Good morning. Here’s your Daily SITREP for Tuesday, 19 September 2023.
- READ TIME: 6 Minutes, 29 Seconds
- Inside the Beltway
- (1) Freedom Caucus Burns McCarthy Again While Senate Stumbles
- (2) Congress Seen Giving Holiday Bonuses to Staffers
- Domestic INTSUM
- (3) El-Erian: U.S. Economy Will Get Disorderly
- (4) Goldman Sachs: Oil Supply Deficit Through 2023
- (5) California Dems Urge Bonta to Bar Trump “Immediately”
- (6) Both Sides of UAW Strike Hint at Escalation
- (7) California Targets Oil Industry in New Lawfare Strategy
- Global SITREP
- (8) Taiwan Raises Alarm Bells Over Chinese Warplane Incursions
- (9) Six Ukrainian Deputy Defense Ministers Fired
- (10) North Korea’s Kim Jong Un Returns Home with Gifts
- (11) Azerbaijan Launches New Offensive in Nagorno-Karabakh
INSIDE THE BELTWAY
- (1) FREEDOM CAUCUS BURNS MCCARTHY AGAIN WHILE SENATE STUMBLES: At least 10 House Freedom Caucus members said they would vote down Speaker Kevin McCarthy’s (R-CA) proposed Continuing Resolution (CR), and Rep. Matt Gaetz (R-FL) called the CR a “167-page surrender to Joe Biden.”
- Senate Minority Whip John Thune (R-SD) said “the ball is in their [the House GOP] court” after the Senate’s “minibus” spending bill stalled on the chamber floor.
- Rep. Anna Paulina Luna (R-FL) said an “at least 10-day shutdown” is coming after a phone call with other House Freedom Caucus Members.
- Why It Matters: Congress is now stuck at an impasse. McCarthy can’t get cooperation from the House Freedom Caucus, Democrats say they aren’t going to cross the aisle to rescue McCarthy, and now the Senate is stalled. Senate Republicans are distancing themselves from the shutdown fight. – R.C.
- (2) CONGRESS SEEN GIVING HOLIDAY BONUSES TO STAFFERS: Congressional staff members are reportedly worried about going without pay during the potential government shutdown while remaining on the job to negotiate a budget resolution.
- The Congressional Workers Union is encouraging members of Congress to pay advances before the shutdown, while others are giving out Christmas bonuses early to help staffers weather the shutdown. “We’re front loading some of their Christmas bonus and encouraging them to put it aside just in case we shut down,” Rep. Maxwell Frost (D-FL) said.
- Meanwhile, staffers themselves are hoping they are designated as “essential” government workers during the shutdown.
- Why It Matters: A push for Congressional staffers to receive advanced holiday pay, which did not happen during previous short shutdowns, is an indicator that staffers could be expecting a longer shutdown than before. The longest shutdown in the past was 35 days during the Trump administration, so staffers could be expecting this shutdown to go past a month. – R.C.
- (3) EL-ERIAN: U.S. ECONOMY WILL GET DISORDERLY: Mohamed El-Erian, Chief Economic Adviser at Allianz SE, is warning that high interest rates will cause corporate debt refinancing problems.
- “If you look at high yield, if you look at commercial real estate, there’s massive refinancing needs next year,” El-Erian said.
- $504 billion in nonfinancial corporate debt matures this year, $710 billion will mature in 2024, and $862 billion will mature in 2025, according to S&P Global analysts.
- Why It Matters: El-Erian isn’t the only analyst warning about the Federal Reserve’s aggressive interest rate hikes. Torsten Slok, Chief Economist at Apollo Asset Management, said that interest rate hikes are rippling through credit markets, and credit card delinquency rates are rising. If the Fed keeps its “higher for longer” rate policy, this will increase the chances of a 2024 recession and financial crisis. – H.B.
- (4) GOLDMAN SACHS: OIL SUPPLY DEFICIT THROUGH 2023: Saudi Arabia’s production cuts will keep the global oil market in a deficit this year and prices elevated, according to investors at last week’s Houston, TX oil meeting.
- Lower chances of a 2023 recession will maintain global oil demand at around 102 million barrels per day this year – higher than daily oil production – noted Goldman’s analysts.
- Why It Matters: Investors’ opinions at this meeting were split on oil prices after this year. Some investors expect oil prices to moderate towards $80 per barrel in 2024 and 2025. Others said that the two previous energy upcycles have averaged over a decade in length, and we’re only three years into the current oil recovery. – H.B.
- (5) CALIFORNIA DEMS URGE BONTA TO REMOVE TRUMP “IMMEDIATELY”: Nine California state lawmakers sent a letter urging Attorney General (AG) Rob Bonta to “immediately intervene” and remove former President Donald Trump from the 05 March 2024 primary ballot.
- Bonta’s office said it is reviewing the request, and a spokesman added that “there is no denying” that Trump engaged in “unacceptable and unbecoming” behavior on January 6th.
- Why It Matters: California lawmakers’ move to bar Trump from the ballot is unique from attempts in other states because they are asking for intervention from the Attorney General and not the Secretary of State. Attorney General Rob Bonta has the legal standing to ask state courts for Declaratory Relief, which would ask a judge for an immediate decision on an unresolved legal question and prevent a drawn-out legal process that could quickly pass by the 08 December deadline for candidates to get on the primary ballot. – R.C.
- (6) BOTH SIDES OF UAW STRIKE HINT AT ESCALATION: United Auto Workers (UAW) Union President Shawn Fain said the union “would amp this thing up even more,” while General Motors said that a factory in Kansas would shut down due to a parts shortage from a striking plant in Missouri.
- Former Michigan GOP Chair Saul Anuzis said the strike and division between the UAW and the White House could give Republicans the opportunity to capture blue-collar worker votes in 2024.
- Why It Matters: Signals from the UAW and the “Big Three” automakers point to the strike escalating in the coming weeks. Currently, only just over 12,000 UAW members at three plants are striking, but the UAW has 150,000 members nationwide who could join at any moment. Fain’s strategy appears to include increasing the pressure on automakers by directing more UAW members to stage walkouts every Friday until a deal is made. Republicans could use this opportunity to pull back blue-collar votes in Michigan that Trump won in 2016 by attacking the Biden administration’s electric vehicle push. – R.C.
- (7) CALIFORNIA TARGETS OIL INDUSTRY IN NEW LAWFARE STRATEGY: California Governor Gavin Newsom and Attorney General Rob Bonta announced that the state of California is suing Exxon, Shell, Chevron, ConocoPhillips, BP, and the American Petroleum Institute, which they say covered up their role in climate change.
- Bonta said California will become the “largest geographic area and the largest economy” to take oil companies to court, and it is “time they pay to abate the harm they caused.”
- Why It Matters: Newsom continues to build his national profile for a future White House run while Democrats adopt a new state-level lawfare strategy targeting the fossil fuel industry. State courts have been more amenable to environmentalist suits targeting fossil fuels, so California’s suit has a better chance to win than it would in a federal court. – R.C.
- (8) TAIWAN RAISES ALARM BELLS OVER CHINESE WARPLANE INCURSIONS: Taiwan’s Defense Ministry issued warnings over a record 103 Chinese warplanes operating around the island nation on Monday.
- Forty of the aircraft crossed the median line in the Taiwan Strait, denoting the de facto line between China and Taiwan territory.
- China currently has a large carrier strike group operating east of Taiwan and south of the Japanese island of Miyako-jima.
- Why It Matters: China continues to up the ante on Taiwan despite a recent flurry of diplomatic activity by Western governments to make nice with Beijing. The Chinese Communist Party’s recent purges of potentially compromised officials in its foreign service and defense establishment could indicate preparations for an all-out confrontation with the West over Taiwan. – M.M.
- (9) SIX UKRAINIAN DEPUTY DEFENSE MINISTERS FIRED: Six deputy defense ministers were fired without notice on Monday.
- The firings come on the heels of Ukrainian President Zelensky’s firing of Defense Minister Oleksii Reznikov for corruption earlier this month.
- Why It Matters: The Ukrainian defense ministry was rife with corruption, which had spilled out into the open in recent months. Despite efforts to contain and correct the pilfering of Western aid, money, and weapons, Ukrainian defense ministry officials continued operating in their own interests. The move was likely to pacify Western governments who their intelligence agencies had informed of the corrupt self-dealing in Kiev. – M.M.
- (10) NORTH KOREA’S KIM JONG UN RETURNS HOME WITH GIFTS: North Korean leader Kim Jong Un returned home to Pyongyang via his personal armored train following a summit with Russian President Vladimir Putin and tours of Russian missile and jet aircraft facilities.
- Kim pledged full support for Russia in its war in Ukraine.
- Russian media claims Kim agreed to provide Russia with upwards of 10 million artillery rounds, rockets, and MLRS launchers in return for 40 Su-35 fighters and possibly advanced missile technology.
- Why It Matters: Despite U.S. defense officials’ wishcasting that a North Korean arms deal with Moscow would do little to alter the war in Ukraine, the reality is that Russia is building an industrial warfighting coalition that heavily outmatches Western capabilities. North Korea’s addition to that coalition assures Russia will likely receive all the material support it requires to achieve its objectives in its special military operation. – M.M.
- (11) AZERBAIJAN LAUNCHES NEW OFFENSIVE IN NAGORNO-KARABAKH: Azerbaijan launched what it called a local anti-terrorist operation against Armenian positions in the disputed Nagorno-Karabakh region on Tuesday.
- Local media reports that Armenian positions were under heavy mass artillery bombardment.
- An Azerbaijan spokesman said its military was only attacking Armenian positions.
- Why It Matters: Russia brokered a truce deal and deployed 2,000 troops to the region in 2020 as peacekeeping forces. Despite additional U.S. and European Union mediation, the fighting has only continued to escalate. The latest armed outbreak of fighting could impact the European Union’s plans to double natural gas imports from Azerbaijan through existing pipelines and transit routes in Armenia. – 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
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