ESADEgeo Daily Digest, 22/07/2019

The Guardian – Patrick Wintour / Iran crisis: what are Britain’s options in tanker standoff?

  • As Jeremy Hunt awaits a new prime minister, who will most likely be Boris Johnson and not himself, the British foreign secretary has only the lukewarm support of Europe for the UK’s decision to seize the Iranian-flagged Grace 1 in Gibraltar.
  • Although there is solidarity over Iran’s recent capture of the British-flagged oil tanker Stena Impero, the wisdom (and legality) of the original British move has been questioned. The Royal Marines landing on the vessel was the equivalent of putting a lighted match into a kerosene-laden tinderbox.
  • Hunt also has the unreliable support of an American president whose intentions towards Iran are entirely different to those of the UK and whose actions over the past years have amounted to diplomatic vandalism, according to the outgoing UK ambassador to Washington, Sir Kim Darroch.
  • In this confined space, Britain probably still wants to de-escalate the crisis. Some limited sanctions aimed at individuals in the Revolutionary Guards are inevitable, but they will not at this stage represent a return to the kind of sanctions that existed before the Iran deal, whose joint commission is due to meet shortly to discuss Iran’s suspended commitments.

Financial Times – Robin Harding / Abe fails to win two-thirds majority needed to revise constitution

  • Japanese prime minister Shinzo Abe’s chances of becoming the first man to revise the country’s pacifist constitution have suffered a serious blow after his ruling coalition fell short of a two-thirds supermajority in the upper house of parliament.
  • Final results showed Abe’s LDP winning 57 of the 124 seats up for election, similar to its showing at the last upper house poll in 2016, but down from the 66 it won in 2013 when the same seats were last up for election. Half of the seats in Japan’s less powerful upper house are elected every three years.
  • Komeito, the LDP’s coalition partner, won 14 seats. Adding those seats that were not up for election leaves the government with a comfortable majority of 141 out of the 245 seats in the upper house but short of the 164 needed for a supermajority.
  • “Various polls show that constitutional reform is an extremely low priority for the public,” said Yukio Edano, head of the Constitutional Democratic party, which gained seats and consolidated its position as the main opposition force.
  • BBC / Ukraine election: President Zelensky’s party heads for win

The New York Times – The Editorial Board / What’s America’s winning hand if Russia plays the China card?

  • Until recently, any relationship between Russia and China could be dismissed as a marriage of convenience with limited impact on American interests. But since Western nations imposed sanctions on Russia after it invaded Ukraine, Chinese and Russian authorities have increasingly found common cause.
  • Xi Jinping and Vladimir Putin have met almost 30 times since 2013. Russia recently agreed to sell China its latest military technology, including S400 surface-to-air missiles and SU-35 fighter jets. The two nations often vote alike at the United Nations and have similar positions on Iran and North Korea.
  • President Trump is correct to try to establish a sounder relationship with Russia and peel it away from China. But his approach has been ham-handed. America can’t seek warmer relations with a rival power at the price of ignoring its interference in American democracy.
  • Yet even during the Cold War, the US and the USSR often made progress in one facet of their relationship while they remained in conflict over other aspects. The US needs to explore avenues of cooperation with Russia (e.g., on arms control) and to rally its democratic allies, rather than berate them.

Foreign Policy – Adam Tooze / Why central banks need to step up on global warming

  • Central bankers are beginning to worry about the potential for climate change to trigger financial crisis. But as of yet, the central banks’ response has been defensive, focusing on managing financial risks. The rest of us have no choice but to hope that they move into a more proactive mode in time.
  • Given the increase of catastrophic risk, the insurance industry faces a basic question: who will pay. One likely outcome is that nobody in the market could afford it. Without the ability to insure against catastrophic loss, the global credit system as we know it would simply cease to function.
  • Oil remains too cheap, and ending its consumption will require deliberate government action. That is precisely what fossil fuel interests have been lobbying hard to prevent. By resisting progressive adjustment, they are courting a revolution, which is very bad news for the financial system.
  • Angela Merkel’s decision to end nuclear power generation in Germany after the Fukushima nuclear accident may be a foretaste of what’s to come. This scenario—protracted denial followed by panic-driven decarbonization—is what concerns the central bankers most of all. And it is closest to our reality.
  • Instead of focusing only on financial stability, central banks and financial regulators should be exploring what they can do to alter the course of economic growth so that the world can rapidly decarbonize and thus prevent worst-case climate change—and the related financial fallout—in the first place.
  • Foreign Policy / Who will save the planet?

The selected pieces do not necessarily reflect the views of Javier Solana and ESADEgeo. The summaries above may include word-for-word excerpts from their respective pieces.

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