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Ethiopia & the U.K. Unravel, Food Prices and the Week in Review

Blog / Weekly Review

Ethiopia & the U.K. Unravel, Food Prices and the Week in Review

Happy Friday, comrades. We are shocked and dismayed by the wildfires affecting California, Oregon, Washington, and other Western states. 2020: the gift that keeps on giving. If you’re affected, stay safe. On a happier note, please check out our latest podcast. Rory Medcalf, the head of the National Security College at the Australian National University, was generous enough with his time to join the show to talk about his latest book on the Indo-Pacific. It’s a great episode and you can listen by clicking here. Our podcast producers at Audiographies tell us our listening base is growing with each episode, so thank you for listening and for sharing the podcast and this newsletter with your friends, relatives, and contacts. It means a lot and is so helpful to us.

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Is Ethiopia unraveling? Ethiopia’s northern Tigray region held regional elections on Wednesday. Nation-wide elections previously scheduled for August 29th had been postponed indefinitely, but the Tigray region rejected this postponement and held its regional elections anyway. Ethiopian Prime Minister Prime Minister Abiy Ahmed said his government would not react to Tigray’s defiance with force or budget cuts, but he also told Ethiopian state media that they should not “sleep with their eyes closed” and that the outcome of the Tigray election will be considered illegal and invalid.

What it means: If Abiy is not going to use military or economic power to assert the federal government’s writ…what is he going to do to keep Ethiopia from coming apart at the seams? Abiy, who so recently was a global media darling, even garnering a Nobel Peace Prize win for his role in pushing for peace between Ethiopia and Eritrea and for initiating reforms that “give many citizens hope for a better life and a brighter future,” seems to be running out of options. An indefinite postponement of general elections, even during a global pandemic, is particularly suspicious considering that his government has also begun detaining more journalists and opposition politicians and using state security forces to put down simmering ethnic unrest throughout the country.

Abiy has a vision for Ethiopia that is more fantasy than reality. Abiy wants Ethiopia to transcend its myriad ethnic divisions and to become a coherent, unified nation-state. That is easier said than done, especially in a country with such ethnic and religious diversity and whose regions are organized along ethnic lines. Abiy understands that Ethiopia, at least on paper, is potentially a much stronger and prosperous country if it can get all of its citizens paddling in the same direction. Ethiopia is home to over 100 million people, and while landlocked, it is in close proximity to one of the most important trade choke points in the world (the Bab el-Mandeb) and can claim credibly to be one of the bookends of the Indo-Pacific region.

Credit where credit is due, however: Abiy has not let Ethiopia’s obvious divisions dampen his ambitions in the slightest. He has embraced reforms aimed at creating the unified Ethiopia he dreams of and has fought back against reforms or regional autonomies that push against his vision. Abiy was also not cowed by a June 2019 coup attempt, which involved security forces in the Amhara regional government, including the head of its Peace and Security Bureau – a man Abiy had granted amnesty and released from prison. In terms of foreign relations, Abiy has stood up to both Egyptian and American demands on his Grand Ethiopian Renaissance Dam, whose hydropower potential is a key part of the Ethiopian government’s plan to achieve universal Ethiopian access to electricity by 2030.

The Tigray election, however, is a different sort of challenge, and it is not one that Abiy is going to be able to sidestep easily. Up to now, even Abiy’s most well-organized Tigray opponent, the Tigray People’s Liberation Front (TPLF) he supplanted in office, has not been willing to embrace secession wholeheartedly. Its dominant faction has sought to protect Ethiopia’s unique brand of ethnic federalism and regional autonomy without pushing for secession, but stronger voices calling for more extreme measures are becoming louder. This regional election and the Abiy government’s recent behavior has only increased the volume, and Abiy is now trapped in a damned-if-he-does and damned-if-he-doesn’t scenario. Crack down, and he risks inflaming secessionist sentiment. Do nothing, and his government looks impotent…and plenty of other Ethiopian ethnic groups may look to take advantage.

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Speaking of governments courting disaster…what on earth is Her Majesty’s government doing? If you missed our look at the latest on Brexit earlier this week, click here for a quick refresher. Since we published that note, the European Union said it was exploring potential legal action against the UK if it undermines the Brexit withdrawal agreement (although what “legal” recourse the EU has is less clear). British Prime Minister Boris Johnson set a deadline of October 15 for striking a free-trade deal and said he was ready to “move on” without one. Wales’ Brexit Minister accused the British government of “sacrific[ing] the future of the union by stealing powers from the devolved administrations,” and a UK government poll showed 56 percent of Scotland supports independence.

What it means: Arguably, the domestic component of these developments matters more than the geopolitical component. Even Wales, which actually voted for Brexit in aggregate, is now frustrated with the British government asserting control over its affairs. And the Scotland poll, which has only been alluded to in media reports and which we admittedly haven’t seen, would be shocking if true. We have been following Scottish opinion polling for months now and there has been a clear shift in pro-independence sentiment, but 56 percent is the largest figure we’ve seen by quite a bit. Considering how the Scottish and British governments have clashed over handling COVID-19 and that Boris Johnson seems to be steering the country head-first into a no-deal Brexit, the 56 percent figure is also surprisingly believable.

We can already hear the haters grumbling, “but Scotland will never be independent, it can’t afford to be, especially with sub-$40 oil prices and with its debt obligations!” Pro-independence sentiments are rarely based on mathematical calculations. When the thirteen colonies revolted against the British Empire, they may not have liked British taxes without representation, but what really pissed them off was tyranny – the idea that they were not permitted a say in how they were governed. Scotland did not vote for Brexit, and it certainly did not vote for a version of Brexit that included WTO subsidy rules with its largest trading partner. Scotland is still better off economically in the UK than out of it, but politically, a hard Brexit could make that untenable.

Before acquiescing to the Brexit withdrawal agreement, Johnson engaged in quite a bit of theatrics and a little bit of detail-changing before eventually capitulating. Perhaps this is just another page in the same playbook and he is holding out hope that if he bluffs hard enough, the European Union will blink. Even if the EU doesn’t, he can at least say he tried before coming around. If he isn’t bluffing, and he is really willing to take on a hard Brexit, it will be relatively easy to quantify the economic cost and the supply chain disruption once we have a sense of the rules that will govern the relationship going forward. It will be much harder to quantify what a hard Brexit would mean for the UK’s future. Initial indicators, however, are not very good.

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Food prices. Consumer prices in Mexico rose over 4 percent in August compared to last year. Energy prices rose 0.31 percent and food prices rose 0.32 percent, led by a 2.97 spike in fruit and vegetable prices. Food prices in Brazil are rising. Overall food prices were up 1.15 percent in August. Prices for rice and beans are up over 20 percent on the year. Meat prices rose over 3 percent for a second consecutive month. Brazilian President Jair Bolsonaro reportedly asked the Associação Paulista de Supermercadosto to be “patriotic” and keep the prices of basic staples as low as possible. Itaú Unibanco projects the annual consumer food inflation rate could rise to 14 percent in October. Farms and wineries are being evacuated in California due to widespread fires. Germany discovered African Swine Fever in a wild boar carcass. Saudi Arabia cut oil prices for Light October exports to Asia by 40 cents a barrel more than expected.

What it means: We covered why we are worried about rising food prices in-depth last week. (Click here if you missed it or want to read it again.) All of these data points are more evidence that food prices may rise considerably in the months ahead. On the bright side, energy prices remain low, and that makes a big difference when it comes to the bottom lines for farmers and for transporting food. Even so, we are still worried that COVID-19 disruptions and the U.S. election season are creating some of the effects of higher energy prices.

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Honorable mention

The trailer for the new Dune movie is here. We are so flipping excited. We’re also nerdy enough to have previously written a geopolitical assessment of the Dune universe. You can read it here. Bless the Maker and His Water!

A Japanese zoo has created a new habitat to encourage giant pandas Ri Ri and Shin Shin to feel the love tonight. #morepandas

Major chipmakers Samsung Electronics and SK hynix and display manufacturers including Samsung Display and LG Display will halt sales to Huawei next week to comply with U.S. restrictions.

China and India traded accusations that the other side was responsible for crossing the Line of Actual Control and firing warning shots in the air or at the other’s forces.

German Foreign Minister Heiko Maas told Bild am Sonntag, “I hope the Russians don’t force us to change our position on Nord Stream 2.”

Australia, India, and France held their first “Trilateral Dialogue” via videoconference.

The U.S. is planning to block Chinese exports that come from Xinjiang via executive order.

Japan is extending eligibility for subsidies for manufacturing companies shifting production out of China to include companies moving operations to India and Bangladesh

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