What We're Watching Today is 1,557 words and a 10-minute read.
Global: NATO plans annual nuclear drill amid heightened tensions with Russia
Secretary General Mark Rutte announced that NATO will begin its annual nuclear exercise on Monday. The Steadfast Noon exercise, hosted by Belgium and the Netherlands, will simulate missions in which warplanes carry U.S. nuclear warheads, protecting the UK, North Sea, Belgium and the Netherlands.
Our Take: Last month, Russia updated its nuclear doctrine to include an option of a nuclear response to an attack by conventional missiles supported by a nuclear power if determined to be a "joint attack." The nuclear saber-rattling seeks to deter the US and NATO member states from expanding rules of engagement, permitting Ukraine to use western provided missiles against Russian military targets deep inside Russian territory. The updated doctrine also places Belarus under the Russian nuclear umbrella, a strategic assertion on the Russian sphere of influence.
Read More: Reuters, Center for Strategic and International Studies
Europe: Far-right Freedom Party (FPO) skipped over in mandate to form new Austrian government
After other political parties refused to sit in a coalition with far-right Freedom Party and its leader Herbert Kickl, winner of the general election, Austria's president called on the next two largest parties to reach a coalition agreement.
Our Take: While the FPO won the most votes, it does not have a majority and would need a coalition partner to lead the government. Only the center-right People's Party (OVP) has left the door open to an alliance with the FPO, but under the condition that its leader Kickl is not part of the government. OVP has previously been in government with the FPO, but with the far-right party as the junior partner. OVP's other option is to form a three-party coalition with the Social Democrats and possibly The New Austrian and Liberal Forum, which would be fragile given policy differences. The OVP has more policy overlap with the FPO. Should there be an agreement between the OVP and FPO, Austria will move further to the right, empowering Eurosceptics calling for lifting of sanctions against Russia and ending military aid to Ukraine.
Middle East: Israeli cabinet to vote on Iran response
Israel's cabinet reportedly met last night to vote on retaliation plans for Iran's October 1 missile attack, according to an Israeli official. The US and Israel discussed the expected retaliation in Biden and Netanyahu's first call in months on Wednesday, as the US reportedly remains frustrated that Israel is not cooperating or sharing information on the attack.
Our Take: Israel is reportedly considering attacks on Iran's oil facilities or nuclear infrastructure. President Biden has indicated that the US could help with the former plan, although attacks could likely cause short-term energy market volatility that could impact the November elections (in the medium term, excess Saudi and Emirati supply would likely stabilize the market). On the other hand, Washington has urged Israel not to hit Iranian nuclear sites, an option that would be highly escalatory and potentially dangerous. However, it is not clear that Israel has the capabilities to attack the underground sites, which require heavy bombs to reach.
Read More: Washington Post [paywall], New York Times [paywall], Wall Street Journal [paywall]
Americas: Mexico signals alignment with US on China trade
Mexican Economic Secretary Ebrard suggested that Mexico will actively take the US' side in its escalating trade battle with China, decisively choosing a side after years of hedging.
Our Take: Mexico has been a contested site for the US and China as both countries seek to establish trade dominance over the other. The US has pushed for years for Mexico to take a stronger stance supporting the US' trade measures to curb Beijing, while Mexico for years has taken a laxer approach, not implementing inbound investment screening and maintaining significantly lower tariffs. In particular, the US has recently taken issue with China using Mexico as a way-station to avoid tariffs and take advantage of USMCA credits. Now, however, Mexico is signaling that it is interested in pursuing more nearshoring and aligning more closely with US trade policies – a significant win for the US if it comes to fruition.
Read More: Associated Press, Brookings Institution, VoxDev
Asia-Pacific: Ratan Tata, former chairman of Tata Group, dies at age 86
Ratan Tata, the Indian tycoon who led the country's prominent conglomerate Tata Group, passed away on Wednesday at the age of 86.
Our Take: Ratan Tata's passing marks the end of an era for both Indian and global businesses. His leadership expanded Tata Group's global footprint, while his emphasis on integrity and long-term growth set standards for corporate governance in India. Though he stepped down as chairman in 2012 (he was briefly interim chairman between 2016 and 2017), Tata remained a pivotal leader for the conglomerate. As Tata Group navigates a future without him, businesses with ties to the conglomerate may face transitional uncertainties, but Tata's legacy of innovation and ethical leadership is likely to sustain the firm's strategic direction.
Read More: BBC, Firstpost, Tata Group
Africa: Leader of Sudan's RSF accuses Egypt of involvement in strikes on its troops
The leader of the Sudanese paramilitary Rapid Support Forces (RSF) Mohamed Hamdan Dagalo, also known as Hemetti, on Wednesday accused Egypt of being involved in air strikes on its ground forces, which Cairo has rejected.
Our Take: Hemetti's accusations against Egypt risk intensifying regional instability, deepening Sudan's internal conflict and straining relations between Cairo and Khartoum. His claims come as the RSD suffers military setbacks, with accusations of external interference, including from Egypt, Iran, and other foreign actors. Given that Egypt is playing a crucial role in regional mediation efforts, Hemetti's recent statements could complicate the peace negotiation process and increase the risk of foreign involvement in Sudan's civil war.
Read More: Reuters, Sudan Tribune, The Washington Institute
Trade & Compliance: UK launches new trade unit to reinforce sanction regime on Russia
The United Kingdom on Thursday introduced a trade sanctions unit containing new powers to inflict penalties on companies failing to comply with bans on the export of services to Russia.
Our Take: The UK's establishment of a new trade sanctions unit, the Office of Trade Sanctions Implementation (OTSI) to enhance enforcement on its Russian sanction regime reflects a growing alignment with the US's use of extraterritorial sanctions to counter Moscow's evasion efforts, in line with recent European Union efforts as well. This move is part of broader efforts to strengthen economic pressure on Russia following its invasion of Ukraine, with the OTSI empowered to impose fines and publicize violations, as well as having jurisdiction over UK nationals violating sanctions in third countries. By tightening enforcement and expanding accountability measures, the UK is signaling a more aggressive stance in ensuring compliance, potentially increasing risks for businesses involved in international trade with Russian entities.
Read More: Reuters, Foreign Policy [paywall]
Disruptive Technology: Nobel Prize in chemistry awarded to three scientists who used AI to contribute to protein folding
Three scientists, David Baker, a biochemist at the University of Washington, and Demis Hassabis and John Jumper, computers scientists at Google DeepMind, on Wednesday were awarded the Nobel Prize in chemistry for using artificial intelligence to design and decode novel proteins, a breakthrough which stands to potentially revolutionize medicine and materials science.
Our Take: AlphaFold, an AI model developed by Hassabis and Jumper, revolutionized protein research by predicting the structure of nearly every known protein with high accuracy, significantly expediting a task that previously took years of experimental research. Baker's work on computational protein design, which also utilized AI advances, further demonstrated the potential for creating new proteins that could solve real-world challenges. Together, these breakthroughs signify AI's growing role in accelerating scientific discovery and reshaping fields such as biotechnology and drug development.
Read More: Associated Press, Nature
Energy Transition: UK government offers a guaranteed minimum income to spur investment in long duration energy storage projects
Britain will offer developers of renewable energy storage projects, such as pumped hydro, a guaranteed minimum income to create investment incentives in technologies that help the country transition to renewable energy.
Our Take: The UK program is designed to share risks with investors as the government pushes forward plans to decarbonize the power sector by 2030. The UK has four pumped-storage power stations, but none built in the last 40 years. London seeks to jumpstart new investment through a cap-and-floor scheme on revenue for energy storage contracts, guaranteeing a minimum income in return for a limit on revenues. A similar cap-and-floor scheme is in place for electricity interconnectors between the UK and European neighbors. So far, no floor payments have been made to developers in that program.
Read More: Reuters, S&P Global
ESG: Greenwashing claims on the decline
A new study by RepRisk found that cases of companies participating in "greenwashing" claims have fallen for the first time since 2019.
Our Take: The study considers possible cases of greenwashing in open-source media, not formal accusations or investigations. Still, the reduction in potentially erroneous eco claims may indicate that companies are increasingly wary of accusations of greenwashing, and are making more realistic promises. Still, the study found that cases of "high-severity" greenwashing claims rose, and that greenwashing claims were inconsistent across regions – the EU led the charge, likely due to an increase in anti-greenwashing regulations that impose real costs for false claims.
Read More: ESG News, European Parliament
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