ARTICLE
19 September 2024

Stepwise Risk Outlook: What We're Watching Today, September 18, 2024

SJ
Steptoe LLP

Contributor

In more than 100 years of practice, Steptoe has earned an international reputation for vigorous representation of clients before governmental agencies, successful advocacy in litigation and arbitration, and creative and practical advice in structuring business transactions. Steptoe has more than 500 lawyers and professional staff across the US, Europe and Asia.
The spokesperson for the Turkish ruling Justice and Development Party (AKP) has confirmed the submission of Turkey's application for membership in BRICS, an association of emerging economies dominated by Russia and China
China Energy and Natural Resources

Global: Turkey confirms aspiration to join BRICS, implications for future EU membership

The spokesperson for the Turkish ruling Justice and Development Party (AKP) has confirmed the submission of Turkey's application for membership in BRICS, an association of emerging economies dominated by Russia and China.

Our Take: Turkey's strategic orientation under Turkish President Erdoğan is neither East nor West, but Turkish. Perceived as taken for granted by NATO members, insufficiently supported by the US vis-à-vis the civil war in Syria, and with EU ascension talks effectively suspended since 2018, Ankara has adopted policies aligned with what Erdoğan judges to best serve the immediate interests of Turkey and his continued leadership. Thus, under Erdoğan, foreign policy is transactional. Erdoğan claims not to have abandoned EU membership; however, with alignment with EU's Common Foreign and Security Policy at a low of 7%, Erdoğan's actions are a far more useful metric than statements in judging intentions. The request to join BRICS could be intended to increase Ankara's leverage in trade discussions. Membership is more apt to close trade opportunities with the EU, with upside risks for new opportunities in Central and East Asia.

Read More: Deutsche Welle, The Conversation, Wilson Center

Europe: The US imposes sanctions on Georgians over anti-democratic measures

The US government widened the circle of Georgians targeted for undermining democracy and the human rights of the Georgian people, sanctioning four individuals and imposing visa restrictions on another 60 Georgian individuals and their family members.

Our Take: The US, along with the EU, is deeply concerned about democratic backsliding in Georgia and is ratcheting up pressure on Tbilisi to walk back anti-democratic legislation, specifically the so-called foreign influence law, recommit to holding free and fair elections and demonstrate significant and measurable progress on outstanding UE accession reform recommendations to stay on the pathway towards EU and NATO membership. Despite warnings that the legislation was not conforming to EU norms, the Tbilisi government violently cracked down against peaceful protestors and pushed the law through parliament in May. The US sees the law as a Russian influence operation, designed to limit free speech. Russia has occupied 20% of Georgia's territory for 16 years, and the US believes Moscow seeks to bring the entire country under its sphere of influence. The country will hold parliamentary elections on October 26 and the outcome of the vote may be decisive on Georgia's foreign policy direction.

Read More:Reuters, US Department of State, German Marshall Fund of the United States

Middle East: Exploding pagers kill Hizballah operatives in historic attack

Eight people were killed and thousands wounded across Lebanon when pagers used by Hizballah operatives spontaneously exploded Tuesday afternoon in an unprecedented attack.

Our Take: The incident is presumed to be a covert attack by Israel, and unnamed Hizballah officials are speculating that malware may have caused the devices to explode. Iranian state media said that the Iranian ambassador to Lebanon was injured. The attack, unprecedented in scope and scale, marks a new escalation in the increasingly intense war between Israel and Hizballah on Israel's northern border, which is increasingly drawing attention away from Gaza and Hamas. This development could trigger larger-scale retaliation by Hizballah, which until recently had claimed to be holding off on full retaliation for earlier Israeli attacks while ceasefire negotiations were ongoing.

Read More: Wall Street Journal [paywall], Washington Institute for Near East Peace

Americas: Canadian prime minister loses special election that was a referendum on popularity

Canadian Prime Minister Justin Trudeau's Liberal Party lost a parliamentary seat in Montreal that it had held for decades, increasing pressure on Trudeau to resign.

Our Take: The loss is the most recent in a series of blows against the increasingly unpopular leader. In June, his party unexpectedly lost a special election in Toronto, and last week the small New Democratic Party pulled support for Trudeau's governing coalition. Trudeau has faced mounting criticism over his handling of the economy, housing, and immigration, and many critiques over his handling of allegations of foreign meddling in Canadian politics. The next general election is mandated to be held by fall of 2025 but is likely to be held this spring, and analysts predict that the Liberal Party will suffer a landslide defeat; however, there are rising calls for Trudeau to step down ahead of the election.

Read More: New York Times [paywall], The Economist [paywall]

Asia-Pacific: Former separatists contest local elections in India's Kashmir

Ten former separatist candidates are running in Jammu and Kashmir's upcoming elections, seeking to restore the region's semi-autonomy despite New Delhi's rejection.

Our Take: The upcoming election in Jammu and Kashmir marks a critical moment, as it is the first since India revoked the region's semi-autonomous status in 2019. The participation of former separatist leaders, such as Hafiz Mohammad Sikander Malik, indicates a shift toward addressing grievances through democratic means, despite ongoing tensions over Kashmiri sovereignty. If these candidates gain power, they could pressure New Delhi to reconsider the 2019 decision, but the Indian government has firmly rejected any calls to restore the region's previous status. As a result, this election could reignite both local and regional political debates, with potential implications for the stability of this contested area.

Read More: Reuters, Reuters, Crisis Group

Africa: Zimbabwe to cull 200 elephants to feed people hungry from drought

Zimbabwe on Tuesday announced plans to cull 200 elephants to feed communities experiencing acute hunger brought by the worst drought in decades.

Our Take: Zimbabwe's decision to cull 200 elephants highlights the severe challenges the country faces due to drought and food insecurity, exacerbated by El Niño and climate change. While the cull aims to address human-wildlife conflict and provide protein to struggling communities, it has sparked criticism from conservationists concerned about the precedent it sets for wildlife management. This move, following Namibia's similar decision, underscores the delicate balance African nations must strike between conservation and human survival amid worsening environmental conditions. The cull serves to impact Zimbabwe's standing in global wildlife conservation circles and could drive further debates on sustainable solutions to human-wildlife conflict.

Read More: CNN, Reuters, Brookings Institution

Trade & Compliance: Germany lobbies fellow EU members to oppose Chinese EV tariffs

The South China Morning Post reports on active efforts between Germany and China to convince EU member states to vote against electric vehicle (EV) tariffs during a vote next week.

Our Take: The ongoing efforts by Germany and China to oppose EU tariffs on Chinese EVs present fractures in the EU's unity on trade efforts. Germany's strong economic ties to China, particularly in the automotive sector, have driven its lobbying against these tariffs, reflecting concerns over Chinese retaliation and potential harm to German automakers. The lack of alignment undermines EU Commission President Ursula von der Leyen's strategy to reduce dependency on China, while simultaneously carrying the risk of straining bilateral relationships within the EU with countries that support the tariffs. If successful, this opposition may offer short-term relief to car manufacturers but could weaken the EU's leverage in future trade negotiations with China.

Read More: South China Morning Post [paywall], Euronews, Atlantic Council

Disruptive Technology: Lenovo to make AI servers in India and opens AI-focused R&D lab

China's Lenovo Group announced on Tuesday that it will begin making artificial intelligence (AI) servers at its plant in southern India and opened a new AI-focused research and development (R&D) lab in the tech hub of Bengaluru.

Our Take: Lenovo's expansion into AI server production and the opening of an R&D lab in India highlight a strategic shift amidst evolving trade dynamics between India and China. Following New Delhi's previous ban on Chinese apps due to security concerns, Lenovo's move to establish manufacturing operations in southern India signals a potential softening in economic relations, albeit through carefully structured ventures. This has potential to satisfy New Delhi's economic agenda of further opening India to attract global tech manufacturing, while China-based companies such as Lenovo adapt to attain market access.

Read More: Reuters, South China Morning Post [paywall]

Energy Transition: USG invests in low-carbon ammonia for farmers in the Corn Belt

The US government announced a conditional commitment for a loan guarantee of up to $1.559 billion to the Wabash Valley Resources, LLC, to help finance a commercial-scale waste to ammonia production facility.

Our Take: The US government is billing the project as potentially the world's first carbon-negative ammonia production facility, as it will use petroleum coke (petcoke) as feedstock while permanently storing carbon dioxide through a carbon capture and sequestration storage program. The project will supply domestically produced fertilizer for Indiana, strengthening food and supply chain security, while mitigating transactional and reputational risks of doing business with Russian companies. Additionally, farmers could benefit from upside risks of greater price stability and reduced agricultural industry emissions.

Read More: US Department of Energy, International Food Policy Research Institute

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