Geostrategic Business Intelligence Trends (GeoBITs)

October 4, 2022

Russia & Europe

Economy

The U.S. announced new sanctions against Russia in response to Russia’s annexation of four regions of eastern Ukraine. These sanctions will impose penalties like visa restrictions on Russian and Belarusian military officials, Russian government and financial services officials, as well as companies that provide supplies to Russia’s military.

Technology / Cyber

Russia restricted access to music-streaming app SoundCloud due to "false information" about Russia’s war in Ukraine. Russia has already banned Facebook and Instagram based on allegations that the two platforms were carrying out “extremist activities.”

Politics

Last Friday, after sham referendums, Russia announced the formal integration of four eastern Ukrainian regions into Russia. The international community strongly condemned Moscow’s alleged integration of the four regions calling it illegal annexation. As soon as the Russian government formally annexed Lyman, which is in the Donetsk region, the Ukrainians took Lyman back. Consequently, Russia swiftly announced Lyman is no longer a part of the “voluntary” integration of Donetsk into Russia. Lyman is strategically important because it is a railway hub which the Russian forces used to resupply their troops. In search for a scapegoat for its losses in Ukraine, Russia fired the commander of its Western military district.

Military

Ukraine is continuing to win back territories previously occupied by Russia in eastern Ukraine, specifically around Lyman, Donetsk Oblast, and in northeastern Kherson Oblast, while Russia is struggling to mobilize and send more forces to the Ukrainian battlefield. Russians continue to flee from their country due to Putin’s announcement of mobilization on September 21. More than 93,000 Russians have passed the Russian border into Georgia since just before Putin signed the mobilization decree. Many more Russians are waiting in mile-long lines for up to five days to enter Georgia, which does not require visas for Russian citizens. As the Baltic states and Finland have closed their borders for Russian citizens, Russians have few neighboring counties left to which they can flee.

In addition, the mobilization process has been poorly conducted. About 300 men from Russia’s East Siberia were sent back because they were mobilized erroneously. There are accounts that recruits continue to be sent to the battlefield without training and at least six men so far have either committed suicide or have allegedly died during the mobilization process. These deaths raise suspicions that mobilization officers may be murdering individuals who refuse to go to war in Ukraine.

Society

Russia’s recent defeats in Ukraine and poor process of mobilization prompted traditionally pro-Kremlin state-sponsored media and some Russian bloggers to criticize Russia’s military failures, and especially Russia’s inability to provide proper supplies and reinforcements to Russian forces. If such criticism persists, it may suggest that traditional Putin allies are more open to criticizing his views which may lead to increased state suppression, more alleged suicides and window falls.

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China & Taiwan

Economy

Financial analysts worry that the central bank’s aid package for real estate developers is too narrowly targeted to be effective. Analysis from PRC banks, who are holding the bad debt, released reports agreeing with foreign firms’ observations. Social media accounts in China indicate that developers are pretending to return to construction to try and receive bailout funds without actually restarting construction. The aid packages that were already thought to be too small are now confirmed to also be inaccessible to the firms that need them. China’s economic slide will continue at current pace until the government intervenes further.

Technology / Cyber

Moderna, a maker of mRNA covid-19 vaccines and leader in the mRNA space, declined to transfer its technology to the PRC in return for market access. The move is a huge loss to China, who has traditionally made market access conditional upon the release of valuable trade secrets and IP (reports emerged in the summer of this year that such discussions over conditional market access were on-going). Except this time, the PRC will not receive the vaccines it so desperately needs to re-open its economy to the world. Relatedly, KSG confirms that media reports that PRC hacking teams are heavily targeting pharmaceutical firms for trial data, patient data, and drug-development related information are accurate.

Politics

All signs point to Xi staying on for a third term at the 20th Party Congress that will get underway late next week. In the last month, state media has fawned of Xi’s legacy; Xi himself took members of the highest CCP committee (Politburo Standing Committee) to a museum to give them a guided tour of his own accomplishments; and Xi has written a forward for a book series on state history that endorses Xi’s accomplishments as fitting into a long lineage of rejuvenating reformers. Western media has paid too much attention to who will replace Xi’s head of economic affairs, Li Keqiang. While speculation swirls over who will become number 2, it is worth mention that this person—a successor of the already defunct Li—will have less power than his predecessor. Xi will continue to drive economic policy.

Military

US Defense Secretary Lloyd Austin is back in touch with his PRC counterpart after communications were dropped during the military show of force around Taiwan in early August. The PRC understands that the US values these crisis control mechanism, and so is willing to cut these channels to impose costs on the US. Experience has taught the US military these lines of communication are important to avoiding accidental escalation. China’s inexperience in combat allows them to believe they are optional. The return to communication indicates that military tensions have subsided to a pre-Pelosi visit level and will remain that way until the next bout of grandstanding. — Separately, a member of Germany’s parliament leaving to visit Taiwan told German media that China has no say in Germany’s relationship with Taiwan. His comments and visit are exactly the type of behavior China hoped to deter with its early August military exercises. PRC diplomats the world over will be quietly reminding their host countries of the potential costs associated with closer ties to Taiwan.

Society

Non-Chinese banks were told to avoid publishing anything damaging to China’s image in the weeks leading up to the 20th Party Congress beginning on October 16th. Foreign firms operating in China were forced to host CCP in-house committees earlier this year, an institution that both the CCP and banks assured outsiders “would have no use, no function, no remit, and no responsibility.” Less than one year later, that’s obviously not true. While this episode only reconfirms what we know about the CCP—that its image near politically significant events is incredibly important—it begs the question whether these committees will facilitate Xi’s “crackdown on capital.” Many ideologues supported by Xi argue that uncontrolled capital is dangerous.