration. The friendshoring/nearshoring/onshoring trend should accelerate this decade and cause dislocations while supply chains are reorganized, leading to commodity shortages and higher sustained rates of inflation. – H.B.
- (8) ISRAELI MILITARY PREPARES FOR GROUND OFFENSIVE INTO GAZA: The Israeli death toll rose to 1200 on Tuesday as Israeli forces began the battlefield preparations for a full ground offensive into Gaza.
- The Israeli air force struck more than 70 targets Tuesday night in Gaza.
- Israeli Defence Minister Yoav Gallant, speaking to soldiers near the Gaza fence, said: “Hamas wanted a change and it will get one. What was in Gaza will no longer be.”
- Why It Matters: Israel is unlikely to heed international calls for a ceasefire and peace process, resulting in an all-out military operation to clean out and possibly annex Gaza. Hezbollah along Israel’s northern border is continuing rocket attacks and attempts to disable key Israeli Defense Force radars and listening posts as a prelude to a probable second front. Arab nations, like Saudi Arabia and Turkey, have pledged allegiance to the Palestinian cause and will most likely provide some level of support to Hamas and Hezbollah. Iran, which allegedly orchestrated the Hamas attack, likely still has a play to make in the conflict, and its presence could trigger a wider regional war. – M.M.
- (9) RUSSIAN FORCES LAUNCH OFFENSIVE IN DONETSK: Russian forces made major gains in the vicinity of the Ukrainian village of Avdiivka on Monday and Tuesday.
- Agence France-Presse reported Avdiivka was under heavy artillery fire, and Russian forces had encircled the strategic hamlet.
- Russian and Ukrainian forces have fought over the village for the past year.
- Why It Matters: Russian forces are likely looking to take key terrain like Avdiivka for follow-on actions this winter. While Ukraine is now advancing about 100 meters per day in the vicinity of Bakhmut, the progress is falling short of the casualty count and ordnance expenditures – creating potential problems for a winter defense. Expect Russia to accelerate shaping operations for a winter offensive that will likely begin in the northeast with the goal of creating a pocket and isolating Ukraine’s forces to the south. A flashpoint in the Mediterranean over Israel and Hamas could prove to be a distraction for the U.S. and E.U. efforts to continue support for Ukraine. – 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
The greatest risk is not preparing for the future, but the next greatest risk is preparing for the wrong things.
Join the Forward Observer Intelligence team as they discuss the latest threats and early warning indicators concerning agriculture and the food supply, oil and energy, the power grid, economics and finance, the supply chain, and geostrategic shocks.
Get our Early Warning report every Friday here: https://forwardobserver.com/subscribe