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May 16, 2023
Russia & Europe
European Commission officials and senior Indian ministers will meet this week for their first-ever EU-India Trade and Technology Council (TTC). The forthcoming EU Carbon Border Adjustment Mechanism—an import tax scheme which will enter into force in 2026—is expected to be a major point of discussion.
New Delhi views the carbon tax, which would equal that levied on its European rivals, as an unfair trading practice. Brussels, meanwhile, widely views it as a non-negotiable aspect of EU’s push for climate action and sustainability. The dispute threatens to overshadow related initiatives on which the two countries seek consensus in separate trade negotiations.
Brussels is meanwhile hoping the TTC will bring India onboard a growing Western consensus on standards around everything from artificial intelligence to telecommunications and quantum computing—particularly as China threatens to advance its own.
Technology / Cyber
The European Commission Global Gateway Initiative last week unveiled a proposal for a subsea communications cable across 684 miles of international waters through the Black Sea, linking Caucasus nations of Georgia, Armenia, and Azerbaijan to the European Union.
According to the European Commission, “the new cable will be essential to accelerate the digital transformation of the region and increase its resilience by reducing its dependency on terrestrial fiber-optic connectivity transiting via Russia.”
The project, which is estimated to cost roughly $50 million, would be partially underwritten by investment grants from the European Investment Bank. The general route and landing locations have already been scouted, but feasibility and geotechnical surveys remain to be completed.
The Turkish presidential elections will head to a runoff vote on 28 May, the Supreme Electoral Board confirmed yesterday, as neither incumbent Recep Tayyip Erdogan or opposition candidate Kemal Kilicdaroglu reached the 50% of preliminary votes needed to secure a victory. With 99.4% of the domestic votes and 84% of the overseas votes counted, Erdogan stood at 49.4% and Kilicdaroglu at 45%.
Both camps expressed confidence heading into the second round, while Erdogan appears favored. He secured a sweeping win of parliamentary votes in a surprise loss for the six-party opposition coalition headed by Kilicdaroglu, which was widely expected to clinch a majority.
The Turkish lira fell to a two-month low early Monday, as investors expressed disappointment that the Erdogan era of economic instability was not conclusively repudiated by voters.
Russia sustained some of its heaviest single-day air losses since the start of its war on Ukraine, last Saturday. Three helicopters and two fighter jets were shot down—almost simultaneously—according to the Ukrainian Defense Ministry, which appeared to deny any involvement. As of early this week, it remains unclear whether the losses were the result of Ukrainian targeting or erroneous Russian friendly fire.
Russian news outlet Kommersant acknowledged that a Su-34 and a Su-35 fighter jet, and at least two Mi-8 helicopters, were downed in the border region of Bryansk. The aircraft were part of the same mission to strike targets in the Chernihiv region of Ukraine.
Russian military bloggers meanwhile assessed that Ukrainian forces may have advanced their air defense capabilities deeper into Russian territory than previously assessed, and potentially gained robust intelligence on the route and timing of the strike operation.
The small Eastern European country of Moldova will withdraw from the Commonwealth of Independent States (CIS), the Moscow-led intergovernmental grouping of states that formed amid the collapse of the Soviet Union. The move follows the exit of Ukraine and Georgia in recent years, and will leave Russia, Belarus, Armenia, Azerbaijan, and the former Soviet republics in Central Asia as participants.
Moldovan parliamentary head Igor Grosu announced the withdrawal last week, in consultation with President Maia Sandu. "After 30 years, it became clear that the presence of the Republic of Moldova in the structures of the CIS did not help us to remove the Russian army from the territory of the Republic of Moldova, to resolve the Transnistrian conflict. Being in the CIS did not protect us from blackmail in the middle of winter.”
Foreign Minister Nicu Popescu had announced in January—the same month that the country achieved EU candidate status—that Chisinau was in the process of reviewing which of the various CIS arrangements “work for the country and which ones do not.”
The pro-Western government under Sandu has struggled to maintain political and economic stability amid a frozen conflict with the breakaway republic of Transnistria—home to a Russian military peacekeeping contingent—and the pro-Russian region of Gagauzia.
The PBoC released an optimistic statement about growth in Q2 that contrasts with The Economist’s briefing from last week’s edition.
China’s central bank thinks consumer demand inter alia puts the PRC in the position to hit its annual and long term growth goals (around 5% for this year).
The Economist argued last week that systemic issues within the economy will make long-term sustained growth difficult to achieve.
Short-term data on consumer spending is up (18% YoY compared to last month’s 10%) but a longer time horizon of evaluation—2019 holiday spending vs 2023—shows consumer spending still down by more than 10%.
Technology / Cyber
The Hong Kong branch of China Daily, one of the few central government mouthpieces for the Party, was apparently hit by the Lockbit cybercriminal gang.
The Lockbit group is threatening to release documents from the media outlet’s computer networks on May 22 if their ransom goes unpaid.
This is the first public ransom of Chinese state media, though likely not the first. China’s state media outlets have not commented on the claims by Lockbit, nor are they likely to do so.
If it’s acknowledged at all, China will use the incident to reinforce its position that other nations have done too little to secure cyberspace. China will continue to promote its view of a “Shared Future for Humanity in Cyberspace,” which includes facilitating surveillance and censorship as a norm of government regulation over the internet.
A Party document suggests that local officials will begin inspecting Party cells that have been established within private businesses.
A Question & Answer page posted by the CCP’s Discipline Inspection arm, the group responsible for internal Party rule-following and punishments, hosted the content online. A full 5-year plan has not yet been released by the office, but is expected within months and is the subject of this Q&A page.
The document states that local officials will be “inspecting party cells, wherever they have been established.” The language is one of four things the Party expects local officials to do to effectively implement the forthcoming 5-year plan.
Given the recent trajectory of Party behavior in the private sector and Xi’s interest in a crackdown on private sector influence in politics, it is reasonable to conclude that the Party will exercise its influence over its own members, wherever they might be.
When HSBC acknowledge that employees established a Party cell within the company in 2022 to the Financial Times, they said “It is important to note that management has no role in establishing such groups, they do not influence the direction of the business, and have no formal role in the day to day activities of the business.” — Time will tell if they continue to lack influence within the business.
John Shing-Wan Leung was sentenced to life in prison in the PRC this week.
John was a US citizen and Hong Kong resident active in the Overseas Chinese Friendship Association and related diaspora organizations run by the United Front Work Department.
Neither the US nor the PRC has commented on the case, indicating the charges for spying are probably accurate.
As with most espionage cases that come to light, there is probably a significant confluence of events that led to this sentence. We don’t care to speculate about those events, but a good rule of thumb is that “it takes a spy to catch a spy.”
The US has committed $500M in military spending on kit for Taiwan.
The sum is arranged in such a way to facilitate prompt delivery to soothe GOP concerns over Biden’s Taiwan policy in light of the Russian invasion of Ukraine.
Separately, the Senate advanced a bill to upgrade the US-Taiwan military relationship with an additional $6.5B in military spending for Taiwan.
An abnormal number of US submarines are known to be operating in the Pacific Ocean to the West of Guam. It’s unclear why their presence has increased, or is even being discussed by US military media, such as Task and Purpose.
Our best bet is there is a planned North Korean missile test that the US is responding to with its distribution of forces. We may only learn what’s going on after it happens.
A blogpost complaining of wage stagnation among young Chinese went viral before being censored. The young man complained that his monthly wages are the same as his dad’s first job 3 decades prior, just 2,000RMB per month.
Persistent youth unemployment is keeping the Party on edge, as young unemployed people are the most politically unstable bunch.
Efforts to push youth into rural places are underway, but the long-term prospects for their careers are careening downwards right now.