Global SITREP for Monday, 22 January 2024 – Forward Observer

Global SITREP for Monday, 22 January 2024

Good morning, and welcome to the Global Situation Report for Monday 22 January 2024. 

  1. CREDIT AGRICOLE: DE-EUROIZATION, NOT DE-DOLLARIZATION: Analysts at French megabank Credit Agricole wrote that claims of de-dollarization are premature and overblown, and de-euroization is what’s happening, according to the data.
  • The International Monetary Fund’s Currency Composition of Official Foreign Exchange (COFER) latest data showed that the dollar’s share of foreign reserves has held steady at around 60% in recent years, while the euro’s share has dropped a few percentage points to the second-lowest level since 2017.
  • “In 2023, the USD became an ever more important transaction currency,” Credit Agricole analysts wrote.

Why It Matters: Since the 2008 Global Financial Crisis, both the dollar and euro’s share of global reserves has steadily fallen, but the euro has fallen faster than the dollar. This trend should continue throughout the decade as BRICS and other trade blocs slowly gain more market share. If global politicians and corporate leaders don’t consider the euro as a key transactional currency, there will be no incentive for banks to hold large amounts of euros, which could doom the currency and eventually break up the European Union. – H.B.

  1. CHINA CHOOSES BRAZILIAN SOYBEANS OVER AMERICA: China’s soybean imports from Brazil in 2023 were 29% higher than in 2022, which expanded Brazil’s dominance in the world’s largest soybean market, according to Chinese customs data published over the weekend.
  • China’s soybean imports from the U.S. fell 13% year-over-year, Reuters reported.
  • Argentina, the world’s third-largest grower behind Brazil and America, expects much higher soybean exports to China this year, which would further cut into the U.S. export market.

Why It Matters: China is methodically and strategically disconnecting from the United States. In the past year, China has sold about 10% of its U.S. Treasury holdings to move this money back home. An agricultural turn to Brazil, which would likely be a neutral party in a China-United States military conflict, is a potential signal of future action against Taiwan or fears of a direct conflict with America. – H.B.

  1. ISRAEL-HAMAS CONFLICT LACKS OFF-RAMP: Hamas offered Israel a peace deal and the release of their hostages if Israel withdraws from Gaza, releases their own hostages, and leaves Hamas intact and in charge.
  • Israeli Prime Minister Benjamin Netanyahu characterized the offer as “outright terms of surrender” to “murderers and rapists.”

Why It Matters: The latest Middle Eastern war has already decimated international shipping, fractured the U.S.’ closest alliances, spread to several neighboring countries, damaged the U.S. Navy’s reputation as guardians of the sea, and threatens to expand into a conventional war with Iran. Hamas’ offer was clearly unserious as it provided nothing to the Israelis, and Netanyahu’s response did nothing to assuage the genocide narrative that Hamas is spinning. Neither side appears willing to come to the table with a real solution, meaning, for now, we can expect this war to escalate until one side no longer exists. – J.V.

  1. JAPANESE GOVT TRACKS GROWING DISDAIN FOR CHINA: The Japanese government released an annual poll over the weekend showing growing animosity for China among the Japanese people. 
  • 86.7% “did not feel friendly” toward China, up from 81.8%.
  • 68.2% said Sino-Japanese ties were important, a record low according to the government, down from 73.5%.
  • 27.8% said Sino-Japanese ties were not important, an increase from 22.1%.
  • All polls for Japanese-Korean relations were up from the previous year in the same survey.

Why It Matters: More than a quarter of the Japanese populace has given up on relations with China. As with all polls, the trend is the important part, and all of the trends are negative toward China. While there is a supermajority of respondents who find Sino-Japanese relations important, survey interpretation is key. It does not elaborate on whether respondents find them factually important or if good relations are important. That particular data point could be significantly worse for Sino-Japanese relations. The growing disdain and apathy toward China gives the Japanese government a large base that is open for manipulation into supporting a war with China. – J.V.

  1. U.S. DELEGATION TO TAIWAN WILL COURT OPPOSITION PARTIES: A U.S. Congressional delegation is planning a trip to Taiwan to congratulate President-elect Lai Ching-te and meet with senior opposition leaders, according to Representative Ami Bera (D-CA), Chair of the Congressional Taiwan Caucus.
  • Bera pointed out that there are no deep relations with the Taiwan People’s Party (TPP) and that he expected to meet with all parties in the legislature.

Why It Matters: The United States appears to be trying to bring the TPP on its side or softening its opposition to U.S. foreign policy. The delegation specifically targeting the TPP suggests a strategy to gain a majority-pro-independence legislature in Taiwan. The Kuomintang is unlikely to be swayed, but as a “middle ground” party, the TPP may be convinced enough to give the pro-independence faction a slim majority. This will, rightfully, be called “encouraging Taiwan independence” by China. – J.V.

THAT’S A WRAP: This does it for today’s edition. Thank you for reading. If you know folks who would also like to receive this email, would you please forward it to them? We appreciate you spreading the word. – M.S.

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