Global Developments and Analysis: Weekly Monitor, 27 June - 03 July 2022

Economic

Our Recession Forecasting Model Is Broken- WSJ

Of course the U.S. could slip into a recession. But with the economy nowhere close to anyone’s idea of normal, thinking a downturn is coming on the basis of what some model or rule of thumb says could be a mistake. The same goes for putting too much credence in indicators that say the risk of a recession is still very low. The pandemic brought about major distortions to the economy and, though worries about Covid-19 have been waning, many of those distortions remain. There are still fewer jobs in the U.S. than before the pandemic struck, but because many people still haven’t returned to the workforce, the unemployment rate is near its lowest level in more than 50 years. Reduced spending and government relief allowed households to accumulate savings like never before. Federal Reserve figures show that holdings of cash and cash equivalents were 30% higher in the first quarter than two years ago. Recent stock market performance has gotten people talking about a possible U.S. recession, but thinking a downturn is coming based on a pre-pandemic model may be a mistake. Spending patterns remain out of whack too. There are also a number of recession indicators that aren’t flashing red. For example, the yield curve—the difference between short- and long-term interest rates—is still positive, with 10-year Treasury yields 1.225 percentage points higher than rates on three-month bills. Click here to read... [2]

China Is Updating Its Formula for Building Itself Out of a Slump

In the past when China faced economic challenges, it built and built. Now chock-a-block with skyscrapers, dams, roads and airports, the country is pivoting to new types of infrastructure in response to fresh economic turbulence. Instead of rallying construction workers in hard hats, the government has produced blueprints to link databases, coordinate traffic flows and inhabit space. China is broadening the concept of infrastructure beyond dusty construction—primarily because it has already done so much of that kind of building. A trusty salve, infrastructure was the main facet of $585 billion in government stimulus that China unveiled in response to the global financial system’s tailspin in 2008. China’s needs are different now, as it faces some of the deepest economic challenges of its modern era. Weak real-estate conditions and its own strictures to combat the Covid pandemic have cast doubt on whether the government will achieve its goals for employment and 5.5% growth this year—already the lowest target in more than a quarter-century. When central government authorities in May unveiled a 33-point program “to stabilize economic performance,” just one section covered infrastructure. “China’s infrastructure development is at a turning point,” said a paper this year co-written by an adviser to China’s central government, Zhi Liu. Click here to read... [3]

China Railway's debt nears $900bn under expansion push

China State Railway Group is doubling down on its expansion of what is already the world's largest high-speed rail network, as the government ramps up efforts to bring the Chinese economy back on track. But the aggressive campaign has added to the state-run operator's total liabilities, which as of the end of 2021 reached 5.91 trillion yuan ($882 billion), or around 5% of China's gross domestic product. With the figure only expected to grow, concerns over China's "hidden debt" loom over its economic outlook. China Railway introduced a state-of-the-art express train to a section of its Beijing-Guangzhou High Speed Railway on June 20. With an operating speed of 350 kph -- 40 kph faster than its predecessors -- the train also outruns Japan's fastest Hayabusa and Komachi shinkansen bullet trains. China's high-speed rail network, which exceeds 40,000 km and is more than 10 times the size of Japan's, grew by another 2,168 km in 2021. The network's expansion shows little sign of slowing. China Railway plans to reach 50,000 km in 2025 and 70,000 km in 2035 -- a roughly 70% jump from 2021. This rapid growth comes as regional governments compete to attract new projects, in hopes of creating jobs and fostering related businesses. Many of China Railway's top leaders, including Chairman Lu Dongfu, are former transportation bureaucrats, and the company essentially functions like part of the government. Click here to read... [4]

China’s move banks on greater use of yuan

The yuan’s internationalisation has been an arduous and gradual process. China has taken another cautious yet significant step in anchoring its currency in the global financial system. Seen by some as another attempt at so-called de-dollarisation to counter the United States’ global monetary dominance, it is actually, perhaps even more significantly, a natural evolution of the yuan’s status as the currency of the world’s second largest economy and top trading nation. The latest scheme means China will provide a renminbi liquidity arrangement at the Bank for International Settlements, often referred to as the central bank of central banks. To create a reserve pool at the bank, China will contribute a minimum of 15 billion yuan (HK$17.6 billion). Other participating central banks will deposit the same amount in yuan or its equivalent in US dollars. The goal is to help protect participating economies against market stresses and to safeguard financial stability. They cannot only draw down on their contributions, but also gain access to additional funding, if necessary, through the reserve pooling. So far, the pool will concern mostly those in Asia and the Pacific, as the initial participating central banks will be those of Indonesia, Malaysia, Singapore, Hong Kong and Chile. The list is expected to expand. Click here to read... [5]

EU Targets Foreign Subsidies, Aiming at China but Worrying U.S. Companies

European Union lawmakers struck a political agreement on new rules for companies that reap financial benefits from governments outside the bloc, pushing forward a proposal that sparked concern from some U.S. business groups. The regulation, under a deal reached late June 30, primarily targets companies from China and elsewhere with government backing. It would allow the European Commission, the EU’s executive body, to block such businesses from making certain acquisitions or winning large public contracts if they previously benefited from foreign subsidies that regulators deem to be distortive. Lawmakers have said the rules are needed to prevent heavily subsidized companies from competing unfairly against their European rivals. But some U.S. business groups said the original proposal, put forward last year, was broad enough that a range of U.S. and other multinational companies could be affected because of how the text defined subsidies. The legislation as drafted “catches a lot of other things in the net,” Garrett Workman, senior director of European affairs at the U.S. Chamber of Commerce, said in an interview before the deal was reached. “It’s actually quite challenging for basically any foreign company that’s investing or doing business or even selling things into the EU.” Click here to read... [6]

US overtakes Russia in gas exports to EU

For the first time, the EU has purchased more liquified natural gas (LNG) from the US than natural gas via pipeline from Russia, International Energy Agency (IEA) Executive Director Fatih Birol tweeted on June 30, adding that the proportion changed due to the latest reduction in Russian supplies. “Russia’s recent steep cuts in natural gas flows to the EU mean this is the first month in history in which the EU has imported more gas via LNG from the US than via pipeline from Russia,” Birol wrote. “The drop in Russian supply calls for efforts to reduce EU demand to prepare for a tough winter,” he added. The surge in imports of American LNG comes amid the European Union’s attempt to cut reliance on Russian energy, which makes it difficult for the bloc to ratchet up Ukraine-related sanctions. In June supplies of Russian gas via the Nord Stream pipeline were slashed by 60% due to technical issues stemming from Western penalties against Moscow. Russia’s Gazprom said that German equipment supplier Siemens Energy had failed to return gas-pumping units to a compressor station on time, as the repaired turbines were stuck at a maintenance facility in Canada due to Ottawa’s sanctions on Russia. Click here to read... [7]

U.S. accuses 5 firms in China of supporting Russia's military

The Biden administration said on June 28 it has added 36 companies to a trade blacklist, accusing five firms in China of supporting Russia's military and defense industrial base following Moscow's invasion of Ukraine. Targets also include companies from Russia, the United Arab Emirates, Lithuania, Pakistan, Singapore, the U.K., Uzbekistan and Vietnam, according to the Federal Register entry. "Today's action sends a powerful message to entities and individuals across the globe that if they seek to support Russia, the United States will cut them off as well," Alan Estevez, the U.S. undersecretary of commerce for industry and security, said in a statement following the listing. The United States has joined with allies to punish Russian President Vladimir Putin for his Feb. 24 invasion of Ukraine by sanctioning a raft of Russian companies and oligarchs and adding others to a trade blacklist. Moscow has called it a special military operation. While U.S. officials had previously affirmed that China was generally complying with the restrictions, the U.S. government has vowed to closely monitor compliance and rigorously enforce the regulations. "We will not hesitate to act, regardless of where a party is located, if they are violating U.S. law," Thea Rozman Kendler, assistant secretary of commerce for export administration, said in the same statement. Click here to read... [8]

EU to end combustion engine vehicle sales

The European Union approved a plan to end the sale of vehicles with combustion engines by 2035 in Europe, the 27-member bloc announced early June 29, in a bid to reduce carbon dioxide emissions to zero. The measure, first proposed in July 2021, will mean a de facto halt to sales of petrol and diesel cars as well as light commercial vehicles and a complete shift to electric engines in the European Union from 2035. The plan is intended to help achieve the continent's climate objectives, in particular, carbon neutrality by 2050. At the request of countries including Germany and Italy, the EU-27 also agreed to consider a future green light for the use of alternative technologies such as synthetic fuels or plug-in hybrids. While approval would be tied to achieving the complete elimination of greenhouse gas emissions, the technologies have been contested by environmental NGOs. Environment ministers meeting in Luxembourg also approved a five-year extension of the exemption from carbon dioxide obligations granted to so-called "niche" manufacturers, or those producing fewer than 10,000 vehicles per year, until the end of 2035. The clause, sometimes referred to as the "Ferrari amendment," will benefit luxury brands in particular. These measures must now be negotiated with members of the European ParliamentClick here to read... [9]

Germany posts first trade deficit in 30 years

Declining exports along with a surging cost of imports caused a €1 billion ($1.04 billion) trade imbalance in Germany in May, data revealed on July 04 by the Federal Statistical Office (Destatis) shows. The first trade deficit in more than three decades came as German businesses faced soaring costs for imports and softer demand abroad for their goods amid gloomy economic prospects. In May, cross-border sales saw a 0.5% decline, while imports rose 2.7%. Year-on-year, German exports and imports rose by 11.7% and 27.8% to €125.8 billion and €126.7 billion, respectively. Destatis data showed the country’s exports to Russia surged 29.4% to €1 billion in May compared to April but declined by a hefty 54.6% versus May 2021. Germany’s imports from Russia dropped 9.8% month-on-month in May. International supply chains have been substantially undermined by China’s latest Covid-related lockdowns, sanctions against Russia and the conflict in Ukraine. This has entailed significant fallout for Germany’s export-reliant economy. The cost of imports, including food, energy, and spare parts used by the country’s manufacturers, surged over 30% in May versus a year ago, while the prices German exporters were able to charge increased at only about half that rate. Click here to read... [10]

Venture Capital Feels the Stock Market’s Pain

The rout in the stock market has cast a shadow over the private-equity market, with valuations tumbling for many companies and some delaying plans to go public. “Fears over the falling stock market, inflation and a potential U.S. recession have spilled over to the venture-capital industry, and multiples on mid- and late-stage valuations are rapidly compressing,” says Asheem Chandna, a partner at Greylock Partners. Valuations aren’t down across the board. But venture capitalists say the situation is worsening for many companies as investors become more selective. “There is a flight to quality among investors,” says Andy Areitio, general partner at TheVentureCity, a global startup fund. Mr. Chandna says companies’ business plans are getting more scrutiny and investors are looking for more evidence of financial health. “They are not solely valuing companies on revenue-growth projections; they are looking harder at a venture’s free cash flow,” he says. Deal-making has slowed overall. U.S. venture-capital funds invested about $47.5 billion in 2,251 deals during the second quarter through June 15, versus about $70 billion in 3,369 deals in the first quarter, according to CB Insights. Click here to read... [11]

As US-China talks resume, an end to years of trade tariffs may not signal a soft landing in rivalry

July 05’s long-awaited meeting between top economic officials from China and the United States appeared to be a step toward a widely anticipated rollback of punitive tariffs on some Chinese products, four years after being put into place. However, some analysts surmise that any such move by Washington would be aimed squarely at tackling decades-high inflation in the US, and that changes to the Trump-era tariffs would not alter the course of the two sides’ bilateral technology war and rivalry. In their first call since October, Chinese Vice-Premier Liu He was said to have had a “pragmatic and frank” exchange with US Treasury Secretary Janet Yellen on economic and tariff issues, as well as the importance of stabilising the global industrial and supply chains, according to the official Xinhua News Agency. “The exchanges were constructive,” the party mouthpiece said, adding that both sides believed that the global economy “is facing severe challenges, and it is of great significance to strengthen the communication and coordination of China-US macro policies”. However, Chen Fengying, a senior researcher with the China Institutes of Contemporary International Relations, said after the talks that the tariffs have little impact on Chinese exports, which have seen extraordinary rises during the pandemic, and that Beijing will not make concessions. Click here to read... [12]

China to give subsidies to domestic oil refining companies to cut costs for real economy

China will give phased price subsidies to domestic oil refining companies in a bid to safeguard stable supplies of processed oil and reduce the operating costs in the real economy, according to a statement published by the Ministry of Finance (MOF) on June 29. The subsidies will be issued when international crude prices surge above the upper limit of China's processed oil price stipulated by the government, which stands at $130 per barrel, the statement noted. With the subsidies, the price of processed oil won't increase at the market end. China's oil price has repeatedly increased this year against the background of surging global energy prices amid the Russia-Ukraine conflict. On June 14, China's processed oil price rose for the 10th time this year, with the price of gasoline rising 390 yuan ($58.2) for each ton. According to the MOF statement, the policy's duration time is temporarily set at two months. If international crude prices continue to remain higher than the upper limit of China's stipulated processed oil price, China will arrange relevant regulatory policies in response. The subsidies will be calculated every 10 working days, and the subsidy amount will be based on companies' actual sales volume of gasoline and diesel oil. Click here to read... [13]

Russia’s control of Sakhalin project could pose upside risk to LNG prices

Russia announced a decree that seizes full control of the Sakhalin-2 gas and oil project in the country’s Far East, a move that could force out Shell and Japanese investors and adds another bullish factor to prices in a tight global LNG market. The order, signed June 30, creates a new firm to take over all rights and obligations of Sakhalin Energy Investment Co, in which Shell and two Japanese trading companies Mitsui and Mitsubishi hold just under 50 percent. In Tokyo, Prime Minister Fumio Kishida said Russia’s decision would not immediately stop LNG imports from the development. The same message was echoed by the Kremlin that Russia sees no grounds for LNG supplies to stop. The immediate impact was yet to be seen in the global LNG market, already tightening further due to reduction of Russian supplies to Europe, curtailed U.S. supply due to a key plant outage and rising demand in Asia. However, the move poses an upward price risk, especially for Japanese buyers. The average LNG price for August delivery into Northeast Asia was estimated by Reuters at $39 per million British thermal units (mmBtu), up $2, or 5.4 percent, from the previous week. LNG prices have recently jumped some 60 percent and could exceed $40 per million British thermal units (mmBtu) soon. Click here to read... [14]

Shell buys stake in Qatari gas field expansion project

Oil and gas company Shell has joined QatarEnergy’s $29bn project to expand production at the world’s biggest natural gas field, becoming the fifth and final international partner. The United Kingdom-based company took a 6.25 percent stake for an undisclosed sum, joining TotalEnergies, Eni, ConocoPhillips and ExxonMobil in the North Field East project. The North Field expansion is the biggest liquefied natural gas (LNG) project ever seen, QatarEnergy said. It comes at a time of intense geopolitical tensions over energy supplies as the ongoing war in Ukraine pushed European countries to stop using Russian resources. The expansion is predicted to increase Qatar’s LNG production from the current 77 million tonnes a year to 110 million tonnes by 2027. “As one of the largest players in the LNG business, [Shell] have a lot to bring to help meet global energy demand and security,” said Qatar’s Energy Minister Saad Sherida al-Kaabi, who is also the QatarEnergy president and CEO. QatarEnergy estimates that the North Field, which extends under the Gulf into Iranian territory, holds about 10 percent of the world’s known gas reserves. The project’s LNG – the cooled form of gas that makes it easier to transport – is expected to come on line in 2026. South Korea, Japan and China have been the main markets for Qatar’s LNG. Click here to read... [15]

Russian parliament passes first vote on war economy measures

The Russian government will be able to compel businesses to supply the military with goods and make their employees work overtime under two laws to support Moscow's war in Ukraine that were approved in an initial vote in parliament on July 05. The measures will effectively place Russia on a war economy footing, nearly 19 weeks into the invasion which it describes as a "special military operation". "The load on the defence industry has increased significantly. In order to guarantee the supply of weapons and ammunition, it is necessary to optimise the work of the military-industrial complex and enterprises that are part of cooperation chains," Deputy Prime Minister Yuri Borisov said. "Right now, when the countries of the collective West are building up their military presence on the border with Russia, intensifying sanctions pressure, increasing arms supplies to Ukraine, the importance of passing the Bills cannot be overestimated," Borisov told lawmakers. One of the two Bills, both passed unanimously in a first reading by the State Duma, the lower house of parliament, said the state could impose "special economic measures" during military operations, requiring firms to supply goods and services to the military. The second Bill would amend the labour code to grant the government the right to regulate working hours and determine off-days at given companies. Click here to read... [16]

Strategic

Asia-Pacific leaders at Nato summit a sign of strategic shift amid Russia, China threats: analysts

The first-ever attendance of four Asia-Pacific leaders at last week’s Nato summit is a clear sign a strategic shift in alliance has occurred among key countries in the region and even turned the US-China competition into one between the West and China, analysts said. Disputing Beijing’s assertion that Washington had engineered Nato’s Asia-Pacific expansion, experts said it was Russia’s invasion of Ukraine and China’s growing aggression that had brought the region’s leaders into seeking closer alignment with their European counterparts. In a statement on June 30, the White House said the inclusion of leaders from Japan, South Korea, Australia and New Zealand at the Nato summit in Madrid had provided the opportunity to “strengthen the rules-based international order”. During the summit, Japanese Prime Minister Fumio Kishida said Tokyo intended to significantly upgrade its partnership with Nato, pointing out that the security of Europe was inseparable from that of Asia. At the end of the meeting, Nato allies agreed for the first time to include challenges and threats posed by China into the alliance’s strategic blueprint, arguing that Beijing’s ambitions and its “coercive policies” were challenging the Western bloc’s “interests, security and values”. Click here to read... [17]

Biden announces US military reinforcements in Europe

President Joe Biden on June 29 announced US reinforcements of NATO forces in Europe, saying the alliance is needed more today "than it ever has been." NATO will be "strengthened in all directions across every domain ― land, air and sea," he told a summit of the transatlantic alliance being held in Madrid. Biden, who was meeting NATO Secretary General Jens Stoltenberg, said the extra forces included: Boosting the fleet of US naval destroyers from four to six in Rota, Spain. A permanent headquarters in Poland of the 5th Army Corps. An "additional rotational brigade" in Romania, consisting of "3,000 fighters and another 2,000-personnel combat team." Enhanced rotational deployments in the Baltic countries. Two additional squadrons of the F-35 stealth plane to Britain. Additional air defence and other capabilities in Germany and in Italy." "Together with our allies we're going to make sure that NATO is ready to meet the threats from all directions across every domain," Biden said. "In a moment where (Russian President Vladimir) Putin has shattered peace in Europe and attacked the very, very tenets of rule-based order, the United States and our allies, we're going to step up," he said. Stoltenberg commented that the expansion of NATO was "the opposite" of what Putin hoped for. Click here to read... [18]

Gap between China, South Korea is widening as Seoul pivots to Washington

Eight weeks into the job, South Korean President Yoon Suk-yeol has given Beijing an idea of what Seoul’s pivot to Washington may look like. He has promised to join the United States to help preserve peace and stability in the Taiwan Strait, and to step up a military alliance with the US and Japan. Last week he became the first South Korean leader to attend a Nato summit. It could not come at a worse time for Beijing, as the leadership prepares for a major reshuffle while facing the worst economic slowdown in decades caused by its zero-Covid rules and global pushback against its pro-Russia stance and assertive foreign policy. Recent surveys have meanwhile revealed the trust deficit between the two Asian neighbours and suggest there could be a rough patch ahead under Yoon, who narrowly won the March election riding a wave of rising anti-Chinese sentiment. A poll by the US-based Pew Research Centre released last week found that favourable views of China had sunk to a record low in South Korea, one of the biggest declines across 19 countries surveyed. Just 19 per cent of respondents had a positive opinion of China when polled between February and June, compared to 38 per cent in a 2018 poll. Click here to read... [19]

Biden, Kishida and Yoon discuss threat of North Korea nuclear test

The leaders of the U.S., Japan and South Korea held their first in-person trilateral meeting in nearly five years on the sidelines of the NATO summit in Spain on June 29, discussing how to handle North Korea's flurry of missile launches and the possibility of a seventh nuclear test. In the roughly 20-minute talks, U.S. President Joe Biden, Japanese Prime Minister Fumio Kishida and South Korean President Yoon Suk-yeol confirmed they will coordinate their response should Pyongyang test another nuclear weapon. Speaking before the meeting, Kishida said the three countries' response could include joint military exercises. Biden said: "Our trilateral cooperation, in my view, is essential to achieving our shared objectives, including the complete denuclearization of the Korean Peninsula and a free and open Indo-Pacific." Yoon said cooperation among the three countries has "become even more important" as the nuclear and missile threat from North Korea grows. The three countries are working together to ensure they have the ability to shoot down trajectory-shifting missiles like those recently tested by Pyongyang. North Korea has launched at least 28 ballistic missiles this year, already setting an annual record. It has tested an intercontinental ballistic missile that may be able to reach the U.S., as well as short- and intermediate-range weapons that could target South Korea and Japan. Click here to read... [20]

Ukraine estimates cost of post-war reconstruction at US$750 billion

Ukraine told an international conference that it will cost an estimated US$750 billion to rebuild the war-shattered country, a task President Volodymyr Zelensky said was the shared duty of the democratic world. Speaking at the Ukraine Recovery Conference in Switzerland on July 04, the Ukrainian president and a long line of government ministers described the massive destruction and towering needs since Russia launched its full-scale invasion on February 24. “Reconstruction of Ukraine is not a local task of a single nation,” Zelesnky said via video message. “It is a common task of the whole democratic world,” he said, insisting that “reconstruction of Ukraine is the biggest contribution to the support of global peace”. Prime Minister Denys Shmyhal told the conference that the recovery “is already estimated at US$750 billion”. “We believe that the key source of recovery should be the confiscated assets of Russia and Russian oligarchs,” he said, stressing that “the Russian authorities unleashed this bloody war. They caused this massive destruction, and they should be held accountable for it”. The two-day conference, held under tight security in the picturesque southern Swiss city of Lugano, had been planned well before the invasion, and had originally been slated to discuss reforms in Ukraine before being repurposed to focus on reconstruction. Click here to read... [21]

Xi Jinping’s Hong Kong Tour Signals Confidence That City Is Under Control

China leader Xi Jinping left Hong Kong July 01 afternoon the same way he had come, zipping across the border by high-speed train, after a truncated trip to mark the 25th anniversary of the city’s return to Chinese rule. It was a visit shaped by the pandemic that Beijing used to declare a new era of stability in a territory rocked by violent protests a few years before. Strict pandemic controls and volatile weather flattened the mood during Mr. Xi’s two-day tour of the former British colony. After a two-year crackdown against opposition voices in Hong Kong squelched most public displays of dissent, Mr. Xi’s July 01 speech seemed moderately toned and reflected a belief that the worst of Hong Kong’s political instability is over, some analysts say. “Hong Kong is now totally under control,” said Alfred Wu, an associate professor at the Lee Kuan Yew School of Public Policy in Singapore. “I don’t think Xi has any worries about national-security issues in Hong Kong right now.” That wasn’t the case during Mr. Xi’s last visit in 2017, to celebrate the 20th anniversary of the handover. That year he gave an ominous speech, warning the city’s residents: “Any attempt to endanger China’s sovereignty and security, challenge the power of the central government… or use Hong Kong to carry out infiltration and sabotage activities against the mainland is an act that crosses the red line and is absolutely impermissible.” Click here to read... [22]

Curfew imposed after deadly unrest in Uzbekistan

A curfew has been imposed in a region of Uzbekistan as the country’s President Shavkat Mirziyoyev responded to unrest, acknowledging that people have been killed in clashes with police this week. “Government buildings were attacked. Unfortunately, there were casualties among civilians and law enforcement officials,” Mirziyoyev told local MPs in the city of Nukus on July 03, the site of July 01’s riots. The president did not specify how many people had lost their lives. The authorities had previously said a “criminal group” instigated street protests and attempted to seize power in Uzbekistan’s northwestern region of Karakalpakstan. A one-month state of emergency came into effect in the region on July 03, with a curfew fixed from 9pm to 7am. Other measures include a ban on protests and “restrictions on the freedom of movement,” according to a document published on the president’s website. The demonstrations ostensibly began after the government unveiled a plan to revoke Karakalpakstan’s autonomy as part of a package of constitutional amendments. Mirziyoyev, however, argued that the backlash was fueled by “misunderstood interpretations” of the proposed reform. Mirziyoyev has promised that the status of Karakalpakstan will remain unchanged, and that the final draft of the amendments will be put to a referendum. Click here to read... [23]

Donbass republic fully liberated – Russian defense minister

The last remnants of Ukrainian forces have been driven out of the Lugansk People’s Republic (LPR), Russian Defense Minister Sergey Shoigu announced on July 03. He reported the news to President Vladimir Putin, the Defense Ministry said in a statement. Shoigu said Russian troops and Donbass forces had completely seized Lisichansk, the last major city which had remained under Ukrainian control since 2014, when the LPR declared its independence shortly after a coup in Kiev. Russia and Ukraine reported heavy fighting around Lisichansk earlier this week, with the fiercest combat occurring at the city’s oil refinery. News of the capture of Lisichansk comes after Ukrainian troops retreated from Severodonetsk, a nearby city on the opposite side of the Seversky Donets River, last week. Russia sent troops into Ukraine on February 24, citing Kiev’s failure to implement the Minsk agreements, designed to give the regions of Donetsk and Lugansk special status within the Ukrainian state. The protocols, brokered by Germany and France, were first signed in 2014. Former Ukrainian President Petro Poroshenko has since admitted that Kiev’s main goal was to use the ceasefire to buy time and “create powerful armed forces.” In February 2022, the Kremlin recognized the Donbass republics as independent states. Click here to read... [24]

China takes aim at Nasa chief’s moon military takeover claims

Beijing has rejected claims by Nasa’s chief that China might “take over” the moon and its space programme is a “military” one, saying the US was responsible for militarising space. In an interview with the German newspaper Bild on the weekend, Nasa administrator Bill Nelson said: “We must be very concerned about China landing on the moon and saying that it now belongs to the People’s Republic and everyone else should stay out.” Nelson also claimed that Chinese astronauts were learning how to destroy other countries’ satellites. He said the competition between China and the US in space was intense, especially for the lunar southern pole where there could be water. China has announced an ambitious lunar exploration plan to send astronauts to the moon around 2030 and build a station there five or so years later. Chinese foreign ministry spokesman Zhao Lijian said on July 04 that Nelson’s claims were “recklessness and falsehoods”. “Some US officials have continuously framed and slandered the normal and reasonable cause of other countries in outer space. China firmly opposes such irresponsible remarks,” he said, adding that it was not the first time Nelson had criticised China. The Wolf Amendment introduced in 2011 prohibits Nasa from engaging in direct collaboration with the Chinese government or any China-affiliated organisations without special permission from Congress. Click here to read... [25]

Sudanese leader stresses keenness on normal, balanced ties with Ethiopia

Chairman of Sudan's Transitional Sovereign Council Abdel Fattah al-Burhan on July 05 reiterated Sudan's keenness on normal and balanced ties with Ethiopia. Al-Burhan made the remarks when he met here with visiting European Union's Special Envoy for the Horn of Africa Annette Weber, the sovereign council said in a statement. Al-Burhan and Weber reviewed the tensions in the Fashaga area on the Sudan-Ethiopia border and the Ethiopian army's execution of seven Sudanese soldiers and a citizen, said the statement. "Al-Burhan stressed Sudan's keenness on normal and balanced relations with neighboring Ethiopia," it said. On July 03, the Sudanese Armed Forces said the Ethiopian army "executed" seven Sudanese soldiers and a citizen who were held captive, which Ethiopia denied. On July 04, Sudan decided to file a formal complaint to the UN Security Council against Ethiopia, while the Sudanese foreign ministry decided to immediately recall its ambassador to Ethiopia for consultations and to summon the Ethiopian ambassador in Khartoum to inform him of Sudan's condemnation. Since September 2020, the Sudan-Ethiopia border has been witnessing rising tensions and deadly skirmishes between the two sides. Click here to read... [26]

Myanmar hosts 1st regional meeting since army takeover

Myanmar's military government on July 04 hosted the first high-level regional meeting since the army took power last year with China's Foreign Minister Wang Yi and counterparts from Mekong Delta nations. State broadcaster MRTV reported that Wang met with his colleagues from Myanmar, Laos, Thailand, Cambodia and Vietnam at the Lancang-Mekong Cooperation group meeting held under the theme “Solidarity for Peace and Prosperity” in the central city of Bagan, a UNESCO World Heritage site. The TV report showed Wang and the other foreign ministers bumping elbows in a show of solidarity before the start of the meeting, but did not provide further details. The grouping is a Chinese-led initiative that includes the countries of the Mekong Delta, a potential source of regional tensions due to an increasing number of hydroelectric projects that are altering the flow and raising concerns of ecological damage. China has built 10 dams along the upper stretch of the Mekong, the part it calls the Lancang. China has been criticized for the dams upstream on the Mekong River which affect water levels and downstream fisheries that are important to several Southeast Asian nations’ economiesClick here to read... [27]

Russian, Chinese ships spotted near Japan, but on different days

When close to 10 Russian and Chinese naval ships were spotted earlier this month in waters near Japan, defense analysts were sent scrambling to parse the motives of the two nations. Some of it was obvious in that they want to send a message to Japan and the United States about Ukraine and Taiwan, and the power of the united front posed by Russia and China. But some of it was less obvious, in that they staggered their voyages. “It was a clear demonstration of cooperation between China and Russia,” one high-ranking Defense Ministry official said. But some notable differences from previous moves like this suggest other agendas are also at play. In October 2021, the two navies formed an armada of 10 ships and sailed around the Japanese archipelago. But this time, they were less united, with a glaring time difference of a few days between the trips by the two nations. Defense Ministry officials said that five Russian and four Chinese naval ships were spotted circling the archipelago along the Pacific coast, with the Russians emerging first. The Russian ships were first observed on June 9 southeast of the Nemuro Peninsula in eastern Hokkaido, the main northern island. Officials believe they were involved in a major submarine warfare exercise because vessels specially designed to attack submarines were included in the fleetClick here to read... [28]

Nordic deal increases Turkish power in NATO, but pitfalls ahead

The last-minute deal between Turkey, Sweden and Finland to clear the path for the Nordic countries’ NATO membership has been portrayed as Ankara firmly placing itself alongside its Western allies in the face of Russia’s aggression. In recent years, debate has raged over whether Turkey is turning away from the West, fuelled by episodes such as Ankara’s acquisition of Russian missiles three years ago and, more recently, its refusal to join sanctions on Russia over its war in Ukraine. When Turkey announced in May that it would veto Sweden and Finland’s NATO applications unless they met a string of demands, many saw it as further proof of Ankara’s reputation as a partner that was increasingly charting its own path within NATO. But last week’s agreement – addressing Turkish concerns over the activities of groups it has designated as “terrorist” organisations in the Nordic states, extradition of suspects and removing restrictions on arms sales to Turkey – saw President Recep Tayyip Erdogan feted as a loyal and supportive ally at NATO’s Madrid summit. Ankara joined NATO in 1952 during the alliance’s first wave of enlargement, having sent troops to fight under the United Nations banner in the Korean War two years earlier. At the time, Turkey and Norway were the only NATO states with land bordering the Soviet Union. Click here to read... [29]

China wants own security company to protect assets in Pakistan

Earlier this month, the Chinese Ministry of State Security asked Pakistan to allow a Chinese security company to operate inside the South Asian country, according to two people in the Pakistani government who were privy to the matter. They spoke on condition of anonymity, since they are not authorized to comment publicly. Pakistan's Interior Ministry, however, objected and offered assurances that Pakistan's security forces are able to protect Chinese nationals and assets in Pakistan, the sources said. The Chinese Embassy in Islamabad did not respond to a request for comment. Pakistani government officials have not publicly commented on the matter, either. The suggestion that Chinese security personnel be allowed to operate on Pakistani soil has come up before. Ahsan Iqbal, Pakistan's planning minister and the man in charge of the China-Pakistan Economic Corridor infrastructure project, or CPEC, told local media in 2016: "There can be tension between Chinese security companies and the local population. It is preferable that Pakistani security personnel and agencies deal with local security problems, as it will not create conflicts between China and the local population." China has more than 5,000 private security companies, 20 of which operate internationally, according to a report titled "Guardians of the Belt and Road" published by the Mercator Institute for China Studies, a German think tank. Experts say Islamabad has given Beijing a lot of leeway to operate in Pakistan. But the presence of Chinese security forces, even if they were ostensibly private contractors, appears to be a red line. Click here to read... [30]

West African leaders lift economic and financial sanctions on Mali

Leaders of the Economic Community of West African States (ECOWAS) on July 03 lifted economic and financial sanctions imposed on Mali, after its military rulers proposed a 24-month transition to democracy and published a new electoral law. The bloc imposed stiff sanctions on Mali in January after the junta said it would not organise democratic elections the following month as initially planned. ECOWAS Commission President Jean Claude Kassi Brou told a news conference that the sanctions will be lifted immediately. Borders with Mali will reopen and regional diplomats will return to Bamako. "However, the heads of state decided to maintain individual sanctions, and the suspension of Mali from ECOWAS, until the return to constitutional rule," Kassi Brou said. The individual sanctions targeted members of the ruling junta and the transitional council. Mali has defaulted on over US$300 million of its debt due to the sanctions, which cut it off from the regional financial market and the regional central bank. The West African leaders meeting in Accra also accepted a pledge from the junta that seized power in Burkina Faso in January to restore constitutional order in 24 months. Kassi Brou said that after a lengthy discussion with the coup leaders in Burkina Faso, a new proposal for a 24-month transition was more acceptable, after the heads of state rejected a proposed 36-month transition. Click here to read... [31]

Health

Explainer | BA.4 and BA.5: what we know about the new Omicron subvariants

Two Omicron subvariants – BA.4 and BA.5 – have become the dominant coronavirus strains in the United States, causing 52 per cent of cases last week, according to new estimates from the Centres for Disease Control and Prevention. The new and highly transmissible strains have also gained prevalence elsewhere, including in the United Kingdom and Portugal, and many countries are expecting a surge in cases in the coming months. Scientists are closely monitoring the new subvariants, with early studies showing that antibodies from existing vaccines and previous Covid-19 infections offer less protection against them. Here’s what we know so far. Before BA.4 and BA.5 came along, the prevailing strains in the US were also Omicron subvariants – first BA.2, then BA.2.12.1. Scientists called these earlier subvariants “stealth Omicron” because it was difficult to detect them. The new strains, BA.4 and BA.5, were first detected in South Africa – in January and February – where they caused a wave of cases, and have rapidly spread elsewhere. There are different theories about how they evolved – that they came from previous Omicron strains, or are offshoots of BA.2. These mutations make it easier for the two subvariants to escape antibodies produced after Covid-19 vaccines and previous infections caused by other strains – which could be why they have spread so rapidly. Click here to read... [32]

One million set to perform Hajj as COVID-19 restrictions ease

After a two-year absence, international pilgrims will perform the yearly Hajj pilgrimage in Saudi Arabia for the first time starting July 06, after previously being restricted amid the kingdom’s battle to curb the coronavirus pandemic. Some one million people are expected to be in attendance in the holy city of Mecca in Masjid al-Haram (Grand Mosque) for the start of the five-day ritual – a large jump from last year when only 60,000 pilgrims were permitted. In 2020, during the height of the pandemic’s early waves and before vaccines were available, about 10,000 were selected. “We are very excited and happy to be here [for Hajj] … It’s a great feeling to do something that is a core religious duty,” Hammad Tahir, a Pakistani citizen, told Al Jazeera via phone from the western city of Medina, Islam’s second holiest site. Many Muslims around the world have been worried about attending a mass gathering of people while the pandemic continues, and infections are rising in some countries. The Saudi government eased several COVID-19 restrictions last month, including mask mandates. Masking will no longer be needed in “closed spaces” except in the Grand Mosque, the holiest site in Islam, the Ministry of Interior said. However, organisers of festivals and events in the city can choose to enforce masking or require proof of vaccination via the local Tawakkalna app, the ministry added. Click here to read... [33]