What We're Watching Today, October 23, 2024

What We're Watching Today is 1,434 words and a 9-minute read.

Global: NATO General Secretary called possible deployment of North Korean troops to fight with Russia in Ukraine a "significant escalation."

South Korea has called on Russia to stop North Korean troops from deploying to fight with Russian troops in Ukraine, and South Korean President Yoon Suk Yeol discussed Seoul's concerns with NATO General Secretary Rutte. After the call, Rutte issued a short statement, flagging NATO's concerns over possible escalation of the conflict.

Our Take: North Korea has supplied Russia with military equipment, shoring up Moscow's supply lines. Deploying North Korean troops as part of Russian forces attacking Ukraine would be another key indicator of escalation of the war beyond Europe, triggering commentary that the conflict could be slow walking into a world war. Currently, Western leaders are downplaying the development, saying North Korean personnel are likely supervising the use of North Korean weapons, i.e., a type of military advisor, and are still investigating. Beyond the impact in Ukraine and on European security, the growing military relationship between Russia and North Korea risks increasing tension on the Korean peninsula, as Pyongyang is reportedly seeking advanced weaponry that could be used against South Korea, triggering a US response in accordance with the Mutual Defense Treaty it has with Seoul.

Europe: Russian President Putin is hosting the expanded BRICS group

In the largest international gathering hosted by Russia since the beginning of the Ukraine war, President Putin is presiding at the expanded BRICS summit, in the Russian city of Kazan.

Our Take: Putin will be hosting 22 leaders, including Chinese President Xi Jinping and Indian Prime Minister Narendra Modi, whose countries are top trading partners of Russia. Putin is seeking to demonstrate that Russia is not isolated. Modi is expected to press Putin to engage in peace negotiations. BRICS member states and hopeful new members are seeking ways to expand their economic and strategic options, gaining more influence in world affairs, balancing against western dominance. However, few want to be forced into an exclusive relationship that would jeopardize their trade or bilateral relationships with G7 nations.

Read More: Reuters, Deutsche Welle, Brookings Institution

Middle East: US pushes for Israel-Hamas ceasefire

US Secretary of State Antony Blinken visited Israeli Prime Minister Netanyahu in Jerusalem to make another attempt to secure a diplomatic resolution to the now deeply entrenched conflict between Hamas and Israel. Blinken is expected to reiterate warnings that the US could withdraw or reduce military support to Israel if it does not improve humanitarian aid access in Gaza.

Our Take: The visit is likely to be a fruitless attempt to forestall greater escalation as Israel battles opponents in Gaza, southern Lebanon, and soon, potentially Iran (as it weighs its anticipated retaliatory strike on Iranian military infrastructure). Prior ceasefire negotiations fell apart over a month ago, with the parties fundamentally misaligned on basic ceasefire stipulations, such as the occupation of the Philadelphi Corridor, the permanence of a truce, and screening of returning Palestinians. If anything, Israel likely now feels in a stronger position to potentially end the conflict with Hamas militarily (or at least continue to improve its position), given the successful strike on leader Yahya Sinwar. The Biden administration, on the other hand, is eager to score some kind of diplomatic win in the region ahead of the November election, and to ease what is becoming a horrific humanitarian crisis inside Gaza. The threat of withdrawing US support is consequential, and a testament to the historic low to which US-Israeli ties have sunk, but unlikely to deter Israel, which sees a unique opportunity to change the regional status quo.

Read More: Washington Post [paywall], CNN, Vox

Americas: Mexico exploring tax credits to attract foreign business

Mexico's new government is considering tax credits to lure foreign firms to invest in the country's domestic economy, especially in the EV, semiconductor, rare earth mineral, battery and electronics sectors.

Our Take: Mexico is seeking to take advantage of a push by the US to "friend-shore" its supply chains, replacing imports from some Asian companies, as well as push back on arguments that the country is becoming less friendly to foreign businesses – especially following the implementation of a law that makes all federal judges, including the Supreme Court, popularly elected. Mexico is reportedly still considering investment by Chinese companies, which could spark concern from the US and be a roadblock in what was largely seen as Mexico's drift towards the US trade camp amid growing economic rivalry with China.

Read More: Reuters, Wall Street Journal [paywall], CNBC

Asia-Pacific: Son of Singapore's founder says he was granted asylum in the UK

Lee Hsien Yang, son of Singapore's founding father Lee Kuan Yew and younger brother of long-serving Prime Minister Lee Hsien Loong, announced Tuesday that he received political asylum in the UK, accusing Singapore of persecuting him during Lee Hsien Loong's tenure.

Our Take: Britain approved Lee's asylum claim in August, allowing him to stay for at least five years due to his fear of persecution, as stated in a letter from Britain's Home Office. The Singaporean government has strongly denied his claims. Fractures within Singapore's first family have emerged since Lee Kuan Yew's passing in 2015, shown by Lee Hsien Yang and his sister Lee Wei Ling (who died this month) having publicly accused their older brother of abusing his position as prime minister for personal gain in a dispute over their father's will. While the family spat is not likely to substantively impact Singapore's international standing, it may risk undermining the Lee family brand, potentially putting pressure on the long-ruling People's Action Party, which has been struggling to maintain the same levels of domestic support it once enjoyed.

Read More: New York Times [paywall], Reuters, Lowy Institute

Trade & Compliance: US appeals court rules authorities can prosecute Turkish bank in Iran sanctions case

A US appeals court on Tuesday stated that the federal government is allowed to prosecute Turkey's state-owned Halkbank on charges that it helped Iran to evade US sanctions. The court rejected the lender's argument that it deserved immunity.

Our Take: Circuit Judge Joseph Bianco deferred to the executive branch's decision to prosecute Halkbank, stating the judiciary should not second-guess the decision to prosecute foreign state-owned companies rather than impose tariffs or deny military aid to their state sponsors. The ruling aligns with an April 2023 US Supreme Court decision rejecting Halkbank's defense against 2019 charges for allegedly helping Iran transfer $20 billion in restricted funds. While the case has strained US-Turkey relations, with President Erdoğan calling the charges an "unlawful" and "ugly" step, Washington's decision to penalize Halkbank, rather than directly targeting Turkey, reflects careful considerations between disapproving of Turkey's lack of sanction policy alignment while still maintaining the country as a regional balancing actor against Iran.

Read More: Reuters, New York Times [paywall], Atlantic Council

Disruptive Technology: Upbeat cloud business outlook drives all-time high in SAP shares

The German software company saw its shares up 5% when markets opened on Tuesday, hitting an all-time high of 221 euros ($239.21) after it raised its full-year targets on a robust cloud business in the third quarter.

Our Take: Cloud revenue grew 27%, adjusted for currency effects, in the third quarter, with artificial intelligence a key driver, as 30% of the company's cloud contracts included AI use scenarios. While share prices fluctuate, SAP's recent surge highlights a medium-term optimistic outlook trend on the growth of the cloud business. Technology research firm Gartner in May forecasted worldwide cloud-end user spending to surpass $675 billion in 2024, having previously predicted that cloud services will become a business necessity by 2028. Driven by AI advancements and application modernization, cloud services increasingly appear set to become a reality which businesses across all sectors will increasing need to operate or engage with in the coming years.

Read More: Reuters, Gartner, Gartner

Climate Change: Ongoing global coral bleaching event now largest on record

NOAA scientists declared that the ongoing fourth global coral bleaching event marks the largest on record, with no end in sight.

Our Take: Coral reefs are a barometer of the health of the world's oceans, as they are nurseries for fish and sustain diverse coastal marine life. Bleaching occurs with water temperature rises, stressing the health of coral reefs. According to NOAA, about 77% of the world's coral reef area has experience bleaching due to heat stress in this current event, which started on January 1, 2023, exceeding previous record setting in 2014-2017, when 65.7% of the world's reef experienced bleaching.

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