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24 June 22. Australia, India target bolder military, defence industry ties. The Indo-Pacific partners have committed to building on established mechanisms designed to bolster defence cooperation and improve links between the nations’ industrial bases.
Deputy Prime Minister and Minister for Defence Richard Marles has met with Indian counterpart Raksha Mantri Shri Rajnath Singh in New Delhi to review existing defence cooperation activities between the nations, which have ramped up amid growing instability in the Indo-Pacific.
The ministers renewed their commitments to the India-Australia Comprehensive Strategic Partnership, welcoming the “diversity and frequency” of joint defence exercises and exchanges, which they’ve agreed to further strengthen via the India-Australia Mutual Logistics Support Arrangement.
Marles and Singh also committed to enhancing the India-Australia Joint Working Group (JWG) on Defence Research and Materiel Cooperation, which aims to bolster collaboration between the nations’ defence industries.
The JWG is scheduled to meet in Australia later this year to explore opportunities to increase the resilience of supply chains and deliver capabilities to respective defence forces.
Further, the pair welcomed a plan to commence the General Rawat Young Officer Exchange Programme later this year, announced during the virtual summit meeting between former prime minister Scott Morrison and Indian Prime Minister Narendra Modi in March.
In light of China and North Korea’s continued violations of international norms, Ministers Marles and Singh reiterated their shared goals of an “open, free, inclusive, prosperous and rules-based Indo Pacific region”.
The meeting between the pair comes just weeks after a Royal Australian Air Force P-8A Poseidon aircraft flew to India for a combined India-Australia maritime surveillance exercise in the Indian Ocean.
The initiative aimed to strengthen operational maritime domain awareness, enhance anti-submarine warfare manoeuvring, and improve interoperability.
Just months earlier, an Indian Navy P-8I aircraft was deployed to the Top End. The Indian aircraft conducted coordinated exercises alongside a RAAF P-8A Poseidon aircraft from 11-15 April off the coast of Darwin.
The combined training, which marked the first time an Indian P-8I has deployed to Australia outside of a routine military exercise, sought to further strengthen bilateral defence ties between the Quad partners.
Activities included surveillance, anti-submarine warfare and interoperability drills. India is scheduled to participate in Australia’s Indo Pacific Endeavour exercise in October 2022. (Source: Defence Connect)
23 June 22. Menat: Security Vacuum.
Key Takeaways
- Moscow’s difficulties in maintaining two active frontlines simultaneously, in Ukraine and Syria, have emboldened an opportunistic Turkey to launch a renewed military offensive in northern Syria. The military action threatens to further destabilise the wider regional security environment.
- While Moscow is highly unlikely to fully withdraw from Syria militarily, a protracted war in Ukraine will result in a diminishing Russian foothold in Syria in the short term. This will likely cause Syria to reconsider the long-term viability of Russian military and financial support and provide opportunities for Iran to expand its regional influence.
- The spillover effects of increased military action in Syria, vis-à-vis a weakened Russian presence will impact bordering countries, such as Israel and Jordan. Ahead of the peak summer tourism season. This will negatively affect regional tourism and hospitality sectors, which have already been hit hard by the Covid-19 pandemic.
- Cross-border insecurity will also elevate reputational and regulatory risks for businesses due to the likely infiltration of organised crime and smuggling groups with local contractors or government officials, who seek to exploit existing supply chain routes and logistics companies.
Context
International and local news reports over the past month have confirmed the redeployment of Russian troops from Syria to bolster forces in Ukraine. This has prompted concerns of a broader Russian disengagement from Syria and its ability to maintain a military presence, with over 63,000 troops deployed since September 2015. Russia is suffering from manpower shortages and force regeneration challenges in Ukraine, apparently forcing its leadership to reconsider its ability to carry out campaigns on multiple fronts. This is in part due to the casualties sustained, as well as resupply issues. Notably, Russian armed forces started to use Soviet-era anti-ship Kh-22 rockets on land targets in June, highlighting the use of less advanced weapons due to diminishing stocks. Therefore, the attritional warfighting in Ukraine increases the likelihood of a reduced Russian presence in the Middle East in the short term, highly likely to destabilise regional security dynamics.
Syria and the wider region’s insecurity will be exacerbated by a reduced Russian military presence
Moscow’s entrenched engagement in Ukraine has presented a suitable opportunity for Turkish President Recep Tayyip Erdogan to advance foreign policy goals and seek to boost popular nationalist support ahead of presidential elections next year, with Ankara announcing a new military offensive in northern Syria in late May. Notably, a similar operation failed in 2021 after Russian and US diplomatic pressure. The development also comes after Turkey spearheaded a renewed offensive in northern Iraq against the Kurdistan Workers’ Party (see Sibylline Situation Update Brief – 27 April 2022). Whilst there have been no signs of a significant military build-up by the Turkish army along the Syrian border in recent days, reports of rocket and artillery fire in recent weeks have increased in frequency, pre-empting a possible resurgence in military action beyond the initial cross-border parameters of previous offensives. As a result, the intervention will significantly complicate dynamics within areas occupied by Turkey in Syria and is likely to undermine international counterterrorism efforts against the Islamic State in the short to medium term.
Distracted by the war in Ukraine, Moscow may allow Iran to have greater operational mobility in Syria. For instance, Tehran may move more missiles and increase its presence at the Imam Ali military base. Additionally, the recent deterioration of diplomatic relations after Russian Foreign Minister Sergei Lavrov’s comments on Hitler’s “Jewish blood”, has increased the likelihood of limitations to the Israeli Airforce’s freedom of operation via a security coordination “deconfliction mechanism” between Moscow and Tel Aviv.
Amid the possibility of greater influence by Iran and its proxies, limitations to operating within Syria’s airspace will significantly elevate cross-border risks for Israel, heightening the volatility in the security outlook along Syria’s southern border in the near term. Israel’s unwillingness to lose its operational superiority is, therefore, likely to trigger an uptick in Israeli air operations, as well as increasing the likelihood of assassinations against Iranian targets in Syria. This will likely drive increased tit-for-tat hostilities between Iran and Israel “shadow war”, with a realistic possibly of resulting in additional cyber attacks and threats to Israeli citizens in the coming weeks (see Sibylline Alert – 14 June 2022).
Iranian influence will grow in Syria, compounding economic deterioration in neighbouring countries
Earlier in May, Syrian President Bashar al-Assad made an unscheduled visit to Tehran, meeting with Supreme Leader Ayatollah Ali Khamenei and President Ebrahim Raisi. This marked the second trip by the Syrian president to Iran since the beginning of the war in Syria in 2011, indicating an objective to strengthen bilateral ties. Moreover, Iran has also been helping Syria to address its fuel shortages over the past year, further expanding Tehran’s economic outreach. Iran has become Damascus’ main fuel supplier since the Russian invasion of Ukraine in February. The protracted conflict in Ukraine will continue to challenge Russia’s presence and influence, resulting in additional outreach opportunities for Iran, as well as its proxies, in the coming months. In the longer term, while President Assad’s support for Russia will continue, he will need to increasingly balance ties between Tehran and Moscow’s strategic aims in Syria.
The prospect of greater Iranian influence in Syria has also raised concerns among neighbouring countries, as outlined by Jordan’s King Abdullah II bin Al-Hussein in an interview on 18 May. Over the past year, Amman has faced significant security challenges due to a sustained uptick in drug trafficking and smuggling, often driven by contributions by Iranian-aligned militias. Therefore, a security vacuum resulting from a diminished Russian military presence in Syria’s bordering areas will likely compound existing challenges for Jordan, further straining the country’s ability to respond to the trafficking of illicit goods. Furthermore, reopening of the Nasib-Jaber crossing in September 2021, following a lengthy closure caused by the Covid-19 pandemic and violent clashes in Daraa near the Syrian border, signalled the resumption of cross-border trade, connecting Europe, Turkey and the Gulf. Any escalation in Syria involving Israel or Iran-backed proxies will likely trigger a border re-closure. This will affect regional supply chains and threaten Jordan’s projected 2.1 percent GDP growth in 2022, based on an economic recovery of the tourism and services sectors.
Forecast
After Erdogan’s military intervention announcement, Russia reinforced its existing troop presence in northern Syria in Ayn Issa, Tel Tamir, Manbij, Kobane and Qamishli over the past weeks, highlighting that Moscow has not made major changes to its redeployment. However, should Turkey go ahead with its intervention in northern Syria, Russia will face significant operational challenges in providing military support to Damascus. This is complicated by the current closure of the Bosphorus and Dardanelles Straits, which will prevent Russian forces from providing naval support, as will the closure of Turkish airspace to Russian civil and military aircrafts, which has been effective since April. Despite being a longstanding ally of Russia, it is increasingly likely that President Assad will reconsider the long-term viability of Russian military and financial support, and will consequently seek to diversify Syria’s alliances in the future.
Notably, Russia could respond to a Turkish incursion in northern Syria asymmetrically by banning Turkish imports or temporarily shutting the TurkStream pipeline, which would result in significant economic knock-on impact on Turkey. However, there is a realistic possibility that a Turkish intervention will not significantly affect the transactional relationship between Moscow and Ankara. Russia’s geopolitical position and its current economic strains, exacerbated by western sanctions, diminish the possibility of Moscow taking drastic measures.
Over the past weeks, two recent attacks in Syria attributed to Israel, including one that damaged the Damascus International Airport on 10 June, have triggered a diplomatic response by Russia. According to news reports on 19 June, Moscow started drafting a UN Security Council resolution to condemn the attacks, warning they undermine regional stability and Syria’s sovereignty. While Russia is unlikely to garner a majority for its resolution, the development underscores the possibility that an increase in Israeli air strikes in Syria will further deteriorate existing diplomatic tensions between Israel and Russia. Any increase in retaliatory attacks in the coming weeks and months will also heighten risk of miscalculation and collateral damage from missile and drone strikes.
Should greater operational freedom by Iranian-aligned militias in areas bordering Syria result in higher levels of drug trafficking, rising levels of criminality and drug-related offences, these are likely to hinder the post-pandemic recovery of industries such as the tourism and hospitality sectors. This impact will be particularly costly for the peak summer holiday season, considering potentially reduced visitor interest due to perceived physical security risks. Notably, this will be crucial for neighbouring countries such as Jordan with its economy relying upon the status of a safe tourist destination, however, its position as a popular trading route for illegal cross-border trading will threaten to jeopardise Jordan’s reputation.
Similarly, in Turkey, an escalation in the “shadow war” between Israel and Iran, will sustain negative impacts to the tourism industry due to the recently foiled incidents targeting Israeli citizens in Istanbul and amid concerns over the spillover effects along the Syrian border in proximity to popular tourist areas along the Mediterranean-facing coast. Moreover, foreign businesses based in, or planning staff travel to, the region will face greater reputational and regulatory risks on the ground, should organised crime groups partner with local contractors or government officials in the coming weeks and months. Instability will further foster increasingly porous borders with Syria, which will heighten the likelihood of smuggling organisations exploiting common supply chain routes. This will present security, regulatory and reputational risks for logistics and transport companies operating in the region. (Source: Sibylline)
23 June 22. India: Risk of domestic unrest elevated in Maharashtra as local government likely to fall. On 23 June, a set of rebel ministers of the local Shiva Sena party of Maharashtra led by their leader Eknath Shinde claimed they held the numbers to topple the ruling alliance led by Shiva Sena party supremo Uddhav Thackrey. Shinde even said it was natural for his “new Shiv Sena” faction to form an alliance with the Bharatiya Janta Party (BJP) that is the main opposition party in Maharashtra. If the BJP were to come to power through an alliance with Shinde’s faction, it would increase its vote share in India’s national parliament, making it politically stronger. However, with Thackrey still commanding loyalty with sections of the local public, the risk of domestic unrest in the state remains high if indeed his government were to fall raising security risks for bystanders. There already exists a heightened police presence in Mumbai in anticipation of protests. (Source: Sibylline)
23 June 22. Iraq: Rocket strike highlights sustained threat towards energy infrastructure and personnel. On 22 June, a Katyusha rocket targeted Iraq’s Khor Mor gas field in the Chamchamal district, though there were no reports of substantial damage or casualties. At the time of writing, no group has claimed responsibility on Khor Mor, which is notably owned by the UAE-incorporated energy company Dana Gas. In recent weeks, there has been a sustained uptick in the number of targeted attacks against critical infrastructure in the Iraqi Kurdistan region. Northern provinces continue to represent a hotspot for competition between Iran-backed and Kurdish militia groups over political influence. Moreover, the attack of the UAE-owned facility underscores the sustained threat to foreign assets, echoed by the alleged targeting of Abu Dhabi by the Iraqi-based Alwiyat al-Waad al-Haq in February in retaliation for the normalisation of ties with Israel. Therefore, energy infrastructure will remain susceptible to attacks in the coming weeks against the backdrop of Iraq’s volatile domestic stability. (Source: Sibylline)
22 June 22. Egypt: Budget approval will reduce long-term policy risk despite concerns over deficit hikes. On 21 June, Egypt’s parliament approved the 2022/2023 state budget set to come into force from 1 July. The fiscal plan will increase government spending from EGP 1.79trn to EGP 2.07 trillion (USD 111bn), with the budget deficit rising by 14.5 percent. Several ministers expressed concern over shortfalls in the budget, noting that the agricultural sector remains underfunded despite Egypt’s deepening food insecurity. Socio-economic pressures, exacerbated by the Covid-19 pandemic and the ongoing Ukraine conflict, continue to drive anti-government sentiment, with austerity reforms remaining unpopular among the electorate. Nevertheless, Egypt’s budgetary approval increases the likelihood of third-party monetary support from the International Monetary Fund, thus improving Egypt’s long-term macroeconomic outlook. Moreover, the budget approval reduces overall policy risk and political instability, helping Egypt’s establishment of trade agreements with regional partners in the energy, food, and fintech sectors, addressing immediate investor concerns over national energy supplies. (Source: Sibylline)
21 Jun 22. Canada will spend billions of dollars to upgrade continental defence. Canada will spend $3.8bn over the next six years to modernise its continental defences as part of its alliance with the United States through the North American Aerospace Defense Command (NORAD) and “to protect Canadians from new and emerging threats,” Defense Minister Anita Anand announced on Monday.
“The threat environment has changed. As our threats evolve, so must our defensive capabilities,” she told reporters on a base of the Canadian Armed Forces. “What we aim to do with this announcement today is to ensure that we, across the board, are engaging in the most significant and relevant upgrade to Canadian NORAD capabilities in almost four decades.”
As part of the upgrade, Canada will construct a new radar-warning system to detect “who or what is entering Canadian airspace from the north,” as per a news release from the Department of National Defense.
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Canada will also put in place a nationwide system called “Crossbow” to spot incoming threats and buy updated air-to-air missiles that can attack threats at short, medium, and long ranges.
The NORAD revamp also includes a space-based surveillance system that can identify threats from around the globe.
As per the military minister, the Canadian government will invest about 31 bn dollars over the next two decades to strengthen its continental and northern defensive systems. (Source: Google/https://www.bolnews.com/international/2022/0)
21 Jun 22. Syria: Deadly attacks illustrate the volatility of overall security landscape despite high-level IS captures. On 20 June, Syria’s Ministry of Defence confirmed that at least 11 soldiers and two civilians were killed during a targeted attack on a civilian bus travelling through the al-Jira area on the Raqqa-Homs motorway. In parallel, the Syrian Observatory of Human Rights (SOHR) reported that Islamic State (IS) militants had carried out a deadly attack on a military bus in the Jabal al-Bashari area of Raqqah on the same day, killing at least 15 soldiers. The targeting of a civilian bus highlights a concerning shift away from militants primarily targeting military personnel. Moreover, despite the US capture of a senior IS leader in Raqqa on 16 June (see Sibylline Daily Analytical Update – 16 June 2022), militants will continue to exploit state insecurities and emerging political vacuums by competing for territorial control against government forces and Iran-backed militia. Such conditions will sustain the uptick in sporadic attacks, driving Syria’s volatile security environment. (Source: Sibylline)
21 Jun 22. Israel: Return To Polls.
EVENT
On 20 June, Israeli Prime Minister Naftali Bennett and Foreign Minister Yair Lapid announced they would submit a bill to the Knesset to dissolve parliament as soon as tomorrow, 22 June. If passed, the bill will trigger new elections, with Lapid set to assume the role as caretaker prime minister until a new government is sworn in.
SIGNIFICANCE
- The bid to trigger Israel’s fifth elections in less than four years represents efforts by coalition leaders Bennett and Lapid to break months of political deadlock amid ideological divisions, particularly between right-wing and Arab members in the Ra’am and Meretz parties.
- Opposition parties have repeatedly attempted to destabilise the governing coalition and form an alternative right-wing government over the past months, including by opposing the renewal of legislation which extends the application of Israeli law to Israelis living in the West Bank, set to expire at the end of June. Last week, the Netanyahu-led right-wing bloc warned that it would submit its own bill to dissolve the Knesset, pre-empted by the recent announcement from coalition leaders.
- The announcement follows several resignations of the eight-party coalition in the past months, with the most recent being that of Nir Orbach from Bennett’s right-wing Yamina party on 13 June (see Sibylline Daily Analytical Update – 14 June). This resulted in governing coalition falling short of a working majority in the Knesset, with only 59 seats out of a total of 120, highlighting the coalition’s growing instability.
- Since the Knesset’s approval of the 2021-2022 state budget in November 2021, the coalition’s focus has shifted towards more ideologically and politically-divisive issues, including those relating to domestic security and Israeli settlement policies. This has disrupted the unity over the budget, underpinned by the shared objectives of preventing former Prime Minister Benjamin Netanyahu’s return to power and ending three years of political paralysis.
FORECAST
The Knesset is overall likely to pass the dissolution bill despite the desire of some left-wing coalition elements to avoid a return to polls, amid objectives held by other coalition members to end the state of political paralysis and by the Netanyahu-led right-wing opposition to form an alternative governing coalition. According to local news sources, elections are expected to take place before the end of October, due to legal constraints and Israeli holidays. A return to polls will embolden right-wing campaigning, possibly driving Palestinian militant groups such as Hamas to exploit elevated ethno-religious tensions or triggering sole-perpetrator incidents. However, the caretaker government under Yair Lapid is likely to continue to prioritise domestic security concerns following a spate of terror attacks during April and March, mitigating the elevated threat of attacks targeting major cities such as Tel Aviv and ultra-Orthodox cities such as El’ad.
Election polls conducted immediately after the 20 June announcement predict that another election campaign would result in the Netanyahu-led right-wing bloc receiving 59 seats and the Bennett-Lapid bloc receiving 55. This would leave neither political bloc with enough seats to hold a majority in the Knesset, highlighting that elections are unlikely to resolve the institutional stalemate. Delays to government formation are likely to emerge amid indications that none of the possible prime ministerial frontrunners, including Bennett, Netanyahu, Lapid and Benny Gantz, appear to have enough support to form a ruling coalition.
Overall, a return to polls is likely to result in broad policy continuity, mitigating policy risk and the impact of political uncertainty on business and investor confidence. A new coalition government continue to prioritise solid economic growth, however, 2023-2024 budget approval is likely to face further delays amid political instability and likely ongoing fragmentation. Nevertheless, political developments in the coming weeks and months are unlikely to have a major impact on Israel’s long-term foreign policy or economic outlook. (Source: Sibylline)
21 Jun 22. India and Bangladesh: Floods displace millions raising climate-induced socio-economic health risks. As of 21 June, nearly 4.7m people have been affected by floods with at least 59 dead across northeast India (largely the states of Assam and Meghalaya) and north-eastern Bangladesh (Sunamganj district). Both regions experienced similar floods in May with climate experts warning that they will remain susceptible to extreme weather events (see Sibylline Daily Analytical Update- 23 May 2022). In Bangladesh, four m people remain stranded with relief efforts still underway. In India, the floods follow record heatwaves in central India as well as flooding in southern and north-eastern India that impacted thousands in April and May (see Sibylline Daily Analytical Update- 18 May 2022). The latest incidents of devastation are a reminder of the vulnerability of South Asian nations in the face of climate change. This has a direct impact on socio-economic health and the living conditions of staff. Flood warnings have also been issued in Pakistan with above-average rains expected starting end of June. (Source: Sibylline)
20 Jun 22. Marles eyes early subs delivery, backs new ‘posture review.’
Closing a 20-year submarine capability gap is the Albanese government’s priority, according to the Defence Minister, who has also touted news of Australia’s $270 bn investment in next-generation defence capability.
Deputy Prime Minister and Minister for Defence Richard Marles has shed light on the Albanese government’s nuclear-powered submarine procurement strategy, revealing he wants boats to hit the water “as soon as possible”.
The Labor government is reportedly aiming to close a 20-year “capability gap” from the initial announcement of the AUKUS agreement in September last year to expected delivery in the 2040s.
“We really need to be doing everything we can in terms of the timing of the next generation of submarines to close that gap as much as possible,” Marles told The Daily Telegraph.
Marles’ comments come just days after Dr Kurt Campbell, the Biden administration’s National Security Council coordinator for the Indo-Pacific, lauded the progress of technology-sharing negotiations as part of the AUKUS agreement.
In an address to the Center for a New American Security, the White House adviser hinted an announcement would be made “shortly”.
The United Kingdom’s Astute Class vessel and the US’ Virginia Class platform are currently under consideration by the Commonwealth government’s Nuclear-Powered Submarine Taskforce to replace the Royal Australian Navy’s Collins Class fleet.
The taskforce’s considerations include requirements for design, construction, maintenance, infrastructure, industry capacity, nuclear safety, environmental protection, crewing and training.
The group will also advise on building timeframes, costs and supply needs.
Earlier this month, former defence minister Peter Dutton threw his support behind the acquisition of US-designed Virginia Class submarines, which he claimed was the “obvious” choice.
The federal opposition leader made particular note of the platform’s “mature design” and vertical missile launch capability.
Notably, Dutton touted the possibility of an off-the-shelf purchase of two Virginia Class submarines before 2030.
He said the two initial submarines would be in addition to a further eight vessels built in South Australia, taking the total size of the prospective RAN fleet to 10.
Posture review in the offing
In addition to sprucing early delivery of the nuclear-powered submarines, Minister Marles has pledged to maintaining Defence spending above 2 per cent of GDP and launching a “posture review” in response to the changing geostrategic environment.
“The former government … was all about developing its bark and did nothing in respect of the nation’s bite,” he said.
“We are pretty well the opposite of that … we’re all about making sure we develop that bite.”
This, he added, would involve looking at the $270bn investment in new capability with “fresh eyes”.
“Broadly our defence force is about Australia being taken seriously in the world,” he said.
“It’s right to be where we are now, much more focused on our region, but we need to be thinking about all of those elements in the way we conceive what the Defence Force is for.”
This is a reaffirmation of Prime Minister Anthony Albanese’s commitment prior to the election, with the then opposition leader expressing concern over delivery timelines and program delays associated with a range of major Defence projects, including the Hunter Class frigate program.
In an address to the Lowy Institute, he said the review would include:
- considerations of whether Tomahawk missiles can be fitted to the Collins Class submarines;
- reviewing progress of the Future Frigates project;
- exploring potential upgrades to weapons on the Arafura Class offshore patrol vessels or through additional Hobart Class air warfare destroyers; and
- advancing Australia’s strike weapons procurement program. (Source: Defence Connect)
20 Jun 22. Afghanistan: Islamic State attack against Sikhs indicates heightened threat of targeted attacks against Indian religious minorities. On 18 June, Islamic State of Khorasan (ISIS-K) stormed a Sikh temple in Kabul killing at least two worshippers. The group on its Telegram channel stated that the attack was an “act of revenge” against ex-BJP spokesperson Nupur Sharma’s controversial comments about the Prophet Muhammad. The deadly shooting at the Sikh temple, or gurdwara, occurred after the group posted a video message warning of such an attack days before. The Indian government has granted over 100 emergency visas for Afghan Sikhs and Hindus following the incidents. Indeed, ISIS-K has successfully carried out several attacks against minority communities including Shia Muslims since the Taliban takeover. With Al-Qaeda threatening similar attacks against India, there remains a heightening risk of targeted attacks, including by a lone actor, against Hindu and Sikh diaspora communities around the world. (Source: Sibylline)
20 Jun 22. Colombia: election of Gustavo Petro as president will increase policy risks and strain relations with the US. On 19 June, the presidential election second round granted a victory to Gustavo Petro with 50.44 percent of the vote, over Rodolfo Hernández, who obtained the support of 47.31 percent. Petro will become the first leftist president of Colombia in several decades, signalling large scale governmental and economic changes in the country. While the margin remains relatively small, Hernández’s decision to concede and the 700,000 votes of difference will significantly reduce immediate concerns of unrest. Policy, criminal, security, and geopolitical risks will likely increase for firms operating in Colombia over the next four years in industries such as agribusiness, pharmaceutics, oil and gas, and defence (see Sibylline Special Report – 16 June 2022). Still, the Petro administration will likely increase opportunities for green energy initiatives and other sustainable investments in the country as the government seeks to prioritise energy transition.
20 Jun 22. Chile: Mining minister declares that firms in “sacrifice zones” should close, fuelling unrest risks due to socio-economic concerns. On 19 June, the Minister of Mining, Marcela Hernando, declared that other energy and manufacturing plants in the Quintero-Puchuncaví should be closed due to pollution, following the closure of Coldelco’s Ventanas smelter. The closure of the smelter and the declaration to increase environmental scrutiny on neighbouring plants follows an incident that caused respiratory problems to at least 76 children and five adults (see Sibylline Daily Analytical Update – 9 June 2022). The statement represents a growing policy risk for firms with operations in Chile’s “sacrifice zones” as the government seems to be pushing for the suspension of operations instead of investing in environmentally friendly assets. The decision to close down the plant will also likely increase the threat of unrest in the “sacrifice zones” due to environmental and employment concerns, which will likely be compounded if the government fails to push policies that incentivise capital expenditure investments that lower the environmental impact of industry. (Source: Sibylline)
20 Jun 22. Ethiopia: Attack on Amhara people will likely drive retaliatory violence, elevating threats to agricultural supply chains. On 19 June, the Oromia regional government blamed the Oromo Liberation Army (OLA) for killing over 100 people, mostly from the Amhara ethnic group, in the region’s Gimbi county the day prior. The OLA has denied the allegations, claiming that the Ethiopian government forces were responsible. The Amhara people are the second largest ethnic group in the country. In August 2021, members of the OLA killed 150 Amhara people in the Oromiya region of Eastern Wollega, prompting retaliatory attacks by Amhara militias, killing 60 people. It is likely that the recent attack will prompt Amhara militias to take a similar response, elevating threats of retaliatory attacks. While rising ethnic violence will have a limited impact on business assets in major cities, it is a realistic possibility that it will disrupt supply chains for agribusiness in rural areas. (Source: Sibylline)
20 Jun 22. Guinea: Junta’s sustained interventionalist approach will continue to elevate policy risks for operators in the extractive industry. On 17 June, the head of the military junta Colonel Mamady Doumbouya announced that partners in Guinea’s Simandou iron ore mine have 14 days to finalise the joint infrastructure venture agreed in March. Doumbouya claimed that the lack of progress made following the signing of the agreement between Rio Tinto and Winning Consortium Simandou (WCS) to construct a 670-kilometre railway to transport iron ore was unacceptable. Until the two entities reached the agreement, the military junta suspended ground activities at Simandou mine. Doumbouya’s recent announcement underlines the ruling junta’s continued interventionalist approach to mining sector, sustaining the threat of further unilateral action taken against businesses. This is likely to elevate policy risk, with failure to commit to local investment threatening the operating licences of firms in the extractive industry. (Source: Sibylline)
20 Jun 22. UAE: New labour framework will offer greater flexibility and investment opportunities for businesses. On 19 June, Abu Dhabi’s Labour Court (ADLC) warned business owners in the private sector to adhere to new labour regulations introduced on 2 February 2022. The deputy chief of the ADLC reaffirmed that the new employment framework will bolster employee rights, with the overhaul promoting equality, fixed-term contracts, and comprehensive maternity cover among other features. In the aftermath of the Covid-19 pandemic, the new legislation seeks to align national employment laws to new global working habits, guaranteeing flexible working arrangements with flexitime and shared jobs. Enforcement of the new regulations aims to mitigate international concerns over poor governance and restrictive visa conditions across the Emirates, in a bid to attract foreign investment opportunities and expand the UAE’s position as a global financial hub. Therefore, local and foreign businesses operating in the UAE’s private sector will likely face frequent regulatory inspections in the coming weeks and months, subject to greater supervision quality. (Source: Sibylline)
20 Jun 22. Syria: Truce offers a short-term fix but will fail to prevent wider cross-border clashes. On 19 June, warring parties in Syria’s northwestern provinces agreed to a ceasefire after days of deadly fighting. The truce was established between members of an al-Qaeda affiliation, Hayat Tahrir al-Sham and Turkish-backed opposition groups which form the Syrian National Army (SNA), after fighting killed at least eight people on 18 June near Syria’s northwestern al Bab city in the Aleppo province. Northwestern Syria remains an epicentre for armed clashes as anti-government groups seek to consolidate their territorial control of the area whilst also facing confrontations from splinter jihadist groups who challenge the SNA’s authority. Turkey’s military backing of groups will continue to destabilise the bordering region as SNA commanders support Ankara’s incursions to create a security buffer in northern Syria. Therefore, the truce will only offer short-term respite, with northern Syria remaining vulnerable to territorial clashes in the coming weeks as a theatre for wider geopolitical tensions. (Source: Sibylline)
20 Jun 22. China: Extreme weather events will hinder business operations during summer, weakening socio-economic health. Heavier-than-normal rainfall in several southern provinces on 18-19 June resulted in major property and infrastructure damage, as well as casualties. Rainfall will persist in Anhui, Guangxi, Guizhou, Jiangxi, and Zhejiang, but is expected to ease from 21 June. Meanwhile, warmer-than-normal weather in Henan, Shandong, and Hebei resulted in record electricity consumption, with irregular power supply expected in Henan throughout the summer. Electricity consumption is expected to peak between late July and early August, which may force local governments to limit supplies to industrial sites, consequently disrupting business operations and supply chains. China’s National Climate Centre (NCC) had previously warned about extreme weather events during this summer (see Daily Analytical Update – 18 May 2022). With production and supply chains expected to be affected until September, extreme weather conditions will exacerbate the economic slowdown that has largely been driven by China’s strict zero-Covid policy (see Daily Analytical Update – 30 May 2022). (Source: Sibylline)
20 Jun 22. Macau: Covid-19 policy alignment with mainland will continue to undermine business environment. On 20 June, authorities in Macau began their second day of mass-testing following dozens of reported Covid cases that led the government to declare a State of Immediate Prevention. Confirmed Covid-19 cases rose to 34 on Monday, which represents the territory’s worst outbreak since last October. As well as testing all Macau’s residents, with the first round scheduled to end tomorrow, the government has implemented several restrictions to prevent further transmission. This includes the suspension of government and restaurant dine-in services, the closure of banks and schools, and the tightening of border controls with mainland China. While casinos have been permitted to remain open, these restrictions will significantly limit business for the territory’s most important industry. With Macau aligning with Beijing’s zero-Covid policy, restricted international travel and the potential for sudden shutdowns will remain a key disruptor for businesses for much of the year. (Source: Sibylline)
17 June 22. ‘Watch this space’: AUKUS subs announcement nears. An announcement on Australia’s nuclear-powered submarine program is due “shortly”, according to the chief White House adviser for the Indo-Pacific.
Dr Kurt Campbell, the Biden administration’s National Security Council coordinator for the Indo-Pacific, has lauded the progress of technology-sharing negotiations as part of the AUKUS agreement between Australia, the United Kingdom, and the United States, unveiled in September last year. In an address to the Center for a New American Security — a US foreign policy think tank founded by Dr Campbell — the White House adviser hinted an announcement was imminent.
“Watch this space,” he said.
“I think we’ve made, behind the scenes, remarkable progress in areas associated with technology, where not only the three countries are deeply engaged but other partners are also supporting working groups.
“We will have more to say, shortly, with regard to the submarine initiative.”
The United Kingdom’s Astute Class vessel and the US’ Virginia Class platform are currently under consideration by the Commonwealth government’s Nuclear-Powered Submarine Taskforce to replace the Royal Australian Navy’s Collins Class fleet.
The taskforce’s considerations include requirements for design, construction, maintenance, infrastructure, industry capacity, nuclear safety, environmental protection, crewing and training.
The taskforce will also advise on building timeframes, costs and supply needs.
Dr Campbell went on to welcome the Albanese government’s cooperation since its election late last month.
“I just want to underscore that as we see a new government finding its legs in Australia, the partnership on AUKUS could not be stronger,” he added.
“We’re very gratified by the engagement on these and many other issues that we’ve had.”
Dr Campbell’s remarks came just a day after the Australia-US Submarine Officer Pipeline Act was introduced into the US Congress.
The bipartisan bill aims to establish a “joint training pipeline” between the US Navy and the Royal Australian Navy, enabling commanding officers to undertake US-based nuclear submarine training.
Specifically, under the program, a minimum of two Australian submarine officers would be selected each year to:
- receive training in the Navy Nuclear Propulsion School;
- enrol in the submarine office basic course; and
- be assigned to duty on an operational US submarine at sea.
Progress with the AUKUS agreement follows the news €555m (AU$830m) would be paid to French shipbuilder Naval Group to compensate for the termination of its $90bn SEA 1000 contract in favour of a nuclear submarine alternative.
The company had been tasked with developing 12 diesel-powered Attack Class submarines to the Royal Australian Navy. (Source: Defence Connect)
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