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Eat Your Vegetables, European Federation, Russia’s Threats, Honduras Shifts to the Left, and the Week in Review

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Eat Your Vegetables, European Federation, Russia’s Threats, Honduras Shifts to the Left, and the Week in Review

Happy Friday, y’all. If you haven’t checked out the latest Perch Perspectives podcast episode – do so! Ambassador Lewis Lucke joined us to talk about his new book, From Timbuktu to Duck and Cover. It’s an excellent book, and though we’re biased, we think it’s an excellent podcast, which you can listen to or read the transcript of by clicking here.

Also, a friendly reminder to check out our Latin America-themed geopolitics newsletter, LatamPolitik. If you find our analysis valuable but aren’t using Perch for business-related issues, you can get more of our unique insights in your life for the cost of roughly a fancy coffee drink per month. You can even try it out for two weeks to decide. If you like it, or already subscribe to LatamPolitik, consider sharing it with your friends. We’re trying to get the word out, and your endorsement is worth more than 1,000 Don Drapers.   

And without further ado – on to the geopolitical week in review!

Eat your vegetables. Turkish President Recep Tayyip Erdoğan implored Turks to eat more vegetables. Erdoğan hasn’t gone health crazy: he’s gone interest rate crazy, which has sent the Turkish lira on yet another downward spiral a week after insisting he would continue to push for lower interest rates despite rising inflation (and sending the lira down 15 percent on the dollar). Erdoğan replaced his finance minister, the Turkish Central Bank tersely announced it was intervening by selling foreign reserves…and Turkey’s economy reportedly grew by 7.4 percent.

What it means: We’ve been doing a lot of work on the investment-related implications of the Turkish lira’s nosedive in the last two weeks, so if you want to talk more about that, hit us up directly by replying to this e-mail. Here, it suffices to point out that Turkey imports over 90 percent of its fossil fuel needs, as well as a significant amount of the food it consumes. When the lira loses value, that means all those imports get a lot more expensive for the average Turkish citizen – even if it also means Turkey’s various exports (which include vehicles, electrical machinery, clothing, and plastics) get cheaper. Erdoğan is betting he can manage the inflation and attendant domestic unrest by supercharging growth, as he’s done for much of the past two decades. It’s a high-stakes gamble.

European Federation. Germany’s new governing coalition, composed of the Social Democrats (SPD, Greens, and the Free Democratic Party (FDP), published their coalition agreement. In it, they called for a “fully-fledged European federation” that should lead to “the development of a federal European state.” The German government will push for a Conference on the Future of Europe as a starting point for major structural reform to the EU.

What it means: These are just words, not actions, so take them with a grain of salt – but they are remarkable words, and a clear break with previous German foreign policy, which has been largely “status quo” when it comes to the EU. The irony is that just as Germany is coming around on EU reform, French President Emmanuel Macron – who has been begging for German help to reimagine the future of the EU in precisely this manner – is heading into election season. *If* Macron can win another term in April, the two most important powers in the EU will be led by strong governments pushing for EU reforms at the same time.

Russia’s threats. Russian Foreign Minister Sergei Lavrov met with U.S. Secretary of State Antony Blinken and discussed Russia’s increased troop deployments near Ukraine. Lavrov blamed NATO for the escalation, specifically calling out its military infrastructure in Romania and Poland and attempts to expand NATO further east. Blinken insisted that dialogue was possible but that there would be ‘serious consequences” for Russia if it attacked Ukraine. Ukrainian President Volodymyr Zelesnky called for direct talks with Russia to resolve the issue, but also stoked Russian anger for renewed calls to take back Crimea, which Russia described as a “direct threat” to Russia.

What it means: For weeks, we have maintained the chance for imminent conflict is low, assessing Russia’s actions as meant to send a political statement rather than prepare for a shooting war. Nothing has happened this week to dissuade us from that point of view. That said: it does seem like Russia is probing just how “ironclad” (in the words of a U.S. State Department official last week) the U.S. security commitment to Ukraine is. *If* Russia thinks the U.S. won’t stick up for Ukraine when the chips are down (like in Georgia in 2008) and it feels threatened by an attempt to fold Ukraine into NATO, Moscow will make a move one way or another. Two big ifs in a row!

Honduras shifts to the left. Honduras held elections and chose Xiomara Castro as its new president with 53.6 percent of the vote as of this writing. (The ruling party conceded defeat earlier in the week even though not all the votes have been counted yet.)

What it means: This was obviously one of the biggest stories of the week in our LatamPolitik newsletter, so we’ll give you a taste of it here. We’re hesitant to say too much until the results are final and we know the exact balance of power in Honduras’s legislative branch, as that will define how much power Castro has to implement her agenda. There is no denying, however, that her political priorities if realized amount to a political sea change for Honduras, to include “readjusting” Honduras’s foreign debt, “immediately opening diplomatic and commercial relations with mainland China,” and distancing relations with the U.S. El Salvador, Nicaragua, Honduras – the list of declining allies in the U.S.’ backyard grows thin.

Extra! Extra!

An unexploded aerial bomb from World War II exploded in Munich, injuring four people. World War II: the gift that keeps on giving!

The European Union announced a €300 billion initiative called “Global Gateway.”

Former Japanese Shinzo Abe warned China that invasion of Taiwan would be tantamount to “economic suicide.”

Japanese factory output expanded 1.8 percent month-on-month in October, halting three consecutive months of contraction.

The Women’s Tennis Association suspended all tournaments in China over concerns for the safety of Grand Slam doubles champion Peng Shuai.

Inflation in Pakistan is now in the double digits, and unlike Turkey, Pakistan is hiking interest rates more than expected.

Scientists discovered a new type of dinosaur with a specialized tail weapon in Chile.

Negotiations over the Iran nuclear deal finally resumed after a five-month hiatus.

The U.S. and Mexico launched a joint initiative under their international development agencies (USAID and Amexcid) to alleviate the root causes of migration in Guatemala, Honduras, and El Salvador.

French government COVID-19 restrictions, including compulsory vaccination for healthcare workers, led to protests in Guadeloupe and Martinique.

A new poll by Pulso Ciudadano found that Chile’s center-left Presidential candidate, Gabriel Boric, leading José Antonio Kast by a 22.7 percent margin.

The Democratic Republic of Congo and Uganda are coordinating a widening military offensive against a militia that claims it is linked to the Islamic State.