Global SITREP for Thursday, 04 January 2024 – Forward Observer

Global SITREP for Thursday, 04 January 2024

Good morning, and welcome to the Global Situation Report for Thursday, 04 January 2024

  1. MUFG: 25% CHANCE OF A REGIONAL MIDEAST WAR IN 2024: Analysts at Japanese megabank MUFG detailed their geopolitical risk scenarios for 2024, ranging from a de-escalation of the Israel-Hamas War to a Middle East regional conflagration.
  • MUFG predicts a 20% chance of a de-escalating Israel-Hamas War, a 55% chance of the war remaining between Israel and Hamas, and a 25% chance of a wider Middle East conflict.   
  • War’s expansion to the greater Middle East would send Brent crude oil to $100 per barrel, gold to $2,400 per ounce, European Union natural gas prices up 70%, and reignite world inflation, according to MUFG’s analysis.

Why It Matters: The oil market has not fully priced in the risk of a greater Middle East and Iranian war despite recent events in the region that are signaling an escalation. Already this year, Israel launched a lethal drone strike in Beirut against senior Hamas leader Saleh al-Arouri. Also, yesterday’s bombing at Islamic Revolutionary Guard Corps General Qassem Soleimani’s memorial ceremony in Iran prompted some Iranian officials to blame Israel. If this powder keg ignites and Middle East oil production or transportation is disrupted, MUFG’s estimate of oil at $100 per barrel is understated, which could push economies into recession. – H.B.    

  1. HONG KONG PLA HELD FULL-SCALE COMBAT DRILL TO RING IN 2024: Hong Kong’s People’s Liberation Army (PLA) garrison held a full-scale joint combat drill on 01 January 2024 with Army, Navy, and Air Force personnel.
  • The exercise is intended “to safeguard national sovereignty and security,” according to the Chinese Ministry of National Defense.
  • Several vessels got underway, along with the Army deploying to defensive positions and the Air Force launching its helicopter wing.

Why It Matters: Hong Kong is about 300 miles from Taiwan’s outlying islands but is on the way to the Southern Theater Command in Hainan. Any disruption in Hong Kong could also disrupt the PLA’s ability to project force on Taiwan’s southern coast. The PLA appears to expect attempted disruptions in the recently re-acquired city in the event of military action against Taiwan. – J.V.

  1. SHORT NOTICE FOR COMPETING CHINESE, US-PI PATROLS IN SCS: China announced its Southern Theater Command would be sending “naval and air forces” on a patrol of the South China Sea (SCS). The Armed Forces of the Philippines announced its second joint patrol of the West Philippine Sea (as they refer to the SCS) with the United States. Both patrols are taking place on Wednesday and Thursday and may coincide with a resupply mission.
  • “Any military activities that cause disturbances and create hot spots in the South China Sea are fully under control,” according to the Chinese Ministry of National Defense.
  • Four Filipino navy vessels and the Carl Vinson Strike Group are conducting the patrol. Filipino state media and USNI only identify three of the four Filipino vessels. Two of the Filipino vessels are the largest surface warfare class in their fleet.
  • The Philippines is likely to conduct its first resupply mission of 2024 to the Second Thomas Shoal this week, according to Chinese media.
  • ASEAN issued its first direct statement on the brewing conflict over the weekend. It urged peace talks, international law, and codes of conduct while expressing deep concern that a war could happen in the South China Sea.

Why It Matters: The unidentified fourth Filipino Navy vessel could be the supply ship Chinese media is warning about. If so, this puts U.S. Navy assets directly in the line of fire for the next China-Philippines run-in. Additionally, the PLA Navy assets are unidentified but will likely be alongside the Chinese Maritime Militia and Chinese Coast Guard vessels that normally operate around the Second Thomas Shoal. As always, there exists the possibility of gray zone warfare, which has historically included ship-ramming and the use of high-pressure water cannons to disable Filipino ships. – J.V.

  1. AFRICAN PORTS ON RED SEA REROUTES AMONG WORLD’S WORST: South African ports that are taking on rerouted Red Sea traffic are among the worst-performing ports in the world according to the Word Bank’s Container Port Performance Index (CPPI). The CPPI is a reliability index based on whether ports can receive ships at their scheduled times and consistently cycle them through in the allotted time.
  • Three ports – Durban, Ngqura, and Cape Town – are in the bottom 10 of 348 assessed ports. 
  • Port Elizabeth is the highest performing port in South Africa at position 291 of 348, the bottom 16% of ports globally.
  • Only two ports in Sub-Saharan Africa are in the top half of the 348 ports surveyed. Both are next to the Red Sea.

Why It Matters: Poor performance by these midway stops for refueling and resupply can further delay shipments rerouted due to war and piracy. A two-week delay around the Cape could easily turn into a month as ships may be backlogged while the port cycles the excess ships through. – 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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