Good morning. Here’s your Daily SITREP for Wednesday, 01 November 2023.
TODAY’S BRIEFING:
- READ TIME: 6 Minutes
- Inside the Beltway
- (1) Bill to Expand Sanctions Against Iran Oil
- (2) Wray: Hamas Terrorist Attacks on U.S. Soil Possible
- (3) Biden to Host Latin American Leaders at Summit
- Domestic INTSUM
- (4) Renewable Failures Spur “Green” Energy Rebrand
- (5) Infrastructure Spending Props Up U.S. Economy
- (6) Biden Alaska Plan “Threat” to Future Drilling
- (7) Trump Wades Into Michigan Ballot Legal Battle
- Global SITREP
- (8) IMF: Central Banks May Keep Rates Higher for Longer
- (9) U.S. and Western Governments Planning Post-Hamas Gaza
- (10) Yemen Declares War on Israel
INSIDE THE BELTWAY
- (1) BILL TO EXPAND SANCTIONS AGAINST IRAN OIL: The bipartisan Stop Harboring Iranian Petroleum (SHIP) Act introduced by Rep. Mike Lawler (R-NY) targeting entities in the Iranian oil industry for sanctions is headed to the House floor for a vote this week.
- Republican and Democratic lawmakers who criticized the Biden administration’s easing of Iranian sanctions in September said Iran’s oil exports have risen because of a surge of purchases by China.
- Why It Matters: It’s unclear at this point that additional sanctions on Iran will be effective, as China will continue buying relatively cheap illicit oil from Iran. And sanctions have failed to cripple the Russian economy after they invaded Ukraine. With the perceived waning of American hard power, American soft power may be losing effectiveness. – R.C.
- (2) WRAY: HAMAS TERRORIST ATTACKS ON U.S. SOIL POSSIBLE: FBI Director Christopher Wray said terrorist attacks inspired by the Israel-Hamas conflict are likely to increase during testimony at the Senate Homeland Security and Governmental Affairs Committee hearing on threats to the homeland today.
- Wray added that the FBI cannot discount the possibility that Hamas or another terrorist organization could conduct attacks on U.S. soil and that there are specific threats of Iran-linked cyberattacks on critical infrastructure.
- Why It Matters: As we noted in previous coverage, Hamas and Hezbollah have a presence in the U.S. already. Critical infrastructure, civilian and military facilities, and Jewish religious institutions remain key targets for foreign adversaries. – R.C.
- (3) BIDEN TO HOST LATIN AMERICAN LEADERS AT SUMMIT: President Joe Biden will host leaders from Latin America and Canadian Prime Minister Justin Trudeau at the Americas Partnership for Economic Prosperity summit on Friday, 03 November, where Biden will pitch the U.S. as an alternative partner for the region to China.
- The summit is expected to focus on building more resilient supply chains for critical minerals and semiconductors.
- Why It Matters: Biden’s intent to present the U.S. as a strategic alternative to China is likely to be hindered by China’s less “judgmental” stance regarding foreign aid. The history of U.S. intervention in the region could also present an obstacle for Latin American countries with governments that have opposed American intervention in the past. – R.C.
DOMESTIC INTSUM
- (4) RENEWABLE FAILURES SPUR “GREEN” ENERGY REBRAND: Solar and wind power projects have not delivered as initially promised, prompting several states to rebrand nuclear, natural gas, and biomass as renewable energy sources.
- Over two-thirds of U.S. states have legally binding renewable portfolio standards (RPS) that require a percentage of electricity to come from renewables.
- Lawmakers in North Carolina – the first state in the Southeast with an RPS – overrode a veto in October to rebrand nuclear as “green,” and other RPS states like Ohio and Virginia now include natural gas and biomass as renewable energy.
- Why It Matters: Higher interest rates and reality have run headfirst into energy ideology. More state lawmakers could expand the “green” energy definition, as solar and wind power continue to disappoint, but utility companies must still comply with renewable portfolio standards. – H.B.
- (5) INFRASTRUCTURE SPENDING PROPS UP U.S. ECONOMY: Money from the $1.2 trillion Infrastructure Investment and Jobs Act passed in 2021 made its way through the economy, boosting state and local infrastructure spending in the third quarter.
- “The infrastructure investments that are being made by the government, although we are [just] starting – we have seen some benefit of that, [and] we expect more benefit in 2024,” said D. James Umpleby, CEO of Caterpillar in yesterday’s earnings call.
- But U.S. construction equipment demand may have already peaked, as Caterpillar dealer inventories rose for the third consecutive quarter while the company’s backlog shrunk.
- Why It Matters: State and local governments’ infrastructure spending should remain above average next year and help construction equipment manufacturers, including Caterpillar, the world’s largest and the industry bellwether. Also, government spending – one component of aggregate economic output – could boost Gross Domestic Product (GDP) and mask a recession, although average Americans may be experiencing one. – H.B.
- (6) BIDEN ALASKA PLAN “THREAT” TO FUTURE DRILLING: Oil industry advocates said proposed changes to the National Petroleum Reserve-Alaska by the Biden administration would thwart development efforts in a crude oil-rich region the size of Indiana.
- ConocoPhillips Alaska President Erec Isaacson said the new rule “presumes permits shouldn’t be issued for energy production except in circumstances that are undefined.”
- Why It Matters: This new rule change to the National Petroleum Reserve-Alaska would deal a major blow to future oil supply, which is in line with the Biden administration’s energy strategy to force the adoption of green energy alternatives. – R.C.
- (7) TRUMP WADES INTO MICHIGAN BALLOT LEGAL BATTLE: Former President Donald Trump filed a lawsuit against Michigan Secretary of State Jocelyn Benson to block efforts to remove him from the 2024 ballot in Michigan.
- Trump’s lawyers argued that Benson’s lack of certainty on efforts to block Trump from the Michigan 2024 ballot affects how the Trump campaign directs resources.
- Why It Matters: Trump is going on the offensive in Michigan after a Michigan judge ruled he did not have standing to join this lawsuit like he has in Colorado and Minnesota. Like the Colorado case and the Minnesota case set to begin this week, expect any decision against Trump to make its way to the Supreme Court, likely in the form of an emergency petition to settle the legal question of the 14th Amendment disqualifying Trump from the ballot before the 2024 general election begins. – R.C.
Global SITREP
- (8) IMF: CENTRAL BANKS MAY KEEP RATES HIGHER FOR LONGER: The International Monetary Fund (IMF) released its semi-annual “Global Financial Stability Report,” stressing that central banks around the world may need to keep interest rates high to battle inflation but higher rates will add pressure to economies.
- “Acute stress in the global banking system has subsided,” the IMF authors wrote, “but an abrupt tightening of financial conditions” could retest the global financial system.
- Optimism is high about the global economy’s potential soft landing – slowing growth without a recession – despite higher rates, the IMF report noted.
- Why It Matters: Even with higher interest rates, inflation will remain elevated in many countries for two reasons. First, this inflationary cycle is supply-driven from shortages, not excess consumer demand. Central banks only have control over consumer demand and cannot increase the supply of commodities or repair broken supply chains. Second, governments are the biggest borrowers – with no regard for interest rates and no intention of repaying these debts. With war expanding, governments will borrow and spend more, increasing the inflation rate. – H.B.
- (9) U.S. AND WESTERN GOVERNMENTS PLANNING POST-HAMAS GAZA: According to U.S. Secretary of State Antony Blinken, the United States and other countries are considering “a variety of possible permutations” for the Gaza Strip after Hamas militants are removed from control.
- Blinken reportedly told a Senate Appropriations Committee hearing that the status quo in Gaza could not continue, and Israel was not interested in running the Palestinian territory.
- One of the possible options includes a multinational caretaker authority under United Nations oversight.
- Why It Matters: It is clear Western nations have little confidence that Palestinians can govern Gaza following whatever ending Israel imposes on Hamas. In this case, barring a forced exodus of the Palestinian people, a governing body must be put in place to restore order and basic services. Some type of U.N. caretaker authority is the most likely solution, although it may not be acceptable to Israel if staffed by militant pro-Hamas supporters. Blinken emphasized that U.S. military participation in a peacekeeping mission was not an option. The likelihood that this conflict will resolve in the short term is practically nil. – M.M.
- (10) YEMEN DECLARES WAR ON ISRAEL: Yemen’s Houthi government declared war on Israel Tuesday.
- A Houthi spokesperson said in a televised statement that its military had fired a number of ballistic missiles at Israel and that there would be more attacks to come.
- Jordan reported on Tuesday that it had intercepted a land attack cruise missile fired by Houthi forces at Israel.
- Why It Matters: The Houthi declaration of war could be the first in several pro-Palestinian countries to join the fight against Israel in support of Hamas. While the Houthis have a limited capability to project force onto Israeli territory, they do have a supply of Iranian missiles and attack drones – a potential complication given recent statements by Israeli officials that they are running low on Iron Dome missile defense munitions. – 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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