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Jan 30, 2023 View in browser
 
POLITICO Global Insider

By Ryan Heath

Follow Ryan on Twitter | Send tips and insights to rheath@politico.com

The Week Ahead

UKRAINE PUSHES FOR FIGHTER JETS: Following successful tank delivery negotiations,Kyiv now wants fighter jets from the West soon, Ukrainian Prime Minister Denys Shmyhal told POLITICO’s Suzanne Lynch. Shmyhal said he knows training Ukrainian pilots to use Western jets could take “six months or longer.” Read the full interview here.

Pentagon warms up to jet deliveries: “A contingent of [U.S] military officials is quietly pushing the Pentagon to approve sending F-16 fighter jets to Ukraine,” a group of my colleagues report. A senior U.S. defense official said: “I don’t think we’re opposed.”

Ukraine’s EU membership timeline: Shmyhal told POLITICO, ahead of an EU-Ukraine summit on Friday, that Kyiv is aiming for full EU membership in 2025, which many European capitals think is unrealistic.

BLINKEN IN MIDDLE EAST: Secretary of state Antony Blinken is in Jerusalem today, before heading to the Israel-occupied West Bank to meet Palestinian leaders Tuesday. Blinked kicked off his three-day Middle East swing in Cairo Sunday, including a meeting with young activists.

HARD OR SOFT LANDING: Inflation may have peaked but it is not under control — and there’s no agreement among economists on how to get it there.

Trying too hard, too quick to bring down inflation would likely trigger recession. Expect a 0.25 percent interest rate rise when the Federal Reserve Board’s two-day meeting, starting Tuesday. On Thursday the European Central Bank and Bank of England will announce their rate decisions.

CZECHING A LOT OF BOXES: 61-year-old former NATO Commander Petr Pavel is the new Czech president. Winning 58 percent of votes in second-round voting, the pro-Western centrist easily defeated his populist Moscow-friendly rival former prime minister Andrej Babiš, a wealthy businessman who was recently acquitted on charges of defrauding the EU.

Priorities: Among Pavel’s first calls today: the presidents of Ukraine and Taiwan

Watch: Global Insider’s most recent interview with Pavel here, from his time as chair of NATO’s military committee.

 

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GLOBAL RISKS AND TRENDS

ENERGY — CHINA REOPENING WILL KEEP PRICES HIGH: As China started gradually reopening its economy after nearly three years of severe Covid restrictions, Brussels and European national capitals cheered. It reminded Global Insider of their initial reaction to the U.S. Inflation Reduction Act.Europe’s war-battered economy needs help, so it was no surprise that in both cases the underlying sentiment was: Finally, economic help is on the way! Finally, the world is moving towards our way of thinking!

Reality check: A kick-started Chinese economy may be good for global growth, but it’s also bad for European energy prices. The energy appetite of China’s businesses could reduce the non-Russian energy supplies available to Europeans on global markets, with the International Energy Agency saying last week. “China will drive nearly half this global demand growth,” meaning oil demand could surge by about 2 million barrels per day.

Japan’s Ambassador to the EU Yasushi Masaki warned in an interview with POLITICO that the G-7’s price cap on Russian oil — put in place before China reopened its borders early January —could also change market fundamentals “dramatically.” And then there’s the problem of China experiencing record low temperatures in some regions this month, further spiking demand.

Ups and downs: A lot of that demand will be met by Russia, which is selling oil at discounted rates to China. While Europe isn’t competing for that oil because sanctions prevent it from doing so, European firms will have to compete against Chinese firms with access to that discounted oil: a competitive advantage for China.

CLIMATE — DO BANKS NEED MORE OF A CLIMATE CHANGE? The world’s biggest banks might need to pick up the pace of their green transitions, according to a new Federal Reserve paper, part of an “international finance discussion papers” series.

Thirty of the world's major banks — 13 in North America, 10 in Europe and seven in Asia — have committed $1.2 trillion a year on average in new green financing. But if they keep financing projects at that pace, they’ll hit $33.6 trillion in new financing by 2050: Only about a quarter of what the report authors estimate is needed to get to net zero emissions.

TRADE — AN AGREEMENT NOT ABOUT FREE TRADE: Washington will launch economic talks partnering with 11 nations in Latin America, but without providing any increased access to American markets. The U.S. goals include locking in higher labor standards — part of the administration’s effort a foreign policies that support the middle class — and officials hope to conclude the Latin American talks, and similar talks for an Indo-Pacific Framework by end 2023, per Jose Fernandez, the State Department’s Under Secretary for Economic Growth, Energy and the Environment.

The diplomat securing responsibly sourced critical minerals: Fernandez is also leading Biden administration efforts, in coordination with U.S. allies, to do deals with mineral-rich countries to secure vulnerable supply chains for EV batteries and renewables.

TRADE — REPUBLICAN PRIORITY IS INCREASING CHINA EXPORT CONTROLS: House Foreign Affairs Chair Michael McCaul sat down with POLITICO’s Gavin Bade to discuss his committee’s approach to the U.S.-China economic relationship. The Texas Republican said his “biggest priority would be enforcing and heightening our export controls — that being: Stop selling technology to China that they can put in their advanced weapons systems.” [More details available for Pro subscribers.]

TECH — JAPAN, NETHERLANDS AGREE TO CHIP CONTROLS: Speaking of export controls,Japan and the Netherlands are joining the U.S. in restricting exports of advanced chip-manufacturing equipment exports to China as key chip production allies work to slow China’s military development. While Japan now produces only 1 in 10 of the world’s chips, the Netherlands is the source of most of the equipment that is used to produce the fastest chips.

DRC — WHERE THE VATICAN CAN TOPPLE GOVERNMENTS: On Tuesday, Pope Francis will arrive in Kinshasa for the first papal visit to Congo in 38 years. That matters because the Catholic Church is in many ways the most stable and functional institution in the country, and counts around half of the 96 million population in its ranks, reports Louise Callaghan:

“The church played a major role in bringing down President Joseph Kabila, an authoritarian who had ruled DRC since 2001,” writes Callaghan, using the abbreviation for the country’s formal name — Democratic Republic of Congo. “Now the Catholic church is taking aim at the government that replaced him — accusing it of widespread corruption and incompetence.”

ZAMBIA — POPULAR WITH ECONOMIC OFFICIALS. WHY? Treasury Secretary Janet Yellen and IMF Managing Director Kristalina Georgieva both happened to be in Zambia on the same day last week, but didn’t meet. What a coincidence!

Atlantic Council’s Josh Lipsky thinks that Yellen and Georgieva had a specific mission: “They want to push China to accept a (debt) restructuring deal" — in order to show that the G-20’s new framework for helping struggling countries with debt problems can work. In other words, they wanted to coordinate, but not too much.

SAUDI ARABIA — FREEDOM FOR SOME, WITH A PRICE: "The festivals, the parties, the loosened social restrictions all come at a price: complete obedience and devotion to MBS” a.k.a the prime minister and Crown Prince Mohammed Bin Salman, reported The Times of London.

GLOBETROTTERS

HARRIS HEADED TO MUNICH: Vice President Kamala Harris will mark the Ukraine war’s one-year mark at the Munich Security Conference mid-February.

AUSTRALIAN MULTI-BILLIONAIRES IN A SOLAR AND CLIMATE FACE-OFF: For years Australia’s energy debate was dominated by whether or not to continue mining coal, with coal interests usually winning. Now the country’s highest-profile billionaires, mining magnate Andrew Forrest and tech founder Mike Cannon-Brookes, are plowing billions into a battle over whether solar and green hydrogen will come to dominate Australia’s grid.

BBC ARABIC RADIO GOES OFF AIR AFTER 85 YEARS: The curtain has closed on BBC’s oldest global radio network. BBC Arabic radio was the first foreign language branch of the British Empire Service, broadcasting from 1932. Around 400 jobs have been cut as part of the cost-saving initiative.

JFK AIRPORT BECOMING A SOLAR MICROGRID: 13,000 rooftop panels at New York’s JFK Terminal 1 will make the aviation hub’s newest terminal the largest solar facility at any American airport.

KLEPTOWATCH

SECOND U.N. OFFICIAL FIRED IN LOANS SCANDAL: The United Nations has fired a senior official, Vitaly Vanshelboim, following an investigation into a financial scandal that is likely to force the U.N.’s Office for Project Services to write off more than $20 million in dodgy loans as bad debt. The scandal was first reported by development news agency Devex in mid-2022. Vansehlboim, who is Ukrainian, promotes himself online as a "serial overachiever in global executive level management."

U.S. SANCTIONS SERBIAN POLITICIANS: Former Serbian National Assembly Representatives Verica Radeta and Petar Jojić have been designated by the State Department as ineligible to enter the United States. Spokesperson Ned Price said that while serving in Parliament they “bribed and intimidated witnesses scheduled to appear before the International Criminal Tribunal for the former Yugoslavia to dissuade them from offering incriminating evidence against Serbian Radical Party leader Vojislav Seselj, who was subsequently convicted of war crimes.” Jojić’s adult son, Gojko Jojić, was also sanctioned.

BRITISH LAW FIRM USED BY RUSSIAN MERCENARY INVESTIGATED: Known as “Putin’s chef,” the controlling force behind the Wagner Group of mercenaries, Yevgeny Prigozhin, instructed the U.K.’s Discreet Law to bring defamation proceedings against Eliot Higgins, the founder the investigative publishers Bellingcat. “This legal action was revenge for Bellingcat’s articles on Prigozhin being cited in EU sanctions against him,” Higgins tweeted.

Prigozhin’s case was dismissed, but Higgins’ legal team has initiated a complaint to Britain’s Solicitors Regulation Authority claiming the case was “an obvious case of strategic litigation against public participation.”

MOVES

Salesforce is shaking up its board: After firing thousands of workers, two long-time board members joined the list of departures: Sanford Robertson and Alan Hassenfeld. Their replacements: ValueAct Capital CEO Mason Morfit, Mastercard CFO Sachin Mehra and Arnold Donald,a former CEO of Carnival.

Chris Fenton has joined the Third Way national security team’s US-China Digital World Order Advisory Board.

 

LISTEN TO POLITICO'S ENERGY PODCAST: Check out our daily five-minute brief on the latest energy and environmental politics and policy news. Don't miss out on the must-know stories, candid insights, and analysis from POLITICO's energy team. Listen today.

 
 
BRAIN FOOD

VIDEO: The life of an ambassador's wife in Burkina Faso, by Theresa Traore Dahlberg.

SHORT READS

MCKINSEY MISSTEPS POINT TO INDUSTRYWIDE MESS: Bloomberg’s Adrian Wooldridge on what he argues are fundamental flaws in a nearly trillion-dollar-a-year industry.

A FOREVER LABOR SHORTAGE? The link between cyclical inflation and structural effects of an aging population, by Ethan Wu. 

Thanks to editor Heidi Vogt, Allison Prang, Daniel Lippman, Stuart Lau and producer Hannah Farrow

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