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8DEC2018 – 14DEC2018

French Government Concedes, Anger Subsides

Followed by large protests that were marked by a high number of arrests on Saturday, the French government has finally granted the Yellow Vests tangible concessions. Macron’s government announced the complete cancellation of the gas tax, as opposed to its mere suspension, as well as exempting income from overtime work and end of year bonuses along with retirees making less that 2,000 Euros a month from taxation. A minimum wage increase of 100 Euros was also announced. While this seems to have defused anger on the street, these measures are expected to prevent France from reaching the deficit target of 2.8% that was agreed upon with the EU, as these concessions are expected to cost about 10 billion$. To make matters worse, the French Retail Federation estimated that the protests cost retail about 1.13 billion$ so far, so if one thing is clear to the French government it’s that the protests cannot continue. Italy’s reaction to France violating its fiscal target will be interesting to see in the coming weeks, as Italy negotiates with the EU over her own budget.

“What did you call me? Nebulous?”

Video footage of an angry Theresa May confronting Jean-Claude Junker, the President of the EC, would make one think that being called nebulous was the worst thing that happened to May this week. A casual observer would be shocked to learn that just days before, the Prime Minister survived a leadership challenge from within her own party and was faced with the almost certain defeat of her current Brexit deal in parliament. A bad situation was made worse by the EU’s intransigence in renegotiating the deal or even giving reassurances about the temporary nature of the backstop, as well as rising voices at home demanding a second referendum. The proposition of another vote has been made all the more appealing by the European Court’s recent declaration that the UK can unilaterally reverse Article 50, thus making it a possibility to end Brexit with the stroke of a pen.

Old friends rekindle a relationship

On the heels of Russia announcing 6 billion$ worth of investments in Venezuela 2 weeks ago, two Russian strategic bombers landed in Venezuela this week to hold 5 days of joint air training exercises. This exercise happened amid loud rumors that Russia was considering a permanent deployment of these bombers in Venezuela, a rumor which was met with loud condemnation by the US. While the bombers have indeed returned to Russia, under the banner of ‘training accomplished’, Russia is signaling that she too can mess around the US’ neighborhood. While not a threat to the US by any metric, a Russian presence in South America can force the US to expend more resources in countering it, thus hitting the American pocketbook at little expense for Russia. It’s important to monitor any other Russian moves in South America as tensions between the Russians and Americans increase.

Bad gets worse for Huawei

The Chinese reaction to the arrest of Huawei’s CFO is quite a mixed bag. It is both muted and strong, both confrontational and appeasing. For while China has signaled to investors that they will be safe in China and that there will be no retaliatory arrests of executives, two Canadian citizens (who are not part of the business community) were still arrested by Chinese authorities. Moreoever, the US-China trade truce seems to be proceeding as if nothing has happened with China returning tariffs on car and car parts back to pre-trade war levels. (From 40% to 15% on cars). Trump, on his side, has also signaled his intent to help with the Huawei CFO case who is now released on bail and is awaiting trial. However, there are more signs that the truce is going to be short-lived than not. A recent DoJ report states that China is involved in 90% of all espionage and Industrial Secrets theft in the past 7 years. To make matters worse, in addition to the four nations that have already banned Huawei from their 5G networks, Canada, France, the UK, and now even Germany’s Deutsche Telecomm are considering restricting Huawei from their 5G networks in some way. This is despite the German government signaling earlier this week that ‘no one’ will be barred from participating in their 5G network.

Tensions in Israel

Israel can’t seem to catch a break. As Gaza died down in the past month, Israel announced an operation on its Northern Border in the hunt of tunnels thus increasing tensions in the North. And as tensions in the North simmered, the West Bank boiled over. In the past few days, 4 attacks have been conducted against Israeli security forces and citizens in the West Bank, with one even occurring in Jerusalem. This wave of attacks resulted in 14 injuries and 4 deaths, 2 of these deaths IDF soldiers and the other 2 a mother and her newborn. Israel responded with a massive security operation in the West Bank accompanied with waves of mass arrests. This resulted in protests in the West Bank and Gaza as well as inter-Palestinian violence. While it increasingly seems that Israel is surrounded on all sides, it’s not all bad news as the Head of the IDF Intelligence Unit reported a reduction in Iranian activity in Syria, presumably due to unrest and financial strain caused by sanctions.

A ray of sunshine for Yemen?

For the first time in years, conflict-ridden Yemen seems to have caught a break. UN-sponsored negotiations have resulted in the announcement of a ceasefire in the port-city of Hodeida, the opening a humanitarian corridor in Taiz, the re-opening of Houthi-controlled Sanaa airport for flights (as long as they’re inspected in a coalition airport), and a prisoner swap. This step towards peace is due to both realities on the ground and the push by external supporters of both sides for peace. Iran, on one hand, is seeking to draw down in theatres that are non-essential for her geopolitical strategy while the US’ appetite for this war has soured. However, the reality on the ground remains that Saudi Arabia cannot tolerate an Iranian backed presence on her border, so while this is a good sign it may be premature to declare peace for our time. Indeed, reports of sporadic fighting in Hodeida have emerged despite the announced ceasefire.

Weather Team

Hurricane season ended quietly with 15 named storms in the Atlantic and 33.8 billion in damages from the beginning to June to the end of November. We still continue to monitor several storms across the globe. Check out our article on GN.W for a summary of the 2018 Atlantic season You can find it at: Please submit applications to the weather team through an official moderator.

Assorted Headlines

  • New Missile Corvette for the Russian Black Sea Fleet. New Patrol boat also expected to join before 2019.
  • Armenian ‘My Step’ party wins 70.4% of vote in snap elections. New government cracking down on former Armenian leaders and opening dialogue with the West. Armenia still firmly pro-Russia, but less so.
  • Japan to allow tens of thousands of foreign workers to come to the country due to her aging population. This is notable given Japan’s aversion to immigrants.
  • New Japanese Defense Plan calls for a record 240 billion$ in military spending over the first 5 years. This is another step away from Japan’s pacifist constitution, as Japan gears up against a resurgent China.
  • The US announced new sanctions against North Korea.
  • John Kelly to leave White House by the end of the year.
  • Qatar has sent its foreign minister to the GCC, making Qatar the only nation not to send her head of state. This is in line with Qatar keeping her options open despite tensions with the rest of the GCC still being high.
  • Lebanese Intelligence announces the foiling a large plot by Idlib based terrorist groups meant to target Christian places of worship.
  • The Turkish Presidency has claimed that the Saudi Consul was directly involved in the Khasoggi killing. This is another chapter in the escalating Turkish-Saudi rivalry over the heart and mind of the Sunni world.
  • Oman officially allows Israeli commercial jets to use her airspace.
  • Saudi-Pakistani ties are warming up, as the Saudi government declared an increase to the quota of Pakistani Hajjis it will now allow into the country. This is on the heels of Saudi Arabia increasing its investment in Pakistan weeks ago.
  • The US has conducted its second successful test in the past 2 months of the US-Japan made SM-3 BlockIIA, which intercepts medium range ballistic missiles. This weapon system has failed 3 tests last year.
  • A terror attack occurred in Strasbourg, France.
  • EU/Japan trade deal approved by the Japanese Houses, and set to go into effect early next year.
  • The Kosovar parliament has confirmed its intent to create an army from her Security forces.
  • The European Central Bank has formally ended its post-2008 QE program.
  • Chinese court rules against Apple in lawsuit by Qualcomm, thus banning certain Apple products from being sold in China.
  • EU unanimously extends sanctions on Russia for another 6 months. No new sanctions announced.

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