The Ukrainian counteroffensive that launched in June against Moscow’s invasion has run into a Russian wall.
In the run-up to the Ukrainian push, weapons from Western allies — such as tanks, artillery and other equipment — poured into Ukraine. Despite some small gains, Ukrainian forces have yet to see a large breakthrough, leaving some to wonder what else is needed.
“This is about as hard as it gets,” said Bradley Bowman, senior director of the Center on Military and Political Power at the Foundation for Defense of Democracies. “Think World War I with drones. … That’s a little bit what the Ukrainians are facing. And so in our microwave culture here in the United States, we want results yesterday, but that’s just not the way it works when you’re confronting a military like the Russians.”
Land mines have been a massive problem for Kyiv’s forces. Russia has deployed large tracts of the explosive devices, including mines aimed at troops as well as mines that are designed to take out armored vehicles like tanks, slowing down any Ukrainian advance. And with Russia’s ability to lay mines with specialized artillery, keeping cleared lanes open to send forces through has been a struggle.
“Let me be clear, this would present a significant challenge for any force that is trying to take it without the full scope of Western capabilities,” said Dmitri Alperovitch, executive chairman of Silverado Policy Accelerator and co-founder of CrowdStrike.
Many in Kyiv have called for the introduction of Western fighter jets, such as the F-16, to beef up the beleaguered Ukrainian Air Force, which has managed to keep flying and fighting despite what on paper is an overwhelming Russian advantage in air power. These fighters would also help take the pressure off of air defense forces, which consists of older Soviet surface-to-air missile systems that are difficult to resupply, and the newly provided Patriot missile system. Just sending F-16s to Ukraine wouldn’t turn the tide overnight. It would take months, if not years, of training to get the most out of these expensive jets.
“These weapons are not silver bullets,” said Mick Ryan, a retired major general of the Australian army and adjunct fellow at the Center for Strategic and International Studies. “There’s no such thing as a single weapon system that will provide that. It’s when you have lots of different weapons systems in the air on the ground. You have operators who are technically proficient and then you’re able to undertake the collective combined arms training, that’s when you have a really war-winning capability.”
Watch the video above to find out if more big-ticket, U.S.-made weapons such as F-16s, the Patriot missile system and HIMARS can turn the tide in Ukraine.
Chinese and U.S. flags flutter near The Bund, before U.S. trade delegation meet their Chinese counterparts for talks in Shanghai, China July 30, 2019.
Aly Song | Reuters
BEIJING — China’s Ministry of Commerce signaled Thursday it would respond, if needed, to the Biden administration’s executive order to restrict U.S. investments in advanced Chinese technology.
China’s Ministry of Commerce has met with businesses to understand the order’s impact, spokesperson Shu Jueting said in Mandarin, translated by CNBC.
“On that basis, we are making a comprehensive assessment of the executive order’s impact, and will take necessary countermeasures based on the assessment’s results,” Shu said.
U.S. President Joe Biden last week signed an executive order aimed at restricting U.S. investments into Chinese semiconductors, quantum computing and artificial intelligence companies over national security concerns.
The Treasury is mostly responsible for implementation, and is currently gathering public comments in order to form a draft regulation.
When asked about U.S. Commerce Secretary Gina Raimondo’s plans to visit China, Shu declined to confirm a time, but said the two countries remained in close communication.
A fire assault drill by North Korean rocket artillery units at an undisclosed location in North Korea in March 2023 in this photo released by North Korea’s Korean Central News Agency (KCNA). Around 6,000 of these units are located in range of South Korean population centers.
KCNA | Reuters
North Korea’s missile launches in the past month have ratcheted up tensions on the Korean Peninsula —but that’s not the only threat the reclusive state poses.
While North Korea’s ballistic missile launches are the ones that grab headlines, the threat of conventional artillery strikes should not be ignored, warned Naoko Aoki, associate political scientist with the Rand Corporation.
North Korea boasts the world’s fourth largest armed forces, according to the Council of Foreign Relations. In late 2022, CFR estimated North Korea had 1.3 million active military personnel, in addition to a 600,000 strong reserve force.
Most military analysts acknowledge that North Korea’s armed forces are no match for the combined U.S. and South Korean forces, but they say that the country can still wreak immense damage on South Korea via conventional arms.
North Korea has regularly threatened to turn Seoul into a “sea of fire” with its arsenal of weapons, and unlike most of its other threats, this one may not be pure hyperbole.
Asked if such a threat was credible, Victor Cha, senior vice president and Korea Chair at the Center for Strategic and International Studies, replied: “They could do that if they wanted to.”
But he warned that Pyongyang will face a strong response if it ever carried out that threat. “There would be a response [from the U.S. and South Korea] very clearly if they did that. But they could do it if they wanted to.”
A 2020 assessment from policy think tank Rand Corp found that North Korea maintains around 6,000 artillery systems within range of South Korean population centers, including the capital of Seoul which has a population of 10 million.
Rand estimated that if the thousands of artillery systems were deployed and used against civilian targets, they could potentially kill more than 10,000 people in an hour.
“Even brief, narrowly tailored attacks could destroy key industrial facilities and seriously harm the South Korean economy,” the analysts pointed out.
Separately, a 2018 Rand report illustrates that one of the world’s largest semiconductor fabrication plants — Samsung Electronics’ Pyeongtaek plant — is within range of North Korea’s long-range rocket systems, despite being about 100 kilometers from the border.
A 2018 Rand assessment on how far various North Korean artillery systems can reach into South Korea. The longest ranged systems can reach as far as 200 kilometers from the border.
Rand Corporation
Display manufacturer LG Display’s largest OLED manufacturing plant is located in Paju, just nine kilometers from the border and can be reached by the North’s mid-ranged artillery.
“This threat gives North Korea the power to coerce the South Korean government, or to retaliate against South Korean military or political actions, even without resorting to its chemical or nuclear arsenals,” the 2020 report pointed out.
Rand’s 2020 assessment said it would be difficult for South Korean and U.S. forces to incur significant damage on North Korea’s artillery units, as these will be sheltered from counterfire in underground facilities.
Daniel Pinkston, who lectures on international relations at Troy University in Seoul, said the constant artillery threat may be overlooked by most people, but not by military planners and senior national security officials in Seoul and Washington.
“The missile launches have been high profile because they have been part of testing many new systems that give North Korea greater military capabilities and options,” he told CNBC.
However, Pinkston disagrees with Rand’s report that such a threat can drive South Korea’s government to “do X” — or more specifically, force Seoul into a course of action.
Should North Korea follow through on the threat to attack the South, “the gloves are off” and a response can be expected from South Korean and U.S. forces, he said, highlighting that North Korea will not do well in conventional warfare against the allied forces.
Pinkston pointed out that North Korea is not the only one that can launch an attack at short notice. “Many people don’t seem to realize that a counterattack from the South can be launched on very short notice as well,” he added.
North Korea’s goal, I think, is not simply to prevent an attack from the U.S. and South Korea. It is really to get the United States off the Korean Peninsula.
Victor Cha
Korea Chair, Center for Strategic and International Studies
If the North were to fire on civilian targets, allied forces from the U.S. and South Korea will be able to retaliate quickly by destroying North Korea’s systems.
“If I were the KPA, I’d want to use my munitions for military targets to suppress the counterattack, which would be very intense,” Pinkston added, referring to North Korea’s armed forces, the Korea People’s Army.
Why would North Korea need to develop missiles if it holds such a potent threat over South Korea — even if short-lived?
That’s because North Korea’s missile program or its artillery forces cannot be seen in isolation, but need to be considered as part of a bigger threat, explained Cha from CSIS.
The North Korean threat needs to be viewed in its entirety, and the full extent of the danger consists of: The conventional artillery threat over South Korea, its missile and nuclear program, as well as its cyber attack arm, he added.
However, Cha pointed out that there have also been studies that have shown the damage inflicted by North Korean artillery is “not that effective.”
“They may be able to do some damage initially, [but] that damage may be overestimated and that soon after their artillery positions become known, counter battery fire from U.S. and South Korean forces could neutralize that artillery pretty quickly.”
As for North Korea’s missile program, it is designed to be more survivable in order to withstand a preemptive strike from the U.S, as well as to have the capability to strike the U.S., in order to create a so-called “decoupling dynamic” between Washington and Seoul.
The ultimate objective of North Korea, Cha said, is to divide the U.S.-South Korea alliance by creating a homeland security threat, and long range artillery alone is not going to achieve that.
Cha concluded: “North Korea’s goal, I think, is not simply to prevent an attack from the U.S. and South Korea. It is really to get the United States off the Korean Peninsula, and then have a have a nuclear advantage over South Korea. That is ultimately their goal.”
Indian Army T-90 Bheeshma tanks roll past during the full dress final rehearsal for the Indian Republic Day parade in New Delhi on January 23, 2009. (Photo credit RAVEENDRAN/AFP via Getty Images)
Raveendran | Afp | Getty Images
India is taking major strides to expand its influence in Southeast Asia, a move that will allow countries to counter China’s dominance in the region.
“India certainly is becoming more ambitious in Southeast Asia. There is no doubt about it,” said Harsh V. Pant, vice president for studies and foreign policy at Observer Research Foundation, a New Delhi-based think tank.
It has also become “more forceful and more upfront” about its ties with the region, he added.
Growing rivalry between India and China is seen as influencing New Delhi’s strategic calculation in strengthening its presence.
Relations have been fraught since a border clash with Chinese forces in 2020, which killed at least 20 Indian soldiers, according to the Indian army.
“I think the understanding in New Delhi had been: Let’s not wade into waters where China might be more uncomfortable,” Pant told CNBC, adding that Beijing has “enormous potential to create trouble for India.”
Since China hasn’t “budged” on the border issue, India “now feels there has been no real return for its cautious attitude towards Southeast Asia,” he added.
India’s foreign ministry did not respond to CNBC’s request for comment.
In June, India’s external affairs minister Subrahmanyam Jaishankar, highlighted the border conflict was affecting relations between the two countries.
Until Sino-India relations achieve “some sense of normalcy,” Pant said, New Delhi has few options but to ramp up ties with countries — “big or small around China’s periphery, to ensure it has some leverage.”
“India also trains pilots and ground crew of fighter jets of the Vietnam Air Force. Indian naval ships visited Vietnam constantly,” he added.
Vietnam is now planning to buy supersonic missiles and surface-to-air missiles from India, said Nagao, who specializes in defense strategy, foreign policy and security alliances.
“India’s ‘Look East’ policy began in 1991, well before China’s growing assertiveness was a real problem in Southeast Asia,” said Derek Grossman, a senior defense analyst at the Rand Corporation.
“But by 2014, when Modi turned the policy into ‘Act East,’ it was apparent that the region and world was dealing with a different kind of China — Xi’s China — which sought to flex its power more often and farther from Chinese shores,” he said referring to Chinese leader Xi Jinping.
Activists display anti-China placards and flags during a protest at a park in Manila on June 18, 2019, after a Chinese vessel last week collided with a Philippine fishing boat which sank in the disputed South China Sea and sailed away sparking outrage. Photo by TED ALJIBE / AFP) (Photo by TED ALJIBE/AFP via Getty Images)
In a landmark ruling on the South China Sea dispute, the international tribunal in The Hague unanimously ruled in favor of the Philippines in a historic case against China.
Beijing claims almost the entire South China Sea — an assertion that is rejected by Malaysia, Vietnam, Brunei and the Philippines among others, in competing claims for the resource-rich waterway.
India “is bolstering strategic ties — diplomatic, economic, and security — to Southeast Asian states to help them balance or hedge against, or outright counter Chinese power,” said Rand’s Grossman.
“This is particularly salient to the maritime sphere, namely the South China Sea, where overlapping sovereignty disputes threaten regional stability and openness,” he added.
China’s expanding influence through its Belt and Road Initiative in Southeast Asia is also driving India’s calculation, according to Joanne Lin, co-coordinator of the ASEAN Studies Centre at ISEAS, at Yusof Ishak Institute in Singapore.
As a result, “safeguarding India’s security, especially maritime security will be important,” Lin added.
Most countries in the region have supported China’s mega infrastructure project — Xi’s signature policy initiative aimed at expanding Beijing’s influence through a network of road, rail and sea connections across Asia, Europe and the Middle East.
Observers note Beijing’s more strident foreign policy, coupled with the political and economic leverage it could exert through the Belt and Road, has raised concerns in the region.
India is not a camp follower of either side. It continues to maintain a very independent streak in its foreign policy, which suits a large number of Southeast Asian countries.
Harsh V. Pant
Observer Research Foundation
Readjusting to an evolving international order defined primarily by the China-U.S. rivalry has also proven particularly challenging for Southeast Asian countries.
Regional countries are “engaging India because it is a power in its own right,” noted Prashanth Parameswaran, a fellow at the Wilson Center and founder of the weekly ASEAN Wonk newsletter.
They see India as an “important piece of a broader strategy of shaping a more multipolar order rather than one that is centered around China or dominated by U.S.-China bipolar competition,” he added.
A regional survey published by the ASEAN Studies Centre at the ISEAS-Yusof Ishak Institute showed India’s standing has improved greatly among Southeast Asian nations, despite its neutral stance in Russia’s war against Ukraine.
“India is the third top option for the region in hedging against the uncertainties of the US-China rivalry. Its ranking more than doubled from the last spot in 2022 to the third spot this year,” said ISEAS’s Lin, one of the authors of the survey.
Observers say that New Delhi also offers “a way out” for countries that seek to remain neutral in the U.S.-China conflict.
“India is not a camp follower of either side,” said Pant from New Delhi’s Observer Research Foundation. “It continues to maintain a very independent streak in its foreign policy, which suits a large number of Southeast Asian countries.”
While China remained the most influential and strategic power in Southeast Asia, its standing has diminished, the Southeast Asia survey from February showed.
China continues to be regarded as the most influential economic power by 59.9% of the respondents. However, its influence has declined significantly from 76.7% in 2022, as countries grew more wary of Beijing.
For several states that “most distrust China in the region — namely the Philippines, Vietnam, Indonesia, and Singapore,” India is “an additional partner to help counter Beijing,” noted Rand’s Grossman.
Still, New Delhi’s latest moves to deepen regional ties won’t go unnoticed by Chinese leaders, analysts noted.
China will be “cautious” about the developments, said Lin from ISEAS. “India’s growing influence in Southeast Asia and enhanced defense cooperation,” among other issues “will cause unease in Beijing,” she added.
Pant noted: “China will be watching this carefully and sending its own messages out.”
But given Southeast Asia “is a central pillar to India’s own Indo-Pacific strategy,” that will not deter New Delhi,” he added. “India’s push into the region will only continue to gather momentum.”
Ukraine has no chance of winning the war against Russia — and Donald Trump is the West’s only hope, Hungarian Prime Minister Viktor Orbán told controversial American TV host Tucker Carlson.
In an interview Tuesday, Orbán said that Kyiv’s victory against Moscow “is not just a misunderstanding. It is a lie. It’s impossible … [Ukrainians] will run out earlier … of soldiers than the Russians. What finally will count is boots on the ground and the Russians are far stronger.”
Only the U.S. can end the war, the Hungarian leader added.
“We missed the historic opportunity” to admit Ukraine to NATO, Orbán told Carlson in the interview, saying that Russia is getting “stronger and stronger.” Ukraine’s admission to NATO “is not a realistic proposal at this moment, so forget about it,” he added.
He also does not believe that Russians will get sick of President Vladimir Putin, and he sees little chance for Crimea to be returned to Ukraine.
Asked what he would do if he were U.S. President Joe Biden, Orbán said: “Call back Trump! Because you know, you can criticize him for many reasons … but … the best foreign policy of the recent several decades belongs to him. He did not initiate any new war, he treated nicely the North Koreans, and Russia and even the Chinese … and if he would have been the president at the moment of the Russian invasion [of Ukraine], it would be not possible to do that by the Russians.”
“Trump is the man who can save the Western world” and all of humanity, he said.
LONDON — Britain has spent years seeking its place in the world after Brexit. Now it seems to have found a role … as a global conference center, where the great powers gather to talk.
Without a seat at the European table in Brussels, and also excluded from power-play summits between the EU and Washington, Britain hopes to wield its own “convening power” as it reboots its foreign policy ambitions.
Indeed almost every time a major global issue has raised its head of late — climate change; war in Ukraine, the rise of AI; the energy crisis — Britain’s answer has been to host another world summit.
Hot on the heels of this summer’s Ukraine Recovery Conference in London, U.K. government officials are now busy prepping for Prime Minister Rishi Sunak’s “major global summit on AI safety,” due to be held later this year.
That event will be followed next spring by a global energy security conference, timed to mark the second anniversary of the Russian invasion of Ukraine. And all this less than two years after Britain played host to COP26, the United Nations Climate Change Conference, in Glasgow.
This “summit frenzy”, as one European diplomat laughingly describes it, has not gone unnoticed in foreign capitals. But as more and more powerstry a similar middleman strategy, the U.K. may have a fight on its hands to stand out.
“This is really our bread and butter,” said Alicia Kearns, Conservative chair of the House of Commons foreign affairs committee. “One of our strongest diplomatic offers to the world is our ability to convene people. I think it’s a really important aspect of our diplomacy.”
“UK-hosted forums and conferences deliver real-world results, and position us as a leading voice on a range of important issues,” a U.K. government spokesperson told POLITICO, in response to questions about its summit strategy.
They are a “vital part of the diplomatic toolkit, giving us the opportunity to bring together governments and experts … and yield commitments which translate into real and lasting change for the better.”
Leading or following?
Hosting international conferences is hardly a new venture for the U.K. — but its efforts to act as global broker have been given fresh prominence in the wake of Brexit.
Former Prime Minister David Cameron’s Syria donor conference in early 2016 raised more than $10 billion to help pay for food, medical care and shelter in the war-torn country. Two years earlier, Cameron’s Foreign Secretary William Hague had gathered global ministers — and a Hollywood megastar — in London to combat the use of rape as a weapon of war. A follow-up was held in Westminster last year.
Britain’s big post-Brexit foreign policy reset, known as the “Integrated Review” and published in March 2021, made the national mission explicit. “Shaping the open international order of the future: we will use our convening power and work with partners to reinvigorate the international system,” the plan promised.
British Prime Minister Rishi Sunak should not confuse a convening role with that of actual leadership | Pool photo by Henry Nicholls/Getty Images
Its author, the academic John Bew, continues to advise Sunak on foreign policy today. And multiple current and former advisers and diplomats agree that playing the role of eager host makes sense for the U.K. these days.
“People can pretty much rely that if they come to London for an international summit it will be well-organized,” Peter Ricketts, a former head of the U.K. diplomatic service, said. He cited Britain’s strong diplomatic reputation for drafting sound communiqués and brokering compromises.
But Ricketts noted Britain should not confuse a convening role with that of actual leadership. “The U.K. is not big enough to provide global leadership on any of these huge issues,” he said, referencing energy, climate change and artificial intelligence.
“Inevitably the Americans are going to be in the lead on setting governance for AI norms and so on,” he added.” The other players will be the Chinese, for their huge market power, and in third place — perhaps a long way behind — is the EU.”
COP out
Hosting a major global conference is one thing — making it count is another matter.
A former adviser to the U.K.’s foreign office, granted anonymity to speak candidly, said the hosting of conferences “in and of themselves doesn’t hold massive value.” More critical is the follow-up work to ensure they “catalyze change or investment and serve a purpose.”
“It’s how you leverage it that matters, and its legacy,” the ex-adviser cautioned. “They take an awful lot of work, and done badly are just talking shops.”
Some believe there are lessons for the U.K. to learn from the aftermath of COP26, when the eyes of the world were on Glasgow for two weeks of high-stakes climate summitry.
Nick Mabey, who advised the U.K. government on COP26 and founded the E3G climate think tank, said the British played a “good game” in their organization of the event — but then appeared to drop “its own ball in the follow-up” as initiatives got delayed while the Conservative Party burned through three prime ministers.
“That did damage the U.K.’s reputation quite strongly among core allies, and other countries. It was seen not to have followed up as strongly across all of the things that it launched at COP26,” he said.
Mabey cited the forest declaration, an agreement which aims to halt and reverse forest loss by 2030, as an example of an initiative he thinks has fallen in priority.
But the U.K. government spokesperson quoted above insisted its “track record” on delivery “speaks for itself.”
“In the last two years alone, 190 countries agreed to phase down coal power at COP26, $60 billion was raised at the Ukraine Recovery Conference and an international declaration on ending Sexual Violence in Conflict was signed by over 50 countries.”
Unlike summits hosted by bigger powers — or meetings like COP that are part of an established United Nations process — Britain will, Mabey warned, really need to “hustle” to get a turnout at its own events.
“The international calendar is going to become a lot more crowded, as other countries will be doing the ‘middle power strategy’ to get their place in the sun too, whether that is the South Africas or Brazils,” he said.
Testing the waters
The European diplomat quoted at the top of the story, granted anonymity because he was not authorized to speak on the record, agreed there is now a “little bit of summit competition” among the larger capitals.
Many leaders, he said, see the benefits of playing host: they find it easier to bag coveted bilateral meetings with important counterparts on the sidelines — especially useful for U.K. prime ministers who no longer have bi-monthly meetings with the EU27 in the calendar.
Italy has spied its own conference opportunity through the Rome Med — an annual gathering of Mediterranean leaders which began in 2015. In June, French President Emmanuel Macron convened a global finance conference in an effort to unlock trillions of dollars for the fight against climate change.
But not everyone wants to be the first mover, the diplomat added, citing risks for the U.K. in taking ownership of hot-button issues like AI.
“You have capitals that don’t necessarily want to be the first to host a summit on a specific topic,” he said. “Maybe they want to host the second or the third, or further down the line, so that they can test the waters and see if that thing flies or it doesn’t fly.”
He added: “If a summit is a failure, it doesn’t look very good for the host.”
For Britain, still seeking its new place in the world three-and-a-half years after Brexit, it seems to be a risk worth taking.
The Chinese commerce and foreign affairs ministries issued strong responses on Thursday, just hours after Biden signed off on the measure targeting “countries of concern” on the basis of national security.
“China is strongly dissatisfied with and resolutely opposed to the U.S.’s insistence on introducing restrictions on investment in China,” the foreign ministry said in a statement, according to a CNBC translation. “This is blatant economic coercion and technological bullying.”
The Chinese Commerce Ministry called upon the U.S. to “respect the market economy and the principles of fair competition” and to “refrain from artificially hindering global trade and creating obstacles that impede the recovery in the global economy.”
“The message is quite clear,” Eswar Prasad, a professor in international trade at Cornell University, told CNBC Thursday.
“Washington wants to use the national security imperative as a way of trying to limit the transfers of technology and investments related to technology to China, because there’s not just a national security angle, but also quite frankly, a commercial angle,” he added.
An editorial photo art illustrating smart city communication networks against the urban landscape in Shanghai.
Dong Wenjie | Moment | Getty Images
On Wednesday, Biden signed off on the executive order that limits U.S. investment and expertise in semiconductors and microelectronics, quantum computing and certain artificial intelligence capabilities in China, Hong Kong and Macao.
Biden warned in the executive order that certain American investments may contribute to “the development of sensitive technologies and products in countries that develop them to counter United States and allied capabilities.”
“I find that countries of concern are engaged in comprehensive, long-term strategies that direct, facilitate, or otherwise support advancements in sensitive technologies and products that are critical to such countries’ military, intelligence, surveillance, or cyber-enabled capabilities,” said the president, who further characterized the situation as “a national emergency.”
This is spectacularly bad timing for China.
Eswar Prasad
economics professor, Cornell University
“The investment restrictions largely mirror export controls already in place, including those that ban exports to China of machinery and software used to produce advanced semiconductors,” Gabriel Wildau, a Teneo managing director focusing on China political risk, wrote in a note to clients.
“Unprecedentedly tough restrictions that the US Commerce Department issued in October (soon to be expanded) already rendered new U.S. investment in advanced Chinese semiconductor production effectively impossible, since any such factory would need imported equipment covered by those restrictions,” he added.
During a visit to Beijing in July, U.S. Treasury Secretary Janet Yellen assured her Chinese counterparts that any curbs on U.S. outbound investments would be “transparent” and “very narrowly targeted.”
Biden’s executive order though is still some way from becoming concrete legislation.
The U.S. Treasury has been tasked to formulate exact regulations to implement the order, including defining the boundary between prohibited transactions and those that merely require notification.
Late Wednesday, the U.S. Treasury Department invited public comment to “seek early stakeholder participation in the rulemaking process” — including input on the sub-sets of national security technologies and related products to the areas of technology identified in Biden’s executive order.
The Treasury Department said it anticipates excepting certain transactions, including potentially those in publicly-traded instruments and intracompany transfers from U.S. parents to subsidiaries.
Biden’s executive order comes at a time when a raft of economic data has underscored slowing growth momentum in the world’s second-largest economy.
Official data Wednesday showed that China’s consumer prices fell for the first time in two years in July from a year ago, as producer prices declined on a year-on-year basis for a 10th straight month.
“I don’t think the U.S. Treasury or the [Biden] administration planned it this way, but this is spectacularly bad timing for China,” Prasad said. “Confidence is falling, growth is stalling, China seems to be sliding into a downward spiral with deflation, low growth and lack of confidence all feeding on each other.”
“This does very little to inspire confidence that China is going to be able to pull back on short-term growth. And this could also affect its long-term growth potential because China is very eager to move into high tech, higher value-added industries,” Prasad said.
As part of its plan to bolster growth, China’s top leaders have recently changed their tone on private and foreign investors, while anticipating the country’s post-pandemic economic recovery to proceed in a “tortuous” manner.
“At the moment, its domestic innovation program is not going that well. China still needs foreign technology — it needs foreign capital a lot less than foreign technology. Without foreign technology, I think it’s very difficult for China to make that leap,” he added.
Australia has urged China to abolish all remaining trade restrictions after Beijing lifted tariffs on its barley imports, pointing to signs of a normalization in bilateral ties.
“We want all of the impediments removed that currently affect our trading relationship with China,” Trade Minister Don Farrell told CNBC Monday.
We think with some goodwill on both sides, that we can completely stabilize this relationship.
Don Farrell
Australian trade minister
“We always saw the barley application and the suspension of the barley application before the [World Trade Organisation] as a template for dealing with the wine issue,” he said. “So I think now’s the opportunity to have some further talks with the Chinese government.”
A decision on wine tariffs is “not very far away,” according to Farrell. “And of course, we’re extremely confident that the 220% tariffs that were applied to Australian wine will be removed.”
In April, Australia agreed to “temporarily suspend” its World Trade Organization complaint against China for its 2020 decision to impose 80.5% duties on Australian barley trade that was once worth about 1.5 billion Australian dollars ($988.1 million).
It paved the way for Beijing to expediate its review of the tariff decision.
Last Friday, the Chinese Commerce Ministry announced it was dropping all anti-dumping and countervailing duties on Australian barley starting Saturday — more than three years after they were imposed. The ministry cited “changes in the Chinese market” but did not further explain.
Bottles of wine imported from Australia are displayed for sale at a supermarket in Nantong Free Trade Zone on November 27, 2020 in Nantong, Jiangsu Province of China.
Vcg | Visual China Group | Getty Images
On Monday, Farrell said a “range of factors” were at play, with Chinese beer consumers and barley importers “very strongly in favor” of reintroducing Australian barley.
The move underscored thawing tensions between Australia and China, following the first meeting between China’s President Xi Jinping and Australian Prime Minister Anthony Albanese on the sidelines of the Group of 20 leaders’ summit in Bali in November.
Since then, Australia’s foreign minister Penny Wong and trade minister Farrell have made multiple visits to Beijing and have had direct meetings with their direct counterparts.
Relations between the two countries deteriorated in 2020 under the leadership of former prime minister Scott Morrison, after Australia supported a call for an international inquiry into China’s handling of the coronavirus pandemic, which was first reported in the Chinese city of Wuhan.
“I think our whole strategy throughout this process has been to de-escalate the issues, to try and resolve the issues between us and China through dialogue rather than disputation,” Farrell said. “And we think with some goodwill on both sides, that we can completely stabilize this relationship.”
China’s trade curbs forced Australian farmers and producers to find new markets for their produce as the Australian government sought to diversify its trading relationship with free trade agreements with India and the United Kingdom. Farrell said he is hopeful of a trade deal with the European Union “soon.”
In this handout image released by the South Korean Defense Ministry via Dong-A Daily, a missile is fired during a joint training between the United States and South Korea on June 6, 2022 in East Coast, South Korea.
South Korean Defense Ministry | Getty Images
South Korean defense stocks have recorded stellar gains over the past 12 months, with one stock soaring more than 60% as tensions on the Korean Peninsula accelerate.
Demand for arms — spurred partially by Russia’s invasion of Ukraine — has also propelled military spending, with global military spending worldwide increasing since 2018 to reach $2.1 trillion as of 2021, according to SIPRI Arms Transfer Database.
Shares of Hanhwa Aerospace, a subsidiary of South Korean conglomerate Hanhwa Group, saw a whopping 66% rise since the start of the year, and a nearly 90% surge in the last 12 months.
The company manufactures air defense systems, armored fighting vehicles and artillery systems.
South Korea has benefited from increased global military expenditure, according to Morgan Stanley analysts, citing SIPRI, or Stockholm International Peace Research Institute.
The U.S. investment bank also noted South Korea is now among the top 10 defense export countries in the world.
Escalating tensions in the Korean Peninsula have also kept interest in South Korean weapon platforms high. Some of those systems have found their way into markets like the Middle East and Europe, the latter as a result of the Ukraine war.
According to Morgan Stanley, South Korea has become a major exporter of military and defense equipment and supplies, with 2022 exports totaling 22.9 trillion South Korean won ($17.9 billion). That’s more than double the figure of 9.5 trillion won in 2021.
“Rising demand from Europe and Asia for Korean manufacturers to provide military/defense equipment, including tanks, artillery, and airplanes, are pushing up export volumes,” said bank’s second half outlook investment report on South Korea.
Some notable weapons systems out from South Korea’s defense industry include the K9 Thunder self-propelled howitzer from Hanhwa, the K2 main battle tank from Hyundai Rotem, and the FA-50 light attack aircraft, manufactured by Korea Aerospace Industries.
In a bid to replace arms donated to Ukraine in the Russia-Ukraine war, Poland placed an order for 672 K9 units for $2.4 billion in July 2022, along with 1,000 South Korean K2 main battle tanks for $3.34 billion, according to SIPRI.
At the signing ceremony, Poland’s Minister of National Defense Mariusz Blaszczak said: “We want peace, so we must prepare for war. The Polish armed forces should be so strong that an aggressor cannot decide to attack.”
Poland has also signed additional deals for 48 of FA-50 light attack aircraft, as well as 288 multiple launch rocket systems in October.
The procurement of the K2 tank is “surprising” as it marks a new entrant into the European arms market, according to Nikkei, which reported that Poland’s move was only the second major arms procurement by a NATO member from a supplier outside the bloc.
NATO forces generally use a similar roster of equipment to maximize interoperability. For example, the mainstay of NATO tank forces is the German Leopard 2, manufactured by Krauss-Maffei Wegmann.
The K2s are manufactured by South Korean heavy industry company Hyundai Rotem. The company’s shares have risen 6% year-to-date, and gained 20% in the last 12 months.
Separately, the FA-50 aircraft are manufactured by Korea Aerospace Industries. Besides the Poland contract, Malaysia also placed a $920 million order in February for 18 FA-50s, according to defence intelligence company Janes.
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Shares of Korea Aerospace Industries gained as much as 17% compared to the start of the year, but have since fallen to a year-to-date loss of about 4%.
The stock is lower this year as a result of first quarter results that disappointed, said Samsung Securities analysts Youngsoo Han and Kayoung Lee in a May 9 report. The company saw delays to its domestic aircraft shipments related to exports to Poland as well as its Iraqi reconstruction project.
However, the analysts expect these sales to be recognized in the second half of the year, which will power most of KAI’s 2023 earnings.
“We see few reasons to cut our 2023 earnings estimate for the firm,” they added, noting the long-term growth scenario for KAI is still “valid.”
The Samsung Securities analysts also cited steady growth in T-50 related sales. (The KA-50 is a variant of the T-50 aircraft).
Morgan Stanley is optimistic about the outlook for the South Korean defense industry.
There are secular growth opportunities for “chip-makers, EV value chain, defense and energy enablers” over the course of 2023, the investment bank said in its report.
That view is shared by Victor Cha, senior vice president for Asia and Korea Chair at the Center for Strategic and International Studies.
Speaking to CNBC, Cha explained that South Korea, under the current administration of President Yoon Suk-yeol, has “made it very clear” that they want to be a major arms exporter around the world.
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Cha says South Korea has a very strong industrial and tech base, and these combine to provide for a very strong defense industrial capability.
“Most of this is not super high-end military equipment, but it’s very good conventional military equipment and vehicles,” Cha also said South Korea’s defense industry is seeking to expand into other areas like drones, as well as unmanned aerial and undersea vehicles.
“They’ll be very good at this sort of stuff, whether it’s on their own or in combination with a U.S. defense company.”
Donald Trump’s inflammatory and artless comments about Hamas’ horror in Israel emphasize the defining characteristic of his attitude toward foreign policy and his entire political world view: It’s all about him.
Trump criticized Israeli Prime Minister Benjamin Netanyahu, lauded Hezbollah militants as “very smart” and sought political gain from the attacks that killed 1,200 people by claiming that if the last election was not “rigged,” he’d be the American president and they’d never have happened.
The ex-president openly admitted a grievance against Netanyahu, complaining he had pulled out at the last minute from joining the US air attack that assassinated Iranian intelligence chief Qasem Soleimani in Iraq in 2020. Trump had previously fumed over the Israeli leader’s perceived disloyalty in recognizing he lost the election.
Trump is now a private citizen, and it’s possible he wouldn’t have addressed the situation in the same way if he were president – although there were multiple examples of his tone deafness and indiscretion when he was in the White House. But he’s also the 2024 Republican front-runner for president and his statements are therefore scrutinized for clues over how he would behave in office. His latest comments add to plentiful evidence that a second Trump term would be even more riotous at home and globally disruptive than his first four years in power.
The former president’s remarks also offered an opening to his GOP rivals, who accused him of behavior unsuitable for a potential commander in chief after an ally came under attack amid horrendous scenes of carnage in which some Americans were also killed. Some bemoaned his apparent admiration for Hezbollah, a Lebanese militia group that is hostile toward Israel.
“He’s a fool. Only a fool would make those kinds of comments,” former New Jersey Gov. Chris Christie, who has rooted his campaign in criticizing Trump’s suitability for office, told CNN.
“Only a fool would give comments that could give aid and comfort to Israel’s adversary in this situation,” Christie continued. “This is someone who cares, not about the American people, not about the people of Israel, but he cares about one person and one person only, the person he sees in the mirror when he wakes up in the morning.”
The former president tried to defuse the growing controversy on Thursday evening, releasing a statement in which he insisted that “there was no better friend or ally of Israel” than him. He accused President Joe Biden of weakness and incompetence. “With President Trump back in office, Israel, and everyone else, will be safe again!” he said. The former president was continuing the clean-up on Friday on his Truth Social platform, praising what he said was the “skill and determination” of the Israel Defense Forces and later posting “#IStandWithBibi.”
Trump’s original grievance-based analysis reflects a transactional, unorthodox approach to foreign policy that often prioritizes his own personal goals over a standard understanding of the national interest. It also highlighted a contrast with his potential 2024 election opponent. Biden reacted to the attack by using all of the tools of traditional statesmanship, including rhetoric, personal behind-the-scenes contacts with key foreign leaders and by mobilizing allies. Like Trump, Biden has had a personal and political beef with Netanyahu – but shelved his differences with him weeks before the attack and has been in constant contact with the prime minister since it occurred.
Biden is seeking to strike a balance. He has shown the most ardent support for Israel of any recent US president and acknowledged its desire to retaliate and reestablish its sense of security after the most shocking penetration of its borders and national psyche in 50 years. But Biden is also sending private and public signals to Netanyahu that Israel’s response should not infringe the laws of war and that he should consider the humanitarian consequences of an invasion of Gaza, as he seeks to prevent the war escalating into a dangerous regional conflict that could draw in the US.
Biden’s opponents have every right to critique his foreign policies and to ask whether a hands-off approach to the Israeli-Palestinian conflict meant his administration dismissed the threat from Hamas. Critics also argue his attempts to open dialogue with Iran, a key sponsor of the militant group, emboldened the Islamic Republic and threatened Israel’s security. But Biden is also forging a contrast of temperament and approach with Trump that will be at the center of his campaign’s narrative if the 2024 election is a rematch of 2020 and will boil down to this question to voters: Is Trump fit for the Oval Office?
Trump said on Fox News on Wednesday that Netanyahu had been “hurt very badly” by the attacks. “He was not prepared, and Israel was not prepared,” the former president said. His comments were not necessarily wrong and the intelligence and political failures in Israel will be investigated after the war. But the timing and tone of criticism is questionable given that Israel, one of America’s closest allies, is suffering after a horrendous attack on civilians and is in need of support not political points scoring and second guessing. His willingness to trash Netanyahu, despite the Israeli leader’s considerable efforts to align himself politically with the ex-president, also shows how loyalty is usually a one-way street for Trump and those who he believes have crossed him are liable to get a public dressing down.
Trump’s comments were not the first time he has appeared to seek a political benefit from his foreign policy and his positions on Israel especially. Last October, he complained that American Jews were not sufficiently grateful to him for actions like moving the US embassy from Tel Aviv to Jerusalem when he was in the White House.
“No President has done more for Israel than I have,” Trump wrote on his Truth Social network, adding that it was somewhat surprising that “our wonderful Evangelicals are far more appreciative of this than the people of the Jewish faith, especially those living in the U.S.” He was accused of using antisemitic tropes demanding the loyalty of American Jews. The White House said he insulted Jews and Israelis.
Trump’s remarks Wednesday on Hezbollah, which has the capacity to rain even more carnage on Israel, also appeared inappropriate in the circumstances. “They’re vicious, and they’re smart. And, boy, are they vicious, because nobody’s ever seen the kind of sight that we’ve seen,” Trump said during a political event in Florida. His statement was in keeping with his habit of praising foreign adversaries he sees as tough even if they rule with an iron fist, infringe basic humanitarian values and are US adversaries. He’s rarely concealed his admiration of Chinese President Xi Jinping and North Korean tyrant Kim Jong Un, for instance. And he added to his long record of praising Vladimir Putin – an accused war criminal because of atrocities committed during the war in Ukraine – when he recently described the Russian leader as “a genius.”
Trump often appeared to be willing to cede national interests to his political benefit while in office. For instance, at a summit with Putin in Helsinki he sided with Putin who dismissed findings by US intelligence agencies that Russia interfered in the 2016 election in attempt to help him.
The former president is advocating a return to his “America First” nationalist foreign policy, prizes tough talk and ruthlessness on the global stage, and remains disdainful of allies and the international security architecture that has been the foundation of American power since the end of World War II. While these are positions that would represent a sharp transformation of US foreign policy, it is quite legitimate for him to present them to voters and try to win support for his vision.
Yet his recent comments will only reinforce the impression often left by his actions as president that his own aspirations are most important. They also show Trump’s quintessential contempt for the rules of politics, foreign policy and even basic human decency, which explain why he horrifies many Americans and foreign governments. But this behavior is key to his authenticity for grass roots Republicans who abhor the codes of what they see as establishment elites.
Trump during the Florida event criticized Israel for not taking part in the raid that killed Soleimani. “I’ll never forget that Bibi Netanyahu let us down. That was a very terrible thing, I will say that,” he said. It was not immediately clear whether Israel had considered an operational role in the strike or whether Trump had broken a confidence with an ally or even revealed classified information.
The ex-president has a record however of loose talk on government secrets. He has been indicted over the alleged mishandling of national security material among classified documents he hoarded at his Mar-a-Lago resort after leaving office. Last week, ABC News reported that Trump allegedly shared US secrets about the submarine service and nuclear weapons with an Australian billionaire. Trump denies all wrongdoing.
The ex-president’s GOP rivals, who have struggled to exploit his political vulnerabilities without alienating his super loyal supporters pounced on his criticism of Netanyahu.
Florida Gov. Ron DeSantis accused Trump of throwing “verbal grenades” at Israel. “Now’s not the time to be doing, like, what Donald Trump did by attacking Prime Minister Bibi Netanyahu, attacking Israel’s defense minister, saying somehow that Hezbollah were ‘very smart,’” DeSantis said in New Hampshire. “Now’s not the time to air personal grievances about an Israeli prime minister.” Former Vice President Mike Pence hammered Trump’s foreign policy – even though he was part of the former president’s administration that repeatedly challenged American values. Pence also claimed that Trump had somehow changed in his years out of office, a debatable proposition that looks self-serving since it appears intended to create plausible distance from Trump’s excesses while in office.
“He’s simply not expressing, and his imitators in his primary, are not expressing the same muscular American foreign policy that we lived out every day,” Pence said on a local New Hampshire radio.
What Trump is expressing is his idiosyncratic, convention-busting brand of foreign policy rooted in his personal prejudices, grievances and search for political advantage that will once again rock the world if he wins the 2024 election.
A weekend of terror in Israel has sharpened already grave questions about the capacity of the politically fractured United States to lay out a unified and coherent response to a world spinning out of its control.
When the House of Representatives descended into chaos last week, many Republicans, Democrats and independent experts warned that anarchy raging in US politics sent a dangerous message to the outside world. But no one could foresee just how quickly the paralysis in Washington would test the country’s reaction to a major global crisis.
The horrific Hamas attacks on Israeli civilians, which have killed hundreds of people and shattered the country’s sense of security, thrust the Middle East to the precipice of a new era of violence and instability. This followed a period of relative calm and after US presidents spent years trying to extricate American forces from the region.
Israel’s response to the carnage caused by a major Iranian proxy raises the possibility of a wider regional war that would further destabilize the global order already rocked by the war in Ukraine and China’s flagrant challenges to Western power.
A situation this dangerous requires a calm, united and thoughtful US response, supported across the political spectrum. But the turmoil in America’s politics – plagued by internal extremism, threats to democracy and the hyperpoliticization of foreign policy – means it will be an impossible task to bring the country together at a perilous moment.
Swift efforts by lawmakers to quickly register support for Israel and to rush extra aid to its government could be hampered by the collapse of the Republican Party’s ability to govern in the House after the ouster of Speaker Kevin McCarthy last week by his party’s extreme elements.
And the US is also facing an unprecedented election season. A president with low approval ratings confronting questions about his advanced age could go up against a potential Republican nominee who could be an indicted felon by Election Day. This means, at best, the United States will spend the coming months preoccupied by its own political plight. At worst, the world’s superpower guarantor of democracy could actually worsen global disruption and instability.
Republican front-runner Donald Trump rushed to exploit the crisis for his political gain, accusing President Joe Biden of causing the conflict because of “weakness.”
“Joe Biden betrayed Israel, he betrayed our country. As president, I will once again stand with Israel,” Trump said.
Foreign policy issues rarely decide US elections. But the danger for Biden and the opening for Trump is that yet another crisis abroad could foment an idea that the world is in turmoil, American power is weakening and Biden is hapless. At home and abroad, chaos is Trump’s friend as he seeks to foment the classic conditions that benefit aspiring autocrats promising strongman rule.
Fractured American governance doesn’t simply pose a material issue for Israel and for Ukraine, whose US lifeline as it battles Russia’s unprovoked invasion is now in extreme jeopardy due to far-right Republicans. The spectacle also suggests to US enemies – including Iran, the main supporter of Hamas, and Russia and China – that the US is hopelessly divided and may struggle to wield power to safeguard its interests.
“It wasn’t my idea to oust the speaker. I thought it was dangerous,” Rep. Michael McCaul, the chair of the House Foreign Affairs Committee, said on CNN’s “State of the Union” on Sunday. “I look at the world and all the threats that are out there, and what kind of message are we sending to our adversaries when we can’t govern, when we’re dysfunctional, when we don’t even have a speaker of the House?
“How does Chairman Xi in China look at that when he says democracy doesn’t work?” the Texas Republican added. “How does the Ayatollah look at this, knowing that we cannot function properly? And I think it sends a terrible message.”
US sends a message of chaos and weakness
The shuttered House created a particularly damaging symbol of the US – and the democratic system of governance it promotes around the world – in disarray. The Biden administration has the capacity to send immediate military aid to Israel, whose government has asked Washington for JDAM precision-guided munition kits and more interceptors for the Iron Dome air defense system as Hamas rockets rain down on Israeli cities. But any delay in seating a new speaker and creating a functioning majority in the House could have serious consequence.
Republican Rep. Michael Lawler, who faces a tough reelection in a New York district that Biden would have carried in 2020 under its new lines, warned that the chaos in the House needs to end. “Given the situation in the Middle East with one of our closest allies in the world, it is critical that we bring this to a close expeditiously,” Lawler told CNN’s Dana Bash. “And so, I think it is imperative, frankly, that this nonsense stop, that Kevin McCarthy be reinstated as speaker,” Lawler added.
Republicans left town after ousting McCarthy last week, and are expected to try to choose between Judiciary Chairman Jim Jordan, who has the backing of Trump, and House Majority Leader Steve Scalise this week. But given the demands of extremists in the GOP conference, the complications of a tiny majority and the fact it took McCarthy a marathon 15 rounds of balloting to win the job in January, there is no guarantee that strong, new Republican leadership will quickly emerge.
While there is crossparty consensus over supporting Israel in the House, the US response to another murderous assault on a vulnerable democracy – Ukraine – threatens to be derailed by America’s viciously polarized politics in a way that could seriously erode Washington’s global leadership.
Right-wing Republicans who back Trump are echoing the former president’s opposition to further US aid and ammunition to Ukraine. While there is still a majority in favor of such measures in the House and the Senate, any future Republican speaker will likely have to pass aid packages with the help of Democratic votes – the very scenario that caused McCarthy’s fall as he tried to head off a damaging government shutdown (even though that stopgap funding bill did not include Ukraine aid, as the White House had wanted).
Already, the political showdown over Ukraine is causing deep concern in Kyiv that it will be unable to continue its fight against Russia in the current form without the more than $20 billion in assistance that the Biden administration has requested.
In a broader sense, the possibility that a populist, nationalist wing of the Republican Party under Trump could desert a democracy under attack from Russia – and therefore reward the aggression of an autocrat who shaped his worldview as a member of the KGB – threatens to not just shatter the logic of decades of US foreign policy, but to fundamentally change the US’ role in the world and the values on which its allies believed they could depend.
The politicization of global crises is not just confined to Israel or Ukraine. A Chinese spy balloon that wafted over US soil this year caused an extraordinary outburst of Republican fury toward Biden, which threatened to tie the president’s hands when managing the critical issue of US relations with the Pacific superpower.
A growing sense abroad that America’s political problems are limiting its ability to lead globally could also have a devastating effect on its power. This can only play into the hands of enemies in Beijing, Moscow and Tehran, who have all sought to influence US elections, according to US intelligence agencies, and all have strong geopolitical incentives in seeing American democracy fail.
The extraordinary and sudden Hamas attack on Israel – which has been compared to the September 11 attacks in the United States, and in terms of per capita casualties was far more bloody – falls into the category of tragedies that could change the world.
Aside from the awful human toll – now also being felt by Palestinian civilians in Gaza, where hundreds have perished in the initial Israel reprisal attacks on the infrastructure of Hamas – the onslaught will have far-reaching strategic consequences that will be felt in the US.
If evidence is found that Iran directly plotted the attack with Hamas, there will be huge pressure on the Israelis to respond by directly confronting the Islamic Republic, at the risk of sparking a wider regional conflagration that could draw in the United States.
The attacks and their fallout are also almost certain to disrupt the effort, in which the US is a key player, to normalize relations between Israel and Saudi Arabia and allied Arab states. Such an agreement would fundamentally reshape the region and further isolate Iran – a logical reason why it could have had an interest in perpetrating the Hamas assault. US officials are still trying to establish how, if at all, Iran was involved.
The horror in Israel presents Biden with another fearsome foreign policy crisis as he contemplates his reelection bid – alongside the war in Ukraine and a rising confrontation with China.
It comes at a moment of political vulnerability for the administration as it seeks to explain why it made a deal to release US prisoners from Iran that resulted in the release of $6 billion in frozen Iranian funds. The Iranian government can use the funds only to buy humanitarian and medical supplies. The deal took place far too recently for such money to be used to finance this attack. But such subtleties don’t count for much in an election year, as multiple Republican presidential candidates accused the president of funding Iranian terror.
Secretary of State Antony Blinken on Sunday tried to defuse the political impact of the agreement. “Not a single dollar has been spent from that account. And, again, the account is closely regulated by the US Treasury Department, so it can only be used for things like food, medicine, medical equipment,” he insisted on “State of the Union.”
But, in a political sense, it only matters that enough Americans believe what the Republicans are saying is true.
GOP hopeful Nikki Haley, a former US ambassador to the United Nations, for instance, implied Sunday on NBC’s “Meet the Press” that funds that Iran may not have to spend on medicine because of the hostage deal could now be spent on terror.
“Secretary Blinken is just wrong to imply that this money is not being moved around as we speak,” Haley said, although her argument is undercut by the fact that Iran’s clerical regime has rarely seemed to prioritize the humanitarian needs of its people while building up a huge state military complex.
Another 2024 candidate, GOP Sen. Tim Scott of South Carolina, went even further, accusing Biden – who has been one of the strongest Washington supporters of Israel in half a century in politics – of being “complicit” in the attacks.
Turkish President Recep Tayyip Erdogan welcomes Saudi Arabia’s Crown Prince Mohammed bin Salman Al Saud in Ankara, Turkey, on June 22, 2022.
Mustafa Kaya/Xinhua via Getty Images
Nearly 300 prisoners of war – both Ukrainian and Russian – faced death or indefinite detention in late September of 2022.
It was a fate that looked all the more real as Russian President Vladimir Putin announced the mobilization of some 300,000 Russian conscripts to fight on the Ukrainian front.
But on that very same day, the warring countries made the shock announcement that they had come to an agreement on a prisoner swap, which would release the detained fighters and political prisoners from their respective captors.
The sheer suddenness and size of the swap – the largest since Russia launched a full-scale invasion of its neighbor the prior February – came as a shock, and an immense relief to the family members of the detained.
But they ultimately didn’t have Russia or the West to thank. Behind the scenes, the hard negotiating work was overseen by two unlikely leaders: President Recep Tayyip Erdogan of Turkey and Crown Prince Mohammed bin Salman of Saudi Arabia.
Ukrainian President Volodymyr Zelenskyy presents state awards to Ukrainian defenders released from Russian captivity during a ceremony for 331 Ukrainian soldiers and policemen who were freed in a prisoner swap with Russia in Kyiv, Ukraine on December 2, 2022.
Ukrainian Presidency | Handout | Anadolu Agency | Getty Images
“I would like to thank the Turkish government for helping facilitate the exchange of prisoners between Ukraine and Russia, building on their leadership on the grain deal,” U.S. national security advisor Jake Sullivan wrote on Twitter at the time.
Saudi Arabia for its part brokered the return of 10 foreign nationals captured by Russia who had been fighting in Ukraine – two of which were American – thanks to the Saudi crown prince’s close relationship with Putin.
“We thank the Crown Prince and Government of Saudi Arabia for facilitating [the prisoner exchange],” Sullivan wrote in a separate post.
In the latest development, Saudi Arabia plans to hold a Ukraine peace summit in Jeddah to which Ukraine, the U.S., European nations, China, India, and Brazil among many others are invited. And it was reported in July that the Saudi and Turkish leaders are attempting to broker a deal to bring Ukrainian children forcefully deported by Russia back to their families.
Turkey, meanwhile, is trying to revive the crucial Black Sea grain initiative it brokered in mid-2022 between the warring countries. Its political heft as NATO’s second-largest military and its control over the Turkish straits, the only entry point from the Black Sea into the Mediterranean, gives it particular diplomatic leverage.
The rise of these so-called “middle powers” in mediating such large-scale conflict signals a new world where players beyond the U.S. and the West can call the shots, and where smaller states aren’t forced to tie themselves to either the U.S., Russia, or China.
These changes reflect “the rise of global multipolarity and mid-level regional powers with international roles,” Hussein Ibish, a senior resident scholar at the Arab Gulf States Institute in Washington, told CNBC.
“Saudi Arabia and Turkey are good examples of such mid-level powers now helping shape international realities in a way they rarely did during the Cold War.”
Both Turkey and Saudi Arabia are broadly seen as well-positioned brokers, given they both have good relationships with Russia’s Putin while at the same time being longtime allies of the West, through Turkey’s nearly 70-year-old NATO membership and through the Saudi kingdom’s more than 80-year-old security relationship with Washington.
Lithuanian Deputy Defence Minister Vilius Semeska poses with Selcuk Bayraktar, Chief Technology Officer of Turkish technology company Baykar, and Haluk Bayraktar, Chief Executive Officer of Baykar, next a Bayraktar TB2 advanced combat drone in Istanbul, Turkey June 2, 2022.
Baykar | Reuters
The diplomatic initiative, Ibish said, “helps solidify the Saudi-Turkish rapprochement and promote the image of these countries as significant global players, regional partners and more independent actors,” beyond their traditional institutional alliances.
The efforts are also in both countries’ interests; they want to increase their political clout, analysts say, while Saudi Arabia’s Crown Prince Mohammed bin Salman seeks to transform his kingdom’s image and status in everything from sports and tourism to diplomacy.
Still, Washington has criticized Saudi Arabia for curtailing oil production and keeping prices high, which helps Russian oil revenues that in turn finance the Ukraine invasion. And Turkey, like Saudi Arabia, refuses to partake in sanctions against Russia, irking its Western allies.
But maintaining independent positions helps both countries’ relationships with other powers like China as well as neutral states in the Global South like India and Brazil.
Saudi Arabian Crown Prince Mohammed bin Salman (R) meets Ukrainian President Volodymyr Zelenskyy (L) in Jeddah, Saudi Arabia on May 19, 2023. (Photo by Saudi Foreign Ministry / Handout/Anadolu Agency via Getty Images)
Saudi Foreign Ministry | Anadolu Agency | Getty Images
And Kyiv has reason to respect both mediators: Turkey supports Ukraine with substantial weapons and aid, while Saudi Arabia’s crown prince already invited Ukrainian President Volodymyr Zelenskyy to the kingdom in May so that he could be heard at the Arab League summit.
“Both Erdogan and Mohammed bin Salman are engaging in a bit of competitive mediator roles in which they are trying to improve their country’s national diplomatic stature by achieving humanitarian goals in the Russo-Ukrainian war,” said Ryan Bohl, a senior Middle East and North Africa analyst at Rane.
“By doing so, they hope to improve their country’s reputations in both the Global North and Global South.”
Taking on the task of trying to mediate Europe’s largest land war since World War II requires realism; and Ankara and Riyadh have measured expectations for upcoming peace summits and negotiation attempts.
Turkey and Saudi Arabia “are among the actors which could help prevent further escalation in the Ukraine war,” Ibish said, “but it’s an exaggeration to think they are the main or only potential buffers.”
Ayham Kamel, Middle East and North Africa practice head at the Eurasia Group, says the upcoming Saudi-hosted peace summit is “unlikely to represent a serious step toward peace talks capable of ending the war in the near future.”
But, he added, it will “build a platform for more constructive engagement among the West and developing countries in the Global South.”
Many developing nations have largely refrained from taking a side in the war or even condemning the invasion, as they often have important trade or military relationships with Russia or simply have a historic distrust of the West.
Some, like Brazil, have also suggested that Ukraine cede territory to Russia to end the fighting – a proposition Kyiv categorically refuses.
“Riyadh is under no illusion that the August gathering will lead to a breakthrough on substance, and Western countries do not expect Global South participants to embrace the Ukrainian peace plan in its current form or be open to expanding sanctions against Russia,” he noted.
In a conflict where the stakes involve potential nuclear fallout, however, even limited diplomatic progress and communication is welcomed.
Since both the West and Russia are so far trying to avoid global escalation, they are also not heavily pressuring Riyadh or Ankara to take a side, Bohl said. “It still serves both NATO’s and Russia’s purposes for the two countries to have working relations between them.”
Riad Salameh’s tenure as governor of Lebanon’s central bank on Monday came to an end after 30 years, with many sharply critical of the legacy he now leaves behind.
“The loss of savings for several generations of Lebanese” is all part of Salameh’s legacy, Nasser Saidi, a former vice governor of the Banque du Liban, told CNBC’s Dan Murphy on Monday.
Lebanon has failed to find an official successor to Salameh, who has been governor of the central bank since 1993 and has worked under 12 prime ministers and recurring political instability.
Wassim Mansouri, the deputy governor will take on the role of governor on an interim basis, he told reporters on Monday. Salameh told CNBC on Monday he hopes his “successor will be successful.”
Lebanon has failed to find an official successor to Salameh, who has been governor of central bank since 1993 and has worked under 12 prime ministers and recurring political instability.
Wassim Mansouri, the deputy governor of the central bank, told reporters that he will take the role on an interim basis.
Lebanon’s Rafik Hariri first became prime minister in 1992 and tapped Salameh to rebuild the country’s post-war economy and banking sector. Under his stewardship, however, Lebanon descended into an economic crisis of epic proportions.
Foreign reserves have dipped below $10 billion, the currency has depreciated by almost 100% in value against the dollar and Salameh himself has been blamed for the collapse of Lebanon’s financial system, which has estimated losses of an eyewatering $70 billion.
In 2022, the World Bank blamed the country’s political elite for a “Ponzi Finance” scheme, saying the depression was “deliberate in the making over the past 30 years.”
An anti-government Lebanese activist displays Lebanese bills during a protest outside the country’s central bank against the continuing downward spiral of the Lebanese pound against the dollar and Riad Salameh’s arrest, under investigation by five European countries.
Even members of the current government have suggested it was time for change at the central bank. In June, Lebanon’s Economy and Trade Minister Amin Salam told CNBC that Salameh had been Lebanon’s central bank head for “way too long.”
Saidi, meanwhile, said Salameh — who faces international arrest warrants and allegations of fraud — is to blame for the country’s economic collapse.
“He is directly responsible, in my view, for conducting monetary and exchange rate policy that has led to the collapse that we have seen. He actually conducted a Ponzi scheme, whereby he was trying to protect a highly overvalued Lebanese pound, by increased borrowing particularly from the banks, the banks, brought in deposits from Lebanese expatriates around the world,” Saidi said.
Despite these many accusations, Salameh left his post on Monday to a crowd of cheering supporters, demonstrating the deep divisions in Lebanese political society and a loyalty to leadership which has been in power since the end of the country’s civil war.
“Lebanon was ruled by a class that diminished and undermined impunity, so it is normal to see Riad Salameh leaving office without any authority questioning him or holding him accountable,” Laury Haytayan, the leader of opposition party Taqaddom, told CNBC on Monday.
Salameh, who faces two international arrest warrants and allegations of fraud, told CNBC on Monday: “It is untrue to hold me directly and solely responsible” for the collapse of Lebanon’s economy.
“The exchange policies are determined by the government and [the Banque Du Liban] applies them in every government that was elected since 1993, their target was exchange stability,” he said, referring to Lebanon’s central bank.
Salameh also pointed to the “waste and losses in the electricity sector,” subsidies, political instability and the “cost of the Syrian refugees,” as contributing factors to Lebanon’s economic decline.
To rebuild Lebanon’s post-war economy, which largely relies on remittances, Salameh offered high interest rates, attracting deposits from the vast Lebanese diaspora, which stands at almost 14 million.
In 2016, Salameh launched a financial engineering operation which combined Lebanon’s local currency and U.S. dollar deposits, attracting foreign reserves in an attempt to prop up the economy.
High interest rates on U.S. dollar deposits helped bail out Lebanon’s ailing banks, which eventually dug into the country’s own reserves, according to the World Bank.
Salameh was also the architect of Lebanon’s dollar peg, which the country still uses today, yet now the economy runs mostly on a black market system with varying rates, and is largely dollarized due to the massive devaluation of the Lira.
Lebanon’s Central Bank Governor Riad Salameh gives an interview with AFP at his office in the capital Beirut on December 20, 2021.
Joseph Eid | Afp | Getty Images
Henri Chaoul, a former advisor to Lebanon’s finance minister and to Lebanon’s negotiations with the International Monetary Fund, told CNBC that Salameh is “substantially” to blame for the country’s economic collapse.
“He had the power and the obligation to say no to two major policy pillars of the last decades: the currency peg and the monetization of the debt. And he failed at both, leading to the catastrophic collapse of the financial sector. Apart of course of all the alleged fraud and aggravated money laundering activities that he is under investigation for.”
Salameh oversaw Lebanon’s debt monetization plan, which allowed the central bank to provide financing for the government. Moody’s warned in 2019 that this could undermine the country’s currency peg and its ability to pay off debts.
Lebanon’s negotiations with the IMF have since stalled after the government failed to implement reforms required to unlock aid. The country has been without consensus on a new president, against the IMF’s demands, since October of last year.
“I think the IMF is the only choice for Lebanon,” Saidi told CNBC.
“Simply because politicians don’t have the courage and don’t have the competence and there’s too much corruption going on. They don’t want reforms because they view the reforms as not serving their own interests, the only way to move forward is to bring in the IMF that will impose conditions” Saidi added.
Military vehicles queue to launch U.S.-made TOW A2 missiles during a live firing exercise in Pingtung county on July 2023.
Sam Yeh | Afp | Getty Images
The United States unveiled a Taiwan weapons aid package worth up to $345 million on Friday, a move likely to anger China even as the Biden administration declined to publicly provide details on the arms in the package.
Congress authorized up to $1 billion worth of Presidential Drawdown Authority weapons aid for Taiwan, which strongly rejects Chinese sovereignty claims, in the 2023 budget. Beijing has repeatedly demanded the United States, Taiwan’s most important arms supplier, halt the sale of weapons to the island.
In recent weeks, four sources told Reuters the package was expected to include four unarmed MQ-9A reconnaissance drones, but noted their inclusion could fall through as officials work through details on removing some of the advanced equipment from the drones that only the U.S. Air Force is allowed access to.
The formal announcement did not include a list of weapon systems being provided.
Taiwan’s defense ministry thanked the U.S. for its “firm security commitment,” adding in a statement it will not comment on the package details due to the “tacit agreement” between the two sides.
Among the issues that could confound the inclusion of the drones was who would pay for their alterations, one of the people briefed on the matter said previously. Reuters could not determine if the drones were still part of the package.
Taiwan had previously agreed to purchase four, more advanced, MQ-9B SeaGuardian drones, made by General Atomics, which are slated for delivery in 2025.
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China views democratically governed Taiwan as its territory and has increased military pressure on the island over the past three years. It has never renounced the use of force to bring the island under its control. Taiwan strongly rejects China’s sovereignty claims and says only Taiwanese people can decide their future.
Foreshadowing the upcoming aid, Secretary of Defense Lloyd Austin on May 16 told a Senate panel: “I’m pleased that the United States will soon provide significant additional security assistance to Taiwan through the Presidential Drawdown Authority that Congress authorized last year.”
Earlier this month, the top U.S. general said the United States and its allies need to speed up the delivery of weapons to Taiwan in the coming years to help the island defend itself.
The Presidential Drawdown Authority (PDA) has been used on an emergency basis to expedite security assistance to Ukraine by allowing the president to transfer articles and services from U.S. stockpiles. The Taiwan PDA, however, is a non-emergency authority approved by Congress last year.
Republican presidential candidate, former U.N. Ambassador Nikki Haley speaks at the American Enterprise Institute on June 27, 2023 in Washington, DC. Haley’s remarks focused on the future of U.S.-China relations and her foreign policy views.
Drew Angerer | Getty Images
American companies should be ready to stop treating China as an economic competitor and start viewing it as a national security threat, Nikki Haley, a Republican presidential candidate and former ambassador to the United Nations, said Monday.
“I think China’s an enemy. I think we have to take them incredibly seriously. And the problem is, you can look at dollars and cents or you can look at a threat to America,” Haley said on CNBC’s “Squawk Box.”
“Companies and people have said for too long, ‘We’ll deal with China tomorrow.’ But China is dealing with us today. We’ve got to address this,” she added.
Haley said “every company needs to have a Plan B” in the event that China decides to “pull the rug out from under us.” She called Beijing “the biggest threat we’ve had since Pearl Harbor.”
The former governor of South Carolina also criticized Treasury Secretary Janet Yellen, who recently said the U.S. relationship with China need not be a “winner take all” contest.
“To even say that means you don’t understand China,” Haley said of Yellen.
Haley’s latest remarks build on the hawkish position she laid out last month in a Wall Street Journal op-ed, in which she vowed to push U.S. businesses “to leave China as completely as possible.”
She also urged businesses to forge stronger ties with U.S. allies, such as India, Japan and South Korea, to become less dependent on China.
Haley pointed to a series of actions taken by China’s communist leadership in recent years that she said pose a multi-layered economic and security threat to the United States. They include buying hundreds of thousands of acres of U.S. farmland, purchasing the country’s largest pork producer, floating spy balloons over America, spreading propaganda in universities, lobbying Congress through “front companies,” rapidly building up a massive naval fleet, stealing U.S. intellectual property and developing new weapons.
The Chinese Embassy in Washington, D.C., did not immediately comment on Haley’s remarks. Chinese government officials frequently insist that Beijing merely seeks a mutually beneficial, “win-win” relationship with the United States. But American diplomats privately joke that “win-win” here means China wins twice.
Haley also suggested that China’s role in the U.S. fentanyl crisis raises questions about the future of the bilateral trade relationship.
Many of the precursor chemicals that make up fentanyl originate in China before being illegally diverted to Mexico, where they are processed by cartels to create the deadly synthetic opioid. The Department of Justice has said fentanyl overdoses are the leading cause of death for Americans ages 18 to 49.
Firefighters help an overdose victim on July 14, 2017 in Rockford, Illinois.
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“I think if it means us ending normal trade relations, you go to China and say, ‘We’ll end normal trade relations until you stop killing Americans,'” she said.
Haley’s alarm-ringing on China comes as she seeks to distinguish herself in the Republican presidential primary, which has so far been dominated by former President Donald Trump.
Only one of Trump’s competitors, Florida Gov. Ron DeSantis, has consistently garnered double-digit support in national polls of the primary race. The rest of the field, including Haley, has struggled to gain traction with voters.
Haley took aim at DeSantis over his ongoing feud with Disney, which stemmed from the entertainment giant’s opposition to a controversial classroom bill in Florida. While she disagrees with Disney’s stance, “I also don’t think that governors should spend taxpayers dollars suing companies.”
Still, it is difficult to predict how forcefully criticizing China will help to set Haley, or any candidate, apart from the pack in the 2024 election cycle.
This is in large part because polls consistently show that a hawkish attitude toward Beijing is one of the few policy positions that enjoys broad support among both Democrats and Republicans.
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As President Joe Biden mounts a reelection campaign, his administration is taking a hard line against China that bears a strong similarity to those of Republicans like Haley.
FBI Director Christopher Wray testified this month that no other country presents a “more comprehensive threat to our ideas, our innovation [and] our economic security.”
Asked about the state of the Republican primary, Haley described it as a marathon, “not a sprint.”
She also said that she would support Trump if he is the eventual Republican nominee. “I’m not going to have a President Kamala Harris,” she said, a reference to the view held by many Republican voters that Biden, who turned 80 last year, is too old to be president.
The pictures posted on the Chinese company’s website show a tall, Caucasian man with a crew cut and flattened nose inspecting body armor at its factory.
“This spring, one of our customers came to our company to confirm the style and quantity of bulletproof vests, and carefully tested the quality of our vests,” Shanghai H Win, a manufacturer of military-grade protective gear, proudly reported on its website in March. The customer “immediately directly confirmed the order quantity of bulletproof vests and subsequent purchase intention.”
The identity of the smiling customer isn’t clear, but there’s a fair chance he was Russian: According to customs records obtained by POLITICO, Russian buyers have declared orders for hundreds of thousands of bulletproof vests and helmets made by Shanghai H Win — the items listed in the documents match those in the company’s online catalog.
Evidence of this kind shows that China, despite Beijing’s calls for peace, is pushing right up to a red line in delivering enough nonlethal, but militarily useful, equipment to Russia to have a material impact on President Vladimir Putin’s 17-month-old war on Ukraine. The protective gear would be sufficient to equip many of the men mobilized by Russia since the invasion. Then there are drones that can be used to direct artillery fire or drop grenades, and thermal optical sights to target the enemy at night.
These shipments point to a China-sized loophole in the West’s attempts to hobble Putin’s war machine. The sale of so-called dual-use technology that can have both civilian and military uses leaves just enough deniability for Western authorities looking for reasons not to confront a huge economic power like Beijing.
The wartime strength of China’s exports of dual-use products to Russia is confirmed by customs data. And, while Ukraine is a customer of China too, its imports of most of the equipment covered in this story have fallen sharply, the figures show.
Russia has imported more than $100 million-worth of drones from China so far this year — 30 times more than Ukraine. And Chinese exports of ceramics, a component used in body armor, increased by 69 percent to Russia to more than $225 million, while dropping by 61 percent to Ukraine to a mere $5 million, Chinese and Ukrainian customs data show.
“What is very clear is that China, for all its claims that it is a neutral actor, is in fact supporting Russia’s positions in this war,” said Helena Legarda, a lead analyst specializing in Chinese defense and foreign policy at the Mercator Institute for China Studies, a Berlin think tank.
Were China to cross the red line and sell weapons or military equipment to Russia, Legarda said she would expect the EU to enforce secondary sanctions targeting enablers of Putin’s war of aggression.
But, she added, equipment like body armor, thermal imaging, and even commercial drones that can be used in offensive frontline operations are unlikely to trigger a response.
“Then there’s this situation that we’re in at the moment — all these dual-use components or equipment and how you handle those,” Legarda explained. “I would not expect the EU to be able to agree to sanctions on that.”
Disappearing customer
Shanghai H Win, like other Chinese companies producing dual-use equipment, has enjoyed a surge in business since Russia’s full-scale invasion of Ukraine.
According to customs records obtained by POLITICO, Russia has ordered hundreds of thousands of bulletproof vests and helmets made by Shanghai H Win | Genya Savilov/AFP via Getty Images
“Because of the war, a lot of trading companies are looking for us and ask: ‘Are you making this kind of vest?’ We received a lot of inquiries,” a sales representative told POLITICO over the phone.
At first, the representative said Shanghai H Win wasn’t allowed to export directly to Russia unless the Chinese military issues a certificate and it can provide documentary proof of its final customer.
Yet when asked who the man in the pictures was, and where he was from, the representative denied that he was even a customer — even though the website said so.
“He is our customer’s customer. We cannot ask him directly, ‘Where are you from?’ But I guess maybe he is from Europe — maybe Ukraine, maybe Poland, even maybe from Russia. I’m not sure.”
Shortly after the call, Shanghai H Win took down the post featuring the mystery shopper from its website.
Who are the buyers?
So, who exactly are those customers? Evidence of deals — importers, suppliers, and product descriptions — can be found in a registry of declarations of conformity by anyone with access to the Russian internet who is familiar with international customs classifications.
In an earlier story, POLITICO searched these filings and found evidence that sniper bullets made in the United States were reaching Russia, where they were freely available on the black market.
The declarations enable the final buyer to certify that the products are genuine and, in effect, make it possible to import goods without the express consent of the maker. If goods are traded through an intermediary, the maker may not even be aware that its goods are going to Russia. The registry is, however, searchable so it’s still easy to find the ultimate buyers of the Chinese kit.
One is Silva, a company headquartered in the remote Eastern Siberian region of Buryatia. It filed declarations in January of this year detailing orders for 100,000 bulletproof vests and 100,000 helmets. The manufacturer? Shanghai H Win.
Such importers often bear the hallmarks of “one-day” firms, as shell companies are known in Russia, set up by actors who want to conceal their dealings. They tend to be new, listed at obscure residential addresses, and have few staff or assets. Their financial statements often don’t report the levels of turnover that the filings would imply.
According to public records, Silva was registered only last September. It reported zero revenues for 2022. A Google Street View search of its address in Ulan-Ude, the capital of Buryatia, takes visitors to a dilapidated apartment block.
POLITICO tried to contact Silva but the phone number given on its filings rang off the hook and a message sent to its email address bounced.
The sale of so-called dual-use technology that can have both civilian and military uses leaves enough deniability for Western authorities looking for reasons not to confront China | STR/AFP via Getty Images
Another Russian company called Rika declared a smaller shipment of body armor from Shanghai H Win in March. Before that, in January, Rika declared a consignment of helmets from a company called Deekon Shanghai, which shares an address with Shanghai H Win. The two companies are affiliated, another Shanghai H Win representative said.
A woman who answered the phone at Rika said: “We buy in Russia, not in China.” The company didn’t reply to a follow-up email from POLITICO.
The denial is hardly plausible: In addition to the protective gear, a search of declarations by Rika threw up hits for deals for thermal optical equipment from China. That was corroborated by customs data accessed by POLITICO, which revealed more than 220 shipments, worth $11 million, for thermal optics and protective equipment since the outbreak of the war. Rika advertises Chinese-made night sights right at the top of its website.
Another Russian company called Legittelekom, whose homepage reveals it to be a Moscow freight forwarding company, also appears as a buyer of 100,000 items of headgear and 100,000 suits of outerwear from Deekon Shanghai, according to filings dated last November 24.
A man who answered a call to Legittelekom declined to comment on POLITICO’s findings and would not say whether the company supplied the Russian military.
“This is a commercial activity and we do not disclose our commercial activities,” the man said in response to both questions.
Bigger deal
Then there’s Pozitron, a company based in Rostov-on-Don, the southern city briefly captured by warlord Yevgeny Prigozhin’s Wagner mercenaries in their failed uprising last month. It imported more than $60 million-worth of “airsoft helmets,” “miscellaneous ceramics,” and other items from Chinese firm Beijing KRNatural in November and December 2022, according to customs data shared by ImportGenius.
These flows check out with Pozitron’s own declarations of conformity between late October and December 2022, for a total of 100,000 helmets. The declarations also reveal that Pozitron acquired a range of drones from Chinese multinational SZ DJI Technology Co., Ltd last December.
Although the quantity is unclear, the models specified include ones known to have been used in the Ukrainian theater of war, like DJI’s Mavic 2 Enterprise Advanced quadcopter or the Mini 2 lightweight drone.
At first sight, the product descriptions in the declarations and customs records appear harmless enough — the “airsoft helmets,” for example, are said to be for use in paintball games and “not for military use, not for dual use.”
Sanctions and defense experts say, however, that it’s common practice to mislabel dual-use goods as being for civilian purposes when they’re in fact destined for the battlefield.
At any rate, Pozitron, which was only founded in March 2021, is having a very good war: Its revenues exploded from 31 million rubles — around $400,000 — in 2021 to 20 billion rubles — almost $300 million — in 2022, according to its financial statement.
Reached by email, Pozitron’s general director, Andrey Vitkovsky, said that his company has “never imported drones and similar products” from the People’s Republic of China.
“The main activity of Pozitron LLC is the purchase and sale of consumer goods, sporting goods, and fabrics, both produced in the Russian Federation and imported from China,” Vitkovsky added, saying that his company’s activities were “exclusively peaceful in nature, in compliance with all rules and restrictions.”
The denial is typical — Russian companies have good reason to fear Western sanctions if they are implicated in trade that supports the Kremlin’s war effort. After POLITICO reported in March that a company called Tekhkrim was importing Chinese assault weapons, and declaring them as “hunting rifles,” the firm was sanctioned by the United States.
Pozitron is on the West’s radar, said one sanctions expert, who was granted anonymity as they are not authorized to speak publicly.
As for Beijing KRNatural, POLITICO was able to trace a company with a similar name at the address given in the Pozitron filings. The company, Beijing Natural Hanhua International Trade Co., Ltd, is listed as a “small and micro enterprise.” It was founded in April 2022, a few months before the Pozitron deals. Nobody answered when POLITICO called.
Heavenly mechanics
In contrast to the bulk consignments of protective gear that appear intended to equip a large fighting force, the orders for drones found by POLITICO are more dispersed among different buyers — both companies and individuals.
In addition to Pozitron, buyers of drones from DJI and its subsidiaries include firms called Gigantshina and Vozdukh — neither of which responded to emailed requests for comment. Another is Nebesnaya Mekhanika (“Heavenly Mechanics”), which before the war was the Chinese company’s official distributor in Russia.
A DJI spokesperson said that the company and its subsidiaries had voluntarily stopped all shipments to, and operations in, Russia and Ukraine on April 26, 2022 — two months after the war broke out.
“We stand alone as the only drone company to clearly denounce and actively discourage use of products in combat,” the spokesperson said in comments emailed to POLITICO.
DJI said it had also broken off its relationship with Nebesnaya Mekhanika, although the Russian company filed further declarations for shipments of the Chinese company’s drones last September 15 and on March 27 of this year.
The spokesperson said that DJI was not in any way involved in the drafting of the declarations of conformity found by POLITICO: “These documents would have been filled out by Russian parties, and they do not indicate in any shape or form who ex- or imported the products that are being declared conform.”
“We have seen media reports and other documents that appear to show how our products are being transported to Russia and Ukraine from other countries where they can be bought off-the-shelf,” the spokesperson added. “However, it is not in our power to influence how our products are being used once they leave our control.”
Still, a search of ImportGenius shows that a Chinese company called Iflight has continued to ship DJI drones to Nebesnaya Mechnika via Hong Kong, care of a local company called Lotos. The most recent consignment was delivered last October 10. In an apparent anomaly, Russia is stated as the country of origin for the shipments.
Nebesnaya Mekhanika, which still advertises DJI drones on its website, did not respond to a request for comment.
Political will
The trafficking of low-tech body armor to high-tech drones and thermal optics highlights a vulnerability in the Western sanctions regime. The ambiguity surrounding the dual-use status of this equipment, coupled with the fact that a significant portion of it is manufactured in China, seems, at least for now, to have placed the possibility of the West taking meaningful action beyond reach.
Then there is the flow of technology through China that may include components made in the West that could be of direct military use.
Russia is fully aware of the China loophole and is using it to buy Western technology to fight its war against Ukraine, according to a recent analysis by the KSE Institute, a think tank affiliated to the Kyiv School of Economics. More than 60 percent of imported critical components in Russian weapons found on the battlefield came from U.S. companies, the researchers found.
It’s an issue that U.S. Secretary of State Antony Blinken brought up on a visit to Beijing last month — the first by Washington’s top diplomat in five years. He told reporters that China had given assurances that “it is not and will not provide lethal assistance to Russia for use in Ukraine.” Blinken, however, expressed “ongoing concerns” that Chinese firms may be providing technology that Russia can use to advance its aggression in Ukraine. “And we have asked the Chinese government to be very vigilant about that.”
U.S. Secretary of State Antony Blinken told reporters that China had given assurances that “it is not and will not provide lethal assistance to Russia for use in Ukraine” during a visit to Beijing last month | Pool photo by Leah Millis/AFP via Getty Images
France is also concerned that China is delivering dual-use equipment to Russia. “There are indications that they are doing things we would prefer them not to do,” Emmanuel Bonne, President Emmanuel Macron’s top diplomatic adviser, told the recent Aspen Security Forum. Pressed on whether China was supplying weapons, Bonne said: “Well, kind of military equipment … as far as we know they are not delivering massively military capacities to Russia but (we need there to be) no delivery.”
Yet there’s little the West can do to twist Beijing’s arm into halting flows of dual-use products into Russia. Only the United States would have the real power to impose an outright ban on dollar-denominated transactions — as Washington did when it sanctioned Iran over its secret nuclear program.
The EU, however, lacks such a strong sanctions weapon because the euro is far less ubiquitous on global markets. It’s also been hesitant to act. In its latest package of Russia sanctions last month, the EU compiled a list of seven Chinese companies that shouldn’t be allowed to trade with the bloc. But, after lobbying by Beijing, Brussels dropped four companies from the blacklist.
Elina Ribakova, one of the authors of the KSE Institute report, said indirect shipments via China pose challenges in terms of both the scope and enforcement of Western sanctions. Secondary sanctions may not be sufficient, she said. She called for manufacturers to be forced to take responsibility for where their products end up — just as banks were required by regulators to step up customer oversight and anti-money laundering operations in the wake of the 2008 financial crisis.
“What we can do differently is to create the same infrastructure for the corporates,” explained Ribakova, who is director of the international program at the Kyiv School of Economics. “We have to threaten them with serious fines.”
Maxim Mironov, a sanctions expert and assistant professor of finance at the IE Business School in Madrid, reckons that the West, despite expanding sanctions to punish Putin’s helpers, lacks the political conviction to enforce them against Beijing.
“Do politicians have enough will to put sanctions on China? Basically, the answer is no,” said Mironov.
“China signals: You can try, but I don’t care what you are trying to do,” Mironov added. “And the European Union is like: If you don’t like it, we are not going to do it. And if the Chinese see that, they are just going to continue doing what they think is in their best interest.”
The European Commission, the U.S. National Security Council and the Chinese Mission to the EU did not respond to requests for comment.
Stuart Lau contributed reporting.
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Sarah Anne Aarup, Sergey Panov and Douglas Busvine
When Italian Prime Minister Giorgia Meloni walks into the Oval Office on Thursday, her transformation will be complete.
Gone is the ghoulish caricature of an extremist monster, sympathetic to Moscow, whose party was descended from fascists, and in her place stands a pragmatic conservative willing to do business with a grateful international mainstream.
For U.S. President Joe Biden and Ukraine’s backers in the West, securing Meloni’s long-term commitment to the war effort is vital: Italy will assume the leadership of the G7 next year, at what’s likely to be a critical time in the conflict.
Initially, the signs weren’t good. Before she was elected last September, Meloni alarmed officials in Western capitals with her blunt brand of far-right populism. She banged the drum for nationalist causes, vowing to slam the brakes on immigration, stand up to the European Union’s leadership in Brussels and even opposed sanctioning Russia over Ukraine.
Yet 10 months since Meloni won power, the picture has changed dramatically. She will receive VIP treatment at the White House Thursday, with a welcome from Biden that will be as sincere as for any other G7 ally. While the Democrat and the far-right populist share almost nothing in their political outlooks, their handshake is likely to be one of mutual relief.
Meloni’s Foreign Minister Antonio Tajani, leader of the center-right Forza Italia party, told POLITICO that the Ukraine war had bolstered Italy’s relationship with the U.S. The Meloni government’s “three polar stars” are now the EU, the U.N. and NATO, he said.
“Italy is part of the Western alliance and wants to be a protagonist in the Western alliance and in particular in its alliance with the U.S.A.,” Tajani said. “Since the crisis in Ukraine, our relationship on issues of security and shared policy with the U.S.A. has been getting stronger.”
Putin’s pals
It is a far cry from the sort of rhetoric that had, until recently, emanated from Rome.
As leader of the hard right Brothers of Italy, she supported Putin’s strongman politics while in opposition, congratulating him after his re-election by saying “the will of the people appears unequivocal.”
After Moscow’s 2014 invasion of Crimea she repeatedly opposed sanctions against Russia, citing the need to protect Italian exports. During the pandemic Meloni endorsed Russia’s Sputnik vaccines. In a TV interview in 2022 before Russia’s full-scale invasion of Ukraine, she highlighted how essential it was to remain on good terms with Putin and accused Biden of “using foreign policy to cover up the problems he has at home.”
If Meloni seemed like a problem to Western leaders, her coalition partners were an even worse prospect. Matteo Salvini, leader of the right wing League, who once wore a T-shirt printed with Putin’s face to the EU Parliament, attempted to arrange a peace mission to Moscow with flights paid by the Russian embassy.
And Meloni’s coalition partner Silvio Berlusconi, who led the center-right Forza Italia party until his death in June, blamed Ukraine for the war and had a personal friendship with Vladimir Putin, continuing to exchange gifts with the Russian leader even after the invasion.
When she took power, there were deep, if private, fears within the White House, according to several Biden administration officials who were granted anonymity to speak candidly, that Meloni might shatter the G7 support for Ukraine.
But Meloni surprised U.S. officials at the G7 summit in Hiroshima in May with just how eager she seemed to build a strong relationship with Biden, according to two government officials who witnessed their interactions.
At the NATO summit earlier this month in Vilnius, Meloni stood just a few feet from both Biden and Ukrainian President Volodymyr Zelenskyy when the G7 nations announced additional security guarantees for Kyiv that were meant as something of a make-good after NATO declined to fast-track Ukraine’s membership.
At the NATO summit earlier this month in Vilnius, Meloni stood just a few feet from both Biden and Ukrainian President Volodymyr Zelenskyy | Odd Andersen/AFP via Getty Images
With Italy set to take over the presidency of the G7 in January, Meloni’s support for the cause has prompted sighs of relief from both sides of the Atlantic.
“The President and the Prime Minister have built a good, productive relationship as they have worked together closely on a variety of issues such as our support for Ukraine and our approach to China, and President Biden is looking forward to continuing that conversation,” said Adrienne Watson, a spokesperson for Biden’s national security council.
Pleasantly surprised
Biden has told those around him he has been pleasantly surprised by Meloni’s leadership in the war effort but is eager to get to know the Italian leader better, according to multiple administration officials.
For Alessandro Politi, Director of the NATO Defense College Foundation in Rome, Meloni “understood very quickly that when you get into government you have responsibilities and the U.S.A. is a primary ally.”
Her visit to Kyiv in February was a clear sign she was following “an orthodox path” and a moment when “she convinced the wider international community that she was in charge of the coalition and that her allies had to follow her political line.”
Meloni’s support for the Western stance does not mean the whole of Italy feels the same way.
Some populists on both the left and right of Italian politics still hold pro-Russian views, and the question of whether it’s right to send arms to Ukraine elicits fierce debate in the media. Italy’s longstanding position on Russia has always been to try to act as a bridge, facilitating good relations between East and West.
But although a majority of Italians are opposed to it, Meloni has continued to back Ukraine with military aid. Ukrainians are “defending freedom and democracy on which our civilization is based,” she told the Italian Senate in March.
While Biden and Meloni are likely to agree on Ukraine, it is not certain that they will be in harmony on all issues.
In 2019 Italy became the only G7 country to join China’s Belt and Road global infrastructure initiative. Later this year it is up for renewal, but in the new cold war climate the U.S. expects the deal to be scrapped.
While Meloni has indicated that she might not extend the agreement with Beijing, calling it “a big mistake,” this position is not yet confirmed. If she does return to the more traditional Italian line of walking a middle ground, the cracks in the Biden-Meloni relationship will open up again.
BARCELONA, SPAIN – JULY 23: A man votes at historical building of Universitat de Barcelona on July 23, 2023 in Barcelona, Spain. Voters in Spain head to the polls on July 23 to cast their votes and elect Spain’s next government. (Photo by Javier Mostacero Carrera#1102751#51C ED/Getty Images)
Javier Mostacero Carrera | Getty Images News | Getty Images
Spain’s conservative party PP [Partido Popular] is on track to lead negotiations to form a new government in Madrid, exit polls have shown, suggesting this could be the end of the socialist rule of Prime Minister Pedro Sanchez.
PP secured between 145 and 150 seats, followed by the incumbent socialist party PSOE with between 113 and 118 seats, according to initial exit polls published by RTVE. An absolute majority requires 176 seats.
In the absence of a clear majority for any of the two major parties, the focus is now heavily on who will be the third largest political force emerging from Sunday’s election. It is so far unclear if the far right party Vox came in third or fourth, given that exit polls put it neck-to-neck with the left-leaning Sumar party.
One of the biggest questions from this election is whether PP will formally join forces with Vox — potentially marking the first time that the far right would return to power since the 1975 dictatorship of Francisco Franco. Exit polls suggest that the right wing bloc could potentially have a working majority.
PP and Vox have previously joined forces to govern in three of the country’s regions, but might find it more complicated to work together at the national level.
Members of Alberto Feijóo’s conservative party have raised concerns regarding Vox’s anti-LGBT rights and anti-immigration policy. Vox has also been criticized by mainstream politicians for opposing abortion rights and denying climate change, among other measures.
The snap election was brought about by socialist PSOE’s strong defeat in regional and municipal polls in May. General elections were originally due at the end of this year.
The Sunday vote was the first to ever take place during the summer time. The extreme heat felt in different parts of the country in recent weeks may have shed light on climate policy ahead of the vote.
Pedro Sanchez has served as Spain’s prime minister since 2018. He has been criticized for pardoning politicians supporting regional independence. During his mandate, there have also been issues with the “only yes means yes” sexual consent law, which reduced the jail time of many convicted rapists through a loophole.
However, Sanchez’ economic record proved strong ahead of the vote. Spain’s economy experienced a growth rate above 5% in 2022 and is set to expand by about 1.5% this year, according to the International Monetary Fund.
Inflation in Europe’s fourth-largest economy is also one of the lowest. In June, Spain became the first economy to report an inflation rate below 2% across the region, down since the historic highs recorded in 2022, according to the country’s economy ministry. Political experts have nevertheless said the Sunday vote was more heavily focused on cultural and societal matters.
US Secretary of State Antony Blinken (L) shakes hands with China’s Director of the Office of the Central Foreign Affairs Commission Wang Yi at the Diaoyutai State Guesthouse in Beijing on June 19, 2023. (Photo by Leah MILLIS / POOL / AFP) (Photo by LEAH MILLIS/POOL/AFP via Getty Images)
Leah Millis | Afp | Getty Images
China-linked hackers breached the email account of U.S. Ambassador to China Nicholas Burns, as part of a recent targeted intelligence-gathering campaign, NBC News has confirmed.
The hackers also accessed the email account of Daniel Kritenbrink, the assistant Secretary of State for East Asia, who recently travelled with Secretary of State Antony Blinken to China, said NBC, citing two U.S. officials familiar with the matter.
CNBC reached out to China’s Foreign Ministry for comment but has yet to hear back.
The beach was limited to the diplomats’ unclassified email accounts, NBC said adding that Secretary of Commerce Gina Raimondo’s email account was also accessed in the breach, as previously reported.
The news, first reported by the Wall Street Journal, further fuels the fallout for the U.S. of the alleged Chinese hack first revealed last week.
The compromise was “mitigated” by Microsoft cybersecurity teams after it was first reported to the company in mid-June 2023, Microsoft said in two blog posts about the incidents. The hackers had been inside government systems since at least May, the company said.
The U.S. Secretary noted he made clear to Wang that Washington will ensure the hackers are held responsible for alleged breaches of U.S. government agencies.
“First of all, this is something that the State Department actually detected last month, and we took immediate steps to protect our systems, to report the incident – in this case, notifying a company, Microsoft, of the event,” Blinken said at a press briefing.
“I can’t discuss details of our response beyond that, and most critically this incident remains under investigation,” he added.
Still, Blinken said that as a general matter, “we have consistently made clear to China as well as to other countries that any action that targets the U.S. Government or U.S. companies, American citizens, is of deep concern to us, and we will take appropriate action in response.”
The visit was aimed at soothing ties between the world’s two largest economies amid escalating tensions.
Security experts have argued the incidents demonstrate an acceleration in Beijing’s digital spying capabilities.
“Chinese cyber espionage operators’ tactics had steadily evolved to become more agile, stealthier, and complex to attribute” over the last decade, researchers at cybersecurity firm Mandiant wrote in a blog post Tuesday.
— CNBC’s Rohan Goswami contributed to this report.
U.S. Climate Envoy John Kerry and China’s Premier Li Qiang attend a meeting at the Great Hall of the People in Beijing on July 18, 2023.
Florence Lo | Afp | Getty Images
BEIJING — In the third high-level U.S. official visit to China in about a month, U.S. special envoy for climate John Kerry emphasized efforts to stabilize the bilateral relationship.
“Now we’re in a place where because of the efforts of President Biden and President Xi to try to stabilize the relationship, we can now I hope, make progress between now and the meeting in the UAE, in December, of COP 28,” Kerry said Tuesday, in opening remarks at a meeting with Chinese Premier Li Qiang.
About a week earlier, Li met with U.S. Treasury Secretary Janet Yellen in the same building. In late June, U.S. Secretary of State Antony Blinken also met there with Chinese President Xi Jinping.
Blinken’s visit brought a thaw to increasingly frigid relations in which climate talks, one of the few areas of cooperation, have even seen temporary suspension.
The U.S. and China are also the world’s largest polluters. In recent weeks, global temperatures have climbed to record highs.
Our hope is now that this could be the beginning of a new definition of collaboration and the capacity to resolve the differences between us.
John Kerry
Chinese premier
The world faces great “challenges” in responding to climate change, Li said.
“It is incumbent upon China, the United States, and indeed all countries in the world to strengthen coordination with consensus and speed of actions,” he said, according to an official translation of his Mandarin-language remarks.
Earlier on Tuesday, Kerry also emphasized stability in his meeting with China’s top diplomat, Wang Yi.
“Biden is very committed to stability within this relationship and also to achieve efforts together, that can make a significant difference in the world,” Kerry said.
“Our hope is now that this could be the beginning of a new definition of collaboration and the capacity to resolve the differences between us.”
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Climate talks between the U.S. and China were temporarily suspended after then-House Speaker Nancy Pelosi visited Taiwan in August last year, drawing the ire of Beijing.
China considers the democratically self-ruled island as part of its territory.
Tensions between the U.S. and China have also spilled over into technology, with U.S. efforts to limit Chinese access to high-end semiconductor technology.
“Of course, pushing for cooperation on climate change is under the larger scope of China-U.S. relations,” Wang said, according to a CNBC translation of the Mandarin.
He said the two countries could resolve problems as long as the dialogue was based on “equality” and with “mutual respect.”
Following the latest U.S. senior official visits to Beijing, high-level Chinese officials are expected to visit the U.S. at an unspecified date.
Since arriving in Beijing on Sunday, Kerry has focused on talks with his climate counterpart Xie Zhenhua. Kerry is set to depart on Wednesday.
Parts of meetings open to the press were tense.
During the meeting with the Chinse premier, Kerry brought up a report of a 52°C (125.6°F) temperature reading in China a few days earlier. Li interjected to question whether it was from an official weather report or “small” media, and whether it was a reading from the ground or air.
“Oh. Well, it may not be,” Kerry said. He said that he’d seen the news on TV and said his point was about the rate of change and predictions for the future.
State-run China News Agency on Monday said an “automatically” recorded temperature from a local weather station showed the Sanbao township in Xinjiang reached a record high of 52.2°C on Sunday.
