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Havana Nights, Hungary’s Future, Saudi Arabian Law, Argentina Agriculture and the Week in Review

Blog / Weekly Review

Havana Nights, Hungary’s Future, Saudi Arabian Law, Argentina Agriculture and the Week in Review

Havana nights. Cuba’s Council of Ministers approved a measure that widens the scope of the private sector in the Cuban economy from 127 sectors to over 2,000.

What it means: In terms of pure geopolitics, Cuba is a more important foreign policy issue for the U.S. than just about any other. Remember, this is the country the U.S. and the Soviet Union almost went to nuclear war over in the 1960s. For over half a century, the U.S. has isolated, blockaded, cajoled, and sanctioned Cuba to no avail. Perhaps that policy was wise during the Cold War, but the Cold War is over. Fidel Castro is dead. Cuba is a de facto frontier economy and dollar diplomacy could change the current economic and geopolitical landscape in the Caribbean. Domestically, of course, the Cuba issue is a political landmine. (Roughly 7 percent of Florida’s population is Cuban or of Cuban descent, and for understandable reasons, they don’t like the current Cuban government). But strategically, burying the hatchet with Cuba makes almost too much sense.

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Hungary’s future in the EU. Reuters reported that the European Commission instructed Hungary to reforms its public procurement laws or else risk losing access to the EU’s €750 billion COVID-19 recovery fund. A Hungarian government spokesperson described the report as “fake news.”

What it means: You might remember that Hungary and Poland only approved the EU COVID-19 recovery fund and the next EU seven-year budget in December after Germany brokered a compromise which effectively ensured the EU could not deprive either of EU funds due to concerns over the rule of law before 2022 Hungarian parliamentary elections. If you need a refresher as to why that matters, you can click here.

If the EU decided to get tough on this issue it would have all the leverage. Intra-EU trade accounts for over 80 percent of Hungarian exports and 75 percent of imports. Hungary receives 5 times as much from the EU than it contributes. If the EU decided no more funds for Hungary, that is effectively like reducing Hungary’s GDP by 5 percent overnight. Also, unlike other potential Euro-skeptic states like Poland and Italy, Hungary is land-locked. Budapest is a major city because of its location on the Danube, which makes it important connective tissue between the Balkans and the rest of Europe. Mostly because of Germany, however, the EU can’t get tough and has to resort to showing Reuters drafts of documents that won’t matter. Until Germany changes its tune, Hungary will do whatever it likes.

A law code for Saudi Arabia? Saudi Arabia is finalizing drafts of four key laws: the Personal Status Law, the Civil Transactions Law, the Penal Code for Discretionary Sentences, and the Law of Evidence.

What it means: Currently in Saudi Arabia’s judicial system, judges have wide discretion, as there is no codified legal system in the country. (The term “medieval” isn’t a pejorative when describing many aspects of modern Saudi Arabia – it’s objectively descriptive.) Judges make decisions based on their interpretation of Islamic law and that’s that.

The drafts of the laws aren’t available yet, but according to the Saudi government press release, they are meant to bring KSA up to standard international laws and practices and specifically meant to address the plight that women face in KSA society. Sounds good in theory, but until we can read the laws, the jury is still out. (Get it?)

Either way, based on what we know, it seems that Crown Prince Mohammed bin Salman (MbS) is proposing what amounts to a judicial revolution. He’s crushed every bit of opposition to his burgeoning power thus far but taking on the religious establishment isn’t like locking some rich princes in a hotel until they pay up or reshuffling a security apparatus. It’s taking aim at the core of what Saudi Arabia was founded on. How high can Icarus fly? We’re soon to find out.

Protectionism begats protectionism. Argentina’s President Alberto Fernández threatened to raise taxes on agricultural exports if food prices continue to rise in Argentina. The CIARA oilseed crushers chamber reached an agreement with the government to keep prices on domestic edible oils low. The CRA rural association said it would hold mass farmer protests if the Fernández government hiked export taxes.

What it means: This is why Russia announcing export restrictions in January was so important: protectionism begats more protectionism. It’s not the fault of Argentine farmers that export prices are rising due to robust Chinese demand, fear of reduced or high-priced Russian exports, and poor weather in Brazil. Nor is it unreasonable of President Fernández to be thinking of how to make sure Argentines can afford their food. But you can either let the market work itself off or indulge in Peronist interventions – the middle road is the worst of both worlds. We don’t envy Fernández the choice, but that’s what leaders get paid the big (devaluing) pesos for.

 Honorable mention

We are not cats.

U.S. President Joe Biden announced the formation of a 15-person Pentagon task force to review every aspect of U.S. defense policy towards China.

China’s Banking and Insurance Regulatory Commission (CBIRC) aims to cut the total outstanding value of trust-financing products by another 1 trillion yuan (~$155 billion) and to effectively 0 by 2026.

For a second consecutive week, petrol prices in India reached record highs.

Indian and Chinese troops both withdrew from a key friction point in eastern Ladakh.

Haiti’s President Jovenel Moïse claimed he survived an assassination attempt during a failed coup.

EU foreign policy chief Joseph Borrell intends to make “concrete proposals” for new EU sanctions against Russia after returning from Moscow last Friday.

Scottish First Minister Nicola Sturgeon denied breaching ministerial code in a civil service investigation into sexual harassment claims against her predecessor, Alex Salmond. Have you listened to our podcast on the geopolitics of Scotland yet? If not…what are you waiting for?

The Brazilian government is withdrawing Brazil’s military from a deployment to police deforestation in the Amazon.

Turkish Defense Minister Hulusi Akar proposed partially activating the Russian-made S-400 missile system in return for lifting of U.S. sanctions and withdrawal of support from Syrian Kurdish forces.

Speaking about the Grand Ethiopian Renaissance Dam (GERD), Ethiopia’s Minister of Water, Irrigation and Energy said “there is no way that the filling of the dam’s reservoir in the coming July could be escaped.”

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