Good morning, and welcome to the Global Situation Report for Friday, 29 December 2023.
- THESE 2023 ECONOMIC TRENDS WILL CONTINUE IN 2024: The global economic trends we witnessed this year should spillover into 2024 and beyond, including increased trade barriers and greater regional/friendly integration, expanding military conflicts that could threaten fragile supply chains, and key commodities and gold gaining more value in response to all these risks.
- Globalization is out, and regional/friendly integration is in, as we witnessed this year with the growing influence of the BRICS (Brazil, Russia, India, China, and South Africa) conference in August and China’s October Belt and Road Initiative Forum – both well attended by “Global South” countries, which are developing countries mostly located in the Southern Hemisphere.
- The Ukraine-Russia War and Houthi attacks have disrupted trade in the geostrategic Black and Red Seas, and the potential expansion of the Israel-Hamas War into a greater Middle East and Iranian conflict could threaten another important choke point – the Strait of Hormuz, where about 20% of the world’s oil travels through each day.
- Natural resources and gold are gaining prominence and value as central banks, financial institutions, and individuals hedge against geopolitical and global supply chain risks.
Why It Matters: Billionaire investor Stanley Druckenmiller, 70, said earlier this year that we’re facing the “worst geopolitical situation I’ve seen in my lifetime.” Druckenmiller is right, as the remainder of the 2020s should be much different than the minimal global conflict, low inflation, and near-zero interest rate environment of the 2010s. Also, potential U.S. domestic policies are a risk that you should not dismiss. To gain votes, the Biden administration could implement price controls next year, which would only amplify global supply disruptions and guarantee shortages of commodities and other critical materials. As a signal for major policy changes, pay close attention to the mainstream media, which should craft a White House-friendly narrative before the administration sets policies that will lead to these disruptions. – H.B.
- LAVROV: READY TO HELP “MAKE IN INDIA” INITIATIVE: India’s External Affairs Minister Subrahmanyam Jaishankar and Russian President Vladimir Putin agreed to produce defense products inside India in support of India’s “Make in India” program.
- “Today, we have taken a number of steps that would allow us to expand cooperation, including in the upcoming launch of the North-South International Transport Corridor as well as establishment of the Chennai-Vladivostok route and the cooperation on the expansion of the Northern Sea Route, which is a very promising area,” Russian foreign minister Sergei Lavrov said.
Why It Matters: India is deepening its ties with Russia alongside its ties to the United States. Notably, Russia is helping India with a homegrown defense industry and launching a sea route through the South China Sea when there is an ongoing dispute between India and China that could boil over and a brewing conflict in the SCS between China and the Philippines. India’s use of military escorts to secure this trade route will be seen as highly provocative to the Chinese. – J.V.
- U.S.-PHILIPPINES TO STRENGTHEN ALLIANCE IN 2024: Secretary of State Antony Blinken and Philippines Secretary of Foreign Affairs Enrique Manalo conducted a call to discuss ways to further strengthen the alliance in 2024.
- The diplomats discussed the ongoing confrontations in the South China Sea.
- Manalo emphasized the importance of dialogue and maintaining open lines of communication with “other parties.”
- 54% of all Filipinos support expanding the U.S.-PI alliance specifically for the issues in the South China Sea, and 58% support expanding it for general external threats, according to a Filipino polling company in August. The state-run Philippines News Agency claims this is a 15% increase but does not specify the timeline.
Why It Matters: The mutual defense treaty and alliance already strengthened this year with the addition of enemy Coast Guard actions being a trigger for military action and the expansion of U.S. basing operations. In April, Manalo told the United States Senate that no material used for war with China could be stockpiled in the new bases. Considering the opposite positions voiced by other Filipino officials and the worsening relations with China, Manalo could be going back on his previous stance. Very little further strengthening could be done without increased weapons shipments, stationing units, or a further increased bilateral training schedule. – J.V.
- ISRAEL: WE ARE PREPARED FOR WAR WITH LEBANON: Israeli officials continued commenting this week on a possible war with Hezbollah in Lebanon.
- The Israeli Defense Force (IDF) approved plans for a Lebanon offensive and put its Northern Command on “high alert.” IDF Chief of Staff Herzi Halevi this week said the IDF should “be ready to launch an attack if necessary.” Hezbollah fighters and the IDF continue to trade strikes against each other without officially declaring war.
- Halevi yesterday reiterated previous comments that the Israel-Hamas war “will go on for many months.”
Why It Matters: The Israel-Hamas war is already a multi-front conflict, with an ongoing ground campaign in Gaza and strikes in the West Bank, Syria, and Lebanon, in addition to attacks from Yemen. Israeli defense officials have been warning about another war with Lebanon for years, and comments may be aimed at deterring attacks from Lebanese Hezbollah, as opposed to foreshadowing another ground war. – M.S.
- CHINA NAMES ADMIRAL AS NEW DEFENSE MINISTER: China named Admiral Dong Jun, former Commander of the People’s Liberation Army Navy (PLAN), to replace General Li Shangfu as the Defense Minister this morning.
- Admiral Dong is the first admiral to hold the Defense Minister position in the People’s Republic of China.
- Admiral Hu Zhongming replaced Admiral Dong as Commander of the People’s Liberation Army Navy earlier this week. Admiral Hu is a career submariner.
Why It Matters: Admiral Dong’s appointment shows a greater focus on naval warfare for China. With Admiral Hu taking command of the PLAN, the Navy and submarine force will likely get far more funding and focus in the next few years. – 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.