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Virtues of Compromise, What’s in a Default, Recognizing Israel isn’t Free, India’s Farmers (again) and the Week in Review

Blog

Virtues of Compromise, What’s in a Default, Recognizing Israel isn’t Free, India’s Farmers (again) and the Week in Review

Happy Friday friends. Before we get to the Week in Review, could you do us a quick favor? It’ll take you all of two minutes and none of your dollars. On your phone, go to your Apple podcasts app. Search for “The Perch Pod.” Click on “The Perch Pod” by Perch Perspectives. Scroll down a bit and give us a five-star rating. (If you want to subscribe and listen that’d be swell too but no pressure! All we’re asking for is a rating.) Thanks in advance. Next time you see Jacob, he’ll buy you a beverage of your choosing. Mask up and let’s get to it.

The virtues of compromise. The Council of the EU drafted a four-page interpretative declaration designed to break the current budget approval deadlock in the EU over a new legal mechanism that could sanction Poland, Hungary, and any other EU member-state for breaching “the rule of law.”

What it means: Compromise can be both good and bad. Compromise is the whole reason the U.S. exists – and also the reason the U.S. eventually fought a war with itself and almost came undone in 1861. The EU holds all the leverage in these negotiations but is still unwilling to use it. Led by Germany, Brussels prefers to search for a face-saving compromise for Warsaw and Budapest that preserves the legal force of this new legal mechanism, whilst still giving the EU authority in the future to punish countries that don’t fall in line with rule of-law-requirements. Time will tell whether this compromise opens a new chapter in EU history or simply kicks the can down the road.

What’s in a default? A month after defaulting on a 1.3 billion yuan (~$199 million) local bond last month, China’s Tsinghua Unigroup defaulted on a $450 million Eurobond repayment and looks set to default on $2.5 billion of offshore bonds.

What it means: The Western media narrative on the recent spate of bond defaults in China is a cocktail of predictable tropes: China’s “lack of mercy” for state-owned enterprises proves yet again that China is where capitalism goes to die as President-cum-Emperor Xi Jinping moves to crush private entrepreneurship. Don’t fall for these absolutes. Since coming to power, Xi has known that under his rule, the CPC must author massive structural economic reforms or else risk his “great rejuvenation of the Chinese nation” becoming a real “great proletarian revolution” instead. Xi is tightening regulatory control over Chinese debt markets (hence why even a semiconductor conglomerate like Tsinghua Unigroup is in trouble), as much because he wants control as he wants the kind of stability and predictability that will attract foreign investment into China.

Recognizing Israel isn’t free. Morocco agreed to recognize Israel. In return, the U.S. agreed to recognize Morocco’s territorial claims over Western Sahara.

What it means: Just a month after Western Sahara’s pro-independence Polisario Front declared an end to a cease-fire with Morocco, the U.S. traded its long-running neutrality in the Morocco-Western Sahara conflict for Moroccan recognition of Israel. But at what cost? This will piss Algeria (which supports the Polisario Front) off, for starters. It sets a disturbing precedent for how the U.S. will treat revanchism in the future (Moscow, for instance, can at least claim it gave Crimea a choice – something the Sahrawi people have demanded and been denied for decades). Fighting in Western Sahara could also lead to disruption at the Bou Craa phosphate mine – which produces 15 percent of the world’s phosphate. Between geopolitical instability in Belarus and now Western Sahara, suddenly global fertilizer supply chains are hostage to geopolitical trends in far-away places most people have probably never heard of.

Consider the bigger picture of U.S. policy in the Middle East since President Trump came into office too. The U.S. left the Iran nuclear deal, almost started a war with Iran, betrayed the Syrian Kurds, and gave Turkey a free hand in the region before belatedly realizing that might be a problem. Yes, some Arab countries now recognize Israel – Sudan because the U.S. took it off a state terror list, the UAE for the promise of F-35s, Bahrain probably because Saudi Arabia told it too. If you believe The Wall Street Journal, Riyadh hasn’t recognized Israel yet mostly because Crown Prince Mohammed bin Salman wants to save that juicy bit of leverage to shakedown the Biden administration.

Lest you think we’re unduly picking on President Trump (g0d forbid!), we pretty much think U.S. foreign policy has been a dumpster fire in the Muslim world in general and the Middle East in particular since the Clinton administration, but now we’re in danger of going on a political rant when all we really meant to do is point out is that the geopolitics of Arab recognition of Israel is not a cut-and-dry issue and will have major implications in the region going forward.

India’s farmers. Hundreds of thousands of farmers across India went on strike following multiple rounds of failed talks between trade unions and farmer representatives and the Indian government.

What it means: Forgive us if we keep bringing this issue back to your attention, but it’s not often that a country of over a billion people goes through such an important geopolitical challenge before your very eyes. The Indian government has tried to insist that it will continue to buy Indian farmers’ produce at a minimum price, but the farmers’ unions, at least so far, aren’t compromising, and making demands (like just flat out repealing the three new agricultural laws) that will be next-to-impossible for the Modi government to agree to without severely damaging Modi’s reputation and more importantly demonstrating he will be unable to undertake the kinds of structural reform India needs to become a more serious geopolitical player on the world stage despite his broad and resilient popularity in India in general.  

Honorable Mention

The former head of Israel’s space program said Israel and the U.S. have been in contact with a Galactic Federation of aliens but have not revealed it because humanity isn’t ready.

Question Time is hard. Just ask British Prime Minister Boris Johnson. Get yourself a better briefer, Boris!

China and the U.S. agreed to extend the stay of giant pandas Mei Xiang, Tian Tian, and their cub, Xiao Qi Ji, for an additional three years. Thankfully even geopolitics still has limits.  

France is preparing new stringent requirements on its crypto sector allegedly because terrorists used bitcoin to finance their operations in France.

Mexico requested the extradition of former Mexican Secretary of Public Security Genaro Garcia Luna, currently residing in a New York prison on charges of drug trafficking and links to the Sinaloa Cartel.

Indonesian police clashed with and killed six armed supporters of controversial Islamic cleric Rizieq Shihab.

China’s ZhenHua Oil Company will buy 4 million barrels of oil a month from Iraq and pay for one year of supply up front at current prices for the next 5 years.

South Korean President Moon Jae-in expressed interest in South Korea becoming a member of the CPTPP.

Democratic Republic of Congo President Felix Tshisekedi announced plans to seek a new governing coalition and also threatened to dissolve parliament and call for new elections.

Islamist fighters in Mozambique ambushed a military convoy, reportedly killing 25 soldiers.

END